Deregulation in Canada: Telecom Sector Transition Challenges - The Competition Commissioner´s Views

Sheridan Scott, Canada’s Commissioner of Competition, presented her views this past summer on how the Competition Bureau ("Bureau") and the Canadian Radio-television and Telecommunications Commission ("CRTC") should improve their working relationship in dealing with aspects of their respective jurisdictions over the Canadian telecom sector. In a speech delivered at a June 16, 2004 conference in Toronto, Ontario entitled the "2004 Canadian Telecom Summit", Ms Scott argued that greater cooperation between the Bureau and the CRTC is necessary to facilitate the telecom sector’s transition towards deregulation and a competitive marketplace.¹ Ms Scott’s views are particularly interesting given her prior background as counsel at both the CRTC and at Bell Canada, the country’s largest telephone company.

Ms Scott began her speech by acknowledging that the Bureau and the CRTC have already taken steps to address issues of overlap between their respective jurisdictions, i.e., through the "Interface Agreement" which they entered into in 1999.² However, while describing this Interface Agreement as a "good start", Ms Scott said that additional steps should be taken in order to achieve the following goals: (i) make the best use of existing knowledge and experience within the two agencies; (ii) ensure timely and effective responses to industry change; (iii) be cost-effective; and (iv) keep government intervention to "the bare essential". Ms Scott also recommended using the experience of other jurisdictions - such as the United States – as possible models in this regard.

As an example, Ms Scott suggested that there is need to improve the quality of information-sharing between the CRTC and the Bureau. One instance in which this is particularly important is when the CRTC is considering whether it should forbear from the regulation of dominant firms on the basis that they no longer possess market power within a relevant product and geographic market. Given that market definition analysis is an integral part of the Bureau’s mandate, and an activity in which the Bureau has considerable expertise, Ms Scott said that the Bureau’s input on market definition ought to be provided to the CRTC in the most effective manner possible. Currently, however, the Bureau is limited to participating in CRTC hearings as an intervener, which has a number of limitations, including that the Bureau is not entitled to access certain confidential and company-specific information in the CRTC’s possession.

Ms Scott compared the current Canadian situation to that of other jurisdictions, where steps have been taken to ensure greater cooperation between competition and telecom authorities. For example, the U.S. Congress has directed the Federal C o m m u n i c a t i o n s Commission ("FCC") to consult with the Antitrust Division of the Department of Justice ("DOJ") on certain issues and to give substantial weight to the DOJ’s views. To facilitate this process, the FCC will enter into confidentiality agreements with the DOJ so that the latter can obtain access to protected information for the purpose of its analysis. The situation is similar in Europe, where EU law stipulates that competition and regulatory agencies within the member states should consult and cooperate with each other in order to ensure the coherent analysis of relevant markets.

Ms Scott suggested that there is also room to improve how responsibilities are allocated between the Bureau and the CRTC in cases where their jurisdictions overlap (e.g., where a complaint could be dealt with either as an abuse of dominance under the Competition Act or as unjust discrimination/ undue preference under the Telecommunications Act). Ms Scott noted that the Interface Agreement deals with the issue of overlapping jurisdiction to some degree, but said that it might be appropriate to enact legislation to make the situation clearer. Although Ms Scott did not provide details, she referred to the German example, where the applicable legislative framework limits the areas of jurisdictional overlap between the German federal telecom and competition authorities and delineates how they are to cooperate with each other where overlap does remain (e.g. with respect to preventing abusive practices). Ms Scott stated that the elements to be considered in establishing a new Canadian legislative framework might include: (i) the best use of staff expertise; (ii) experience in analyzing the industry; (iii) sector specific knowledge; and (iv) the availability of remedial tools.

Taking the last point as an example, Ms Scott noted that the CRTC can impose ex ante controls on the ability of telecom firms to exercise market power, whereas the Bureau seeks to assure ex post facto that market forces reduce or eliminate the incentive to engage in anti-competitive behavior. She said that the appropriateness of available remedies should be a factor in deciding which agency is better suited to deal with a specific type of matter.

Finally, Ms Scott recommended certain additional steps to improve Bureau/ CRTC cooperation, including regular meetings at senior staff levels and staff exchanges where an employee of one agency would spend time at the other.

Ms Scott returned to these themes in a speech to the International Institute of Communications on December 9, 2004.³ She also made the following additional points:

• The Bureau and the CRTC should apply the same economic analysis and principles in dealing with competition issues. The private sector should have confidence that, on competition grounds at least, there is consistency in approach when dealing with federal government agencies.
• To that end, cases before the CRTC could involve a joint Bureau–CRTC determination of relevant market definition or even the Bureau being given exclusive responsibility for market definition in such cases.
• The Bureau must be entitled to access the CRTC’s confidential record if it is to provide informed and comprehensive advice to the CRTC. Currently, for example, the Telecommunications Act prohibits the CRTC from sharing confidential information with the Bureau.
• The CRTC, and not the Bureau, is best equipped to address access and interconnection issues in the telecom industry. The key issue in these cases is the price at which access is mandated. The Bureau, however, is not a regulatory body and cannot supervise pricing on an ongoing basis. It is the CRTC that has the authority and tools to do so.
• Both the Bureau and the CRTC have jurisdiction to review broadcast media mergers. It is rare that the Bureau and CRTC reach different conclusions on whether such mergers should proceed, but uncertainty is created when this does occur. The reason for disagreement in this area is that the respective mandates of the Bureau and CRTC are different. The Bureau focuses on the likely anticipated effects of a merger on competition in the relevant market. The CRTC, on the other hand, looks primarily at the extent to which the "diversity of voices" in broadcast media might be affected.

Ms Scott indicated in both of her speeches that she has met with the Chairperson of the CRTC to discuss these issues and that there has been further dialogue between senior staff of the two agencies regarding possible models for cooperation. This is a positive development, which hopefully will result at some point in concrete steps to make the regulatory regime governing the Canadian telecom sector more efficient and less burdensome to the private sector.

• The authors would like to gratefully acknowledge the assistance of Corinne Lester, Clerk-at-Law, in preparing this article.

3 See ^{http://cb-bc.gc.ca/epic/internet/incb-bc.nsf/en/ct03041e.html}.

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