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Mediamorphis

Slim and skewed: C.D. Howe report on media ownership misses big picture Add to ...

A new report by the C.D. Howe Institute came out Thursday. It's not big, just 3 pages and seemingly informed by a bunch of guys sitting around a table at the Howe's inaugural meeting June 17.

It is brash, and some might dress it up as bold: drop all limits on ownership of telecoms and media industries in Canada, it says. Full stop.

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No phase out. No "newcomer advantages." No attempt to separate the medium (wires, spectrum, sewer access) and the message (broadcasting, integrated suite of content from mags to blogs) from one another. A digital free-for-all, you might say.

Perhaps the gentlemen - and they were, with the exception of a single woman - thought this might be a good idea. Apparently, there were few female law and economics types available to join them. I guess law and economics types such as Sheridan Scott, a hard liner in these matters, and Monica Auer, who generally takes the opposite tack by speaking eloquently and passionately on the telecom and media workers' behalf, weren't available, or any of the other smart dames roaming these circles as I saw, in the minority, at the CRTC's hearings this week.

I looked at the composition not just because their gender was so obviously skewed, but because I recognized the names of most of the guys. One in particular leapt out: Jeffrey Church, a University of Calgary economics professor. By all accounts, he's an excellent teacher. Professor Church caught my eye because, in addition to advising petroleum and pharmaceutical companies and the Alberta Beef Producers - he just wrote an economic analysis for Bell as part of the very, very important vertically integrated telecom-media-Internet hearing now being held by the CRTC.

According to Church in his voluminous 93 page submission on Bell's behalf, vertical integration is good for consumers and for Canada (p.5).

I disagree, strongly, for reasons set out regularly in this blog (e.g. here) and my column for the Globe and Mail on Monday.

It's not just Church who is so closely tied to Bell, but also Marcel Boyer, Bell Canada Professor Emeritus of Industrial Economics, Université de Montréal, as the C.D. Howe report indicates on the back of this slim three-page "report." Two out of 16 does not a majority make, obviously, but their presence does stand out.

The rest of the lot does not seem very adventuresome, either. I know one professor occupying a chair endowed by former BCE CEO, Jean Monty, at the University of Western Ontario, Professor Robert E. Babe, won't be called upon for advice for he has traced the propensity of telecoms historically to go from limited competition to total consolidation on a regular basis. Let us say that the fact that the Howe report has zero to say about such notions is not all that surprising.

The three-page report is candid that dropping the foreign ownership limits on everything - telecom, media, internet - will not increase the number of competitors in the market. As it states, "given the small size of the Canadian market, the consensus view saw no major change in the number of national competitors."

Translation: The big three companies in wireless telecoms - Bell, Rogers, Telus - for instance will still account for about 94 per cent of the market (according to CWTA 2010), but they might be owned by yet a larger foreign based telco (Verizon, AT&T, Deutsche Telekom, etc.) or maybe private equity funds. Me, I have doubts many foreign investors - telcos, private equity funds, banks - will even come if permitted to do so (or if we want 'em to on such carte blanche terms). I'm not alone on this, and hardly radical, given that even the World Bank states that the keys to effective foreign ownership is a strong state able to regulate and competition.

Instead, the Council of 15 wise men and one woman says, drawing on newfangled theory about competitive innovation drawn from the right-wing side of Schumpeterian innovation economics, that "the gains from liberalization would likely result . . . from better performance by telecommunications market participants."

Umm, I hope so, especially because its this same crowd braying for the withdrawal of any meaningful conception of regulation or state intervention. The CRTC's horizons have been blinkered and public ventures like CANARIE have had their wings clipped. How foreign capital will 'improve' performance standards in Canada is not clear to me.

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