Ms. Tara R. Ehrcke
Dr. Richard S. Rosenberg, University of British Columbia
This paper examines policy initiatives which may improve the likelihood that electronic computer networks will be universally accessible, with respect to the production and the reception of information, to all Canadians. We begin by describing the industries which will be involved in the development of new high speed computer networks. We then examine the notion of universal access, and policies which have been applied to existing communications systems with the objective of improving access through affordability. Finally, we examine some of the policy initiatives being considered by the Canadian government, and the degree to which they would protect the public interest. We conclude with alternative recommendations which we feel are more likely to succeed in ensuring universal access for Canadians.
We are at a point in history when the rapid growth of technologies is set to have a remarkable impact on societal organization. Countless articles in the popular press announce the coming of an information age, that is, the development of the information society as the result of an information revolution. We are bombarded with news of information technologies, information workers, and information highways.
Information technologies encompass the range of products and services which supply or manipulate information. The speed with which new technologies are created and disseminated into public life has increased and is only getting faster. The range of new technologies seems to be growing exponentially, as traditional forms of representing, manipulating and communicating information are combined with each other and continually improved. Thus we have, to name a few, the mobile telephone, video conferencing, electronic mail, high definition television, call forwarding and direct broadcast satellite. We are buying and using more information services and products than ever before. Almost every Canadian home has a telephone and a television; 80% of us subscribe to cable; roughly 75% have a video cassette recorder; almost 40% have a compact disc player; and while only 20% own a home computer, the number of privately owned computers has doubled in four years [New Media - New Choices, p. 23].
The most frequently cited benefit of the information highway is economic growth. The Canadian economy is increasingly dependent on information industries, with information technologies accounting for more than 5% of the Gross Domestic Product (GDP) [New Media - New Choices, p. 26]. While other industries stagnate, information industries are growing The possibility of such high levels of growth in these industries creates the drive to continually invest in further research, to develop new products and new services, and to convince the marketplace that these new technologies are indispensable tools. Governments and businesses, both pressured by high debt, see these industries as a means to replace revenues lost from other more traditional sources, such as the extraction of natural resources and production, and to stimulate traditional industries through improved services and productivity. Using economic justifications, it is considered a national priority to encourage and stimulate information industries by developing a communications infrastructure. Ontario’s Advisory Council on a Telecommunications Strategy describes this justification:
"This new infrastructure is analogous in many ways to existing transportation systems, gas and electrical utilities and other public services. Often referred to as the ‘highway of the future’, it is a vital part of the knowledge-based economy. A leading-edge national information highway including associated applications, products, services and software could provide a critical competitive edge for all industrial sectors." ["A fast lane promised for new jobs, May 18, 1994]
Unregulated Network Systems
The only unregulated network systems in Canada are networks which were built primarily for research purposes, and which now function as the Canadian backbone of the Internet. Since 1984, various research projects have led to the development of CA*net, a computer network intended for research purposes which connects all 10 provincial networks of Canada and links to NSFNET (the United States’ publicly funded research network backbone) in three locations. In 1988, the CANARIE program (CAnadian Network for the Advancement of Research, Industry, and Education) was started by Industry Science and Technology Canada to promote the enhancement of Canada’s networking capabilities and oversee the operation of CA*net. CANARIE is a non-profit group of government, industry (including Stentor and Unitel, as well as several computer companies) and academic organizations with roughly 80 members. CANARIE has been modelled on the U.S. initiatives for a national information highway [Silva, Marcos and Cartwright, Glenn F., 1992], reflecting similar policy objectives. The rationalization for the existence of CANARIE is the need for cooperation among industry and government in order to compete globally. Its major goals are the upgrading of CA*net, and extension in the northern regions of the country, as well as the development of network applications.
Regulated Industries--Cable and Telecommunications
Both cable and telecommunications companies are regulated by the Canadian Radio-Television and Telecommunications Commission (CRTC) and are heavily concentrated. The telecommunications industry is considerably larger than the cable industry, with revenues in 1991 of roughly $12-billion in telecommunications and $3-billion in cable [Nicholson, Peter, 1993, p. 24]. The cable industry is dominated by Rogers Communications Inc. with revenues of roughly $1.2-billion, Groupe Videotron with revenues of $598-million, CanWest Global Communications with revenues of $248-million, and Shaw Communications with revenues of $234-million. Close to 80 percent of Canadians are served by the five largest cable companies [Globerman, Steven, 1992, p. 20]. Recently, there have been two important takeovers in the industry. Rogers has acquired MacLean Hunter Ltd. After the takeover, Rogers will control roughly 43 percent of the English language cable market [McKenna, Barry, 1994], concentrated mostly in the highly populated provinces of British Columbia and Ontario. Rogers already owns 32 percent of Unitel, two pay TV channels, video rental stores, a cellular phone network, and several TV broadcast stations. After the merger, it will acquire 6 Canadian magazines, many community papers and other publications, commercial printing companies, and other communications services companies [Enchin, Harvey et. al., 1994]. In addition, Shaw Communications has acquired CUC Broadcasting Ltd., giving it a portion of the Ontario market as well as interests in Britain, and making it the second largest cable company with almost 20 percent of the market share ["Shaw Communication to...", April 29, 1994].
