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Universal access to electronic communications systems in Canada Ehrcke, Tara R. 1994

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UNIVERSAL ACCESS TO ELECTRONICCOMMUNICATIONS SYSTEMS IN CANADA : A PERSPECTIVEbyTARA R. EHRCKEB.Sc., The University of Toronto, 1991A THESIS SUBMITTED IN PARTIAL FULFILLMENT OFTHE REQUIREMENTS FOR THE DEGREE OFMASTER OF SCIENCEinTHE FACULTY OF GRADUATE STUDIES(Department of Computer Science)We accept this thesis as conformingto the required standardTHE UNIVERSITY OF BRITISH COLUMBIASeptember 1994© Tara R. Ehrcke, 1994In presenting this thesis in partial fulfillment of therequirements for an advanced degree at the University of BritishColumbia, I agree that the Library shall make it freely availablefor reference and study. I further agree that permission forextensive copying of this thesis for scholarly purposes may begranted by the head of my department or by his or herrepresentatives. It is understood that copying or publication ofthis thesis for financial gain shall not be allowed without mywritten permission.(Signature_____________________Department ofThe University of British ColumbiaVancouver, CanadaDate Ec—22, q1LjAbstractThis thesis examines policy initiatives which may improve the likelihood that electronic computer networkswill be universally accessible, with respect to the production and the reception of information, to allCanadians. I begin by describing the technologies and industries which will be involved in thedevelopment of new high speed computer networks. I then examine the notion of universal access, andpolicies which have been applied to existing communications systems with the objective of improvingaccess through affordability. I discuss some restrictions on content, including Canadian contentrequirements and carriage and content separation, and their effects on universal access. Finally, I examinesome of the policy initiatives being considered by the Canadian government, and the degree to which theywould protect the public interest. I conclude with alternative recommendations which I feel are more likelyto succeed in ensuring universal access for Canadians.— 11 —Table of ContentsAbstract iiTable of Contents iiiAcknowledgment vChapter 1 ...Introduction 1The Social Impact of Technological Innovation 1Computer Networks - Benefits and Threats 2Objectives of this Thesis 4Chapter 2 ...Background 5New Communication Technologies 5Anatomy of a Communications System 5End Devices 6Carriers and Broadcasters 7Routing - Topologies and Protocols 9Applications and Services 10The Internet 11The Information Industry 12Corporate Organization 13Unregulated Network Systems 14Regulated Industries - Cable and Telecommunications 14Regulation 15Chapter 3 ...Access to Communications Systems 19Universal Access 19Monopoly, Markets and Regulation 22Economies of Scale and Efficiency 23Resource Scarcity 23Cross Subsidy of Local Basic Service 24The Effects of Deregulation 25Content Restrictions 26Canadian Content 27Chapter 4 ... Canada’s Information Infrastructure 29Canadian Government Objectives 29Access Revisited 30Cross Ownership 32— 111 —The Physical Infrastructure - Control and Design 33National Sovereignty 34ChapterS Conclusions and Recommendations 36Bibliography 38- iv -AcknowledgmentThis thesis is dedicated to all my parents - Ann, Bill, Donna and Michael. I would like to acknowledge thecontributions made by my supervisor, Richard Rosenberg, as well as my second reader, Alan Mackworth.Finally I would like to thank my friends, Linda Klann and Nancy Lanthier, for listening to me after a fewtoo many glasses of wine.Chapter 1 Introduction‘In the face of accelerating technological change, it is a genuine challenge to introduce the subject ofcommunication and information technology; even more challenging to convey a perspective on the debatessurrounding computerization and the information society.’- Vincent MoscoWe are at a point in history when the rapid growth of technologies is set to make a remarkable impact onthe nature of societal organization. Countless articles in the popular press announce the coming of aninformation age - the development of the information society as the result of an information revolution. Wehave information technologies, information workers, and information highways. Despite the challenge ofanalyzing the effects of the so-called information revolution it seems a necessary goal, and one which, forthe first time, may be realizable before the development and deployment of the technology steers historyupon an unalterable course.Information technologies encompass the range of products and services which supply ormanipulate information. The speed with which new technologies are created and disseminated into publiclife has increased and is only getting faster. The range of new technologies seems to be growingexponentially, as traditional forms of representing, manipulating and communicating information arecombined with each other and continually improved. Thus we have, to name a few, the mobile telephone,video conferencing, electronic mail, high definition television, call forwarding and direct broadcastsatellite. We are buying and using more information services and products than ever before. Almost everyCanadian home has a telephone and a television; 80% of us subscribe to cable; roughly 75% have a videocassette recorder; almost 40% have a compact disc player; and while only 20% own a home computer, thenumber of privately owned computers has doubled in four years [The Daily, February 14, 1994; NewMedia - New Choices, p. 23].The Social Impact of Technological InnovationNo one would deny the astounding social changes brought about by the introduction of telephones andtelevisions. The effects are not limited to the increased use of these technologies, but encompass changes—1—in how and what we do at almost all times. Because the rate of technological change is accelerating, weshould only expect that the resulting social changes will accelerate as well. In 1971, the governmentsponsored report, Instant World, predicted that“The marriage of computers and communications systems, if it can be successfully consummated, maygenerate, within the next few decades, social changes more profound than those of the past 200 years.”[‘Instant World: A...’, 19711Since the early part of this century and the introduction of new communications technology, andlater with the invention and development of the computer, social analysts have tried to describe the changesbrought about by new technologies and the relationships between the technologies and social organization.Various approaches to the description of technological innovations have yielded differing opinions on theextent and nature of the societal changes which accompany them, and the degree to which the technologiesthemselves are the instruments of change.When a new technology emerges policy makers must attempt to ascertain the relative benefits ofthe technology. This question is complicated when one considers that often a technology may benefit somemembers of the society while creating hardships for others. For instance, a technology may increase thestandard of living of citizens on average, while at the same time widening the gap between those who enjoya very high standard and those who do not. When discussing a possible benefit of technology, one mustalways consider who will benefit since different groups of individuals often have competing interests.Other factors complicating analysis are the many unknown consequences of a technology which may not bediscovered for many years. Consider the environmental impact of the car, for instance. The expectedutility of a certain technology may be impossible to know. One can only compare reasonable expectationsgiven many assumptions which may turn out to be false.Computer Networks - Benefits and ThreatsThe most recent technological advancement transforming our society is the development of nation widehigh-speed networked communications systems. These systems are used to distribute informationelectronically between computers and other input and output devices. Proponents of networking want tocreate an infrastructure which would foster growth in the information technologies sector by providing avery fast and cheap means of information distribution. There are many competing visions of what such aninfrastructure would encompass and do, each one inspired by the interests of the people proposing it.The most frequently cited benefit is economic growth. The Canadian economy is increasinglydependent on information industries, with information technologies accounting for more than 5% of theGross Domestic Product (GDP) [New Media - New Choices, p. 26], and more than $6-billion in salaries[“A fast lane promised for new jobs”, May 18, 1994]. While other industries stagnate, informationindustries are growing. The networking industry itself contributed $519-million to the GDP in 1993 and is-2-projected to increase by 20 per cent in 1994 to $625-million [“The networking market in Canada’, March1993]. The possibility of such high levels of growth in these industries creates the drive to continuallyinvest in further research, to develop new products and new services, and to convince the marketplace thatthese new technologies are indispensable tools. Governments and businesses, both pressured by high debt,see these industries as a means to replace revenues lost from other more traditional sources, such as theextraction of natural resources and production, and to stimulate traditional industries through improvedservices and productivity. Using economic justifications, it is considered a national priority to encourageand stimulate information industries. Ontario’s Advisory Council on a Telecommunications Strategydescribes this justification:“This new infrastructure is analogous in many ways to existing transportation systems, gas and electricalutilities and other public services. Often referred to as the ‘highway of the future’, it is a vital part of theknowledge-based economy. A leading-edge national information infrastructure including associatedapplications, products, services and software could provide a critical competitive edge for all industrialsectors.” [“A fast lane promised for new jobs”, May 18, 1994]Economics is not the only reason given to promote a national networking system. Anothercommonly mentioned benefit is improved services within other industries which would result from the useof high-speed networks as a communication tool. Improvements could occur both in the type of serviceitself, and in the availability of services, especially to remote locations. Two industries with great potentialto exploit these possibilities and improve our standard of living are education and health care. Growingpublic debt again inspires solutions which can improve the quality of service at a reduced cost. Both ofthese public services have suffered from cuts in public spending, and the private sector has notcompensated for the lack of funds. Industry Canada claims,“Soaring costs in health care, education and training coupled with large federal and provincial deficits arestimulating interest in the electronic delivery of public services. In his February 1994 budget speech, theMinister of Finance stated that the federal government will ensure that its services to Canadians are moreaffordable, accessible and responsive. Delivery will be easier and more efficient via an advanced informationand communications infrastructure.”