Speech
Notes for an address
by Richard D. French
Vice-Chairman, Telecommunications,
Canadian Radio-television and Telecommunications Commission
to the 2005 Telecommunications Invitational Forum, Brookstreet Hotel
Ottawa, Ontario
April 19th, 2005
(CHECK AGAINST DELIVERY)
I was invited by Lawson Hunter to speak to this meeting after Charles Dalfen “volunteered” me. I am glad to be here.
Lawson said, “This meeting is off the record”. Then the conference firm wrote me a letter in which they helpfully pointed out that although I would retain the copyright to my remarks, Northwind Professional Institute would have (quote) “..the non-exclusive right to commercially reproduce, publish, and distribute these materials in any medium or format, in the course of our business” (unquote).
So this is what Lawson means by “off the record”.
Well, words often mean different things to different people!
In a way, that is my theme today. How can we have a constructive dialogue in our industry, one in which words mean the same thing to all of us? How can we cut through the noise, the spin, the buzz–words, and the sheer volume, to understand one another?
In posing these questions, I am very much including myself – as a former politician and corporate spokesman I have been as responsible as anyone else for diluting the discourse.
In my corporate role, I have re-engineered, gotten closer to the customer, downsized, spun off, defended Canadian carriage, regretted bypass, deplored leaky switches, feared uneconomic entry, inflated the access deficit, lit Beacons, sought a level playing field, stopped the goal posts from being moved, and otherwise brandished the nearest likely bromide.
Forgive me Father, for I have spinned.
Now, I am not under the impression that if we only said exactly what we meant and meant only exactly what we said, all our troubles would be over. There will always be conflicting agendas and interests – there will always be competition in communication. And there will always be honest failures to communicate.
But one of the things that has struck me on returning to Canada after some years abroad is that in ways I would not have anticipated, the CRTC has become the focus of attention, not all of it complimentary, from many quarters.
More column inches, more MP's questions, more public controversy, more ministerial interest. That raises what is at stake in the quality of the debate, rather than lowering it. So maybe it is worth spending some time on this question of effective dialogue. Not a lot of time – I know better than to get between you and dinner for any prolonged period.
Let me divide my comments into two parts, each containing its own challenges and scope for improvement.
The two parts I shall call “rendering unto Caeser” and “rendering unto God” – the profane and the sacred, respectively. The first, the profane, refers directly to your business and our regulatory role in it. The second, the sacred, refers to the public interest and public policy regarding your business and our role in it.
Well….the profane is where we cannot be unduly optimistic – I refer to the day-to-day friction of regulated competition. You defend the interests of your shareholders as you define them and we do our best to achieve the objectives which our Act establishes for us. I want to start here because we can do better here, even if we can't do best.
Although the Commission makes the rates, I can tell you for example that it was a shock when my colleagues recently realized the degree of misunderstanding which existed between ourselves and the industry over the flexibility which the ILEC's have to adjust local prices in the light of competition.
The Commission assumed that the ILEC's understood that they were free to reduce tariffs under existing policies and practice, suspension of promotions notwithstanding. The ILEC'S, at least at senior levels, seem to have assumed that the suspension of promotions meant that they could not reduce tariffs.
I do not want to try a tedious history and explanation of PN 2003-1, an exercise which I am in any case unqualified to undertake. Nor do I want to try to assign blame for this disconnect. Let me simply say that we don't think this speaks well for the quality for the communication which we have with the industry. We want to do better. We want to improve. And I believe that we can and will.
Our staff are dumbfounded at the evidence of this misunderstanding. It may be that there is a vertical as well as a horizontal blockage in the flow of information here. By this I mean that it may not be only a failure of communication between regulator and companies which causes difficulties.
However, it may also be that the professional level dialogue and the executive level dialogue may be detached even within our respective institutions. I mean the vertical lines of communication between the staff experts who make the regulatory relationships work or not work, and the executive leadership of our respective organizations, may not be operating effectively. Not to put too fine a point on it, we may not be exploiting all the information and expertise which is available to us within our own organizations.