The telephone industry is dominated by the regulated monopoly companies who make up a national telecommunications system called Stentor Canadian Network Management. These are AGT (Alberta), Bell Canada, British Columbia Telephone, Island Telephone (Prince Edward Island), Manitoba Telephone, Maritime Tel & Tel, New Brunswick Telephone, Newfoundland Telephone, and Sask Tel, as well as Telesat, the national satellite company. Stentor operates the interprovincial networks and the U.S. interconnections for its member companies. In the long distance market, the primary competition is Unitel Communications, of which 60 percent is owned by Canadian Pacific Ltd., and 32 percent is owned by Rogers Communications Inc. Both Stentor and Unitel operate a nation-wide fibre optic backbone. International connections are made through the legalized monopoly company Teleglobe Canada, which was privatized in 1987 and is 30 percent owned by BCE Inc., the parent company of Bell Canada [Globerman, Steven, 1993, p. 299-300]. Other players in the telecommunications industry include resellers, who buy time from one of the national networks in bulk, and bypassers, who route single cross border calls via the U.S.
Regulation began in Canada with the introduction of price controls over telephone and telegraph services in 1892. Heated parliamentary debate ensued around complaints received which primarily concerned unreasonably high rates, particularly in larger cities, and very poor rural interconnection. However, it was not until 1906 with the revision of the Railway Act that a federal regulatory body was assigned to monitor telecommunications, and even this act only applied to federally incorporated telephone companies, not local providers. Shortly thereafter several provincial regulatory boards were created which have regulated intraprovincial telephone service until very recently. Provincial telephone companies have enjoyed regulated monopolies over almost all telecommunications services until the 1980s. The CRTC was given regulatory control over telecommunications in 1976, and at that time assumed jurisdiction over Ontario, Quebec, British Columbia and the North West Territories as well. Provincial regulatory power was overturned, first by a 1989 court decision, and in 1993 by the passing of the new Telecommunication Act. Price regulations have included forced cross subsidy of local telephone rates by long distance service, as well as profit limitations. The CRTC, aside from regulating prices and services, has restricted foreign ownership in Canadian telecommunications companies to 20 percent and has prevented telecommunications companies from owning or creating any of the content which travels over their lines.
In 1992, Decision 92-12 [CRTC Decision 92-12] allowed two new entrants into the long distance telephone market in Canada, Unitel Communications Inc. and BCRL. The intent of the decision was to increase productivity, reduce costs and encourage new services and products through competition. These improvements were deemed necessary due to competitive influences from the United States, where long distance rates were considerably lower. A portion of Canadian long distance business has been lost to services which reroute calls through U.S. lines. These "bypass" services have been in existence since the 1979 and 1980 CRTC decisions to allow private ownership of interconnect equipment and connection to public exchanges [Globerman, Steven, 1988, p. 41]. The restrictions on foreign ownership remained, and the system of cross-subsidization was altered to enforce competitors renting access to telephone switching services to pay a fixed amount monthly for each connection. These contributions were discounted for Unitel for the first four years to assist the new entrant into the market ["The CRTC decision ...", 1992, p. 13].
Subsequently, in September, 1994, the CRTC announced that it had approved local rate increases of $2 per year for 3 years ["A Competitive Telecom...", September 16, 1994]. This is contrary to previous rulings in which Stentor members applied to increase local rates but were rejected [CRTC News Release, January 25, 1994]. As Globerman predicted, the "need for telephone companies to earn reasonable returns for their shareholders" has superseded the need "to ensure the prices paid by telephone subscribers are just and reasonable" [Globerman, Steven, 1988, p.1]. The more serious concern is that this trend will eventually lead to local tolled rates which have already been applied for by several provincial telephone companies [see for instance, CRTC News Release, January 25, 1994].
