Essay/Term paper: The economic impact of the new telecommunications legislation

Essay, term paper, research paper:  Management

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.