There has been considerable attention paid in the media to the potential entry of Verizon into the Canadian wireless market and the impact on Canadian carriers. This blog is not about the Verizon debate, nor is it a piece for or against foreign ownership. Rather this blog is simply a plausible scenario about how increased foreign ownership and foreign competition may impact all sectors of communications and what options there are to address this likelihood in a way that benefits consumers and creators that rely increasingly on advanced broadband networks.
As the head of the Canadian Media Production Association I am interested in the evolution of markets as a result of more foreign entry because under the current regulatory system producers spend some $6 billion annually on production activity and as a consequence generate some 132,500 jobs. Ownership and creation of intellectual property from software to film, and all in between, is an important aspect of any digital economy and ensuring our policies support that outcome is of critical benefit to the system. Regardless of whether or not Verizon ultimately chooses to enter the wireless business in Canada, the door to increased foreign ownership in telecom has already been opened in part and one can assume increased foreign entry as a result in various sectors of the telecom market. But realistically it will be increasingly impossible to limit entry to carriage and not impact content. Technologically you cannot separate or assign distinct functions to communications networks anymore. When all networks are digital and broadband, the traffic carried over them and the apps they support all start to look the same. Moreover with broadband networks near ubiquitous in coverage and an open internet in terms of regulation, the broadcast and broadcast distribution business is already subject to competition from exempt entities like Netflix or Google. Again no value judgment, that just is how it is and one can assume how it will increasingly be. However in my view we are about to enter perhaps a prolonged period of trading not just in wireless licenses issued by Industry Canada but in broadcast licenses issued by the CRTC. Why? Because the largest domestic carriers are all vertically integrated to some degree into content and carriage. And as increased competition negatively impacts the market caps of licensed undertakings in Canada due to increased entry, Canadian carriers will seek (a) further liberalization of the foreign ownership regime to ensure a “level playing field” (b) more consolidation in Canada not only between broadcasters but between cable/satellite and IPTV broadcast distribution undertakings to achieve greater scale relative to foreign entities and (c) a reduction of regulatory obligations because foreigners are not “contributing to the system”. To me all these positions are now pre-ordained and obvious. The problem with the debate on our digital future right now is its occurring in a broader policy vacuum and yet this debate has incredibly profound implications for the whole communications industry. One way to look at this in to measure what benefits foreign ownership may bring to the market in general which is the test right now for permitting foreign investment. There is lots of debate about that in wireless but what happens when there is an acceleration in the trade in CRTC license which is likely to happen? How do we ensure widespread benefits in that case? I use the word “benefit” because it is the test not only used by the government in terms of approving foreign investment but is a regulatory term used by the CRTC to assess mergers and acquisitions of licensed entities under the Broadcasting Act. And since the CRTC has commenced a dialogue with Canadians on the future of broadcasting, consider this blog to be the first of many contributions to the debate.
- The CRTC should bring back the benefits requirement for takeovers/mergers on the licensed broadcast distribution (cable/satellite) side that address contributions to content and to broadband access and digital literacy before further consolidation or vertical integration is allowed to occur. The timing is right and the CRTC had planned to look at benefit policy anyways in the near-term.
- The CRTC should consider the role of broadband television (OTT/TV Anywhere) not just in terms of additional consumer choice it provides but its role and impact on the development of a digital economy in Canada; including re-evaluating the status or obligations of exempt broadcasters that nevertheless remain subject to CRTC jurisdiction;
That type of action by the CRTC would go a long way to ensuring increased benefits accrue to all stakeholders as the market evolves.