CRTC Chair Ian Scott: the story behind the photo.

February 22, 2022

12-minute read

On December 19, 2019 Bell Canada’s second-ranking executive Mirko Bibic went for a beer at McGee’s pub, two blocks from Parliament Hill. Someone took his picture. His table companion with his back to the camera was CRTC Chair Ian Scott. 

A meme was born.

Bell is of course Canada’s biggest communications company. The CRTC regulates telecommunications and broadcasting. The “telco” side of the house includes Internet, wireless, and telephone networks; the broadcast side includes cable and satellite distribution, television and radio. As a vertically integrated (“VI”) communications company along with Rogers and Québecor, Bell has a finger in every pie.

The photo didn’t get much traction in the media. But Bell’s industry adversaries, allied with numerous consumer groups and academics who regard Bell as their foil and nemesis, had better luck recycling the photo into social media with conspiratorial suggestions of clandestine lobbying. It lives online today, reposted at moments of regulatory controversy. The punch-line is that the meeting occurred around the time Bell and other VIs launched appeals against the CRTC’s slashing of the wholesale Internet prices paid by ISP re-sellers like Distributel and TekSavvy to access the VIs’ fibre networks.

Over two years later the CRTC’s rate setting for Wholesale Internet rates is still on the boil: Distributel recently revived the McGee’s photo as smoking gun evidence of Scott’s conflict of interest, demanding he recuse himself from the file.

Earlier this month Scott probably decided he could ignore the photo no longer. He gave an interview to the Toronto Star’s Tony Wong and explained that he and Bibic are old friends (Scott spent years working for Telus in regulatory affairs) and were meeting socially in Ottawa’s best known pub for a beer.

According to Scott, Bibic raised a regulatory issue, of which the many-fingered Bell has plenty. So Bibic had to file the standard report with the federal lobbying registry, coincidentally around the time he ascended to the top of the corporate ladder as Bell’s CEO. Significantly, the registry identifies the subject of the McGee meeting as “broadcasting” (Internet Wholesale is a telco matter, not broadcasting).

Scott told the Star that “no rules were broken” which while true hardly mollified his critics, especially the re-seller representatives (who can also found many times on the lobby registry).

On February 3rd the CRTC’s general counsel responded to Distributel’s motion to remove Scott from the wholesale file saying it’s up to Scott to respond to the recusal request if he wishes.

This is no longer breaking news of course. I write about it to get a better understanding of the photo behind the recusal request and the meme’s success in igniting popular opinion about the inside game in Ottawa in general, and the CRTC in particular.

Heated public criticism of the CRTC and its chair —appointed by the ruling government to a five-year term— is a time-honoured Canadian tradition.

The CRTC regulates which itself assures it many enemies.

It regulates big things: Internet and wireless networks, television and radio, and if Bill C-11 is passed it will regulate online streaming.

All that regulation impacts monthly household bills and —depending on your point of view— freedom of speech and Canadian cultural sovereignty. Cue the photo meme, and it’s no wonder that Ian Scott has become another Ottawa piñata. 

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So what’s up with the CRTC’s Wholesale Internet regulation?

Most Canadians have something to say about their monthly ISP bills and the corporate power of VIs like Bell and Rogers usually animates those opinions.

The CRTC knows this and has been working on it a long time. 

For the better part of two decades the VIs have ploughed billions (yes, many billions) of dollars into expanding and upgrading wireline networks across the country while ISP re-sellers have entered the market to apply downward pressure on retail prices. The CRTC’s rulings that force the VIs to sell network access to their own competitors at wholesale rates has been described in 2019 by the federal Competition Bureau as a success story for consumers in terms of provider-choice, lower prices, and customer experience.

Still, VIs and re-sellers have fought bitter regulatory battles for the better part of a decade over setting a fair wholesale rate (retail rates for consumers are not regulated).

The master plan designed by the CRTC goes back 15 years including the terms of at least three Commissioners appointed by two different governments. In forcing the VIs to provide re-sellers access to their fibre networks and setting wholesale rates, the CRTC has been searching for the sweet spot between increasing competition to push down retail prices without dampening investment incentives for the VIs to keep up with the exponential growth in consumer demands for more data and higher speeds.

According to the Competition Bureau, as detached and pro-consumer a body as you will find in this heated debate, the CRTC’s wholesale plan has allowed re-seller services grow with retail prices often 10% to 15% lower than those charged by the VIs.

Neither side is satisfied.

The VIs —Facilities Based Carriers (FBC) in CRTC lingo— remain irked at being forced to give a leg up to their competitors. They are particularly irked that the CRTC has slashed wholesale rates to the point that the FBCs say they are not recovering their capital costs; that it’s a drag on further capital investment in a network that increases every year in traffic, consumer expectations of download speeds; and (thorniest of all) that is struggling to connect rural Canadians.

The re-sellers and their consumer allies rail against the FBCs’ foot-dragging in opening up their networks and, most of all, that the CRTC is not cutting wholesale prices far enough.

If this was all a televised drama series, an episode recap would be in order.

Let’s wind it back to 2015.

In a ruling by the previous Chair Jean-Pierre Blais (appointed in 2012 by Prime Minister Stephen Harper), the Commission mapped out a consensus plan for how the Wholesale Code would help the resellers grow without discouraging network investments by the FBCs.

The philosophy behind the plan was explicit: the re-sellers were not going to be wards of the state propped up by the CRTC setting retail rates to ensure their success. Entrepreneurial risk was a given. The CRTC was offering wholesale rate regulation as far as necessary to recognize that while re-sellers could plausibly build their own hardware plants, they could not reasonably be expected to raise billions in capital to build their own “last mile to the home” fibre networks. Access to those last-mile networks would continue on a wholesale basis, but piggy-backing on the FBCs’ “backbone” networks would be phased out.

