Speech
“Small Telcos and Regulation”
Notes for an address
by Richard D. French
Vice-Chairman, Telecommunications
Canadian Radio-television and Telecommunications Commission
to the Ontario Telecommunications Association
Huntsville, Ontario
June 12, 2006
(CHECK AGAINST DELIVERY)
Introduction
Thank you for your introduction and this opportunity to meet with the Ontario Telecommunications Association. I want to congratulate Tim DeWeerd and the Association for putting together this program on the theme of achieving balance. Certainly this resort provides a wonderful venue for considering balance in our professional and personal lives. I wish you pleasant balancing in these idyllic surroundings!
I want to take this opportunity to note the success that your companies have achieved through balancing three qualities that have assured your success: service, quality and price. As you know better than I, the key to your success is your deep roots in your respective communities. But these roots cannot be taken for granted and you must, like any other business, prove yourself anew everyday.
I want to address a different aspect of balance – the need to balance competing public policy objectives. From the Commission’s perspective, this balance comes in many forms:
- between markets and regulation;
- between short, medium and long-term interests;
- between anticipation and evidence;
- between regulator and policy maker.
Let me touch briefly on each before inviting your questions.
Markets and Regulation
First, the balance between markets and regulation. We’ve all gone through big changes. I especially want to congratulate your companies on going through the transition to price cap regulation. You have also had over four years to adapt to the changes made in December 2001 to the cost recovery of direct toll, and the role of earnings, pricings and subsidies in financing your businesses.
The objective of the four-year transition period was to reduce the possible financial impact on companies receiving a lower subsidy under the new contribution mechanism. We consulted with you on the direct toll and network access costs. We worked together so that the Commission could understand your concerns. We looked at various options. I think the results have been very satisfactory. One very important result has been the spirit of cooperation and consultation that we have built together, and that we want to continue to improve.
Meanwhile, the regulatory environment continues to evolve. The Commission has moved from regulation of the rates charged by telecom monopolies, to enforcing the rules in a market largely driven by open competition.
Regulation is costly. It can inhibit innovation. It transfers resources and management attention away from the market toward the regulatory forum. It creates distortions and rigidities in the economy. Regulation is always slower than the market, and the technology and economic changes that drive the market.
You should be clear that the government currently in power in Ottawa is sympathetic to these arguments. It is also determined to exercise a greater role in policy-making for the communications industries. I think this policy ambition is good news. But in this environment, the justification for the role of the CRTC in the economy will be continually evaluated in the light of a basic belief in markets. To the extent that you feel your businesses depend upon regulation, you will want to be able to demonstrate to policy-makers your unique contribution to the economies and communities in which you operate.
Let me review for you the basis of my conclusion. The government received the Final Report of the Telecommunications Policy Review Panel in late March. Since then, it has been studying the report and last week, the Minister of Industry testified to the Parliamentary Committee that the report is “interesting and thoughtful” and that the government is taking the report “very seriously”. I expect that tomorrow at the Telecom Summit in Toronto, he will expand on these remarks with further evidence of the government’s desire to re-examine the basic premises of telecom regulation.
Furthermore, as you may have seen in news reports, the government has begun consultations with a view to the issuing of a directive to the CRTC based upon the report of the Review Panel. I suggest that you read the report with that in mind, to get a flavour of the general philosophy which the government is considering.
Finally, as you know, the government has asked the CRTC to review its decision on VOIP telephony and has received an appeal asking it to do the same with respect to the recent forbearance decision.
All of this means that telecom regulation is a more crowded and more complex space than has been the norm over the last twenty years. Time will tell whether this is a temporary or a permanent change, but small incumbents will want to keep a close eye on these developments.
Consumer Interests
This brings me to the second issue of balance – between short, medium, and long-term interests.
Telecom companies provide an essential service – a vital link in the lives of many customers. The balance between the short term economic costs – or savings – to consumers, on the one hand, must be balanced against the long-term viability of the service itself. No one wants to repeat the experience of the regulation of Californian public utilities, where the rate payers enjoyed lower and lower rates, but at the ultimate cost of the system’s integrity.
Some observers charge that the Commission has a duty to balance the needs of incumbents, competitors and consumers. I believe our only goal should be the short, medium and long term interests of the consumer. From my perspective, specific corporations are instruments to meet the consumers needs – not ends in themselves.
With this perspective in mind, you can see why you will need to continually develop your role in the telecom system. In the Commission’s view, many small incumbents have done an admirable job in making sure that the short, medium and long-term interests of your customers are taken into account. With the deregulation of local services, there are many consumers in the areas adjacent to your service area that would welcome your expansion to take care of their communications requirements as well. You will want to be aggressive, not passive, in the environment of the next decade.
Anticipation and Evidence
This brings me to the balance between anticipating the future needs of the telecom industry, and relying upon the evidence available to us now to respond to issues as they arise.
In its Report, the Telecom Policy Review Panel makes several recommendations that would affect the Commission. I don’t want to go over them now, but would be pleased to respond to any specific questions that you might have.
However in our discussion on the need for balance, I believe the TPR weighs in on one side of an important debate on the nature of regulatory systems. It raises the question of whether the consumer is better served if the regulator anticipates developments and sets up the regulatory regime in advance, or whether the regulator should respond to specific issues as they evolve. The Report favours the first approach; the Commission has been practicing the second.
It’s not hard to see why we at the Commission have been very skeptical about regulating in advance of anticipated breakthroughs in telecommunication technology – for every Internet, we can cite another Minitel. We believe that Canada has a regulatory system that has helped to put this country at the forefront of the telecom industry worldwide – and the TPR seems to agree as to past performance. However, the question remains open: is the Commission’s more risk-averse approach to continue to be the norm, or have we to regulate in anticipation of the best wisdom as to future direction and technological evolution?
Regulator and Policy-maker
Perhaps the TPR Report is right when it urges the creation of a telecom regulatory system that is more accountable, adaptable and responsive. These are laudable goals, and we share them.
And perhaps the TPR is right when it advises us that we need to build stronger partnerships with our stakeholders. Certainly your organization and ours have worked well together over the past four years since the implementation of Decision CRTC 2001-756.
It is indeed the government’s role to make policy and the regulator’s to regulate. Policy requires accountability and governments are accountable. Regulation requires independence and regulators are independent. The fascination in the current situation is the articulation of the two and how that will play out over the next several months. There will be a debate from which you will not, as an industry, want to be absent.
Conclusion
The Commission has gone through many changes over the past decades, in response to changing technologies, market realities, and regulatory imperatives. Your companies have gone through even more change, in response to the same causes.
We are going to be working together for many years to come. One would hope, from the perspective of your companies, that the relationship will last for generations. But in the meantime, we will all need to evolve. We will all need to keep finding the right balance. I look forward to working with you in the future.
Thank you. I would be happy to answer your questions.
- 30 -
Media Relations:
MediaRelations@crtc.gc.ca, Tel: (819) 997-9403, Fax: (819) 997-4245
General Inquiries:
Tel: (819) 997-0313, TDD: (819) 994-0423, Fax: (819) 994-0218
Toll-free # 1-877-249-2782
TDD - Toll-free # 1-877-909-2782
This document is available in alternative format upon request.
Date Modified: 2006-06-12
|
