In what may be considered a premature exclamation, the CRTC chair issued a statement on the Online Streaming Act (Bill C-11) having received Royal Assent. (The Globe and Mail has an excellent summary of the bill.

The Media Policy blog had talks about ambiguity as “the fuel source for the never-ending flame of controversy” surrounding the legislation.

So, in some ways, it was smart for the CRTC to try to introduce some calm reassurance by issuing a statement about next steps.

The CRTC will establish a modernized regulatory framework where all players contribute equitably. The broadcasting system will ensure that online streaming services make meaningful contributions to Canadian and Indigenous content. Creators will have opportunities to tell their stories and Canadians will have access to a greater variety and diversity of content. The CRTC has no intention to regulate creators of user-generated content and their content.

Hold on.

That last sentence may be premature.

As Media Policy notes, “It’s been well established that social media users — ranging from major movie studios to individual YouTubers— won’t be directly regulated as businesses, only YouTube will be. But their programs might be if they are sufficiently ‘commercial,’ a line drawing exercise delegated to the CRTC.”

There are going to be consultations and the CRTC should be making determinations based on evidence. So, was it premature for the CRTC Chair to say the Commission “has no intention to regulate creators of user-generated content and their content“?

For that matter, how will we define a “creator of user-generated content”? How do we define content that is user-generated? At some point, does user-generated content become successful enough to be considered a commercial venture? At what point did the 4 brothers (Harry, Albert, Samuel, and Jack) transition to become Warner Brothers Entertainment? (As an aside, Jack Warner was born in London Ontario). What about that Saint John, NB scrap dealer, Lou Mayer, who turned his mind toward entertainment and co-founded MGM?

There is much ambiguity to be resolved by the CRTC in order to give effect to the Online Streaming Act. We need confidence that there won’t be political interference impacting the independence of Canada’s telecommunications regulator.

Let’s ensure that premature exclamations don’t prejudice the ultimate evidence-based determinations by the CRTC.

Will government regulations addressing online harms make it less safe to be online?

That is what the heads of a number of messaging apps have told the UK government. A recent article on Telecoms.com reports that executives from WhatsApp, Signal, Viber, Element, OPTF, Threema, and Wire have signed an open letter calling on the UK to rethink its Online Harms bill (that I have discussed previously).

“The UK Government must urgently rethink the Bill, revising it to encourage companies to offer more privacy and security to its residents, not less.”

The companies warned that as “currently drafted, the Bill could break end-to-end encryption, opening the door to routine, general and indiscriminate surveillance of personal messages of friends, family members, employees, executives, journalists, human rights activists and even politicians themselves, which would fundamentally undermine everyone’s ability to communicate securely.”

Writing about various states’ legislative bills aimed at protecting your from harms on social media, Ben Sperry of the International Center for Law & Economics opined, “It’s understandable that legislators would seek solutions to address the perceived harm that social-media usage may cause, especially for teen girls. But where these proposals go wrong is in substituting lawmakers’ own preferences for the decisions of parents and teens on how and when to best use social media.” Sperry says the predictable result would be for social media platforms to invest more in excluding teens from their platforms altogether, rather than investing in creating safe spaces for them to connect and learn online. “This may even be the goal of some legislators, but it’s not beneficial to teens, parents, or society in long run.”

Similar to what we have seen with digital legislation in Canada, the UK’s review of the Online Harms bill has been deeply polarizing. The author of the Telecoms.com article is pretty clear about his views on the legislation. “Given the degree of technological and ethical illiteracy shown in the drafting of this bill and its passage through the House of Commons, there seems little hope that the Lords will understand what’s at stake. But we’d be delighted to be proved wrong and cross our fingers that the Bill is returned to the government with lots of red ink on it.”

Budget myopia: It is a lot easier to prepare a 1 year forecast than a 5-year, or 10-year plan. Any questions about that bromide?

I remember in the early years of my consulting, entrepreneurs asked me to help prepare 10 and 20 year business plans for their revenues to show their investors. I politely refused to put my name to revenue forecast pulled from the air for new untested products and services. Other consultants happily created those wacky dot-com era forecasts. Remember those hockey-stick shaped revenue curves, the slope of which was sufficient to make the business case wildly positive?

I created and managed budgets at a few major service providers, so I fully appreciate the challenges.

With that in mind, today let’s take a look at budgets and planning at Canada’s communications regulator.

Last July, I noticed (and wrote about) the CRTC’s decision to hike telecom fees by 25%. Those are fees paid by telecom service providers, and ultimately consumers, to cover the cost of running the Commission.

How well does the CRTC perform in its budget planning and management?

Each year, the CRTC publishes its departmental plan, including a forecast (and actuals) for financial and human resource requirements. Some interesting trends appear when you look at the staffing levels in the past few plans.

