Last night’s Cabinet directive on the CRTC’s wholesale fibre decision (2023-358) may show signs of tangled up regulatory processes.

Ted Woodhead has a good review of the issues that were under review and the likely resolution. As an aside, if you don’t already subscribe to his blog, you should.

As Ted writes,

In an after hours announcement Minister Champagne directed the CRTC to reconsider its earlier decision to mandate High Speed Access resale allowing the large incumbents Bell, Rogers and Telus to resell each others’ FTTH services in Ontario and Quebec.

Of course the Minister couldn’t just say that, he first had to deny the Bell Petition that would have rescinded the wholesale decision altogether or vary it on his motion. Rather than do that himself, the Minister referred it back to the CRTC to *ahem* reconsider.

Ted’s blog post discusses the issues motivating the review, so I won’t get into that aspect of the Cabinet determination.

I want to focus on the process. Why couldn’t the Minister make the changes that are implicit in Minister Champagne’s statement and the Order by the Governor-in-Council itself?

The answer may be found in certain government processes that create challenges under the timelines set out in the Telecom Act. I have written before about the various channels of appeals of a CRTC decision. In this particular case, Bell appealed to Cabinet, which engaged the timelines set out in Section 12(1) of the Act.

12(1) Within one year after a decision by the Commission, the Governor in Council may, on petition in writing presented to the Governor in Council within ninety days after the decision, or on the Governor in Council’s own motion, by order, vary or rescind the decision or refer it back to the Commission for reconsideration of all or a portion of it.

Unpacking that complicated sentence, this means that you have 90 days to file an appeal (a written “petition”) following a CRTC decision you don’t like. If Cabinet wants to act, it has until one year after the CRTC decision to make changes to the decision (“vary”), rescind the decision, or refer it back to the Commission for them to do the dirty work. Note that Cabinet can act on its “own motion”, meaning that it doesn’t need to wait for a “petition” to come it. Cabinet can also simply allow the calendar to run out and do nothing.

Let’s look at the timetable for last night’s Cabinet Order. The CRTC issued Telecom Decision CRTC 2023-358 on November 6, 2023. As stated in the Order, Bell filed its petition on February 2, 2024 (88 days after the Decision). Cabinet released its Order on November 6, 2024, exactly one year after the Decision.

The language of the Order implicitly tells the CRTC the expected outcome from its “reconsideration”. So why didn’t Cabinet use its powers to vary the Decision itself? After all, the CRTC already has such a jammed up schedule that its strategic plan calls for “addressing backlogs”.

Could it be that the Treasury Board’s regulatory impact analysis requirements have created so much red tape that Cabinet cannot complete the required impact analysis and still conform to the one-year review deadline set out in the Telecom Act?

As a result, asking the CRTC to “reconsider” allows Cabinet to bypass the impact process, but its add more work to a Commission already tangled up with its own work schedule.

It is also worth noting that the CRTC’s decision from last year (2023-358) has been superseded by the CRTC’s release a couple weeks ago of rates for the broader competition policy framework set out in August.

Last night’s Order in Council includes an explicit reference to the August decision, but it does not reference the CRTC’s October 25 interim rates order. At paragraph 9, doesn’t that CRTC order explicitly address the competitive and investment issues contained in the Cabinet reconsideration directive?

9. The interim rates will allow competitors to better serve Canadians using the latest available technology. The rates will provide competitors with the opportunity to innovate and to attract customers by selling a range of communications services over FTTP, including Internet, television, home phone, and smart home solutions. The rates will also ensure that those who build Internet networks will continue to invest in high-quality Internet access across Canada.

Will the CRTC respond to the Cabinet reconsideration with finalizing the interim rates set in October, or will more substantive changes be made?

The clock is ticking on the CRTC’s August 13, “Competition in Canada’s Internet service markets” framework. If a petition to Cabinet is going to be filed, the 90-day deadline is coming up early next week.

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(Today’s blog post title is a nod to Bob Dylan’s Tangled Up in Blue, with apologies)

October saw two irregular process letters from the CRTC that reek of political interference.

On October 7, a letter was sent to Bell, Rogers and TELUS, “calling on Canada’s large cellphone companies to take immediate action to reduce roaming fees.”

The Commission expects Bell Mobility Inc., Rogers Communications Canada Inc., and TELUS Communications Inc. to report back by 4 November 2024 on the concrete steps they are taking to respond to these concerns. If the Commission finds that sufficient action is not taken, it will launch a formal public proceeding.

