What is the appropriate role for politics in the regulatory process?

Some might answer “none”. Political interventions in the regulatory process can lead to substantial distortions.

Seventeen years ago, in its report [pdf, 1.6MB], Canada’s 2006 Telecom Policy Review Panel wrote:

It is the proper role of government to establish policies and that of regulators to implement the policies and to develop the more detailed rules necessary to provide certainty as to how the policies will be applied. Comments submitted to the Panel during this review expressed broad support for the principle that the government should develop policies in the telecommunications sector. Parties also supported the principle that regulators should implement those policies in an independent, professional and transparent manner.

In 2006, the panel observed “Canada appears to be the only OECD country whose telecommunications legislation empowers government to do both”, providing “advance directions on policy matters” as well as “to review and vary, rescind or refer a decision back to the regulator on policy grounds”. That panel recommended repealing the cabinet appeal process, saying “the Panel believes the combination of the policy direction power with the Cabinet review power has the potential to undermine the integrity of the CRTC’s independent regulatory process.”

A decade and a half later, the Broadcasting and Telecom Legislative Review (BTLR) Panel did not make such a recommendation in its January 2020 report. Instead, the more recent review panel sought to rationalize the process and timelines for appeals under the Telecom Act and Broadcast Act. “While the Governor in Council (GiC) has rarely exercised its power to review, private parties have nonetheless made frequent requests when they are dissatisfied with a CRTC decision. The possibility of an appeal to the GiC does provide an important safety valve in cases in which the CRTC’s decision deviates from the government’s policy view.” Still, the panel stated that Cabinet’s powers should not include the ability to vary the decision, simply providing an ability to let the CRTC’s determination stand, reject the decision or return it to the Commission for reconsideration.

I recently wrote about the various channels available to appeal a decision by the CRTC.

As noted by both review panels, a number of other countries empower the executive branch of their government to issue policy directions. No other jurisdiction “couples this power with the ability to review a sector regulator’s decision: Canada is alone in allowing the government to direct its communications regulator, and to perform reviews of the regulator’s decisions.”

Over the past few years, that safety valve has been put into action, with Cabinet telling the CRTC to take a fresh look at CBC’s license last September (OiC 2022-0995), and urging the CRTC to consider that “Canada’s future depends on connectivity” in its review of the wholesale wireline rates decision (OiC 2020-0553).

What characteristics of Canada’s communications regulatory structure have made the appeal to Cabinet such an important piece of the regulatory process?

A British Parliamentary Committee has recently released a report discussing Digital Exclusion [pdf, 1.4MB] in the UK. The intent of the report was to call attention to the “political lethargy” in the UK that is undermining an ambition to make the UK a technology superpower.

However, the report was criticized as being “vague and superficial” in a commentary by Telecoms.com editorial director Scott Bicheno. He observed inconsistencies, such as a claim in the Committee’s press release that there are 7M households without broadband or mobile internet access. The report itself says the correct figure is 1.7M households. The report uses an Ofcom study that found 6% of UK households (which corresponds to 1.7M of the UK’s approximately 28M total households) had no internet connection, whether fixed or mobile. One can only presume the figure in the press release is just wrong, perhaps driven by a typo.

The Telecoms.com commentary concludes with a reference to the UK’s efforts to create an Online Harms bill. The article finishes with a bite. “If this clumsy legislation is anything to go by it seems the first focus for improving digital skills should be the government itself.”

Unfortunately, Canada’s Parliamentary Industry Committee (INDU) has not really distinguished itself with exemplary digital literacy as I have discussed many times in the past.

In my view, the parliamentary committee review process is broken. That view was also expressed last fall by University of Ottawa professor Michael Geist. Is there a better example than the Heritage Committee review of Bill C-18, the Online News Act?

Witnesses are frequently given too little time to provide meaningful responses to questions from Members of Parliament. Frequently, those questions seem designed mainly to create transcripts for campaign materials in the next election, hoping for a “gotcha” moment that can be editted into a partisan soundbite for Twitter or Facebook.

