Abstract: This paper discusses key concepts in telecommunications policy: common carriage, natural monopoly, universal service, and price setting. Three crucial points are made. First, in light of historical practices that created and sustained boundaries between the media industries, contemporary trends toward reconvergence need to be seen, mainly, as a consequence of economic, legal, and political factors -- not technology. Second, the governing discourse of telecommunications policy should not be regulation /deregulation, but about whether policies prevent, permit, or promote reconvergence and broadband telecommunications. Third, the choice of the latter strategy by the CRTC as well as broader trends in telecommunications have propelled media politics to a new high-water mark as telecommunications companies (telcos) increasingly obtain the ability to claim media freedoms under the Canadian Charter of Rights and Freedoms. The paper also argues that there are grounds for the telcos to claim such rights on a de facto basis through NAFTA and WTO provisions that prevent the regulation of enhanced services. The key question in this respect is how can the CRTC distinguish between, for example, a broadcast signal (which it would like to apply cultural policies to) and on-line services (which they cannot regulate) when all information is digitized and sent down the same pipe? Answers to such questions are urgently needed before telcos usurp the democratic rights of citizenship associated with the nascent "electronic free press."
Résumé: Cet article discute des concepts clés dans la politique de télécommunications : le partage des lignes, les monopoles naturels, le service universel, et la fixation des prix. Il souligne trois questions cruciales. Premièrement, à l'exemple de pratiques historiques qui créèrent et renforcèrent des divisions entre les industries médiatiques, il faut entrevoir les tendances contemporaines de reconvergence comme étant les conséquences de facteurs économiques, légaux et politiques plutôt que technologiques. Deuxièmement, la question directrice dans les politiques en télécommunications ne devrait pas être la (dé)réglementation, mais plutôt la reconvergence et la télécommunication à large bande -- les politiques actuelles servent-elles à prévenir celles-ci, à les permettre, ou à les encourager? Troisièmement, l'accent que la CRTC met sur cette dernière question, ainsi que des tendances plus générales en télécommunications, ont conduit les politiques médiatiques à une nouvelle extrémité, avec les compagnies de télécommunications revendiquant de plus en plus de libertés médiatiques sous la Charte canadienne des droits et libertés. Cet article soutient en outre que les compagnies de téléphone ont déjà raison d'exiger de tels droits de facto, grâce à des provisions de l'ALENA et de l'OMC qui empêchent la réglementation de services optimisés. La question clé à cet égard, c'est comment la CRTC peut-elle distinguer entre, par exemple, un signal radiodiffusé (qu'elle aimerait réglementer au moyen de politiques culturelles) et des services en ligne (qu'elle ne peut pas réglementer), quand toute information est numérique et transmise sur le même fil? Il faut répondre d'urgence à de telles questions avant que les compagnies de télécommunications n'accaparent les droits démocratiques de citoyenneté associés à la "presse électronique libre" émergeante.
This paper takes a broad look at telecommunications. In my view, the topic is vital in an era where discussions of media convergence around some form of integrated networks are widespread, popular imaginations of "information highways" abound, and quite massive changes in the nature of telecommunications policy often proceed along fixed ideological lines with little consideration to the breadth of issues involved.
The paper begins by defining telecommunications (telecoms), discusses why this is an important area to study, and identifies some of the issues addressed by telecoms policy. The next section introduces key historical concepts in the literature about telecoms: common carriage, natural monopoly, universal service, and different approaches to setting prices. The section indicates that while telecoms is often thought of in narrow technological and economic terms, it is an area pregnant with issues of power, politics, and democracy. I suggest these links have shaped the history of telecoms in Canada and will continue to do so in the emerging contexts of media convergence, "information highways," and regulatory liberalization.
In addition, the paper considers some of the economic, regulatory, and legal barriers to media reconvergence; how universal service can be conceived in an era of technological innovation and information abundance; the nature of ownership and control in telecoms; and whether telecoms companies should be given freedom of "expression rights." As I indicate, these areas reveal the intimate connection between telecoms, politics, and democracy, and thus require rethinking historical discourses that have shielded this important area of communications from public inquiry by shrouding it in the specialist languages of engineers, administrators, and economists.
Telecoms is wire- or radio-based communication networks that carry information -- voice, data, television, computer enhanced services, and so forth -- from one point to another without editorial intervention. From telegraphs to broadband communication networks, telecoms has provided an essential infrastructure for commerce, administration, the mass media, and communicative interaction between people across great distances. In doing so, telecoms promotes economic welfare, mediated social interaction, and democratic communication. The centrality of even simple technologies to Canadian life has been underscored across the century, as Canadians have consistently been among the worlds most extensive users of the telephone.
Canada offers an excellent opportunity for studying telecoms, providing a record of how interactions between technology, economics, and government policy over the last 150 years have been consistently and deliberately guided to produce one of the most ubiquitous electronic communication systems in the world. Telecoms is the cornerstone of this system, providing telephone and more advanced services to 99% of Canadian homes, a rate higher than the U.S. (94%) and equalled only by Sweden and Norway. As a point-to-point, two-way communication system, telecoms supplements pervasive patterns of mass-mediated communications delivered to 72.4% of Canadian homes by cable systems and to 99% of the population by over-the-air television (Industry Canada, 1995). They also support more recent forms of electronic communication, most notably the Internet. Furthermore, telecoms systems often provide the distribution infrastructure for electronic mass media (e.g., television), although from the vantage point of end users the two seem to be engaged in completely separate activities. Given their commonalities, one task of this paper is to account for why telecoms and electronic mass media evolved along separate lines and to consider recent pressures for reconvergence in the communication industries.
As a distinct economic sector, the communication industries are crucial to national economies. Telecoms, computers, and broadcasting (cable and over-the-air) account for about 6% of the Canadian gross domestic product (GDP), have annual revenues of approximately $33 billion, and employ 258,000 people. Economic growth in computers (7%) and telecoms (8.8%) is much higher than in the rest of the economy (5%). Telecoms is the most significant segment of the communication industries, contributing 3% to GDP, having revenues of $16.5 billion, and employing 126,000 people (Industry Canada, 1994, 1995). Because of such facts, telecoms has surged to the top of economic policy agendas.
Yet telecoms policy is more than just another aspect of industrial policy. Telecoms has a significance which goes beyond the economic because of the historical relationship between communication and democracy, a status reflected in, for example, the second clause of the Canadian Charter of Rights and Freedoms, the First Amendment to the United States Constitution, Article 10 of the European Convention on Human Rights, and Article 19 of the United Nations Universal Declaration of Human Rights. Ideally, telecoms policy builds on these values to bring about goals thought socially desirable. Often the aim is to increase access to communications media, a goal pursued through universal service and "just and reasonable pricing." Another regulatory concept, "common carriage," prevents telecoms providers from controlling the contents /messages flowing through their networks, thereby defending against government /state and private /corporate censorship (Noam, 1994). Common carriage, thus, can help sever mediated communication from the distorting influence of power that stems from ownership and control of the means of communication, a point unique to telecoms.
By mediating relationships between technology, industry, and society, policy stamps its imprint on the evolution of telecoms. Telecoms policy has traceable consequences for:
Despite the decline of the "natural monopoly" concept and regulatory liberalization, telecoms policy is as consequential as ever. One example used to illustrate this point in this paper is Stentor's2 proposal to build integrated broadband networks (IBNs) or "information highways" if the government agrees to remove measures preventing telecommunications companies (telcos) from delivering information and video services. This confronts the Canadian Radio-television and Telecommunications Commission (CRTC) with the option of using regulatory policy to prevent, permit, or promote these far-reaching proposals (Elton, 1992). While each choice entails a different degree and kind of regulatory involvement, none eliminate government's role in making policy decisions that will affect telecoms for years to come. The important questions deal with how competing interests will be reconciled in the context of "information highways," who will shape the regulatory agenda, and how concerns with democratic communication will fare in the ensuing battle over the evolution of the new telecoms (Mansell, 1993).
In Canada there are 61 telecoms carriers. Most, but not all, are privately owned and regulated by the CRTC. Several carriers, such as Manitoba Telephone Service (MTS), Saskatchewan Telephones (SaskTel), and the Thunder Bay Telephone Company, are publicly owned and, until recently, were provincially or municipally regulated. The Telecommunications Act (Canada, 1993) and recent court decisions brought these companies and independent telcos under the federal regulatory authority of the CRTC. Independent telcos have furthered universal service by providing services to remote areas thought unprofitable by Stentor members or would-be competitors. The major providers and general conditions of the telecoms industry are outlined in Table 1.
|Ind. Telcos||Mixed||n /a||$1.10||6.5|
|L. D. Comp.||Private||n /a||$2.30||14.0|
As Table 1 indicates, despite the many companies in the Canadian telecoms industry, control of the telecoms system (77.2%) rests mainly with the ten Stentor members. Even within this consortium, the industry is very concentrated, with Bell Canada accounting for about 44% of the all revenues. To the extent that competition exists, it remains on the margins with a small number of competitive long-distance suppliers (AT&T / Unitel, Sprint Canada, Westel, Telroute) and a large number of resellers3 recently permitted entry by a series of CRTC decisions (CRTC, 1990, 1992). Overall, competitors garner 10 to 15% of all telecoms revenues, most of which comes from their gain of 25 to 30% of long-distance service revenues in recent years.4
For much of this century, telecoms services in Canada have been governed by three factors: the status of service providers as common carriers, a belief that telecoms services were natural monopolies, and public interest-oriented regulation by a semi-autonomous regulatory agency (now the CRTC). These factors have left an indelible imprint on the evolution of telecoms and continue to set the baseline for discussions about the future of the industry, the role of policy, and the contributions telecoms can make to economic welfare, social interaction, and democratic communication. The following pages survey these principles and consider their future viability.
