Obama was the keynote speaker at a symposium on April 21, “Challenges to Democracy in the Digital Information Realm”.
Among highlights in the 1-hour address, the former president referred to a weakening of democratic institutions around the world, attributed to “the profound change that’s taken place in how we communicate and consume information.”
For more and more of us, search and social media platforms aren’t just our window into the internet. They serve as our primary source of news and information. No one tells us that the window is blurry, subject to unseen distortions, and subtle manipulations. All we see is a constant feed of content where useful, factual information, and happy diversions (and cat videos) flow alongside lies, conspiracy theories, junk science, quackery, white supremacist racist cracks, misogynist screeds. Over time, we lose our capacity to distinguish between fact, opinion, and wholesale fiction. Or maybe we just stop caring.
“Like all advances in technology, this progress has had unintended consequences… in this case, we see that our new information ecosystem is turbo-charging some of humanity’s worst impulses.”
Obama said tech platforms need to accept their “unique role” in how information is consumed, referencing business models that, by design, encourage inflammatory and polarizing content to increase engagement. He said “the veil of anonymity that platforms provide their users” contribute to difficulties in determining the quality of information being consumed.
His speech also touched on the decline of traditional sources of information that maintain “the highest standards of journalistic integrity,” talking about more and more ad revenue [flowing] to the platforms that disseminate the news, rather than that money going to the newsrooms that report it”.
He supports reforms Section 230 of the Communications Act, a law that shields platforms from legal liability for content posted on their sites.
According to Obama, “Do we allow our democracy to wither, or do we make it better? That is the choice.”
An opposing viewpoint can be found in a post by Dr. Mark Jamison, director of the Public Utility Research Center at University of Florida’s Warrington College of Business. “The answer to bad information isn’t a greater information gatekeeper role for government, but more voices.”
“Obama is wrong that government regulation of what people see would promote democracy or, more specifically, promote freedom. Such controls have done the opposite throughout history and would this time, too.”
As some will recall, prior to becoming a talk show host, Stephen Colbert starred as a right-wing pundit on a satirical news show entitled The Colbert Report. Colbert, the pundit, was billed as America’s most fearless purveyor of “truthiness”. What is truthiness? It’s “the belief or assertion that a particular statement is true based on the intuition or perceptions without regard to evidence, logic, intellectual examination, or facts”.
Giving elected officials the chance to ask questions of regulators is an important part of our democratic process. It can be very informative when used wisely. Unfortunately, the opportunity is wasted if Committee members are unprepared or do not have a solid understanding of the industries they are overseeing.
There was a lot of truthiness on display at INDU as Committee members repeated inaccuracies about wholesale internet access rates, the state of competition in the wireless industry, the reasons for the lack of foreign entry, and the role of MVNOs in the wireless market. Some of these topics were discussed in my post last year (“Mythbusting Canadian Telecom”), but these misunderstandings refuse to go away and deserve revisiting.
Myth #1: The CRTC raised wholesale internet access rates
Few regulatory files have been as misunderstood as the setting of wholesale rates for internet service providers (ISPs) dependent on using facilities of carriers that have invested billions in building Canada’s digital infrastructure. These reseller ISPs operate using connections built by wireline carriers, paying wholesale rates that are set by the CRTC.
For as long as I have been around, these rates have been in dispute. Indeed, the interconnection architectures have been subjects of multiple regulatory battles as independent service providers seek alternate ways to arbitrage the connections provided by the facilities-based service providers [see, for example, the CRTC’s wholesale services framework set in July 2015].
The latest rates dispute actually began in May 2015, when the CRTC began a “Review of costing inputs and application process for wholesale high-speed access services.” In early 2016, the CRTC resolved that consultation and made a determination on processes to set the wholesale rates. In October 2016, the CRTC established substantially lower wholesale rates that it designated as “interim” while it undertook a more extensive review. These interim rates reduced the transport component by up to 89%, and the access component rates by up to 39%. Notably, at the time, CNOC issued a statement saying “The CRTC’s actions will immediately benefit both Canadian consumers and businesses and we are hopeful that the final outcome of this matter will have the same result.”