Unlike telecommunications, broadcasting has been more vigorously federally regulated since its inception. A 1928 Royal Commission led to the 1932 and 1936 Broadcasting Acts, which recognized the need for public control over a limited radio spectrum, and enacted a public broadcasting company, the Canadian Broadcasting Corporation (CBC). In 1968 the Canadian Radio Television Commission [1] (CRTC) was created to regulate cable television as well as the broadcast spectra for radio and television. Since its inception, the CRTC has been a means for controlling the content of Canadian broadcasting. This has been deemed necessary because of the proximity of the United States, which has provided far more radio and television programming for Canadians than we have for ourselves. Content restrictions have usually taken the form of requiring a certain percentage of Canadian programming as a licensing condition. The objectives of broadcast policy are outlined in the Broadcasting Act, and include specifically that the broadcast system should "serve to safeguard, enrich and strengthen the cultural, political, social and economic fabric of Canada" [Broadcasting Act, Section 3]. This has been executed by creating a system which incorporated public control through the CBC and the CRTC, and private control through the licensing of private television and cable companies. The success of broadcast regulations is questionable. Although it is impossible to know the degree of Canadian content which would exist if Canada had pursued its objective through different means, such as a completely public broadcast system, the system as it currently exists has not created an economically sustainable Canadian content industry.
"Canadian broadcasting comprises ‘a single system’ only insofar as the CRTC is successful in unifying the cultural goals and the financial objectives of the private sector. In this regard, the CRTC has failed completely. The schizophrenia of Canadian broadcasting today is the outstanding characteristic of the system, with the financial, market-oriented side rapidly increasing in dominance over the cultural." [Babe, Robert, E., 1979, p. 236]
The future of broadcast and telecommunication regulation is at the heart of many of the debates surrounding Canada’s information highway. Many of the newer technologies are not currently regulated, and yet are being offered by the regulated companies, such as telephone companies selling value added services. The discrepancies in regulation between cable and telecommunications, particularly the relatively lax content regulation in the cable industry compared to the ‘common carrier’ status of the telecommunications industry, may be seen as discriminatory once broadcast and telecommunications services are no longer discrete. International competition and the global trend towards deregulation is also affecting Canada’s regulatory structure.
Access encompasses two concepts - the right of members of a society to be able to obtain information and the right of members of a society to be able to disseminate information. Both concepts are considered fundamental rights in many democratic countries and are enshrined in constitutional laws. Universality implies that any member of the society has these rights. Universal access has been a fundamental principle guiding Canadian Government communications policy. Access can be inhibited by a number of causes, including intervention by powerful institutions, such as governments or corporate interests, prohibitive costs which make information and services only available to those who can afford them, and geographic isolation which may be prohibitively costly to overcome.
When universal access was originally conceived as a social policy it was because telephone service was considered essential. Telephones are essential for both economic and social reasons - it would be very difficult for a member of Canadian society to function without access to our largest communication system. Telephone use is required for most forms of employment, for medical treatment and for utilizing the education system. Similarly, many now believe that the types of information systems that will become available through computer networking and enhanced, hybrid communications systems will be equally if not more essential. The National Telecommunications and Information Administration (NTIA) in the United States claims, "In recent years,..., many have questioned whether traditional notions of universal service are adequate to meet the needs of the American people, now and in the 21st century...it may be anachronistic to continue speaking of universal service in terms of voice telephone service. Accordingly, consensus is growing that there is a need to redefine that concept to meet the demand of a new age." ["Inquiry on Universal...", 1994, p. 2, 3].
A project funded by the National Research and Educational Network (NREN) in the United States suggests certain fundamental rights related to access and information technologies. These are: "Section 1 : A citizen’s access to computing and information resources is a right. Access to computing or information resources shall not be denied or removed without just cause. Section 2 : The right to access includes the right to appropriate training and the tools required to effect access." ["Bill of Rights ...", Educom Review, p. 2 4]
The prohibitive costs of emerging technologies usually imply that access will be restricted. Initially the technologies are seen as luxury items, rather than necessities. Difficulties arise when a technology is not a recreational tool, but rather an economic and social necessity. The telephone is clearly such a technology, and increasingly, electronic communications in general are becoming a necessity rather than a luxury. Already there are services and information, government information, for example, which are only available electronically. Because the costs of producing and disseminating electronic information are so much lower than their paper equivalent this trend is likely to escalate. In addition, many essential social services, such as public education, are increasingly relying on forms of electronic dissemination. For instance, Canada has open university courses available only through television broadcasts. The obvious concern is that when a technology becomes an essential tool for economic and social advancement, and is not correspondingly universally accessible, economic and social disparities are likely to occur. Richard Civille, writing for the Center for Civic Networking suggests,
"An accelerating income gap in the United States over the past ten years may well be related to a widening knowledge gap through the rapid expansion of a two-tier information society of haves and have-nots as the economy is further restructured away from its industrial antecedent." [Civille, Richard, 1993, p.2]
To ensure universal access, services and information must be either affordable or subsidized for those unable to afford them. There is a contrast between the regulated industries, in which price controls are used to ensure affordability, and the non-regulated ones, in which market forces and competition are used to control prices. Both cable and telephone rates for basic service must be sanctioned by the CRTC, although many value added services are not subject to price control. The arguments supporting regulation rest on the notion that cable and telecommunications services are natural monopolies. Because such a large amount of capital is required to set up a wired communications network, few will be able to enter the market. For those who are able, they are at a disadvantage immediately because whichever company is dominant will attract customers more easily because they will be able to offer a better service at a lower cost, simply due to the fact that they have more subscribers. Any new entrants into the market would be unable to compete fairly. In some cases, monopoly power is not complete, and a few firms have control over different jurisdictions, or different services. One argument is that if there is no legalized monopoly, there will be a monopolistic situation as a result of market forces anyway. Legalized monopolies are intended to ensure that in a monopoly situation, the government is looking out for the public interest, since market forces are unable to perform this function. This includes ensuring universal access through affordable service.
