Competition the name of the game

Letting service providers go at it unfettered is the best way to drive prices down, Industry Minister Jim Prentice says

Letting market forces work is the best way to drive prices down, Jim Prentice says

With an election looming, no one can accuse the Conservatives of being slaves to ideology, at least as far as the telecommunications market is concerned.

The government's previous minister of industry, Maxime Bernier, was a deregulatory, market-forces steamroller. In the span of a year, he managed to give the Canadian Radio-television and Telecommunications Commission a "back-off" order, deregulate the local phone market against the wishes of a parliamentary committee, and initiate a competition review that would ultimately urge the removal of foreign ownership restrictions on telecommunications companies.

Bernier's successor, current Minister of Industry Jim Prentice, took a notable 180-degree turn from that deregulatory bent last November when he announced that new cellphone carriers would be given special priority in an auction of public airwaves. Canada's wireless companies were too expensive and not competitive enough, Prentice said at the time in front of a backdrop that read "putting consumers first." The auction netted several potential new players and cellphone prices have already started to dip.

The minister, 52, told his ultimate goal is boosting competition — even if it means sometimes compromising a pure market-forces ideology.

Prentice, the MP for Calgary Centre-North and former minister of Indian Affairs and Northern Development, discussed the need to strike a balance between regulation and competition. There are lots of lawsuits and protests flying around. Is this something that is normal? Have you noticed?

Prentice: It's fair to say that Canadians as consumers are more focused than they have been on competition in the industry. In the global market place of today everybody sees what they are paying for their communications technology and what's being paid in other countries and the suite of products that's being offered. My sense is it's become more of an issue to consumers right across the country to make sure they're getting the right service at the best possible price. We've been moving toward deregulation for the past few years. The CCTS office has been set up, but has enough been done to protect consumers from the effects of deregulation?

Prentice: I think it's a case of balancing the need and ensuring that consumers are protected on the one hand but ensuring at the same time that we have a dynamic industry that is not burdened with additional costs so they can be a competitive thriving industry. Canada has actually had quite a successful telco industry, it's something we've distinguished ourselves at. The AWS [wireless spectrum] auction was important because it represented steps taken by the government in terms of the allocation of spectrum to make sure that the industry was as competitive as possible and, as you know, it was done with a view to increasing competition and thereby exerting a downward pressure on prices and increasing the suite of products available to consumers. It's interesting that a week or so ago, Moody's, the credit rating agency, actually verified for the first time that the auction is having exactly that effect but at the same time the industry remains healthy.

In terms of other specific steps, certainly there's the Commissioner for Complaints for Telecommunications Services that you mentioned, and that over time I think will have a quite a significant impact as well. The CRTC is of course an independent organization that is dealing with those issues.

We continue to think that the best way is to be vigilant but to have an industry that is not overly regulated and therefore cost-uncompetitive for consumers. It was well over 10 years ago that the position of minister of consumer affairs was done away with and rolled into your portfolio. Are you comfortable playing that role and should there perhaps be a discussion about spinning that off into its own separate position again?

'I think it's possible for the minister of Industry to be vigilant on the consumer affairs side as well.'—on whether a consumer affairs minister is needed

Prentice: I don't think we need a separate portfolio. At the end of the day, competition is really what it's all about. It's ensuring that the industry is sufficiently competitive because if it is, we as consumers have access to the suite of services and the prices that are available across the globe. It's about making sure we have a competitive industrial structure and it's we as consumers who benefit from that. Competition in and of itself is not the objective, it's competition that will drive better outcomes for consumers. I think it's possible for the minister of Industry to be vigilant on the consumer affairs side as well. You mentioned the CRTC, which has asked for the ability to institute monetary penalties when a service provider is abusive or breaks regulations. What do you think of that request?

Prentice: We'll deal with the requests of the CRTC as they come forward. In terms of uncompetitive behaviour, we of course have the Competition Bureau that deals with those issues. The Competition Act ensures that we as consumers are protected. The CRTC's responsibility is to deal with the regulation in the industry. We've tried to ensure through the [phone deregulation] forbearance decision that we maintain oversight of the industry but without suffocating regulation. By and large we've been successful in striking that balance. Many people, including a recent competition review panel, believe the foreign ownership limits on telecommunications companies are problematic. Canada is definitely behind the rest of the world when it comes to those restrictions. How is it we've fallen behind in that sense?

Prentice: I'm not sure by what criteria you're saying we've fallen behind. Certainly there's room for improvement in terms of cellular penetration rates, for example. We believe that more competition in the industry will benefit consumers in terms of lower prices, but all things considered we still have quite a dynamic industry in our country. The foreign-ownership issue really was addressed in the Red Wilson report you're referring to — it's the second report that has recommended that we essentially alleviate the foreign ownership restrictions in the telecommunications industry, opening up the Canadian industry to more competition and foreign capital. Those are certainly recommendations that we're studying and they fit into the broader recommendations of the Red Wilson panel, namely that Canada as a country needs to be more globally focused and more competitive internationally. We've been doing quite a bit of work over the summer, studying those recommendations and determining the best way forward. To be fair, there was also the telecommunications task force a few years that came in fact to the same recommendations. It's an issue that's a political football, though, isn't it? A lot of people agree that these restrictions need to be lifted but it's a minefield to go into.

Prentice: I will say it's very complicated and in the world of convergence where telecommunications is ever more complicated and the segregation of regulating the content versus the medium itself exists it is a complicated area that requires lots of study before any steps are taken. On the text messaging front, when it came to light that Bell and Telus wanted to introduce incoming fees, you were pretty adamant against it and said it was an "ill-thought-out decision." In the end, you said there wasn't much that could be done. What happened there — why the sudden change of heart?

'I met with the two CEOs involved and was satisfied with the additional steps they are taking to ensure that no consumers receive unwarranted spam.'—on text messaging fees

Prentice: First thing, I did not say there was nothing that could be done. What I said was that if you go back to the very first concerns I expressed about text messaging, it related to unsolicited spam and the possibility of spam and consumers being charged for spam that they had not asked for and that their telco carrier allowed to come their way. I met with the two CEOs involved and was satisfied with the additional steps they are taking to ensure that no consumers receive unwarranted spam with the spam filters that have been in place. In addition, in terms of incoming text messages I think the critical question is whether consumers have choice in that respect and specific steps were taken by both companies that there were no charges coming to consumers for unwanted messages but also that there was consumer choice in the marketplace. At that point it becomes less an issue for government and more for consumers to make their choice and vote with their feet in a sense if they're unhappy with the plan and the charges that are being assessed. You didn't get your back up when Scott Brison accused you of "grandstanding?"

Prentice: No, I said very clearly that we were concerned about spam arriving unsolicited and people being charged for it. In the case of both of the carriers, that is not a possibility. They have both taken very specific steps to make sure that will not happen and that any such charges can be reversed in a very efficient manner that doesn't require people to get on a lengthy phone call to do that.


Peter Nowak


Peter Nowak is a Toronto-based technology reporter and author of Humans 3.0: The Upgrading of the Species.