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Privacy and Security
Transparency

CRTC Forum: Shaping Regulatory Approaches for the future

24 March 2011

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Message from the Chairman of the Canadian Radio-television and Telecommunications Commission

It is my great pleasure to welcome you to the National Capital Region to take part in what we hope will be meaningful discussions on modern regulatory approaches for the Canadian communications industry.

Our entire landscape has been shaped by an earlier era. Telecommunications over fixed land lines were operated, largely, by monopolist carriers. Broadcasters were granted access to the airwaves and, in return for this privilege, ensured Canadian access and content. Distinct statutes, the Telecommunications Act and the Broadcasting Act, regulate each activity.

Technological development, accompanied by economic, social and business changes, has made that view appear increasingly outdated.

In the face of enormous change, we have been confronted with dramatic challenges. How do we ensure that Canadians continue to have access to an evolving communications system and to broadcasting content that reflects Canadian culture?

And, while it now seems obvious, how do we recognize the complete convergence between “telecommunications” and “broadcasting”?

Finally, how do we ensure that the communications system benefits all Canadians? How do we foster the continued production and promotion of Canadian content, and Canadians’ access to that content in a global environment?

These are not simple challenges for us as regulators because we all need to ensure that there is a strong Canadian presence in a mobile, digital world. We all need to contribute to this great challenge and opportunity.

I thank you for your attendance and look forward to learning from you.

Konrad von Finckenstein, Q.C.

Introduction

Clearly, we now face a powerful convergence of ideas, technologies and economics that is leading to a fundamental re-shaping of the ways in which we act, think and relate to each other.

In 2010, the Commission described the converged communications system in Canada as increasingly consolidated, but also characterized by greater consumer choice operating in a global context.¹

Today, most Canadians are customers of one of the several large integrated broadcasting and telecommunications enterprises that together dominate the Canadian market. These companies offer a mix of broadcasting and telecommunications services that include traditional telephony, cellular, broadcast and on-demand television, and Internet. Some of these services are regulated, others not; some are tariffed, others are forborne; some are licenced, others exempt. At the same time, smaller providers including resellers, regionally-based companies, single service providers and “over-the-top” entities,² as well as public and community entities, offer various kinds of digital services to Canadians. These products, services, applications and content occupy a central place in the Canadian digital economy. The appropriate integration of these services is a matter of great importance to Canadians and is therefore a priority to the Commission.

The largest entities in Canada’s digital universe have their roots under rules designed to manage a transition from quasi-monopolies to a competitive marketplace, and have evolved. The companies have taken advantage of new flexibilities in the regulatory system to offer innovative products and services in direct competition with one another, with other domestic entities and with providers from around the globe. For example, the regulation of pricing and marketing for residential and business telecommunications services has largely been eliminated. In broadcasting, online activities are exempt from regulation, and a new group television policy will break down certain traditional silos.³

Serious challenges to the Canadian system have not been resolved. It is very possible that the proliferation of choice in content and services from around the world will erode traditional regulatory supports that were designed to further Canadian public interest. Moreover, access to advanced networks on fair, equitable, and non-discriminatory terms will be paramount in order that all Canadians participate in the digital economy.

Traditional approaches to regulation and tools developed under existing legislation will need to be revisited. For example, will a licensing regime in broadcasting that creates a regulatory “bargain” continue to be the most appropriate way to achieve public policy objectives in that field, or is a reliance on market forces to be preferred? How will the fragmentation of the industry affect traditional approaches used to generate direct and indirect subsidies? What is the best way to ensure that access to advanced networks is provided on affordable terms and as universally as possible? How will the public policy goals set out in legislation be achieved in the face of industry and technological convergence? Is Canadian legislation outmoded? How should we understand the manner in which the statutes governing the communications industry will evolve?

These are some of the questions. The CRTC Forum: Shaping Regulatory Approaches for the Future, it is hoped, will provide an opportunity to understand the broad trends in the communications industry, consider their implications and explore alternative regulatory approaches that may prove more effective over time in achieving policy objectives. Participants in the Forum are asked to pay particular attention to the themes outlined below.

Network Evolution

Telecommunications networks have undergone a dramatic transformation in recent years. There has been an evolution from public circuit-switched telephone networks to fibre-based transport and Internet protocol networks. Canadian consumers and businesses – particularly those in urban areas – have benefitted from access to increasingly robust services. The competitive impetus to use the Internet to provide services such as television or video security monitoring will likely lead over time to even higher transmission speeds based on fibre optic cabling to customer premises.

Very high access speeds are becoming available in Canada, as in other developed countries, through the deployment of fibre-based networks. “Intelligence” is being deployed through the core of access networks to optimize, for example, the delivery of video.
Similarly in the wireless sphere, successive improvements in data transfer speeds have made truly mobile Internet access available almost everywhere. In the future, access to the Internet through wireless networks will rival wired access for the delivery of all but the most bandwidth-intensive applications. These new, faster wireless networks will enable Canadian businesses, large and small, to achieve significant productivity gains as services move increasingly into the “cloud” – i.e., the world of distributed, Internet-based computing and data management.