Babe [Babe, Robert E., 1990] argues strongly that many of the original arguments in favour of natural monopoly were not so clearly supported by the available evidence, and rather that those who had most to gain from a monopolistic situation used the public interest to support policies that in fact were in their best interest. Thus he quotes John Kenneth Galbraith,
"Personal interest always wears the disguise of public purpose, and no one is more easily persuaded of the validity or righteousness of a public cause than persons who stand to gain personally therefrom." [Galbraith, John Kenneth, 1977, p. 232]
While one may argue that market forces are not appropriate regulators for large scale communications systems because they are natural monopolies, one can also argue that regulatory bodies are equally inappropriate because it is difficult to ensure that the people controlling these bodies do not have an interest in pleasing the companies they are regulating.
"In recent years, the very concept of regulation by an independent tribunal has come under increasing criticism, partly because of a perception that regulatory boards inevitably become ‘captured’ by the industries they ‘regulate’. It has been convincingly argued elsewhere that, in the United States, regulatory boards were often created at the behest of the particular industry concerned, in order to achieve stability, cartelization, and government-supported price fixing, all of which were impossible to achieve without the aid of a regulatory commission." [Babe, Robert E., 1979, p. 233]
Thus, part of the difficulty in evaluating the relative merits of public regulation versus market regulation is the difficulty in measuring the effectiveness of each system.
Cross-Subsidy of Local Basic Service
Perhaps the most significant argument in favour of legalized monopoly in Canada is the use of regulation to cross-subsidize local and geographically remote service in the telephone sector. Under the current regulatory structure, the shared fixed costs of local and long distance service are not equitably covered by the costs of these services. Instead, the tolled long distance services subsidize a large portion of the shared costs (approximately 150 percent). Even with the introduction of new entrants in the long distance sector, a fee is paid for every trunk connection to help subsidize the local service and ensure that the local companies are not at a disadvantage because they are required to support local service [Globerman, et. al, 1993, p. 304-5]. Cross-subsidization is used to ensure affordable local service and is justified by the need for universal access. Were there to be a competitive market one would expect that service would become oriented towards businesses, who tend to be bigger spenders, and away from the residential market. Historical evidence also suggests that with open markets in both the U.S. and Canada service extension to rural areas was only made when economically favourable or when governmentally subsidized [Babe, Robert E., 1990, p. 140].
This argument is countered by the increasing importance of long-distance rates in the U.S., which have been declining steadily since deregulation in 1984. Although bypass through the U.S. between Canadian end points is illegal, bypass for calls into the U.S. and beyond exists. Another related issue is the environment for companies using telecommunications services who may relocate or choose to locate in the U.S. because of the lower costs. Thus some argue that we must remain competitive with the U.S. in the long distance sector (which is more heavily utilized by business, rather than individuals) to facilitate growth in the information industries.
Finally, there are arguments which suggest that the system of cross-subsidy should no longer be maintained, because long-distance use is increasingly important for residential customers as well as businesses. Thus, the CRTC has claimed that the move towards local competition will drive down long-distance rates sufficiently that the over all cost to most Canadians will be lower. The has been disputed by the "People for Affordable Telephone Service" who argue that in fact most Canadians will pay more overall for telephone service.
"In justifying its decision to "rebalance" rates, the Commission stated:
Since revenues from rate rebalancing will be directed to reducing rates for basic toll service,...many subscribers will see their total bills reduced.
