Critics of CRTC missing point

And the Saskatoon StarPhoenix finally chooses me over all those angry letters about dog shit that hasn't been picked-up over winter... and you know there are a LOT of dogshit letters.

Critics of CRTC missing point

More Butter on your Bread

As heralded by the StarPhoenix in its February 9 Editorial, Canada certainly needs to continue investing in agricultural and agri-food research in order to boost its stature as an agricultural exporter and food-supplier to the world.  However, Canada’s stature is not sure to rise until its protectionist policies change, especially concerning dairy, poultry and egg production.  Canada’s food production capacity, especially on the land-rich, sparsely populated prairies, does not achieve its full potential as a result of the supply-management systems imposed on certain sectors of Canadian agriculture.

For example, prior to 2003, an enterprising collection of roughly 35 Ontario dairy producers decided they could profitably produce dairy for export entirely outside the scope of the Canadian quota system.  Instead of buying the hyper-expensive Canadian production quota, they sunk their money into milk production and marketed their non-quota milk directly to U.S. purchasers.  Their business worked.  And it didn’t impinge on those domestic producers who produced for the domestic market under the quota system.  During the same period, foreign countries, namely the U.S. and New Zealand, had Canada chastised by the WTO for exporting the excess dairy from Canada’s supply-managed system.  It was determined that exports from Canada’s supply-managed system were unfairly subsidized and violated Canada’s trade commitments.  Instead of encouraging the development of an export class of producers who fell outside the quota system, and thus, complied with the WTO ruling, the Department of Foreign Affairs and International Trade, at the urging of the Dairy Farmers of Ontario, proceeded to crush the renegade non-quota milk producers, and with them, Canada’s entire dairy export industry.  The non-quota producers applied for judicial review the new regulations, but were ultimately unsuccessful.

Under Canada’s system, every one of its producers has the majority of its capital tied-up in a government-created piece of intangible property called “quota” – often hundreds of thousands, if not millions of dollars.  This is why dairy farmers work so hard to protect their domestic market shares: the system has required them to lay-out enormous sums of cash for intangible rights to those market shares.  And now, we’ve waded so deeply into our supply-managed system, that politicians and producers, alike, see no alternative but to maintain the status quo.  Canadian consumers are stuck with the results: a series of boards and tribunals across the country that determine who provides your dairy products (especially fresh milk) and at what price, which turns-out to be significantly higher than other industrialized nations.  Furthermore, that block of Italian parmesean you grated onto you pasta last night is roughly double its market price as a result of Canada’s import tariffs on dairy.

If those billions of dollars currently tied-up in quota had been spent on capital improvements related to production, and if Canada had not destroyed the export market for its producers, imagine the potential scope of our dairy production.  It’s the billions of dollars tied-up in quota, and the associated cost of regulatory boards and tribunals, that squelches innovation and growth in the agricultural sector.  Imagine if our legume producers were limited to selling on a protected domestic market: roughly 75% of the current crop is exported.  We’d be eating shockingly expensive lentils, and most producers would be looking for other work.

If Canada is serious about expanding its agricultural presence on the global stage, it must develop a plan for transitioning its supply-managed sectors into efficient export enterprises, eliminating the costs tied-up in quotas, and the administration of those systems.  At the same time, Canada might consider concluding the CWB, which serves a limited purpose at this stage.  Maybe then, we might hold a candle to an agricultural exporting powerhouse like New Zealand, a country with roughly a 10^th of our population and fraction of our land-mass.  Certainly, your butter would be properly priced in proportion to your bread.  And couldn’t we all use a little more butter on our bread?

