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Speech

Notes for an address

by Konrad von Finckenstein, Q.C.

Chairman, Canadian Radio-television
and Telecommunications Commission

to the Eighth Annual Conference of the International
Institute of Communications, Canadian Chapter

Ottawa, Ontario

December 1, 2008

(CHECK AGAINST DELIVERY)

Thank you very much. I'm happy to welcome you all to our conference.

I'm standing here in a double capacity as President of the Canadian Chapter of the IIC and Chairman of the CRTC.

Putting on my CRTC hat, I'd like to welcome some people who have worn it before me. We have here today six former Chairs of the Commission: Pierre Camu, John Meisel, André Bureau, Françoise Bertrand, David Colville and Charles Dalfen.

I'm very pleased to have them here with us. This year the CRTC has been celebrating its 40th anniversary as the regulator of broadcasting. Last month at the CAB convention we heard from André Bureau, the Chairman of Astral, who gave us a very eloquent and elegant summary of the Commission's work in broadcasting over those 40 years.

In 1976, the CRTC also became the regulator of telecommunications, under the Telecommunications Act. The Commission has thus had a dual mandate for 32 years.

I hardly need to tell you that in recent years telecommunications and broadcasting have been converging—not only in terms of technology, but also in terms of the companies.

However, the two regulatory structures remain separate, set out in different statutes and based on fundamentally different concepts.

Convergence at the CRTC

I think it is inevitable that the convergence of telecom and broadcasting will also take place, sooner or later, in the area of regulation. And I hope it is sooner rather than later. This has happened in other countries and it will happen here as well. Technological, economic and cultural evolution require it.

In the meantime, administratively, we are taking a converged approach to our regulatory activities to the greatest extent allowed by legislation.

We realigned the structure of our organization so that we can deal with convergence in the industry as intelligently and effectively as possible. It also helps us position ourselves for the legislative reform that is bound to come.

For example: Last month we held a public hearing on accessibility issues. We are looking for ways to ensure that Canadians with disabilities will not be discriminated against in gaining access to communications services—whether in broadcasting, telecom or New Media.

While we've been dealing with these structural issues, we've also had a very busy time with our normal activities. I'd like to review the year briefly, starting with telecommunications.

Phase II costing

First, Phase II costing. Regulated companies are required to follow prescribed methods in costing their services for inclusion in their submissions for regulatory approval of their rates. Phase II costing is concerned with the prospective incremental costs of new telecommunications services.

In February, after an extensive review, the Commission issued its decision on changes to its Phase II costing methodology. The revised framework specifies for all companies a standardized method of applying expenses, including the allocation of indirect costs. It also simplifies the reporting requirements, which will reduce the burden on the companies.

Essential services

In March, we addressed the issue of wholesale services. Since 1997, incumbent telecom companies have been required to provide to competitors a set of essential services at mandated wholesale prices. This ensures that new competing entrants can offer meaningful competition, to the ultimate benefit of consumers.

Two years ago, the government issued a Policy Direction which instructed us to give market forces the greatest possible latitude, and to intervene only in cases of market failure. It also asked us to review the full range of mandated wholesale services, to ensure they do not provide disincentives to innovation and investment in competitive network facilities.

Our new framework classifies existing wholesale services into six categories:

  • First, interconnection services. These allow competitors access to facilities that enable their customers to call customers of a different service provider. 
  • Second, the public good services. These are mandated because they provide important social benefits to Canadians, such as safety or accessibility.

Neither interconnection nor public good services were ever really in question during the proceeding. All parties agreed that these two categories should continue to be mandated.

  • Essential services make up the third category. Services are considered essential if the firm controlling them could use its market power to prevent or lessen competition, and it is not practical or feasible for competitors to duplicate their functionality.
  • Fourth, we have conditional essential services. These currently meet the definition of essential, but with one difference: There is a possibility that before the new framework is reviewed in five years, new technologies may become available that can provide an alternative functionality.
  • We have called the fifth category conditional mandated non-essential. These services do not meet the criteria for an essential service, but they are mandated because they are closely linked to conditional essential services.
  • Finally we have the services identified as non-essential, subject to phase-out.

To get an idea of the scope of our plans to deregulate, let's set aside the first two categories of interconnection and public good services, which everyone agrees should continue to be mandated. Of the previously mandated services that remain, about 60% will be deregulated gradually over the next three to five years.