It is interesting to see that the UK parliamentary committee report on Digital Exclusion can be as poorly crafted as some INDU reports I have critiqued here in Canada (eg. this one). Indeed, it is sad that so little illumination seems to emerge from so many committee review processes.

As Professor Geist wrote, “I don’t have any obvious solutions. The reality is probably that unless Ministers prioritize accountability and MPs show some independence, nothing will change.” On that note, it has been just over 2 years since I highlighted CRTC funding of a purveyor of hate. The Department of Canadian Heritage ignored warnings until the story went viral. No one has been held accountable. Not one dollar has been recovered. The Heritage Committee review of the case resulted in no report, no admonishments, no accountability. The Ministers responsible for the funding, Rodriguez and Hussen, have retained seats at the Cabinet table.

Of course, there have been exceptions where Committee review created better legislation. The Standing Committee on Citizenship and Immigration recently concluded a productive review of Bill S-245, “An Act to amend the Citizenship Act (granting citizenship to certain Canadians)”. But, the Committee review process there was nearly derailed by partisan filibustering.

The Parliamentary Committee review process is currently broken.

Why are some committee reviews more productive than others? Why has such success been the exception, not the rule?

Will increased digital engagement drive increased partisan polarization or less?

Statistics Canada recently released data from its Canadian Internet Use Survey, 2022. In late June, I wrote about “Trusted sources for telecom data” and pointed to its “Telecommunications: Connecting Canadians” page, a subset of its “Digital economy and society statistics” portal.

The 2022 Canadian Internet Use Survey was actually conducted between December 2022 and April 2023. Although Statistics Canada has been conducting its Canadian Internet Use Survey for many years, the agency cautions against comparing data prior to 2018 because of changes in design.

While the Canadian Internet Use Survey covers just the 10 provinces, a companion article was issued last year, “Canada’s Far North less remote than meets the eye”. According to that article, “in 2021, 88% of those living in the Northern Territories said they had used the Internet over the past three months and 90% over the past 12 months. By way of comparison, in 2020, 92% of Canadians living in the provinces said they had used the Internet over the previous three months. The overwhelming majority (97%) of non-Indigenous Northerners used the Internet over the past year, compared with just over three-quarters of Indigenous people living in the North.

There were a number of notable observations in last week’s release of the Canadian Internet Use Survey:

• Internet use among Canadians aged 15 years and older rose to 95%, an increase from 92% in 2020; the biggest increase was among Canadians aged 75 years and older, increasing to 72% in 2022, up from 62% in 2020;
• The proportion of Canadians with home Internet access “remained stable in 2022 compared with 2020, at 94%, but the proportion of Canadians who reported having a download speed of 50 megabits per second (Mbps) or more increased”: 87% had a download speed of 50 Mbps or more, compared with 72% in 2020;
• 84% of Canadians had a personal mobile internet data plan in 2022;
• 2% reported having only a mobile data plan with no home Internet connection.

In addition to the infographic reproduced here, Statistics Canada provided a number of tidbits regarding Online Safety.

In 2022, 8% of Canadians felt victimized by an incident online, such as incidents related to bullying, harassment and discrimination, or related to the misuse of personal pictures, videos or other content. Among various age groups, younger Canadians aged 15 to 24 years (11%) had the highest proportion of people who felt victimized online.

About half (51%) of Canadians said that they had seen content online that may incite hate or violence, and three-quarters (73%) of Canadians reported that they had seen content online that they suspected to be false or inaccurate, such as misinformation.

As I said last month, for reliable facts and statistics I start with government agencies, especially the data produced by Statistics Canada.

Falling prices for telecommunications services highlighted yesterday’s Statistics Canada release of the June 2023 Consumer Price Index (CPI).