In my experience, the executive suites of the country, including your own, are generally filled with red-blooded capitalists who regard regulation as a regrettable fact of life, a doomed art, and not one which they want to understand. Guys – because the CEO's are all guys – just don't want to know. I understand. I have not wanted to know myself.
Here is the syndrome: the COO or CEO asks when such and such is coming from the Commission, your staff answers – “it'll take some time yet”, the CEO or COO vents his frustration as to the amount of time taken…… and the executive management of regulation is done for another two weeks.
But if regulation is as important as marketing or finance, how come it doesn't get the same senior-level attention as marketing and finance? You have good people working with us – if you are not giving them the time and support and understanding they need, that may be one reason that, collectively, we sometimes don't get to where we want to go.
We in the Commission are committed to moving much faster and more efficiently than we have been doing. You have spoken. We have heard. We have understood. But we are not doing this only because you have demanded that we do so. We are doing it also in order to better focus on the important. Like you, we have to ensure that we the members of the Commission get the full benefit of the knowledge and experience of our expert staff.
Charles Dalfen, our Chair, and Len Katz, Executive Director for Telecommunications, have initiated a series of measures designed to speed things up, and our staff has worked very hard to deliver:
- We have completed a major review of our internal operations and will announce streamlining initiatives next week. You can already see that routine tariff filings, for example, are being dealt with in ten days. (I see by the industry press that people are now concerned that we may be responding too quickly for due process.)
- Our expedite process is successfully speeding the resolution of uncertainty in commercial disputes between companies.
- We are committed to searching out and eliminating sources of regulatory burden which do not justify their costs to you. We are going to be very attentive to you in that regard.
- We are attempting to encourage inter-company negotiations as much as possible, and we will respect the results as long as they are consistent with the Telecom Act. I might note that the CISC – the Interconnection Steering Committee, where much of this negotiation goes on – is as much your instrument as ours. Some of your people have apparently complained to us that it is taking too much time. We have to say, please look in the mirror.
These steps we have taken are only the beginning. We recognize that we are far from finished in our quest to implement an efficient regulatory practice.
We in the Commission must do more, do it better and do it faster. Our Commissioners and staff must be in a position to swim through the sea of paper in order to regularly beach for some quality time on the handful of really fundamental issues.
As we clean up our act, so to speak, we hope that you can reduce our workload as well. I will resist the temptation to use the term “abuse of process” but I will say this. Our new expedited hearing process has demonstrated that we can collectively move much faster. It has also proven, not only through the cases which come before us but also through those which do not, that a significant proportion of the applications which have come to us could have been and should have been resolved by the parties themselves.
Is it possible that the industry may on occasion regard last-ditch resistance in all available non-market venues as the only appropriate posture in the defence of shareholders' interests? This is great for the telecommunications bar, and it sometimes wins you some time, but it does not necessarily add much value nor credibility.
In this spirit, and because the time issue is so much on our minds, we are going to help you not to contribute to it yourselves.
We are not going to start the clock ticking when the application is inadequate on its face, we are going to send it back. We are not going to help train your staff on a case-by-case, person-by-person basis, that's your job. From now on, we will not compromise our own efficiency in an effort to improve yours. Tough words, perhaps, but in the search for best practices everyone must contribute.
Finally, we are not going to be tolerant of any regulatory gaming intended to handicap competitors and we are not going to be silent about it either.
We hope that you appreciate that we are taking you at your word – the word being “delay”.
So much for the profane, for better practices in our respective roles as business and regulator.
By “sacred” I refer to the discussion we must have on the future of the industry and what we must do together to ensure it meets the public interest of Canadians. Here I really do want to insist that special pleading and bafflegab do not have a place.
We all want to get to the paradise of full competition. Where we differ is what route to take from here to there, how long the voyage will take, and how much of it we have already completed.
Notwithstanding the importance of the subject, the Commission sometimes feels that this discussion is hard to insulate from the continual and conflictual grind of specific interests and proceedings. Thus the Telecom Review panel which has been constituted by the government represents a promising opportunity to address some of the critical issues, without the shock and awe of regulatory warfare inducing us all to take rhetorical cover.
