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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.

The report advocates this regulatory shock and awe to be developed in one swell swoop, with no distinctions kept between telecoms and broadcasting, between networks and content, between incumbents and newcomers. The telecom-media-Internet sectors are now so entangled on account of digitization and how people use media that they must be treated together as a whole. Partial agreement on this point from me about needing to treat things holistically.

More targeted measures are suggested as an alternative to foreign ownership for whatever "cultural policies" might be left over. Some of these targeted measures I believe in - securing financing for content production, shelf space, strong CBC - and they have been promoted by at least two of the same writers involved in the three-page missive (e.g. see Hunter Iacobucci).

There are several problems with this report, however, that make it's contribution to public discussion dubious, despite the fact that it will gain much attention.

1. Three pages is not a report and should not be pitched as one.

2. The Council of the Wise is skewed along lines suggested above, ie: by Bell and by gender. Bell has always had a visible hand in the telecom, broadcasting and media industries. Indeed, this has been the case since it began broadcasting speeches, songs and sermons in the 1880s and took over the Chairmanship of the 1905 Mulock Commission which had originally been convened to look into Bell's predatory behaviour and the underdevelopment of the telephone system in Canada in the early days of the 20th century.

So, that Bell continues to be front and centre 100 years later, at the dawn of the 21st century, is both a marker of continuity and somewhat unsurprising, but equally suspect in each of these occasions. The presence of Bell's hired gun (Church), a Bell-sponsored academic chair (Boyer), and BCE CEO George Cope's speech at C.D. Howe two months ago all so bunched up in time and the common stance struck on each occasion has a whiff of something not quite right about it.

3. While I don't have many problems with increasing competition and dissolving lines between the medium and the message, or the network infrastructure and content, we also need to be up front about the fact that the former (media infrastructure) are generally scarce and the latter (messages) abundant. In the recent OECD Communication Outlook 2011, it is clear that, generally speaking, the top two NetCos in each of the OECD countries account for between two-thirds and three-quarters of fixed and mobile telecom network markets in each of the OECD countries (pp. 56-59). The only exception is the U.K., where structural separation has fostered a more vibrant, open and competitive market.

This means:

  • that Netcos generally should be regulated for market power, 'messagcos' generally not.
  • ties between Netcos and Messagcos are congenitally fraught with problems and propensity for anti-competitive behaviour.
  • Free speech standards and the values of a networked free press[[LINKTEXT]]etworked free press[[/LINKTEXT]][URL]]ttp://benkler.org/Benkler%20Wikileaks%20CRCL%20Working%20Paper%20Feb_8.pdf.[[/URL]][TARGET]]blank[[/TARGET]] are also at play. As the United Nation's Human Rights Council recently stated, those standards apply to the Internet and people should have, as Article 19 of the Universal Declaration of the Rights stated before it in 1948, the freedom to receive and impart any information, through any media regardless of frontiers. At the CRTC Hearings on vertical integration the other day, Bell's Mirko Bibic and Shaw's brass called the idea that people should have access to any content on any device "preposterous". The C.D. Howe report is oblivious to these considerations.

4. The C.D. Howe report misses the big picture. Perhaps this is because there is not a whiff of heterodox thinking among the law and economics experts who wrote it. Not one eclectic economist, not one wild-eyed crazy lawyer, not a single communication or media scholar or a historian in sight.

This is too bad because as long as this continues to be the case, people will continue to talk past one another. And it also means that "reports" like this one, and the policies and approaches that actually do follow close in tow in the real world, will lack legitimacy.

5. Without being able to expand their horizon, the authors of the C.D. Howe report blithely countenance "North American integration." Economically, as I said above, I don't have a particular problem with that, although I doubt that things will pan out as they expect, and even that what the Howe folks do expect ain't much ("better performance" from same number of players).

Politically and culturally, however, there is a problem, not with Cancon and traditionalist conceptions of culture, but network culture. Netcos and search engines are now closely allied with state security, military strategy and defence contractors. It's probably best to keep some clear blue water between these domains. The authors give no hint that they have even thought of this.

Netcos, ISPs, search engines, etc. are also constantly being badgered by lobbyists as well as politicians in Canada and the U.S. to play a greater role on behalf of media and entertainment industries (for most recent and strong opposition to this from within just the mainstream', see here). The approaches have differed, with the last government in Canada wisely turning down lobbyists' push to have ISPs play the role of "copyright cop," disconnecting people who repeatedly are identified as copyright bandits.

The International Federation of Phonographic Industries (IFPI) launched it's efforts to lean hard on ISPs and search engines, and less on Digital Rights Management (DRM), in 2008. It has been picking off wins for this agenda around the world, but not so much yet in Canada.

On June 23, CNet journalist Greg Sandoval reported that AT&T, Comcast, and Verizon "are closer than ever to striking a deal with media and entertainment companies that would call for them to establish new and tougher punishments for customers who refuse to stop using their networks to pirate films, music and other intellectual property." That turn-of-heart, in turn, he reports, was eased by coaxing from the Obama Administration and the National Cable TV Association.

The pressure is already strong in Canada, but has been resisted by refusing to make ISPs the deputies of the media and entertainment industries or to regulate the Internet as a broadcast distribution medium. On law and order, however, the push is for a stronger state and more compliant Netcos and Searchcos.

While there's lots of dots to connect between all of these latter points, the key idea is that integration at the network and market levels is going to increase pressure to harmonize tougher matters that impinge greatly on network media, and thus network culture. That the blokes from C.D. Howe have nary a word about this - and don't dare let the phrases "network neutrality" and "open media" cross their lips - is a problem of the first order. Those concerns, as sure as night follows day, are at the heart of the emergent network media culture. How can foreign ownership be reconciled with these concerns should be the question, rather than if it is good or bad altogether.

In sum, until we can start speaking one another's language and stop passing off economic and policy platitudes backed by those with big stakes in the game, the nominal ideas presented in this report should be shelved and other big questions - vertical integration, for example - put on hold.

Ultimately, Pork, Petroleum and Pharma are not the same as telecoms and media. We need some new thinking for new media.

Until we recognize this, we're not going to get very far, at least in a way that takes into account the full range of issues at hand, rather than the economists' narrow measuring rod of value.

Dwayne Winseck is a communications professor at the School of Journalism and Communication, Carleton University in Ottawa. Prof. Winseck been researching and writing about media, telecoms and the Internet in one way or another for nearly 20 years. You can read more comment on his blog, Mediamorphis . His column will appear every second Tuesday.

In the original version of this column, Prof. Jeffrey Church was misidentified as a University of Alberta professor. He is a professor at University of Calgary. Mr. Church was also described as having advised pork producers, which was incorrect. He has advised the Alberta Beef Producers. A reference to authors of the C.D. Howe report mistakenly included Prof. Michael J. Trebilcock of the University of Toronto, who did not contribute to the report. The Globe and Mail regrets these errors.

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