Speech Article from  Canadian Radio-television and Telecommunications Commission

Archived - Jean-Pierre Blais to the Vancouver Board of Trade

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Vancouver, British Columbia
November 6, 2014

Jean-Pierre Blais, Chairman
Canadian Radio-television and Telecommunications Commission

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Good afternoon.

I am sure you would agree that communication technology has undergone a radical transformation over the last few years. The emergence of new devices is but one example of the astounding rate of change. We now have a world of information and entertainment in our palms, pockets and purses.

Chances are, you have given little thought to the infrastructure that enables these devices to function, or the complex retail and wholesale regulatory frameworks that allows various players to operate fairly. 

Communication devices are so much a part of our daily routines, we simply want assurance they will be there when we need them to do our jobs, stay in touch with people who matter, discover what’s happening in the world, or call for help in an emergency. And we want these and other communication services to not only be reliable, we also want them to be affordable.

Commission’s role

You don’t have to give these issues a lot of thought. Because that’s our job at the CRTC. It is a job we do with you and for you.

Our mandate is to ensure that Canadians are at the centre of their communications system: whether as consumers of communications products and services . . . creators and distributors of content . . . or citizens who need access to information to engage fully in a democratic society.

It is our job to ensure Canadians have access to a world-class communication system.

Adapting to change

Theoretical physicist and cosmologist, Stephen Hawking, observed, “Intelligence is the ability to adapt to change.”

So you might ask: How do we ensure the outcome Canadians expect of us at a time of relentless technological change? How do we go about doing our job when we can’t just rip a page from a pre-existing playbook? How do we ensure that it will reasonably turn out “OK” when we do not have a time-travel machine to check out the future?

Today, I would like to speak to you about how we are adapting to change in light of this unprecedented digital disruption in the field of communication services.

Not our first spin around the block

The first thing to remember is that although the current disruption may be unique in some respects, the CRTC has a long history of enabling Canadians to capitalize on change.

Some of you may be old enough to remember the days when, if you wanted telephone service, your options were Bell Canada…or Bell Canada—or, here in the west, B.C. Tel.

You may also recall that the only way to get your hands on a phone, and we’re talking about land lines now, was to rent the equipment from those same companies. You didn’t have the option of buying your own device.

In those days, long-distance calls were a luxury—or strictly for family emergencies—as the rates were so high. Five-cent-a-minute plans would have been inconceivable to a consumer in that era.

A lot of people probably don’t remember that it was the CRTC that stepped in and deregulated—not regulated—the industry to increase competition in the marketplace. Because that was, and remains, in the public interest.

Today, over 90% of telecom revenues in this country are not subject to CRTC regulations and tariff approvals. Thanks to these decisions, Canadians now enjoy more competition, better service and reduced costs—such as lower local and long-distance telephone rates.

Things most Canadians probably take for granted. They assume that it’s the result of what Adam Smith called the market’s invisible hand when, in reality, it is the result of sound public policy combined with the private sector’s investments and innovation. It was as a result of the very visible enabling hand of the regulator.

Given Canada’s vast size and diverse geography, this should be viewed, for the most part, as a success story.

Sky not falling

I use these examples to make the point that we have been able to adapt to relentless changes in the world of communications—and derived benefits for Canadians—because we have approached these developments in a responsible, measured and intelligent way.

We don’t react to every fad or buy into the hype when people claim the sky is falling and that all things good and Canadian will come to an end if we don’t cling to the security of the status quo.

I’m not exaggerating. It wasn’t that many years ago that Canadian firms were warning of “death stars,” their rhetorical hyperbole to describe direct broadcast satellites that could broadcast signals across Canada. This would create competition for incumbent cable companies that had pretty much sewn up the market. The big players wanted us to regulate these threats and lobbied hard to protect their turf.

Well, the sky didn’t fall and U.S. satellite firms did not commandeer our airwaves. In fact, Canadian businesses like Bell ExpressVu and Star Choice obtained CRTC licences, made major investments and launched their own direct-to-home satellite services soon after.