Another letter dated October 30 was sent to Bell, Cogeco, Eastlink, Northwestel, Rogers, Quebecor, Sasktel, Telebec, and TELUS saying, “It has come to my attention that customers have recently reported being surprised by increases in fees related to their services during their commitment periods and are frustrated at the situation.”

If the actions of service providers negatively impact the price certainty that customers deserve and that the Consumer Protection Codes are designed to ensure, as the Vice President, Consumer, Analytics and Strategy of the CRTC, I will be directing CRTC Staff to determine what regulatory processes need to be launched to create safeguards that will limit these actions on a going forward basis.

Hold on.

In each case, the CRTC reminds the service providers that there are Codes in place that provide certain consumer protections to address the concerns. Yet, the form of the letter is somewhat coercive, threatening new regulatory processes if the service providers don’t fall into line. But, if there is a code of conduct already in place, why send these letters?

Let’s face it. The last thing the CRTC wants to do is launch a substantial regulatory process. The Commission has long recognized the trouble it has with its internal processes.

A year ago, the CRTC’s Action Plan committed to “Make faster and more transparent decisions”. This year’s Strategic Plan is less ambitious on that point, saying instead, “The CRTC will continue to: Issue timely and clear decisions; address the historical backlog of Part 1 applications and post new ones as they are received; and inform Broadband Fund applicants of the status of their application once a decision has been made.”

Look at an example of the CRTC’s Review of the Broadband Fund. The consultation opened more than a year and a half ago. A CRTC director recently was quoted in an industry newsletter: “We hope to have a decision come out probably in the next year or so”. That adds up to three or more years.

With the international roaming letter, the CRTC is seeking a solution for an issue that is no longer a problem. The marketplace has already provided a wide range of options. As I described a few weeks ago, consumers already have access to plans that include roaming to many of the most popular destinations. Freedom Mobile has plans available that include data as well as unlimited talk and text for roaming in 92 countries. There are add-on passes that provide similar access for up to 101 countries for as little as $30 for 30 days.

Both of the October letters refer to consumer Codes put in place by the CRTC. As noted in the October 30 letter, “The Consumer Protection Codes are designed to rebalance the relationship between customers and their service providers – to empower them in these relationships.”

Is the CRTC now saying that these Codes have been ineffective?

The CRTC established the CCTS – the Commission for the Commission for Complaints for Telecom-television Services to deal with violations. Has CCTS been unable to deal with Code violations? If not, what motivated the irregular process letters?

Was the press release issued late in the day on November 5 supposed to make us think consumers just don’t know about the CCTS?

As a quasi-judicial body, the CRTC has to adhere to the rule of law, “a principle of governance in which all persons, institutions and entities, public and private … are accountable to laws that are publicly promulgated, equally enforced and independently adjudicated.” As the Supreme Court of Canada has written, “At its most basic level, the rule of law vouchsafes to the citizens and residents of the country a stable, predictable and ordered society in which to conduct their affairs. It provides a shield for individuals from arbitrary state action.”

The not-so-veiled threats in the Commission letters appear to be opening an irregular process to deal with political concerns. There are Codes already in place, and there are established offices and processes to deal with violations. If the CRTC is seeking to modify those Codes, it must conduct a public review through its consultation process.

The tone, and the approach, in the two October CRTC letters struck me as unusual for a body that describes itself as “an administrative tribunal that operates at arm’s length from the federal government”.

Lately, the length of those arms seem to be a lot shorter.

The CRTC released its strategic plan last week. It is subtitled “Connecting Canadians through technology and culture”.

To be blunt, the strategic plan is light on details. In my view, it reads more like a preliminary outline than a plan.

There are three broad headings:

• Promoting competition and investment to deliver reliable, affordable, and high-quality Internet and cellphone services;
• Modernizing Canada’s broadcasting framework and creating the bargaining framework for the Online News Act; and
• Investing in the CRTC to better serve Canadians.

Under that first heading, it is interesting that the CRTC only refers to “internet and cellphone services”. Personally, I prefer to refer to “mobile services” in order to better capture the breadth of devices. More importantly, the idea of fixed telephone services is absent. Why wouldn’t the CRTC address a multi-dimensional approach, referring to voice and data, fixed and mobile?