[’The Canadian Information , April 1994, p. 7]The specific types of services may include the availability of experts over large geographic regions. Aradiologist may be sent x-rays electronically and be able to examine them and respond very quickly.Similarly, advanced educational services could be offered remotely, with lectures on television, discussiongroups and private help through electronic communications. Existing institutions may also have access tomore information sources, such as schools accessing library resources electronically [“The CanadianInformation ...‘, April 1994, p. 7].The government itself would like to deliver improved services at a lower cost by makinggovernment services and access to government information electronic. In April, 1994, Human ResourcesDevelopment Canada opened close to 300 InfoCentres, and the federal government produced a report,“Blueprint for Renewing Government Services Using Information Technology” describing a “governmentwide electronic information infrastructure... The overall benefits of applying this blueprint will be more-3-efficient and effective program delivery, reduced overall costs across government(s), and maintained oreven improved customer service in the face of fiscal restraint.” [“Blueprint for renewing...”, April, 1994, p.51Despite the possible benefits of networking technology there are corresponding threats -foreseeable negative consequence. Whether these threats are realized will depend in some cases on thestructure and implementation of the networks. Competing interests often have competing notions of thepublic good and the means by which to achieve it.Economically, the promise of an increased GDP is countered by the threat of a widening wagegap. Many aspects of the new technologies may only be easily utilized by those who already have thewealth and knowledge to exploit them. Thus some critics predict a growing distinction between theinformation haves and have-nots. Increased access and improved services may only be available at a highcost, thereby depriving lower income individuals from a resource which could be essential to economicimprovement. The availability of more services and information may also prove to have somedisadvantages. If the information distribution system is controlled by stakeholders with a vested interest inpromoting certain views, we could end up with a greater quantity of information, but of a poorer quality.Canada has a specific threat with respect to the control of information content, in maintaining nationalsovereignty. All of these issues will be discussed more thoroughly later in relation to the building andregulation of the information infrastructure.Finally, there are very serious concerns about the protection of individual privacy and intellectualproperty rights. The nature of very large electronic networks makes safeguarding these rights essential.Currently the legal protection for individuals is weak, giving people limited recourse for action when theserights are violated. The issues surrounding privacy and intellectual property rights are extensive and areoutside the scope of this paper but should be kept in mind as a possible threat of information technology.Objectives of this ThesisThis thesis seeks to explore some of the issues surrounding access to computer networks and electronicinformation and communication systems. Chapter 2 provides a background for the discussion bydescribing the new technologies which these systems will be composed of, including a description ofcurrent mass communications systems; and by describing the industries and major corporate players whowill be involved with the development and use of these systems. Chapter 3 explores the social issuesrelated to access and some of the policy decisions made for existing systems and the outcomes of thesepolicies. Chapter 4 examines some of the discussion and issues specifically related to new electronicinformation systems, including the policy discussions of the federal government; the technical design ofnew systems and its effect on control and access; and the effect of international agreements and-4-transnational information flow. Chapter 5 suggests some specific concerns about the social effects ofelectronic information systems justified by the historical evidence and the direction of public policy.-5-Chapter 2 BackgroundThis chapter will provide a context for the discussions in Chapters 3 and 4 of social and policy issuesrelating to computer networking. Each subsection covers a brief description of relevant developments indifferent areas. Because of the breadth of subject matter, only a cursory view of each area is provided.New Communication TechnologiesNew technologies can be categorized in many ways. The traditional categories revolved around thehistorical development of the technologies and the characteristics of the technologies themselves. Thus, forinstance, the telephone was contrasted with the telegraph, and broadcast technologies were distinct fromtelecommunications technologies. These distinctions are no longer always appropriate, since many newtechnologies arise from the combination of previous ones. New technologies may be more usefully viewedin terms of their function, instead of the means by which they achieve it.This section provides a brief description of communication systems and recent technologicalinnovations which may affect the functionality of existing systems. Following the descriptions of the majorcomponents of these systems and the different design possibilities of new hybrid systems is a comparisonof the three existing world wide electronic communications networks - the telephone system, the cablesystem, and the Internet.Anatomy of a Communications SystemAny communications system must allow two or more parties to exchange information. Becauseinformation can be represented in many ways, it must first be encoded, then transmitted and finally decodedin order to communicate. Any message must have a source, or originator, travel through some medium,such as a wire, and be received by the sink, or destination. In two way communications, both ends act assources and sinks. The source must convert the information and transmit it and the sink must receive theinformation and then reconvert it. Communications can be full duplex, allowing two way simultaneous-6-communication, half duplex, allowing two way communication but only one way at a time, and simplex,allowing communication in only one direction.Communication systems can be broken up into component parts - the sources and sinks, or enddevices; the carrier, or the medium which moves the information from one geographic location to another;and the routing technology, or the devices and protocols, which connect the wires and other carrierstogether and allow communication between specific locations by finding a path from one to the other. Atypical telephone system very simplistically consists of telephones, which convert and reconvert soundsinto and out of electric currents, a system of wires which connect all the telephones to central exchangesand the central exchanges to each other via trunks, and a system of switches which can create a completeconnection from one telephone to another, a circuit.The efficiency of a communications system can be measured by the amount of information whichcan be sent in a given period of time, or the bandwidth. The bandwidth can critically determine what typeof information, visual, auditory or textual, can be communicated with a particular medium in real time.The earliest communications systems all relied on analog media, either electric currents runningthrough wires, or electromagnetic waves broadcast through the air. These two media distinguished carriersfrom broadcasters. One conceptual breakthrough which led to the ability to manipulate and quantifyinformation much more precisely and uniformly was digitization, or the representation of information assequences of ones and zeros (or electrical ons and offs). Digital representation is discrete in contrast withanalog representation which is continuous. The use of digital representation, as opposed to analog, allowsany type of medium to be used to transform, store, or move any kind of information which can beartificially reproduced from its digital representation, visual, auditory, or textual. A digital sequence can berepresented in an analog medium and can be converted back into an analog form using a digital to analogconverter.End DevicesAn end device can consist of a transmitter, a receiver, or both. The transmitter must have an input device,which collects the information in some way from the person using the device, such as a microphone or akeyboard. The receiver has an output device which is able to recreate the information, such as a speaker orvideo monitor. Both the transmitter and receiver may also have a converter, a mechanical or electricaldevice which converts or reconverts the information into or from a form which can be moved along thecarrier, such as a sequence of on/off pulses in the case of digital communication. Improvements in enddevices come in two varieties - those which can more accurately collect or reproduce information,improved input and output devices, and those which convert the information in such a way that the quantityof information is reduced and consequently the bandwidth increased.-7-Improvements in input and output devices are significant primarily because they increase thelikelihood that a technology will disseminate into widespread public use. One of the most important factorsis the reduction in the cost of a device. This can affect not only the number of people using the devices, butthe purposes of their use. Many devices which were previously affordable only to very wealthy individualsor businesses are now relatively affordable and are used as “personal” devices, like personal computers, faxmachines, laser printers and personal digital assistants. Other improvements usually involve the quality ofthe device, producing an image or sound which more accurately resembles the original one such as HighDefinition Television (HDTV), or providing a means of inputting information not previously available,such as handwriting recognition.Improvements in information conversion are significant because the effect can be to change thefunctionality of the communication system by increasing its bandwidth. Digitization makes any carrier ableto transport any kind of information which can be converted into a digital representation and thenreconverted and produced on an output device. The only disadvantage is a small loss in the amount ofinformation when converting analog signals. Different media, text, sound and image, vary greatly in thesize of their digital representation, with text being comparatively small, images fairly large and soundsquite large. For example, a full page of plain text is roughly 1000 bytes, compared to an equivalently sizedpicture, which may be in the order of 100,000 bytes and a sound file which could be as much as 1,000,000bytes. To communicate a certain medium in real time a system must have sufficient bandwidth. Forinstance HDTV requires approximately 20 million bit per second (bps). Although the bandwidth is limitedby the carrier, insufficient bandwidth can be overcome by changing the representation of the information tocompress it into a