In 2019, the CRTC issued its “final” determination, setting rates that lowered the rates even more, rates that the Commission later acknowledged were based on mistakes. Those 2019 wholesale rates were never given effect; the 2019 decision was immediately made the subject of multiple channels of appeal and the rates were stayed. In May 2021, the CRTC finalized the rates and issued a wholesale broadband service background paper describing the process.
As the CRTC Chair told INDU, “When we analyzed the evidence, we found errors and could no longer justify the associated rates. Ultimately, we chose to reaffirm and make final the interim rates that we set in 2016, with some adjustments.”
Most importantly, as INDU was told, “the 2019 rates were never in effect in the marketplace.”
The CRTC did not raise wholesale internet access rates. It lowered them.
Myth #2: Canada has a lack of competition compared to other countries
Many have heard it said that the Canadian wireless market is less competitive and more concentrated than in other countries. But how many making such statements have bothered to look at the state of competition in other markets?
Figure 1
I decided to do just that.
[Note: The data in Figures 1 through 4 is from Telegeography (September 2021). The source data for Figure 5 is The Economist Intelligence Unit – The Inclusive Internet Index – 2021]
One way to look at competition is by the number of mobile wireless carriers in each market. If you listen to some commentators, you might assume that Canada has fewer carriers than most other countries.
In fact, the opposite is true.
Figure 2
As shown in Figure 1, Canada has more mobile service providers with a 5% market share than any other country in the G7 plus Australia.
Some may respond by saying that despite having five carriers that surpass the 5% threshold, Canada’s three national carriers dominate the market.
Figure 3
Sure, the national carriers are bigger than the regional providers, but does that make Canada an outlier compared to its peers?
The facts show otherwise.
Figures 2, 3 and 4 illustrate that Canada’s wireless market is less concentrated than peer countries (other than France) when you look at the market share of the leading carrier, the share of the top two carriers, and the top three carriers.
Figure 4
Another commonly accepted measure of market concentration is the Herfindahl-Hirschman Index (HHI). HHI is calculated by squaring the market share of each competing firm and then summing the result.
An HHI of 10,000 would indicate one company in a market with 100% market share, while a market of thousands of firms, each with less than 1% market share would have an HHI of close to zero. In other words, the lower the HHI, the less concentrated a market is.
Figure 5As Figure 5 illustrates, of the G7 countries plus Australia, Canada has the lowest HHI for fixed broadband markets and is in a virtual tie with France for lowest wireless market HHI.
Despite these facts, critics of Canada’s wireless industry continue to argue that a lack of competition is the cause of whatever aspect of the market they are rallying against.
Since it isn’t the competitive intensity, perhaps more attention should be paid to other factors that distinguish Canada from other countries.
For example, readers of this page know that I have frequently discussed the high quality and expansive coverage of Canada’s digital infrastructure, despite substantially higher costs associated with spectrum and building networks to serve Canada’s widely-dispersed and smaller population.
Myth #3: More MVNOs would reduce prices in Canada
At INDU, one MP suggested that the CRTC said “no” to Mobile Virtual Network Operators (MVNOs).
No, the CRTC did no such thing.
The Commission refused to mandate MVNOs, but that is the same as virtually every regulatory body around the world. And similar to most jurisdictions, MVNOs are indeed permitted in Canada.
And MVNOs actually exist in the Canadian market. But, implicit in the MP’s questioning was the idea that having more MVNOs would result in lower consumer prices. It’s an appealing argument, until you look at the facts and understand that the objective of MVNOs is not to lower prices, it is to make a profit.
Outside of China, the countries with the largest MVNO market are the US, Germany, and Japan. It is estimated that Japan has about 170 MNVOs. If there were a relationship between the number of MVNOs and lower prices, one would assume that these three countries would also have the lowest wireless prices. They do not. As shown by ISED’s most recent international price comparison report, wireless prices in these countries are similar to, and in some cases higher than, prices in Canada.
