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Stephen Kelly: Lowering telecom prices won’t come from policy tweaks. We need a drastic rethink


In August of 2007, I strolled up the driveway of the Governor General’s residence, Rideau Hall for a cabinet swearing in ceremony. My next stop was my minister’s department: Industry Canada.

A policy priority for us was the upcoming Advanced Wireless Spectrum auction. AWS is a wireless telecommunications spectrum band used for mobile voice and data services, video and messaging. Pre-billed as a policy to lower prices through more competition in the cell phone market, the details remained for department officials to advise and the minister to decide. I would be the guy in the middle. Working with officials, debating, scrubbing, mapping, incorporating the minister’s values and judgement, and knitting together political and public interest matters.

The end product of the work can be found in the 2007 AWS spectrum auction framework and the subsequent auctions which now form a major subset of the 15-year history of inertia in Canada’s telecom/broadcast and internet policy.

What follows are my thoughts on why the policy failed. And why the failure doesn’t matter and an outline of a new policy approach reflecting other events since 2007.

Key factors that contributed to the policy’s failure were specific to the initial auction while others migrated into future auctions and one was a critical policy choice unhelpfully left out of the framework.

Timing. The auction was held very close to the 2008 financial meltdown and related credit crunch. The financial scaling of new entrants began shortly afterward and proved to be less than ideal.

Continuity. A change of minister in November 2008 was unhelpful. The policy development was initially led by a minister who knew and understood all proponents, market dynamics, and corporate relationships across the industry. I mean no disrespect to those who followed, but simply observe that the minister who created the policy would likely have had a stronger hand in its implementation.

Policy consistency. Cabinet overturning a key CRTC decision on the foreign control status of one of the new entrants was unwise. The rules, in my view, were clear. There, the auction proceeds from the new entrant should have been retained, the new entrant disqualified, and its spectrum re-bid, possibly with a set-aside. Given all the churn amongst incumbents and new entrants, government efforts to preserve one additional new entrant at the expense of time and political capital were disproportionate to its importance.

Usage. Deployment of spectrum became and remains a serious problem. I’m not an advocate of “use it or lose it,” but I do wonder the result had governments enforced usage in a consistent and escalating manner, up to and including revoking licenses. In private sector hands, a licensed public asset (in this case unused spectrum), is converted into a bankable asset. If it’s just sitting on a corporation’s balance sheet accruing value, that’s a private, not a public benefit.

Network access. Lastly, the initial and subsequent policy left the matter of network access to commercial terms, negotiated between commercial parties. Some favoured a third-party arbitration model. Ultimately, in my view, its absence is the main reason the policy failed. New entrants, particularly those who couldn’t trade services or assets had no leverage in “commercial” negotiations with what are in effect oligopolies. Most players wishing to access a competitor’s network infrastructure, then and since, get access only if it accords with the business interests of the owner, at rates that reflect the interest level, which are too often higher than commercially justified and inherently anti-competitive.

In summary, the 2007 policy leaned into bundling of telecom, internet, cable, and cell under one bill to advantage new, regional entrants and vague terms of network access for non-bundled new entrants as stand-alone national carriers. More than fifteen years later, the policy has been given time and it hasn’t worked.

What’s next?

Fixing the price problem won’t come from tweaking the policy to fix the flaws noted above and subsequent others. To me, that would be akin to attempting to bail out a boat that’s sitting at the bottom of a lake.

Some say bring in foreign competition. I’m pretty cold on that. First, outside trade negotiations, unilaterally surrendering a great market to foreign operators is unwise. It’s also naive to think foreign operators would be any different than Canadian companies. The big difference for policymakers and consumers would be access to ultimate decisionmakers and leverage over same. In the auto sector, for example, big decisions get made outside of Canada. I don’t think we would be well served by adding telecom, cell, cable, and internet services to that mix.

