Canada Gazette

Order Issuing a Direction to the CRTC on Implementing the Canadian Telecommunications Policy Objectives

Whereas, pursuant to subsection 10(1) of the Telecommunications Act (see footnote a), the Minister of Industry had a copy of the proposed Order Issuing a Direction to the CRTC on Implementing the Canadian Telecommunications Policy Objectives published in the Canada Gazette, Part I, on June 17, 2006, substantially in the an-nexed form, and a reasonable opportunity was thereby given to interested persons to make representations to the Minister with respect to the proposed Order;

Whereas, pursuant to subsection 10(1) of that Act, the Minister laid the proposed Order before each House of Parliament and forty sitting days of Parliament have elapsed since the proposed Order was tabled in both Houses;

Whereas, pursuant to subsection 10(2) of that Act, the Minister consulted the Canadian Radio-television and Telecommunications Commission with respect to the proposed Order before it was published and laid and consulted the Commission again with respect to the proposed Order in its definitive form;

And whereas, pursuant to section 13 of that Act, the Minister, before making his recommendation to the Governor in Council for the purposes of this Order, notified the minister designated by the government of each province of his intention to make the recommendation and provided an opportunity for each of them to consult with the Minister;

Therefore, Her Excellency the Governor General in Council, on the recommendation of the Minister of Industry, pursuant to section 8 of the Telecommunications Act (see footnote b), hereby makes the annexed Order Issuing a Direction to the CRTC on Implementing the Canadian Telecommunications Policy Objectives.

ORDER ISSUING A DIRECTION TO THE CRTC
ON IMPLEMENTING THE CANADIAN
TELECOMMUNICATIONS
POLICY OBJECTIVES

1. In exercising its powers and performing its duties under the Telecommunications Act, the Canadian Radio-television and Telecommunications Commission (the "Commission") shall implement the Canadian telecommunications policy objectives set out in section 7 of that Act, in accordance with the following:

(i) rely on market forces to the maximum extent feasible as the means of achieving the telecommunications policy objectives, and

(ii) when relying on regulation, use measures that are efficient and proportionate to their purpose and that interfere with the operation of competitive market forces to the minimum extent necessary to meet the policy objectives;

(b) the Commission, when relying on regulation, should use measures that satisfy the following criteria, namely, those that

(i) specify the telecommunications policy objective that is advanced by those measures and demonstrate their compliance with this Order,

(ii) if they are of an economic nature, neither deter economically efficient competitive entry into the market nor promote economically inefficient entry,

(iii) if they are not of an economic nature, to the greatest extent possible, are implemented in a symmetrical and competitively neutral manner, and

(iv) if they relate to network interconnection arrangements or regimes for access to networks, buildings, in-building wiring or support structures, ensure the technological and competitive neutrality of those arrangements or regimes, to the greatest extent possible, to enable competition from new technologies and not to artificially favour either Canadian carriers or resellers; and

(c) the Commission, to enable it to act in a more efficient, informed and timely manner, should adopt the following practices, namely,

(i) to use only tariff approval mechanisms that are as minimally intrusive and as minimally onerous as possible,

(ii) with a view to increasing incentives for innovation and investment in and construction of competing telecommunications network facilities, to complete a review of its regulatory framework regarding mandated access to wholesale services, to determine the extent to which mandated access to wholesale services that are not essential services should be phased out and to determine the appropriate pricing of mandated services, which review should take into account the principles of technological and competitive neutrality, the potential for incumbents to exercise market power in the wholesale and retail markets for the service in the absence of mandated access to wholesale services, and the impediments faced by new and existing carriers seeking to develop competing network facilities,

(iii) to publish and maintain performance standards for its various processes, and

(iv) to continue to explore and implement new approaches for streamlining its processes.

2. This Order is binding on the Commission beginning on the day on which it comes into force and applies in respect of matters pending before the Commission on that day.