The Railway Act (the guiding legislation for telecoms from 1906 until 1993; Canada, 1979) and the Telecommunications Act (Canada, 1993) stress that telecoms are point-to-point communication systems that carry all forms of content. These definitions distinguish telecoms from other forms of electronic communication in two important ways. First, the emphasis on point-to-point communication distinguishes telecoms from electronic mass media which distribute messages from one point to a large number of receivers -- the so-called mass audience. Second, telecoms rests on the separation of carrier and content supply functions, unlike the electronic mass media. This separation is known as the common-carrier principle.
This common-carrier principle is rooted in the perception of telecoms as a part of the social and economic infrastructure of a community. Like railways and other services of value to a community, telecoms has long been guided by the idea that common access would best facilitate the free flow of services, in this instance, information (Chitty, 1950). Yet the principles of common carriage did not automatically apply to the first technological innovations in telecoms. Courts in North America were reluctant to apply the common-carrier principle to telegraphy because information and communication were intangible and thus not encompassed by the idea of services assumed by definitions of common carriage (Baxter v. Dominion Telegraph Co., 1874-75). The Supreme Court of Canada in Dominion Telegraph Co. v. John Silver and Abraham Martin Payne (1882-83) also found telecoms and the press to be interdependent, and that therefore they should be regulated by the same laws. This changed in the first decade of the twentieth century in response to complaints by news agencies that some telegraph companies were interfering with the free flow of information by charging discriminatory rates between their own wire services and that of others (Babe, 1990; Board of Railway Commissioners, 1910; Nichols, 1948).
The view of telephone systems as common carriers subsequently evolved piecemeal through interpretations of the Railway Act, amendments to this Act, and changes to the laws governing telecoms providers in Canada. Until recently, the common-carrier concept contained three principles: control of content should be separated from control over networks, network access should be non-discriminatory, and rates should be just and reasonable. These principles have been implemented by policies that prevented carriers from influencing the messages flowing through their networks and required them to offer non-discriminatory access to their system on the basis of "just and reasonable" rates (Canada, 1979, s. 320; 1993, s. 33). In return, policies limited carriers' liability for messages communicated through their networks (Canada, 1979, s. 381; Department of Communication, 1971). Section 5 of the Bell Canada Act unequivocally states that the company "shall neither control the contents nor influence the meaning or purpose of the message emitted, transmitted or received" nor "be the holder of a broadcast license" (Canada, 1967, p. 65). These provisions were extended to all carriers by the Telecommunications Act, although it allows the CRTC to grant waivers to such a policy -- an issue discussed further below (Canada, 1993, s. 36).
According to Eli Noam (1994), such policies create a communication system that is decidedly different from the mass media, where access is discretionary, the conditions of access are governed by private contracts, and responsibility for contents is enforced through libel, indecency, and slander laws. According to some critics, these conditions create a system of electronic mass media where media freedoms belong to those who own the media, since citizens' access to the media is entirely dependent on their discretion (although this freedom is qualified by the cultural policy orientation of the broadcast regulatory regime, public access cable channels, and a minimal right of public access to over-the-air broadcast facilities [CRTC, 1971; Juneau, 1972]). In contrast, the common-carrier principle prevents private arrogation of freedom of expression by erecting barriers to censorship by the state and private interests. Table 2 outlines some of the differences between the competing network access regimes for telecoms and the electronic mass media.
The common-carrier principle is crucial because it provides an entry point for discussing the relationship between telecoms policy and democratic values -- a discussion seldom undertaken because telecoms interests are biased toward technical and economic considerations while communications research predominantly focuses on media content rather then the institutions and infrastructures of electronic media. This is no longer desirable as telecoms policy moves to the fore in debates over the organization, control, and use of new media technologies. A key issue is whether common carriage should be imported wholesale into the nascent telecoms policy regime to preserve "freedom of expression" independent of ownership and control, be adopted for limited public access "set asides," or be sacrificed at the altar of "information highways."
|Comparative focal points||Telecoms||Electronic mass media|
|Type of communication||Point to point||Point to multi-point|
|Direction of||Two-way and interactive||One-way and relatively|
|Network architecture||Switched and narrowband||Unswitched and broadband|
|Focus of regulation||Structure||Structure and content|
|Policy goals||Economic welfare, social||Cultural identity, national|
|interaction, free flow||sovereignty, and freedom|
|of information||of expression|
|Justification for regulation||Natural monopoly||Spectrum scarcity|
|Network access||Non-discriminatory,||Discretionary, private|
|Financing||Regulated tariffs||Advertising and some|
|Carrier responsibility||Limited||Libel, slander, etc.|
As the above discussion indicated, one concern of the common-carrier principle has been to prevent the ownership of telecoms networks from translating into the exercise of power over those producing and distributing media content. Conventional views of telecoms as a natural monopoly made concerns about concentrated economic power, market behaviour, and the public interest even more salient. Indeed, some suggest that the entire regulatory edifice for telecoms has been tied to the natural monopoly concept. Yet what is a natural monopoly? If policy was contingent upon it, does competition render telecoms policy obsolete?
Until recently, the natural monopoly view stemmed from the observation that in most countries, or regions within a country, one firm controlled the supply of telecoms services, from the manufacture of equipment to the telephone in peoples homes. Yet competitive and independent telephone systems thrived from about 1893 until 1920. It was only after a series of efforts to establish dominance within telecoms and several regulatory decisions that the Bell Telephone Company of Canada and six other telcos consolidated control over the industry after 1915 (Board of Railway Commissioners, 1916). Thereafter, the theory of natural monopoly became unassailable in telecoms policy circles. The main explanations for this exceptional view was that the technical characteristics of the industry inexorably lead to "natural market failure" (Wilson, 1992, p. 348, emphasis added).
According to Babe (1990), three arguments supported the idea that telecoms were unable to sustain a competitive industry structure: economies of scale, the need for systems-wide cross-subsidies to bring about universal service, and systems integrity. The high cost of constructing universal telecoms networks created enormous economic barriers to market entry. Besides, it was thought inefficient to duplicate networks, especially since economies of scale meant that extending existing networks to embrace additional subscribers was cheaper than reaching these same people through the construction of competing networks. Thus a single network served the public interest, as the declining cost of serving additional subscribers meant that average costs for all subscribers would decline. This also enhanced the value of the telecoms network for all users, since additional subscribers were potential communicative partners for everyone else connected to the network. As a framework for harmonizing divergent interests, the natural monopoly concept appeared to be as good as they come.
The final major argument supporting natural monopoly was that of systems integrity. According to the telcos, the complexity of the technologies used and the importance of uninterrupted telecoms services to the public required unified, end-to-end control of the network by one company. Representatives of Bell Canada put the case before Senate hearings this way: "[t]he company feels very strongly that it should have complete control over the system, firstly in order to protect the equipment . . . , and, secondly, in order to make sure that the fringe operations, which sometimes can become the most lucrative operations, are not taken away from it to the detriment of the subscriber ..." (Canada, Standing Committee on Transport and Communications, House of Commons, 1967, p. 66).
Similar arguments have been put forth by Bell since at least 1905 (Canada, Mulock Committee, 1905). The argument cloaked the monopolistic structure of the telecoms industry in the shroud of technological necessity. A second effect was to present competition as unfair in the sense that competitors would only enter the most profitable areas -- a process known as "cream-skimming" -- thereby undercutting the telcos' ability to use revenues from these areas to subsidize unprofitable rural and remote areas. Once again, natural monopoly aligned the telcos with the public interest through recourse to the goal of universal service. Yet, as Babe (1990) observes, the position ignores the independent telcos -- about 1,400 in 1915 -- who drew their existence from the failure of Bell and the other large telcos to serve remote areas.
Critics of natural monopoly point out that monopolies always seek legitimacy through reference to the public interest. They argue that the natural monopoly explanation is historically inadequate and based on reasons that are neither necessary nor of the magnitude claimed. Even recent studies commissioned by the CRTC have been unable to conclusively determine if natural monopoly conditions prevail in telecoms (CRTC, 1992). Other studies suggest that corporate size in telecoms has not led to innovation and universal service but to efforts to snuff out new technologies and competitors threatening the monopoly /oligopoly network operators (Babe, 1990; Davis, 1994; Mansell, 1993; Schultz & Janisch, 1993).