I created this table from the budget summaries in the CRTC’s Department Plans: for 2019-20 [pdf], 2020-21 [pdf], 2021-22 [pdf], 2022-23 [pdf], and 2023-24 [pdf].

For each plan, actual results are provided for two years (shown in blue), the forecast for the current year (shown in red), and two years of planning looking forward (shown in black italics).

Notice that total CRTC staff levels increase 40% from 460 during the year ending March 31, 2017 to a forecasted 640 in the year ending March 31, 2024. Over the same period, CRTC spending increases nearly 60%, from $59.1M to $92.7M.

Look at the shape of forecasted spending, especially over the latest two plans. Last year’s plan called for a “temporary” bump in staffing to 547, falling back to 525 by March 2024. Surprise! The newest departmental plan no longer shows a reduction. Indeed, it calls for the CRTC to grow by another 12%, from 550 to 640. But, don’t worry! The plan drops back to just 603 the following year.

Uh, huh. More budget myopia?

The CRTC forecasted expenditures in 2022–23, in comparison to 2021–22, show a significant increase primarily due to the preliminary work undertaken related to the potential adoption of the Online Streaming Act (Bill C-11) that will continue in 2023–24, and to telecommunications-related activities.
…
Funding authorities increase in 2023-24 to undertake preliminary work for the potential implementation of the Online News Act (Bill C-18), and then decrease in 2024-25 as a result of the sunsetting of temporary funding authorities.

The CRTC’s 2019–20 Departmental Plan attributed the significant jumps in staffing and spending “to the implementation of the Broadband Fund regime.” The industry funds the CRTC’s Broadband Fund itself, as well as its administration.

In November of 2020, I asked, “When other agencies and departments at federal provincial and regional levels of government are already in the business of awarding grants, did we need the CRTC to create yet another broadband capital funding program?”

The CRTC has already started significant levels of spending for the Online Streaming Act and the Online News Act. The bills have not yet been passed and proclaimed. As the Commission continues expanding its mandate, are there appropriate and sufficient checks on its spending?

The CRTC has long operated an off-the-books alternate social benefits system outside the government’s tax system. I described this before in 2016 and 2018 among numerous other times.

These added costs of regulation inflate costs to Canadian service providers, ultimately raising monthly consumer bills. It doesn’t help that there appears to be an increasing level of political direction being given to the CRTC, that is supposed to operate “at arm’s length from the federal government”.

Do Canadians support a 40% bigger CRTC, costing 60% more?

A recent Bell Canada policy paper examines the causes and magnitude of place-based disparities in Canada. It is a timely piece, considering the CRTC hearing currently underway that is reviewing telecommunications in the Far North.

It is worth reviewing “Your postal code should not determine your economic future” [pdf, 290 KB], the public policy paper that inspired a recent Financial Post Op-Ed by Bell CEO Mirko Bibic.

The 21-page paper includes more than 3 pages of footnotes, with an interesting discussion of the growing concentration of population and economic activity in a very small number of major cities.

In 2021, Montreal, Toronto, and Vancouver represented roughly 35% of Canada’s total population, up from 29% in 1981. In the US, the three biggest cities (New York, Los Angeles, and Chicago) comprise just 13% of the national population. The 18 largest cities in the US represent a third of the US population.

In economic terms, Montreal, Toronto, and Vancouver are responsible for 37% of Canada’s economic output, contrasted with New York, Los Angeles, and Chicago making up less than 17% of the US economy. The paper shows that “in the five years prior to the COVID-19 pandemic, nearly two-thirds of net new jobs created in Canada were concentrated in Montreal, Toronto, and Vancouver.”

It is clear that there are place-based disparities in Canada, similar, but different from those seen in other countries, creating unique challenges for policy makers.

The key point here is that while Canada’s economy and population have grown in overall terms over the past few decades, the aggregate story misses big differences across cities and communities in every part of the country. University of Toronto political scientist David Cameron has warned that these divergent trends risk creating a growing gap in the expectations, needs and lived experiences of those in our major cities and those elsewhere in the country, including within Indigenous communities.

The paper suggests that the Great Divergence caused by these place-based disparities can contribute to a political climate “tilting in the direction of polarization.”

Scholars such as economic geographer Andrés Rodrígues-Pose have argued that the recent rise of disruptive political movements in advanced economies should be principally understood as an expression of place-based disparities – namely, among those who feel like their communities and own personal circumstances have “no future.”

As telecommunications professionals, we should endorse Bell’s proposition that “we have a collective interest in extending economic opportunity as broadly as possible.” Can telecommunications investment “diminish the influence of one’s postal code on their economic future”?

