Konrad von Finckenstein and James Mitchell

May 4, 2022

As the fourth industrial revolution continues to transform human experience from politics to health to finance, governments are incorporating the lessons of its first decades to protect citizens. In Canada, that regulatory response is the Trudeau government’s Bill C-11.

The legislation is an ambitious effort to address the myriad challenges of digital content in an age when (largely foreign) social media and streaming services have upended traditional methods of content regulation and marginalized some traditional media such as newspapers and conventional television.

C-11 has attracted more than a little controversy – proponents see it as a necessary step to promote and protect Canadian content in the digital age and to protect society from some of the obvious harms of social media. Opponents see it as massive (and futile) overreach by government. But little attention has been paid to the institutional set up for regulating communications in Canada.

Experience has shown that new policies to deal with change like the digital revolution depend on both the logic of the authorizing legislation and the institutional mechanisms established to implement them.

Communications regulation in Canada today is divided among three players:

The Canadian Radio-television and Telecommunications and Commission (CRTC) is responsible for the regulation of broadcasting and telecommunications. It is an independent agency which for cultural/broadcasting purposes reports to the minister of Canadian Heritage. The CRTC’s mandate is to regulate and supervise all aspects of the Canadian broadcasting system with a view to implementing Canadian broadcasting policy, the principal goal of which is to safeguard, enrich and strengthen the cultural, political, social and economic fabric of Canada. The CRTC establishes and supervises terms and conditions imposed on licenced broadcasters; under C-11 it will have the capacity to do the same with registered online broadcasters.

The minister of Canadian Heritage is responsible for government policy on broadcasting matters. In that capacity, the minister makes recommendations to the cabinet regarding appeals of broadcasting decisions of the CRTC or with respect to any directions to be given by the government to the CRTC. The minister is also responsible for the major Canadian agencies that fund broadcasting in Canada – the National Film Board, Telefilm Canada and the Canada Media Fund (CMF).

The minister of Innovation, Science and Economic Development (ISED) is responsible for spectrum management and wireless communications. The minister is in charge of government policy on telecommunications, and is responsible for recommendations to cabinet regarding appeals from the telecom decisions of the CRTC or with respect to any direction to be given to the CRTC relating to telecom.

There are three key points here:

• First, responsibility for the two dimensions of modern communications — what might be called the “hardware” and the “content” sides — has been divided for nearly 30 years between two ministers, one responsible for broadcasting and the other for telecommunications;
• Second, to keep politics largely out of the equation, almost all responsibility for decision-making on broadcasting and telecom has been assigned by law to an arm’s length agency, the CRTC;
• And third, to respect the ultimate responsibility of governments for the public interest on those matters of policy, Cabinet has the power under both the Telecommunications Act and the Broadcasting Act to vary or rescind a CRTC decision or refer it back to the commission for reconsideration of all or a portion of it.

This tripartite system grew up over time and made sense when the regulation of broadcasting was based on scarcity of spectrum and regulation of telecom was aimed at regulating quasi-monopolies and preventing undue profit-taking. We now live in the age of the internet, a digital environment that is both massively decentralized in terms of creators and users, and dominated, in terms of both hardware and software, by a small number of huge enterprises, mostly American.

The internet is both the foundation and the centre of today’s communications landscape. It has myriad uses and new ones are invented daily. It has been widely characterized as the most dynamic generator of cultural activity, economic growth and wealth creation since the industrial revolution.

The question is, does it make sense to regulate the internet through the same three players that, in Canada, have regulated telecom and broadcasting? We would argue that this makes little sense.

A more logical division, in our view, would be to:

1. Leave the CRTC with responsibility over broadcasting, including the relatively new domain of broadcasting over the internet. This is what the government is currently trying to do through Bill C-11. Its objectives in the Bill – which some argue are misguided – are essentially the same as what has long been set out in the Broadcasting Act, namely to ensure that Canadian content is created and promoted through regulatory and financial subsidies and incentives. On this new model, the CRTC would continue to report to the heritage minister. Commissioners would have backgrounds in fields relevant to broadcasting and cultural content in the broadest sense.
2. Create a new agency, perhaps called the Canadian Communication Commission (CCC), modelled on the CRTC, responsible for telecommunications in any form over any medium – e.g., wire, cable, wireless or satellite. The CCC would also be responsible for the new anti-spam legislation (CASL) which is aimed at preventing one form of misuse of the internet. Here, commissioners should have a background in telecom, technology, law, computing or the tech industry.

