The CRTC should celebrate its 50th birthday by giving up telecom regulations entirely
This year marks the 50th anniversary of the CRTC. Until the 1990s, the CRTC regulated Canada’s regional telecom monopolies as public utilities. Then it oversaw the transition from monopoly to competition in the provision of wireline voice services, starting with long distance telephony in 1992, and then opening up local telephone markets in 1997.
In March 2006, the Telecommunications Policy Review Panel found that “the Canadian telecommunications industry has evolved to the point … where detailed, prescriptive regulation is no longer needed in many areas.”
Unfortunately, 12 years later, the CRTC has shown few signs of restraint in its approach to telecommunications regulation. Rather, the regulator has shifted its attention from the retail side of the telecommunications market to the wholesale side, where it has implemented a variety of interventionist policies aimed at helping new entrants and resellers.
Wholesale-access policies were developed when local telephone markets were opened up to competition. The CRTC thought it would be difficult for new entrants to compete, so it established a regulatory framework allowing them to access the networks of the former monopolies at below-market rates.
But these policies failed to create facilities-based competition in Canada. Competitors relying extensively on mandated network access at artificially low prices did not build significant infrastructure of their own. If anything, network-access policies undermined new entrants’ incentives to build alternative facilities.
Canadians did end up benefiting from facilities-based competition in the wireline telephony sector, but this was thanks to cable providers, which started providing telephone services in the early 2000s. These competitors already owned their networks, and therefore did not need to piggyback on incumbent networks to provide telephone services.
The same kinds of policies have been used to stimulate competition in the broadband internet market. However, as in the case of wireline telephony, network-sharing policies have not encouraged the deployment of additional broadband networks, but instead encouraged the emergence of a large number of small resellers that would not be viable without the CRTC’s regulatory largesse.
Despite these questionable results, the CRTC recently doubled down on its embrace of network-access policies by requiring telecommunications carriers to allow resellers to access their highest-speed fibre-to-the-premises networks. The case here is even less compelling, as these networks do not rely on telcos’ legacy copper networks, and telcos have no inherent competitive advantage in deploying them.
Canada has a competitive broadband internet market, but this is despite mandated network-access policies, not because of them. (Again, we have the cable industry to thank.) About 96 per cent of Canadian households have access to download speeds of 5 Mbps, and 82 per cent of Canadians have access to speeds of 50 Mbps, which corresponds to the new aspirational target set by the CRTC in 2016.
What about the CRTC’s “Wireless Code,” which now allows consumers to cancel their wireless contract for free after two years? Well, wireless carriers have stopped amortizing wireless-device subsidies over periods of more than two years, a change that has often resulted in higher monthly fees for wireless customers. This exemplifies the failures of the CRTC’s “command-and-control” approach to competition: In an attempt to portray itself as “pro-consumer,” the regulator has actually reduced consumer choice.
Although the CRTC keeps looking for reasons to justify its existence, Canada long ago successfully transitioned from monopoly to competition. In this context, you may be wondering why exactly we still need a dedicated telecommunications regulator. The answer? We don’t.
In 2011, Denmark eliminated its regulator and abandoned centralized regulation in favour of self-regulatory agreements negotiated among services providers. This followed a decision to do away with the wholesale regulation of the wireless sector, which the regulator found was no longer necessary due to competitiveness of the wireless market, made up of four wireless network operators. The dedicated telecommunications regulator’s limited regulatory powers were transferred to the general Danish Business Authority.
Denmark is recognized as a top digital nation. It ranks fourth in the 2017 International Telecommunication Union’s Measuring the Information Society Report, which measures countries’ access to, use of, and skills in information-communications technologies. The Danish example shows that the presence of a dedicated telecommunications regulator is not the sine qua non of admissibility to the top ranks of digital nations.
As the CRTC celebrates its 50th year of operations and the federal government embarks on a review of the Telecommunications Act, now is a good time to reconsider the CRTC’s relevance. The truth is that a sector-specific regulator is no longer needed for Canada’s telecommunications sector, which is now mature and competitive. It should be treated like most other sectors of the Canadian economy, and regulated for the most part through general competition law.
Martin Masse is the author of the MEI’s new annual report on The State of Competition in Canada’s Telecommunications Industry, available at www.iedm.org.