In contrast to natural monopoly explanations, it is necessary to consider how the entire communications system has been shaped historically through extensive struggles between civic associations, labour unions, farmers, independent telephone companies, large corporations, and government agencies. One intense period in telecoms politics coincided with the flourishing of competitive and independent telcos (circa 1893-1920) that was briefly described above and drew its energies from the fact that the organization of the communications industries was still undetermined and up for grabs.
This quickly abated once control in the communication industries was consolidated on the basis of powerful ties between the media industries and the Canadian government, and between the Canadian communications system and its U.S. counterpart. Besides adopting the natural monopoly concept as the cornerstone of telecoms policy, the most significant outcome of this historical period was the segregation of communications industries between telephony, telegraphy, publishing, and broadcasting. This was not due to technical requirements of different media, but to struggles for dominance in sub-sectors of the communications field involving skirmishes over patents, restrictive covenants, and subsequent legal frameworks that protected these exercises of corporate power. One key record of this history is the 1926 Consent Agreement which resulted in, among other things, AT&T leaving broadcasting and telegraphy in return for pledges by General Electric, Western Union, Westinghouse, Zenith, and RCA to stay clear of the telephone business (United States Senate in Committee of the Whole, 1926).5 Given the integration of the Canadian communications industries with that of the United States through ownership, extensive patent agreements, and corporate director interlocks, a similar situation came to define conditions in Canada.
As Babe stresses, the division of the communications industries and separate legal regimes developed for each thereafter resulted from
collusive and restrictive covenants on the part of Canadian [and U.S. communication] firms, certainly not from either a general principle that content should be separated from carriage or the premise that broadcasting and telephony used radically different types of apparatus.... In fact, the opposite was the case: the two fields diverged through corporate agreement. (1990, p. 205)
Without these practices, the issue of media reconvergence now so prominent may have been settled in the 1920s and 1930s instead of the 1990s: the Bell Telephone Company may have extended its early trials with radio to become not only the dominant telephone company in Canada but also the largest commercial broadcaster. For their part, policymakers noted that these dealings violated anti-trust laws, then adopted them as the basis for the United States' Communications Act of 1934 and, in Canada, continued to separately regulate telecoms under the Railway Act and broadcasting through a series of legislation leading up to the Broadcasting Act of 1991.
By the end of the 1920s the natural monopoly concept underpinned the position of the major telephone companies within telecoms while corporate agreements secured their positions across the divided communications industries. But could such arrangements last, especially in the face of an onslaught of technological innovations such as cable television? The short answer is yes, until a more compelling alignment of interests was constructed! That compelling alignment of interests is taking shape now, amidst the experimental use of new media such as the Internet and jostling amid strategic interests over the institutional boundaries and telecoms policies that will govern the convergence of IBNs, ownership of the emerging networks, and conditions for offering services on the so-called "information highways."
In the 60- to 70-year span between segregation of the communications field and the present, a penumbra of policies inhibited media convergence, cross-media ownership, and delivery of content services that seemed to cross imaginary technological boundaries. The CRTC regularly put forth policy statements and decisions disallowing telcos from holding a cable television license, preventing the undue reliance of cable systems on the telcos, and hindering efforts by SaskTel and MTS to provide cable television services (CRTC, 1969, 1976, 1977). In addition, Parliament amended the Bell Canada Act to prohibit Bell from exercising editorial influence over information flowing through its network or from holding a broadcasting license (Canada, 1967, s. 5). Although digitization, computerization, and visions of "wired cities" animated public discourse during the late 1960s and 1970s, barriers between the media industries were not being eroded, but reinforced. The telcos acquiesced willingly. As Bell chairperson A. J. de Grandpré stated, the company did not want to be a broadcaster, cable television operator, or "to control in any way the contents of the message.... [T]he telephone companies wanted to be common-carriers, pure and simple ..." (Canada, Standing Committee on Transport and Communications, House of Commons, 1967, p. 65).6 Bell not only acquiesced to regulatory reinforcements of the Maginot line, but actively enforced the line itself by prohibiting cable systems leasing its facilities "from offering any ... network or point-to-point communications" (CRTC, 1977, p. 71). Faced with the option of preventing, permitting, or promoting network convergence, most institutional actors involved in telecoms policy chose the first option: there were to be no breaches in the regulatory walls separating electronic media.
The natural monopoly concept within telecoms and government-sanctioned corporate agreements structuring institutional arrangements across the communications industries meant that any role for communication markets was purely residual. In the place of communication markets there developed the concept of public interest-based regulated industries.7 Whether publicly or privately owned, telcos across the country were brought under the supervision of provincial or federal regulatory agencies. In Manitoba, MTS was supervised by the provincial Public Utilities Commission after 1912; in Saskatchewan, SaskTel has been overseen by the government of the day. In areas under federal jurisdiction, Bell and B.C. Tel,8 among others, fell under the regulatory authority of, first, the Board of Railway Commissioners (BRC), then the Canadian Transport Commission (CTC), and lastly the CRTC after 1976.
More crucial than who regulated who is that the transition from competitive telephone systems to the monopoly provision of telecoms services early in the twentieth century dissolved the potential for the industry to claim that markets could adequately represent the public interest. According to classical economic theory, competitive markets accomplish two things: efficient allocation of economic resources and commutative and distributive justice -- fairness in relations of production, exchange, and in the distribution of income. The natural monopoly concept displaced both goals. As C. B. Macpherson explains, "with the twentieth-century decline of competition the market could no longer claim exemption from non-market ethical standards.... Moreover, the state, which now shares the allocative function [of markets], must, in so far as it is a democratic state, claim that its ... policies are based on the public interest" (1985, p. 15).
Within the context of telecoms, the state stepped into the regulatory and ethical void created by "market failure" through the use of policies designed to secure what markets no longer could: efficiency, social justice, and the public interest. This was done through the common-carrier principle, rate regulation, universal service goals, and balancing citizens' and corporate rights to freedom of communication. While in some ways these measures did check potential abuses of monopoly power, they also raised the spectre of an economic and /or legitimation crisis (Habermas, 1975) as the state became torn between promoting economic accumulation and using telecoms policy to expand citizens' rights.9 This placed tensions between economic rights and human rights at the heart of telecoms policy. Should telecoms policy promote the economic value of information or expand potentials for democratic communication? Irresolvable in theory, the tension is preserved in the transient balancing of interests and rights obtained through the politics and power relations endemic to telecoms policy. This point is illuminated below in reference to three key areas of telecoms policy: pricing, universal service obligations, and the concept of "freedom of expression" that held sway in media policy in the 1970s and into the 1980s.
One of the most salient issues in telecoms policy is pricing. It is also one of the most complex areas, where extensive political issues are easily obscured by economic and scientific models designed to distribute costs across various users and to promote competing policy ends, such as universal service, growth in the electronic services industry, and international competitiveness.
Telecoms policy has conventionally employed "rate-of-return" regulation to set monopoly telecoms operators' (TOs') profits in the absence of competition. Ideally, rate setting by regulators balanced the interests of the TOs in a reasonable profit and users' interests in, and legislative requirements for, "just and reasonably" priced telecoms services. Of course, these competing interests and the fact that what was "just and reasonable" was a malleable concept meant that rate setting was inherently political. Moreover, many claimed that "rate-of-profit" regulation contained incentives for telecoms companies to build "gold-plated" networks, as the costs could easily be passed through regulators and onto users. Yet, regulators did supervise construction plans to avoid overbilling and to see that network construction was reasonably balanced across geographical and economic zones.
Currently, rate-of-profit regulation is being replaced by "price-cap"10 regulation. Price caps are positively perceived by many regulators and TOs since it allows the TOs some flexibility in setting prices across a range of services, so long as they do not surpass the "ceiling price" for the whole "basket of communication services" covered by the price-cap plan. Several issues are important here: the size of telcos' profits under this regulatory regime versus the rate-of-profit regime, how broadly the "basket of services" is defined, how stringent the "price-cap ceiling" is in relation to the consumer price index (CPI), the effects of price-cap regulation on network investment, and the ability of TOs to assign high prices to services in the basket where competition is weak and demand inelastic (e.g., local service where research shows an insensitivity to price changes) and low prices to services where competition is strong and price elasticity high.
Price-cap regulation has been welcomed by the TOs, especially since their profits have risen from 8% to 12% under rate-of-profit regulation to between 15% and 20% during the transition to the price-cap regime to be implemented in 1998 ("Revenue Ranking by Industry," 1996; Industry Canada, 1995). Despite this benefit, the price-cap approach pits the telcos, who have an interest in narrowly defined "service baskets," against users and those interested in social justice, who seek broader definitions. Also, price caps contain incentives to reduce investment in network development and to reduce the workforce in order to increase profits for shareholders, setting the interests of telecoms workers against those of the companies (Carsberg, 1987; Hills, 1991). Thus, contrary to efforts to harmonize competing interests under rate-of-profit regulation, price-cap regulation contributes to a complex system of class conflict. In contrast to much of the literature on deregulation, this expands the role of the state as regulators such as the CRTC become embroiled in the mediation of conflict through the telecoms policy process.
