The Economic Impact Of The New Telecommunications Legislation Essay, Research Paper

The Economic Impact of The New Telecommunications Legislation

By: David Lister

Canada has been transformed in recent years into an information based

society. Nearly half of the labour force in Canada works in occupations

involving the collection and processing of information. In a society in which

information has become a commodity, communications provide a vital link that can

mean the difference between success or failure. Telecommunications is a

fundamental infrastructure of the Canadian economy and society. For these

reasons, an efficient and dynamic telecommunications industry is necessary to

ensure economic prosperity. Deregulating the Long Distance Industry is the only

sure way to ensure that prosperity.

Telecommunications in Canada, which include services and manufacturing,

employ more than 125,000 people and generate over $21 billion in revenues (Dept.

of Communications, 1992, p7). Telecommunications helps to overcome the obstacles

of distance in a vast country such as Canada, permitting remote communities to

benefit from services taken for granted in large urban centres. More than 98

percent of Canadian households have a telephone, and there are more than 15

million telephone lines for a population of nearly 27 million(Dept. of

Communications, 1992, p7). It is therefore not surprising that Canadians are

among the biggest users of telecommunications in the world. For example, in 1990,

Canadians made more than three billion long-distance calls (Dept. of

Communications, 1992, p8).

Innovations made possible through telecommunications have also

contributed significantly to the phenomenal growth of the Canadian

telecommunications industry. For example, the total value of the major telephone

companies’ investment in their facilities rose from $17.8 billion in 1979 to

$40.3 billion in 1990. In the same year, Canadian telecommunications companies

reported more than $15 billion in revenues, accounting for an estimated 2.7

percent of the Gross Domestic Product (GDP). In addition, in 1990 the telecom

industry achieved a real growth rate (after inflation) of 8.6 percent compared

to 0.3 percent for the Canadian economy as a whole. Telecommunications is also

Canada’s leading high-technology industry; its Research and Development costs of

$1.4 billion in 1990 represent about 24 percent of total expenditures in this

area. This shows how telecommunications has come to play such a vital role in

our society, in addition to being our most important high technology industry

(Dept. of Communications, 1992, p9-12).

Changes are constantly taking place in the telecom industry. These

changes are caused by rapid progress in telecommunications technology, growing

demand for new services, the globalization of trade and manufacturing operations,

and increasing competition worldwide. It is also important to note that the

Canadian telecommunications market of $15 billion is small compared to those of

our major trading partners, the United States ($185 billion), the European

Community ($125 billion) and Japan ($65 billion) (Blackwell, 1993, p26). These

factors were a mounting source of pressure on the previous regulatory structure

of the Canadian telecom system. As regulation was eased in other countries

around the world, Canada was beginning to lose its competitiveness. The USA and

Britain have made strategic decisions to increase competition in

telecommunications services and to modernize their “information infrastructures”.

Other countries such as Japan, Australia, and New Zealand are following their

lead. The European Community is considering legislation to unify the European

telecommunications market next year (Blackwell, 1993, p22). In order to not be

left behind, Canada updated its telecommunications legislation to bring it in

line with world developments. For example, a key piece of legislation that

regulated telecommunications, the Railway Act, dated back to 1908 (Beatty, 1990,

p135).

Clearly, with such “ancient” legislation, new policy was required that

would allow a more flexible regulatory system, and not hamper the development of

our telecommunications industry (as the Railway Act did). The first steps toward

such a policy were taken in 1987 by the Minister of Communications, who outlined

three basic principles to guide telecommunications policy making:

Maintaining a basic telephone service which is affordable and

universally accessible;

Encouraging development of an effective and efficient telecommunications

infrastructure; and

Permitting Canadians in all regions to have access to the same levels of

competitive services (Beatty, 1990, p42). Bill C-62 – the Telecom Act, passed in

June of 1993, brought these principals to reality. In addition, the legislation

gave Canadian Parliament legislative authority over the principal

telecommunications “common carriers” (i.e. Bell Canada, Alberta Gov’t Telephone,

BC-Tel) in Canada.