The Order Issuing a Direction to the CRTC on Implementing the Canadian Telecommunications Policy Objectives ("the Policy Direction") is made under section 8 of the Telecommunications Act ("the Act"). The purpose of the Policy Direction is to mandate that the CRTC should rely on market forces to the maximum extent feasible and regulate, where there is still a need to do so, in a manner that interferes with market forces to the minimum extent necessary. The Policy Direction to the CRTC is an element of the Government's broader telecommunications policy agenda to decrease regulatory burden and make regulation more efficient and effective through increased reliance on market forces. To this end, the Policy Direction specifies criteria which must be met by any new regulatory measure to encourage effective regulation. The Policy Direction further directs the CRTC to adopt operational practices that enable more efficient, informed and timely regulation where it is required.

In April 2005, the Government appointed the Telecommunications Policy Review Panel ("the Panel") to examine the policy and regulatory frameworks surrounding telecommunications, and to make recommendations that would help ensure that Canada has a strong, internationally competitive telecommunications industry, with world-class services for the economic and social benefit of all Canadians. On March 22, 2006, the Panel proposed 127 legislative, institutional and social recommendations to improve the effectiveness of the current framework.

A fundamental finding of the Panel was that competition in telecommunications markets has evolved to the point where market forces can be relied upon to achieve many of the telecommunications policy objectives, and the need for regulation should no longer be presumed. Moreover, the Panel recommended specifically issuing a policy direction as an Order under section 8 of the Act as a first step in a move towards greater reliance on market forces. In creating the Policy Direction, the Government is signalling its vision for the future of telecommunications policy in advance of more substantial regulatory change by providing policy guidance on how the Commission should exercise its regulatory mandate and direct it to take a more market-based approach to implementing the Act. The text of the Policy Direction draws heavily on the proposal recommended by the Panel.

As part of the policy making process, the Government has considered several courses of action as alternatives to issuing the Policy Direction at this time, including not issuing a policy direction, and delaying the finalization of the Order.

Canada has a history of leadership in innovation and deployment of telecommunications networks and services; however, as of late, Canada has not remained at the leading edge of technological development and deployment in important emerging technologies, such as wireless and broadband. At present, Canada is facing three key challenges: the telecommunications policy and regulatory frameworks, last modernized in 1993, have not kept up with the rapid pace of technological change; not all Canadians have access to advanced telecommunications networks; and Canadian firms have weak investment in information and communications technologies (ICTs), relative to our global counterparts. The current regulatory framework needs to be modernized if the Government wants to improve the productivity and competitiveness of the Canadian economy and ensure a strong, internationally competitive telecommunications industry.

In moving towards greater reliance on market forces, the Panel provided numerous recommendations as part of a comprehensive telecommunications strategy. These recommendations involve complex issues that require time to allow for in-depth analysis and consultations before the Government can take action. Issuing the Policy Direction at this time will allow Canadians to benefit from an updated regulatory regime that relies more on market forces, ahead of greater regulatory change.

On October 19, 2006, the House of Commons Standing Committee on Industry, Science and Technology (INDU) met with representatives from a range of stakeholders who presented their views on the Policy Direction. Subsequently, INDU recommended that finalization of the Policy Direction be delayed to allow for further Committee study. The recommendation was not unanimous and certain Committee members issued a dissenting report.

Delaying the release of the Policy Direction to allow for further study would mean that the benefits of an updated regulatory regime that relies more on market forces would be postponed. The power to issue policy directions was designed to be an instrument to provide timely policy guidance to the regulator. Issuing a policy direction formally states the government's vision and enables timely change towards more market-oriented regulation in advance of any potential legislative changes, which would inevitably take more time. Given these considerations, and that all statutory requirements have been completed and extensive consultation has taken place, the Government has decided to move forward with issuing the Policy Direction at this time.

The Policy Direction would formally and transparently communicate the Government's vision for an updated telecommunications regulatory regime, a regime where market forces are relied upon to the maximum extent feasible, and where regulation is minimally intrusive, efficient, up-to-date, and clearly identifies the policy objectives which are being advanced.