In fact, relatively few subscribers will see their total bills reduced. Based on the most recent data from Statistics Canada, 65% of Canadians will pay more for local and long distance service combined as a result of the CRTC’s rate rebalancing...Lower income Canadians, who spend significantly less than average on long distance service, are particularly hard hit: 80% will find their total telephone bills higher as a result of this decision." ["A Petition to...", October 31, 1994, p.2]
The Effects of Deregulation
Canada’s current system of subsidized local telephone service is an example of a program based on the philosophy that universality is best achieved through global subsidies for all Canadians, rather than targeted subsidies for certain income or other classes. Mosco [Mosco, Vincent, 1988, p. 345] has looked at the effects of deregulation in the United States and concludes that deregulation has led to basic rate increases, which in turn has led to lower telephone penetration, particularly in certain classes such a low income earners, blacks and Hispanics. The NTIA reports that,
"Approximately one-third of African-American and Hispanic households with annual incomes of less than $5,000 lack telephone service, as compared to twenty percent of white households." ["Inquiry on Universal...", 1994, p. 5]
He predicts that deregulation would lead to similar statistics in Canada with respect to minority and low-income groups. He also counters the argument that Canadian telecommunications services are not competitive on the world market by citing a 1990 OECD report which claims that "Canadian telecom costs for businesses are equal to the average of 24 developed countries and lower than several of Canada’s leading trading partners, including the United States and Britain" [Mosco, Vincent, 1990, p.4]. Globerman [Globerman, Steven, 1988], who supports deregulation to improve international competitiveness acknowledges that a likely consequence is a greater disparity across income distribution in access to telecommunications services. In addition there is growing evidence in the United States of telecommunication "redlining", in which neighbourhoods with a majority of members belonging to certain ethnic, racial or income classes are systematically denied access to new or existing services [Lohr, Steve, May 24, 1994, and "‘Information Highway’ could...", May 23, 1994].
The trend towards deregulation is often deemed necessary because many of the arguments which originally supported a regulated monopoly system may no longer be valid - economies of scale are not certain, resources are becoming less and less scarce, costs of entering the market are shrinking. Yet there is an inconsistency because, as previously detailed, almost all the information industries are becoming more and more concentrated, with monopoly power increasing. In addition, where deregulation has been tried, the trend has not been towards increased universality through market regulated prices, but rather a shift in emphasis towards very high quality service for corporate users and higher prices for residential users. The most significant argument in favour of regulation, universality through cost subsidies, in our opinion outweighs the others because there is sufficient evidence to suggest that communications will be increasingly important for economic and social survival and that the effects of deregulation are likely to include disparity in access across income levels.
To support economic growth and expansion in the information industry sectors, it has become popular for governments to describe a whole set of policy initiatives designed to promote the creation of an information highway. Such an infrastructure is likened to other existing infrastructures, primarily those used as systems of distribution, such as the highway system, which is used to distributed goods. The information highway would similarly be used as a distribution system for knowledge and information. Many existing networks are already used for this purpose, and are cited as models for different aspects of a national information highway. The Internet already functions as an infrastructure for academic exchange of information, and is increasingly used for more diverse and widespread functions. Additionally, private networks function as information highways for large corporations and governments which have been able to afford to implement them. A national information highway would improve upon existing networks by having qualities of mass communications systems - being accessible to a large segment of the population - and by the use of very high bandwidth connections, allowing real time distribution of many information formats. The information highway is described by Industry Canada as follows: "The terms information highway or electronic highway denote the advanced information and communications infrastructure that is essential for Canada’s emerging information economy. Building on existing and planned communications networks, the infrastructure will become a "network of networks," linking Canadian homes, businesses, governments and institutions to a wide range of interactive services from entertainment, education, cultural products and social services to data banks, computers, electronic commerce, banking and business services." ["The Canadian Information...", April 1994, p. 2]
In the past year the Canadian government has expressed a great deal of interest in the promotion of the national information highway. Although many references to infrastructure related topics have appeared in the last decade through Industry Canada and other government bodies, in 1994 government interest increased noticeably. In January, the Speech from the Throne mentioned the information highway as a "key priority for the Canadian government" ["Canada’s Information Highway", August 1994, p. 3]. Shortly after, a special advisory council was created to deal specifically with the "information highway". The council is composed primarily of members from industry but does also include some public interest advocates. The council was provided with a consultation document from Industry Canada, entitled "The Canadian Information Highway", and has built upon many of the ideas in this paper. They have released publicly the minutes of their meetings, as well as several reports. An initial report prepared by the Angus TeleManagement Group, Decima Research was commissioned to "provide the basis for a national action agenda for Canada’s information highway" ["Canada’s Information Highway", August 1994, p.2]. This report is based on Industry Canada policies as well as numerous interviews with representatives from industry, government, interest groups such as education and health care workers and public interest advocates. The council has since written it’s own report directly on access issues, entitled "Access, Affordability and Universal Service on the Canadian Information Highway" ["Access, Affordability and...", January 26, 1995]. In addition, the CRTC has recently published it’s own report on issues related to the information highway entitled "Competition and Culture on Canada’s Information Highway: Managing the Realities of Transition" ["Competition and Culture...", May 19, 1995].