Ultimately a policy based on the flawed assumptions made two decades ago—layered onto decades-older public interest tests that drove the development towards today’s telecom/cable/ broadcast and internet conglomerates—will give you a policy that boldly goes where we’ve always been. On the cutting-edge of tradition. Inevitably dealing with legacy issues first while relegating new opportunities to a later date.

The better path forward is to part ways with legacy policies through a two-pronged approach.

First, we should embrace the lessons from a far more successful 2007 launch: the Apple iPhone, the App Store, and the sea change it and related technologies have brought to markets, business, jobs, lifestyles, and broad societal use of information technology.

Second, we need (here and across a range of institutions and policies) to renew the public interest tests at hand. In this case, we’re dealing with different tests that were once separate but now, by way of technology convergence and corporate mergers, have concentrated market power in a handful of dominant operators, resistant to competition and hostile to lower prices. Given these well-established facts, the onus is now on government to rebalance the public interest test to reflect today’s public interest.

From my perspective, today’s public interest would boil down to one outcome and one deliverable.

The outcome would be the strongest information technology infrastructure in the world, universally accessible, anywhere in Canada.

The deliverable would recognize that the state and supported work best when the state steers towards clear, publicly understood outcomes and lets a singularly-focused organization get on with the work.

This two-pronged approach would narrow our policy focus to delivering accessible, affordable, ubiquitous, high-quality networks to all Canadians in all corners of Canada without compromise by mixing in other goals. The “pipes” matter. But it would also enable the information flow—where the value and future are being built. And where governments are ill-equipped—in comparison to users, consumers, and markets—to develop, deploy, pick, select, screen, or shape let alone envisage what that future will be.

The starting point for the new policy would be divestment of network infrastructure from the current owners and the creation of a set of national and regional networks as regulated utilities delivering open access to consumers at regulated rates of return. A publicly established, independently adjudicated price of access would be common to all consumers. Service providers would compete for consumer and other buyers’ business to add their service, and the costs, to the basic cost of network access.

Governments would retain ownership restrictions for the networks. Providers of additional services would face fewer if any such restrictions. And rather than impose antiquated Canadian content rules designed for a few hundred radio and television stations but poorly suited for thousands if not ten of millions of “stations” in the form of content creators, there would be a narrowing of effort to ensure prioritizing of support for indigenous Canadians (particularly in language retention, community development), official language groups, news (with an emphasis on local and regional news) and support for new Canadians in their integration into Canadian society.

The government(s) would also undertake a renewal of tax and income support policies to ensure they too, along with the infrastructure, have the appropriate incentives to ensure Canada is competitively positioned in attracting and retaining the economic and societal benefits of first-rate, affordable network access.

I’ll close with a quicker walk down memory lane. Charlie MacMillan was on The Hub recently. In the course of his conversation with host Sean Speer, he reminded me of the monumental work undertaken between 1984 and 1993. The Neilson Task Force, responses to the MacDonald Commission, reforming financial services, repealing odious restrictions in the energy and foreign investment space—they covered a lot of ground. Most of this good work is lost in history. Much of it is buried under an unhealthy instinct to simply condemn anything to do with the era.

But then as now, there was a list of policies and moribund organizations in Canada who enjoy privileged access to a public asset (airports, ports) or public markets (telecom, banks, airlines) or public money (crown corporations and agencies various) who were estranged from the public interest test that enabled their privilege.

More troubling, so were the keepers of the public interest inside government. Sean Speer wrote about this in his commentary on the CBC. In my words, the public interest test that led to the creation of the CBC and countless others have been lost in time. It’s unhealthy when the public is left to wonder why things are the way things are.

 The public has had enough of ‘it is that way just because’. Canadians deserve a serious, detailed response to their demands for change. Banks that are inaccessible to too many marginalized Canadians. Government services that don’t service. Airlines and regional transportation systems servicing fewer and fewer communities. Police forces who don’t police. Unarmed Armed Forces. Environmental review processes that don’t process anything.

 So, there’s another pile of work ahead for anyone interested in doing it. Finally developing an up-to-date national information technology policy would be a good place to start.