The Blais plan was to reconfigure the network design from the “aggregated access” of each re-seller hooking into the FBCs’ networks at central “points of interconnection (POI)” and instead linking into those network tentacles closer to the “last mile” at numerous local POIs, a “disaggregated model” of re-seller access.

The disaggregated model —-which the re-sellers supported— meant several knock-on changes in wholesale rates and business risk for the re-sellers.

First, the resellers were going to have to invest in their own “transport” hardware at each POI on the FBCs’ premises, either by renting from the FBCs, buying their own, or forming a cooperative with other re-sellers at the same POI premises.

Next, to give the re-sellers a firm push out the door of the aggregated house, the CRTC sunset the re-sellers’ access to the FBCs’ central POIs and capped the network speeds that they could purchase wholesale in the aggregated set-up.

Lastly, the CRTC announced it would set wholesale rates for both aggregated and disaggregated networks over a three-year transition period. Crucially the Commission deferred the disaggregated rate decision until later and first reviewed the aggregated wholesale rates.

And that’s when the trouble began.

On October 6th, 2016 the CRTC cut the wholesale aggregated rates for what the re-sellers had to pay the FBCs: by 90% on the “usage” rates covering the “backbone” portion of the FCBs’ networks and 40% for the “access” rates covering the last-mile of the network. Blais described them as interim rates, pending a more detailed review of FBC capital costs.

The carriers, including Bell, didn’t take it too well. They said Blais had just killed off the the re-sellers’ incentive to wean themselves off of the aggregated model and start building POI transport in a disaggregated system. The FBCs filed appeals to the federal court, the federal cabinet, and asked the CRTC to reconsider its decision. They lost all of them and the rate cuts stood.

In July 2017 Ian Scott was appointed by the Liberal cabinet to succeed Blais who had not asked for a second term. His appointment was immediately criticized by consumer-group Open Media for being selected from the telco industry instead of the consumer community. Scott had indeed worked for both Telesat and Telus, as well as a short tour of duty in 2007 as senior policy advisor to then-CRTC Chair Konrad Von Finckenstein who was widely seen as a pro-consumer Chair (as was Blais).

Among many regulatory files, the new Chair continued with the laborious study of the FBCs’ capital costs to finalize aggregated wholesale rates, which both sides in the dispute predictably wanted to move up or down.

The Commission released its decision in August 15, 2019 and to the delight of the re-sellers and the horror of the FBCs, the Commission cut the aggregated wholesale rates even further.

Transport rates, already reduced by 90% in 2016, were lowered another 15% to 43% depending on the carrier and the network speed. Last-mile rates were reduced again in a range from 3% to 77%.

And the cuts were retroactive to 2016 so the carriers owed the re-sellers $325 million in rebates. Yes millions, Dr. Evil. 

Again, the FBCs launched appeals to federal court and cabinet, as well as requesting the Commission reconsider its decision which they said was riddled with costing errors. In October 2019 they caught a break when a federal judge stayed the CRTC’s order to change rates and make retroactive payments pending appeal proceedings.

And six days before Christmas, Scott and Bibic had that beer.

Tek Savvy and Distributel spokespersons raised hell in press releases and Twitter. The consumer group Open Media, which counts both re-sellers as major financial backers, did the same. Other consumer advocates piled on.

Bell and the other FCBs eventually lost their court challenges. But the wind was shifting in their favour anyway.

Two things happened.

First, in June 2020, the Commission convened another proceeding in the long saga of transition from aggregated to disaggregated rates, this time to design the system of POIs in the disaggregated model which was now informed by Distributel’s request to reverse course from disaggregated and go back to a highly aggregated model.

Distributel, no doubt elated by the double cuts to rates under the aggregated model in 2016 and 2019, told the Commission that the capital costs of building their transport equipment in a disaggregated wholesale regime were astronomical (it might take “centuries”) and the Commission should reverse its 2015 decision.

The FBCs including Bell told the Commission that Distributel’s 180 degree turnabout on the Commissions’ transition plan was a smokescreen for cashing in their winning lottery ticket of deeply reduced aggregated rates. They pointed out that Distributel had originally advocated for the disaggregated system (and neither Distributel nor Bell suggested that transport capital costs had changed in the interim). They also pointed out that the largest reseller Tek Savvy wasn’t complaining about transition to disaggregated and was already building its own hardwired network in southern Ontario.

The winds of change really picked up in August 2020 when the federal cabinet answered Bell’s appeal by stating the Commission’s 2019 rate cuts had missed the sweet spot and showed insufficient consideration to the FBCs’ capital costs and therefore the Commission must review its second rate cut.

So the Commission began its months-long do-over of the aggregated rates review, which resulted in its decision on May 27, 2021. In a unanimous decision by nine commissioners including Scott, the Commission reversed its 2019 rate cut, agreeing with all 14 arguments raised by the FBCs identifying errors the Commission had made in reviewing costing models and its own guidelines. The 2016 interim rates, which had included the initial rate reduction in favour of the re-sellers, were confirmed as final.

Not only that, the Commission said it was carrying on with the transition from aggregated to disaggregated model which meant those reduced aggregated rates would soon be a thing of the past. Distributel and other ISP re-sellers were going to have to build those multiple transport nodes throughout the FBCs’ networks. Their 2019 lottery ticket was in shreds: no second rate cut, no $325 million payment.

At this point raging public controversy was a given. Needless to say the ruling gave new life to the resellers’ public campaign and the juiciest orange in the campaign was the McGee’s photo. (Visits to the Tek Savvy, Open Media or CNOC websites illustrate that, but the most acidic commentary might be Tek Savvy exec Peter Nowak’s twitter account).