smaller number of bits. There are many different techniques for data compression.Some can be applied to any type of digital information, for instance representing long repetitive sequenceswith a symbol which represents the sequence. Other techniques apply only to specific types of data, forinstance representing video images by the change between two consecutive frames, which will usually besmall, rather than representing all the information for every frame.Carriers and BroadcastersIn the past, carriers and broadcasters were distinguishable not only by the nature of the technology, but alsoon the basis of the type of communication performed - carriers were able to provide two-way analogcommunications with relatively limited bandwidth, and broadcasters were able to provide one-way analogcommunications with relatively high bandwidth. The most pervasive uses of carriers was for voicetelephony and text telegraphy, and for broadcast, radio and television transmission. Carriers used primarilytwisted pair copper wire, and developed switched systems, allowing bi-directional communication betweenany two points in the network through the creation of a fixed circuit. Broadcasting, in its first incarnation,was an analog wireless transmission which could be received by anyone within a certain geographic-8-proximity to the point of broadcast, but the receiver was unable to transmit information back to the sender.Even with the introduction of cable broadcasting this distinguishing feature remains because the cablenetwork is not switched and because only a single co-axial cable enters a household, in contrast with atwisted pair of copper wires for carrier networks. A single co-axial cab le can only carry a signal in onedirection because the signal must be amplified many times to retain its strength over distances. Thus theessential nature of a carrier was a communication device which connected two parties and allowed each totransmit as well as receive, whereas a broadcaster only transmitted information to a wide audience ofreceivers who were unable to communicate back to the broadcaster. Both carrier and broadcasttechnologies are limited by their bandwidth.The carrier and broadcast networks were originally built as analog systems. The telephone systemused twisted pair copper wires. Because the signal weakens due to attenuation (resistance), amplifiers arerequired every 1 to 20 kilometres. The bandwidth is very low, only suitable for a single voice transmissionor low speed data transmission, under 20,000 bps. Broadcasters use signals transmitted through the air at aparticular frequency of the electromagnetic spectrum. The signal cannot be focused, but projects to a widearea surrounding the transmitter. With cable broadcasting, a copper wire acts as the inner conductor,surrounded by an insulator and then another conductor and finally an outer shell. This increases thebandwidth significantly compared with twisted pair, allowing real time video transmission such astelevision. Cellular transmission uses high frequency radio transmissions which are received by antennas incells, small geographic areas. When a transmitter moves from one cell to another the antenna in the newcell will automatically take over. The cellular antennas can be connected to the rest of a telephoneexchange network for long distance communications. All of these media are fairly low bandwidth and nowused primarily for connection between short distances to central hubs.Most large communications systems use different media for their backbones, or heavily traffickedlong distance corridors. Microwave transmissions are high frequency radio transmissions which can befocused into a beam and projected from one point to another. The signal is more stable, requiringamplification only every 30 to 50 kilometres. A single microwave transmission can carry hundreds ofvoice or data messages. Satellite transmission is a variety of radio transmission which is directed to areceiver located in a satellite orbiting the earth and then retransmitted to a new earthbound location.Although satellite is now used primarily for large backbone transmissions, receivers are now small enoughthat other direct-to-home services could be implemented. Broadcasters want to use Direct BroadcastSatellites which are received by very small satellite dishes in homes. Mobile telephones couldcommunicate directly with satellites, increasing the coverage of mobile phone systems no longer dependenton neighborhood cells [Enchin, Harvey, May 18, 1994]. Both microwave and satellite transmission aresaturating the available air space - if signals are transmitted too close together there is interference.Perhaps the most promising new technology is fibre optic cable. Very thin glass strands bundledinto a cable carry sequences of light pulses, representing digital sequences. This is the only technology-9-which does not require amplification to retain its signal over long distances (several thousand kilometres),and has considerably greater (orders of magnitude) bandwidth than any form of copper cable. Mosttelephone networks use fibre optic cables for their backbones, while satellite and fibre are used by cablebroadcasters [Reinhardt, Andy, 1994].A new alternative to regular leased line telephone service is Integrated Services Digital Networks(ISDN). This service provides end to end digital connection at 144,000 bps. ISDN can be offered overregular twisted pair wires by using a technology called Asymmetrical Digital Subscriber Line (ADSL)which uses end devices to convert analog video signals into digitally compressed signals and specialtransmitters and receivers which reduce the noise on a copper line. Proponents project real timecompression, allowing live television broadcast through twisted pair copper wires as soon as 1995[Reinhardt, Andy, 1994; Stix, Gary, 1993].To compete with the telephone companies, cable companies are trying to find a way to provideupstream communications. One problem is that the repeated amplification will propagate noise goingupstream which would overpower the signal. A possible solution is to use fibre optic cable to reach smallareas reducing the length of the coaxial cable and therefore the number of amplifiers needed [Reinhardt,Andy, 1994]. This has been tested by Time Warner Inc. which has also installed switching equipment andcan now offer telephone service over its cable wires [‘Time Warner to...”, May 19,1994].Routing - Topologies and ProtocolsDifferent communications systems have different ways of creating a path for information to travel along.The topology, or structure, of a communications network determines which nodes (input and outputdevices) are physically connected to which other nodes and therefore how a path from one node to anotheris established. The protocol determines how communication actually takes place over the hardware - howa link is set up and information sent and received. The topology and the protocol are not completelyindependent since some protocols are designed with specific topologies in mind and may not perform aswell on other topologies.Some common topologies are ring, connecting all nodes in a ioop with messages passed along thering through each node on the way; bus, connecting all nodes to a single cable which may have a head endwhich collects the messages and then sends them back along the cable to the receiving node; star, which hasall nodes connected to a central switch which creates circuits; and mesh, in which every node is connectedto every other node. Star topologies and some bus topologies operate by having a single controller which isresponsible for collecting messages and sending them to the appropriate node, or establishing a circuitbetween the two nodes. In contrast ring topologies rely on all the in between nodes to forward theirmessage, and mesh topologies and bus topologies with no head end can create their own node to nodecircuits. These topologies have decentralized control and can usually operate (with the exception of some-10-ring topologies) even when one or more of the nodes is dysfunctional. Currently the telephone systems usecircuit-switched star topologies and the cable companies unswitched trunk and branch, similar to the bustopology with messages only broadcast out of the headend.Protocols allow two nodes in a network to establish and carry out communications. There aremany different protocols in use on different systems ranging from the very simple plain old telephoneservice (POTS), to the very complex, in which many protocols are layered on top of each other. In alayered protocol system, the end user only needs to communicate with the top layer, which then performssome function and communicates with the layer below it, and so on, until the very bottom layer actuallysends the message along the hardware. Each layer has a virtual circuit connection to the correspondinglayer of the other system. The advantage of layered protocols is that only the very bottom protocol of thetransmitting node must be the same as the bottom protocol of the receiving node for them to be able tocommunicate. This allows two independent networks of differing topology to communicate, creating anetwork of networks.The most common set of protocols used in networks of networks (usually wide area networkscreated by networking many local area networks) are the Transmission Control Protocol/Internet ProtocolSuite (TCP/IP). TCP/IP functions by separating messages, which may be very large, into distinct packetsof varying sizes. Each packet is addressed and finds its own route dynamically, passing through the nextavailable node which agrees to forward it until it reaches its destination. Because TCP/IP communicationdoes not require a static circuit, it is very robust and reliable. There is no central exchange through whichevery packet flows.The success of the wide area networks using TCP/IP and the widespread use of packet-switchedprotocols in private local area networks has spurred telephone and cable companies to try to find a protocolwhich combines packet-switched and circuit-switched technology. Asynchronous Transfer Mode (ATM)uses packets which are uniformly sized and are all sent together along a virtual circuit. Both telephone andcable companies are using ATM in test cites for interactive television and other services [Reinhardt, Andy,1994]. ATM would be used over a star topology, requiring all packets to be routed through centralexchanges.Applications and ServicesOnce the physical networks are capable of transporting large amounts of data very quickly there will needto be corresponding software applications and services to use these networks. Attempts at certain types ofservices - such as Telidon - have been unsuccessful in the past and many of the services being suggestedstill require technological advances before they can be implemented. Video-on-demand, for instance,requires very large video servers, or databases which can provide real time throughput, larger than anydatabase in existence today [Reinhard, Andy, 1994].