The public interest in these networks takes many forms. Consumers depend on affordable telecommunications services to fully participate in Canadian society. The success of small, medium and large enterprises in the digital economy will depend in part on the openness, affordability and availability of the new networks. Cultural creators depend on the same considerations to create their works and provide Canadians with access to their content. Network openness and the rules and commercial relationships governing how networks interconnect will be critical questions moving forward.

Canada shares with relatively few jurisdictions a legacy of facilities-based competition between incumbent cable companies and incumbent telcos. Both of these previously discrete networks now compete with each other. A variety of companies also offer wireless and satellite alternatives. This diversity of communications channels and providers sets Canada apart from jurisdictions in which structural separation of access and services exists. Furthermore, the vast geography of this country seems to require different incentives and regulatory frameworks to encourage the roll-out of nearly-universal networks.

To what extent can market forces be relied upon to ensure openness, affordability and ubiquity of service? What types of targeted regulatory measures will be required in cases where market forces prove insufficient? The CRTC, for instance, has a longstanding policy of encouraging wholesale access to incumbent facilities to ensure sustainable competition for telecommunications services in Canada. Since 2006, the Commission has worked within the framework of government direction obliging it to rely as much as possible on market forces.⁴

The opportunities created by the new telecommunications networks, however, are not equally enjoyed by all Canadians. In some regions, there may be fewer competitors offering services than in the largest urban areas. Small and medium sized businesses in some regions and on some business campuses may have few telecommunications services to choose from. Some large enterprises may have a limited choice of providers.

There is also an issue as to how these new networks will be used by citizens and businesses to access content and services from an ever-growing number of providers. Capacity is not infinite. In 2009, the Commission established, as a foundation of non-discriminatory behaviour by network owners, a framework for Internet Traffic Management Practices.⁵ That framework encourages ISPs to mitigate congestion on their networks first through network infrastructure investment; then, via economic measures; and, as a final resort through the implementation of technical measures.

Mobility

The shift to greater mobile consumption of content and services presents opportunities and challenges. Since the introduction of digital wireless voice telephony in the late 1990s, the role of wireless has grown enormously. Wirelessly-connected tablet computers and smartphones from 2011 bear little resemblance to first generation cell phones. Voice and email have become just a few of tens of thousands of applications available on  modern handsets that now deliver audio and audiovisual programming, multiplayer gaming, social media, as well as video capture and sharing. Mobile commerce, location-based marketing, and machine-to-machine will add to spectrum requirements in the future.

As devices evolve and become easier to use, consumers and businesses will have progressively-higher expectations regarding access to content and services. The growing use of wireless for bandwidth-intensive broadcasting content – such as news, information and entertainment – as well as for innovative commercial use, has prompted regulators globally to pay particular attention to future spectrum requirements.

The multiple use of spectrum, including for broadcasting, voice telephony, public safety and fixed and mobile wireless broadband, enriches the public interest. Wireless communications have been identified as an enabler to a vibrant and competitive digital economy. The cultural content that flows through that spectrum serves equally important social goals. What remains to be seen is the extent to which wireless will provide greater choice in the marketplace to a broader group of Canadians and Canadian businesses.

 

The Cultural Challenge

Proliferation and abundance are the watchwords of the new digital economy. The digitization of content and services has had a profound impact on the communications landscape. Packed into digital containers, information has become easier to share and manipulate across multiple networks, and the uses made from that information have expanded apace. The interconnection of previously discrete networks has resulted in the global availability of communications services.

Digital distribution of broadcasting content, for example, has enabled a sophisticated array of choices for customers. Direct to home television, digital cable and IPTV networks have spawned such features as electronic programming guides, interactive television and creative packaging options including à-la-carte channel choices. Digital over-the-air television provides crystal-clear, high-definition viewing. The digitization of content has enabled multi-platform distribution.

In this new environment, virtually any device combination of user interface, networking capacity and CPU is a potential distribution platform for content or communications. The variety of devices on which content and services can be used has exploded to include mobile handsets, Internet-connected televisions, tablets, gaming consoles, media extenders and others. “Apps” have enabled this migration.

The latter half of the last decade witnessed rising viewership to alternative sources of content and growing use of over-the-top services, and the new decade will see even greater growth. Consumption of digital media is growing exponentially, and technological evolution will likely accelerate this trend. Business models will continue to evolve to meet changing consumer demands and respond to new opportunities in this dynamic environment.