The complexity of pricing issues is aggravated by the range of "subsidy myths" in popular circulation. At one end of the spectrum is the argument that there has been historically a cross-subsidy from long-distance to local services. The effect of this subsidy was to artificially inflate the price of long-distance services and underprice local services, which was, in effect, a hidden income transfer from business users dependent on long-distance communications to local users. According to this myth, the entire framework was legitimated through references to universal service and idealistic notions about the role of communication in strengthening local communities. On the other hand, William Melody argues that the subsidy was the other way around. Melody claims that networks were built to the demands of heavy-volume users for data communications and to access long-distance networks, regardless of whether residential users required these capabilities. Since local users were paying for "gold-plated" network designs that outstripped their requirements, they were subsidizing big business (Melody, 1982, cited in National Anti-Poverty Organization, NAPO, 1987). The elaborate nature of the evidence and models underlying both conclusions lead some to conclude that the economic theories used to justify pricing decisions are "fairy tales" reflecting and serving the balance of power prevailing in policy circles at any given point in time (Rideout & Mosco, 1997, p. 86).
Other important issues in telecoms pricing are emerging as regulators revisit the controversy between flat-rate and measured-service pricing. Flat-rate pricing sets fees for a period of service irrespective of telecoms facilities usage, whereas measured service is charged according to how much one uses communication facilities. Because it is insensitive to usage, flat-rate pricing can encourage communication, enhance social interaction, and further goals of democratic communication. Furthermore, flat-rate pricing may spur the development of electronic network services, since large amounts of time and vast fluctuations in the volumes of information involved in, say, a telephone conversation, the delivery of a large document, or a video feed can outstrip small users' ability to pay when charged on a volume-sensitive basis (Connell, 1994). Recently, local users and service providers in Germany derided substantial local rate increases, claiming this would dampen the growth of electronic network services dependent on local network access points.
Issues in pricing policy are closely linked to universal service goals. Universal service is often claimed to be one of the most important objectives of telecoms policy -- historically, politically, and in terms of the legitimacy of the regulatory framework. The goal of universal service is to allow all people access to broadcasting, telephone, and more advanced network technologies. The concept emphasizes affordability, availability, and the needs and interests of all users. In Canada, these aims have historically been pursued through provisions in the Railway Act that required all telephone rates to be "just and reasonable" and "not unjustly discriminatory or unduly preferential" (Canada, 1979, s. 320). Similar clauses are included in the new Telecommunications Act (Canada, 1993).
Universal service is influenced by available communication technologies, social and political factors, and assumptions in the theory and praxis of democracy prevailing during any point in time. The concept is derived from premises in democratic theory that link access to information to effective citizenship. Over time, universal service has expanded from concerns with literacy to include education, access to libraries and government information, and broadcasting and telecoms. Universality underpins representational aspects of democracy by providing access to broadcasting agencies who, at least in theory, function on behalf of citizens (e.g., "fourth-estate" notions). Moreover, universality contributes to participatory dimensions of democracy, as telecoms networks facilitate communicative interaction within civil society, bypassing representative /mediated channels of bureaucratic public service and commercial media (such as the CBC and commercial media such as CanWest and CTV networks in Canada). As Jill Hills notes,
democratising telecommunications can play a part in facilitating the interchange of information between citizens. It is no coincidence that where civil and political rights have been denied, although ... centralised broadcasting systems used for propaganda have been well developed, ... telecommunications have remained undeveloped.... Telecommunications enable citizens within a democracy to receive information on which to determine their ... political interests and the right to communicate and join with others to further their interests. (1993, pp. 21-23)
The centrality of universal service to Canadian telecoms policy has extended telecoms services to 98.7% of the population, one of the highest rates in the world. However, more detailed analysis reveals that only 86% of people below the poverty line ($10,000) have telephone service and that universal service remains an elusive goal with respect to long-distance service, cable television, computer ownership, and computer networking. As the analysis of access to these technologies presented in Figure 1 suggests, divisions between "information rich" and "information poor" closely parallel income distribution in the country (Statistics Canada, 1994, Table 3).
23P 1 Universal Service Measures of Information / Communication Technologies in Canada (1992) Source: Statistics Canada, 1994.
As broader changes in the Canadian economy eliminate the historical tendency for income gaps to narrow (Love & Poulin, 1991) and an expanding range of telecoms network services become available, important questions arise about the future of universal service. Given these trends, a key issue in telecoms policy is how universal service should be defined. Those concerned about gaps between the "information rich" and "information poor" argue for a broad definition of universal service, that is, one that embraces convergence between computers and telecoms, while most policymakers and members of the communication industries would like to narrow the concept (Bangemann, 1994; CRTC, 1994b; NAPO, 1987; Norman, 1995; Rideout & Mosco, 1997). The first position is consistent with the history of attempts to expand the theory and praxis of democracy, while the latter subordinates such values to instrumental concerns. Current trends in telecoms policy point toward a significant narrowing of the concept. The CRTC narrowed the concept of universal service in its long-distance competition decision and in a subsequent decision where it adopted the Bell Canada-inspired redefinition of "basic" services as "utility" services (CRTC, 1992, 1994b).11 Elsewhere, German communication ministers announced that citizens should understand universal service as a narrow concept and not a "luxury system" (Norman, 1995, p. 2). The European Unions Bangemann Report (Bangemann, 1994) on the information society makes a similar point.
Of course, proponents of such measures would not agree that they are aiming to narrow the range of communication services available to citizens. Rather, regulatory policy is claimed to objectively draw lines between "basic services" that fall under regulatory jurisdiction and other "value-added" services that are subject to market regulation.12 Yet, as Robin Mansell notes, "such distinctions are static and arbitrary" (1988, p. 245). The basic controversy is whether universal service "should be extended to newer services," not where regulatory lines should be drawn on the basis of supposed technical considerations (p. 246). The crucial point is that all communication services "add value" (p. 246) and policymakers are in the business of deciding just how much of that value citizens will receive, at what cost, and under what terms.13 Services defined as "value-added" and thus falling beyond universal service obligations, are made available primarily on a "pay-per" basis, thus directly linking access to information to income (Mosco, 1989).
As the previous discussion of pricing and universal service indicates, telecoms policy remains captive between cross-cutting pressures to realize the economic value of information on the one hand, and efforts to expand the historical link between communications and democracy on the other. Despite being riddled with such conflicts, the natural monopoly-based telecoms policy regime did partially harmonize the interests of monopoly TOs, labour unions, large users, and citizens. Furthermore, the common-carrier policy, CRTC restrictions on cable / telco cross-ownership, and prohibitions against Bell and other telcos holding a broadcasting or cable license staked out an ambitious concept of the public interest that constrained the concept of information /communication as a commodity.
The balance struck between competing values by telecoms policy reflected general shifts in the Canadian political economy, other areas of media policy, and in the courts. Indicative of general trends in how communications issues were being thought about, courts continued into the 1980s to reaffirm freedom of expression as a political right of citizenship, rather than a commercial one. In arguments about the competing values in communications policy, the Ontario High Court of Justice made two crucial points. First, the Court stated that in "a democratic society the economic realm must be subordinate to the political realm" ("Klein and Law Society of Upper Canada," 1985, p. 523). Second, it distinguished between freedom of expression as a commercial right versus a political and civil right, stating:
Pure commercial speech says nothing about how people are governed, or how they should govern themselves. Indeed, it stands outside of public discourse: it could be said in a tyranny or a democracy, a monarchy or a society without a government at all. Providing no support to a democracy, it does not claim constitutional protection. (p. 534)
Essentially, the Court was reaffirming that there is a hierarchy of values covered by constitutional protections for media freedoms, and that in this schema commercial values are subordinate to political and civil ones. Similar statements were made in the 1970s by the chairperson of the CRTC, Pierre Juneau. In an address to the Canadian Association of Broadcasters, Juneau (1972) stated that when media owners' rights to freedom of expression conflicted with those of citizens, the latter should prevail. For Juneau, the crucial concern of communications policy has to be with "the freedom of people, that's the important principle that we have been talking about for centuries, not the freedom of opinion of the owners of the transmitters and their small group of employees" (1972, p. 47). Although neither of these examples, nor any other "freedom of expression" case law, explicitly references telecoms policy, their ranking of speech rights is consistent with the balance of interests achieved by the common-carrier principle, that is, the subordination of telcos' editorial discretion to the rights of those whose information is carried over telecoms networks.14 Current efforts to remove restrictions on media reconvergence suggests that the link between telcos, the common-carrier principle, and freedom of expression is poised to become a major issue in telecoms policy. For now, we can note that by the 1980s, communications policy -- through pricing, universal service, and the balancing of freedom of expression values -- had furthered an expansive idea of citizens' communication rights in practice.