— 11 —Many different types of services are emerging commercially or are being developed and tested.These include services which already exist but would be offered electronically. Some examples areelectronic banking, networked educational services, using network communication for remote access toexperts or specialty equipment in the health care industry, electronic library services, home shopping,access to government information, and electronic information services such as news wire feeds and on-linemagazines.Another type of new service which is already available in some forms from telephone companiesis a value added service. A value added service does not provide any product or information, but ratherdoes something to some existing information to increase its value. A very simple example is voice mail,which collects and stores telephone messages. Another type of value added service collects information invery large databases and manipulates this information. The statistics and reformulated informationgathered are then sold for more than the original cost. For example, a Canadian firm has recently developeda system which cellular phone companies can purchase which will record the type of call the cellular usersare making - whether it is voice or data transmission, for instance. This information can then be used todesign services, price structures and marketing strategies [Smith, David, 1994]. Value added services areinteresting because they are non-productive, requiring only the collection and manipulation of information,rather than the creation of information; and because they provide a means for common carriers who are notallowed to be content providers, to integrate vertically by entering new service markets.The InternetThe largest network of networks and a successful model of world wide high speed networking is theInternet, which has approximately 20 million users worldwide. The Internet is definable only as the set ofnetworks connected and communicating using TCP/IP. The number of users is increasing exponentially,doubling approximately every 10 months. One of the earliest services used on the Internet was electronicmail (e-mail), which still accounts for a large volume of network traffic. Other successful services includeUsenet, a system of discussion groups, Internet Relay Chat (IRC), a forum for talking’ to other users,remote logins to other machines, and file transfers, copying data from other Internet cites. To facilitatesearching for information on the Internet, software applications called browsers allow users to accessinformation in many different formats. A project developed at CERN called the World Wide Web, hasdeveloped a standard for identifying and accessing information in different formats, including multi-mediahyper-documents which can contain hyper links to any other type of document. The most popular browser,called Mosaic was developed at the National Centre for Super Computing Applications (NCSA). Mosaicand similar browsers allow users to access documents of many different types of information formats usinga single application. The increase in use of the World Wide Web in 1993 was 341,634 percent.-12-The first packet-switched computer networks came into being in the late 1960’s. A test networkwas set up by the National Physical Laboratory in Great Britain in 1968 and in 1969 the first node of theU.S. Advanced Research Project’s Agency’s ARPANET was installed in the University of Califormia inLos Angeles (UCLA). The initial justification for creating these networks was to facilitate remote access tocomputing resources. However, the heaviest use of ARPANET very early on was for electronic mail. TheInternet began as a project sponsored by the U.S. Defense Advanced Research Projects Agency (DARPA)in 1973 designed to develop communication protocols. The result was the creation of the TCP/IP Suite ofprotocols. In 1986, high speed backbones were provided by the U.S. National Science Foundation, creatingNSFNET. The original network, ARPANET, ceased to exist in 1989, being supplanted by NSFNET andother U.S. government backbones maintained by NASA, the Department of Energy and other agencies.The number of countries connected to the Internet grew to over 40 and continues to expand, with eachcountry or region providing its own backbone and administration. The Internet is no longer the domain ofcomputer science researchers. Governments, universities, businesses, non-profit organizations, schools andindividuals are all members of the Internet community, although recently commercial connections havebecome dominant, accounting for 55 percent of all sites. Many of the earlier users of the Internet seeincreasing commercialization as a threat to the Internet’s continued existence. [All historical informationfrom Cert, Vint, 1993; Sterling, Bruce, 1993; Zakon, Robert Hobbes, 1994]The Information IndustryThe information industry is composed of several related industries each of which depends in some way onproducing, communicating or manipulating information. The producers of information include the printmedia - newspaper, magazine and publishing industries, the film industry - as well as the broadcast media -television and radio producers and networks. The communication industry consists of the telephone andcable companies and the computer networking industry. Finally the computer hardware and softwareindustries, along with microelectronics and other office equipment suppliers provide tools for manipulatinginformation. Those industries not related to content are referred to as the information technologies industry[“The Canadian Information...”, 1994].Information technologies provide 5.8% of Canada’s GDP, with revenues of over $43-billion in1992. Revenues have been growing at 7.4% over the past six years. These industries consist of roughly13,500 businesses employing 278,000 people. While the industry exported $9.9-billion in 1992, there wasa trade deficit of $9.3-billion, with only the telecommunications sector having a trade surplus [“TheCanadian Information...”, 1994]. In Canada there is a dichotomy between those information technologyindustries which have been heavily regulated, the telephone and cable industries, and those which have not.The regulated industries are comprised of legal monopolies which are regulated by the Canadian Radiotelevision and Telecommunications Commission (CRTC).- 13 -The arts and culture industries account for 2.4% of GDP, with revenues of $14.7-billion. Culturalindustries alone make up $13.4-billion, with $4. 1-billion in broadcasting and cable, $3.5-billion innewspapers, $2.6-billion in film related industries, $2.5-billion in publishing and $0.7-billion in soundrecording [“The Canadian Information...”, 1994].Corporate OrganizationSeveral important characteristics apply to certain segments of the information industries. These includeconcentration, in which a few companies control a large percentage of the market share, monopolies in thecable and telecommunications industries, and vertical and horizontal integration. Similar trends can bewitnessed in world markets as well as Canadian markets.“As has been documented elsewhere, the international flow of communication is largely controlled by a smallnumber of Western transnational industrial conglomerates, the majority of the world’s communicationequipment (satellites, radio and TV sets, telex, etc.), patents on communication technology, andcommunication projects (films, TV programs, comics, etc.) originates in what can be called the informationindustrial complex. This complex steers the global flow of communication because of its access to finance,technology and marketing: the three pillars of power in the present world order.” [Hamelink, Cees J., 1984, p.72]The composition and dynamics of these industries affects how the industries develop, what newtechnologies and services disseminate into public life, who controls the flow of information over variousviaducts and, in cases where corporations exert a large amount of political power, who influences policydecisions. Many of the arguments in favour of free and open markets assume that the markets will functionin such a way that public interests are served through competition in the marketplace. However, wheremarkets are highly concentrated, the effects of individual consumer choice are limited.Examples of market concentration in various information industries in Canada include bothinformation distribution and information production. For example, in the broadcast industry, Babe [Babe,Robert E., 1979, p. 51] quotes estimates from 1973 claiming that the ten largest broadcast companiesaccounted for 71 percent of industry profits through the control of 33 AM stations, 15 FM stations and 19television stations. Most of the roughly 100 television stations in Canada are controlled by one of the fivemajor networks, Canadian Television Network (CTV), Global Television, Quatre Saisons, TVA and theAtlantic Satellite Network, with the exception of some private stations affiliated with the publicbroadcaster, the Canadian Broadcasting Corporation (CBC); and are owned by one of four companies,Baton, TeleMetropole, Selkirk and Western Broadcasting [Deschenes, Lucie, 1992, p. 9]. Thus both theproduction of television programs and the distribution of these programs occur in concentrated marketswith little competition - oligopolies.In addition there are some areas of the information market in which Canada plays no significantrole, yet concentration on the world market is relevant. One example is consumer electronics. This is anarea in which Canada depends on foreign imports. Most consumer electronics are imported as finished-14-products, including fax machines, computers and telephones [“The Canadian Highway...”, 1994]. Withinthe world market, there is heavy concentration in the production of televisions, with ten companiescontrolling 75% of the market [Deschenes, Lucie, 1992, appendix]. In the electronics market, the top 100firms control 74% of the market and the top 16 control over half of the market [Humbert, M. and Perreult,J.-L., 1992, p. 17]. Another area of heavy market concentration, in which international marketconcentration has affected the Canadian market is computer software. Of the 633 companies producing andmarketing software in 1992 in Canada, 11 American-owned companies produced 48% of total sales[Deschenes, Lucie, 1992, p. 19]. The largest international software company is Microsoft. FollowingMicrosoft in the home software market is Softkey International Inc., the result of a recent merger. Otherrecent mergers include Novell Inc. buying WordPerfect Corp., Borland International Inc.’s Quattro Pro,UNIX Systems Laboratories Inc. (from AT&T). Novell’s networking software accounts for 67% of thenetwork operating system market [Rowan, Geoffrey, 1994].Unregulated Network SystemsThe only unregulated network systems in Canada are networks which were built primarily for researchpurposes, and which now function as the Canadian backbone of the Internet. Since 1984, various researchprojects have led to the development of CA*net, a computer network intended for research purposes whichconnects all 10 provincial networks of Canada and links to NSFNET (the United States’ publicly fundedresearch network backbone) in three locations. In 1988, the CANARJE program (CAnadian Network forthe Advancement of Research, Industry, and Education) was started by Industry Science and TechnologyCanada to promote the enhancement of Canada’s networking capabilities and oversee the operation ofCA*net. CANARIE is a non-profit group of government, industry (including Stentor and Unitel, as well asseveral computer companies) and academic organizations with roughly 80 members. CANARIE has beenmodeled on the U.S. initiatives for a national information infrastructure [Silva, Marcos and Cartwright,Glenn F., 1992], reflecting similar policy objectives. The rationalization for the existence of CANARIE isthe need for cooperation among industry and government in order to compete globally. Its major goals arethe upgrading of CA*net, and extension in the northern regions of the country, as well as the developmentof network applications.Regulated Industries - Cable and TelecommunicationsBoth cable and telecommunications companies are regulated by the Canadian Radio-Television andTelecommunications Commission (CRTC) and are heavily concentrated. The telecommunications industryis considerably larger than the cable industry, with revenues in 1991 of roughly $12-billion intelecommunications and $3-billion in cable [Nicholson, Peter, 1993, p. 24]. Each industry is concentrated,- 15 -with the largest company having revenues an order of magnitude larger than the tenth largest [‘Revenueranking by ...