Regulators regulate. It is just what they do.

Consider it to be a corollary to Maslow’s Hammer: “If the only tool you have is a hammer, it is tempting to treat everything as if it were a nail.”

Why does Canada’s current government seem to believe that regulation should be the primary approach for achieving its communications policy objectives? Indeed, it might help if the government could clearly state what those objectives are and how they are being measured.

A week ago, I wrote about regulating misinformation. Digging way back into the archives, I found this excerpt that appeared as well in a National Post OpEd [ pdf, 330KB] in 2005.

In Canada, as in most countries around the world, we have a regulator that oversees the market for telecom. But what sets the CRTC apart from regulators in nations that are also some of our most important trading partners is the Commission’s presumption that new technologies and services should be regulated. It isn’t surprising. Regulators regulate. It is just what they do.

That article (from more than 18 years ago) spoke of “major changes” in Canada’s communications industry being at hand, as phone services based on internet protocol technology began to move into the mainstream, offering more service capabilities, lower prices and a wider variety of choices for consumers. I identified potential roadblocks, “perhaps the biggest is the possibility of unnecessary regulatory intervention.”

We understand why the CRTC would want to ensure that basic consumer safeguards – including access to emergency safeguards, general protections related to privacy and service level disclosure – are guaranteed. We also recognize that this will likely entail a degree of regulation that, by necessity, should apply equally to all companies offering communications services.

But to go beyond that – to deny certain companies the freedom to offer innovative new services, new capabilities and lower prices without first receiving approval from the Commission – goes too far.

Unfortunately, empowered by recent legislation, the CRTC is extending its regulatory reach beyond the communications facilities and into the content carried over those facilities. In the old broadcast world, this was understandable. Radio waves – spectrum – is a limited resource, so there was only space for a limited number of voices to be carried over the public airwaves. No such limit exists in an internet world. Consumers have the ability to access every program offered anywhere.

That means our ears and eyeballs are no longer fixated on legacy media: newspapers, radio, television. In the case of radio and television, these are regulated by the CRTC under the Broadcasting Act. New media, whether it is streaming alternatives for TV, such as Netflix or Amazon Prime or Apple Plus or other subsciption services, or podcasts and other audio services, or short form content such as TikTok or YouTube, have typically been unregulated, subject only to the terms of service of the platforms.

There were two ways the government could have gone in order to provide regulatory parity for legacy media and new media: relax the regulations on the traditional services; or, regulate the new services. In Canada, the government has chosen to impose regulatory obligations on new media.

It is a consistent approach for Canada. As I wrote earlier this year, “Canada’s policy framework for net neutrality is among the most prescriptive and restrictive.”

Regulators regulate.

Intellectually, I understand the underlying motivation behind the approach that imposes regulation on all content providers. Unfortunately, the legislation has not benefited from meaningful committee review, with the government putting egos and partisanship ahead of genuine improvements to flawed sections of the various Online Acts. We were told that the CRTC will take care of concerns as it works through the details and regulations.

The first details emerged late in the day on the last Friday of September, setting out registration requirements in an 85-page Broadcasting Policy and Order [ pdf, 521KB]. While the CRTC is targeting platforms with more than $10M in Canadian revenue, there are real concerns that smaller content creators will be caught by indirect regulation – the CRTC imposing conditions on a platform, leading the platform to control hosted content produced by smaller independent creators.

Regulators regulate. I get that.

How do we avoid regulatory over-reach to avoid disincentives for Canadians to benefit from investment in content, infrastructure, and leadership in a next generation economy?

This decision helps to promote access to affordable telecommunications services for Canadians and to foster sustainable competition and continued investment.

That was how the CRTC summarized its decision last night on final offer arbitration between Bell Mobility and Quebecor for wholesale mobile virtual network operator (MVNO) access rates.

The decision was notable for a few reasons:

• A focus on creating and maintaining incentives for investment;
• Fostering “sustainable competition”, which has historically been CRTC and Competition Bureau language for “facilities-based competition”;
• Clarifying that the wholesale framework is not intended to guarantee profitability for wholesale-based service providers;
• The CRTC explicitly discounted the usefulness of comparisons to European rates;
• Recognition that average network costs don’t support investment in suburban and rural infrastructure.