While Canada’s overall CPI rose 2.8% year over year, the cellular sub-component fell 14.74% and internet access prices fell as well.

As a result, prices for telecommunications services merited a special mention in Statistics Canada’s CPI summary in The Daily:

Prices for telecommunications fall

Consumers paid 14.7% less for cellular services year over year in June, following an 8.2% decline in May. This was a result of both lower prices for cellular data plans and promotional pricing.

Prices for Internet access services fell 3.2% in June on a year-over-year basis after increasing 1.0% in May. On a month-over-month basis, prices declined 5.0%, the largest 1-month decline since February 2019. This was mostly due to promotions in Ontario and lower prices in Quebec.

Since January 2021, the cellular component of the price index has fallen nearly 30% while the overall CPI has risen nearly 15%. If prices for cellular service had tracked at the average for Canadian prices, plans would be 60% higher than they are today.

The latest report on falling prices provides more evidence supporting my post from last month, where I asked, “Is it time for government telecom policy makers to say, “Mission accomplished”?”

Measuring price without consideration of variances in quality produces meaningless results. “Value” seems to be a much more relevant metric.

Policy makers need to look at factors beyond price as a measure of competitiveness. The marketplace is working. As I told the Canadian Press a couple weeks ago, price reductions we are seeing in the mobile market are “well beyond any of the expectations that were set by Ottawa”.

So, are authorities in Ottawa preparing to declare “mission accomplished”? That would be unlikely. However, with the recent substantive changes in the structure of the sector, it might be appropriate to ask if regulators should stand aside and let marketplace dynamics work.

The following opinion piece, by Canadian Telecommunications Association President and CEO Robert Ghiz, first appeared on July 14 in Wire Report, as “OPINION: Declining prices and record levels of investment show competition is increasing in Canada’s telecom market”.

With the dust having settled on Rogers Communications’ acquisition of Shaw Communications and Quebecor’s related acquisition of Freedom Mobile, now is a good time to take an early look at the impact the acquisitions have had on Canada’s telecommunications market.

When the transactions were first announced, some questioned whether it would result in a lessening of competition in Canada’s telecommunications market and if Canadians would end up paying more. Based on what Canadians have seen so far, the answer to both questions is a resounding “no”.

Just weeks after these transactions closed, prices for entry-level 5G wireless plans offered by Canada’s three largest wireless providers dropped by as much as 35 per cent and the price per gigabyte (GB) of data fell by as much as 50 per cent.

Other brands introduced new plans that offer more data at lower prices than their previous plans. Under its new ownership, Freedom introduced its first truly national wireless plan – with data that can be used in both Canada and the United States.

Simply put, since the Rogers-Shaw-Quebecor transactions were completed, Canadian mobile wireless users are getting more for less.

These recent price reductions are just the latest in a multi-year trend of declining prices in Canada’s wireless market. In fact, while Statistics Canada’s All-items Price Index has increased by 15 per cent during the last four years, its Cellular Services Price Index declined by over 36 per cent during the same period. And according to the government’s own price study, Canadians pay less per month for wireless services than customers in the United States.

Price declines of this magnitude are a clear sign of the vigorous competition that is occurring in Canada’s wireless market. And it should come as no surprise. According to Bank of America, the Canadian wireless market has long been one of the least concentrated in the world. With Videotron’s acquisition of Freedom, Canada now has four national service providers, along with strong regional providers that have brought additional competition to the regions they serve.

But assessing the performance of a telecom market is not one-dimensional. While price is usually top-of-mind, quality and coverage are also important factors. Canada’s mobile wireless networks cover more than 99 per cent of the population, and, according to PwC, are the best-quality networks of all G20 countries. This is truly remarkable when you consider the distances that our networks must cover compared to those in other countries.

This level of performance and coverage extends beyond the mobile wireless market. Canada also has among the best performing and farthest reaching high-speed fixed internet networks in the world with median download speeds that are more than 60 per cent faster than the G20 average, according to Ookla’s Speedtest Global Index.

