Telecommunications Service in Canada: An Industry Overview

Section 6: The Evolution of Competition in the Canadian Telecommunications Service Market

6.2 The 1993 Telecommunications Act

Introduced in Parliament in February 1992, Canada's Telecommunications Act came into force on October 25, 1993. The Act consolidated and updated laws governing Canadian telecommunications, some of which dated from 1908. The legislation brought amendments to the Radiocommunication Act, and to the special acts relating to Bell Canada, BC Tel, Teleglobe Canada and Telesat Canada. It repealed the National Telecommunications Powers and Procedures Act and the Telegraphs Act, and those sections of the Railway Act which formerly dealt with telecommunications. It represented a hard-won consensus, which was built on consultations with industry, business users, consumers, unions and the provinces. Key factors underlying the need to modernize Canadian law in this field included:

• rapid developments in telecommunications technologies and accelerated introduction of new services;

• a global trend toward greater reliance on market forces and competition in telecommunications services; and

• a 1989 Supreme Court decision which confirmed federal jurisdiction over all of Canada's major telephone companies.

The Telecommunications Act established a new legislative framework for all federally-regulated common carriers. In so doing, it provided for an integrated Canadian market for telecommunications services. In addition, it allowed the federal regulator, the CRTC, to put in place a more flexible regulatory framework that fosters competition, innovation and the development of Canada's telecommunications service industry. This is becoming increasingly important as global markets continue to become more competitive.

Scope of the Act

The Act provides for the regulation, where required, of Canadian telecommunications common carriers. These include, among others, the incumbent telephone companies, the new competitive local and long distance service providers, mobile and fixed wireless service providers, as well as satellite services providers.

"Resellers", who do not own or operate transmission facilities but rather lease them from Canadian carriers, are not subject to direct regulation under the Act. However, resellers contribute to a fund to support affordable local service and resellers of international services are subject to certain licencing requirements (see section 6.4 of this document).

Canadian Telecommunications Policy

One of the significant features of the Telecommunications Act that distinguishes it from previous legislation is the inclusion in section 7 of a statement of Canadian telecommunications policy. Section 7 of the Telecommunications Act reads as follows:

"7. It is hereby affirmed that telecommunications performs an essential role in the maintenance of Canada's identity and sovereignty and that the Canadian telecommunications policy has as its objectives

(a) to facilitate the orderly development throughout Canada of a telecommunications system that serves to safeguard, enrich and strengthen the social and economic fabric of Canada and its regions;

(b) to render reliable and affordable telecommunications services of high quality accessible to Canadians in both urban and rural areas in all regions of Canada;

(c) to enhance the efficiency and competitiveness, at the national and international levels, of Canadian telecommunications;

(d) to promote the ownership and control of Canadian carriers by Canadians;

(e) to promote the use of Canadian transmission facilities for telecommunications within Canada and between Canada and points outside Canada;

(f) to foster increased reliance on market forces for the provision of telecommunications services and to ensure that regulation, where required, is efficient and effective;

(g) to stimulate research and development in Canada in the field of telecommunications and to encourage innovation in the provision of telecommunications services;

(h) to respond to the economic and social requirements of users of telecommunications services; and

(i) to contribute to the protection of the privacy of persons."

Powers of the Government and the CRTC

Under the Telecommunications Act, the Governor in Council has the authority to issue directions of general application on broad policy matters to the CRTC (s.8). The Governor in Council may also vary, rescind or refer back CRTC telecommunications decisions - either on petition in writing presented to the Governor in Council within 90 days after a decision, or of its own motion (s.12). The Minister of Industry has the authority to establish technical standards and to require the CRTC to enforce these standards (s.15). Both the public and the provinces must be informed and have an opportunity to comment before any of these powers are used. The Governor in Council may also require the Commission to make a report on any telecommunications matter within the Commission's jurisdiction (s.14). The Minister also has the authority to issue licences for international submarine cables that pass through, or land in Canada, and the Governor in Council may issue regulations in relation to those licences (s.17-22). In addition, the Governor in Council can make regulations to implement various aspects of the Canadian ownership requirements (s.22). The Governor in Council power to review CRTC telecommunications decisions has existed since 1976 and has been used sparingly (22 times in 24 years out of a total of over 26,000 CRTC decisions). The Telecommunications Act power to issue policy directions has never been used.

The Telecommunications Act gives the CRTC a broad range of powers, which must be exercised with a view to implementing the policy in section 7 of the Act and any directions issued by the Governor in Council. For example, the CRTC must ensure that rates are just and reasonable and that Canadian carriers do not discriminate unjustly or accord any undue preference with respect to the telecommunications services they offer (s.27). The CRTC may also settle disputes between Canadian carriers and municipalities or other public authorities regarding the use of rights-of-way (s.42-45).

An important and frequently used new power granted to the CRTC in the Act is the power to forbear (s.34). Section 34 (1) gives the CRTC the power to forbear from regulating a service or a class of services provided by a Canadian carrier where it finds that doing so would be consistent with the Act's telecommunications policy objectives. Under section 34 (2), the CRTC must forbear where it finds that a service or class of services is or will be subject to competition sufficient to protect the interests of users. The Commission can forbear from the exercise of only specific responsibilities and obligations under the Act. Moreover, it may do so in whole or in part, with or without conditions. In many of its forbearance determinations, the CRTC has eliminated the requirement for carriers to file tariffs and agreements for approval but has retained its powers to address instances of undue preference or anti-competitive behaviour, should they arise. The CRTC has forborne from regulation for most of the services of wireless carriers and new entrants and for a significant portion of services offered by the incumbent telephone companies. Table D-2 in Appendix D, provides a list of the CRTC's major forbearance determinations.

The Telecommunications Act was amended in May, 1998, by An Act to Amend the Telecommunications Act and the Teleglobe Canada Reorganization and Divestiture Act. The Act repealed sections of the Teleglobe Canada Reorganization and Divestiture Act that were related to Teleglobe's special investment and regulatory regime. It also amended the Telecommunications Act to exempt international submarine cables and earth stations from the foreign ownership and control restrictions (s.16(5)).

The 1998 amendments also provided the CRTC with authority to introduce a licensing regime for international services (s.16.1 - 16.4) and gave it responsibility for numbering administration (s. 46.1). Finally, the amendments authorized the CRTC to require any telecommunications service provider to contribute to a fund to support continuing access by Canadians to basic telecommunications services and to designate a person to administer that fund (s.46.5).

Canadian Ownership Policy

Section 16 of the Act establishes the Canadian ownership and control requirements applicable to the telecommunications industry. The fundamental objective of these rules is to ensure that the Canada's telecommunications infrastructure is owned and controlled by Canadians. Canadian carriers, that is companies owning telecommunications transmission facilities, used to offer service to the public, must have at least 80% of their voting shares owned by Canadians and not less than 80% of the members of their board of directors must be Canadians. In addition, these Canadian carriers must be controlled in fact by Canadians at all times. The Governor in Council has issued the Canadian Telecommunications Common Carrier Ownership and Control Regulations which establish that investor companies in such Canadian carriers will be treated as Canadian if at least 66 2/3% of their voting shares are held by Canadians. Resellers are not subject to these rules, nor do they apply to satellite earth stations or international submarine cables.

The Radiocommunication Regulations, made pursuant to the Radiocommunication Act, establish the Canadian ownership and control requirements for radiocommunication carrier licensees. These requirements are the same as those of section 16 of the Telecommunications Act.