However, for some, the inclination of telecoms policy toward political and civil rights suggested that it had been diverted from its original mission towards a far more expansive social policy agenda. As the Canadian communications policy analysts Richard Schultz & Hudson Janisch argue, telecoms policy went from limiting abuses by monopoly TOs, "to pursue a wider political agenda through regulatory means" (1993, p. 9). As a result, markets were overrun and the benefits of new technologies were not passed on to major users and the economy as a whole. This was particularly problematic in the context of long-term declining rates of growth for the Canadian economy. In contrast to a decline in economic growth rates from about 6% during the 1950s and 1960s to 3% or less from the mid-1970s onwards, the communications sectors, except broadcasting, were growing at a rate of about 8% per annum (Industry Canada, 1995; Magdoff, 1992). Coupled with the thesis that industrial economies were being transformed into information economies, these growth rates suggested the need to unshackle the economic potential of telecoms from the social-policy orientation of previous telecoms policies.
From a different perspective, C. B. Macpherson (1985) argues that what was really at stake was a trade-off of civil and political rights for promises of economic growth. From this view, attempts to reinstate the priority of economic goals involved depoliticizing and disconnecting government policies from their normative roots and making efforts to secure citizens' consent to this narrowing of the political sphere through promises of higher material standards of living (Habermas, 1975). It also meant stripping communication of its links to theories of democracy and public interest connotations.
During the 1980s and 1990s the boundaries of state action and telecoms policy have been redrawn to expand the role of communication markets, rebalance the prices of telecoms services for large and small users, ensure that competition works, and enforce a narrow view of the public interest. The processes of regulatory liberalization began in the 1980s by removing services from the natural monopoly framework and public interest-oriented regulation. As the decade progressed, the CRTC allowed private lines used to supply competitive data services to be interconnected with the telecoms network, completely eliminated the telcos' monopoly over equipment attached to the network, adopted distinctions between basic and enhanced services that limit the scope of monopoly services while expanding competitive markets, and accepted the principle of long-distance competition (CRTC, 1979, 1982, 1984, 1985). The Commission extended this approach during the 1990s by allowing resellers to offer local and long-distance services, approving facilities-based competition in local and long-distance telephone service, and adopting a new regulatory framework (CRTC, 1990, 1992, 1994b). By the mid-1990s, these actions had created one of the most competitive-oriented telecoms systems in the world, at least in theory if not in practice.
A corollary of expanded communication markets is the narrowing of universal service and public interest concepts. For its part, as noted above, the CRTC restruck the balance between economic imperatives and civic values by redefining "basic services" as "utility services" and by promoting distinctions between these and "enhanced" services. The telecoms sections of the NAFTA and the World Trade Organization's General Agreement on Trade in Services (GATS) adopted similar distinctions. As a result, there are a paucity of regulated basic/utility services on the one hand and a plethora of enhanced "information-age" services delivered on the basis of commercial transactions, such as e-mail, voice mail, electronic data bases, Internet access, electronic newspapers, and video-on-demand on the other (Canada, 1992, 1994b; Trade Negotiations Committee, 1993). These distinctions remove new media and "enhanced services" from the scope of public-interest regulation and contribute to a condition where, as Schultz & Janisch suggest, "social policy concerns largely disappear from the forefront of public debate" (1993, p. 9).
Such attempts to depoliticize and narrow the scope of telecoms policy are often confused with deregulation -- the reduction of regulations governing the sector. For advocates of these initiatives, deregulation does not reflect changes in the political economy of telecoms but is the natural outcome of changing technology. Government reports, industry statements, academic writing, policy-position papers by telecoms labour unions, and the popular press all suggest that telecoms policy is "rapidly being undermined by technological change" (Addy, 1994, p. 2) and "that all markets will be competitive in the not-too-distant future" (Schultz & Janisch, 1993, p. 7). However, such views overlook the ever-prominent role of the CRTC, an expanded role for Industry Canada, increasing attention to the sector by the Minister of Consumer and Corporate Affairs, greater reliance on the Competition Act and Merger Enforcement Guidelines, and higher levels of direct ministerial intervention in telecoms policy then ever (Addy, 1994; Canada, 1993; CRTC, 1994b; "MacDonald's Record," 1988; Schultz & Janisch, 1993). Given these trends, rather than speaking of deregulation, it is more appropriate to speak of regulatory liberalization -- a process changing the focus of telecoms policy from protecting natural monopolies, industry boundaries, and balancing competing interests towards expanding markets, ensuring that competition works, and reconciling the contradictory interests between historically dominant TOs, new competitors, and large users.
These changes in telecoms policy are most evident in the evolving approaches to the new telecoms, media reconvergence, and to so-called "information highways." One encapsulation of possible approaches to these developments is provided by the United States' Administration White Paper on Communications Act Reform (United States, 1994), a document that appears to have influenced the CRTC's thinking for its Competition and Culture on Canada's Information Highway (CRTC, 1995a). According to the U.S. White Paper, policy for broadband communications networks should be guided by the following five principles:
While most of these principles have been incorporated in Canadian telecoms policy through the CRTC's Review of Regulatory Framework (CRTC, 1994b) and its Competition and Culture document (CRTC, 1995a), Canadian policy on broadband networks is still unfolding and key regulatory issues have yet to be resolved satisfactorily. A key question that the CRTC has had to face is whether or not policy should prevent convergence, permit it, or take an active promotional role towards this possibility as part of larger industrial and social policy initiatives (Elton, 1992). None of these options presented itself as the best one, each involved different trade-offs, and none could lead to state withdrawal from telecoms.
Despite enduring technological potentials, it is only recently that there has been intense pressure to allow media reconvergence. Why? Several reasons are offered below to help explain this change: the decline of natural monopolies; monopoly abuses of cable network operators; telcos' need for additional revenue to finance "information highways"; weak regulatory concerns with media concentration; and prospects for telcos to claim media freedoms under the Canadian Charter of Rights and Freedoms.
The eclipse of the natural monopoly regulatory regime means that there are no longer any vested interests served by continued media segregation. Stentor members have gone from wanting only to be common carriers to advocating network competition and media reconvergence. Stentor members sought reinterpretations to the Telecommunications Act (Canada, 1993) immediately after it became law and persistently petitioned the CRTC to exempt them from common-carrier status so that they could offer a range of content and video services. They also proposed the Beacon Initiative, a plan to invest $8.5 billion in interactive IBNs to be available to 80% of homes by the year 2005, in return for government pledges to remove restrictions on cross-media ownership and the telcos' ability to obtain broadcast licenses, in order to become multi-media content producers and to offer any other on-line service (Anderson, 1994; CRTC, 1994b; Cohen, 1993; Stentor Telecom Policy Inc., 1994; Surtees, 1994). In response, between 1994 and 1996 the CRTC and government removed all legal and regulatory barriers to reconvergence and set out the criteria under which telcos could become involved in broadcasting, cable television, electronic publishing, and so on (Canada, 1996a, 1996b; CRTC, 1994b, 1995a, 1995b).
While Stentor's initiatives and government accommodation of these proposals would have been wholly out of place even a few years ago,15 such overtures came to be seen as sensible in light of popular imaginations about information highways, the perception that information services are key to economic recovery, and prevalent criticisms that cable systems were abusing their monopoly position. With respect to the latter point, it has long been clear that cable operators have used their local monopolies to exact rate increases in excess of price rises for regulated telecoms services and other items charted by the consumer price index (Statistics Canada, 1995, Table 3; Task Force on Broadcasting Policy, 1985). While this seldom meant more than empty admonitions for cable operators to quit abusing their positions, the balance may have shifted as content providers, including the largest press interests such as Southam, and specialty program suppliers, experienced difficulty getting cable distribution. This combination of interests may have lent increased support for alternative local networks. The telcos also argued that the CRTC's "asymmetrical regulatory policy," which kept them out of cable but allowed cable operators into telecoms, reinforced cable monopolies to the detriment of consumers. In this view, asymmetric regulation propped up artificial competition and should be done away with (Stentor Telecom Policy Inc., 1994, 1995).
Another argument is that regulatory barriers to media convergence and the supply of content services by the telecoms carriers had to be removed so that they would have the additional revenue sources needed to finance broadband networks. As a CRTC-commissioned study on convergence noted, the development of IBNs:
will not be possible without significant new revenue sources.... [O]nly the delivery of interactive entertainment broadband video services, some only conceptually defined, others yet to be invented or identified, are likely to generate a sufficiently broad based consumer demand to produce the incremental revenues required to deploy [IBNs] to the home. (Comgate Engineering Ltd., 1991, p. 35)
Martin Elton (1992), however, challenges these justifications, stating that network competition may lead to even more colossal monopolies across the telecoms and cable industries, that the link between network modernization and content as revenue sources may not be as tight as contended, and even that IBNs are unnecessary to serve the needs of all but the most demanding users. This latter argument mirrors earlier ones about subscribers financing "gold-plated" telephone networks but on a grander scale since IBNs will mainly be used only by the most demanding institutional users. While it is typically acknowledged that there is an explosion in the range of network information services, it is argued that most of these services can be made publicly available using less grandiose technologies, such as Integrated Services Digital Networks (ISDN).16 Such observations suggested caution before universal freedom of expression values embodied in the common-carrier principle were traded in return for financing network technologies that may mainly serve particular institutional interests.