Obviously, the current regulatory regime must constitute part of the discussion before the panel. But the regime as such is really a second order issue. The first order issue seems to me to be the one I evoked above as a voyage. In this discussion, policy and regulation flow from an understanding of economics and technology. So it is economics and technology which ought to take our attention before all else.
We will be missing an important opportunity if we do not raise our respective games in order to focus on the really important medium term issues. I would offer – I emphasize that this is on a personal basis, without purporting to speak for the Commission – a few examples:
- What are the respective roles, going forward, of facilities-based and resale competition?
- What does technological development tell us about functional substitutability and market definitions in communications?
- What is “workable oligopoly” – that is, what kinds of market structures short of full competition, may safely be forborne? How much market power can Canadians live with? How do we measure market power accurately? Should we be measuring competitors or competition and what are the appropriate parameters?
- What is really at stake in the debate opposing ex ante and ex post regulation? How can we assess this issue?
- If the panel is being asked to make specific recommendations, what legislative and administrative changes would be required to effect them? (One sometimes wonders if some of those who comment on our decisions have ever read our statutes, or understand our responsibilities under them.)
- So, I am making a plea that we not waste this moment of reflection by perceiving it as another chance to diffuse our usual messages. If we treat the panel as business-as-usual we risk getting a result which is business-as-usual. That would be a shame.
While these questions all address specific issues, we ought to think for a moment about where we stand in the larger frame of world telecommunications. You and your employees, directors and shareholders have an awful lot to be proud of – innovative services, competitive long distance markets, penetration of high-speed broadband among the three or four world leaders, reasonable and varied pricing schemes. Canadian telecom consumers are exceedingly well served, as they should be. That is, first and foremost, to the credit of the industry.
It would seem that the regulator has not been entirely negligent either. Robert Crandall uses the Canadian equal access and unbundling regimes in a favourable comparison with their American counterparts.1
The OECD, in its study of Regulatory Reform in Canada, had this to say (quote) “Relative to a number of OECD countries, Canada has had a much smoother and less problematic implementation of its telecommunications regulatory safeguards” (unquote).2
Honesty compels me to add that immediately after this quotation the OECD adds that Canada (quote) “can probably afford to accelerate change where it is needed” (unquote). My colleagues and I are determined to take this suggestion to heart, given the legislative framework within which we operate.
So, ongoing irritants notwithstanding, our story together is not a bad one and our collaboration, far from fruitless. There will always be friction and there will always be debate, but the evidence suggests that so far our record together is one of accomplishment and success.
Let me give credit where credit is due: to my predecessor, David Colville, on whose watch much progress occurred. I am attempting to fill large boots.
I think we should keep this record of ours in the back of our minds when we prepare our advice to the Telecom Review Panel. Where there is bathwater, there is often a baby. Let us try to be careful to distinguish between the two.
The next few weeks are going to be important ones for the industry. We will be issuing a series of determinations which will set the stage for the remaining issues associated with local markets and their progress toward sustainable competition. They will stimulate discussion and debate – that is all to the good.
Like CEO's and parliamentarians, the CRTC sits at the confluence of a nexus of countervailing forces which often conceive of its decisions as a series of zero-sum games. This does not make for a quiet life.
It is the Commission's hope that its basic philosophy – more efficient regulation, reduced regulatory burden, as much reliance on markets as is compatible with the medium-term interests of consumers – will nevertheless be evident.
If there is some conviction that major evolution in the framework within which we operate is necessary, then the executive and the legislature will not find in the CRTC an agency unwilling or unable to comply.
Such evolution will be more rapid and more rewarding to the degree it is founded upon a dialogue which is at least as analytical as it is political.
In addition, we need all the homespun wisdom we can obtain, as opposed to the office-spun variety.
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Footnotes
1 Robert Crandall and Jerry Hausman, “Telecommunications Services” in Sam Peltzman and Clifford Winston, (eds.), Deregulation of Network Industries: What's Next? Washington, DC, Brookings Institution, 2000), 73 – 112, at 76 n.7and 86 n.34.
2 OECD, Regulatory Reform in the Telecommunications Industry: Regulatory Reform in Canada from Transition to New Regulation Challenges, (OECD, 2002), 8.
Date Modified: 2005-04-19
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