Speech
THE CRTC IN THE AGE OF CONVERGENCE
Notes for an address by Françoise Bertrand, Chairperson
Canadian Radio-television and Telecommunications Commission
to the Association des MBA du Québec
Montréal, Quebec
April 9, 1997
(CHECK AGAINST DELIVERY)
Good day, ladies and gentlemen.
First I want to thank the Association des MBA du Québec, and particularly your
President, Guy Langlois, for inviting me to share with you the CRTC's vision of
convergence and our role in this rapidly changing environment.
Of course I could comment on recent decisions issued by the Commission or give
you the scoop on the decisions to come. For now I prefer to take a look at the
major issues we are looking at and in which Quebec is destined to play a
strategic role, namely, assuring a Francophone presence on the information
highway.
Convergence, a global phenomenon
We all know the information highway is offering and will continue to offer a
growing selection of new information and programming services through
telecommunications. It is this increasingly common intermingling of broadcast and
telecommunication services that we call convergence.
Today this phenomenon is making more and more industries sit up and take
notice, including the industries that many of you work for. In fact, it is
generating a tremendous amount of discussion, both in the federal and provincial
governments and at the international level.
As for the CRTC, we too are evolving and adapting to the new realities in the
communications industries. That is why last fall we initiated an internal review
of our procedures and decision-making processes so that convergence will become a
reality within the CRTC itself. Our aim is to put into place all the mechanisms
required to foster competition and convergence as soon as the regulatory barriers
come down on January 1, 1998.
But until full deregulation comes, we look forward to the future with the
conviction that a regulatory regime that is informed, intelligent and as light as
possible can co-exist with converging technologies and services. In fact, we
believe such a regime can even facilitate convergence and promote competition in
the communications market.
We face an era of challenges that are, to say the least, stimulating, and I
feel privileged to be part of it. The issues we will have to address go far
beyond the workings of technology, because they have profound and direct
implications for business, education, culture, our homes, and the lives of most
of us here today. Moreover, the unceasing advances of technology have the
potential of altering the economic activities of the country, and fast-forward us
from a post-industrial economy to a full information, knowledge-based society.
It is precisely because convergence will have such a profound impact on so
many facets of our lives that it is the priority of all priorities, in my own
agenda and in the Commission's agenda. Convergence will bring about innovations
that will serve Canadians, and not the other way around.
The CRTC wants to speed up the transition to convergence and open competition.
Our approach to opening markets and deregulation is based on the need for
transitory mechanisms before the deregulated market becomes reality. In fact,
things are moving so fast that we are now beyond the phase of preparing for the
future. We are already adapting to what people are calling "the new realities".
And what does this mean?
The move to competition in telecommunications
In telecommunications, deregulation made a quantum leap toward convergence
when the Commission introduced competition in the long-distance market in 1992.
At the time Unitel, which was eager to get into the long-distance market, wanted
in fact to set up a duopoly. The Commission stunned everyone and decided instead
to completely open the long-distance market to competition.
Barely two years later, the Commission began a major reform of telephone
services regulation. With the arrival of competition in long distance, it was
obvious that we would have to redesign the regulatory framework, which was
originally set up for a monopoly.
This reform was announced in September 1994, and it focuses essentially on two
central issues:
First, pricing. The Commission decided to discontinue its method of tariff
regulation based on a company's rate of return, and instead adopted price cap
regulation, to come into effect on January 1, 1998. The aim is to ensure that
prices more accurately reflect the actual cost of providing service.
The second key issue in our reform initiative is competition in the provision
of local services. We have already started the process to establish an open
market, recognizing that the rules for competitive entry and operation had to be
established, and that local rates had to be brought closer to costs before
competition could work.
As I mentioned a few moments ago, some rules are needed to smooth the
transition to a more competitive environment. With this in mind, the Commission
separated the phone companies' rate bases into two segments utility and toll
which until then were considered a single source of revenue. We also allowed some
increases in local tariffs during the transition period.
The rules for competition in local phone services will be announced in the
coming weeks. But I can tell you now that these new measures will be favourable
to competitive entry without causing undue harm to the existing telephone
companies.
This is how we have approached the domestic market. As for the overseas
market, we will also have to work under the new rules of the game, particularly
in light of the recent World Trade Organization agreement. Good news: the WTO
agreement will substantially reduce long-distance prices! Not only that, it will
also give Canadian companies even greater opportunities for expansion in foreign
markets. Meanwhile, Canada has pledged to open its toll market to competition at
the end of 1999 and to end the Teleglobe Canada monopoly on overseas calls in
October 1998.
Since the introduction of long-distance competition in 1992, overseas traffic
has grown by 10% due in large part to significant price reductions for all
subscribers. Moreover, the revenues of the new entrants have grown each year, and
collectively they are now a $2-billion sector with about 25% of the toll market.
At the same time, the telephone companies report higher toll revenues despite
an estimated 10% loss of market share from 1994 to 1996. Consumers, meanwhile,
estimate they save 20-30% on their long distance bills.
In other words, we feel competition in this sector is real and in good health!
Given this new maturity, we believe it is time to think about full deregulation
of the toll market. We are now consulting with all stakeholders, and a decision
will be released in the fall.
