Is it time to set some policy priorities for communications? Or is it too late?

With the election over with, there will be some debate and discussion around the priorities of the new Liberal government with regard to shaping communications and digital policy. I suspect that, perhaps with the exception of more funding for the CBC, and a few other election promises, communications will not be an immediate priority for the transition team or for Cabinet. Its not that communications/digital policy is not relevant, whether in respect of competition and choice, price, culture, accessibility, economic growth, innovation in IT or jobs. It is. Its just these things are not seen, politically, to be broken enough, particularly on the carriage side, to merit immediate attention. These generally never are seen that way, which may be why policy in communications so often seems ad hoc, and policy issues more often than not, are driven out of the CRTC.

I read an commentary recently by Greg O’Brien in CARTT about it being time to reconsider the need for a Department of Communications. While a worthy point, that may be putting the cart before the proverbial horse. Clearly a healthy communications ecosystem can contribute to economic growth, innovation and inclusiveness, and, insofar as digital economy issues are concerned, there is still no coherent vision, years after a promised review of digital economy issues. Perhaps having one Department could ensure more focus and more coherent policy. But even if that was the case, are current statutory definitions of communications (broadcasting, telecommunications) broad enough to address policy issues in a broadband era?

It also seems, that in order to reach a conclusion that a single or integrated Department is a good idea, relative to the status quo, you first have to accept that issues related to content and carriage, have become so entwined as a result of “convergence” and vertical integration that you cannot make good policy without more consideration of the impact of carriage issues on the development and delivery of content, or vice versa. That seems valid in terms of vertical integration or market power across platforms, including the Internet, but not necessarily for numerous issues that are readily handled by the CRTC today. And maybe one Department is a good idea but will it be prone to sacrifice important policy issues on the content side because of a current focus on pressing carriage issues or vice versa? That would be sub-optimal.

However its also fair to point out that some of the most influential papers and policy ideas on the evolution of modern communications policy came out of the early days of the Department. And these ideas helped shaped much of the debate around competition into the early 1990’s.

But for those of us inside and outside government in the 1980s and 1990s that were involved in decisions to promote increased competition and choice, the Department of Communications always seemed, at that point, like an impediment to change and greater reliance on market forces; seemingly anchored on one side by the belief only the phone companies could manage telecommunications, and hobbled on the other by perceived biases in favour of culture over profit. To many, the shift of economic regulation to Industry Canada was seen as a positive move.To be fair the problems that lead to the break-up of the Department may have had more to do with the times and/or simple bureaucratic inertia and regulatory capture than with a fundamental problem of organizational structure, but it does beg the question as to whether a return to the past is the best answer to the future.

One thing to think about is whether,and to what degree, an integrated department will be the best way to resolve often distinct issues related to content and carriage? Since the breakup of the department of Communications, most carriage/telecom issues have been, or at least could be, adequately dealt with by the CRTC, under economic forms of regulation pursuant to the Telecommunications Act, that have focused on access, on consumer price and choice, on incentives to invest, restraints on market power and greater reliance on markets etc. So is change from the status-quo critical from a telecom or carriage perspective? And if so how do you exercise policy guidance on big issues  any better than we do today under bifurcated policy direction from Industry Canada and Heritage?

Regardless of organizational structure, my bias would be to get to a point where we can be again as focused on broader content and intellectual property issues, as much as we have been on access to broadband networks and consumer price. Arguably, the creation by, and ability of Canadians to exploit intellectual property, is threatened by disruption and that could result in lower economic and social  returns to the economy. And by content, I mean more than  on “broadcasting”, since the real convergence occurring today is not between network and content but between content industries as a result of broadband/Internet.

On the content side,(and with apologies to the ICT community which is another important part of the network ecosystem), addressing the impact of change is now perhaps more, or at least as, important/critical in terms of a sustainable content business ecosystem, than on the carriage side. The Internet has disrupted all content-based businesses and while “supposedly” it has done away with concepts of scarcity in the short run, that formed,in part, rationales for regulation and intervention, particularly in broadcasting, it has also resulted in new issues of market power that extend well beyond vertical integration by Canadian carriers, and that should have proponents of network neutrality at least a little concerned.