Open Media newspaper ad from July 2021

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Whatever one thinks is the right answer on wholesale internet rates, there’s the matter of lobbying.

Lobbying on matters of public interest under controlled conditions including a federal registry is expressly allowed in all democracies including this one: not only to the CRTC, but to all federal administrative bodies, politicians and their senior staff (and carried on with gusto by representatives of VIs and resellers alike).

There are no rules against one-on-one meetings either. Before I retired, I lobbied federal politicians countless times on media issues, both one-on-one or by committee.

I even lobbied Ian Scott on February 12, 2018 (you can look it up on the registry) although truth be told it was a meet-and-greet in a bar following his appointment the previous July (I am guessing Bell didn’t have to wait that long, but I’m over it).

It was a two-on-two meeting and very pleasant. We filled his ear about the history of the CRTC’s failures on local news and he nodded a lot. At the time, there were no open CRTC files dealing with local news but I hope we educated him for the next time it comes up. I think regulation works better with more information.

Still. Scott —and Bibic— were very naive to think that they could just be regular guys going to a pub that’s located within 100 metres of offices housing the Parliament Hill press corps. Next time maybe they’ll bring chaperones, even if it’s Christmas.

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Online Streaming Act debated in Commons before going to Committee

February 17, 2022

The Liberals’ Online Streaming Act C-11 passed second reading in the House of Commons on February 16th, setting the stage for the expected political drama of Heritage Committee proceedings in the coming weeks.

Heritage Minister Pablo Rodriguez took to the floor of the House to speak about the importance of cultural sovereignty and kept his messaging on the content of the Bill simple.

The revisions to the Broadcasting Act, he said, are to compel the mostly American streamers serving the Canadian market to platform their fair share of Canadian programming or else contribute cash to the Canada Media Fund. 

As for social media uploads, Rodriguez’s sound byte “platforms are in, users are out” was shorthand for saying that the regulation of upload-based streamers like YouTube would be restricted to professional rather than amateur videos and music. 

While the Minister has yet to spell it out, presumably the “regulation” of professional content  —-does he mean “significantly monetized”?—- is relevant to the streaming platform’s in-kind or in-cash contribution to Canadian programming and also to its obligation to bring that content to the audience’s attention through “discoverability” functions that do not include algorithms (which are expressly excluded under the section 9(8) of C-11).

No fire-breather, Conservative Heritage critic John Nater struck a moderate pose in reply. He cited the Conservative election platform’s commitment to regulate “large” American streamers “like Netflix, Disney Plus and Amazon Prime” but left the demarcation point between large and not-large unspecified.

As expected most of Nater’s comments were directed at section 4.2 of C-11 which states the general principle of distinguishing professional from amateur social media uploads. He served notice the Conservatives don’t think it’s clear enough and are opposed to leaving the fine print for the CRTC or federal cabinet to fill in after the Bill passes.

Nater also seems to think the Bill contemplates regulating the streaming platforms’ discoverability algorithms, but they are explicitly excluded (leading NDP MP Alexander Boulerice to ask how the discoverability of a platform’s Canadian programming was going to be tracked if not by algorithm design).

Nater also said the Conservatives want the definition of Canadian content changed “to ensure that real Canadian stories are captured within CanCon rules,” a criticism of the long standing “point-system” that  measures Canadian content by counting heads of leading creative staff (directors, writers, and actors) rather than a film’s intrinsic Canadian expression (for more on this, have a read of George Carothers’ 2020 study).

When asked by other MPs whether the House could expect a repeat of last year’s filibuster of C-10, Nater responded with a sober “I will work constructively with my colleagues” and “we will table reasonable amendments.”

We’ll soon see.

Conservative MP Pierre Poilievre took the occasion of Second Reading (before his Heritage Critic Nater had a chance to get on this feet) to tell the House that Liberals have “abused the freedoms of Canadians. Why should Canadians now trust that same abusive government with the power to censor what Canadians see and say online?” 

During last year’s Bill C-10 proceedings, the Tories fundraised off that kind of messaging and parachuted Alberta MP Rachael Harder Thomas into the Heritage Committee to lead a filibuster. 

There are no scheduled dates for the Heritage Committee but after next week’s short break Parliament is in session for 12 out of 17 weeks to the end of June.

A wobbly advertising rebound in 2021

SMI data published by CARTT Magazine

February 10, 2022

Canada’s media advertising market bounced back in 2021 from pandemic lows for digital and TV, but remains mired in a downturn for news publishers and radio stations.

According to CARTT Magazine and based on data from Standard Media Index, the advertising spend on “traditional” (non-digital) media improved 19% in 2021 but remains 15% below pre-pandemic 2019. 

Within traditional media, television recovered by 25% over 2020 but newspapers and radio merely plateaued at 2020 numbers which were a 40% to 45% drop from 2019.

Digital advertising increased 33% increase in 2021. Digital giants Google and Facebook were up 40% over 2020. Digital was flat in 2020, the first year of the pandemic.

The 2021 digital growth helped some TV companies combining conventional and digital broadcasting but not all.

CBC (41% growth) and Rogers (38%) had the best results suggesting they are growing ad revenue post-2019, but Bell (18%), Quebecor (22%) and Corus (14%) are still below 2019 levels.

Catching Up: Poilievre Attacks the Media; Bill C-10 is Back; Minister Rodriguez reports on Online Harms consultation

Pierre Poilievre accuses the mainstream media of “insulting Canadians.”

February 7, 2022

No news round-up of Canadian media policy can begin without first remarking on the quantum leap in the vilification and attempts to intimidate the Press during the last two weeks.