The launch of satellite television services in Canada meant we now had technologies that served Canadians in remote corners of the country—beyond the reach of cable—and provided a competitive alternative in areas traditionally served by cable monopolies.

Thanks to a so-called threat to the cable industry, we were able to encourage the growth of Canadian businesses, help create job opportunities and investments in Canada, offered more marketplace choices for consumers and supported the production of content made by Canadians creators. The advent of more competition also led to less regulation in the cable industry to allow it to compete.

Tipping points and other fads

In the interest of time, I condensed the satellite story to its bare essentials. The path was somewhat more tortured than the beginning and the end I summarized. But, the lesson to be drawn is that the CRTC will not find wise counsel in the rhetoric of today’s pundits and incumbents who have created new technological “death stars” to scare the regulator into action or inaction. Nor should we embrace knee-jerk solutions to complex problems.

Today, some are pointing to a different threat. Some say that all audiovisual content is moving online and Canadians are cutting the cable cord at record rates. Many also add that there is no more role for broadcasting and telecommunications regulation. Some people believe that TV is at a tipping point. “OTT” or so-called “over-the-top television” is the new buzz word, which is language that only makes sense to a nostalgic incumbent. It means nothing to someone who is just looking for good content, content that speaks to them.

Let me bust a few myths. Yes, some companies are losing subscribers. This is not a threat; this is precisely what one would expect in a competitive marketplace. 

According to our most recent data, the total number of subscribers to cable, satellite and Internet Protocol television (IPTV) service providers has gone down by 7,600 across Canada.  That is a decrease of 0.1% in the span of a year. Compare that to the cord-cutting occurring in wireline telephony. In 2013, the number of residential telephone lines fell by 6%.

And those alleged cable cord-cutters are actually more connected through wired and wireless broadband. We live in an age of audiovisual abundance, both Canadian and non-Canadian. Duncan Stewart from Deloitte coined the phrase “cord-stacking” rather than cord-cutting to describe what he was observing. Some Canadians just can’t get enough audio-visual content, so they are finding it on all kinds of platforms, concurrently.

Similarly, cord-shaving may be a matter of the perceived value of current satellite and cable offerings in light of other more convenient offerings in the marketplace and the lack of choice offered by some incumbents.

And despite the mountain of media stories about Netflix, and Shomi, and HBO online, and CBS online and Bell’s Project Latte, let’s not lose sight of the fact that about 60% of Canadians do not stream TV programming. Canadians still watch on average 28 hours of traditional TV a week.  And the hours of viewing to online video services, including cute kittens on YouTube, is only 1.9 hours per week.

On the surface, it may look like everything’s changing overnight. And there may very well be some important shifts occurring. But the CRTC needs to examine the whole system, focus on real evidence, consider trend lines and act at a measured pace. We must also do so with an eye on our legislative mandate, and our obligation as an administrative tribunal to provide procedural fairness to all parties.

No one will benefit from a reckless regulator. If this is acting like a dinosaur, I will wear that label proudly!

It’s about the evidence

As I said, the only way to keep pace with a dynamic communication landscape is to gather intelligence. So we seek out the latest research and established facts. To do so, the CRTC is putting the talent and knowledge of its staff to work. People may view us as an aging institution that is out of touch the 21st century. The reality is that our employees are young and tech savvy: a critical mass are under the age of 35.

We are an evidence-based decision-making body. On that score, you may have read about our public hearing in September about the future of television, called “Let’s Talk TV.” 

If so, you probably know we were criticized by some commentators over our demand that interveners provide the hard data we need to make informed regulatory decisions. I am not speaking about individual Canadians who appear at our hearings. I am speaking of two companies, with a total market cap of over 400 billion dollars, which operate in Canada and filed positions in our hearing. Such parties cannot refuse to provide evidence without consequences, especially when they appear before an evidence-based decision maker. Like other administrative tribunals, we struck out their incomplete evidence.

This is not about regulating them or not, as some uninformed casual observers would have you believe. This is about the integrity of an evidence-based proceeding. Every day, we receive and protect highly confidential and competitively sensitive information.