“, 1994, p. 130, 1321.The cable industry is dominated by Rogers Communications Inc. with revenues of roughly $1.2-billion, Groupe Videotron with revenues of $598-million, CanWest Global Communications with revenuesof $248-million, and Shaw Communications with revenues of $234-million. Close to 80 percent ofCanadians are served by the five largest cable companies [Globerman, Steven, 1992, p. 20]. Recently,there have been two important takeovers in the industry. Rogers has acquired MacLean Hunter Ltd. If thetakeover is allowed by the CRTC, Rogers will control roughly 43 percent of the English language cablemarket [McKenna, Barry, 1994], concentrated mostly in the highly populated provinces of BritishColumbia and Ontario. Rogers already owns 32 percent of Unitel, two pay TV channels, video rentalstores, a cellular phone network, and several TV broadcast stations. After the merger, it would acquire 6Canadian magazines, many community papers and other publications, commercial printing companies, andother communications services companies [Enchin, Harvey et. al., 1994]. In addition, ShawCommunications has acquired CUC Broadcasting Ltd., giving it a portion of the Ontario market as well asinterests in Britain, and making it the second largest cable company with almost 20 percent of the marketshare [“Shaw Communication to ...“, April 29, 1994].The telephone industry is dominated by the regulated monopoly companies who make up anational telecommunications system called Stentor Canadian Network Management. These are AGT(Alberta), Bell Canada, British Columbia Telephone, Island Telephone (Prince Edward Island), ManitobaTelephone, Maritime Tel & Tel, New Brunswick Telephone, Newfoundland Telephone, and Sask Tel, aswell as Telesat, the national satellite company. Stentor operates the interprovincial networks and the U.S.interconnections for its member companies. In the long distance market, the primary competition is UnitelCommunications, of which 60 percent is owned by Canadian Pacific Ltd., and 40 percent is owned byRogers Communications Inc. Rogers also owns the national cellular phone company Rogers Cantel. BothStentor and Unitel operate a nation wide fibre optic backbone. International connections are made throughthe legalized monopoly company Teleglobe Canada, which was privatized in 1987 and is 30 percent ownedby BCE Inc., the parent company of Bell Canada [Globerman, Steven, 1993, p. 299-300]. Other players inthe telecommunications industry include resellers, who buy time from one of the national networks in bulk,and bypassers, who route single cross border calls via the U.S.RegulationRegulation began in Canada with the introduction of price controls over telephone and telegraph services in1892. Heated parliamentary debate ensued around complaints received which primarily concernedunreasonably high rates, particularly in larger cities, and very poor rural interconnection. However, it wasnot until 1906 with the revision of the Railway Act that a federal regulatory body was assigned to monitor-16-telecommunications, and even this act oniy applied to federally incorporated telephone companies, not localproviders. Shortly thereafter several provincial regulatory boards were created which have regulatedintraprovincial telephone service until very recently. Provincial telephone companies have enjoyedregulated monopolies over almost all telecommunications services until the 1980’s. The CRTC was givenregulatory control over telecommunications in 1976, and at that time assumed jurisdiction over Ontario,Quebec, British Columbia and the North West Territories as well. Provincial regulatory power wasoverturned, first by a 1989 court decision, and in 1993 by the passing of the new Telecommunication Act.Price regulations have included forced cross subsidy of local telephone rates by long distance service, aswell as profit limitations. The CRTC, aside from regulating prices and services, has restricted foreignownership in Canadian telecommunications companies to 20 percent and has preventedtelecommunications companies from owning or creating any of the content which travels over their lines.The history of regulation in Canada can be contrasted with that of the United States, which unlikeCanada, relied exclusively on private capital for development, receiving no government subsidies, and hada legal monopoly only from 1876 to 1893 from Alexander Graham Bell’s patent. This patent led to thecreation of American Telephone and Telegraph (AT&T), which has been by far the dominant telephonecompany in the U.S. and was at one time the largest company in the world. The first federal regulationwas made in 1910, giving the Interstate Commerce Commission (ICC) the power to regulatetelecommunications. This was changed in 1934, when the Federal Communications Commission was setup as the principal regulator, monitoring, among other things, interstate telephone rates. Unlike Canada, amajor player in regulating AT&T has been the federal courts, through the use of the antitrust laws. Thepolicy of AT&T not to allow interconnection with smaller telephone companies prompted the first antitrustcase. The most significant antitrust case was the Consent Decree of 1982 which completely restructuredthe U.S. telephone system, allowing long distance competitors and forcing AT&T to split into severalregional companies which continue to operate the vast majority of local service, although there are roughly1400 independent telephone companies. The introduction of long distance competition has resulted in adrop in market share for AT&T from 95% to 60% [All historical information from Tanenbaum, Morris,1993].In 1992, Decision 92-12 [CRTC Decision 92-12] allowed two new entrants into the long distancetelephone market in Canada, Unitel Communications Inc. and BCRL. The intent of the decision was toincrease productivity, reduce costs and encourage new services and products through competition. Theseimprovements were deemed necessary due to competitive influences from the United States, where longdistance rates are considerably lower. A portion of Canadian long distance business has been lost toservices which reroute calls through U.S. lines. These “bypass” services have been in existence since the1979 and 1980 CRTC decisions to allow private ownership of interconnect equipment and connection topublic exchanges [Globerman, Steven, 1988, p. 41]. The restrictions on foreign ownership remained, andthe system of cross-subsidization was altered to enforce competitors renting access to telephone switching-17-services to pay a fixed amount monthly for each connection. These contributions were discounted forUnitel for the first four years to assist the new entrant into the market. The impact on resellers will besignificant, as their contributions have increased dramatically [‘The CRTC decision ...“, 1992, p. 131.The obvious concern over decision 92-12 is its potential impact on local rates. This concern hasalready proved justified by the application by Stentor members to increase local rates [CRTC Hearings 92-78]. Some applications for basic rate increases have already been rejected by the CRTC [CRTC NewsRelease, January 25, 1994], but justifications are based on reassessments of profit forecasts. Eventually, iftelephone companies show losses, we can expect the “need for telephone companies to earn reasonablereturns for their shareholders” to supersede the need “to ensure the prices paid by telephone subscribers arejust and reasonable” [Globerman, Steven, 1988, p.11. The more serious concern is that it will eventuallylead to local tolled rates which have already been applied for by several provincial telephone companies[see for instance, CRTC News Release, January 25, 1994].Unlike telecommunications, broadcasting has been more vigorously federally regulated since itsinception. A 1928 Royal Commission led to the 1932 and 1936 Broadcasting Acts, which recognized theneed for public control over a limited radio spectrum, and enacted a public broadcasting company, theCanadian Broadcasting Corporation (CBC). In 1968 the Canadian Radio Television Commission’ (CRTC)was created to regulate cable television as well as the broadcast spectra for radio and television. Since itsinception, the CRTC has been a means for controlling the content of Canadian broadcasting. This has beendeemed necessary because of the proximity of the United States, which has provided far more radio andtelevision programming for Canadians than we have for ourselves. Content restrictions have usually takenthe form of requiring a certain percentage of Canadian programming as a licensing condition. Theobjectives of broadcast policy are outlined in the Broadcasting Act, and include specifically that thebroadcast system should “serve to safeguard, enrich and strengthen the cultural, political, social andeconomic fabric of Canada” [Broadcasting Act, Section 3]. This has been executed by creating a systemwhich incorporated public control through the CBC and the CRTC, and private control through thelicensing of private television and cable companies.The success of broadcast regulations is questionable. Although it is impossible to know the degreeof Canadian content which would exist if Canada had pursued its objective through different means, such asa completely public broadcast system, the system as it currently exists has not created an economicallysustainable Canadian content industry.“Canadian broadcasting comprises ‘a single system’ only insofar as the CRTC is successful in unifying thecultural goals and the financial objectives of the private sector. In this regard, the CRTC has failedcompletely. The schizophrenia of Canadian broadcasting today is the outstanding characteristic of thesystem, with the financial, market-oriented side rapidly increasing in dominance over the cultural.” [Babe,Robert, E., 1979, p. 236]1 The Canadian Radio Television Commission was renamed the Canadian Radio-Television and TelecommunicationsCommission in 1976 when it was given regulatory power over telecommunications,- 18 -The future of broadcast and telecommunication regulation is at the heart of many of the debatessurrounding Canada’s information infrastructure. Many of the newer technologies are not currentlyregulated, and yet are being offered by the regulated companies, such as telephone companies selling valueadded services. The discrepancies in regulation between cable and telecommunications, particularly therelatively lax content regulation in the cable industry compared to the ‘common carrier’ status of thetelecommunications industry, may be seen as discriminatory once broadcast and telecommunicationsservices are no longer discrete. International competition and the global trend towards deregulation is alsoaffecting Canada’s regulatory structure.