Pierre Poilievre’s viral video tweeted January 29th in solidarity with Convoy protesters accuses “the media” of “insulting Canadians.” His most recent video road-testing his leadership narrative goes full Trump, weaving in attacks on the mainstream media as a member of the establishment cabal plotting against freedom.

The bile spewed at journalists both on social media and during live news stand-ups is daily fare now, seemingly a Scouts-badge for Convoy militants. 

Right-wing efforts to foster the Trump formula in Canada are in full swing: malign the integrity of all political institutions including the mainstream media, leaving only faith in the Leader. 

We are about to find out what kind of country we are.

Poilievre’s video briefly alludes to a Liberal attempt to repress political speech through its Internet legislation. With the Liberals re-tabling C-10 amendments to the Broadcasting Act, we can expect the Conservatives to re-boot their political opposition from 2021 focussing on the regulation of social media posts.

The new Online Streaming Bill C-11 was drafted to smooth the rough edges from last year’s Bill C-10 aimed at ending the 20-year regulatory exemption of Internet-based broadcasting. The main thrust of the legislation is to require foreign streamers Netflix, Disney, DAZN, Amazon, Spotify and YouTube to make the same in-kind or in-cash contributions to Canadian content as regulated Canadian TV and radio broadcasters do.

The distraction –-and opportunity for critics— is the Bill’s provision for regulating the streaming of programming on social media platforms; programming that mimics conventional broadcasting but distributes content on social media platforms instead of (or mostly in addition to) Internet apps or TV channels. The Bill delegates to the CRTC the rule-making on what kind of program uploads will be regulated and provides Parliamentary criteria for the Commission to follow. The chief criterion is whether the programming is commercially monetized.

Critics immediately pointed out that despite Parliament’s guidance the CRTC could regulate a huge array of amateur and start-ups creators trying to monetize their uploads.

Given its past history of foregoing regulation of small cable operators and broadcasters, the CRTC will almost certainly grant a widespread exemption for nascent commercial activity. 

But given the Liberals are trying to dodge controversy in C-11, it’s a bit of a head-scratcher they didn’t write in a more specific exemption for programming uploaded by small scale content creators.

The political weak link in C-11 has little to do with the fine print of the legislation: its vulnerability is that a common front of opponents and critics of communications regulation have kept up a years-long campaign against the CRTC and lately have been personally targeting Chair Ian Scott.

We can expect the anti-C11 sound bites will be that Scott can’t be trusted with new powers over social media and the Bill is part of a power-hungry Prime Minister’s plot to shut down free speech. 

Wait and don’t see if I am right.

Meanwhile the Liberals’ work on an Online Harms Bill is back in the news

Unlike C-11, an Online Harms bill is a free speech and censorship issue. It also raises compelling harm issues that we never had to confront before: ask any journalist, especially female, Muslim or POC journalists about the threats and abuse in their social media feeds.

Minister Pablo Rodriguez released an interim report on Heritage’s public consultation, the now-standard “what we heard” summary of public submissions, so it’s going to be some time before we see a Bill.

At this point I make only one observation: the ill-advised decision of the Minister not to publish the 422 submissions Heritage received from various Internet companies, academics, civil society organizations, victim’s groups, and ordinary Canadians

The reason given by Heritage for this secrecy is that some submissions came from victims of online abuse who understandably want their traumas and identities kept private. But Heritage could easily have offered confidentiality to those Canadians without shielding all submissions from public view.

This is more than just a question of principle.

The Minister’s summary of “what we heard” repeatedly quantifies specific critiques of its proposed model of regulation. The Report is replete with “most people said” and “some said” and “few said.” 

Without knowing who is saying what —is it a commercial entity, a known political advocate, or an ordinary Canadian— how are we to adequately judge their arguments ? 

For instance, what has Facebook said to the government? Are we not allowed to know? We only know what Google has to say (some important things as it turns out) because its submission is posted voluntarily on Michael Geist’s website.

The Minister could do us all a favour by being more transparent.

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Will Big Tech be cut down to size?

February 3, 2022

(8-Minute Read)

Update on an Update! On February 8, 2022 Competition Commissioner Matthew Boswell released his submission to Senator Wetston’s anti-trust review, a day after ISED Minister François-Philippe Champagne announced a government review of the Competition Act. As befits a submission from the chief enforcer of competition law, Commissioner Boswell recommends a laundry list of amendments intended to strengthen competition outcomes, especially in the digital economy. His recommendations overlap with the various reform proposals discussed in this blog. Where they do, I have made bolded annotations.

Updated: On February 7, 2022 the federal government announced a comprehensive review of the Competition Act will be undertaken, including “potential ways [to adapt] the law to today’s digital reality to better tackle emerging forms of harmful behaviour in the digital economy.”

The debate over whether Big is Bad or Beautiful is back.

US Congress is engaged in daily debates on legislation aimed at taking Big Tech down a peg, joining a global trend.

Here in Canada we have yet another communications merger on the front burner: the proposed $26 Billion Rogers-Shaw conglomerate.  Decisions from both the Competition Bureau (telco assets) and the CRTC (broadcasting assets) are pending.

What Canadians may not realize is that the CRTC review of whether broadcasting mergers are “in the public interest” is an anomaly: all other corporate mergers and abuse of market power are governed by the little-known Competition Act—Canada’s “anti-trust” legislation— that is very much designed to protect the private interest of big business in the name of economic growth.

The obscure rules of competition law will be vital if Canada follows the global movement to trim the size and power of Big Tech.

The picture often painted by news coverage of Canadian corporate mergers is that our Competition Act is toothless and its agent of enforcement, the Competition Bureau, is ineffective. Certainly, the business community likes it that way (more on that later).