DEAR CRTC: IT'S NOT YOUR FAULT

Consumers and politicians, alike, have created a stew of confusion respecting Canada’s telecommunication laws and regulations amid the teeth-knashing and finger-pointing on internet billing matters.  Consumers appear to carry a common misunderstanding that the CRTC somehow prevents or limits competition in Canada, and that it is squarely in the pocket of the large incumbent telecos and calbecos, like Telus, Bell, Rogers and Shaw (the “incumbents”).  This is quite misguided.  If anything, the CRTC has received consistent political direction during the past twenty years to increase competition in Canada’s telecommunication sector.  The CRTC has attempted to do so, by requiring the incumbents to provide network access to competitors at regulated rates.  Internet service, like telephone service, is only useful to the end-user if it is connected to the entire, singular, global network.  Thus, there is no economic case for a competitor to even attempt to replicate a parallel worldwide network: that’s impossible.  Instead, competitors look to the CRTC to force incumbents to provide access to the larger networks of copper, fiber and wireless the incumbents have built and expanded through nearly half a century.

Unfortunately, this regulatory approach does little to introduce real competition.  New “competitors” simply set-up small networks in dense population centres, places with condo towers, for example, to skim off as many customers as possible with limited investment.  Such competitors are entirely reliant on their connections to an incumbent network, the cost of which is regulated by the CRTC.  All the calls by consumers and politicians for “market forces” to prevail (heralded by the Hon. Tony Clement, no less), and those demonizing the CRTC as an inept economic meddler, miss the point.  If the CRTC didn’t “meddle” as it has, at the encouragement of both Liberal and Conservative governments, we would not even have the current façade of competition.  Without CRTC meddling, we would be back in the world of regulated monopolies and crown corporations, much like the telephone service of thirty years ago.  Why?  Because the nature of a single integrated network, to which everyone wants unfettered access, means that: a) each household or business only needs one connection, and b) that one connection offers precisely the same service as would any other connection.  And thus, there is limited economic incentive to build parallel competitive networks.

Consumers must understand that the neither the CRTC, nor the incumbents, can be blamed for the potential rising cost of providing unlimited broadband service to Canadians.  The incumbents bear the cost to build and maintain the backbone of the digital network, and of course, they wish to squeeze the most from those competitors who attempt to skim the cream from lucrative urban markets, while contributing little to the broader digital infrastructure.  A few folks in dense urban markets may get access to cheaper competition, but only because the CRTC forces it upon the incumbents.  The rest of us are forced to subsidize that competition by helping the incumbents, whose networks we are stuck with, absorb the cost of maintaining the broader digital network that serves those competitors.  Why is broadband service in Nunuvat shockingly slow and expensive, with no competitors in sight?  Because it’s expensive to provide broadband service to a small, isolated population: that’s the natural result of market forces.

If consumers and politicians want to have their cheap, unlimited broadband cake, and eat it too, they should consider a change of government policy.  Perhaps, the old crown corporations and regulated monopolies make the most sense for providing all citizens with reasonably priced broadband access to the new digital network.  At least we wouldn’t be paying for false competition, and we’d know, for certain, who to blame when the price is too high, or the service is poor.

Can I Supersize That? Canadian Regulations Fail to Deliver Functional Broadband Policy

More than anything, we love volume.  North American consumers appreciate more and bigger, for the same price, whenever possible.  Bigger cars, bigger houses, more food: and all for as little as possible.  Our supersized appetites for energy, water and fries has gradually expanded to our appetite for bandwidth, a prediction heralded by many since the advent of residential broadband access.  When cablecos and telecos each began their migrations to supplying the same calibre of digital broadband service over twenty years ago, it was clear that our Canadian regulatory system was outdated – we had one Act that concerned telecommunications and another that concerned broadcasting.  The two regimes rarely engage with each other, except in the offices of the CRTC, which was charged with the administration of both regimes.  The telecom regime was guided by engineers, mathematitions and statisticions, while the broadcast regime was driven by social scientists and the arts community.  When the broadcast distribution giants, the telecommunication incumbents and the broadcast content developers were suddenly engulfed by the same digital revolution, the rickety foundations of Canada’s regulatory regimes would clearly fail to tolerate the weight of the impending collisions.