Although this action agenda makes some commitments to public interest objectives, many of the policies outlined may not realistically achieve these objectives. The agenda defines three main policy objectives:
"*create jobs through innovation and investment in Canada; *reinforce Canadian sovereignty and cultural identity; *ensure universal access at reasonable cost." [Canada’s Information Highway", August 1994, p. 3]
The latter two of these objectives are consistent with previous government policy objectives in other areas of communications; as previously discussed, the promotion of Canadian culture has been an important policy objective with respect to cable regulation and universal access has been an important policy objective with respect to telecommunications regulation. While these three objectives are sometimes referred to as if they are equivalently important, there are suggestions throughout the government’s literature that this may not be the case. The Industry Canada paper describes the relative importance of the first objective by claiming "Job creation and economic growth are the top priorities." ["The Canadian Information ...", April 1994, p. 8]. We believe that the policies espoused by the government do favour economic concerns in cases where there may be considerable conflict with the public interest objectives of cultural promotion and universal access.
The government literature describes two access issues - availability and affordability. The term "access" is used to refer to the first of these issues, availability. Availability encompasses physical availability, that is that a physical link is available and services are available through this physical connection. It is recognized as "a necessity, not a luxury" ["Canada’s Information Highway", August, 1994, p. 62]. The "suggested policy guideline" is that single line telephone service be available to all Canadians, and that additional access be provided through public access sites such as libraries. Affordability is not precisely defined, but levels of affordability are suggested by the statement that "basic telephone and cable connections in Canada are affordable" ["Canada’s Information Highway", August, 1994, p. 64]. In later documentation ["Access, Affordability and...", Jan 26, 1995], it is recognized that the cable penetration rate (roughly 75%) and recent consumer resistance to price increases suggest that cable rates are stretching the limits of affordability (at least relative to the service they provide).
The Decima Research report outlines many access issues which were raised by potentially affected parties as well as making statements about the state of affordable access which currently exists. Among the issues raised is the affordability of access to networks in remote regions. The reasons for limited access cited included the high cost of leased lines and the inability to share leased lines, making access to high speed connections in rural areas near impossible, the limited number of Internet access nodes, and long-distance tolls. Also mentioned is the concern about access for individuals, and the growing disparity between information "haves" and "have-nots". The report recognizes that the growing number of Free-Nets - community based network access free to users and supported by donation - are a response to the lack of affordable network access through commercial sources. The report concludes that access is currently restricted to most users because of high costs, that "Canada will benefit from a greater use of networks by all individuals and groups", and that consequently,
"To the extent that access and service costs are a barrier, it is in the public interest for all network pricing to be kept as low as possible. This is an argument for across-the-board rate minimization, not targeted reductions. Widespread reductions are best achieved through effective competition." ["Canada’s Information Highway", August, 1994, p. 86]
This opinion is reiterated in the more recent report ["Access, Affordability, and...", Jan 26, 1995], where the abolition of cross subsidies is discussed.
"In a more competitive environment, however, there is increasing pressure to bring prices in line with the cost of providing services and to reduce or eliminate cross subsidies. In a effort to move toward greater reliance on market forces in telecommunications, a recent decision by the CRTC authorized the increase of local monthly telephone tariffs. Consistent with this pro-competitive approach, the CRTC also opened up local telephone service to competition by cable television, satellite, cellular and other service providers. This move acknowledges the potential cost benefits to individuals and businesses by allowing other competing technologies to supply a larger share of Canada’s communications requirements." ["Access, Affordability, and..., Jan 26, 1995, p. 18] The CRTC also supports this move towards open competition. In their recent report "Competition and Culture on Canada’s Information Highway" ["Competition and Culture...", May 19, 1995] they state,
"In September 1994, following extensive public hearings, the Commission established a comprehensive framework for telecommunications...based on the premise that the public interest is best served if basic telecommunications and innovative information services are competitively provided..." ["Competition and Culture...", May 19, 1995, p. 13]
And yet, it is admitted that "Canada’s very high level of telephone penetration has been achieved by requiring telephone companies to provide phone service to anyone who wants and can pay for it, and by keeping basic rates and rural rates artificially low." ["Access, Affordability and...", Jan 26, 1995] Clearly there is a discrepancy between the acknowledgement of the success of rate rebalancing in ensuring universal affordability, and the promotion of competition (and therefore cost based pricing) as a method of securing this objective in the future.
