Canada’s telecommunications sector is bracing for an uncertain regulatory future as the federal government increasingly undermines its watchdog.
What began with a simple Twitter post by Industry Minister Tony Clement late Wednesday – he pledged to block a ruling on Internet pricing by the Canadian Radio-television and Telecommunications Commission – has morphed into a controversy over the independence and future of the regulator.
The latest development could turn out to be the second time in two years that Ottawa overturns a major CRTC decision. And for the regulated industry, already in the middle of rapid convergence and technological change, the move translates into new uncertainty for the multibillion-dollar sector.
But with two crucial, landscape-shifting political decisions looming ahead – how Ottawa decides to loosen foreign ownership rules in the sector, and how it structures the next auction for wireless spectrum licences – the industry is certain of one thing only: That it can’t be certain of anything.
“When it comes to politics, there are no rules for this industry, they’ll be made up on the fly,” says Michael Hennessy, senior vice-president of regulatory affairs at Telus. “That’s unfortunate, but that’s the way it seems to be.”
It’s the latest indication of how Prime Minister Stephen Harper’s minority government is increasingly willing to step in and override the telecommunications regulator on decisions that become politically unpopular.
In 2009, it overturned a CRTC ruling on whether one of the new entrants in the wireless field, Globalive, met foreign ownership rules. The CRTC decided it didn’t, while Ottawa, eager to see new competition, decided it was acceptable.
On Thursday, CRTC chairman Konrad von Finckenstein said he would review and delay the decision on Internet pricing. It would allow large Internet providers such as BCE Inc. and Rogers Communications Inc. to charge small players, which lease space on their networks, on the basis of how much data their customers use, effectively killing their popular “unlimited” download plans.
“We are convinced that Internet services are no different than other public utilities, and the vast majority of Internet users should not be asked to subsidize a small minority of heavy users,” he told a hearing, adding he had decided to delay the ruling on his own the day before.
By the time Mr. von Finckenstein spoke publicly, Mr. Clement had already said on Twitter that he would send the CRTC “back to the drawing board.”
Recently, this previously obscure regulatory change on pricing exploded into a full-scale battle over Internet charges, with all three major political parties criticizing the CRTC for delivering what they called an anti-competitive ruling that allowed large telecom companies to skewer consumers on price.
Now, with Industry Minister Tony Clement urging the regulator to reconsider, and warning he will overturn any decision that limits use, the industry is tense, awaiting the possible disruption of the Canadian Internet business.
Executives and analysts are now trying to determine what sort of politicized telecom policy making is in store for the industry.
The two acts that oversee the CRTC are at the crux of the tension. The CRTC is required to follow the Telecom Act and Broadcast Act, and must rule solely on what is allowed under those regulations in evaluating mergers, takeovers, ownership or any other key industry issue. Mr. von Finckenstein has long wanted to update those acts – arguing they are behind the times – but the government has so far not wanted to do so.
After the regulator has arrived at a decision, it is within the government’s power to refer a decision to cabinet if it believes the CRTC erred. The lever has been available since the creation of the regulator, but has just never been used to this extent.