Now, almost three decades since the first warnings from policy analysts, industry personnel and academics, that Canada’s regulatory regime was ill-equipped to handle the coming digital revolution, the CRTC is charged with the impossible task of managing the mess with regulatory tools designed in the days of the radio broadcast and the land-line telecom system.  Whether the issues concern wireless competition, broadband usage caps or fee-for-carriage charges from Canadian broadcasters, the CRTC’s decisions now bear a commercial and political weight that was previously unknown.  CRTC decisions respecting licence renewals, fees, rates and interconnections were once followed by a handful of industry insiders and academics.  In the past two years, we have seen unprecedented political and public scrutiny of the CRTC decisions, including the intervention of cabinet.  Why are Canada’s communication rules and regulations suddenly so contentious, so public now?

The simple answer is that digital services that have been heralded for nearly 30 years, are just now reaching consumers, ne voters, in a recognizable, useable format.  When all information has been digitized (and most of it has), be it voice, video, sound, text or other, it can be carried or distributed on any network, wired or wireless, that can send a series of dots-and-dashes.   Now, your television, your radio, your text information, your documents, video, audio and virtually any medium of communication can be reduced to the same stuff: digital data – dots and dashes.  Because all digital information is essentially the same stuff – dots and dashes – Radio waves, power lines, old telephone lines, fiber optics, coax cable, satellite signals, and cellular networks – they can all distribute the same digital stuff.  That’s why telecom companies want to sell you television, cable companies want to sell you telephone service and everyone wants you on their internet service, wired or wireless.

Now, digital hardware, like smart phones, game consoles and set-top boxes, and digital networks, like 3G and broadband, have progressed and merged with content providers, like iTunes and Netflix, to produce a true cross-platform information network, where consumers expect to access any content, at any time, from anywhere, through any device.  The key common factor is access to “the Network”.  Cable television, satellite television, voice telephone, radio and even “the Internet” were once discrete, separate communication systems until very recently.  You had a cable, satellite receiver or antenna to receive your television, you had phone line for your telephone, you had radios to tune into radio stations and a computer to access the Internet.  Now, you just need one device, any device really, that can access The Network.  The problem we face now in Canada (and the U.S., to be fair) is that we designed a regulatory system that regulated the communication field as the old, discrete networks.  As you might imagine, that presents some difficulties for today’s communication providers and consumers.

At the root of the regulatory problem is that in addition to treating all mediums of communication as discrete networks, the regulatory world saw two distinct purposes of regulation.  When it came to telecommunications, the government was concerned about access – it wanted consumers and providers of phone services to form one inter-operable telephone network based on a series of reasonable price and operation regulations.  This was done not only on a national, but on an international scale, which is why you could even make phone calls to other countries nearly a half century ago.  Network integrity and consistent, fair pricing were the regulatory goals.  The content which passed through the telephone network, your conversations and faxes, were really of no concern to the regulators (although they might have been some concern to your neighbours on the party line).  And by all means, we would have found it strange to have rules imposed on the content of our phone conversations.

In the broadcast regime, however, the regulators were primarily concerned with content, not access.  The regulators wanted to ensure they maintained a market for Canadian programming and that those who delivered television to the masses continued to distribute the precious Canadian products.  Thus, unlike the telecommunication regulations, which focussed on technical concerns, like interconnection and pricing, the broadcast regulations primarily spoke to what content was to be provided through the broadcast network.  While this was certainly a high minded goal that aspired to push the maintenance and development of our distinct Canadian culture, the objective level of success the broadcast regime has produced is difficult to ascertain.  Sceptics suggest that what has resulted, instead of a distinct Canadian broadcasting culture, is a protected Canadian advertising market, where the broadcast distributors sell protected broadcast space to Canadian advertisers, while carrying primarily popular U.S.-based programming, showing minimal concern for Canadian content through production of generic and U.S.-styled programming like Canadian Idol.

The pendulum, however, has swung from the content regulation battles that raged as the spectrum of television channels grew throug the 1980s and 90s, back to concerns of access that are more suitably addressed by the telecommunication regime.  Consumers are no longer worried about what TV show is being broadcast on what channel at what time, because frankly, they don’t care.  With PVRs, online programming, and on-demand purchases, consumers are seeking out the content they want, when they want it.  The content regime has essentially flatlined… as long as consumers have sufficient access to The Network in all the places they want it.  And that’s the catch.  Everyone wants as much access as possible, for as little as possible, in as many formats as possible.