The discussion on access presented in government position papers has many omissions and fails to consider many possible policy options. These include:
*Access is defined only in terms of reception of information, not production. Although there are references to the need for two-way communications systems, there is little concern for content diversity, bias and censorship except with respect to Canadian content considerations. *Affordability only takes into consideration network connection charges, not the cost of end devices for using the network. Based on the history of penetration of other communication devices, such as video cassette recorders and fax machines, for example, it is clear that the cost of these devices will affect penetration rates.
*The conclusion that across-the-board rate minimization is required is faulty. It seems to be primarily justified by the need for low-cost access in remote communities, where current long-distance charges make network connections prohibitively costly. However, although the distinction between local and long-distance service may no longer correspond to the distinction between basic and luxury service, this does not imply that all services of the infrastructure will be basic and therefore no cross-subsidies should exist. The level of bandwidth is an obvious candidate for defining levels of service.
"....many representatives of community groups, small and medium businesses, schools and health care organizations said that their needs today are far simpler. In the future, they say, they may need or want access to applications which need high bandwidth connections; but for now, they would be satisfied by much less ambitious initiatives." ["Canada’ Information Highway", August, 1994, p. 64]
*The relationship between moving to a competitive market and the effect t his will have on access, particularly with respect to low-income earners is not explored. The need for competition in all levels of the infrastructure is assumed, and no policy alternatives which may better ensure universal access are seriously considered.
*There is no discussion of specific methods of network pricing. Concern has been raised in the United States that Network Access Providers (NAPs) will move from fixed rates to metered rates and the consequences this will have on the content of the Internet.
"We are concerned about the future pricing systems for Internet access and usage. Many users pay fixed rates for Internet connections, often based upon the bandwidth of the connection, and do not pay for network usage, such as the transfer of data using email, ftp, Gopher or Mosaic. It has been widely reported on certain Internet discussion groups, such as com-priv, that the operators of the NAPs are contemplating a system of usage based pricing....
"Usage based pricing would also introduce a wide range of problems regarding the use of ftp, gopher and mosaic servers, since it is conceivable that the persons who provide "free" information servers would be asked to pay the costs of "sending" data to person who request data. This would vastly increase the costs of operating a server site, and would likely eliminate many sources of data now "published" for free." ["Taxpayer Assets Project - Information Policy Note", May 7, 1994]
Pricing structures on networks could have a significant effect on the costs of distributing as well as receiving information across the network.
As Canada chooses to adopt technologies which place increasing importance on the role of the exchange of information within our society, it is critical that we take advantage of those aspects of the technologies which are within our control. Many aspects of the emerging electronic communications infrastructure are unique in that the technologies required to create them are not rigid. This is unlike the telephone and broadcast systems, in which the technology determined many aspects of the design of the system. Because of this, other factors will play an important role in determining how and what becomes Canada’s information highway. Most notable is the role of government policy and regulation. It is essential that government policy promote and protect the public interest.
We are also in the fortunate position of having previous policy examples in the communications industry which can help determine which policies best achieve the stated objectives, or, how we can avoid past mistakes and recreate past successes. In our opinion the greatest success in serving the public interest in the communication sector has been the creation of one of the most advanced telecommunication systems in the world which is truly affordable to all Canadians. This has been achieved through the implementation, within a regulated monopoly, of a system of cross subsidy in which luxury service subsidizes basic service. The notion of cross subsidies should not be abolished because long distance rates affect rural access. Instead new ways of defining basic and luxury service should be explored and methods to implement cross subsidies based on these new distinctions created. Because technologies will continue to change rapidly, it is also important to re-evaluate what is "basic" service regularly, to ensure that socio-economic necessities are accessible to all Canadians. Although there are legitimate criticisms of the system of regulated monopoly, it should not be excluded as a policy option given that it has been a successful communications policy with respect to access and affordability in telecommunications systems. In addition, various other systems which incorporate public ownership should be considered as policy alternatives.
Finally, among the failures of previous communications policies has been the lack of evaluation of the degree to which policies meet the objectives they are designed to achieve. This has been a failure in the regulation process. If our communications policies are to be successful, the implementations of these policies - at every level and branch of government --must be regularly evaluated within the context of their stated objectives to ensure that our government is truly acting on behalf of the best interests of all Canadians.
"Access, Affordability and Universal Service on the Canadian Information Highway", Information Highway Advisory Council, January 1995, available at: URL: http://debra.dgbt.doc.ca/info-hhighway/ih.html
"A competitive telecom future: cheaper long distance, increased choice and innovation", CRTC speech, Keith Spicer, Chairman, September 16, 1994.