Despite these warnings, the CRTC has promoted media reconvergence and the delivery of information and video services by the telcos. After an early period of caution, the CRTC removed all restrictions on telcos' ability to offer information services, allowed exemptions for telcos to deliver "cable-like" programming on an "experimental basis," permitted cable network operators to offer telecoms services, and set out the pre-conditions for full-scale telco /cable competition and cross-ownership (all of which suggest a "promote" approach). Furthermore, the acceptance of a spate of acquisitions across the communications industries reinforces the idea that government policy is not only permitting media reconvergence but actively promoting it (CRTC, 1994b, 1995a). These approaches parallel trends in the U.S. where remanded legal decisions, Federal Communications Commission (FCC) "video dial-tone" policy, and new legislation replacing the Communications Act of 1934 have opened content services to the Regional Bell Operating Companies and major long-distance carriers, as well as increased their role in cable television and broadcasting (FCC, 1991; United States, 1996; United States v. Western Electric Company et al., 1990).
The promotional approach to media reconvergence has helped to fuel acquisitions across the media industries. In the wake of these trends, the number of independent telcos continues to decline and extensive links between telecoms carriers, broadcasting, new media, and other industries are created. Exemplifying the trend, BCE bought part-ownership of the direct-to-home satellite service, ExpressVu. It also started Multi-Media Incorporated (MMI) in conjunction with other members of Stentor as a means of developing content services to be delivered over the emerging broadband networks once they are in place (Anderson, 1994; Surtees, 1994). The telcos also moved into on-line services and Internet access in late 1995 with Sympatico / MediaLinx.
Another telecoms provider Rogers / Unitel (cable television, broadcasting, telecoms) recently acquired MacLean-Hunter (publishing and broadcasting). Similar patterns have consolidated control in the cable industry among three players: Rogers, Videotron, and Shaw.
Despite widespread belief that cross-media acquisitions put the prerequisites for reconvergence and IBNs in place, they do not guarantee success. Immediately after acquiring MacLean-Hunter, difficulties in telecoms forced Rogers and CNCP to sell their shares in Unitel to AT&T and three of Canada's five biggest banks -- Royal Bank, Toronto-Dominion, and Bank of Nova Scotia. Whether specific deals succeed or fail, the belief that cross-media alliances are essential to success in the context of the new telecoms has proved resiliently triumphant. As an executive stated in discussions of the aborted merger between Bell Atlantic and TeleCommunications Inc., the largest cable system in the U.S., the deal was "a perfect information age marriage, ... a model for communications in the next century," combining the companies' activities in telecoms, publishing, film, video, cable, etc. with emerging services such as video-on-demand, home banking, electronic date bases, and so forth (quoted in Morley & Robins, 1995, p. 14, emphasis added). Using the same logic, but with a nationalist twist for good measure, the CRTC approved Rogers' takeover of MacLean-Hunter, arguing it meant "Canadian stories, ideas and values ... for the electronic information highway" (Dalglish with Kaye-Fulton, 1995, p. 44).
The CRTC's permissive approach to cross-media ownership is bolstered by its reliance on the weak tests of concentration, vagaries, and omissions included in the Mergers Enforcement Guidelines and competition law (CRTC, 1994b). The effect of these features is to reinforce the enduring tendency in Canada for government policies to support "national champions." As a commentator on the Telecommunications Act stated, " `competitiveness' at the domestic level may require a number of industry participants, while competitiveness' at the international level may require significant concentration at home" (Romaniuk, 1992, p. 21). Current government policy appears to be pursuing the latter course of action.
The Mergers Enforcement Guidelines buttresses the "national champion" strategy by relying on a weak measure of market dominance. Historically, analysts have accepted that a potential for abuse of market power existed when one firm controlled over 10% of a market, less then four firms controlled 35% of a market, and /or less then eight firms had 50% market share (Atkin, 1994). The Mergers Enforcement Guidelines, in contrast, uses the comparatively weak benchmark figure of "35% market control" by one firm to establish a case that a merger could lead to excessive market control. Mergers and acquisitions falling beneath the threshold will usually be approved, while those exceeding the benchmark should be avoided.
This benchmark is not only weak but plagued with three other problems. First, there is a lack of clarity about what 35% control of a market means. Are markets defined by sector, technology, or geography? If sector-based definitions are assumed, as the CRTC does in Competition and Culture on Canada's Information Highway (1995a), the acquisition of a television station by Bell Canada Enterprises, to use a not too-far-fetched hypothetical example, could be seen as diversifying control within the television "market." However, this does not measure diversity across the media or the economy as a whole. The "35% standard" also fails to distinguish between network providers and content providers. While the standard may not pose problems for telecoms networks that are properly regulated and governed by the common-carrier principle, 35% control of all on-line services, electronic newspapers, or broadcasting by one firm is surely unacceptable. Second, the regulator can grant exemptions to these standards altogether, if the benefits of technological innovation and global competitiveness are perceived to outweigh the costs of regulation (Addy, 1994; CRTC, 1994b; Schultz & Janisch, 1993). Finally, competition law and guidelines for mergers and acquisitions omit communication policy's stress on pluralism, diversity, and goals that further the values of democratic communication. For example, after approving Hollinger's takeover of Southam, which gave the company control over 40% of newspaper circulation, the Industry Minister justified the decision on the grounds that competition policy offered no basis to consider the impact of the merger on content, diversity, and media freedoms. Content, according to the Minister, just did not matter (Mosco, in press).17
It appears that concentrated ownership is to broadband networks what restrictive covenants and dormant anti-trust laws were to early broadcasting and telecoms history. Although there may not be any consent agreements, and arguments about system integrity, economies of scale, and cross-subsidy have lapsed, three claims are being pressed into service to sanction media concentration: concentration is needed to build IBNs, to sustain technological innovation, and to compete globally.
Ownership concentration may be offset by decisions introducing competition into the industry and the use of "open network architectures" to allow interconnection between competitors and the networks of the historically dominant TOs. As a result of these measures, there is an emerging range of new competitive and private networks, content providers and service providers, Internet Service Providers (ISPs), and resellers offering telecoms and network-based content services. While still small relative to the industry as a whole, some of the new players have formed coalitions to influence changes in telecoms policy and to curtail the powers of the TOs (Bouwman & Latzer, 1994). Rather than relying on the traditional politics of telecoms policy, these "new coalitions" have sought regulatory policies that embed possibilities for competition in the design of media technologies. These include, for example, proposals for Comparably Efficient Interconnection (CEI), Open Network Architecture (ONA), and Open Systems Architecture (OSA). These proposals have also gained favour among some regulators, as they can coincide with their interest in finding technical solutions to an acutely political issue in telecoms policy: market power (CRTC, 1994b; Mansell, 1993).
"Open networks" attempt to solve such problems by separating telecoms networks into various components, functions, and services; unbundling the network services costs from general tariffs; and requiring that these separate aspects be made available to all on an "as-needed" basis. In theory, this helps wrestle control of telecoms networks away from dominant TOs, who have historically refused network interconnection to would-be competitors, offered services on an "all-or-nothing basis," and denied access to network functions required by competitors. Open network protocols limit the scope of network monopolies by allowing interconnection and delineating services that are to be made available according to commercial criteria in contrast with terms defined by regulation.
Yet, as Robin Mansell (1993) indicates, these solutions cannot eliminate contests by strategic interests to control the organization, design, and uses of the new telecoms. Instead, open network policies move the politics of telecoms policy into the frontiers of technology design, as incumbent TOs seek to embed most network functions, services, and intelligence into equipment under their control, while others try to remove functions, services, and intelligence from the TOs' networks and towards competitive service providers, peripheral computers, and so forth.
2 Telecoms Network-Based Media Institutional Users Very heterogeneous
Residential Users Access to "appropriate technology." Content Providers / Information Retailers Providers: Press (Southam, Thompson), Institutional and Residential Network Users, Web Sites (Personal, Non-profit groups, Sympatico / MediaLinx, AOL / Bertelsmann), On-line Data Bases Providers (Infomart / Dialog, Stats Can), Mass Media (CBC, CTV), Public Libraries, and so on.
Major Policy Concerns: Free speech; editorial autonomy; access to distribution; diversity; balance of commercial and non-commercial content; timeliness; authenticity; citizens' access to "essential information"; ability to produce and receive information; whether to finance from user fees, advertising subsidy or government subvention; public good versus commodity view of information (e.g., intellectual property right /copyright regime). Content Packagers / Information Wholesalers Providers: Information brokers (AFP, AP, AP / Dow Jones; Bloombergs, CP, Infomart /Dialog, UPI, Reuters), On-line Service Providers (AOL / Bertelsmann, Compuserve, Europe On-line, IBM / Southam, Prodigy, Sympatico / Medialinx), on-line libraries, and so on.