The CRTC will continue to:

• Implement a renewed approach to Internet and cellphone competition, which includes ensuring the rates that competitors pay to access the networks of the large Internet and cellphone companies are just and reasonable.
• Monitor the markets for Internet and cellphone services to ensure the right balance between increased competition and continued investment in high-quality networks.
• Work with government partners to help connect rural, remote and Indigenous communities to high-speed Internet, including by: approving projects as part of the Broadband Fund’s third call for applications; launching a process to create an Indigenous stream of the Broadband Fund; and issuing a decision to help improve the reliability, affordability, and competitiveness of telecommunications services in the Far North.
• Support and protect consumers, including by: making cellphone use more affordable when Canadians travel internationally and within Canada; making shopping for Internet services easier; enhancing protections for outages; and consulting on new measures to help reduce online spam and nuisance calls.
• Work with provinces, territories and municipalities to help support the implementation of next-generation 9-1-1.

At least one industry veteran observed “It appears to be essentially doing tomorrow what it was doing yesterday.”

Indeed, the press release for this year’s Strategic Plan links to last year’s Areas of Focus (2023), a document dating back at least 17 months (according to the Internet Archive).

Headlines have been updated, but the three themes remain intact. “Promote competition to deliver reliable and high-quality Internet and cellphone services to Canadians at lower prices” became more balanced with “Promoting competition and investment to deliver reliable, affordable, and high-quality Internet and cellphone services”. “Modernize Canada’s broadcasting system to promote Canadian and Indigenous content” became “Modernizing Canada’s broadcasting framework and creating the bargaining framework for the Online News Act”. “Improve the CRTC to better serve Canadians” changed to “Investing in the CRTC to better serve Canadians”. (That last one sounds like a warning it is going to cost more money.)

In the new plan, “Actions” have become more detailed and the CRTC sets out desired outcomes for each of its areas of focus. It is likely helpful for us to have a clear understanding of the outcomes being sought by the regulator. Perhaps it is precisely the increased details in the plan that gives me pause.

The Commission should resist the temptation to follow a path of centralized management of the communications industry. That is an approach that might have been better suited to what was once called a ‘Soviet-style monopoly’ era.

We have seen an increased level of regulatory micro-management of the telecom sector as I described a few weeks ago. At the beginning of 2024, I had a post asking “Can light touch regulation benefit consumers?”

Last year, we read “The CRTC will make faster and more transparent decisions”. This year, “The CRTC will continue to issue timely and clear decisions; address the historical backlog of Part 1 applications and post new ones as they are received; and inform Broadband Fund applicants of the status of their application once a decision has been made.” It sounds like a wordier way of promising the same thing.

As the CRTC moves to execute its strategic plan, it should consider increased regulatory humility and understand the potential consumer benefits to arise from a lighter hand on the market.

Who knows? Maybe it will be result in making faster and more transparent decisions.

Do foreign ownership restrictions in Canada’s Broadcasting Act create a poison pill for foreign ownership of Canadian telecom carriers?

A number of recent articles discuss the benefits of increased foreign ownership in Canada’s telecom sector. Those articles have focused on restrictions contained in the Telecom Act. Last Friday, a detailed “explainer” appeared on The Hub, discussing “A brief history of foreign ownership restrictions in Canada’s telecom sector”.

However, most carriers in Canada also hold broadcasting licenses, even if the companies are not involved in radio or TV stations. The Broadcast Act comes into play for their TV distribution businesses (cable or IPTV). As I observed last week, I have not seen discussion of liberalization of foreign ownership limits contained in the Broadcasting Act. Under that Act, foreign control simply is not permitted:

3 (1) It is hereby declared as the broadcasting policy for Canada that
(a) the Canadian broadcasting system shall be effectively owned and controlled by Canadians, and it is recognized that it includes foreign broadcasting undertakings that provide programming to Canadians

“Broadcasting undertaking” is a defined term under the Act: “includes a distribution undertaking, an online undertaking, a programming undertaking and a network”. Under the Broadcasting Act, “Network” is defined as: “includes any operation where control over all or any part of the programs or program schedules of one or more broadcasting undertakings is delegated to another undertaking or person, but does not include such an operation that is an online undertaking”.

As I noted two years ago, the 2006 report of the Telecommunications Policy Review Panel [pdf, 1.6 MB] and the 2008 Competition Policy Review Panel report [Compete to Win] each recommended liberalization of restrictions on foreign investment in order to boost competition.