So why do these countries have so many MVNOs?
Mobile carriers in these countries decided that part of their business strategy would be to use resellers and other brands to acquire customers for their network services. In some cases, they use a sub-brand that they own; in other cases, they enter into a commercial arrangement with an independent brand. For the independent brand, the motivation is not to lower prices; like all businesses, their objective is to make a profit. Some were successful by targeting specific demographics or brand-aware groups, while many were unsuccessful and have gone out of business. But the bottom line remains: the number of MVNOs does not correlate to lower prices.
Myth #4: Foreign companies are not allowed to offer wireless services in Canada
I continue to be surprised at the persistence of this myth. But even more surprising was to hear a Conservative MP raise the issue at INDU, when almost ten years ago the Conservative-led government removed nearly all restrictions on foreign companies operating in the Canadian wireless market. The only remaining restriction is a foreign-owned company cannot gain entry by acquiring any of the three national carriers.
What is stopping them from launching a competing wireless business in Canada? I can only speculate, but I think it is reasonable to assume that they have looked at the amount of investment required to acquire spectrum and build out a network, the relatively small population of Canada, and, as discussed in Myth 1 above, the number of carriers already in the market, and concluded the business case simply does not work.
It is economics, not regulations, that drives their decision-making.
Why do I continue to address these myths?
I try to tackle these myths for the same reason I write this blog.
You cannot properly oversee a market that you do not understand. Canada and Canadians will not benefit from policies based upon the “truthiness” of feelings and perceptions.
Balancing the policy objectives of quality, network coverage, and affordability requires a deep understanding of the Canadian telecom market, how it compares to other countries, as well as looking at the positive and negative impacts of policy decisions made in other countries to try to avoid unintended consequences.
We can, and must, do better to ensure that the digital networks that helped maintain economic and social activity during the COVID-19 pandemic can propel Canada into a future of economic and social prosperity.
Canada’s future depends on continued investment in connectivity.
Over the past few years, I have discussed spectrum policy a number of times (likely driving readership down). Spectrum policy can be one of those deeply technical, painfully boring areas reserved for a specialized kind of regulatory technologists. But spectrum policy has the opportunity to improve outcomes for Canadians, if we get the policy right.
Spectrum can enable advanced broadband connectivity for Canadians in urban and in rural areas, for mobile and fixed applications.
Unfortunately, spectrum policy in Canada has seemed to singularly focus on stimulating mobile competition, without sufficient focus on other policy objectives. As a result, Canada may be missing the opportunity to leverage some capabilities that emerge from wideband 5G in a rural setting.
Let’s take a quick look at some of my posts over the past two years:
Paying for spectrum policy • January 20, 2020
An economist calculates that Canadians’ mobile bills include a hidden tax of 12-16% to cover the fees paid by carriers to the government for spectrum
An insatiable need for spectrum • August 13, 2020
Describing the need for the government to press forward more aggressively with the release of more spectrum.
5G spectrum policy drives economic growth • November 20, 2020
Looking at a study from the GSMA describing expected economic benefits to Canada to be derived from the transition to fifth generation mobile technologies.
Spectrum trafficking • May 4, 2021
Commenting on how speculating in spectrum can be extremely profitable for some Canadian license holders.
Spectrum policy and the digital divide • September 27, 2021
Can changes to spectrum policy help Canada become more effective in bridging the digital divide?
Can we do better with Canada’s spectrum policy?
Can we ensure competitive wireless operators have access to sufficient spectrum to serve their customers while restricting those who squat on spectrum, denying others from offering important connectivity for Canadians in rural and remote areas?
At a recent event hosted by The Logic (“Connecting Canada—5G, spectrum policy and closing the digital divide”), a TELUS executive suggested that aspects of Canada’s digital divide are unintended consequences of our spectrum policy.
How do we ensure that spectrum holders deploy the spectrum assets upon which some are squatting?
