Speech
CONVERGENCE AND REGULATION
Notes for an address
by Louis R. (Bud) Sherman
Vice-Chairman, Canadian Radio-television
and Telecommunications Commission
at a Symposium on National Convergence organized
by the Institute for International Research
The Sheraton Centre Hotel
Toronto, Ontario
February 7, 1995
(CHECK AGAINST DELIVERY)
Good morning ladies and gentlemen. Before I begin, I would like to thank the
conference organizers for inviting me to speak to you. It is indeed a pleasure to
be here.
This conference on convergence is aptly timed, given that the Commission's
Information Highway hearings are scheduled to begin next month, on March 6. The
hearings were initiated by the Cabinet's directive of October 1994 to the
Commission to examine questions relating to the new communications technologies.
Cabinet directed the Commission to gather information, seek input and make
recommendations on a number of matters as they relate to the Commission's areas
of responsibility. I will say more about the Government's directive, later.
The purpose of my presentation today is to give you a regulator's view of the
crossroads we are at in this country in terms of regulation and policies that are
being affected by the convergence of the broadcasting and telecommunications
industries.
We live in a time of vast change and enormous opportunity, in the midst of a
major revolution in communications technology and services. Canadians are well
positioned to derive the benefits of these developments.
Let us look, for a moment, at industry strategies to deal with convergence: as
the convergence of technologies moves more industries onto a common,
digitally-based platform, it is redefining the traditional roles of many
companies. The telephone and cable television monopolies, now faced with
competitive pressures, are vigorously pursuing strategies in order to position
themselves favorably, in rapidly evolving and newly emerging markets.
The announced strategy for cable companies is to move beyond the carriage of
traditional television services into what the Canadian Cable Television
Association calls the "unclaimed territory". It includes telemetry, messaging,
shopping and other interactive services. Such services will require high-speed
switched networks, and the cable industry already has plans for the gradual
implementation of digital video compression (DVC) and two-way addressability over
the next several years.
On the telecommunications side, the telephone companies have increasingly
moved away from narrowband networks, intended for voice communications. They have
developed broadband capabilities that will allow them to carry not only voice,
but also high-speed data, text, graphics and video.
Given that all signals will be digitized, and the actual content in the
network will be indistinguishable and under control of the user, it will soon be
anachronistic to identify different services. The actual service provided to the
subscriber will be "bandwidth".
A number of trials are planned or underway to test video-on-demand in
different parts of the country. Stentor, in its Beacon initiative announced last
year, said that its members plan to deliver high-bandwidth services over a hybrid
fibre-coaxial network. Optical fibre will form the backbone of the network, and
coaxial cable will connect it to the home.
Another consequence of convergence is the sharing of complementary resources
through joint ventures, strategic alliances and mergers. Alliances are occurring
between a wide variety of companies operating in the information and
communications industry. Internationally, there are alliances between cable
companies and telephone companies, wireline companies and wireless companies,
various types of wireless service companies with each other, publishing companies
with telephone and cable companies, and large established companies with small
start-up enterprises such as software developers whose only asset is brainpower.
There are global alliances such as BCE/Mercury, Stentor/MCI, Unitel/AT&T,
BT/MCI, Sprint/France Telecom/Deutsche Telekom, Sprint/Telefonos de Mexico.
Global alliances enable companies to access customers in other countries and/or
to provide seamless cross-border services between countries.
Alliances are also occurring with publishing and software interests. Rogers
Communications has acquired MacLean Hunter Publishing. Southam Publishing is
joining with telephone and cable companies in order to provide electronic
information services. Very recently, Sony and Microsoft announced an alliance to
develop products jointly for the Information Highway.
The regulatory environment in Canada
Government responsibility for broadcasting and telecommunications policy is
divided between two different ministries. Broadcasting policy falls under the
purview of Heritage Canada, whereas telecommunications policy rests with Industry
Canada.
A single institution, the CRTC, regulates both broadcasting and
telecommunications, albeit through separate legislation, the 1991 Broadcasting
Act and 1993 Telecommunications Act.
Cable and telephone companies are regulated in some ways quite differently.
Under the Telecommunications Act, the emphasis is on consumer protection.
The Commission is required to approve all regulated carriers' tariffs before they
can provide a service, and rates must be just and reasonable.