-19-Chapter 3 Access to Communications SystemsMany issues relate to the possible consequences of new technologies, changing industry boundaries andchanging policy choices. My principal concerns will be with issues which relate to access to information,both production and reception, and the nature of the content carried by communications systems. There aremany other critical issues which are similarly affected by changing technologies, such as personal privacyand freedom of information and intellectual property rights. These issues will be beyond the scope of mydiscussion.Once desirable social objectives have been identified, a community or its government mustdetermine which political and economic policies have the greatest likelihood of yielding the desiredoutcomes. Estimating the probable outcomes of policies is not at all straightforward, and many of thearguments rest not on what the objectives are, but rather which policy is most likely to meet the objectives.Because it is highly unlikely that any one policy will meet all the social objectives, in many cases there aretrade offs, and a policy is chosen because a particular objective is given higher priority. For instance it maybe that overall economic benefit is seen as more desirable than economic equity.Universal AccessAccess encompasses two concepts - the right of members of a society to be able to obtain information andthe right of members of a society to be able to disseminate information. Both concepts are consideredfundamental rights in many democratic countries and are enshrined in constitutional laws. Universalityimplies that any member of the society has these rights. Universal access has been a fundamental principleguiding Canadian Government communications policy. Access can be inhibited by a number of causes,including intervention by powerful institutions, such as governments or corporate interests, prohibitivecosts which make information and services only available to those who can afford them, and geographicisolation which may be prohibitively costly to overcome.When universal access was originally conceived as a social policy it was because telephoneservice was considered essential. Telephones are essential for both economic and social reasons - it wouldbe very difficult for a member of Canadian society to function without access to our largest communication- 20 -system. Telephone use is required for most forms of employment, for medical treatment and for utilizingthe education system. Similarly, many now believe that the types of information systems that will becomeavailable through computer networking and enhanced, hybrid communications systems will be equally ifnot more essential. A project funded by the National Research and Educational Network (NREN) in theUnited States suggests certain fundamental rights related to access and information technologies. Theseare:Section 1 : A citizens access to computing and information resources is a right. Access to computing orinformation resources shall not be denied or removed without just cause.Section 2 : The right to access includes the right to appropriate training and the tools required to effectaccess.’ [“Bill of Rights , Educom Review, p. 24]The prohibitive costs of emerging technologies usually imply that access will be restricted. Initially thetechnologies are seen as luxury items, rather than necessities. Difficulties arise when a technology is not arecreational tool, but rather an economic and social necessity. The telephone is clearly such a technology,and increasingly, electronic communications in general are becoming a necessity rather than a luxury.Already there are services and information, government information, for example, which are only availableelectronically. Because the costs of producing and disseminating electronic information are so much lowerthan their paper equivalent this trend is likely to escalate. In addition, many essential social services, suchas public education, are increasingly relying on forms of electronic dissemination. Canada has openuniversity courses available only through television broadcasts. The obvious concern is that when atechnology becomes an essential tool for economic and social advancement, and is not correspondinglyuniversally accessible, economic and social disparities are likely to occur. Richard Civille, writing for theCenter for Civic Networking suggests,‘An accelerating income gap in the United States over the past ten years may well be related to a wideningknowledge gap through the rapid expansion of a two-tier information society of haves and have-nots as theeconomy is further restructured away from its industrial antecedent.” [Civille, Richard, 1993, p.2]If the new communications systems are owned and controlled by a few major telecommunications andcable conglomerates, and the consequences of competition are local rate increases, then access to lowerincome groups could be limited. In addition, although basic service may be affordable, many of thepotential opportunities for increased services which may be necessary such as health and education servicesmay be priced too high for low income earners to be able to use them. There is a potential for not only atwo-tiered system, but a multi-tiered system similar to the current U.S. health care system in which basichuman needs, such as medical care, are available only to those who can afford access to them. As Moscopoints out, “One of the fundamental reasons why there is so much interest in information technology isbecause it expands opportunities for profit and control” [Mosco, Vincent, 1988, p. 343]. Thus the concernis not only that those members of society who are information deficient will never be able to evercome their-21-economic disadvantage, but also that those who are able to take advantage of the technology will use it as apolitical and economic power source.Access may be inhibited in monopoly situations. In some cases, there emerges monopolisticpower in a free market. This can happen when resources are scarce [Pool, Ithiel de Sola, 1983, p. 234-401,or when costs are prohibitive. In unregulated monopolistic situations, access may be denied by those whocontrol the communication systems. Hence, regulation is seen as a means for ensuring the public interest isfulfilled when monopoly is inevitable. This principle is exemplified in a recent U.S. court ruling supportingcable regulation. Supreme Court Justice Kennedy claimed,Simply by virtue of its ownership of the essential pathway for cable speech, a cable operator can prevent itssubscribers from obtaining access to programming it chooses to exclude.. .The potential for abuse of thisprivate power over a central avenue of communication cannot be overlooked.’ [Greenhouse, Linda, June 28,1994]In these situations, the potential for abuse is twofold, since the carrier can both control who hasaccess to receiving information on the system and who has access to distributing information through thesystem. This second form of access restriction can be equally as dangerous, since it may lead toinstitutionalized censorship. The draft version of ‘The People’s Communications Charter”, a documentcommissioned for the 50th Anniversary of the Declaration of Human Rights specifically includes the rightsof individuals to distribute information.‘People have the right to distribute information. This includes fair and equitable access to media distributionchannels and to adequate resources and facilities. [“People’s Communication Charter’, Article 6]There are many examples in print and television which illustrate the extent to which these media havealready become limited in scope. Canada now has its own version of “Project Censored”, a project whichcollects censored (biased, omitted, or underreported) media stories [“All the news , April 15-22, 1994].The trend towards “news wire” journalism can be witnessed in the Canadian Broadcasting Corporation’suse of the British Broadcast Corporation’s international news reports, which are aired several times a day.This relinquishes the CBC’s responsibility to report on these events, and prevents Canadians from receivinga Canadian viewpoint of international affairs. The firing of many Globe & Mail reporters in 1989 after achange in the editor-in-chief [“All the news...”, April 15-22, 1994] verifies the opinion that reporters, whilenot explicitly censored, are hired based on their political track record.Lack of sufficient information and opinion reduces public debate. The end result is that publicopinion is controlled by those who control the media. The democratic process is stifled because only oneviewpoint is available [Schiller, Herbert, 1991, p. 42-45]. Control and censorship can happen in a varietyof ways, and, as noted above, includes omission, underreporting and bias. Expressing one’s opinion in oursociety requires access to a system of information distribution. In Canada, many of the established meansof information distribution are controlled by a small group of companies and individuals. In some cases,these companies or individuals have ties with political parties which suggests that the views their media- 22 -will portray will coincide with a party line. The compensation may be regulations and tax structures whichfavor corporate interests over the public interest. Schiller points out that the so-called “free flow” ofinformation which supposedly results from ever better communications systems, may only be free to thosein a position of power.‘historically and currently, the free flow of information is a myth. Selectors and controllers continue, as theyalways have, to sift and shape the messages that circulate in society. It is always a matter of who the selectorsare and whom they represent. And this is an area of which social class is in control.” [Schiller, Herbert I.,1991, p. 174]Thus it is essential to consider power structures and how they interact with information systems in order toevaluate the effects of promoting the development of information industries.Monopoly, Markets and RegulationTo ensure universal access, services and information must be either affordable or subsidized for thoseunable to afford them. There is a contrast between the regulated industries, in which price controls are usedto ensure affordability, and the non-regulated ones, in which market forces and competition are used tocontrol prices. Both cable and telephone rates for basic service must be sanctioned by the CRTC, althoughmany value added services are not subject to price control. Because I will be relating different argumentsprimarily to the social goal of universal access, the telecommunications system will be the primary sourcefor trying to evaluate the likely outcome of different policy decisions since the telecommunications systemin Canada has always been perceived as a necessary social service, unlike the cable system.The arguments supporting regulation rest on the notion that cable and telecommunications servicesare natural monopolies. Because such a large amount of capital is required to set up a wiredcommunications network, few will be able to enter the market. For those who are able, they are at adisadvantage immediately because whichever company is dominant will attract customers more easilybecause they will be able to offer a better service at a lower cost, simply due to the fact that they have moresubscribers. Any new entrants into the market would be unable to compete fairly. In some cases,monopoly power is not complete, and a few firms have control over different jurisdictions, or differentservices. One argument is that if there is no legalized monopoly, there will be a monopolistic situation as aresult of market forces anyway. Legalized monopolies are intended to ensure that in a monopoly situation,the government is looking out for the public interest, since market forces are unable to perform thisfunction. This includes ensuring universal access through affordable service.Babe [Babe, Robert E., 1990] argues strongly that many of the original arguments in favour ofnatural monopoly were not so clearly supported by the available evidence, and rather that those who had- 23 -most to gain from a monopolistic situation used the public interest to support policies that in fact were intheir best interest. Thus he quotes John Kenneth Galbraith,“Personal interest always wears the disguise of public purpose, and no one is more easily persuaded of thevalidity or righteousness of a public cause than persons who stand to gain personally therefrom.” [Gaibraith,John Kenneth, 1977, p. 2321While one may argue that market forces are not appropriate regulators for large scale communicationssystems because they are natural monopolies, one can also argue that regulatory bodies are equallyinappropriate because it is difficult to ensure that the people controlling these bodies do not have an interestin pleasing the companies they are regulating.