The Policy Direction will guide the CRTC toward reduced and more targeted regulation and therefore will reduce regulatory cost and burden associated with this Regulation. Greater reliance on market forces will reduce the direct cost to Government and the CRTC in implementing and enforcing regulation by streamlining the current regulatory regime. Moreover, reduced regulatory burden benefits industry by reducing operating costs. At the same time, greater reliance on market forces will allow for greater realization of the benefits of free markets — increased competition and productivity, which in turn has the ability to produce benefits for consumers and businesses alike through greater innovation and investment.

Direct costs associated with the Policy Direction are primarily the costs of CRTC reviews, regulatory proceedings and other activities to implement the practices specified by the Order. However, the overall benefits of the Policy Direction will be more streamlined and efficient practices, reducing regulatory burden and costs. The Policy Direction represents an initial step towards greater regulatory change in telecommunications, and looking forward, creates the foundation for a modern, more efficient and effective telecommunications environment for the benefit of all Canadians.

In accordance with subsection 10(1) of the Act, the proposed Order was pre-published in the Canada Gazette, Part I, on June 17, 2006, opening a 60-day period for public comment. The comment period closed on August 16, 2006. Over 60 submissions were received on the proposed Order, representing a broad range of views. Groups who provided comment on the Policy Direction included various incumbent and competing telephone companies, cable television companies, internet service providers, consumer and public interest groups, cultural groups, business and economic councils, as well as private citizens. The public comments on the proposed Order are available online to view at the following Web addresses:

Comments received generally supported the Policy Direction's broad objectives of increased competition, investment and innovation in the telecommunications industry. The majority of submissions commented on various specific elements of the proposed Order. Public comments ranged from concerns that deregulation was being undertaken prematurely, to the belief that the Policy Direction, as written, would be unable to effect real change in the telecommunications policy environment. Some were of the view that the Policy Direction provided too great a focus on the economic objectives of telecommunications policy, to the detriment of social objectives. However, in particular, a large number of interested parties suggested changes to subparagraph 1(c)(ii) of the Policy Direction, which proposes a review of the regulatory framework surrounding mandated access to wholesale services to increase innovation, investment, and infrastructure-based competition in the telecommunications industry.

All comments received were given due consideration. The Government believes that it is timely to move forward with the Policy Direction substantially as proposed. While some public comment had indicated the Policy Direction may be ultra vires the Act, the Government is satisfied that the Order, in its present form, is fully within the power and authority of section 8 of the Act. Moreover, in addressing concerns with regards to social policy, the Order does not diminish the Commission's commitment to upholding the legislated policy objectives in section 7 of the Act, both economic and social, including the objectives to render reliable and affordable telecommunications services of high quality accessible to Canadians in both urban and rural areas in all regions of Canada, and to contribute to the protection of privacy of persons. Furthermore, the Policy Direction does not apply to issues outside of telecommunications, such as broadcasting and its important cultural considerations.

The Government has taken note of the significant questions raised concerning the implications of subparagraph 1(c)(ii) and the potential market impact of the CRTC's review of its framework governing wholesale services. In particular, amendments to subparagraph 1(c)(ii) in the definitive version of the Order respond to concerns with the review of mandated access to wholesale services.

In accordance with statutory requirements, consultation with the CRTC was carried out both before the proposed Order was initially pre-published in the Canada Gazette, Part I, and again before it was finalized. The provinces and territories were also consulted as required under section 13 of the Act.

In accordance with the Act, all statutory requirements for creating an Order under section 8 have been fulfilled. Pursuant to the Act, the CRTC is bound to carry out its activities in accordance with the applicable terms of the Policy Direction in relation to regulation under the Act and in relation to its own operations. In the Policy Direction, "regulation" refers broadly to the wide variety of measures, including orders, approvals, decisions, policies and other activities that the CRTC carries out under the Act in order to implement the various telecommunications policy objectives. Subject to subsection 11(3) of the Act, the Policy Direction to the CRTC shall apply in respect of matters pending before the Commission on the day on which the order comes into force, and prospectively to the wide variety of measures the Commission handles. The Order comes into force on the day on which it is registered.

Leonard St. Aubin
Director General
Telecommunications Policy
Industry Canada
300 Slater Street, 16th Floor
Ottawa, Ontario
K1A 0C8