Search Results for: "out of the way"

I have frequently written about government keeping out of the way. The phrase “out of the way” appears in about 25 of my posts.

Twice, I used the same title, “Getting out of the way” [2012, 2016]. Earlier this year, in “Let the marketplace work”, I describe government policies and regulations inhibiting capital investment by the telecom sector.

So, it was with interest that I read a recent article on “The Hub”, “Want to be a more productive country, Canada? Get the government roadblocks out of the way” by Jerome Gessaroli. He says “policies relying on government intervention to replace the free market seldom produce improved growth and productivity.” His article includes 4 policy recommendations relating to government maintaining a smaller economic footprint.

Mario Draghi’s newly released report for the European Union, “The future of European competitiveness” [Part A (A competitiveness strategy for Europe) pdf, 3.4MB | Part B (In-depth analysis and recommendations) pdf, 11.5MB], cites “inconsistent and restrictive regulations” among the hindrances for innovative company growth. The report calls for reducing the regulatory burden imposed on European companies. “More than half of SMEs in Europe flag regulatory obstacles and the administrative burden as their greatest challenge.” According to the report, “Regulation is seen by more than 60% of EU companies as an obstacle to investment”.

In other words, I’m not alone in wanting government to stay out of the way.

A few years ago, I quoted Ronald Reagan’s 1986 remarks to the National White House Conference on Small Business. “Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.”

That approach gives the appearance of government doing something, but rarely achieves a positive long-term outcome. It seems to be where Canada is heading with its legislation on the digital economy. The Online News Act and Online Streaming Act already drove unintended consequences, as predicted. In addition, Canada is risking a trade dispute with the US over its approach to taxing digital services.

It is so very tempting to intervene in the marketplace. It takes much stronger leadership to trust in the power of competitive markets. Look at the telecom market. Canada ensured there are 4 well-capitalized facilities-based wireless service providers operating in most of the country, including all population centres. These service providers have sufficient spectrum and technology to compete in both mobile and fixed markets.

Continued regulatory intervention in the marketplace threatens to return Canadian telecom to the haphazard Calvinball era of a decade ago. Such an environment discourages investment, precisely the opposite of what is needed to drive productivity.

Government needs to try a new approach. Stand aside.

“The past was never as good as some people would have you believe. And the present is never as bad.”

That quote was in an article I read this week by Roy Peter Clark about US politics. But the quote jumped into my mind as I read an opinion piece in yesterday’s Globe and Mail that mistakenly claims “Canada is reverting to its pre-1992 telecom conditions“. The piece was co-authored by telecom entrepreneur Michael Kedar and Stéphane Gagnon, a professor of business technology management at the University of Quebec in Outaouais.

The article claims that “The evolution from 100-per-cent monopoly to today’s regime benefited Canadians tremendously. It brought the cost of that $1 call to a few pennies, owing to the entry of competitive companies such as CallNet, Unitel, Clearnet, Microcell and others. Most of those competitors are long gone, though, purchased by the dominant players. And the benefits of equal-access competition, introduced in 1992, have been eroded to the point where they are nearly gone, too.”

I remember the days before the CRTC’s landmark decision in 1992 very well. I was part of the lead off panel that testified in the oral hearing in that proceeding. Many people don’t realize that we had to prove the case for competition to the CRTC. In fact, I still have my briefing book on the shelves in my office – one of the tabs in that binder highlights why we used the term “equal ease of access”, not “equal access”. The CRTC used our terminology in their decision.

The benefits of equal ease of access have eroded mainly because the marginal price of a minute of long distance voice communications has fallen so precipitously close to zero. I speak to my overseas family on a daily basis, still marveling at the ability to be using a mobile phone traveling 100 kmph on a highway, traversing overseas lines and speaking to my daughter riding on a high speed train home from work – and there are no charges per minute.

Who needs equal ease of access when so many calls are now effectively free with your monthly plan?

While Kedar and Gagnon claim that most of the competitors were purchased by “the dominant players”, they neglect to mention that many were acquired out of bankruptcy or on the verge of financial disaster.

We shook up the telecom market back in the early nineties – what business school profs might say was an early instance of disruption in the technology arena.

There were a lot of failed business models. A number of companies took advantage of arbitrage opportunities and made a lot of money in the early days, but struggled as the bigger players adjusted. When retail prices fall toward zero, profitable arbitrage opportunities are tough to find.

The survivors are those companies that have anticipated and driven changes in the marketplace, investing in new technologies, to develop innovative new products and services.

Kedar and Gagnon say “Today, more than 90 per cent of the spectrum and revenues are held by the three former monopolies – Bell, TELUS and Rogers.” The authors claim “They were the only players with a 100-year head start in the infrastructure deployments necessary for building wireless networks.”

Really?

In what field did Rogers have a 100-year head start? Apparently the authors forgot that Rogers was actually one of the competitors, a key investor in the group that led the battle to create Canada’s competitive telecommunications landscape that started in 1992. It didn’t have a head start.