Indignant questions about the Bureau are frequently asked: how could Postmedia get away with buying the Sun Media tabloid chain in 2015? How could Postmedia and Torstar trade 41 community papers like baseball cards in 2017 and then close 36 of them on the same day because they competed with each other in local markets? How could Bell buy rival Astral Media in 2012 (though only with divestments) and the telco MTS in 2017 (again with divestments)? How was Telus able to buy cell phone start-up Public Mobile in 2013 ? 

When our Competition Bureau picked up one of its earliest Big Tech files in 2013 —-a review of whether Google’s 95% control of the Search Engine market has resulted in the abuse of market power—- it issued Google a clean bill of health in 2016. When Facebook snapped up Instagram (2012) and WhatsApp (2014) our Competition Bureau did nothing (although to be fair, neither did US authorities). Our Bureau’s results in policing Big Tech are inferior to the US and the EU, other than “me-too” settlements after the larger jurisdictions have levied fines.

But popular tolerance of Big Tech’s size and might has worn thin around the world. Most importantly, it has worn thin in US Congress. Debate on the diverse raft of proposed regulatory Bills, matching the diverse holdings of Big Tech, is now a daily event on Capitol Hill.

With all of this public attention on whether Big Tech is bad or beautiful, our own  Senator Howard Wetston has given the debate a Canadian focus by kicking off his own consultation on whether clipping the wings of Big Tech first requires an overhaul of the Competition Act. 

While a lone Senator taking up an arcane policy issue hardly constitutes legislative momentum, Wetston enjoys special credibility as the former Director of Competition Enforcement, ex-Chair of the Ontario Securities Commission and a stint as a federal judge (he’s also a Senior Fellow at the C.D. Howe Institute). Depending on what he has to say, his report could be the spark to tinder here in Canada if the US Congress moves the needle on anti-trust.

The submissions to the Senator’s consultation address the technical features of competition law but mostly they offer some very readable (and philosophical) debates over the role of government in distributing economic opportunity and wealth. 

But first, a quick review of the Competition Act:

The bread and butter of the Act is the index of criminal offences that Canadians take for granted like corporate collusion in price and output fixing, bid rigging, and deceptive marketing practices. 

The more controversial stuff is about mergers, acquisitions, and the abuse of market power by big business.

The Competition Act is explicit: market dominance is perfectly fine. Even an air-tight monopoly is legal. If a dominant company keeps its nose clean it’s free to grow, merge and acquire its way to market dominance. It only runs afoul of competition regulators by committing acts that substantially lessen competition through sharp practices designed to harm competitors, such as:

  • exploiting its dominant market position to put out cheaper quality goods;
  • a conglomerate charging lower prices to its own retailing divisions; 
  • selling at prices lower than the acquisition cost; 
  • demanding a supplier refrain from selling to competitors; or
  • buying up and stockpiling scarce resources.

Otherwise, big is not bad. It’s not even suspect.

And that’s the way the Competition Act ought to remain according to its chief defenders which include the big business lobbyists C.D. Howe Institute and the Montreal Economic Institute, as well as the Bay Street merger and acquisition lawyers speaking through the Canadian Bar Association. All of them have advised Senator Wetston to leave the Competition Act alone or make it even more favourable to big business. 

As they accurately point out, the Act’s purpose clause makes “efficiency” the trump card in all matters of abuse of market dominance and, notably, mergers and acquisitions. [Commissioner Boswell rejects a proposal to strengthen further the “efficiency trump card” ].

By “efficiency” these acolytes of Chicago School economist Milton Freidman mean an unfettered market economy increasing total wealth and output without regard to the impact on workers, the environment, or the distribution of wealth among the rich and poor. 

Our Canadian legislation even sports the notorious section 96 “efficiencies defense” when reviewing mergers, unique among OECD nations. That provision forgives a merging company for committing anti-competitive harms (for example using market dominance to raise prices) so long as the gains from economies of scale outweigh the harms. [Boswell recommends abolishing section 96, noting that in the US and other major jurisdictions the only justification for sanctioning anti-competitive mergers is if consumers benefit.]

The triumphalism of the Chicago School’s gang goes so far that the Montreal Economic Institute suggested to Senator Wetston that Canadian judges ought to just overrule any Canadian law or regulation that conflicts with their definition of “efficiency,” as rogue a statement by the business community as you are going to find.

The Bay Street view expressed to the Senator in various submissions is simple: don’t mess with our much-loved competition law just to get at Big Tech through anti-trust.

On the other side of the policy ledger, the Senator has received a number of submissions from reformers (Vass BednarKeldon BesterPublic Interest Advocacy CentreJennifer Quaid) which in aggregate propose several amendments to the Act, some fundamentally challenging the Chicago School status quo:  

  • Give the Bureau clear authority to retroactively review mergers and acquisitions that later develop unanticipated market dominance, an obvious allusion to Facebook’s successful acquisitions of Instagram and WhatsApp. [Boswell has a similar recommendation and would also apply it to abuse of dominance enforcement.]
  • Write into the legislation that the common denominator creating a single “market” that can be dominated by Big Tech (and policed by the Bureau) is the accrual of data, rather than maintain the fiction of a siloed array of digital products and platforms.
  • Impose a “reverse onus” on companies doing the merging or acquisitions to prove affirmatively there is no anti-competitive harm. [Boswell has a similar recommendation].
  • Lower the dollar value of the “notification threshold” which requires companies to report mergers and acquisitions to the Bureau so that strategic acquisitions of startup firms don’t fly under the enforcement radar. [Boswell has a more elaborate recommendation].
  • Require explicit consumer consent to having one’s individual data handed over to another Big Tech company in a merger or acquisition.
  • Make sure the Bureau has sufficient remedial tools like break-up powers and segregation of operating divisions rather than relying on fines which, even if they are increased significantly, are unlikely to deter Big Tech companies that have already racked up billions in fines around the world. [Boswell has a long list of improvements to the Bureau’s remedial powers.]
  • Give the Bureau stronger administrative powers to review the Big Tech sector without launching a formal investigation, including compelling data disclosure.[Boswell definitely agrees with this one!]
  • Give the Bureau the human resources it needs to analyze Big Tech.
  • And most radical of all reforms, amend the purpose clause to remove the trump-card status of “efficiency” by adding other public interest considerations when reviewing market dominance or mergers. [Boswell rejects pro-business changes to the Purpose clause, but also ignores this reform proposal.]