How do we ensure operators have sufficient spectrum to deploy world class fixed and mobile broadband services to Canadians in urban and rural settings?
The mandate letters for the Minister of Canadian Heritage and for the Minister of Justice and Attorney General each contain a section calling for the Ministers “to develop and introduce legislation as soon as possible to combat serious forms of harmful online content to protect Canadians and hold social media platforms and other online services accountable for the content they host”.
It is worth examining the report of the Joint Committee on the Draft Online Safety Bill, issued by the UK House of Lords and House of Commons in mid-December [pdf, 2.0 MB].
The UK report opens powerfully:
Self-regulation of online services has failed. Whilst the online world has revolutionised our lives and created many benefits, underlying systems designed to service business models based on data harvesting and microtargeted advertising shape the way we experience it. Algorithms, invisible to the public, decide what we see, hear and experience. For some service providers this means valuing the engagement of users at all costs, regardless of what holds their attention. This can result in amplifying the false over the true, the extreme over the considered, and the harmful over the benign.
The human cost can be counted in mass murder in Myanmar, in intensive care beds full of unvaccinated Covid-19 patients, in insurrection at the US Capitol, and in teenagers sent down rabbit holes of content promoting self-harm, eating disorders and suicide. This has happened because for too long the major online service providers have been allowed to regard themselves as neutral platforms which are not responsible for the content that is created and shared by their users. Yet it is these algorithms which have enabled behaviours which would be challenged by the law in the physical world to thrive on the internet. If we do nothing these problems will only get worse. Our children will pay the heaviest price. That is why the driving force behind the Online Safety Bill is the belief that these companies must be held liable for the systems they have created to make money for themselves.
At 193 pages, it is a lengthy but worthwhile read. The report includes 127 recommendations for the draft legislation over 25 pages in the report.
Having been involved in a number of projects and committees with the late human rights lawyer Alan Borovoy, I am sympathetic to his view that “We should not censor those making racist statements but censure them.” Professor Daniel Lyons of Boston College writes “Traditionally, the solution to bad speech is more speech, not censorship.” He expresses concern that attempting to control the flow of information online, like other attempts to craft digital legislation, can lead to unintended consequences.
Big Tech’s critics are correct that platforms can be misused to disseminate socially undesirable content online. But the remedy is to address the source of the problem — harmful users and the social conditions that make their messages attractive to others.
Still, it is difficult to reconcile how we can accept content in a digital stream which would be unacceptable in print, or as the UK paper writes, enabling “behaviours which would be challenged by the law in the physical world to thrive on the internet.”
Following its consultation process, those crafting new laws need to maintain a careful balance. Perhaps those involved in drafting Canada’s legislation should consider some of the UK recommendations in their initial draft.
“If we do nothing these problems will only get worse. Our children will pay the heaviest price.”
Government programs to provide better broadband are failing underserved markets. On this point, a number of recent releases agree.
Whether it is improving availability of higher speed, better quality, more reliable services, or improving rates of adoption among certain communities, governments in Canada at all levels are simply not delivering fast enough on their commitments to improve access to broadband services for their constituents.
Subsidy programs designed to stimulate construction in underserved areas have moved too slowly, and in some cases, the overhang of promised funding may have delayed roll-outs to areas that might have otherwise seen construction without government funding. (See: “A less than rapid response stream”.)
Social service agencies aren’t dispensing direct subsidies to allow low income households to sign up for communications services of their own choosing, leaving the development of such services to the goodwill of the private sector, which has stepped up to fill the void left by a failure of government leadership. Contrast this with the Emergency Broadband Benefit in the United States, that provides “a discount of up to $50 per month towards broadband service for eligible households”.