In addition, responsibility for spectrum regulation and management would be transferred from the innovation minister while leaving  overall policy direction for spectrum there.

It’s well known that there is a major overlap between privacy, competition and telecom policy when it comes to the internet. Data is the new oil of the digital world.

Given the central importance of the internet in modern society and the Canadian economy, the objectives set for the CCC should clearly state that, with respect to regulating on any matters related to the internet, the CCC should adopt an ex-post approach. That is, rather than trying to anticipate future developments, the agency would  only step in to the extent necessary to alleviate or eliminate unacceptable outcomes and it should do that in the least intrusive manner possible. In short, a light touch by government.

The operational efficiency of the CCC would be enhanced by adopting two features from the present legislation governing the Canadian International Trade Tribunal (CITT):

The present-day CRTC takes too long to make decisions. While there are time limits for applicants and participants in proceedings initiated by the CRTC, there are none on the CRTC as to its own decision-making. Given the fast pace of developments in communications, there is no reason why strict timetables cannot be prescribed, as is the case with other specialized tribunals. The CITT, for instance, conducts its final injury inquiries in 120 days.

CRTC proceedings are public and open, whether in written form or involving oral hearings, and there is provision for the submission of confidential information. Like the CRTC, the new CCC would be a court of record. Making decisions affecting the public as transparent and predictable as possible is highly desirable. However, many of its decisions would require a deep knowledge and understanding of corporate data and strategy, something that companies are most reluctant to share. Yet without such information the regulator works on partial knowledge or makes only best guesses. The same problem, however, exists in dumping matters where the costs of production and marketing are key to making good corporate decisions.

The CRTC already has provisions for the receipt of confidential data from parties before the commission. But that data is not challenged in an adversarial fashion – the other side cannot see it. The beauty of the CITT model is that counsel can see the data and try to refute it, or add another interpretation of it, but their client cannot. The new CCC, however, would have the benefit of an adversarial examination and could make up its own mind after hearing both counsel. Should a counsel ever breach the confidentiality requirement, disbarment would be sure to follow.

In telecom, where costing is a big issue and every side presents different figures, a process such as that of the CITT would be a great help.

It’s well known that there is a major overlap between privacy, competition and telecom policy when it comes to the internet. Data is the new oil of the digital world.  Possession of data, access to it and use of it are key ingredients in any decision by a telecom regulator or by the Privacy Commissioner and Competition Commissioner. While each may have different policy objectives to achieve, they should all work from the same data base. For this reason, in the area of telecom explicit transparency provisions will have to be legislated for the exchange of information among the Competition Commissioner, the Privacy Commissioner and the new CCC. Similarly, the sharing of expertise, avoidance of duplication of information requests and the timing of decisions would also need to be addressed.

Today, the internet is as important to the Canadian economy as are banking or the airline industry, arguably more so because it underpins the functioning of almost every institution in our country. In both banking and the airline industry, the same approach to mergers and acquisitions has been adopted.

First, the appropriate regulators conduct their investigations and recommend either to approve the deal, usually with conditions, or deny the transaction. Their report is made public. The minister of finance or  transport, as the case may be, then makes the final decision, with responsibility for explaining any changes and making public the reports of the commission and the competition bureau. The minister would have to explain a decision to depart from expert advice for national policy reasons.

This seems to be the best way to bring together regulatory expertise and political accountability. Mergers falling under the Telecommunications Act should be subject to a similar regime. Specifically, we recommend that mergers above a certain threshold, say $300 million, would need to be approved by the innovation minister within an fixed timeline.

As Parliament considers C-11, urgent attention should be given to the institutional structure required to deal with the digital age and the challenge of the internet.

Konrad von Finckenstsein, a Senior Fellow at the C.D. Howe Institute, is a former Chair of the CRTC and former Commissioner of Competition.

James Mitchell, an adjunct professor at Carleton University, is a former head of the Machinery of Government Secretariat at the Privy Council Office.