A Lesson From Canada For The FCC
by Bruce Mehlman
Oh, FCC: Take some notes from Canada.
Maxime Bernier, one of the candidates for leader of the Conservative Party of Canada, has just given a speech in which he set out ways to achieve real competition in the telecom sector. And one of the things he proposes is actually to phase out the role of the Canadian Radio-television and Telecommunications Commission (CRTC) as telecom regulator.
Bernier is a telecom and regulatory expert. He was Minister for Industry in Stephen Harper’s Conservative government and led the deregulation of local telephone markets after cable companies and wireless had transformed the telecom landscape. In short, Bernier recognized that there was “obviously more and more competition,” and he acted on it. In the face of opposition both from those who favored continued regulation and the Canadian regulator itself, the market was deregulated and competition flourished.
So why is Bernier so anxious to act now? It all goes back to his time in government. Ten years ago, he had set out a Policy Direction to the CRTC, which instructed, in his words, “the CRTC to rely on market forces to the maximum extent feasible within the scope of the Telecommunications Act” as a “solution” to its “control freak mindset.”
Back to old ways
What happened? “I, and many others at the time thought that it would force the CRTC to change its ways, to become more flexible and adapt to the new competitive reality. We were wrong. The CRTC seemed to take the Policy Direction seriously for a few years. And then it reverted back to its old ways.”
And from this, Bernier draws a conclusion about regulation and regulators: “Those whose task it is to regulate this industry tend to be behind the curve. They don’t want to let go of their regulatory control. Meanwhile, the industry has actually moved on, with new innovations.” That’s exactly right. And it applies just as much here as there.
Now if the CRTC can behave this way in a parliamentary system, in which it is supposed to follow the directions of Parliament, imagine the vast discretion our own Federal Communications Commission (FCC) has in a system where it is an independent regulatory body.
Implementing policies that ignore the marketplace
Why should Americans care? Because the issues that Bernier cites as examples of a regulatory mindset are the same ones we face here, notably with broadband, wireless and the nature of competition itself. In each case, the regulator opted for policies that ignored the marketplace, put its hand on the scale and favored policies that restrict investment. In auctions, restrictions on bidding intended to dictate market outcomes led to misallocation and under-utilization (as some of the spectrum sold in 2007 for public safety is still not being used and other parts took seven years to finally see service after sale in secondary markets).
So whether it’s broadband, wireless auctions or the nature of competition itself, the issues are similar on both sides of the 49th parallel. Regulators too often seek to ignore marketplace realities. In the U.S., we are witnessing it today with the FCC’s heavy-handed proposed regulations in areas such as special access, privacy and the video marketplace, among others.
Regulators only want to protect their own power
What Bernier writes of the CRTC could equally be said of the FCC: “As the industry evolves, the CRTC finds new reasons to continue to regulate it, in order to justify its existence. In doing so, it is not protecting consumers, it is only protecting its own power. The telecom industry is a mature and competitive industry, and it should be treated as such. It’s not a playground for bureaucrats.”
Both Americans and Canadians are better off with greater access to modern, fast telecommunications services, when the regulator lets the market work, encourages real competition, and investment, and keeps its hand off the scale. In fact, again quoting Bernier: “Interventionist policies that are meant to bring more competition actually do the opposite. Competitive markets don’t need government intervention to work. They only need to be free.”