The convergence of telecommunications and broadcasting – where phone and cable companies buy TV networks and cellphones carry TV signals – is a source of both opportunity and challenge for Canadian businesses, says the country’s telecom and broadcast regulator.
But in its second background report in a year on the state of convergence, the Canadian Radio-television and Telecommunications Commission (CRTC) holds back from advocating what it or Ottawa should be doing to meet those challenges.
However, the report also warns that as the digital economy becomes more sophisticated, Canadian “policy, legislation and regulation must adapt.” It identifies four critical areas that may need either further deregulation or new approaches by the commission or Parliament:
–ensuring fair and non-discriminatory access to networks;
–increasing wireless spectrum resources to meet Canadian demands;
–creating new regulatory approaches to support innovation, access to affordable services and the creation and promotion of high-quality Canadian content,
–and addressing consumer concerns over privacy.
On fair access, the report notes that not all Canadians have equal access to broadband Internet. Not only is there a rural-urban divide, there is also a 40 per cent gap in subscribers between households pulling in less than $35,000 a year and households earning more than $150,000 a year.
The CRTC’s power is limited to encouraging competition, the report notes. Other strategies to encourage lower-income Canadians to sign up for broadband could be addressed in a national digital strategy.
Also to be considered is the fact that Internet access is dominated by large cable and phone companies, the report adds, which relates to open access by subscribers. The commission notes that it has adopted an Internet traffic-management practices framework to ensure non-discriminatory treatment of Internet traffic on both wired and wireless networks, “the evolution of services that provide better than best-effort routing bears monitoring.”
The Harper government has promised to issue a digital economy strategy that may deal with some or all of these points. It hasn’t said when the strategy will be released. Industry Canada is in the middle of preparing a report on the expected demand for spectrum.
Meanwhile, the government is still polishing its policy for easing restrictions on foreign ownership of the telecommunications commission, which may be revealed when Parliament resumes. It has said that policy is closely tied to the rules it will set for the upcoming auction of spectrum in the eagerly-sought 700 Mhz bands.
“The changes occurring in the communications landscape are evolving and the long-term implications are uncertain,” the report says. “It is premature to suggest that any specific approaches can or should be employed to address the specific challenges.” Some new approaches may need legislative change, it adds.
Meanwhile, now “is an opportune time for reflection and discussion on how the benefits of an innovative digital economy may be fully realized.”
The report looks at how convergence hits Internet networks, Canadian broadcasting content, advertising and consumers.
While the report shies away from specific approaches, it leans on some issues. For example, the commission notes that in some countries governments have ordered a major Internet provider to split its wholesale and consumer operations to increase competition, an approach called structural separation.
Independent Internet service providers, who depend on CRTC-mandated access to the equipment of facilities-based cable and phone companies for their survival, may be drawn to a section dealing with competition. “The introduction of next-generation networks [such as the fibre optic networks being built by BCE Inc.’s Bell Canada and Telus Communications Corp.] will raise questions about the necessity of mandating access to wholesale services,” the report says.
Cable and phone companies told the commission that “overly interventionist regulation runs counter to the requirement for network investment.” These companies insist consumer and business demand for innovative services will drive the need for significant investment in network capacity, so mandated wholesale services aren’t needed.
“There is, however, no consensus as to whether the existing market structure will be able to maintain competition as networks evolve,” the report says.
The commission just finished a hearing into the wholesale pricing regime for next-generation networks.
No discussion of convergence would be complete without considering its impact on Canadian broadcasting content rules, which the CRTC has to enforce, as well as privacy laws. “New product and service categories strain traditional regulatory definitions,” the report says. “Traditional public-policy approaches are becoming less effective at protecting Canadian consumers.”
In particular it notes that so-called over-the-top content providers like Netflix, which sell movies over the Internet and avoid the rules cable and satellite carriers have to face, are a challenge.
“The creation and promotion of Canadian programming, including audio programming, will be best achieved through a holistic approach that involves various government departments and agencies (including the commission) as well as market forces,” the report says.