“In recent years, the very concept of regulation by an independent tribunal has come under increasingcriticism, partly because of a perception that regulatory boards inevitably become ‘captured’ by the industriesthey ‘regulate’. It has been convincingly argued elsewhere that, in the United States, regulatory boards wereoften created at the behest of the particular industry concerned, in order to achieve stability, cartelization, andgovernment-supported price fixing, all of which were impossible to achieve without the aid of a regulatorycommission.” [Babe, Robert E., 1979, p. 233]Thus, part of the difficulty in evaluating the relative merits of public regulation versus market regulation isthe difficulty in measuring the effectiveness of each system.Economies of Scale and EfficiencyIn Babe’s view, the Canadian system of regulated monopoly has been historically justified through threearguments, one of which is the existence of economies of scale. As Babe points out, this argument was firstrejected by the CRTC in 1978 when an interconnection decision claimed that the proof of existence ofeconomies of scale was not conclusive and the burden of proof was on the monopoly company, not the newentrant or competitor [Babe, Robert E., 1990, p. 1381. In decision 92-12, Unitel similarly argued that forspecific markets (in this case long distance toll markets) the existence of economies of scale in the wholesystem did not imply existence within the specific market, and the CRTC accepted this argument[Globennan, et. al., 1993, p. 3021.Another historical argument, according to Babe, is that telecommunications systems are moreefficient if they are centrally administered. He cites the monopoly proponents comparing a fragmentedsystem failure to a “weak link in the chain” [Babe, Robert E., 1990, p. 143]. Thus adequate service is onlyensured through monopoly control. Babe counter argues that the evidence does not support thissupposition, pointing to the fact that both the U.S. and Canada have had fully functionaltelecommunications systems with over 1000 interconnected subsystems [Babe, Robert E., 1990, p. 1441.Again in the 92-12 decision, the CRTC accepted the competitors argument that competition would improveservice and productivity [Globerman, et. al., 1993, p. 303]. However, Mosco [Mosco, Vincent, 1990, p.6]- 24-argues against this position noting several service developments made by Bell Canada and BC Tel beforetheir U.S. counterparts.Resource ScarcityPool [Pool, Ithiel de Sola, 1983, p. 234-40] argues that how natural’ a monopoly is varies acrosscommunication industries, depending on resource constraints. Thus whether market forces are sufficient tocontrol prices depends on whether the communication viaduct is a limited resource, as it is with manybroadcast technologies such as radio and television transmission. A more recent example of a scarceresource is satellite transmission, which, as mentioned above, is becoming a very scarce commodity. Poolargues that in such instances where resources are very scarce, markets do not operate very well, andmonopolistic systems emerge from treating the resource as property. The Canadian government hasrecognized this factor in its statement of broadcast policy objectives in the Broadcasting Act, which enactsthe public ownership of the radio spectrum [Broadcasting Act, Section 3]. Resource scarcity with respectto high speed networks may be less and less significant as fibre optic cable (very high bandwidth) replacesother communication media, since there is no intrinsic limit to the amount of cable which can be laid.Technological change, when it reduces the scarcity of resources, supports the notion that market forces willbecome increasingly effective regulators.Cross Subsidy of Local Basic ServicePerhaps the most significant argument in favour of legalized monopoly in Canada is the use of regulation tocross-subsidize local and geographically remote service in the telephone sector. Under the currentregulatory structure, the shared fixed costs of local and long distance service are not equitably covered bythe costs of these services. Instead, the tolled long distance services subsidize a large portion of the sharedcosts (approximately 150 percent). Even with the introduction of new entrants in the long distance sector, afee is paid for every trunk connection to help subsidize the local service and ensure that the local companiesare not at a disadvantage because they are required to support local service [Globerman, et. al, 1993, p. 304-5]. Cross-subsidization is used to ensure affordable local service and is justified by the need for universalaccess. Were there to be a competitive market one would expect that service would become orientedtowards businesses, who tend to be bigger spenders, and away from the residential market. As mentionedabove, since the introduction of competition in the long distance market several local service providershave requested local rate increases including a switch to measured local service. Historical evidence alsosuggests that with open markets in both the U.S. and Canada service extension to rural areas was only madewhen economically favourable or when governmentally subsidized [Babe, Robert E., 1990, p. 140].- 25 -This argument is countered by the increasing importance of long-distance rates in the U.S., whichhave been declining steadily since deregulation in 1984. Although bypass through the U.S. betweenCanadian end points is illegal, bypass for calls into the U.S. and beyond exists. Another related issue is theenvironment for companies using telecommunications services who may relocate or choose to locate in theU.S. because of the lower costs. Thus some argue that we must remain competitive with the U.S. in thelong distance sector (which is more heavily utilized by business, rather than individuals) to facilitate growthin the information industries.The Effects of DeregulationCanada’s current system of subsidized local telephone service is an example of a program based on thephilosophy that universality is best achieved through global subsidies for all Canadians, rather than targetedsubsidies for certain income or other classes. Mosco [Mosco, Vincent, 1988, p. 345] has looked at theeffects of deregulation in the United States and concludes that deregulation has led to basic rate increases,which in turn has led to lower telephone penetration, particularly in certain classes such a low incomeearners, blacks and Hispanics. He predicts that deregulation would lead to a similar sequence of events inCanada. He also counters the argument that Canadian telecommunications services are not competitive onthe world market by citing a 1990 OECD report which claims that “Canadian telecom costs for businessesare equal to the average of 24 developed countries and lower than several of Canada’s leading tradingpartners, including the United States and Britain” [Mosco, Vincent, 1990, p.4]. Globerman [Globerman,Steven, 1988], who supports deregulation to improve international competitiveness acknowledges that alikely consequence is a greater disparity across income distribution in access to telecommunicationsservices. In addition there is growing evidence in the United States of telecommunication “redlining”, inwhich neighbourhoods with a majority of members belonging to certain ethnic, racial or income classes aresystematically denied access to new or existing services [Lohr, Steve, May 24, 1994, and “‘InformationHighway’ could...”, May 23, 1994].The trend towards deregulation is often deemed necessary because many of the arguments whichoriginally supported a regulated monopoly system may no longer be valid - economies of scale are notcertain, resources are becoming less and less scarce, costs of entering the market are shrinking. Yet there isan inconsistency because, as previously detailed, almost all the information industries are becoming moreand more concentrated, with monopoly power increasing. In addition, where deregulation has been tried,the trend has not been towards increased universality through market regulated prices, but rather a shift inemphasis towards very high quality service for corporate users and higher prices for residential users. Themost significant argument in favour of regulation, universality through cost subsidies, in my opinionoutweighs the others because there is sufficient evidence to suggest that communications will be- 26 -increasingly important for economic and social survival and that the effects of deregulation are likely toinclude disparity in access across income levels.Content RestrictionsContent restrictions encompass a range of regulations. The most strict applies to common carriers, who arenot allowed to own or distribute any content over their networks. This type of restriction is used to preventnetwork owners from censoring any part of the communication system they are administering. Less strictare the content regulations relating to specific types of content, such as the origin of production. This typeof regulation occurs in the cable industry, where licenses stipulate that a percentage of programming isCanadian.An argument used often to support deregulation of the telecommunications and cable industries isthat these two industries are merging as a result of technological change. While there is some truth in thisclaim, some of the deregulations those in the industry claim are necessary may not in fact be justified. Akey difference, as noted above, between telecommunications and cable regulations is that content is muchmore heavily regulated in the telecommunications sphere.Pool [Pool, Ithiel de Sola, 1983, p. 811 describes the policy choices with respect to regulation andcontent restriction as ranging from monopoly with discrimination allowed as the most