Major Policy Concerns: Ability to influence content providers; vertical integration with providers and distributors; exclusive access packages; editorial power over content reaching users; exclusive rights versus public right to access information; financing of content production and distributon; privacy of users' non-discriminatory access to carrier networks; interconnectivity with other network, service, and content providers. Access Providers Providers: Internet Service Providers (ISPs) (AOL, Compuserve, FreeNets, Istar, Hook-up, Sympatico / MediaLinx, Wincom), Bandwidth Wholesalers / Resellers, and Network Management.
Major Policy Concerns: Integration with Network and Content Providers; Access to Carriage and content; privacy of users; public access; new media freedoms. Network Infrastructure Providers Providers: Wire and wireless network providers, e.g., broadcasters, cable television, LANS, MANs, mobile communications, satellite, telecoms, etc. (Stentor members, private networks, cable / broadcast companies, etc.).
Major Policy Concerns: Universality in terms of price and coverage; responsiveness to user needs; interconnection with other network and content providers; non-discriminatory access; vertical integration; public infrastructure. Equipment Providers Providers: Network and CPE equipment, such as Northern Telecoms, Ericsson, Siemens, but also computer firms, such as Hewlett Packard, IBM, Microsoft, SystemHouse, and so on.
Major Policy Concerns: vertical integration; interconnectivity, patents, location of intelligence /functionality.
To be sure, the legalization of competition in telecoms and greater reliance on ONA, CEI, and so forth have contributed to the spread of new competitors where before there were none. Competitive networks and on-line new media services are taking hold. As they do, the previously stable boundaries between the media industries are being erased and the "natural monopoly" of telecoms is yielding to a view of the telecoms environment as consisting of "multiple tiers" and a "network of networks" (Noam, 1994). The emerging system consists of interconnecting, interoperable, and competitive networks organized into a tiered hierarchy of infrastructure providers, access providers, content suppliers and packagers, and users. Figure 2 provides one way of viewing the emerging telecoms network-based media environment.
As Figure 2 indicates, near the bottom of the telecoms system hierarchy there are network infrastructure providers.18 Examples of these are the traditional TOs and competitive networks where infrastructure competition is allowed, as in Canada, the United States, United Kingdom, and Japan.19 Moving upwards, there are those who mediate relations between network and content sources (access providers andcontent packagers /information wholesalers), such as ISPs, information wholesalers who package content from numerous sources, and resellers. This tier includes access networks /service providers such as America On-Line; Compuserve; Istar; Prodigy; Sympatico / MediaLinx; Wincom; the Calgary, Ottawa, and Vancouver Freenets, among others; and network management services offered by resellers such as Call Net. In Canada, this is currently a quite diverse group of providers, including 400 ISPs and 150 resellers (Cyberspace Research, 1996; Industry Canada, 1995). However, the future of this tier may be in jeopardy, as telcos reorganize access to needed network functions, search for a feasible commercial model for IBN deployment, and offer their own ISP packages. At the same time, computer hardware and software providers, such as IBM20 and Microsoft, are bundling Internet access and content sources into their systems in efforts to establish dominant positions within broadband media. Moreover, moves by large ISPs and on-line service providers toward greater reliance on advertising to finance network services contain ambiguous prospects for independent service providers.21 Finally, near the top of the model are content providers and users, including telephone subscribers, electronic data base providers, newspapers, academic journals, libraries, and so forth. Recent research reveals that this tier consists of a large, diverse, and expanding range of services, as there were at least 2,745 Canadian-based World Wide Web sites by early 1996. Currently the range of content providers in this tier are structurally diverse, including 930 research and education-based sites, 1,671 privately owned sites, and 144 government-affiliated sites (Cyberspace Research, 1996). Once again, as with the independent ISPs, the long-term potential of this vibrant domain of content providers depends to a large degree on which model of media evolution, finance, and regulation prevails in the near future.
Media reconvergence challenges the existence of common-carriage principles in telecoms policy. The telcos are increasingly functioning simultaneously as bandwidth retailers /wholesalers (carriers), content providers (publishers), and audiovisual producers and distributors (broadcasters) and this has brought formerly distinct media policy traditions into collision. In the wake of these processes, the common-carriage principle is withering (Noam, 1994) and the telcos are endowed with media freedoms that allow them greater ability to pick and choose who can access the PTN. Yet, even as they begin offering content services and editing "on-line mediaspace," the telcos will continue to confront vestiges of common carriage embedded in the CRTC's video-dial-tone platform, interconnection policy, and other places. As such, telcos do not have unbridled editorial rights and media freedoms. The key issue now, however, is to define just where the telcos' media freedom ends and others' right to access the PTN begins.
In the abstract, telecoms policy can treat the common-carrier principle in one of three ways. The first is to import the principle wholesale into the emerging telecoms network-based media environment. This would maintain separations between the TOs, content providers, content packagers, access providers, and so forth. This approach would bar the telcos from influencing messages flowing through their networks. An alternative is to relax the common-carrier principle to allow telcos to offer content, video, and interactive services over a portion of their networks. In this approach, policymakers can agree to turn over some editorial discretion to the telcos in return for commitments from them to develop IBNs that meet specified telecoms policy aims. This approach was favoured in the U.S. by public interest groups such as the Electronic Frontier Foundation who argued that it "permits ... a band of channels to be controlled by the network operator, but also for a common carriage connection that is open to all who wish to speak, publish and communicate on the digital information highway" (1994, p. 2). Although this approach was included in early legislative approaches in the U.S. to replace the Communications Act of 1934, it fell in favour of giving U.S. telcos near unbridled discretion to manage access and use of the PTN (United States, 1996).22
While it was possible that any these three approaches could be incorporated into the emerging Canadian telecoms policy framework, the range of choices was narrowed by several factors that colluded against the viability of common carriage as hitherto known. One factor limiting the prospects of common carriage is that it is often understood in a highly stylized fashion that does not correspond to actual practices. For example, while one author has tried to link the concept to a centuries-long European legal tradition (Noam, 1994), common carriage for telecoms was put in place in Canada only after 1910 (Babe, 1990; BRC, 1910). Rather than mythologizing the origins of common carriage, it is better to consider the actual historical and political conditions in which its rise and fall has occurred. In addition, the breach between highly idealized renditions of the concept and reality has widened considerably from the early 1970s. Excursions by the telcos into computer communications in the 1970s, the joint telco /government Telidon experiments from the late 1970s into the early 1980s, and Bell's Alex trials from 1988 to 1993 meant that the stylized ideal of common carriage deviated significantly from real practices.
While these examples were deviations from the norms demanded by the concept, rejection of the common-carriage principle itself has a rather more recent history. One of the most substantial challenges to common carriage came from "dial-a-porn" services; with these services, courts and regulators seemed all too eager to let carriers censor content that would otherwise be constitutionally protected. As Samarajiva & Mukherjee note, Canadian telcos and regulators worked out a system behind closed doors whereby Stentor members would "police information services" for sexually oriented, racist, and /or other "nefarious" types of content (1990, p. 330). Once carriers declared a service undesirable, it was denied access to the network, regardless of its legal status. Similar trends occurred in the U.S., where courts struck down government attempts to regulate sex-oriented services, but eagerly approved telco efforts to the same end. In the precedent-setting Sable (1988) case, the Supreme Court declared "that while ... the Constitution prevents Congress from banning indecent speech . . . , we do not hold that the Constitution requires public utilities to carry it" (quoted in Barron, 1993, p. 381). Barron (1993) claims that U.S. Courts have used a thinly veiled form of judicial activism to fabricate new rationales -- the broadcast-like nature of on-line media, business judgment, enhanced services, State action, and so forth -- that vastly expand the telcos' editorial judgment.23
The scope of telephone companies' "media freedoms" has been expanded far beyond that which is incidentally attributable to the regulation of on-line sex services. Perhaps the most far-ranging assault on common carriage stems from a 1993 judicial decision in the U.S. that struck down FCC regulations preventing telco /cable cross-ownership on the grounds that they "deprived telephone companies of the editorial judgment, control and discretion that is the essence of their First Amendment rights" (United States Court of Appeals, 1994, p. 12, emphasis added).
Prior to recent policy shifts, it was possible for a similar course of action to unfold in Canada in relation to sections of the Telecommunications Act (Canada, 1993, s. 36) and Bell Canada Act (Canada, 1987, s. 7) that prevented the telcos from influencing content or holding a broadcasting or cable license. Following the logic set in the U.S., it was plausible that the telcos could build a case that such restrictions curtailed their freedom of expression rights embodied in the Canadian Charter of Rights and Freedoms. Such a case may have been bolstered by recent court decisions which, contrary to earlier cases and CRTC statements introduced above, decided that commercial speech is covered by the "freedom of expression" clause of the Charter (Festinger, 1994). Despite these possibilities, events in Canada proceeded through Parliament and the CRTC rather than the courts. On account of policy changes introduced by the Liberal government and CRTC decisions, Canadian telcos can now obtain broadcast licenses24 and their entry into cable is imminent. As such, telcos now possess media freedoms guaranteed under the Canadian Charter of Rights and Freedoms (1982) and Broadcasting Act (1991).