In an age of digital communications, and given the importance of Canada’s communication system to our collective economic and social welfare, public policy cannot be based solely on unsubstantiated statements.

The whole purpose of public hearings is to listen to the views of a broad cross-section of Canadians to help us uncover the public interest and how it can best be served. We hold them in the open, not behind closed doors. Our hearings are webcast and are often broadcast live on CPAC when the House of Commons is not sitting. Anyone can listen in over the Internet, and we keep an eye on comments made by the public through our contemporaneous online forums.

I know of few other institutions, whether here or abroad, that is as public as the CRTC when we seek to uncover the public interest.

Good decisions cannot be based on anecdotes about how your teenager is using his smartphone or gaming system either. Neither can we make informed decisions based on one-sided blog arguments or 140 characters in the Twitterverse. Nor is it helpful when think tanks and pundits weigh in from the sidelines, often after our hearings have occurred. I can provide examples of every one of those behaviours.

If we were to make decisions based on the latest fad or unverified assumptions, we would find ourselves on a very short pier, rather than an intelligent bridge towards the “change” destination on the other shore. And we would risk doing irreparable harm to the sectors of the economy we oversee, as well as to the quality, reliability and affordability of the communication services Canadians rely on.

Ultimately, the CRTC’s decision-making will only be as smart as the people who appear at our public hearings and the quality of the information they provide.

I often refer to our hearings room as a darkened stage at the start. But then, throughout the proceeding, different players shine their lanterns on the issues before us, exposing a different perspective on the overall public interest. All of them shine their lanterns on different corners of the stage, putting the best light on their area of interest. Some lanterns are skewed to obscure the truth. Others are very dim (but we listen nevertheless). And the very small lanterns of thousands of individual Canadians often create a powerful beam of light.

It’s only when the stage is fully illuminated, by all those lanterns, that the full story becomes clear. It is only then that the full public interest comes to light.

Let’s Talk TV

Although analytical rigour in our decision-making is key, timely regulatory responses must also be provided. For this reason, I’m happy to tell you that earlier today we announced our first decision stemming from Let’s Talk TV. We have banned 30-day cancellation policies for television services. In the same decision, we also banned this practice for Internet and telephone services. Late last year, we did the same thing for wireless services.

This will make it easier for Canadians to switch service providers and benefit from a more dynamic marketplace.

Some companies had been requiring that their customers give them 30-days advance notice when cancelling their television, Internet or telephone services. Anyone tempted to switch to another company to take advantage of a better deal had a disincentive to do so, because they risked having to pay both providers for the same service for a month. This is a clear obstacle to healthy competition.

As for the other decisions on the Let’s Talk TV proceeding, you will have to wait. There are numerous interrelated issues that require a few more months of thoughtful consideration. But there is one thing I can share: “regulating” Netflix is the least of our concerns. Whether we choose to attack these disruptive services, as some advocate, or learn from their success will be our regulatory decision to make and ours alone.

And frankly, the CRTC is looking at much bigger issues with greater ramifications down the road.

An ambitious regulatory agenda

In order to address the need to adapt to the emerging communication environment, the CRTC is busy beyond the Let’s Talk TV proceeding. We are currently tackling one of the most ambitious regulatory agendas in over two decades.

We recently concluded a public hearing on wholesale mobile wireless services. Later this month, we have another hearing on wholesale telecommunications services.

During our wireless hearing, we examined the wholesale business arrangements between companies for services such as roaming and tower sharing. We are looking at whether there is a need to intervene in these arrangements to ensure that there is sustainable competition in the marketplace—and, ultimately, that Canadians have choices.

On November 24, we will kick off our hearing on wholesale telecommunications services. Again, we are looking at the wholesale arrangements between companies, but this time for wireline services.

Large companies have been making significant investments in their networks to bring fibre right to your front door. This enables them to offer faster Internet services, Internet Protocol television services and other services. Both residential and business services. One of the big questions we will be asking during this hearing is whether independent Internet service providers should have access to the large companies’ fibre-to-the-premises facilities.