The Bell – Quebecor decision should be read in the context of a similar arbitration between Rogers and Quebecor released by the CRTC nearly two months ago. In the earlier instance, the CRTC required Rogers to offer a wholesale service at rates acknowledged to be below Rogers’ costs. The CRTC said Rogers’ shortfall could be made up “through other telecommunications services”. The Rogers decision has been appealed to the courts because of the precedent-setting nature of wholesale rates being set below costs.

This week, the CRTC selected Bell Mobility’s offer.

The Commission clearly accepted the concern that wholesale rates impact the incentives for investment by both parties.

49. Nevertheless, the Commission considers that Bell Mobility has raised a valid concern regarding the long-term impact of artificially low wholesale rates on the policy objective of fostering network investments, which is particularly relevant in suburban and rural areas. While lower retail prices backed by lower wholesale rates are desirable, as discussed earlier, these different interests must be balanced with the wholesale MVNO access provider’s incentives for continued network investment. Accordingly, the Commission is of the view that Bell Mobility’s offer best strikes the balance of maintaining both parties’ incentives to invest.

The CRTC said “the MVNO access framework is not intended to guarantee a risk-free profit margin for [Quebecor’s] MVNO operations, and QMI’s ability to compete should not be assessed by looking at only the profitability of specific plans, but rather by looking at all of the wireless plans it offers.” While the CRTC wants to see lower-priced plans, it also needed to consider the potential negative consequences of lower rates on sustainable competition, and incentives for investment.

The Commission referred to the controversial cross subsidization aspect of the Rogers – Quebecor arbitration decision in this Bell – Quebecor determination, saying “that it does not necessarily have to ensure that costs are recouped over the short term for a rate to be considered just and reasonable, fair compensation for the wholesale MVNO access provider is still an important consideration in evaluating offers”.

Quebecor had asked the CRTC to compare Canadian wholesale rates to those found in Europe. The CRTC clearly stated European wholesale roaming rate structures “have very limited comparative value given the different contexts in which European and Canadian carriers operate, resulting in different cost structures.” Many Canadians have fixated on international comparisons that have such “limited comparative value” precisely because of the “different contexts in which European and Canadian carriers operate”. It was somewhat encouraging to see the CRTC explicitly discount such comparisons.

Finally, the CRTC seems to have given weight to the argument that wholesale-based service providers have uneconomic arbitrage opportunities when average rates are applied for urban, rural and suburban traffic. Such rate structures create incentives to build urban facilities but create a disincentive for investment in suburban and rural areas. “Bell Mobility submitted that, on average, a rural cell site costs more to build, while serving less data volume, than an urban one, resulting in higher costs per GB.” As Scotiabank observed in a research note this morning, Quebecor’s favourable MVNO deal with Rogers will result in Bell’s network being used only in areas where Rogers isn’t as strong. This would result in a disproportionate level of wholesale traffic running on rural and suburban while leading to disincentives for either party to invest.

Fostering sustainable competition and continued incentives for investment are clear themes of this wholesale wireless rate decision. To what extent does it provide clues for the way the CRTC will approach revisions to the wireline wholesale framework?

What should be the role of government in regulating misinformation?

That is an important question being considered in Canada and around the world as governments seek solutions to online harms and the spread of misinformation. My own views on the subject have been evolving, as I wrote early this year.

As the Center for News, Technology and Innovation (CNTI) writes, “the credibility of information the public gets online has become a global concern. Of particular importance… is the impact of disinformation – false information created or spread with the intention to deceive or harm – on electoral processes, political violence and information systems around the world.”

It’s important to distinguish between “hate” and that which is “merely offensive”. We may not like encountering offensive content, but does that mean there should be legal restrictions preventing it? Readers have seen me frequently refer to Michael Douglas’ address in Aaron Sorkin’s “The American President“. “You want free speech? Let’s see you acknowledge a man whose words make your blood boil, who’s standing center stage and advocating at the top of his lungs that which you would spend a lifetime opposing at the top of yours.”