Howard Anglin: The Trudeau Foundation deserves to be saved from itself


I want to say a good word about the Pierre Elliot Trudeau Foundation. Maybe it’s my previously-confessed contrarianism, maybe it’s a hitherto undiagnosed masochistic streak, but when I see the sort of pile-on that we’ve witnessed over the last few days, my instinct is to try to find some saving grace and salvage something from the wreckage. In this case, it isn’t easy, but I’ll try.

But first the bad (and buckle up, there’s a lot). As Andrew Coyne put it, for much of its existence the Trudeau Foundation “appears to have been run like a cross between a college housepainting service and a Panamanian shell company”—an assessment that does a disservice to both college housepainters and Panamanian accountants. He’s right, and I won’t defend it. I’m not that contrarian or masochistic. 

Nor am I interested in defending the inexplicable greed and gullibility that has been damningly revealed by Bob Fife and Steven Chase in the Globe and Mail. What would possess the foundation’s board to accept donations from a transparent front for the Chinese Communist Party is beyond me, and beyond my sympathy. It’s not like a foundation sitting on a $125 million plus taxpayer endowment needed the money.

So what is left to defend? Two things, I think. 

First, the foundation’s work, which was the target of a drive-by hit from the usually astute Brian Lilley in the Sun earlier this week. Lilley opened by asking “[i]f the Trudeau Foundation ceased to exist, would Canadians notice?” It’s a silly question that typifies an attitude that is unfortunately common in politics: if something doesn’t affect you and your life, it can’t have much value. 

Lilley notes that the Trudeau Foundation was originally set up to create a program similar to the British Rhodes Scholarship program, but “after 21 years” he’s “not sure they can claim success on that front.” I don’t know what he’s basing this judgement on, but it sounds to me like he has too lofty an opinion of Rhodes scholars and too low an opinion of Trudeau scholars. 

I can only speak from experience (which includes meeting quite a few scholars from both programs in Canada and in Oxford), but on balance, the Trudeau scholars stack up well. If a lot of what they have produced is “much of … the same banal material academics produce elsewhere” that says more about the state of academia than the foundation’s selection process. And I can assure you, the work of Rhodes scholars is no more inspiring.

Second, and this may seem like a small thing, I want to praise the decisive action by the foundation’s executive and (most of) its board. When was the last time anyone in Canadian public life took responsibility for anything the way they did, resigning en masse? Faced with similar allegations of interference in their own party, has a single Liberal cabinet minister demurred, let alone departed?

Again, my information is anecdotal, but friends I trust have told me that the now-former president and CEO, Pascale Fournier, was doing an excellent job stewarding the selection and development of the program’s scholars. Like many who resigned, she was not in charge when the board decided to accept the Chinese tea money, and from what has been reported, her team went to grimly comical extremes to try to give it back. 

I’m not saying everyone who resigned is blameless, but as I see it most of the foundation’s past incompetence, including accepting the dodgy donation, can’t be reasonably pinned on the management that resigned. And yet they still resigned. I don’t want to make it out to be a more heroic act than it was, but it was refreshing to see someone step up and show real accountability. So, good for them.

What I don’t understand is why, of all the people to keep on as chairman of the three-member board that remains to keep the foundation’s work going and to prepare it for whatever comes next, they would choose Edward Johnson, who is neck deep in the foundation’s, shall we say, complicated history. Why is one of the men responsible for the foundation’s problem—he is a founding member and was a director when the Foundation accepted the donation—now in charge when his fellow board members, many of whom weren’t, have resigned?

Johnson is an old Trudeau family insider, having served as Pierre’s executive assistant from 1980 to 1984. He is also the senior vice-president and general counsel of Power Corporation, which in 1978 founded the Canada China Business Council to facilitate trade with recently-opened Red China. This may look suspicious, but I assure you it’s not. It’s worse: this is how the Canadian Establishment works when it’s not being suspicious. 