It’s a compelling policy debate. Could it lead to change?

One thing that is missing in all of the Wetston submissions is the taboo subject of political power. 

The popular will to limit corporate power is not just about curbing market dominance and rebalancing the distribution of wealth. 

It’s also about big business’ acquisition of so much economic power that it becomes political power: Exhibit A is Facebook’s one-week capital strike in Australia which was an unsuccessful effort to intimidate a sovereign government into not regulating (note that the C.D. Howe Institute thinks Facebook’s move was just fine).

When big business thinks it can boss around sovereign governments it suggests that even if big isn’t always bad it always remains dangerous.

But any political movement to reform Canadian competition law in a significant way has more to fear than just the opposition of Big Tech. 

For Canada to exercise its sovereignty over large US-based companies always brings the possibility of trade complications. 

And here at home there should be no doubt that reform of competition law means taking on a fight against a tight and influential establishment of big business, its policy think tanks, Bay Street law firms, university economics departments, and Competition Tribunal members themselves. A brief web search of curriculum vitae and policy statements points in the direction of group think on competition principles of wealth maximization. Reform would be no small political battle. 

Even Wetston’s consultation may be hedged to vindicate the status quo. Leaving aside the Senator’s impressive but impeccable Bay Street credentials, his choice of former law school Dean Edward Iacobucci to write a consultation paper (to which participants respond) on reform options is interesting.

Iacobucci’s paper is a well-crafted and temperate defense of the Chicago School principle of efficiency trumping all other societal goals and supports the central tenet of competition law in that regard.

He does offer the expected solace to those left behind by wealth maximization: the continued importance of progressive taxation and government social programs. But that still excludes employee, consumer, or environmental concerns about specific occasions of market domination.

Iacobucci also goes further than big business might prefer (by the way he sits on the C.D. Howe Competition Law Council) in conceding that government can always regulate a specific sector like Big Tech through special legislation so long as it leaves competition law alone.

That might be a reasonable approach but demands naivety about the likelihood of legislative action addressing market dominance in any given industrial sector. 

As a former lobbyist and current advocate for news media funding and broadcasting regulation reform, I can tell you that Parliamentary regulatory measures in any given sector of the economy can take years to accomplish and most of the time the efforts are unsuccessful. 

If you got this far reading this overly lengthy blog, thanks for hanging in. I am looking forward to the Senator’s report.

Catching Up: Last week on @MediaPolicy.ca includes funding public broadcasting and another Big Tech merger.

January 23, 2022

Public broadcasting is about to claim a front row seat in politics…but in the United Kingdom, not Canada. Britain’s Conservative government has served notice to the ad-free BBC —which boasts the most popular news site in the world— that six years hence it will not renew the BBC’s main funding mechanism established in 1946, the “TV tax,” a mandatory licence fee on every TV set. The current annual fee is $270.

The replacement for the TV Tax is undecided and such a funding mechanism, and the future of the BBC itself, is sure to become a lightning rod in British politics.

None of which has escaped the attention of media commentators here in Canada. 

We live in a world in which #defundcbc routinely trends on Twitter and Conservative Opposition Leader Erin O’Toole has promised to do just that (except in Quebec where it would kill him politically).

Loving, hating and reimagining the CBC is the birthright of every Canadian it seems. Globe columnist Andrew Coyne was first off the mark, touting a voluntary subscription fee on ad-free broadcasting with the goal of reducing or eliminating the parliamentary appropriation.

The regulatory future of Big Tech continues as a daily show in US Congress as different bills (none of which directly impact media) make their way through various committees. Microsoft gave it some unexpected immediacy by purchasing the world’s number three video game company, Activision Blizzard, (Call of Duty, Candy Crush) for $USD 69 Billion. Microsoft already owns the “pipe” to that gaming content, the ubiquitous Xbox streaming device. 

Up until now, Big Tech mergers have been mostly buy-outs of future competitors or the acquisition of media products that fit snuggly into a multi-product ecosystem fed on consumer data. We’ll see what Activision turns out to be for Microsoft.

Catching Up: An Edgy Week on @MediaPolicy.ca includes Tara Henley, Ed Rogers, Rumble, The Athletic and Big Tech

January 15, 2022

Big Tech has no hope of keeping itself out of the public eye during an election year in American politics. Democrats attack Facebook for its enabling role in the Stop-the-Steal lie and the Capitol insurrection. Republicans routinely blame Big Tech for almost anything. No less than four Big Tech bills are before Congressional committees.

This week’s most interesting Big Tech news was a federal judge’s ruling that the Federal Trade Commission’s re-filed anti-trust lawsuit against Facebook for its competition-squelching acquisitions of Instagram (back in 2012) and WhatsApp (2014) can proceed. No trial date has been set.

All of this bad publicity for Big Tech will surely colour public opinion on the federal Liberals’ promised legislation against online harms. So far its mostly Facebook and Google’s YouTube getting attention for toxicity on their platforms as befits their market share of online media, however the Globe’s Joe Castaldo spotlighted one of the right-wing up and comers: Toronto-based Rumble competes with YouTube, sans algorithm, and has successfully positioned itself as an alt-right platform.