In the distribution industry, the Commission took a similar approach, and we
recently announced a new regulatory framework for broadcasting service
distributors in Canada.
Canada has always been recognized as a leader in cable distribution, with
three-quarters of all Canadians subscribing to basic cable. But cable operators
will now have to compete against companies using other distribution platforms,
including telephone networks.
As in telecommunications, the new policy on distribution aims to smooth the
transition to a competitive regime by addressing several aspects. One is the just
and equitable treatment of all distributors. Another is the removal of certain
obstacles to competitive entry into the distribution market for broadcast
services.
As in the telephone industry, the arrival of competition in the distribution
market will bring improvements in service, new products, and more competitive
prices.
In recent weeks we wrapped up our first hearing on convergence with proposals
from Bell Canada and TELUS Multimedia to distribute broadcast signals AND carry
telecommunication services over the same network.
Licence applications for video-on-demand undertakings raise the same questions
on the broadcasting side. These services should eventually allow us, the viewers,
to watch our favourite programs on the day and at the time of our choice. In this
kind of universe, how can we ensure that Canadian products will be available? How
will producers gain access to this new window? How can consumers get all these
new services at affordable prices?
One thing is certain: we are leaving the era of "pull" and entering the era of
"push".
The Commission will reach decisions on these issues over the coming months,
but I believe these initiatives will land us squarely in the converged universe
and will truly signal a quantum change for the industries and for the Commission.
Competition in broadcasting
In broadcasting, I am confident that we have all the expertise and talent we
need to assure a strong Canadian presence on the screens and airwaves in Canada
and abroad.
The age of the supercarrier is dawning, and the challenge for the entire
industry, both telecom and broadcasting, is how to reach consumers and hold on to
them.
We all agree that digital technology and video compression will transform
broadcasting. The repercussions are still unknown. But what is certain is that
the changes we are seeing now will result in a melding, and in some cases
convergence, of cable, telephony, wireless communication, and satellite
distribution, as well as a refinement of information technology. This promises to
bring more distribution channels for radio, TV, musicians, actors, creators and
producers.
How can we adapt to these changes? Our broadcasters know what consumers want
and they are able to deliver. They have formed strategic alliances, of which the
concrete expression is surely the arrival of the new specialty and pay TV
services.
Our system has enormous financial resources to support the production of a
large number of quality Canadian programs. We have a dynamic production industry
and the skills to produce content that can hold its own against anything in the
world. Further, the government and the industry are working together on a
framework policy for the transition to digital television in Canada, which should
be implemented starting in 1998.
In radio, the economic situation is more difficult. But we have to bear in
mind that the technological advances and convergence that will affect radio will
give us as many more opportunities to turn the situation around.
The Commission has provided the means to maintain our technological lead in
digital radio while exploiting the new business opportunities that this
technology offers. The arrival of pay radio and audio services on the Internet
will open new markets and expand the horizons of Canadian music.
In November we will be reviewing the rules and procedures for radio. This
policy review is intended to redeploy forces within the industry, particularly
with the introduction of digital radio.
As for the new media, our analysis continues. We know that convergence has
arrived for the Internet and on-line services, which increasingly will deliver
radio and television programming services, music and films on demand. Many
questions are being asked about maintaining a space for Canadian programming on
these new formats. What's more, how can we continue to offer French-language
programming? How can we maintain universal access at affordable prices? Will we
have to change our definition of "basic service"? Indeed, the list of questions
is long, but the answers will not come unless government and industry work
together to find the best way to serve the interests of the consumer. These
cooperative efforts over the next few months will clarify the ground rules while
giving these new industries some room to develop by not encumbering them with the
kinds of processes more appropriate to the conventional media.
In this regard, I am absolutely convinced that Quebec has all the expertise
and dynamism it needs to take up the challenge of the information highway. What's
more, I believe Quebec should demonstrate the same leadership it has shown in
other areas, to maintain the presence of the French language and our products and
our culture within Canada and abroad. To do that, it is essential that our
companies attain the critical mass they need to remain competitive in a lawless
world where tomorrow is as unpredictable as multimedia itself. It is not
surprising that so many Canadian and U.S. companies today are going through a
phase of vertical integration and consolidation.
The role of the CRTC in the age of convergence
The Commission must keep pace with the evolution of the industries that it
regulates or exempts from regulation. It's true that we are headed for a
deregulated environment, but the referee role for the Commission is not likely to
end in the near future.
I see the laws of competition coming into play more and more as we forbear
from regulating other services. But I also see the need for a knowledgeable
referee to be available for a while to ensure that competition is sustainable and
the interests of consumers and all citizens are fully protected.
In closing, by collaborating with all stakeholders we will achieve this goal,
confident that the success of our joint efforts will enhance the well-being of
many generations to come. Quebec, by its vitality and extraordinary
accomplishments from conventional television to Softimage has everything it needs
to reprise its leading role in communications. We've done it before. Now I am
confident that together we can take up the challenge of global markets.
Thank you for your attention.
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Contact: CRTC Public Affairs, Ottawa, Ontario K1A 0N2
Tel.: (819)
997-0313, TDD: (819) 994-0423, Fax: (819) 994-0218
Date Modified: 1997-04-09 |
