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Speech

Notes for an address

by Len Katz

Vice-Chairman, Telecommunications
Canadian Radio-television and Telecommunications Commission

to the E-Commerce and Telecommunications Committee of the
Canadian Chamber of Commerce

Ottawa, Ontario

December 11, 2007

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Thank you very much. I'm very pleased to be here with you this afternoon.

At the Canadian Radio-television and Telecommunications Commission (CRTC), we have been entrusted with a dual mandate to oversee telecommunications and broadcasting. These two industries account for over $47 billion in annual revenues and provide employment to tens of thousands of Canadians.

What's more, they are on the leading edge of innovation. Their products and services are rapidly transforming how we communicate, how we do business, and how we entertain and inform ourselves.

The Commission has been busy keeping pace with all of this change, and I want to give you an idea of some of the main issues that are currently before us. My focus will be mostly on telecommunications, but I will say a few words on our broadcasting and media initiatives a bit later on.

Telecommunications

The Canadian Chamber of Commerce brings together business leaders from all sectors and all corners of the country, with a purpose of fostering a strong, competitive and profitable economic environment that benefits Canadians. 

This is similar to the Commission's objective when it comes to the telecom side of our mandate. The Telecommunications Act states that our system should serve to safeguard, enrich and strengthen the social and economic fabric of Canada. Another objective of the policy is to enhance the efficiency and competitiveness of Canadian telecommunications, nationally and internationally.

In the past, the CRTC relied on regulation to achieve these objectives, and to facilitate sustainable competition.

Two important developments caused us to rethink our approach: the 2005 report of the Telecommunications Policy Review Panel and the 2006 Policy Direction from the government.

We now rely on market forces to the greatest extent possible. Regulation is to be used in the least intrusive and most cost-efficient way possible – and only when there is a market failure to achieve the objectives of the Telecommunications Act.

Deregulation

We began to put the government's directive into practice right away, starting with the last major regulated market in Canada – the local phone market. Competition has arrived in residential markets across the country due to the introduction of Internet Protocol technologies. Canada is ahead of many other countries in this regard.

To date, the Commission has deregulated 378 exchanges, representing over 65 per cent of the local phone market. We have also deregulated business phone services in 130 exchanges. We continue to process applications for other exchanges that may qualify for deregulation.

Established companies in deregulated markets no longer have to ask the Commission for permission to set rates, introduce new services or bundle services together.

More recently, we relaxed the bundling rules in markets that are still regulated and announced that we would no longer regulate services offered in market trials. 

Consumer protection

Even when the Commission deregulates a given market, consumers and small businesses have a right to expect reliable, affordable and high-quality communications services. It is especially important that subscribers can bring disagreements with their service providers to an independent party.

In April 2007, the government called on service providers to create a self-regulated agency that would be approved by the CRTC, and that would fulfill this role.

At our Chairman's urging, the industry moved quickly to set up this new agency, which is headed by a Commissioner for Complaints for Telecommunications Services. Since it began operating on a provisional basis in July, it has worked to resolve complaints from consumers and small business customers regarding deregulated services.

A few weeks ago, the Commission held a public consultation to review the agency's proposed mandate, governance structure, remedies and operation. Our intention was to ensure that the agency is consistent with the government's direction and that it serves the interest of consumers.

We will be issuing our determination very shortly.

National Do Not Call List

One of our other important projects at the moment is the creation of a National Do Not Call List. Earlier this year, we decided to seek out an independent operator to develop and manage the list. We've received four proposals that we are currently evaluating. The successful bidder will then be required to submit a date by which the list could begin operations.

Anyone who wants to place an unsolicited telemarketing call will first need to subscribe to the National Do Not Call List and verify that they are not calling consumers who have registered their numbers. Telemarketers will be responsible for updating their lists regularly.

There are a few exemptions to the list. These include unsolicited calls made by or on behalf of:

  • registered charities;
  • political parties;
  • opinion polling firms;
  • general-circulation newspapers;
  • organizations that have an existing business relationship with a consumer; and
  • organizations to business consumers.

Even if these types of calls are exempt, organizations making them must keep their own do-not-call lists and respect the wishes of consumers who request not to be contacted in the future.

We realize that telemarketing is a common business practice. Our goal is not to eliminate unsolicited calls altogether, but to give Canadians who prefer not to receive them the option of adding their numbers to a centralized database. It is a model that has worked well in other countries, notably in the United States. 