Sorting-out the issue of access would be eminently easier in Canada if our communication policies weren’t still so strongly tied to regulating content.  If our rules and regulations ignored the content of information travelling across The Network, it would eliminate one massive policy and regulatory headache.  However, it might kill the Canadian broadcast system as we know it.  I’d argue it’s more like euthanasia for a suffering system that no longer enjoys its quality of life.  Perhaps the new policy for Canadian content should focus on supporting production, and strengthening the CBC into a multi-platform Canadian content distributor, instead of fighting against a raging current of technology that will eventually sweep away the remaining shards of content regulation.  Ottawa might be shocked at what Canadians choose to consume without force-feeding them.  Canadian hockey would do just fine, as would news programming and even some alternative programming.  Witness the growing success of CBC Radio 3, which is only available on-line or on satellite radio.  It’s all Canadian, all the time and has been ultimately successful.

But eliminating content regulation, although helpful, does not solve the issues surrounding access.  The current access disputes, in order to be resolved, should be framed by our very early history in communication.  From the onset of the telegraph, it was recognize that everyone needed to adopt the same system, and interconnect in the same way, in order for the system to be useful to anyone.  And so went the telephone system, and so goes the new digital network.  In order for any end user device, like a smart phone or television, to be useful, everything must be on the same network.  And much akin to the telephone network, which developed slowly, as different players built different chunks of the network, the internet came in bits and pieces from both telecos and cabelcos.  But over time, and through negotiated rules, both nationally and internationally, the chunks became interconnected, such that we are approaching one new, comprehensive digital network.

When you think of old telephones, you recognize that, for the most part, we all had one phone line into our house.  And in most places, excepting certain downtown cores in large centres, there was only one provider of service.  That made some sense, in that you could only be connect to one telephone network: there was no parallel network, because a parallel network would only be useful if it was connected to the original network, which simply makes it part of the original network.  Much the same logic applies to roads.  A road is only useful if it is connect to other roads.  Even in regions which contain some measure of private roads, they are ultimately only useful because they are attached to the entire road network at each end: it’s simply a private shortcut people pay for the privilege to use.

In this light, we can understand how the large telecos developed monopolies in land-line telephone service.  A telephone line to your house was much like the road to your driveway, the water line to your basement, or the gas line to your furnace.  Each was part of a larger network, and was only useful connected to that larger network.  Just as there was no economic case for an alternative road to your house, or an alternative water line, there was really no economic case for an alternative phone line that would simply be connected to the same network and provide the same service as the first phone line.  And thus, the monopoly telephone providers became regulated monopolies, or crown corporations (or both) in most jurisdictions, in order to protect consumers from the natural effects of monopolies.

The problem with the new comprehensive digital network, is that it has arrived in a number of different “pipes”, be they wireless, cable, telephone copper, satellite or even power lines in some areas.  Frankly, most of us only need one “pipe”.  This multiplicity of offerings, complicated by the bureaucratic drive to regulate content on each “pipe”, has resulted in a meandering, confused approach to resolving communication regulation issues in Canada.  Furthermore, for the roughly the past twenty years, there has been an increasing political call for competition in the communication sector, where possible.  Although we have a smattering of supposed competition in long distance, in the wireless sector, and more recently, in the home telephone and internet sectors, the competition is largely a smokescreen.  There were really only three major physical networks in Canada: the cable television network, the telephone network, and the satellite network.  Long distance competition, internet competition and wireless competition were only achieved by regulations which forced the incumbent network owners, the large telecos and cablecos, to permit competitors to use and/or interconnect with the incumbent networks at fixed rates.  All the competition we have is leveraged on the network backbones built primarily by the original telecos, and somewhat, by the large cabelcos.  New communication competitors generally set-up small networks in high-density areas, where they connect to the incumbent network and leverage an entire country-size network built by other companies.  They skim the cream whilst leaving the breeding, the birthing, the feeding and the milking of the communication network to the incumbent network providers.  The competitors have not, nor will they ever, develop a network in Lucky Lake, Saskathchewan.