Speaking of Trumpish politics, former CBC lifestyle journalist Tara Henley got the notoriety she sought by publishing a slam-the-door-on-your-way-out denunciation of CBC newsroom culture.

Her accusation that the CBC is preoccupied with “woke” issues and that journalists are discouraged from pitching hard news stories included the following counterfactual statement:

“It is to endlessly document microaggressions but pay little attention to evictions; to spotlight company’s political platitudes but have little interest in wages or working conditions. It is to allow sweeping societal changes like lockdowns, vaccine mandates, and school closures to roll out — with little debate. To see billionaires amass extraordinary wealth and bureaucrats amass enormous power — with little scrutiny. And to watch the most vulnerable among us die of drug overdoses — with little comment.”

Henley immediately attracted the admiration of “defund the CBC” Erin O’Toole. Henley then agreed to an excoriating interview by Canadaland’s Jesse Brown who demanded she explain her accusations. Worth a read.

Some industry news of importance to local newspapers in both the US and Canada: the New York Times dropped $700 million (CAD) to buy online sports site The Athletic with 400 journalists covering 250 major sports teams in 50 local markets.

How much of a threat does the Times-Athletic super-team pose to local newspapers? Not one bit, says Joshua Benton.

And finally yet another episode in the Rogers family drama. With former CEO Joe Natale sent packing with a mega-severance package, rival Tony Staffieri was confirmed as his permanent replacement.

A number of other C-suite departures followed in this changing of the guard, including broadcasting VP Jordan Banks, replaced by back-in-favour Colette Watson.

But the most memorable scene was the life-imitates-art video starring Succession’s Brian Cox congratulating Ed Rogers on his victory and profanely mocking the departed Natale.

CRTC report reveals trends continue during the Pandemic: Internet TV goes up, Legacy TV goes down.

January 13, 2022

The CRTC’s annual report on broadcasting metrics was released in December for the 2019-2020 year ending August 31st (a 15-month lag). As expected the report revealed the impact of the pandemic’s first six months on media consumption, revenue and profitability.

Key trends from previous years for legacy and Internet TV continued but were accelerated by pandemic conditions for advertising and consumer consumption.

Streaming audio and visual media increased their share of the total market (combining regulated legacy TV and unregulated Internet TV). Lead by Netflix ($1.1 billion in revenue) and YouTube ($900 million), the “over the top” media claimed 25% of media revenue, or a $4.4 Billion slice of a $20 billion pie. 

On the flip side, regulated television distributors and broadcasters kept declining. Cable, satellite and IPTV distributors still have 40% of the overall revenue market (at $8 billion) but continued the long term trend of shrinking revenues and profitability. 

Meanwhile television broadcasters had a miserable year in 2019-20. Local television continued its eight-year run of losses by plummeting another 14% in revenue and registering a stunning net loss of 18.6% despite the fact that news consumption rose sharply. 

The only good news was that normally healthy (and subscription-based) specialty channels were down only 7% in revenue and still showed a 25% profit. 

Specialty TV represents 60% of overall broadcasting revenues while advertising-dependent local TV accounts for the rest. However the de facto subsidy of “specialty” to “local” impacts the major broadcasters differently, and does not exist at all for independent local TV stations that do not own specialty channels.

The knock-on effect of the revenue downturn for both distributors and broadcasters is the shrinking budgets for Canadian news, sports and entertainment. As “CanCon” spending is tied to a percentage of earned revenue in the regulated sector, the 2019-2020 year was very bad news.

As for private commercial radio, the sector was down 21% in revenue which hit the local advertising-dependent AM stations the hardest. 

Broadcasters Sound the Alarm on Local News – August 30, 2020

News broadcasters want in on legislation compelling fair compensation by Google and Facebook – National Post, January 4, 2022.

Catching Up: Recently on @MediaPolicy.ca

January 5, 2022

Traffic in Twitter posts debating media issues should swell to monumental proportions in 2022. Much will focus on the deeply troubling mayhem of American politics in which the role of Big Tech will feature prominently.

There are several pots boiling on the Big Tech stove in Washington D.C. but Facebook is the biggest. Democrats want Facebook held to account for its enabling of the January 6th Capitol attack. Two former Facebook employees, Frances Haugen and Brandon Silverman, are very publicly making life uncomfortable for CEO Mark Zuckerberg.

On that note you can listen to a great podcast from New York Times Tech columnist Kara Swisher interviewing whistle-blower Haugen who keeps hammering home the message that if Congress would just force Zuckerberg to be more transparent with Facebook’s algorithm and data traffic that would be the straightest line between the political toxicity of today’s Facebook and a healthier platform. 

Here in Canada expect a flurry of legislative activity in Ottawa: a reprise of Bill C-10 the Broadcasting Act, legislation to squeeze fair compensation out of Google and Facebook for publishers’ news content, and an Online Harms Bill that will spark a sharp debate over the toxicity of online speech.

Possibly an emerging issue will be whether our federal competition law will prove to be any restraint at all on the rising power and influence of Big Tech or if the Competition Bureau decides to stay out of it. There’s a very good overview in the Toronto Star from Amir Barnea.

Although we don’t think of Rogers or Shaw being in the same league as Facebook or the rest of “Big Tech,” if their $26 billion merger is approved by the CRTC and the Competition Bureau that will certainly stir up the big-is-bad conversation. Rogers is pushing for a decision before mid-March.

Television news broadcasters want in on promised federal legislation for fair compensation from Google and Facebook for news stories

Can Non-Profit Local Journalism Save Democracy? Robert McChesney says Yes We Can.