While there is a current abundance of content, due to a fight in the old and new distribution businesses for market share, what is also happening is that the of viability of creators and businesses producing content for film,TV,music, newspapers and magazines is under siege by new streaming services that are driving the returns on content towards zero. This in turn is raising legitimate concerns about the sustainability of independent creators and national enterprises in the face of the emergence of transnational players that are dominating, global and domestic platforms for distribution over broadband. The consequences of this are two-fold. First there is an increase in market power as walled-gardens become a primary source of content distribution over broadband. Second the ability to produce high value content is coming into question because, in the longer run it is hard to identify viable business models for the production of said content, given the returns to creators. Any discussion of the impact of this shift, in terms of Canadian communications policy should transcend debate around, one form of content like broadcasting and look, rather, at the importance of creative industries, and the intellectual property and jobs these create, from both a social and economic sense.

Arguably then, the degree of vertical integration that arises when owners of carrier networks, or increasingly walled-gardens, can control/exploit access of content creators or providers to large audiences, and through that control what intellectual property is created and monetized, does require more convergent thinking when it comes to policy. This type of control of access often now transcends current definitions of carrier and the Telecommunications Act even though issues of market power can arise in both circumstances.

There are other related, issues in addition to vertical integration, that also transcend distinctions between content and carriage. The first is the application of regulatory rules broadly defined, to national and transnational players. There is in the communications sector a bias that suggests traditional network enterprises, particularly those that are vertically integrated are too big and their behaviour needs to be regulated in order to limit opportunities to abuse market power. That’s not unreasonable, but the converse has been that big, often bigger, Internet-based players are perceived as more innovative and don’t have to play by national rules because these entities create more competition and are net good for consumers. The problem is that many of these players can exercise as much market power in communications, as “incumbents”.

The open Internet/World Wide Web that led to a hands-off approach, may still be alive in some respects, but increasingly a few multi-billion dollar enterprises are controlling how consumers access content in ways that may become the very converse of “open”. And increasingly many trans-national corporations in all sectors, not just communications, are finding ways to avoid basic tax and other obligations that apply to national incumbents, potentially undermining local businesses/employers that are subject to more stringent rules. This does beg the question as to why some multi-billion dollar enterprises must be regulated, while other even bigger multi-billion dollar enterprises get a pass. and it may have very real consequences for local economies and jobs.

Another critical convergent policy issue that needs some attention is the issue of foreign ownership and control. Critics of vertical integration or market dominance in Canadian communications point to restrictions on foreign ownership as the reason Canada is “less competitive” than other jurisdictions. Often in the past there was some political sympathy for liberalizing on the telecoms side of communications, but that was always tempered by a concern if you liberalized on carriage that would ultimately lead to liberalizing broadcasting as well because of convergence and cross-ownership. That was seen as sacrificing too much sovereignty on cultural and political matters. The irony today is that the CRTC and government effectively have now allowed foreign entry into broadcasting, when it was decided not to regulate streaming services, including the largest walled-gardens, online. So perhaps getting rid of the ownership rules and then treating/regulating all significant  players in national markets in the same fashion could be a better alternative to where we are today, than maintaining rules and restrictions that we are not prepared to enforce. It is at least debatable that you can achieve many of the objectives related to Canadian ownership and control indirectly through regulation, even if some of the regulated entities are not Canadian.

And one last big policy issue that relates to all of this. All that I have suggested assumes government retains the power to exercise some modicum of control over issues of foreign ownership, regulation of operations of broadband-based trans-national entities, intellectual property, and public support to achieve economic, social or cultural objectives. But maybe under trade deals like the TPP, the ability to develop domestic policy in communications, if government sees that to be in the public interest, may be circumscribed to a degree that makes a national digital strategy, or even a national Department of Communications somewhat unnecessary and redundant.

So while communications may not be a big priority right now relative to other platform promises made by the new Government, there are still very big issues to address and maybe less time than we think to address them, if we want to help Canadians derive value out of intellectual property and incent creative jobs and futures for the next generation, amongst other priorities. Getting traction on ways to address these issues much more holistically, is the next step. How to do that is the big question. and that may be where Greg’s idea has real merit. Maybe rather than another expert tribunal, leaving recommendations on bureaucratic shelves, setting up a Department to both review and distill ideas into policy and then implement such through direction or direct action may actually create results. That may create the right incentives to act.

 

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