Interestingly, new services have begun appearing in the marketplace that may help Canadians to better screen their calls.

Essential services

As I mentioned a few moments ago, we want to give market forces the maximum weight possible in order to encourage sustainable competition. To accomplish this, we needed to review our telecommunications regulatory policies with a view to reducing the regulatory burden to the minimum required to meet our obligations under the Act. We consulted with the industry this past summer and asked it to identify regulatory priorities.

At the top of our list was a review of our essential services framework.

We hired an outside consultant to prepare an independent report on our policies. We also held a public hearing that focused on several key issues, including: a definition of essential services, the associated pricing principles and, where necessary, an appropriate transition period prior to phasing out the mandated provision of services.

It would not be practical – from a financial or technical perspective – for new competitors to reproduce some aspects of the networks that make up our telecommunications system. Our intention is to find the right balance between mandated services and incentives that will lead to innovation and investments.

We hope to achieve this by eliminating the disincentive arising from the mandated sharing of non-essential facilities, and to create a dynamic competitive environment that will benefit both the industry and Canadians.

In the UK, the BT Group was prompted to functionally separate its retail operations from its wholesale operations. This concept of functional separation appears to be gaining traction among European countries. Notably, it was a prominent feature of the proposals to boost competition recently put forward by Commissioner Reding of the European Commission.

So you can see that the challenge of developing regulatory policies that promote facilities-based competition is certainly not unique to Canada. That being said, our own proceeding will likely propose a distinctive Canadian solution. It will be interesting to follow the developments abroad and to see how our model compares with those in other countries.

Network capacity

Canada is fortunate to have a high penetration of broadband services. In fact, it is one of the strengths of our telecommunications system. At last count, 60 per cent of Canadians have broadband services in their home – the highest rate among G8 countries. In addition, over 93 per cent of Canadians have access to broadband services and 87 per cent have a choice of service providers.

Broadband services are playing a vital role in our economy and are spurring our competitiveness. As the membership of this committee illustrates, Canada is a world leader in the digital economy, and has been at the forefront of its adoption, use and development.

So Canadians are making increasing use of mobile phone technologies and Internet-based services. But these are dependent on fast, reliable broadband access. The capacity of networks around the world is being strained due to the growing popularity of bandwidth-intensive applications such as video streaming, online gaming, peer-to-peer file sharing and other services.

There are two main schools of thought over how this problem can be resolved. The first consists of network providers who claim that prioritizing traffic from preferred or paying content providers would help alleviate congestion, fund network improvements and enhance innovation. On the other side of the coin, content creators and broadcasters argue that traffic should remain neutral, while consumers feel that they should be able to access the content of their choice.

Comcast and Bell Sympatico have both recently admitted to shaping their bandwidth traffic, affecting such popular peer-to-peer services as BitTorrent, Gnutella and Limewire.

These revelations, and the entire debate over net neutrality, raise important questions that are as relevant in Canada as in the rest of the world. Are these cases of prudent network management? Or are they examples of Internet service providers granting preferred access? Should service providers give priority to preferred or paying traffic? 

We are seeing another battle brewing in the United States over the 700 MHz frequency being freed up by the transition from analog to digital TV in 2009. Described by some as the “last beachfront property,” this wireless spectrum is coveted by telecommunications service providers because it can be used to distribute broadband content or to run mobile networks.

Google, which advocated for auction rules favouring open access, recently announced its intention to bid on spectrum when the auction gets underway in January 2008. It will be interesting to see if it is successful in its bid, and if other Web companies also join in the auction.

Two weeks ago, our Minister of Industry announced that Canada will be holding its own advanced wireless spectrum auction in May 2008. The government has decided to set aside 40 MHz of the 105 MHz of spectrum to be made available for new wireless entrants. In addition, Industry Canada will mandate tower sharing, as well as roaming for a minimum of five years and a maximum of 10, depending on whether the new entrants are regional or national players.

For many of you here, the spectrum auction has all the makings of another gold rush as lawyers and consultants will surely be in high demand.

Canadians will be watching closely to see if a fourth national wireless carrier, and maybe even a fifth, emerges from the auction.

Broadcasting

I have spoken at length about telecom, but I would also like to address broadcasting. As you would expect, our mandate here is different. Broadcasting is a powerful medium when it comes to promoting our national identity and reflecting our culture and society. 