As the paper notes, Canada’s communications industry is investing about $10B to $12B per year on network infrastructure. This is among the highest level of investment among G-7 countries, on a per capita basis, or measured as a percentage of revenues. These investments have resulted in 94% of Canadians having access to broadband connectivity exceeding the CRTC target of 50/10 Mbps with unlimited service.

Indeed, as I recently noted, at year end 2020, more than 75% of Canadians had access to gigabit speeds, two and a half years before the UK reached that milestone.

More investment is needed to extend broadband service to Canadians in rural and remote areas, including the majority of First Nations communities. Mobile carriers are working to extend 5G capabilities and Bell notes that its network already reaches 82% of Canadians with 5G.

This point is worth emphasizing: extending high-quality, fast-speed broadband infrastructure across the country is key to fulfilling our collective goals of equity and inclusion. It is also an increasingly important determinant of economic outcomes, much like traditional policy tools. It is not an exaggeration to say that in today’s economy, network infrastructure is the foundation of economic growth and productivity for individual communities as well as the economy as a whole.

The policy paper calls for development of a place-based policy agenda, built upon four key pillars:

1. infrastructure,
2. capital,
3. people, and
4. institutions.

The paper concludes with an uplifting vision. “We are on the cusp of a future possibility where Canada’s unique economic geography is less determinative: where people can dream about big aspirations regardless of where they live.”

How do we get there? We need a combination of public policy and business-led initiatives.

The paper makes a strong case for a place-based strategy to boost economic growth and opportunity throughout the country.

Will leaders step up to seize the opportunity?

Low income households and similar vulnerable communities have lower rates of adoption of digital services. This is a well known problem.

What is less well understood is the appropriate means to deal with the challenge.

Fifteen years ago, in my opening remarks at The 2008 Canadian Telecom Summit, I said:

there are many households in urban areas that can’t afford to equip their homes with a computer and connectivity. Shouldn’t our connectivity strategy be as concerned about that kind of digital divide? We might find that a direct, needs-based subsidy, costs less and benefits a broader group of Canadians caught on the wrong side of the digital divide.

The digital divide is not just a chasm between rural and urban. At the root is affordability, which is a problem facing lower income urban dwellers as much as rural markets.

I used to think the right solution is for the government to develop a direct subsidy program that would provide targeted groups with lower cost access to technology and services. In the United States, the FCC has US$14.2 billion dollars to transform its Emergency Broadband Benefit Program into its long-term Affordable Connectivity Program. “The benefit provides a discount of up to $30 per month toward internet service for eligible households and up to $75 per month for households on qualifying Tribal lands. Eligible households can also receive a one-time discount of up to $100 to purchase a laptop, desktop computer, or tablet from participating providers if they contribute more than $10 and less than $50 toward the purchase price.”

Unfortunately, the Canadian government likely lacks the competence to effectively (or efficiently) deliver such a program.

That is unfortunate.

Ideally, we would let qualified households choose their own suppliers and make their own choices for communications services and devices in order to receive a direct user subsidy, similar to other targeted government programs. Under such a program, consumers would make their own decisions about which speeds and services meets their needs. Select the products and services you want, negotiate your best deal, and then present your affordability discount certificate to get an additional $X off as a discrete line item on the bill.

I just don’t see this government doing such a thing. As such, it will be interesting to watch the outcome of the CRTC’s hearing currently underway as part part of its review of telecommunications in the Far North.

Fortunately, for the overwhelming majority of Canadians, we have seen communications services providers develop and fund their own programs, such as Rogers Connected for Success and TELUS Internet for Good. The government’s role has been limited to helping the service providers by identifying qualifying households.

Since these programs were launched 10 years ago, there have been a number of enhancements and a lot of lessons have emerged.

I wrote last year,

Unfortunately, we have learned that it isn’t enough to offer low-priced computers and $10 per month broadband. Indeed, as Georgetown University economist Scott Wallsten writes [pdf, 1.8MB], the FCC conducted studies associated with its Broadband Lifeline service testing “consumer responses to a range of issues, including preferences for speed, the effects of different levels and types of discounts” Surprisingly, the FCC found “only about ten percent of the expected number of households signed up, even with the price of one plan set at $1.99 per month.” The research also found a significant avoidance of digital literacy training classes. “In one project, many participants were willing to forego an additional $10 per month savings or a free computer in order to avoid taking those classes.”

There is still much work to be done. Fifteen years after my opening address at The 2008 Canadian Telecom Summit, there are still too many vulnerable members of society who have not been able to benefit from a digital world. Many are concerned about the risks of being a novice user. Many distrust government and the potential risks of always being online.

More recently, I wrote, “just as we might work with professional associations to reach out to doctors and pharmacists, can we look to associations, community centres, and agencies to help proselytize, winning over those who have not yet been convinced of the benefits of digital connectivity?”

We need to try new means of community outreach to get vulnerable communities online.