National DNCL

This year, we launched an initiative that definitely ranks as one of the CRTC's greatest hits. The National Do Not Call List went into operation on September 30. Canadians can register their phone numbers on the list, at no charge, in order to reduce the number of unwanted calls and faxes they receive from commercial telemarketers. And Canadians have responded with enthusiasm: Already about 4.5 million numbers have been added to the List. This service was established without creating additional costs for the government.

Compliance with the rules of the List, and action against violators, are concerns that will occupy us in the coming year.

CAIP application

Another major issue was raised through an application from CAIP—the Canadian Association of Internet Providers. CAIP has a number of members who resell Internet services that they buy from Bell Canada.

CAIP asked that Bell cease the traffic-shaping practices that they adopted—practices that slowed down certain types of network traffic at certain times. CAIP said this impaired their members' ability to serve their customers effectively.

In our decision last month we denied CAIP's application—although we did require that Bell notify its customers at least 30 days in advance of making such changes. We determined that Bell's restrictions were not discriminatory, since they applied equally to its own retail customers and the customers of CAIP members. Bell acted to protect the integrity of the network in response to congestion produced by peer-to-peer file-sharing applications.

Our decision, however, addressed only this one specific case, involving one particular wholesale service and one particular technology. There are broader questions that have to be addressed urgently on the general subject of Internet traffic management. In the trade, this is often loosely referred to as “net neutrality.”

So we have launched a proceeding on the subject of traffic management, leading up to a public hearing in July. It will deal with the current and potential traffic management practices of all Canadian Internet service providers (ISPs), with respect to both retail and wholesale services.

We will be asking this question: “At what point do traffic management practices cross the Rubicon into unjust discrimination or undue preference?”

The Telecommunications Act specifies that a carrier shall not control the content or influence the meaning or purpose of telecommunications unless the Commission approves otherwise.

So we will also ask what criteria the CRTC should apply in deciding whether to authorize ISP intervention in network traffic.

Decision on BDUs and discretionary services

We have also taken significant action this year on the broadcasting side. A month ago we released our new regulatory policies on broadcasting distribution undertakings (BDUs) and discretionary programming services.

The players in the broadcasting industry will need a maximum of flexibility to allow them to respond to the challenge of New Media. Our new policies provide that flexibility. Here are a few of the highlights:

  • We simplified the packaging rules, giving more flexibility to BDUs and more choice to their subscribers. At the same time we preserved an overall preponderance of Canadian services at the subscriber level.
  • We replaced three classes of BDU licence with one. And we have issued a single exemption order to cover all BDUs with fewer than 20,000 subscribers.
  • We opened up the genres of mainstream news and mainstream sports for competitive applications, and we will consider opening up other genres when competitors show that this can be justified.
  • We denied the request of over-the-air broadcasters for a general fee-for-carriage to be paid by the BDUs that deliver their programming.
  • However, we granted their request for the right to consent to the use of their distant signals by the BDUs, and the right to be paid for them.
  • And we have established a Local Programming Improvement Fund to help smaller-market stations, especially in the news area. It will be financed by increasing the Canadian programming contribution of licensed BDUs from 5% to 6% of their gross revenues from broadcasting.

The year to come

As for the year to come, it will also be a busy one at the CRTC.

  • As you know, we have done extensive research through our New Media Project Initiative. In February, we will follow up with a public hearing on broadcasting in the converged New Media environment. We will be re-examining our present New Media exemption.
  • We are conducting a public process on the idea of using local availabilities and video-on-demand for targeted advertising.
  • Another public process deals with the definition of video-on-demand. We would especially like to clarify where VOD ends and specialty linear programming begins.
  • As I mentioned, we will be holding our public hearing on Internet traffic management issues.
  • And we have the public hearings for the major broadcasting licence renewals coming up: the private TV groups in April and CBC/Radio-Canada in September, with specialty and pay services to follow in early 2010.

IIC Conference 2009

We at the CRTC hope to have an opportunity a year from now to share our findings on New Media and Internet traffic management with our colleagues from around the world. This group—the Canadian Chapter of the IIC—would be the host in Montreal for the IIC's 40th Annual Conference and Regulators Forum.

It should be an exciting event. At the Forum we can expect a productive exchange of ideas among regulators at a particularly interesting time in the world of communications.

We should use this opportunity as a showcase for Canadian industry, technology and regulatory expertise.

Now let's turn our attention to the very expert and distinguished speakers and panellists who have agreed to join us this evening and tomorrow. I know we're all looking forward to hearing from them.

Thank you very much.

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This document is available in alternative format upon request.

Date Modified: 2008-12-01

 

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