Big, Brash & Bold: report says to drop all telecom-media foreign ownership limits

The CD Howe Institute’s most recent report is brash, writes Dwayne Winseck,
and some might dress it up as bold, but it definitely ain’t right. Why
the institute’s three-page report in dropping media foreign ownership
limits just doesn’t cut it. This story originally appeared on Dwayne
Winseck’s blog,
Mediamorphis, and a version of it also appeared in The Globe and Mail.

A new report by the CD Howe Institute came out
today. 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’ two weeks ago (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.

No phase out. No ‘newcomer
advantages’, full stop again. 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

Perhaps the gentlemen, and
they were with the exception of only a single woman, thought this might be a
good idea while they sat around and chatted last Friday afternoon. Apparently,
there were not so many women ‘law & economics’ types available to join
them, given that all but out of the 16 places apparently went to the guys and
boys from Bell (see below). I guess ‘law and economics’ types like 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 of ‘the
deciders’ 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 the ‘big 3Ps’ in Canada as I’ll call them — Petroleum, Alberta Beef
Producers, Pharma — Professor Church just wrote an economic analysis for Bell
as part of the very, very important vertically-integrated telecom-media-Internet hearings
now being held by the CRTC.

According to Church in his voluminous 93 page submission on
 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 that is so
closely tied to Bell, but also Marcel Boyer, Bell Canada Professor
Emeritus of Industrial Economics, Université de Montréal, as the CD Howe report
indicates on the back of this slim 3 page ‘report’. 2 out of 16 does not a
majority make, obviously, but their presence does stand out.

The rest of the lot in this ‘law and
economics’ crowd does not seem very adventuresome, either. I know one professor
occupying a BCE endowed chair that won’t be called upon, Professor Robert E.
Babe at the University of Western Ontario,
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 Howe ‘report’ has zero to say about such notions is not all that

The 3 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% of the market (according to CWTA 2010), but they might
be owned by yet a larger foreign based telco (Vertizon, the ‘new’ AT&T,
Deutsche Telekom, etc.) or may private equity funds. Me, I
have doubts many foreign
investors –telcos, priv 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

Instead, the Council of 15 wise men
and 1 smart 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 breying 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/self-evident.

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 there about
treating things ‘holistically’.

More targetted measures are
suggested as alternative to foreign ownership for whatever ”cultural
policies” might be left over. Some of these ‘targetted 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 today’s 3
page missive (e.g. see Hunter and Iacobucci, with
a third author Michael J. Trebilcock).

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, 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 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/problematic in
each of these occasions. The presence of Bell’s hired gun (Church), a Bell
sponsored ‘academic chair’ (emeritus, Boyer), and BCE CEO George Cope’s speech
at the C.D. Howe two months ago all so bunched up in time and common stance has
a whiff of something not quite right about it.

3. While I don’t actually 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
upfront about the fact that the former (media infrastructure) are generally
scarce and the latter (messages) abundant. In today’s OECD Communication Outlook 2011,
it is clear that, generally speaking, the top 2 ‘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). 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
are also at play (and here). As the United Nation’s Human Rights
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

4. The C.D. Howe report misses
reality and the ‘big picture’. Perhaps this is because there is not a whiff of
heterodox thinking among the ‘law & economics’ experts who wrote it. Not
one ‘ecclectic’ economists, not one wild eyed, crazy lawyer, not a
communication and media scholars or a historian in sight.

This is too bad because as long as
it 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/romanticist’
conceptions of culture, but ‘network culture’. Netcos and search engines are
now closely allied with state security, military
strategy and defense 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.

Yesterday, 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 so far government and regulators have refused 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 and one women 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 because 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 if 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

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

Winseck is a professor at the School of Journalism and Communication,
Carleton University. He has been researching and writing about media,
telecoms and the Internet in one way or another for nearly 20 years.