Kedar and Gagnon say “Ubiquitous interoperability and high quality of service are essential, and are not to be entrusted to private monopoly providers.”

What monopoly?

One might ask what were the factors that led these companies to compete against each other? Why did these companies succeed in expanding their geographic scope to operate nationally while other telephone and cable companies kept to their original territories? Bell, TELUS and Rogers were not the only companies of their kind in 1992. Why Rogers and not Videotron or Shaw? Why Bell and TELUS and not MTS or SaskTel?

In any case, it is completely inaccurate to refer to Bell, TELUS and Rogers as “private monopoly providers”. Even the application of the term “incumbents” is an artifact of linguistic gymnastics by the government in defining who qualifies as a “new entrant” bidding for spectrum set-asides.

Pre-1992, there was the phone company, a single company in each area. In many parts of the world, that telephone monopoly was in the hands of a government agency, often part of the post office (the PTT – postal, telephone and telegraph). Those of us who ever dealt with a PTT do not remember them fondly and they were generally not noted as models of customer service excellence. Would Kedar and Gagnon prefer a return to the days of state-owned government monopolies?

The past was never as good as some people would have you believe. And the present is never as bad.

In my briefing book, the word “choice” is highlighted over and over again. One of the messages that we were trying to deliver was that competition in long distance would lead to improved consumer choice.

None of us had any idea of the number and kinds of choices that consumers would enjoy 25 years later. Speaking through instant messaging applications? Watching football games on a mobile phone?

We didn’t know that cable companies would offer voice calling, that wireline communications would no longer be an automatic choice for households. That phone companies would stop installing copper lines.

Kedar and Gagnon say “It is elected government, devoted to the public interest, that is entrusted with ensuring equal and fair access to promote innovative participation by all.”

What we actually need is a government that promotes investment by the private sector. We need government to promote measures that enable and encourages the private sector to experiment with different models, some of which will succeed and some will fail, but all will continue to deliver more choices to consumers.

The past was never as good as some people would have you believe. And the present is never as bad.

I continue to look optimistically to the future. As I have written before [such as here and here], the future will be brighter for Canadian innovation if the government would try harder to get out of the way.

“The CRTC is putting Canadians at the centre of their communication system.” At least, that is what the Commission’s press release proclaimed in announcing its latest 3-year plan.

The reality is that the CRTC is still stuck in the middle of Canada’s communication system. Everything Canadians want to watch, even on the internet, goes through the CRTC. Everything.

Recall that the Chair of the CRTC made this very clear in admonishing a witness during the Local TV hearing in January in reference to YouTube:

3619. THE CHAIRPERSON: You see and maybe your difficulty of seeing that is based on — and you’ve repeated a number of occasions in your oral representation of always referring to the unlicensed element of the broadcasting system as unregulated, as opposed to what it really is and that is unlicensed.

And let’s not forget the run-in with Netflix and YouTube last fall, when those companies refused to acknowledge the CRTC’s authority to order production of data for the TalkTV hearing. The CRTC Chair told Netflix “You operate subject to an exemption order that requires you to provide information. Failure to provide information puts at risk your exemption order.”

Rather than have its powers tested in court, the CRTC ordered the destruction of the transcripts and struck all YouTube and Netflix evidence from the record of the proceeding. Thankfully, CPAC has preserved the video record of the exchange. It is an important piece of Canada’s regulatory history and it (together with the second part) will hopefully be archived. The interaction (beginning at at 22:30 of the video) is compelling viewing.

The CRTC has also put itself into the middle of commercial contracts for programming, most notably NFL football broadcasting, not only for the Super Bowl but for a mobile football app. The CRTC is also investigating pricing models of mobile services, despite having forborne from regulating such prices.

Earlier this week, the CRTC decided that a competitive Canadian TV distributor, VMedia, would not be allowed to carry an American shopping channel, QVC, that would be a consumer alternative to Rogers owned TSC.

Although there is no evidence of QVC establishing any physical premises in Canada or having bank accounts or employees in Canada, it is clear that QVC intends to do business with Canadians located in Canada. Specifically, it intends to sell its products to Canadians on a continuous basis and to ship them directly to Canadians. As well, its toll-free number can be dialed from a Canadian telephone.
…
While there are programming services on the list that sell products to Canadians, unlike QVC, these are not dedicated to teleshopping services funded primarily by retail sales to viewers.

Buffalo’s PBS station, WNED, promotes itself with “Toronto” and the Canadian flag as part of the station’s logo. WNED actively solicits “donations” with its sales of DVDs and other items. The “Canada” page of the station’s website states “More than half of WNED | WBFO’s membership is Canadian”. The CRTC cited a 2003 decision that found “insufficient evidence on the record to show” that allowing QVC into Canada “would benefit Canada and Canadian consumers.” So much for putting Canadians in the centre of our communication system.

