Speech by Leonard Katz, Acting Chairman, Canadian Radio-television and Telecommunications Commission

To the National Symposium of the Law Society of Upper Canada

Ottawa, Ontario
April 27, 2012

Check against delivery

 

Thank you, Richard [French, Paul M. Tellier Chair on Business and Public Affairs, University of Ottawa].

It’s a pleasure to have been invited to share my views on Hank’s [Intven, McCarthy Tétrault] paper.

Before I do that, I’d like offer Hank my congratulations on the recent publication of the first edition of the Canadian Telecommunications Regulatory Handbook. I keep a copy on my desk and refer to it regularly. It’s become known as the “black book” around the Commission—a name that’s inspired, I hope, by the cover and not because people think that telecommunications regulation is a form of black art.

The paper Hank presented this morning sheds some light on the major developments that have shaped the industry in recent years. Since I agree, for the most part, with his assessment, I’d like to comment on the trends identified in the second half of the paper.

Reliance on market forces

If I had to rank them in order of importance, with the most important trend providing the greatest net benefit to Canadians, the shift from intrusive economic regulation to a reliance on market forces would be at the top of my list. Over the past decade, the CRTC has gone to great lengths to support a competitive marketplace and to give service providers the freedom to innovate.

Our approach to local telephone markets fits squarely in this objective. Until a few years ago, this was the last major telecommunications market that was still regulated. Today, over 80% of residential lines and 70% of business lines are now deregulated.

We are also in the process of introducing local telephone competition in the North, as well as in rural and remote areas. The incumbent companies will still need to offer basic telephone service to residents, though they can now meet this obligation using wireless technology.

Canadians in deregulated areas have an unprecedented choice of innovative services at competitive prices, and service providers can quickly respond to changing market conditions.

Despite these positive steps, there are small pockets across the country where there is little incentive for competitors to offer their services. These areas will continue to be regulated for the foreseeable future in order to protect the interests of local telephone subscribers.

You can see how this situation is less than ideal from a business or consumer perspective. It would be far more efficient for a service provider to roll out a province-wide advertising campaign instead of only in select markets. Customer service representatives would simply need to be trained on the latest offers, and not have to worry about the different rates and plans in regulated areas. And consumers in these areas would benefit from deals that otherwise would not be available to them.

Perhaps there are ways to expand the forbearance regime, such as by using a nearby competitive market as a proxy. This would allow a large telephone company to change its rates in the regulated market to match those offered in an adjacent market.

The competitiveness of the telecommunications market—including local and long-distance telephone, wireless and Internet—has meant that we have been less and less involved in the regulation of retail services. We can’t escape the fact, however, that the Canadian market is concentrated in the hands of relatively few players. The five largest telephone and cable companies earn more than 80% of the total revenues.

To promote more competition and more investment in network infrastructure, we established a framework for wholesale services. Large companies must give their smaller competitors access to essential services, including interconnection and 911 services, under terms and conditions approved by the CRTC. In addition, as Hank mentioned in his paper, this policy was notably applied in the proceedings involving wholesale high-speed access services.

We will continue to take on an active role in wholesale regulation until such a time as there is sufficient facilities-based competition. As a result of the essential services decision, we have deregulated more than a third of wholesale services.

I expect that we will be able to go even further in the next few years if independent wireless and satellite Internet services become viable substitutes. There are some in the industry who disagree with this view, but there is at least one person on this panel who agrees with my economic theory. In a recent interview, Hank said that wholesale markets should be deregulated as they become competitive, and it’s only a matter of having three or four suppliers of wholesale carriage facilities in each market.

The shift to an ex post regime goes hand-in-hand with an increased reliance on market forces. Under this regime, parties have much more leeway to negotiate commercial arrangements. Off-tariff rates are an example of the kinds of arrangements they can strike. Of course, parties can make use of the CRTC’s dispute-resolution process if negotiations are unsuccessful.

Several countries are looking at the role of the communications regulator in a converged and digital environment. Last December, Australia’s Convergence Review Committee issued an interim report containing its preliminary recommendations. The report states, among other things, that the regulator should have the flexibility to apply self-regulation and co-regulation. It should also have sufficient powers to encourage compliance with its rules.

In Canada, we have the Commissioner for Complaints for Telecommunications Services. This consumer agency is charged with resolving disputes between residential and small business customers and their service providers. We would like to make greater use of self-regulation and co-regulation as we continue down the path of deregulation. We also support having a range of enforcement tools to ensure competition and innovation can flourish in an environment where there are fewer prescriptive regulations.

Internet and wireless services

The next trend I want to highlight is the growing prominence of Internet, wireless and mobile Internet issues. It’s hardly surprising that Canadians are taking a keen interest in the services that are serving as the foundation of an innovative digital economy.

Canada is one of the most connected countries in the world: 95% of households have access to broadband Internet services through telephone, cable or fixed-wireless networks. Given the vast size of our country and dispersed population, ensuring that all Canadians can benefit from the digital economy is one of our key challenges.