The Broadcasting Act requires that the Commission regulate all
broadcasting distribution undertakings. Under the Broadcasting Act,
broadcasters, including cable companies, are also required to meet certain public
interest policy objectives, such as providing support to Canadian programming and
content.
However, with convergence, each industry is planning its future around more or
less the same services, to be delivered by the same technologies. Both cable and
telephone industries have been integrating fibre in their networks with the
objective of providing broadband services to the home. Cable operators and
telephone companies will both make use of digital and video switching and
improved digital compression techniques.
Convergence is raising some contentious regulatory issues. It has led some to
question the appropriateness of the current regulatory structure. As well, it has
led to questions as to whether present-day regulatory definitions of content will
be applicable in a world where the distinction between databases and
"programming" in the broadcast sense is blurring.
Today when most people refer to "content", they usually mean programming such
as a TV or radio shows, something which clearly falls within the purview of the
Broadcasting Act. On the other hand, content sources such as databases on
stock prices, sports scores, and research subjects, where users can call up using
the telephone to access information, are not within the purview of the
Broadcasting or Telecommunications Acts.
A problem arises because digitization makes it possible to store any
information in a computer including both informational databases and the
audiovisual components traditionally associated with broadcast programming such
as TV and radio shows. To many, it is not readily apparent why downloading a
video file from a bulletin board or server is treated any differently than
downloading a text file. As we enter the world of multimedia software, where is
the distinction to be drawn between image, sound, and text files? Any and all of
them can be stored in digital format.
With convergence, some have argued that a rethinking may be required to bring
the cultural obligations of cable into line with the consumer protection
obligations and the obligation to serve borne by the telephone companies. The
content regulation that has traditionally been used as an instrument for
protecting Canadian culture may be at odds with the increasing importance of open
access to networks for all content providers; and it may not be sustainable in a
more competitive domestic, and/or international, free trade environment.
Because it is the regulator of both the telecommunications common carriage
industry and the cable industry, the converging of technology and services places
the Commission in a very interesting position. As the Commission has pointed out
in the past, there remain a number of fundamental questions in the converging
environment. Some of these questions are: Under what circumstances is a cable
distribution system a common carrier? How will regulations concerning Canadian
content programming objectives be realized? Is there a need to make a distinction
between carriage and content within cable television services, as well as within
telecommunications networks? Any decisions on these issues will have major
consequences, and are likely to encourage or interfere with technological
developments towards convergence.
The Government Directive that initiated the forth-coming Information Highway
hearings is aimed at addressing these and other matters as they relate to the
Commission's areas of responsibility. Cabinet has directed the Commission to
gather information, seek input and make recommendations on a number of matters.
The Government requested that the CRTC undertake this review in the belief
that this process will permit all interested parties, including the CRTC itself,
to make their views known. Given the growing importance of a broadband
interactive network as an economic infrastructure, the Government stated that a
thorough airing of views was essential prior to making its final policy
determinations. The Cabinet directive noted that the convergence of media, as
well as technologies, has huge implications for both Canadian culture and our
economy.
The Cabinet directive also contained a number of broad policy statements on:
the sharing of facilities of cable-TV systems and telecommunications carriers,
Canadian content and culture, and competition. It stated that facilities and
capacity, including support structures, of telecommunications carriers and cable
licensees should, to the extent practicable, be made available for lease,resale
and sharing by service providers and other carriers on a non-discriminatory
manner.
Cabinet requested that the Commission address the following questions
regarding facilities:
- Within what timeframe can the Government's policies regarding
interconnection and interoperability as well as leasing, resale and sharing of
cable facilities not used for broadcasting be implemented?
- What, if any, conditions should apply, and what mechanisms should be in
place to ensure effective cooperation and fair competition?
In regard to Canadian content, the Government stated that participants in the
Information Highway should make contributions to the production and distribution
of Canadian cultural content products and services. It also stated that the
Government should continue to have tools and mechanisms to promote Canadian
content.
Cabinet requested that the Commission address the following questions:
- Are the current legal definitions under the Broadcasting Act and the
Telecommunications Act sufficiently clear to enable emerging services to
develop under a coherent regulatory approach, or is there a need for a review
of definitions such as "broadcasting" and "telecommunications service"?