Wireless and Internet services have impacts far beyond your access to entertainment such as TV shows and music. They will fundamentally shape the future of e-business in a digital economy, just as they will revolutionize electronic health, e-learning, e-government, machine-to-machine applications and smart transportation grids.

There will be huge demand on our communication networks as these new services become available and more and more traditional services migrate to the Internet.

In addition, less connected parts of our country and their local industries require access to the latest technologies to satisfy the expectations of the people who live there and to diversify and grow their economies.

The CRTC has a responsibility to ensure that all Canadians have comparable access to these services—and future opportunities—whether they are in Whitehorse or downtown St-John’s.

However, in order to build new networks and expand the range of available services, companies need to have a fair opportunity to make a return on their investments. The communication sector is among the most capital intensive in the country. It is a $62-billion-a-year business, employing more than 150,000 Canadians.

These are hard and very important issues. If you think this is about House of Cards and Orange is the New Black, you are missing the point about the breadth of potentially disruptive digital issues on the horizon.

We are not the only people facing this conundrum. Regulatory bodies in the U.S., Europe and elsewhere are also struggling with the same questions. Because we know that our respective countries’ futures in a globally connected world require us to make the right decisions.

Canada needs a strong and competitive digital communication industry to take a leading role in the global digital economy.

Meeting Public Expectations

As we move forward to intelligently achieve our ambitious “change” agenda, we must be cognizant of general expectations. The current regulatory environment is a very challenging. It is marked by two phenomena.

The first, I call the regulator’s paradox. Under this paradox, members of the general public don’t really care about regulations. In fact, I would think that many philosophically perceive regulation as a bad thing; until, that is, they care strongly about a particular issue that is personal to them. We receive daily complaints about TV advertisements that are too loud, phone bills that are too high, nudity that is just too much, quality of service that is lacking, telemarketing calls that are unwanted, spam that is not desired, and the list goes on.

The second phenomenon, I call the regulated company’s corollary. This corollary is quite simple: leave my company alone, but regulate the heck and the profits out of my competitor.  And please give him a good kick on the way down...

Conclusion: Moving forward

So what does the future hold? In my view, the sky is not falling. But that doesn’t mean that there aren’t dark clouds on the horizon. Clearly, Canada’s communication system is evolving, but it’s certainly not collapsing.

We still have time to get it right—to adapt to change. This means doing it intelligently, based on what the evidence tell us and what best meets the public interest test. It also means being nimble and responsive to the changing environment.

Good regulators don’t live to regulate:  they act—or abstain from acting—to achieve outcomes that Parliament has entrusted them to achieve. That means ensuring that Canadians benefit from a dynamic marketplace, as well as networks that are reliable, affordable, high-quality and available across the country. That’s why, as a result of the proceedings I mentioned earlier, the CRTC may have to step back in through a measured regulatory response.

That’s the duty of care that Parliament has bestowed on us.

We could maintain the status quo. We could simply abdicate any responsibility to do our job, throwing our hands up in despair because technology is changing too fast. Or we could respond to those who claim that there is no need to intervene because the system is successful.

But none of these are realistic options.

As U.S. President, Theodore Roosevelt, once observed, “In any moment of decision, the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing.”

While many people in Canada’s communication system are clinging to the past (many of whom appear at our public hearings), the CRTC is moving forward with its eyes firmly fixed on the future. We are reading the Broadcasting and Telecommunications Acts with 21st century eyes.

We are adapting to the fundamental shifts underway—being innovative and taking measured risks, but managing change intelligently. Rather than regulation as a reflex, we are exploring alternative approaches to achieve the objectives of our mandate.

Because, as Stephen Hawking reminds us, intelligence is the key to successfully adapting to change.

We are carving out a distinctly Canadian approach, based on the best available information, that protects the interests of Canadians as consumers, creators and citizens.

An approach that provides enough incentives and supports to ensure: the availability of reliable and ubiquitous services, resilient networks, affordable choices, and sustainable and dynamic competition.

Because we understand that the health of our communications sector in a digital economy, and the welfare of our country in an information age, depend on it.

Only the future will tell us if we got it right.

Thank you.

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