In 2010, the CRTC directed the large telephone companies to spend over $420 million from their deferral accounts to extend broadband Internet service to 287 rural and remote communities. The companies recently gave us an update on the status of their initiatives, and we will continue to monitor their progress.

Canadians are some of the heaviest Internet users, both in time spent online and in the consumption of digital media content. To ensure they can take full advantage of digital opportunities, we set a national speed target for broadband Internet services. By 2015, we expect all Canadians—regardless of where they live—to have access to download speeds of at least 5 megabits per second (Mbps) and upload speeds of 1 Mbps.

Already, 80% of households have access to download speeds of 5 Mbps and above. We are confident that the industry will respond to consumer demands for faster Internet connections in all areas of the country.

Last fall, for example, Xplornet Communications launched a next-generation satellite to provide faster Internet services to rural Canadians. It is preparing to launch another one this summer. The company is also partnering with Shaw Direct to offer television and high-speed Internet service bundles to rural Canadians. These initiatives reinforce the fact that satellite technology is gaining traction in the market.

We are working with the industry and our government partners to obtain accurate and up-to-date information on broadband speeds in Canada. Our annual Communications Monitoring Report will provide an update on the industry’s progress.

It’s only a matter of time before mobile broadband connections rival wireline Internet services. Canadians are buying smarthphones and tablets in droves. These devices will only become more popular with each new generation.

The government’s rules for the next spectrum auction are designed to improve broadband access to rural Canadians. I was encouraged to see that companies that purchase more than one block of the 700 megahertz band will be required to deploy services to 97% of their coverage area within seven years.

Of course, broadband Internet services are only useful if people are using them. Another key challenge for policy-makers will be to ensure that these services are affordable and that Canadians possess the necessary digital literacy skills.

Social measures

Although regulation should not act as a roadblock to greater choice, competition and innovation in the communications industry, some rules are still needed to protect consumers.

As Hank pointed in his paper, the CRTC has been given enforcement powers to oversee the National Do Not Call List and its associated telemarketing rules. Canadians have registered over 10.7 million numbers in order to reduce the number of unwanted telemarketing calls they receive.

Based on the complaints submitted to us by Canadians, we have taken a number of enforcement actions to encourage telemarketers to follow the rules. In some cases, we imposed significant penalties to send a strong message that certain practices are not acceptable and will not be tolerated.

We will continue our outreach activities to ensure telemarketers are familiar with the rules and to bring into compliance those that break them. We will also continue to play a leadership role within the newly created International Do Not Call Network to facilitate enforcement activities across different jurisdictions.

At the same time, we are ramping up to enforce certain provisions of Canada’s anti-spam legislation. Once the law comes into force, the CRTC will investigate violations in the three areas:

We will work with partners, both in Canada and abroad, to take action against abuses that threaten to undermine consumer confidence in the digital economy.

Consumer concerns

This brings me to the last trend: an increased focus on consumer concerns.

This trend could easily have been placed higher on my list, as I think it’s essential for a public organization to be in tune with the concerns of the public.

In addition to the pro-consumer measures identified in Hank’s paper, the CRTC is exploring whether it should play a role in the development of a national code for wireless services. A number of stakeholders have suggested that the patchwork of provincial legislation in this area creates an inefficient environment for service providers and consumers.

The CRTC has not regulated retail wireless services since the mid 1990s. To do so now, we would need evidence that consumer interests are not being looked after in the current marketplace. Interested parties have until May 3 to submit their comments.

On the topic of public proceedings, we want to ensure that we receive a broad cross-section of perspectives. Since 2009, the CRTC has held five online consultations to call attention to issues that affect consumers directly.

Public-interest and consumer groups will soon be able to apply to a new fund to help offset the costs of participating in our broadcasting proceedings. The Canadian Broadcasting Participation Fund will support research, analysis and advocacy of issues related to our proceedings. In addition, Canadians who wish to appear at a public hearing can do so by videoconference from one of our regional offices.

Social media are transforming the ways in which citizens interact with public organizations. Consumers are not afraid to use these channels to voice their displeasure when they feel their interests are not being recognized. How can organizations make better use of social media to engage Canadians and build public awareness of their mandate? That’s a question many organizations are asking, the CRTC included.

Conclusion

I’ve covered a lot of ground over the last few minutes, while only scratching the surface of Hank’s paper. The trends I’ve discussed all point to the need for a regulatory approach that reflects changes in technologies, the industry and consumer expectations.

The CRTC will continue to promote a healthy and competitive communications system that benefits Canadians, and put in place the conditions that will encourage innovation. This will be achieved by reducing regulation and carefully weighing the need for any new regulation. I’m sure this is music to Hank’s ears since he will save on printing costs for the next edition of his regulatory handbook. That being said, we will maintain those regulations that are in the public interest.

To give everyone a clear understanding of our priorities, we will publish next week a three-year plan for 2012-15. This plan will outline the main proceedings and activities we will undertake as they relate to broadcasting, telecommunications and compliance and enforcement. It will also provide details of the organizational improvements we have planned, as well as how we intend to improve our outreach to stakeholders.

Thank you.

 

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