The 2008 Competition panel wrote:

Telecommunications and Broadcasting

• For several years, Canada has been reorienting its telecommunication policies to place greater reliance on market forces in recognition that competitive access to information and communications technology facilitates business productivity throughout the economy.
• Canada’s telecommunications policy was subject to an extensive review in 2005–2006 by the Telecommunications Policy Review Panel, which concluded that reducing restrictions on foreign ownership would increase competitive intensity, improve industry productivity, and be more consistent with Canada’s open trade and investment policies.
• Accordingly, the Panel recommends the adoption of a two-phased liberalization of foreign ownership rules pertaining to the telecommunications and broadcasting sectors. In the first phase, foreign telecommunications companies would be permitted to establish a new Canadian business or acquire an existing Canadian telecommunications company with a market share of up to 10 percent. In the second phase, liberalization of foreign ownership would be undertaken for both telecommunications and broadcasting in a way that would be competitively neutral.

The Telecom Act was updated to accommodate that first phase; the Broadcasting Act was not.

There are all sorts of cultural sovereignty issues that come to mind when considering complete liberalization of foreign ownership in the broadcast sector. However, is there really such an issue for broadcast distributors – companies that deliver cable TV or IPTV services?

Perhaps the most obvious cure would be to declare that broadcast distributors are telecom undertakings, and explicitly remove this class from the ownership restrictions in the Broadcasting Act. If we consider the metaphor of streaming video services, we do not consider an internet service provider (ISP) to be a broadcast distribution undertaking. Do we still need to maintain a different ownership regime for transporting linear channels?

There are still wholesale access issues that could need adjudication by the regulator, but we are talking about liberalization of ownership, not deregulation of the sector. Couldn’t the current regulations remain intact?

Foreign ownership restrictions under the Telecom Act apply only to Bell, Rogers and TELUS, the only service providers with telecommunications revenues exceeding 10% of the national telecommunications services market. However, broadcasting foreign ownership restrictions continue to serve as a poison pill, even for smaller telecom service providers that also provide TV distribution. Does that continue to make sense?

Looking beyond companies that own radio and TV broadcasters, perhaps it is time to examine the first steps toward creating an antidote for broadcasting’s foreign ownership poison pill.

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Postscript: Writing on The Hub, Peter Menzies covered a similar theme in his post today with “When it comes to telecoms, does Canada need to get over its foreign ownership phobia?”

In a recent newsletter, the Canadian Anti-Monopoly Project (CAMP) delivers an overly simplistic rebuttal to Sean Speer’s plea for increased liberalization of Canada’s telecom market.

You should read both. Both pieces have their shortcomings, especially in failing to consider the impact of foreign ownership restrictions in the Broadcast Act that would also need liberalization in order to accommodate broadcast distribution licenses (such as cable TV / IPTV).

The CAMP perspective fails to acknowledge real challenges faced by facilities-based companies that invest tens of billions of dollars in digital infrastructure each year. There is a cost associated with restrictions on the sources of capital, costs that inevitably factor into the prices paid by consumers. CAMP says “Current ownership rules block foreign stakes in large incumbents precisely to prevent further consolidating market power in the sector.”

Consider an alternate scenario. As a colleague recently observed privately to me, “Shaw sold to Rogers, increasing concentration, because they didn’t have the risk tolerance for raising the capital they needed to upgrade to competitive infrastructure. Obviously an American partner would have had the capital.” Liberalized foreign ownership might have provided an alternate option for the Shaw family to exit, resulting in more competition, not less.

Would a foreign buyer have emerged? Who knows. There are so many other problems with Canada’s telecom policy framework, not the least of which are considerations I discussed last week.

But we won’t know.

Each restriction on capital investment reduces degrees of freedom. Each translates into lost opportunities.

As I have written many times, we need to look at the industry like a chess master, thinking three or four moves ahead. Anticipate consequences of each path – intended and unintended. How would foreign ownership liberalization impact jobs? Ownership of intellectual property rights? Responsiveness to rural, remote, and indigenous investment?

It is worth noting that CAMP’s newsletter includes a line, “regulatory actions have supported strong independent carriers like Sasktel”. Sasktel is hardly an independent carrier. It is the provincially owned incumbent in Saskatchewan. The new entrants in that province are Bell, Rogers and TELUS, none of which received regulatory support for market entry.

Avoid overly simplistic takes. Telecom policy requires a much more sophisticated approach.