Some analysts believe that the growing fragmentation of services and technology is leading to a decline in support of the creation and presentation of high-quality Canadian content. The potential for lost distributor subscription revenue and advertising dollars exists as consumers opt to acquire more content from the Internet. It will also be possible to view content from over-the-air television signals once the digital transition is concluded. Viewing and listening habits may even be replaced by other non-broadcasting activities such as gaming and the use of social networking sites, among others. This rapid evolution in consumer choice and consumption practices will challenge traditional methods of ensuring that there is a place for Canadian content in the broadcasting universe. Expenditure/exhibition requirements to buy and broadcast Canadian programming have served as important sources of support for Canadian content in the private system. Where these are reduced as a result of competition and fragmentation of audiences, there may be a need to find new mechanisms to support Canadian content.

Tangible benefits associated with broadcasting transactions have also served as an important way to fund public policy goals such as the reflection of Canadian realities, diversity, accessibility and other objectives. In a highly consolidated industry, tangible benefits may become less effective if the pace of transactions slows.

Future pressure on the effectiveness of contribution and expenditure/exhibition rules raises important questions. Canadian content in the private broadcasting system is generally supported through the Commission’s ability to impose conditions on licensees, expenditure and exhibition rules on programmers, financial contribution and carriage rules on distributors.
Where competitors in the same market operate without such obligations, however, licensed entities may be subject to a disadvantage. Restrictions, for example, on what content may be carried on regulated distribution undertakings seem increasingly out of step with an environment that features choice and openness.  There may be a need for greater flexibility. At the same time, a basic level of regulation may be appropriate for substitutable services.

In an environment of fragmentation, new approaches and tools will be required to meet the policy objectives set out by Parliament for Canada’s communication system. Promotion of Canadian content in a world of vastly expanded choice is likely to become more critical than ever. Protection of intellectual property, particularly copyright, will likely become a primary issue for technology companies, creators and distributors.

The private element of the broadcasting system does not operate in a vacuum. Public broadcasters play a central role in providing high-quality Canadian content that reflects Canadian values as well as ensuring a diversity of editorial voices for news content. Public broadcasters in Canada and abroad have served as leaders in extending traditional and multiplatform content to emerging distribution channels. Long-term approaches to ensuring the prominence and quality of Canadian production may increase the importance of public and community broadcasters as instruments of public policy. Local and regional programming will also be important, and community broadcasters may play a key role.

 

Consumer Choices and Voices

In this new environment of abundance and proliferation, communications products are becoming more complex, and consumers are eager to discover new sources of content and services – whether these are offered domestically or by providers globally.

Today, citizens are making their influence felt by using social networking tools. Increasingly, a consumer campaign can effect change in the communications landscape with respect to contract terms and pricing. In this context, regulators have recognized that consumers require information to understand complex products and make sound purchases. Transparency will likely become more important in the future as consumers navigate complicated terms and conditions for communications services. Enabling further competition and innovation in the marketplace may increasingly mean taking advantage of the Internet.

As an additional consideration, it will be important that all Canadians have access to these services, including those with physical or cognitive disabilities. New devices that offer access to broadcasting and telecommunications services are geared toward the mass market and may not necessarily take accessibility into consideration. Ensuring universal access will become more challenging as communications services are delivered to an even wider range of devices.

The future environment provides new opportunities to improve social well-being. It is now possible, for instance, to use over-the-top telecommunications services in lieu of traditional means to provide advanced emergency services. Social protections, such as guarding against content harmful to minors, or privacy assurances, will become more challenging in a fragmented environment. Digital literacy will grow in importance in the coming years.

 

Conclusion

Network evolution, rising mobility, the cultural challenge and greater consumer choices and voices are driving significant changes in the Canadian communications landscape. As citizens, creators and organizations, Canadians are rapidly adopting services and applications that meet new expectations and create new needs. As we move forward in the digital economy, critical considerations will consist of determining the most appropriate regulatory approaches to support the creation and promotion of high-quality Canadian content, innovation and affordability in a competitive environment; ensuring fair and non-discriminatory access to networks; providing sufficient spectrum resources to meet Canadian demands; and enabling citizen voices and social protections. Furthermore, all of these considerations will help to enable the digital economy.

The CRTC Forum: Shaping Regulatory Approaches for the Future is an opportunity to reflect on these considerations in the spirit of collaboration and with the prospect of influencing the future directions of our digital economy.

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Notes:

 

1 CRTC, Navigating Convergence: Charting Canadian Communications Change, February 2010

2 “Over the top” (OTT) refers to a service offering that does not depend on ownership of distribution facilities. Services such as Netflix, Pandora and Skype, for example, provide broadcasting and telecommunications services over third-party wireless and wired networks, largely independent of the control of those network owners.

3 For example, there will be less prescriptive regulation concerning how groups of television services allocate required spending on Canadian content.

4 Order Issuing a Direction to the CRTC on Implementing the Canadian Telecommunications Policy Objectives http://laws.justice.gc.ca/eng/SOR-2006-355/page-1.html

5 Review of the Internet traffic management practices of Internet service providers, Telecom Regulatory Policy CRTC 2009-657, 21 October 2009