Canadian networks provide access to speeds of one gigabit per second to a greater percentage of households than those in countries like Australia, the U.K., Italy, France, and Germany, based on a comparison of Australia’s Broadband Performance report, the CRTC’s Communications Market Report, and the European Commission broadband coverage report.

Meanwhile, internet service prices have remained relatively flat, defying the overall inflationary pressures that have resulted in significant increases in the price of most other goods and services.

These positive outcomes did not happen by chance. They occurred only because successive federal governments and the CRTC, have long recognized that facilities-based competition – or competition among network operators – is the preferred form of competition, as it determines Canada’s network quality, coverage, and reliability.

In its 2019 study of competition in Canada’s broadband industry, the Competition Bureau observed that while wholesale-based (or resellers) and facilities-based competitors compete against each other every day, “facilities-based competitors engage in a dynamic form of competition to successfully introduce better networks over time through investments in new technologies.”

The Competition Bureau further described the benefits of facilities-based competition as follows:

This type of dynamic competition benefits competition in at least two ways. First, it is logical that better networks provide better results for consumers: faster, less congested connections that grow and change more or less in tune with consumer demand. Second, once the investment in new networking equipment and physical lines has been made, companies have a strong incentive to compete hard and win customers in order to generate revenues sufficient to recoup those investments.

This race to provide the most robust networks is an important source of dynamic competition. It results in consumers having access to the fastest speeds and best connections while, at the same time, driving substantial investment in the Canadian economy. And, at least over the past 20 years, it has been a self-sustaining form of competition, as both telephone and cable companies jockey to establish themselves as market leaders.

In recent years, Canada’s national and regional facilities-based providers have combined to invest an average of more than $9.2 billion per year in capital expenditures to expand and enhance wireline broadband networks in Canada. Facilities-based providers have also invested close to $3 billion per year over the same period in wireless infrastructure, and more than $12 billion in acquiring additional spectrum licenses.

The benefits of facilities-based competition cannot be matched by mandated service-based competition, which relies on providing reseller companies with access to the networks built by facilities-based network operators at mandated wholesale rates. Because they do not invest in building their own networks, resellers do not contribute to Canada’s network quality, coverage, and reliability. They do not contribute to closing the rural/urban digital divide, nor do they help Canada keep pace with the technical advances that are crucial to Canadian businesses remaining competitive with their international peers.

It is within this context that the CRTC is currently reviewing its wholesale framework that provides resellers with mandated wholesale access to high-speed internet services. The potential negative impact of wholesale regulation on investment is well-established. As the Competition Bureau stated in its 2019 broadband study:

…wholesale access regulation diminishes the expected profits of the investment, as some of the profits from the investments are instead earned by wholesale-based competitors using that network to serve consumers.

In other words, mandated wholesale access can lessen a network operator’s incentive and capacity to invest in expanding and enhancing its network facilities. Without such incentives and investment capacity, Canada risks falling short of the investments necessary to bridge the digital divide, stimulate research and innovation, maintain network security and resiliency, and provide the connectivity needed for Canada to remain competitive in an increasingly digital economy.

As the evidence shows, following the Rogers-Shaw and Freedom-Quebecor transactions, facilities-based competition is not only continuing to deliver ever-improving quality, coverage, and resiliency, it is also delivering lower prices and more value for money. To the extent the CRTC keeps mandated wholesale internet access as part of its telecom policy framework, it is crucial that it balances its wholesale objectives with the need to maintain the benefits of facilities-based competition and the incentives for private sector investment in high quality and resilient infrastructure and innovative services. Specifically, wholesale prices must be set at levels that ensure that investment incentives are maintained.

As I wrote last week, “Canadian carriers have spent billions of dollars investing in telecom infrastructure, but the job is not yet complete. This is not the right time for regulation to discourage carriers from investing in telecom infrastructure.”

Is there ever a right time?