- Do the tools and instruments existing under the Broadcasting Act and
the Telecommunications Act ensure that content-based services, whether
Canadian or foreign, are made available in a manner that furthers Canadian
cultural policy objectives? If not, what modifications are required?
- Would it be appropriate to establish specific criteria that could be used
in determining which services could be exempted from the Broadcasting Act?
- Would it be appropriate for all telecommunications carriers to become
eligible to hold broadcast licences subject to Canadian ownership rules and
generally applicable regulation?
In regard to competition, the Government has stated that its policy is to
foster competition and place increased reliance on market forces in the provision
of facilities, products, and services. It also stated that it intends to ensure
that anyone acting as both a "broadcasting undertaking", as defined by the
Broadcasting Act, and as a "Canadian carrier", as defined by the
Telecommunications Act, is subject to both Acts for those activities to which
they respectively apply.
Cabinet has also requested that the Commission report on:
- The appropriate time frame to complete the move to fair competition in the
delivery of telecommunications and broadcasting services to Canadians.
- The measures, transitional or otherwise, that are required to ensure that
competition is fair in the long term. Such measures might include
line-of-business restrictions and restrictions on cross-ownership for the
transition period.
The public hearings on the Information Highway, scheduled to take place from
March 6 to March 31, in Hull, Quebec, have generated lots of interest. The
hearings involve a two-stage written process: first-stage comments were due on
January 16, and second-stage reply comments are due next Monday, February 13. The
total number of participants in this hearing is well over 600, of whom almost 60
have requested to appear at the hearing.
In sum, the bottom line is that, change is coming. Broadband services are
coming, with or without an accommodating change in the regulatory environment,
with or without any government policy direction, whether or not there is a policy
vacuum, and possibly even with or without the telephone companies or the cable
companies. The Information Highway is not a single, monolithic entity --a kind of
mega-project that will stand or fall on the merits of one deal or one vision of
the future. Rather, it will evolve from the work of a vast range of
organizations, including those supplying underlying network facilities, those
providing advanced communications services, and those providing content and
information. In the end the only sure winners will be consumers, because they
will have more choices. It is therefore important that the Commission set, as a
key goal, a climate for sustainable investment in a competitive infrastructure.
As the regulator, the CRTC must be mindful that we are in many respects in a
state of change that will last for some time. Not only is competition emerging
amongindustries as a result of convergence, but there is increasing competition
within sectors of the communications industry. Within the telecommunications
sector, there exists a mix of monopoly and competitive markets. Coming to terms
with circumstances in both sectors will present the Commission with enormous
challenges in terms of its mandate.
In the case of the telecommunications industry, I am confident that Telecom
Decision 94-19, the Review of Regulatory Framework decision, released last
September, establishes the necessary principles for encouraging competition, plus
sufficient regulatory safeguards to protect consumers and competitors from
potential abuse of market power by dominant, incumbent telephone companies.
Decision 94-19 represents a significant development in telecommunications
regulation. It represents a shift away from micro-regulation, as the best means
of protecting the public interest, and places greater reliance on market forces.
The decision shifts the emphasis of regulation toward the facilitation of
competition by, among other things, ensuring that new entrants have access to
essential bottleneck facilities.
In this changing environment, there is one constant that remains, at least for
the time being. The CRTC has mandatory obligations to fulfill, under the
Broadcasting and Telecommunications Acts. In fulfilling them, the Commission will
be focussing, intensively, on the effects of this emerging environment on
consumers in terms of their benefits and choice, on the state of competition in
the market, and on new service providers, in terms of their viability and growth.
Additionally, we shall be very much concerned with the impact that new
services may have on existing regulated services.
In regard to public policy in a convergence and multi-media environment, about
all one can say with certainty at this time is that there will be a need for
increased coordination between broadcast and telecommunications regulations and
policy. I leave you with that emerging reality for us all to think about, and
thank you once again for this very pleasant opportunity to be with you. It is an
exciting time to be in Communications.
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Contact:
Bill Allen, Director
CRTC Public Affairs Ottawa, Ontario K1A 0N2
Telephone: (819) 997-0313
TDD: (819) 994-0423
Fax: (819) 994-0218 |