All of which raises the question of why, in an era of global internet content and competitive distribution, do we need regulation of any broadcaster that isn’t using over-the-air spectrum? If “The CRTC is putting Canadians at the centre of their communication system” maybe it should look at simply getting out of the way?

On June 8, one of the panels at The 2016 Canadian Telecom Summit is “Personalizing Entertainment & Information”, looking at the ongoing video revolution. It is certain to be discussing these kinds of issues and more. Have you registered yet?

Twitter forces a discipline in writing. With only 140 characters, I have learned to review my tweets, removing extraneous words like “that” or future perfect sentence structures. There are some who write tweets that read like old classified ads; I lack the patience to decipher these. Others who write extended tweets marking them 1/4, 2/4… as though we follow them – and only them.

So I have an appreciation for Tweets that are especially concise in expressing a thought, such as Karen Selick’s exchange last night with Jesse Kline:

@accessd Govt can’t leave anything alone. If they’re not subsidizing something, they’re prohibiting it.

— Karen Selick (@kselick) July 8, 2012

I have precisely this concern with the national digital strategy.

Over the past few years, I have written about the potential for unintended consequences when government tries to pick winners, such as: “Weaning Canadians from government intervention“; and, “Toronto ICT plans“. I am continually troubled by the inequities of government handouts to certain businesses, which inevitably mean that one industry participant is receiving a subsidy from their competitors. I hate seeing Ministers flying coast to coast handing out cheques, while spending as much (if not more) on the photo op itself.

What are the areas that truly need the leadership role or guiding hand of government? Will government be able to resist the temptation to intervene in areas that should be left alone? Can we see leadership without increased spending?

Canada seems to be afraid to let the marketplace work on its own for telecom. The old “regulators gonna regulate” thing.

A few weeks ago, the Competition Bureau testified at the Standing Committee on Industry and Technology saying, “This committee is well aware that the bureau filed an application to the Competition Tribunal seeking to block the proposed merger between Rogers and Shaw. While we were unsuccessful in our attempt, we stand by our decision to bring the case and our reasons for it.” The representative from the Bureau later said “For example in the Rogers-Shaw case, we would have seen that the four largest firms would have held a market share of 95% collectively.” Was this really a bad thing? Many of our peer countries only have 3 competitors in the telecom market.

The Bureau still talks about Rogers-Shaw as though it should not have been allowed even though the Competition Tribunal thoroughly discarded the Bureau’s arguments. Millions of dollars in legal costs were assessed against the Bureau as a further slap-down of its misguided opposition to the deal. Recall, I cited the finding by the Competition Tribunal, where it stated [pdf, 1.25MB]:

It bears underscoring that there will continue to be four strong competitors in the wireless markets in Alberta and British Columbia, namely, Bell, Telus, Rogers, and Videotron, just as there are today. Videotron’s entry into those markets will likely ensure that competition and innovation remain robust. … Moreover, instead of the two firms (Telus and Shaw) that offer bundled wireless and wireline products in those markets today, there will be at least three (Telus, Rogers, and Videotron).

The strengthening of Rogers’ position in Alberta and British Columbia, combined with the very significant competitive initiatives that Telus and Bell have been pursuing since the Merger was announced, will also likely contribute to an increased intensity of competition in those markets.

The Competition Bureau witnesses only provided a partial picture when saying 4 players have a 95% share. But, this disinformation played well to the expectations of the audience – the Committee MPs.

I already wrote about the faux outrage on display for the telecom carrier witnesses at the committee. As Ted Woodhead wrote, “Most of the MPs on the Committee clearly didn’t care or listen to anything they heard. They engaged with none of it, they speechified, interrupted, some insulted, derided and lectured the witnesses with fact free questions.” Yesterday’s meeting of the Committee was no better.

Many MPs on the Committee simply weren’t interested in fact-finding for their study, ostensibly examining “Accessibility and Affordability of Wireless and Broadband Services in Canada”. Had they been interesting in understanding affordability, there would have been more follow-up on low cost connections, a topic I recently covered in a February blog post.

Earlier this year, I wrote “The failure to properly acknowledge the decline in Canadian mobile prices is a form of misinformation, perpetuating a distorted view of the industry. This leads to uninformed public discourse, and misguided policy and regulation.”

The facts are clear. Mobile prices are half of what they were 5 years ago. People get faster speeds, and far more data for lower monthly rates than ever before. Many plans include unlimited calling and messaging. Most service providers have unlimited roaming options available for the US and beyond. Better quality, faster speeds, greater capacity, lower prices. Competition drove these changes. The marketplace is working. As the Canadian Telecommunications Association wrote earlier this week, “in this period of heightened inflation, there is a notable exception – the price of telecommunications services.”

Still, MPs display faux outrage against the telecom industry. When government policies are set based on electoral calculus, that is a failure to lead.

Carriers are prepared to invest billions of dollars more in digital infrastructure, despite the regulatory uncertainty that overhangs capital markets for the sector.

As I said before, government should declare victory and get out of the way. It is time to let the marketplace work.