It would appear that Innovation, Science and Economic Development Minister Navdeep Bains has had enough. Enough of incumbent telecom giants claiming that more competition would be bad for consumers. Enough of CRTC Chair Ian Scott dismissing consumer concerns about the state of communications services. Enough of half-measures that fail to significantly move the policy needle and leave the government looking weak on an issue that is critically important to its innovation agenda. Yesterday, Bains took his most significant policy step to date to address telecommunications concerns by issuing a proposed policy direction to the CRTC based on competition, affordability, consumer interests, and innovation. The proposed policy direction will take several months to work its way through a defined legal process (publication in the Canada Gazette in early March, 30 days for public comment, 40 House of Commons sitting days before it can take effect), but should be operational by the summer.
The core of the proposed policy direction requires the Commission to consider how regulatory measures can be used to promote competition, affordability, consumer interests, and innovation by assessing the impact on seven goals:
the Commission, when relying on regulation, should consider how the measures used can promote competition, affordability, consumer interests and innovation, namely the extent to which they
i. encourage all forms of competition,
ii. foster affordability and lower prices, particularly when there is potential for telecommunications service providers to exercise market power,
iii. ensure that affordable access to high quality telecommunications services is available,
iv. enhance and protect the rights of consumers in their relationships with telecommunications service providers,
v. reduce barriers to entry and barriers to competition for new and smaller telecommunications service providers,
vi. enable innovation in telecommunications services, including new technologies and differentiated service offerings, and
vii. stimulate investment in research and development and in other intangible assets that support the offer and provision of telecommunications services
In addition, when relying on regulation, the Commission will be required to “demonstrate its compliance with this Order and should specify how the measures used can, as applicable, promote competition, affordability, consumer interests and innovation.”
The order of the seven goals represents an inversion of past policy, which emphasized investment over competition. Indeed, new policy measures to promote competition have been invariably greeted with warnings by incumbents that those measures could lead to reduced investment. The government obviously wants investment, but it is now more intently focused on consumer-related issues. Further, the call to encourage all forms of competition is clear rejection of prioritizing “facilities-based competition”, sending an unmistakable signal that the next wireless review should result in the entry of new competitors, including mobile virtual network operators.
What are the other implications of the proposed policy direction?
First, it signals that telecom policy will be an election issue in 2019. Wireless pricing, misleading telecom sales tactics, and an embarrassingly out-of-touch CRTC under Ian Scott have attracted significant media attention and are forcing the issue onto the political agenda. The Liberal approach to date on the telecom issue has been largely ineffective: the “step in the right direction” refrains are increasingly mocked, the referrals back to the Commission rejected, and their selection of CRTC chair viewed as a blunder. The proposed policy direction sends the signal that the government wants to prioritize alternative competition such as MVNOs, affordability, and consumer protection. Look for the other parties to jump in with their own proposals in the months ahead.
Second, the government is not buying what the incumbent telecom companies have been selling. Bell, Telus, and Rogers have tried to cast doubt on studies that consistently find Canadian consumers pay some of the highest wireless prices in the world. They have downplayed the reports of misleading sales tactics. They have implausibly argued that competition from MVNOs would harm consumers (an April 2018 letter from BCE CEO George Cope to Bains released under ATIP warns of “the damage that would be done to competition and consumers”). The government isn’t buying any of it, instead introducing a proposed policy direction that features policies that have been consistently opposed by the incumbents.
Third, the proposed policy direction will make a difference. When the last policy direction on market forces was introduced in 2006, Bell executives touted the move toward “fewer regulatory proceedings and minimally intrusive regulations.” In the years since, scarcely a proceeding has gone by where Bell has not raised it with the CRTC, cited it when asking the Commission to review and vary its previous ruling, referenced it in cases at the Federal Court, or relied on it when petitioning Cabinet to vary a decision. While that does not mean that every outcome is fully consistent with the policy direction, it requires the regulator to grapple with the issue and provides a ready foundation for potential reviews or appeals. With a proposed policy direction focused on competition, affordability, and consumers, those perspectives will become a more prominent part of the regulatory process that cannot be easily dismissed.
Fourth, the policy direction is aimed at the CRTC, but the Broadcast and Telecommunications Legislative Review panel ought to also pay attention. The BTLR is an independent panel, perhaps best illustrated by its decision to keep submissions secret for months contrary to common principles of transparency and open government. Yet if the panelists hope to see their recommendations adopted by the government in any meaningful way, policies that fail to account for affordability or consumer interests will be on shaky ground. Indeed, given that Prime Minister Justin Trudeau rejected taxes on Internet providers to fund Canadian content literally minutes after a committee recommended it, repackaging Internet tax proposals are unlikely to find a receptive audience. The committee is certainly free to establish its own policy priorities, but the government has made its priorities abundantly clear with its proposed policy direction.