Another of the remaining board members is curious for another reason, but one that points to the same problem. According to his corporate biography, Peter Sahlas is a director by virtue of being “elected by the members representing the Estate of the Late Right Honourable Pierre Elliott Trudeau.” (The other director nominated by the Trudeau estate, who did resign, was the late prime minister’s daughter, Sarah Coyne). 

Both men highlight the Trudeau Foundation’s fundamental flaw, and the clue is in the name. No matter how much good work it did in providing doctoral scholarships, fellowships, and academic mentoring, the foundation could never shake the perception that it was the private plaything of the Trudeau family and their extended family in the Liberal Party because, at least in part, it was. If you want proof, look at the latest 2021-2022 Annual Report, where all three of Trudeau’s living children were still listed as members or directors.

Yes, despite his disavowal of any knowledge of the foundation’s business, the prime minister’s name is still listed right next to his brother Sacha’s as a “succession member” of the foundation. Jesse Armstrong couldn’t script it better. A discrete asterisk informs the reader that “The Rt. Hon. Justin Trudeau has withdrawn from the affairs of the Foundation for the duration of his involvement in federal politics.” Not permanently, mind you, just while he’s occupying the prime minister’s office, with the implication that we are not to worry—he will be back. 

Forget temporarily stepping away from the foundation, Justin Trudeau never should have been involved in the first place. When the foundation was established in 2001 (with taxpayer money, remember), he had no relevant qualifications. This was around the time he was describing himself to the press as “far from a finished product … I haven’t done anything. I haven’t accomplished anything.” And he wasn’t exaggerating. He was a 30-year-old trust fund kid about to drop out of an engineering program. 

Back in 2001, it probably never occurred to anyone that Pierre’s wastrel son would become a serious political player. Sure, he’d attracted the spotlight a year before for his treacly eulogy at his father’s funeral, but the thought that he would follow in his father’s footsteps was still just the misty-eyed fantasy of a few greying Boomers. 

Yet there he is in the very first Annual Report alongside Sacha, the Roman to his Kendall. And what, come to think of it, did their 31-year-old half-sister Sarah bring to the board of directors before she resigned beyond sacred bloodline? You can see why the Chinese Communist Party might have confused the Trudeau Foundation with the Trudeau family. 

The line was further blurred, of course, by the prime minister’s appearance with the same donor at a Liberal Party fundraiser in the same year. (As for the $800,000 that the same source pledged to the University of Montreal law school, Pierre Trudeau’s alma mater, there is Sacha once again, dragged out to lend his surname to the official announcement.)

So what now? You can say that the foundation should give back its endowment and turn off the lights, and I wouldn’t object. But most of our peer countries think it’s worthwhile to have a national graduate scholarship program of this kind, and I agree. And if we are going to have such a program and we already have a body with the infrastructure and experience to deliver it, we might as well use it.

The problem was not the idea but the execution, specifically the structural flaws that were baked into it the foundation from the beginning, which even the best leadership could not have overcome. The board and the executive’s resignation provide an opportunity for a complete re-set. That is, if the remaining board members are prepared to take it, which is why I was so critical of the choice to keep on board members who are by implication tainted with the foundation’s core problems. 

The new chairman has said that they are “launching an independent review of the organization’s acceptance of a donation ‘with a potential connection to the Chinese government’” that will be “conducted by an accounting firm instructed by a law firm, neither of which were previously involved with the Foundation.” That is not good enough. 

The last thing the foundation needs is another Liberal-connected law firm (because they all are) directing another Liberal-connected accounting firm (because they all are) to provide them with a list of cosmetic measures that will allow the family business to carry on as usual. The board should skip the “review” and move straight to the “independent” part with a top-to-bottom reordering of the foundation’s governance. 

Ditch the Trudeau name. Cut all ties with the Trudeau family. Give the tainted money to a charity fighting human rights violations in China. And then step aside so that a new board and new management can take over. Nothing less will honour the recent board and management resignations; nothing less can save the good work the foundation was doing and should continue to do.