“Waiting to Connect”, a report [pdf, 3.8 MB] from the Council of Canadian Academies, says “Canada’s current broadband funding and consultation processes are often complex, onerous, competitive, and involve many actors, making them difficult for small, capacity-limited organizations to navigate.” This is accurate. However, it is difficult to support a conclusion that says “Broadband infrastructure can only meet long-term connectivity needs if it is scalable and sustainable, and if there is local expertise and capacity to build, operate, and maintain it.” The paper appears to argue against the efficiencies of scale, in favour of local capabilities. About a year ago, I wrote “Toward a universal broadband strategy”, that talked about the problems caused by the lack of stable funding to offset the higher ongoing operating costs associated with rural and remote telecommunications services. There is a relatively easy solution, reminiscent of the funding for high-cost serving areas that was formerly administered by the CRTC before it chose to duplicate other branches of government funding capital projects.
In another paper, from the Public Policy Forum, “Future Proof: Connecting Post-Pandemic Canada” [pdf, 1.8 MB] argues that Canada needs to be a global leader in 5G as I discussed a couple weeks ago. The paper argues for “future-proof digital connectivity infrastructure — connectivity that is scalable so it is capable of supporting data rates that far exceed needs that can be foreseen today” but also notes “It is prudent to enter a caveat that truly universal future-proof connectivity cannot be assured within specified time.” Recognizing that universal access to fibre is impractical, the paper argues for Canada to develop a strategy to be a global leader in 5G.
Two papers, both talking about connectivity, but ignoring the issue of adoption. The papers focus on the supply side, without looking at measures to increase demand among those who are not yet connected.
In part, I believe the problem is a result of a failure to apply some basic systems engineering principles, defining requirements rather than specifying solutions. In the past, I have described this as having people start with a premise that they need nails, which is a specific kind of solution, rather than defining the real requirement, that they need to put two pieces of wood together.
It is easier to define problems in terms of solutions with which we are familiar, or in terms of concrete, physical solutions. As a result, we have had people hijack the need to increase broadband adoption among low income households and advocate for municipalities to build their own fibre network. The most extreme case is the Connect TO project, overlaying municipal fibre in one of the world’s most connected cities. Look at Beaumont, Alberta, a suburb of Edmonton, that in the summer of 2020 promised to have construction underway before the end of the year. A year and a half later, all that Beaumont has done is inhibit investment by private sector service providers. At least Beaumont isn’t as far along in squandering taxpayer dollars as Olds, Alberta which is rescuing its community network from bankruptcy.
The proponents and advocates for such local community network programs aren’t ill-willed, but unfortunately, I think many of these programs suffer from a failure to examine the potential for unintended consequences emerging from their solutions.
For example, if a municipality builds its own private network to link all schools, hospitals, and other municipal public institutions, it can have the effect of significantly damaging the business case for investment in communications infrastructure in the rest of the community. When a government infrastructure subsidy program is announced, it can freeze the incentives to invest until funding is distributed. Further, it is important to recognize that a government subsidized network, or a municipally owned network, impairs the business case for a competitive network build. It enshrines a monopoly in that area and the history of government telecom monopolies is not a good one.
There is some activity on the supply-side. Rogers (Connected for Success) and TELUS (Internet for Good) have each upgraded the initial targeted programs for affordable broadband, empowering disadvantaged households to choose the services that best meet their needs. It is expected that there will soon be upgrades to the national Connecting Families program, a private sector led initiative, coordinated under a federal government umbrella.
As we approach the end of the year, we need to look back at what we have learned from more than 20 months of pandemic-induced changes to our way of working and studying, driving increased needs for improved broadband connectivity at home.
Which programs are working? Can we, or should we, do more of them? How can we accelerate service improvements?
I have long argued “Isn’t some broadband better than nothing?” Isn’t it better to get some broadband service to unserved areas rather than wait for future-proof connectivity? When some Canadians are wanting for any kind of affordable broadband, it takes a certain kind of arrogance to proclaim that 25Mbps (or 50 Mbps) just isn’t good enough.
“Le mieux est le mortel ennemi du bien.”
We can’t wait for a perfect, “future-proof” solution for universal broadband for all Canadians. But surely we can strive to do a lot more, a lot better, and a lot sooner.