The Great American News Deserts: from the Washington Post

January 1, 2022

(5 Minute Read)

Hello 2022. New Year’s Day is a good time to reflect upon the state of local news journalism.

For a decade we’ve known that the advertising-dependent business model for local newspapers is broken (local TV and radio news aren’t far behind).

Paid-subscription models —you know, where citizens pay for what we read— are barely making it at the polarities of the market: national audiences reached by the New York Times or the Globe & Mail at one end, and niche followings at the other.

As yet we have no answer for the decline of mass audience news journalism in cities and towns other than the band-aids of government funding or, maybe, cash from Google and Facebook.

Thankfully the collapse of local news has been gradual rather than a dramatic whoosh. But nothing has interrupted the steady decline in revenue, journalists, and news coverage. It’s been charted in both Canada and the US.

So far, Canada’s triage approach to saving local news looks like this:

  1. Federal subsidies and grants to newsrooms and a bit more money for the CBC. It’s been supplemented by Covid-emergency aid.
  2. The federal Liberals’ promise (supported by the Conservatives) of legislation aimed at compelling Google and Facebook to pay publishers fairly for news content, as the Australian government has done.
  3. New tax laws giving non-profit news organizations the opportunity to attract tax-deductible funding from philanthropic foundations and private donors. Montreal’s La Presse is the only major metropolitan newspaper where owners have been willing to dissolve their for-profit corporation and register a non-profit business with Revenue Canada. The Narwhal is the only other major publisher.
  4. A modest readership federal tax credit where taxpayers shell out $500 for news subscriptions to recover $75. Revenue Canada won’t be releasing any data on the success of this program until 2024.
  5. As yet nothing for local TV or news radio. It’s possible the federal Liberals could use the occasion of tabling a revised Bill C-10 Broadcasting Act to inject more industry cross-subsidies into local news.

The US is even further behind than Canada in addressing local journalism’s state of emergency:

  1. For now, no Congressional aid to journalism. Emergency funding failed when President Biden’s Build Back Better omnibus legislation collapsed in December. The more comprehensive approach in a proposed Local Journalism Sustainability Act seems forever stuck in House and Senate committees.
  2. No short-term prospect of Australian-style legislation to compel Google and Facebook to pay for news content.
  3. Unlike Canada, a highly developed “philanthropic sector” that funds niche journalism, especially investigations and some local news.
  4. Public broadcasting is a niche and national news source, with far less funding than the CBC on a per capita basis, and that’s not changing.
  5. American local TV news is in less dire circumstances than Canada because US station owners have something Canadian TV doesn’t have, the intellectual property rights over their on-air broadcasts. This allows US stations to negotiate fees from cable companies picking up their signal.

Enter American media critic Robert McChesney and his frequent collaborator John Nichols with a sweeping, out-of-the-box proposal they call the Local Journalism Initiative, published a month ago (download the 30-minute PDF version below ).

Their starting point is this: the for-profit business model for written news journalism is finished for good at the local level. The only solution is massive public subsidy: a $34 Billion annual federal grant (equivalent to $100 per citizen in a national population of 340 million). Adjusting for population scale, the $34 Billion price tag is about 20 times greater than Canada’s current funding commitments to journalism.

The first thing you need to know about their proposition is they don’t want a dime going to national media organizations or for-profit newspaper chains. They want to sponsor an ecosystem of authentically local, county-by-county, independent newsrooms that adopt a non-profit model.

Here’s how it would work:

  1. Lump sum federal funding would be available every three years for independent, non-profit local newspapers serving only their home county (there are 3000 in the US).
  2. The funding would be up for grabs in a triennial popular vote in each county based on a universal voter franchise. Voters would be able to endorse more than one news source, perhaps up to five in large metropolitan counties.
  3. Based on vote tallies, the term-funding (averaging $11 million annually per county) would be divided proportionately among eligible news organizations that earn at least one per cent of the vote. No news source could receive more than 25% of the funding.

On the thorny issue of defining a legitimate news organization, McChesney and Nichols offer this:

  • The news organization must be non-profit: as a transitional measure they would allow for-profits if they convert to non-profit within six years;
  • The news organization must demonstrate legitimacy by publishing regularly for at least six months prior to participating in a funding plebiscite;
  • The news organization must produce original journalism at least five days per week. Unlike Canadian rules for federal funding, there is no requirement for a minimum amount of news reporting, as opposed to opinion writing;
  • 75% of salaries must be paid to employees in the home county;
  • The news organization must be completely independent and cannot be a subsidiary of a larger organization, even non-profit; and
  • The news content must be online and available for free.

Yes it’s a paradigm shifting proposal with a huge price tag.

It helps to understand the perspective that McChesney and Nichols are coming from (they have been writing about the collapse of American journalism for two decades, including their 2010 book The Death and Life of American Journalism.).

As they tell it, for-profit chain media companies sucked the lifeblood out of a profitable newspaper industry beginning in the ’90s and ’00s, long before the Internet came along and delivered the coup de grâce.

They are very specific about what is to be saved, describing the core crisis in journalism and democracy as the dramatic loss of local newspapers. Local because the collapse of the business model leaves news deserts where powerful interests act unseen. Local because the every-day stories covered by a small or mid market Press ——stories they describe as “the connective tissue of a community”— “introduce people to their neighbours and encourage them to listen and to empathize with one another.”

That binding community experience is the opposite, they might have added, to the tribalism of social media that is rushing in to fill the void.

You don’t have to buy into all of McChesney and Nichols’ broader analysis (although you may recognize some of your own observations about media and politics in the pages of their books).

Their proposal presents as Utopian in 2021. But the consideration is whether by the end of the decade our local news media will be such a blasted landscape that sooner or later we are going to reach for paradigm-shifting solutions.