"A petition to rescind, or in the alternative, to refer back, that portion of telecom decision CRTC 94-19 which raises local telephone rates, Petition of People for Affordable Telephone Access", October 31, 1994, Before the Governor in Council, Government of Canada.
Babe, Robert E. Canadian Television Broadcasting Structure, Performance and Regulation. A study prepared for The Economic Council of Canada, Minister of Supply and Services, 1979.
Babe, Robert E. Telecommunications in Canada: Technology, Industry, and Government. University of Toronto Press, Toronto, 1990.
"Bill of Rights and Responsibilities for Electronic Learners", Educom Review, May/June 1993, p. 24-27.
"Canada’s Information Highway", Angus TeleManagement Group, Decima Research, August, 1994, available at: gopher://debra.dgtb.doc.ca/11/isc/Canadian.Information.Highway/Info. Highway.Advisory.Council file: study
Civille, Richard. "The Internet and the Poor", Center for Civic Networking, "Public Access to the Government", JFK School of Government, August 1993, available at: gopher: nic.merit.edu file: /conference.proceedings/harvard.pubaccess. symposium/network.communities/internet-poor.txt
"Competition and Culture on Canada’s Information Highway: Managing the Realities of Transition", CRTC, May 19 1995, available at: URL: http://www.crtc.gc.ca
CRTC Telecom Decision 92-12, "Competition in the Provision of Public Long Distance voice Telephone Services and Related Resale and Sharing Services", June 12, 1992.
CRTC News Release, January 25, 1994, "CRTC Says No To BC Tel Basic Service Rate Increase".
Department of Communications, Government of Canada. "New Media, New Choices", 1992, available at: URL: http://www.nlc-bnc.ca/documents/infopol/canada/newmedia.txt
Enchin, Harvey and Partridge, John. "Rogers, Maclean Hunter sign deal", The Globe and Mail, Wed. March 9, 1994, page A1.
Galbraith, John Kenneth. The Age of Uncertainty. Houghton Mifflin, Boston, 1977.
Globerman, Steven. Telecommunication in Canada, The Fraser Institute, 1988, page 41.
Globerman, Steven. "Convergence entre les technologies de communications: Le cas de l’Europe de l’Ouest" in Etudes de cas de l’Amerique du Nord et de l’Europe de l’Ouest, OECD, 1992. Translated in Deschenes, Lucie, Towards an Information Society.
Globerman, Steven. "Competition in public long-distance telephone markets in Canada". Telecommunications Policy, May/June 1993, p. 297-312.
"‘Information Highway’ could bypass low income and minority communities", May 23, 1994, available at: USENET newsgroup: comp.org.cpsr.talkMessage-ID: <1994May25.001753.19076@mont.cs.missouri.edu>
Information Highway Advisory Council, Summary of Meeting, May 25 and 26, 1995, available at: URL: http://debra.dgbt.doc.ca/info-hhighway/ih.html
"Inquiry on Universal Service and Open Access Issues", 1994, U.S. Department of Commerce, National Telecommunications and Information Administration, available at: USENET newsgroup: comp.org.cpsr.talk Message-ID: <37114k$fbh@snyside.sunnyside.com>
Lohr, Steve. "Data Highway Ignoring Poor, Study Charges", The New York Times, May 24, 1994, p. A1, C5.
McKenna, Barry. "Merger my face long regulatory scrutiny", The Globe and Mail, Mon. March 14, 1994. page A6.
Mosco, Vincent. "Whose Computer Revolution Is It?", Information Technologies and Libraries, December 1988, p. 341-348.
Mosco, Vincent. Transforming Telecommunications in Canada. The Canadian Centre for Policy Alternatives, December 1990.
Silva, Marcos, and Glenn F. Cartwright, "The Canadian network for the Advancement of Research, Industry, and Education", The Public-Access Computer Systems Review 3, no. 6 (1992): 4-14.
"Shaw Communications to Grab Cable Television Rival", available at: CLARINET: clari.biz.industry.broadcasting, April 29, 1994.
"Taxpayer Assets Project - Information Policy Note", May 7, 1994, available at: ftp: ftp.cpsr.org
"The Canadian Information Highway, Building Canada’s Information and Communicati ons Infrastructure", Spectrum, Information Technologies and Telecommunications Sector, Industry Canada, April 1994.
"The CRTC decision on long distance voice competition or how to write a voter friendly decision", Richardson Greenshields Equity Research, June 16, 1992, page 13.
1 The Canadian Radio Television Commission was renamed the Canadian Radio-Telev ision and Telecommunications Commission in 1976 when it was given regulatory power over telecommunications.
For more information, please contact:
Ms. Tara Ehrcke at tehrcke@vnet.ibm.com
Dr. Richard Rosenberg at rosen@cs.ubc.ca