Of course, such media freedoms are not wholly untrammeled. In the current media policy context, they are somewhat restrained by the cultural policy obligations of the Broadcasting Act (1991), CRTC admonishments to the telcos to further "community expression" aims, issues about whether or not there should be "public network spaces" set aside for non-profit and community computer networking groups, and so forth (CRTC, 1995a, p. 46). Yet, despite these efforts to maintain some space for cultural policy within the emerging context of telecoms network-based media services, several factors suggest that such concerns are weakly conceived. One such indication is the narrow rendering of "community expression" offered by Bell Canada and Telus for their current "information highway" experiments in Ontario, Quebec, and Alberta. Both have suggested "distributing the community channel of the incumbent cable operators" and to put "computer terminals in public places" (CRTC, 1996b, p. 1). Yet such proposals do not further community-based cable access and media production, nor do they address the role played by FreeNets and non-profit computer networking initiatives available in Canada that are recognized as world leaders in opening up the new media to a broader swath of the public (Weston, 1994). For its part, the CRTC has also taken a narrow view of cultural policy. Among other things, recent decisions constrain the expansion of public network space by restricting special tariffs for non-profit groups to education and health institutions (CRTC, 1996a, 1996b).
Rather than applying cultural policy in a broad manner to the new media, the CRTC has tethered it tightly to the traditional audiovisual sector (CRTC, 1994b). While this narrowly conceptualizes culture and communication, the CRTC's approach does have the merit of expanding the number of contributors and increasing the amount of financing available to support the Broadcasting Act's (1991) cultural policy aims. In essence, bringing the telcos into the broadcast policy regime may broaden and deepen the resources available to support Canadian cultural policy. While this approach makes intuitive sense, it does not mesh well with the processes of media reconvergence and certain provisions in the NAFTA and GATS agreements.
With respect to the first point, a fundamental problem arises about what constitutes a "broadcasting program" as opposed to some other kind of on-line service? When telecoms networks carry streams of digital content -- voice, data, television program -- on what basis can unregulated "enhanced services" be distinguished from regulated "broadcast services"? This is not an esoteric academic question, but one the CRTC had to face as it struggled over whether video-on-demand (VOD), near video-on-demand (NVOD), and video games should be defined as programming and thus be covered by the Broadcast Act (1991), or as something else and thus be exempt from cultural policy goals (CRTC, 1994a, 1995a). Demonstrating the inherently political nature of these choices, even before the CRTC announced its new policies it was engaged in a tussle with SaskTel over whether NVOD and VOD should be defined as enhanced telecoms services or broadcast programs. SaskTel argued that since VOD / NVOD programs were distributed on a point-to-point basis over the telecoms network they should be considered enhanced services, a move that would expand its position as an "electronic publisher" and free it from the cultural policy aims of the Broadcast Act (1991). The government's position was essentially that if it "looks like television, it is television." Although such a rationale is not a very strong basis for communications law, it appears to have sufficed for the moment (Cohen, 1993; CRTC, 1994a).25
This approach is unlikely to be sustainable over the long run. It does not correspond with the emerging organizational structure of the communication industries, a legal /policy regime meant to usher in reconvergence and cross-media competition, or the functional and technical characteristics of media technologies, especially digitization. When companies such as Rogers and AT&T, Stentor/ Sympatico / MediaLinx/ MMI, Time Warner/ USWest / CNN, and so on simultaneously offer interactive computer services, basic telephone services, video games, and broadcasting programs, and the digitized signals for each of these services commingle in the same "pipe," on what grounds can the CRTC base its line drawing exercises to uphold its various policy objectives?
The reference to Time Warner et al. above is meant to indicate that the "problems" of cultural policy being referred to here may be compounded at the transnational level by provisions within the NAFTA and GATS agreements. The NAFTA and GATS are relevant because their distinctions between basic and enhanced services26 result in the latter falling beyond the reach of national regulatory authorities. While NAFTA has its "cultural exemption" clause (Canada, 1992, Article 1301) and the GATS allows countries to choose whether or not to include their cultural industries,27 it is not difficult to imagine foreign telecoms operators trying (as SaskTel did within Canada) to define VOD, NVOD, and so forth as "enhanced services." It is unlikely that the same response cobbled together within Canada to stave off SaskTel's challenge would be sustainable in the global communications environment. Unless the CRTC can muster a reasonable basis for distinguishing between digital streams -- and there is likely to be enormous pressure from the U.S. government, foreign telcos, Canadian telcos, and sanctions applied according to the terms set out in the Free Trade Agreement if it does -- NAFTA and GATS may prevent regulation of all enhanced services, whether data, on-line services, Internet access, or television programming. Hence, de facto freedom of expression for telcos, without even residual considerations for traditional Canadian cultural policy aims.
There are strong parallels between efforts to stabilize the new telecoms and the historical propensity of policymakers to sanction alliances between communications, the state, and corporate power during the formative years of broadcasting and the telephone. During the 1920s policymakers realized that covenants to divvy up the communications industries among a small number of major players were clearly violating the Clayton anti-trust and the Sherman anti-trust laws (United States Senate in Committee of the Whole, 1926, p. 548). Yet, rather than pursuing the implications of such observations within parameters established by law or in relation to the potentials of the new media demonstrated by citizens' groups, churches, educators, and labour unions, the agreements brought the new media into the prevailing matrix of power. These moments parallel contemporary developments where weak anti-trust laws and new justifications sanction concentration in some areas of the new telecoms.
There are also parallels between the technological necessity arguments used to legitimate natural monopolies and current attempts by the CRTC to don the mask of technological determinism to conceal the politics involved in drawing lines between communication services made universally available to citizens and those excluded from public service aims. The key issue is whether universal service should be expanded to encompass the increased importance of communication in contemporary society and the capacities of the new technologies, or curtailed so that most services are defined as information-age luxuries.
While policymakers claim to rely mainly on technological factors to distinguish between basic and enhanced services, to distinguish between broadcast and non-broadcast services, and for controlling market power, it is better to see such claims as a rather thin veneer behind which the politics of telecoms policy are being conducted. There are two key points here. First, technology is being used ideologically to mask choices about whether the state should prevent, permit, or promote reconvergence; expand or contract the scope of universal services; adopt an expansive or narrow approach to cultural policy; and so forth. Second, given that there is no compelling anchor for such decisions, in the end they more or less reflect a particular ordering of competing values, values which presently place more emphasis on expanding the economic value of information than on the historical links between communication and democracy. Obviously, this is open to change under altered circumstances.
There are alternative conceptions of "how things could be." Such alternatives are available in the history of telecoms policy recounted above. Even the CRTC's current regulatory framework contains some ingredients of a differently conceived telecoms policy order. It is not that the CRTC has ignored key issues, but that its emphasis on market power, cultural policy, community expression, on-line public spaces, and so forth has been narrowly conceived. A good start to telecoms policy reform would do well to start by fleshing out that which already exists within the evolving regulatory framework.
Looking beyond Canadian sources, it is helpful to consider European Commission (EC) efforts to establish a regulatory framework for new network-based services. In contrast to Canada, the European Commission distinguishes between reserved and non-reserved services. While the idea of reserved monopoly services is being eliminated, EC members can require that non-reserved services be made universally available, conform to data protection and privacy policies, and use policies that can be shown to be in the public interest, narrowly tailored, and not unnecessarily conflicting with competition policy (Commission of the European Communities, 1990). Building on this, the EC recently proposed a new regulatory policy for on-line media that addressed issues regarding technical compatibility between networks and service providers, on-line advertising, market power, privacy, and universal service (European Commission, 1996). Although it stressed the "lightest regulation possible" (EC, 1996, p. 6), the EC was lambasted by some of the larger members of the telecoms, computer, and on-line industries who took umbrage at attempts to regulate advertising and market power, and the mention of efforts to connect the new media with cultural policy aims (European Union Committee of the American Chamber of Commerce, 1996).
Perhaps the most compelling source of alternative policy proposals, however, exists within the current period of radical experimentation with the new media. In this regard, it seems important to ensure the continued viability of the independent ISPs as well as on-line content and services providers. A key point here relates to the need to uncouple telecoms policy from the advocacy of information highways. This is especially important as the apparent lack of commercial viability of information highways and slack demand increases pressure to rely on advertising, media concentration, and weak privacy laws, among other things, to subsidize the development of IBNs (see Winseck, in press, chap. 7).
In the current period of correctly felt optimism about the potentials of new media, it is necessary to ask some of the following questions: Do current patterns of new media use register a permanent expansion in democratic communication? Or is this a transient moment in the interval between the emergence of new media and their final stabilization within the prevailing political and economic matrix of society as heterodox visions give way to a commercially viable model of communications? Are today's civic networks, electronic bulletin board posters, FreeNets, and ISPs modern incarnations of yesterday's demolished "radio movement" (McChesney, 1997),28 this time exploring the bounds of media freedom through the new telecoms? Finally, it is incumbent upon us to consider, to recall Pierre Juneau, whether it is citizens' rights to freedom of expression that are central to democratic theory, or, as a new regime of media freedoms for telcos suggests, that we are still really talking about the "freedom of a small number of media owners"?
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