There are two objectives that lie at the heart of the Broadcasting Act:

  • the predominance of Canadian content, and
  • full access by Canadians to the system, as participants in the industry and as audiences.

Clearly, we cannot leave these objectives in the hands of market forces alone. Regulation will always be necessary to advance them, however it must be as targeted and minimally intrusive as possible. Our job is to maintain a broadcasting system that is distinctly Canadian – a system that reflects the diversity of our society through its programming and by providing opportunities for participation in the industry.

This is why we are currently studying the New Media environment and its impact on the Canadian broadcasting and telecommunications systems. We are particularly interested in the new, unregulated platforms and services that deliver the same kind of content that has traditionally been broadcast on radio and television. We will issue a report in 2008 that will set out our findings, after which we will hold public hearings to explore the opportunities and challenges presented by New Media.

Industry consolidation

Today, Canadians have access to an incredible range of content – both Canadian and foreign – through the traditional broadcasting system and new technologies. With so many options, audiences are becoming more fragmented as they seek out content that appeals to their specific interests, and on the platforms that are most convenient for them.

Not surprisingly, the fragmentation of audiences has resulted in consolidation among broadcasters. Notably, we have witnessed mega-transactions between CTV and CHUM, Astral and Standard, Rogers and Citytv, and CanWest and Alliance Atlantis. These deals involve large ownership groups with a variety of media interests.

Vertical integration has also been characteristic of the industry as of late, as companies gather production, programming and distribution operations under one roof to maintain control of content rights.

Diversity of voices

A diversity of voices, and particularly editorial voices, is essential for a democratic society to function well.

The trend toward the consolidation of media ownership within the private broadcasting industry has raised concerns that the number of programming choices and independent sources of news and information may be reduced.

So the Commission launched a first-ever comprehensive review of its approach to media ownership, and the impact it may have on the diversity of voices. Our proceeding looked at three key areas:

  • the plurality of commercial editorial voices;
  • the diversity of programming choices; and
  • journalistic content.

A number of stakeholders shared their views on these issues at a public hearing in September. This proceeding will require us to balance the need for a diversity of voices with the need to foster an environment that lends itself to innovation and in which broadcasters can deliver the services and programming that will contribute to the objectives of the Broadcasting Act.

Since his arrival at the CRTC, our Chairman, Konrad von Finckenstein, has brought a renewed emphasis on four principles that guide us in carrying out our mandate. They consist of fairness, transparency, predictability and timeliness.

In keeping with these principles, any guidelines that may be developed as a result of our review should be simple, consistent and clearly articulated.

Streamlining our processes

Above and beyond the proceedings I have highlighted this afternoon, the Commission has been working on streamlining its processes. We are fully aware that the business world is a fast-paced environment and that delays can have a detrimental affect on companies. So we want to give our licensees and stakeholders a quick turnaround on our decisions, and yet give each matter the careful consideration it deserves.

How we process applications relating to transactions provides a perfect example of the progress we have made. Four significant transactions have recently come before the Commission for approval. In the past, it might have taken the CRTC up to seven months after the end of the public hearing to render its decision for each transaction.

Using a modified procedure, we were able to reach our decisions much more quickly. For example, we dealt with the CTV/CHUM transaction in 39 days, Astral/Standard in 32 days and Rogers/Citytv in 29 days.

In November, we held a public hearing to consider the CanWest/Alliance Atlantis transaction, and we expect to issue our decision within a similar time frame.

We also asked independent consultants to cast a critical eye on our broadcasting regulations. They evaluated each regulation to see whether it still fulfilled its original purpose, and recommended whether it should be kept, enhanced, streamlined or eliminated altogether.

Their recommendations have already provoked much discussion in various public forums. We expect that a sharp focus will be brought to bear on the recommendations relating to the cable and television sectors when the Commission reviews its policies for broadcasting distribution and discretionary services next year.

Conclusion

We are living in an era of convergence that is erasing the traditional boundaries that used to separate the telecommunications and broadcasting industries. Companies from both industries are now competing vigorously for customers by offering their own brands of wireless, home phone, Internet and broadcasting services.

There is no question that our principal challenge going forward will be to position our organization so that it is able to fulfill its separate mandates in a converged communications environment.

However this environment evolves, I can assure you that we will continue to seek ways to achieve the objectives of our legislation in the least intrusive and most cost-effective manner possible.

Thank you very much for your attention.

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This document is available in alternative format upon request.

Date Modified: 2007-12-11

 

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