My post in January referred to a Newsweek article in which Aviva Klompas and John Donohoe wrote:

The old saying goes, sticks and stones may break my bones, but words will never hurt me. Turns out that when those words are propelled by online outrage algorithms, they can be every bit as dangerous as the proverbial sticks and stones.
…
When it comes to social media, the reality is: if it enrages, it engages… Eliciting outrage drives user engagement, which in turn drives profits.

But my views are also informed by years living in the United States, a country that has enshrined speech freedoms in its constitution.

As CNTI notes “Addressing disinformation is critical, but some regulative approaches can put press freedom and human rights at great risk.”

Ben Sperry provides another perspective in a paper soon to be published in the Gonzaga Law Review. “The thesis of this paper is that the First Amendment forecloses government agents’ ability to regulate misinformation online, but it protects the ability of private actors — ie. the social-media companies themselves — to regulate misinformation on their platforms as they see fit.”

The Sperry paper concludes that in the US, regulating misinformation cannot be government mandated. Government could “invest in telling their own version of the facts”, but it has “no authority to mandate or pressure social-media companies into regulating misinformation.”

So, if government can’t mandate how misinformation is handled, by what rights can social media companies edit or block content? The author discusses why the “state-action doctrine” protects private intermediaries. According to Sperry, the social media platforms are positioned best to make decisions about the benefits and harms of speech through their moderation policies.

He argues that social media platforms need to balance the interests of users on each side in order to maximize value. This includes setting moderation rules to keep users engaged. That will tend to increase the opportunities for generating advertising revenues.

Canada does not yet have the same history of constitutional protection of speech rights as the United States. However, most social media platforms used here are US tech companies. Any Canadian legislation regulating online misinformation is bound to attract concerns from the United States.

About a year and a half ago, Konrad von Finckenstein and Peter Menzies released a relevant paper for the MacDonald Laurier Institute. In “Social media responsibility and free speech: A new approach for dealing with ‘Internet Harms’” [pdf, 619KB], the authors say that Canada’s approach to date has missed the mark. “Finckenstein and Menzies note that the only bodies with the ability and legitimacy to combat online harms are social media companies themselves. What is needed is legislation that establishes a regime of responsibility for social media companies.” Their paper proposes legislation that would protect free expression online while confronting disinformation, unrestrained hate speech, and other challenges.

The UK Online Safety Bill is continuing to work its way through British Parliament.

Canada already has laws prohibiting the wilfull promotion of hate, as applied in a recent case in Quebec. In that case, a man was convicted of promoting hatred against Jews in articles written for the no-Nazi website, the Daily Stormer. He was sentenced to 15 months in jail with three years of probation.

Does Canada need to introduce specific online harms legislation?

What is the right approach?

These papers provide perspectives worth consideration by policy makers.

Can connectivity play a role in fighting climate change digitally, contributing to Canada’s sustainability goals?

That is the theme of a new report from Accenture, released earlier this week by Canadian Telecommunications Association. “Canada’s next sustainability frontier: Powering digital transformation with connectivity” [ pdf, 12.4MB] explores the environmental impact of connected technology and industrial reinvention.

The new report expands on Accelerating 5G in Canada: The Role of 5G in the Fight Against Climate Change discussed a few months ago in “Broadband’s broader benefits”.

Digital transformation includes the deployment of industrial Internet of Things technology, artificial intelligence, cloud computing, and other technologies to drive increased productivity. Technology enables re-engineered processes and automated operations, powered by data and analytics. “By leveraging technology to produce the same or increased outputs with fewer inputs and waste, this improved productivity, in turn, reduces resource and energy consumption and greenhouse gas emissions. With access to better data on their operations, businesses can further improve their processes over time, driving continuous improvement in both efficiency and sustainability.”