The new legislation defines the powers of the federal government and the

regulation that is required to bring Canada’s telecommunications policy into the

twenty-first century. It ensures the efficient operation of our

telecommunications system, maintains and promotes and internationally

competitive telecommunications industry, and guarantees all Canadians access to

reliable, affordable, and high-quality services. In order to achieve this, the

new law centres on two major principals: the first is to open the

telecommunications market by having a workable policy for the whole country

under the guidance of a single regulatory agency (i.e. the CRTC); the second is

to establish a more flexible regulatory framework. The new legislation

modernizes and improves the existing system in three ways: 1.By updating and

modernizing existing legislation that governs telecommunications. Namely, the

Railway Act, the National Telecommunications Powers and Procedures Act, and the

Telegraphs Act. 2.By making a single agency responsible for regulating

telecommunications, and 3.By ensuring consistent conditions in regards to

access to facilities, local and long-distance rates, and introduction of

competition for providing telecommunications services across the country (Beatty,

1990, p42). In addition, the legislation resulted in the creation of a more open

domestic market so that all Canadians will have access to relatively high-

quality services, regardless of where they live.

Advances in telecommunications technology enable companies to offer a

wide variety of new services to satisfy the needs and interests of consumers.

One of the goals on the legislation is to ensure that all Canadians benefit from

innovations in communications. In addition to promoting the economic benefits of

telecommunications technology, the legislation also tackles the social needs and

interests of users. The legislation also contains measures to protect consumers

against possible abuse, including the sending of unsolicited information by

telephone or fax machine (Beatty, 1990, p66).

The Telecom Act gives the government the power to issue licenses to

Canadian telecommunications companies and to set standards for equipment and

facilities. In order to be eligible to hold a telecommunications license, the

company ,must meet specific requirements respecting Canadian ownership and

control. A main requirement is that 80 percent of the companies shares must be

owned and controlled by Canadians (Angus, 1993, p17). The legislation, and

related regulations, therefore promote Canadian control over the country’s

information infrastructure. As well as this, the new legislation ensures that

telecommunications policy takes into account the interests of the regions and

provinces.

Given the fundamental role of communications in Canadian society, and

the vital importance of this sector in the Canadian economy, deregulation (or

more accurately, easier regulation) of the telecom market will ensure that the

Canadian telecommunications industry can successfully meet the challenges of the

coming decades. By promoting the establishment of a more open telecommunications

market, deregulation will contribute to improving Canada’s competitiveness,

which is essential to the country’s prosperity and well-being.

Telecommunications is the country’s leading high-technology industry

(Dept. of Communications, 1992, p1). It is one of the few industries in which

Canada is a world leader, and it provides an essential infrastructure for

Canadian businesses. The economic importance of this sector has been proved, and

the deregulation of telecommunications recognizes the urgent need to give Canada

the ability to maintain and promote competitiveness in telecommunications, both

nationally and internationally. Deregulation thereby ensures that the

telecommunications industry, which is vital for the country’s economy and for

all Canadians, can successfully meet the challenges of the next century.

Works Cited

Angus, Lis. “Telecom Act Close to Approval” Telemanagement: The Angus Report on

Communications Systems, Services, and Strategies. p17, June-July 1993.

Angus, Ian “More Discount Options in Unitel’s Portfolio” Telemanagement: The

Angus Report on Communications Systems, Services, and Strategies. p15, May 1993.

Blackwell, Gerry “The Canadian Telecom Market in Perspective” Telemanagement:

The Angus Report on Communications Systems, Services, and Strategies. p20-32,

September 1993.

Bill C62 – An Act Respecting Telecommunications (The Telecom Act) Ottawa:

Canadian Federal Government, 1990.

Beatty, Perrin Summary of the Bill Respecting Telecommunications Ottawa:

Canadian Federal Government, 1990.

Telecommunications: New Legislation for Canada Ottawa: Department of

Communications, 1992.

Untitled and Anonymous postings from the Internet, including messages from

rec.canada and the CRTC’s WWW (World Wide Web) site.