Perhaps, it’s time we reconsider what, precisely, requires regulation in our communication systems.  People will find the communication content they wish to consume, and technology will render the concept of content regulation to be difficult, if not impossible in Canada – the concept of “broadcasting” is waning.  Canadian consumers have seen the light and they want unfettered access to self-selected content, on-demand.  Instead of regulating “broadcasting”, Canadian cultural policy should focus on supporting the production of Canadian content and making it available to Canadians.  Today, that means developing a number of government servers, leveraging a number of digital distribution channels: it doesn’t mean choking-off the distribution channels themselves.

What concerns Canadians is having access to the Network.  We all need at least one “pipe” to receive the stream of digital content available to us.  Unfortunately, the evolution or our communication systems, and the inept regulation of these systems, has resulted in a very strange and expensive mess.  Most Canadians now have many digital “pipes” available to them – cable, telecom, satellite and wireless.  Each pipe is competing to provide virtually the same service, a combination of voice communication, television and general internet.  Furthermore, in satellite and wireless, there is further competition among brands .  The Canadian communication economy, supported by consumers, is attempting, at the encouragement of the CRTC, to carry the cost of all those different service providers, and all the duplicated network infrastructure, that all serve to offer essentially the same service – access to the Network.  Competition, in this case, is false, expensive and forced.

The debate respecting usage caps on broadband internet rates misses the point entirely.  Broadband “competitors” only exist at the leisure of the CRTC which grants them access to incumbent networks.  The incumbent networks cannot be blamed for requesting compensation from high-volume users: why should Bell maintain its network at its cost for the benefit of a competitor?  For some reason, consumers are under the impression that our communication regulations or the CRTC somehow inhibit or prevent competition.  Competitors cannot afford to build alternative infrastructure, and so the CRTC has permitted them to piggy-back on the incumbent networks, at discounted rates.  One way or the other, consumers are covering the cost of having competition introduced, and limited real competition has developed.  When it comes to the new digital network, it’s time for us to reconsider the entire model: think “telephone”.

At one stage, everyone seemed to understand and agree upon the nature of telephone service.  Telephone companies understood that the value of their service entirely rested upon their ability to interconnect and cooperate with the larger network.  Governments understood the value of the telephone network as part of the over-all public infrastructure, and either co-opted the existing networks through crown corporations, or instituted regulations where monopolies operated, to ensure the integrity of the system and fair access to consumers.  And consumers, who all appreciated and wanted telephone access, accepted the rates developed by regulators and telecos with limited whining.  The new Network is no less, and likely more important than the telephone was, to our current economy.  Everything flows through the Network, from bank transactions, to research data, to television and personal correspondence.  Its importance cannot be underestimated.  And its unity – its value as a single Network, must be understood to formulate a better regulatory approach.  As we know from past experience, the market does not work well in such a circumstance.  Regulated monopolies, or crown corporations, seem to be the best methods for managing the distribution and maintenance of this type of service.  Indeed, we do have small sections of private roads where the dense, urban populations of southern Ontario and lower mainland BC, will support such infrastructure without direct harm to the public road system.  Ultimately, the backbone, and the vast majority, of our transportation infrastructure is a public good, and its maintenance is a public service.

I’m not suggesting the entire communication sector should be nationalized – such a demand would be absurd, if not impossible.  But I am suggesting that our federal government needs to recognize the nature of the new Network, and make new statutes and regulations accordingly, instead of charging the CRTC with the impossible task of adapting our old, tired policies to the new reality.  Crown corporations, like SaskTel, approached the roll-out of communication technology in precisely this light.  The Saskatchewan government understood the social and economic value of communication services, but recognized there was a limited market to drive the development of a sophisticated network in the province.  Now, SaskTel, not a federal regulator, ensures that all communities in the province, urban, rural and remote, get timely and reasonable access to modern communication services.

Everyone needs fair, reasonable access to at least one large digital “pipe” – this should be the goal of federal regulation.  Forced competion for its own sake, and outdated content protection are hollow causes.