The report examines three specific use cases in key Canadian sectors: oil and gas, mining, and agriculture. Accenture says predictive maintenance of oil rig equipment can significantly reduce downtime and energy consumption, leading to 20% reductions in wasted fuel. Connectivity improves management of mining tailing ponds, leading to a 90% reduction in incidents, and improved worker safety. Precision agriculture, with connected sensors and drones, reduce water and fertilizer use by 20-40%. Each of these sectors are described in greater detail in the report.

Most sustainability initiatives focus on renewables and alternative energy. Digital transformation of key industrial sectors can play a significant role in Canada’s sustainable future. “Canada’s next sustainability frontier” makes the case for digital transformation as part of the solution space.

How do we get there?

The report identifies levers for Canada’s sustainability acceleration.

1. Expansion of the Next Generation of Network. CSPs need to continue to deploy and upgrade wireless and wireline network infrastructure so businesses have the connectivity they need to transform and power use cases
2. Use Case and Device Availability. Solution providers need to build and provide market-ready, proven use cases for businesses that can allow them to digitally transform and meet their industrial needs, accelerating adoption & benefits
3. Industry Verticals Transformation. Businesses need to undergo total enterprise reinvention by investing in their infrastructure and enterprise architecture, use cases and solutions, and talent & services to support digital integration
4. Incentives, Programs, and Impact Measurement. Government programs & incentives need to include digital transformation, supported by a strong end-to-end sustainability measurement strategy to measure and verify emissions more precisely, and drive continuous improvement

Continued investment in advanced telecommunications infrastructure is a key enabler for reimagined business processes. Connectivity, driving digital transformation, work together as important catalyts for fighting climate change digitally.

Canada’s future depends on connectivity.

A newly published paper from University of Calgary examines whether Canada’s spectrum policy has succeeded in promoting the interests of wireless consumers.

The paper, by Jeff Church of the Department of Economics, and Kent Fellows of the School for Public Policy, examined the opportunity cost associated with the spectrum set-asides in 2008. Recall, the original AWS-1 spectrum auction set-aside 40 MHz for new entrants, and the remaining 50 MHz was for open auction.

The issue of spectrum policy has been a frequent theme on these pages. A couple years ago, I wrote “Spectrum scarcity driving up wireless costs”. A number of articles have referred to costs, as much as $100 per year per subscriber, associated with Canada’s stubborn adherence to a four carrier policy.

Last December, Jack Mintz (President’s Fellow, School of Public Policy, University of Calgary) wrote, “Ottawa’s fourth wireless competitor fixation slows 5G adoption”, saying “Canada’s overall telecom policy is failing”. Mintz cites the Church / Fellows research – not yet published at the time of his article – when he claims “set-aside policies are misallocating spectrum, contrary to consumer interests.”

The newly published paper concludes “Allocating the set-aside spectrum to the incumbents instead of the entrants would do more for consumers by increasing quality than subsidizing competition.”

The data shows that Canada’s singular focus on boosting a fourth competitor through set-asides has had only a modest impact on consumer welfare. “We estimate the effect of the set-asides was to increase consumer surplus over the three year period from 2011-2013 by $932 million and the number of subscribers in 2013 by 1.4 million.”

However, the Church / Fellows research found that the number of wireless consumers would have increased by an additional 1.8 million to 2.5 million subscribers and the consumer surplus would have been $5.9 to $8.2 billion greater.

The set-aside policy had a modest impact in reducing quality-adjusted prices, from one to two percent, whereas if the spectrum was allocated to the three incumbents, quality-adjusted prices would have fallen by four to six percent. The focus of the Federal Government then, and since, was on the wrong market failure: the welfare gains from using spectrum policy to address a perceived market power issue are insignificant relative to the benefits of reallocating spectrum to increase the quality of wireless service.

As Jack Mintz explained, “In the interest of price competition, set-asides restrict incumbents’ quality of service.”

Rather than using set-asides to effectively subsidize new entrants, Church and Fellows found that it would have been better for wireless consumers had the government provided all service providers with unencumbered access to more spectrum.

Getting rid of the set-asides would increase service quality, and result in even lower quality-adjusted prices.