restrictive, throughmonopoly with no discrimination (regulated) and no monopoly with discrimination as intermediate, and nomonopoly and no discrimination as the most libertarian. Thus the freest system would consist of an openmarket in which competitors were completely unregulated. From this perspective, it seems necessary tostrike a balance between two social objectives, that of access to production and dissemination ofinformation (free speech) and that of universal access to reception of information (achieved throughregulation of a monopoly company).Of course the most libertarian choice depends on a truly free market. If such a market is untenablethen this choice is not realistic. Within an American context, one might argue that antitrust legislation issufficient to protect the openness of the market. However the evidence does not clearly support thishypothesis. While it is true that since the break up of AT&T their market share of long distance servicehas decreased from 95 to 60 percent, the two major competitors, MCI and Sprint have adopted a largeportion of the lost market [Tanenbaum, Morris, 1993, p. 2701. There is ample evidence that the predictionthat markets in the information industry in Canada will be more open is simply false. As I suggested in mydescription of these markets presented earlier, they are becoming more and more concentrated, with trendstowards both vertical and horizontal integration, where this is possible (in unregulated industries). Even theregulated industries are using value added services as a means to diversify. The cable industry plans “to- 27 -have non-basic services account for half of their revenue within 10 years, up from about 25% today”[Sikios, Richard, 1993, p. 1].Canadian ContentOf major concern to Canadians are the cultural and political effects of our particular geographical situation,residing so close to one of the strongest cultures on earth, and having such wide distances between our ownmajor population centres. There is ample evidence that mass communication systems in Canada havetended to distribute more foreign (mostly American) content than Canadian.‘Communications Canada reports that almost all cultural products consumed by Canadians, except fortheatre, come from other countries, seventy-six percent of the books sold in Canada are imported; 97 percentof projection time is devoted to foreign films; 89 percent of sound recording industry profits go to 12 firmsunder foreign control that market mostly imported popular music; and finally, despite several decades ofefforts to regulate television broadcasting, more than 90 percent of the dramatic presentations on televisionare not Canadian.” [Duschenes, Lucie, 1992, p. 9]One of the major difficulties in establishing an economically viable Canadian cultural industry hasbeen the relatively small audience to which it can be distributed. A television programme sold only toCanadian networks could generate at most one tenth of what the corresponding U.S. programme could,simply because our population is correspondingly small. Consequently, the production quality of Canadiancultural products is limited by the potential revenues.In response to the threat of a completely Americanized cultural industry, the CRTC (and itsregulatory predecessors) have adopted policies designed to counteract the economic disincentive to produceCanadian culture. Babe [Babe, Robert E., 1979, p. 141-145] writing for the Economic Council of Canadadescribes some of the historical disputes between the CRTC and the cable industry regarding Canadiancontent regulations. Because the content regulations inhibit the industries’ profitability, there has beencontinual tension between the regulator and the members of the industry, resulting in relaxation ofregulations and failure to achieve the content objectives. Babe points out that the CRTC has recognized itsown failures. It admits that some of the content policies are designed with loopholes, such as allowingcontent requirements to be averaged over very generous time periods (both within a day, such as “primetime” and within a year, allowing quarter year averaging) giving the broadcaster the ability to slot Canadianprogramming out of peak viewing times. The CRTC also admits to its inability to monitor the contentrestrictions and to refuse to reissue licenses based on failure to comply. Another form of content restrictionis achieved through the licensing system for television stations. Rather than license by lottery, licenses aregranted if the licensee is expected to fulfill the cultural objectives of the regulator. Originally, privatetelevision licenses were given to Canadian stations in the hope that they would increase the overall amountof Canadian programming. More recently, with the licensing of new pay-TV stations, more specificcultural objectives have been used as criteria, including regional and language equity and diversity ofprogramming [Vardy, Jill, February 12, 1994].- 28 -There are both ideological and practical arguments against the use of such specific contentrestrictions. Because broadcasting space is limited, the promotion of Canadian broadcasting results inrestricting other broadcasting. The current chairman of the CRTC, Keith Spicer, admits that an “electronicBerlin Wall” is not appropriate [Siklos, Richard, June 4, 1993], suggesting that the CRTC must be sensitiveto the degree to which it prevents the distribution of foreign programming. True proponents of free speechwould claim that it is not a matter of degree, but of kind, and therefore the only fair method of distributionwould be a lottery system or “toll broadcasting”, creating common carriers in the broadcast media [Pool,Ithiel de Sola, 1983, p.134]. Practical limitations to content restrictions are varied and increasing. Oneproblem is the difficulty of establishing a regulator that acts independently of industry pressures, aswitnessed by the history of the CRTC mentioned above. Another related problem is that of externaleconomic pressures. There is an increasing trend to increase the trans-border flow of information, boththrough international agreements such as the General Agreement of Tariffs and Trade (GATT) and theNorth American Free Trade Agreement (NAFTA), and through new technologies, such as direct broadcastsatellite, which may be impossible to regulate. This type of argument is used by some members of industryto reduce Canadian content regulations. This was exemplified recently when the CRTC overturned alicense for digital music service offered over cable. The licenses originally granted to two competitorswere retracted when members of the music industry argued that the Canadian content restrictions on theseservices were too low. The service providers claimed that with a higher Canadian content, they required amonopoly in order to make the service economically feasible. The new applications were denied andthreats levied that “the decision in effect leaves the field open to similar music services expected to beoffered by U.S. satellite operators, which will have no requirement for Canadian content” [Siklos, Richard,August 26, 1994].Although Canadian content restrictions may appear to limit access, by applying specific conditionsfor sharing the television and radio bandwidth, one must also consider that the production and distributionof Canadian audio-visual content depends on these restrictions because of the economic influence of theU.S. Thus if we consider Canadian content a valuable part of a diverse range of information available toCanadians, content restriction are a necessity. It is important to recognize, when discussing the feasibilityand effects of Canadian content regulation, that part of their failure may be attributable to a lack of will anda tendency for the regulator to compromise. In addition, many of the strongest arguments against Canadiancontent restrictions come from those industries which are economically affected, and therefore looking outfor their particular interests, rather than the interests of the Canadian public.- 29 -Chapter 4 Canada’s Information InfrastructureTo support economic growth and expansion in the information industry sectors, it has become popular forgovernments to describe a whole set of policy initiatives designed to promote the creation of an informationinfrastructure. Such an infrastructure is likened to other existing infrastructures, primarily those used assystems of distribution, such as the highway system, which is used to distributed goods. The informationinfrastructure would similarly be used as a distribution system for knowledge and information. Manyexisting networks are already used for this purpose, and are cited as models for different aspects of anational information infrastructure. The Internet already functions as an infrastructure for academicexchange of information, and is increasingly used for more diverse and widespread functions.Additionally, private networks function as information infrastructures for large corporations andgovernments which have been able to afford to implement them. A national information infrastructurewould improve upon existing networks by having qualities of mass communications systems - beingaccessible to a large segment of the population - and by the use of very high bandwidth connections,allowing real time distribution of many information formats. The information infrastructure is described byIndustry Canada as follows:“The terms information highway or electronic highway denote the advanced information and communicationsinfrastructure that is essential for Canada’s emerging information economy. Building on existing and plannedcommunications networks, the infrastructure will become a ‘network of networks,’ linking Canadian homes,businesses, governments and institutions to a wide range of interactive services from entertainment,education, cultural products and social services to data banks, computers, electronic commerce, banking andbusiness services.’ [“The Canadian Information , April 1994, p. 2]Canadian Government ObjectivesIn the past year the Canadian government has expressed a great deal of interest in the promotion of thenational information infrastructure. Although many references to infrastructure related topics haveappeared in the last decade through Industry Canada and other government bodies, in 1994 governmentinterest increased noticeably. In January, the Speech from the Throne mentioned the informationinfrastructure as a “key priority for the Canadian government” [“Canada’s Information Highway”, August- 30 -1994, P. 3]. Shortly after, a special advisory council was created to deal specifically with the “informationhighway”. The council is composed primarily of members from industry but does also include some publicinterest advocates. The council was provided with a consultation document from Industry Canada, entitled“The Canadian Information Highway”, and has built upon many of the ideas in this paper. They havereleased publicly the minutes of their first meeting, as well as a report prepared by the AngusTeleManagement Group, Decima Research which “provide the basis for a national action agenda forCanada’s information highway” [“Canada’s Information Highway”, August 1994, p.2]. This report is basedon Industry Canada policies as well as numerous interviews with representatives from industry,government, interest groups such as education and health care workers and public interest advocates.Although this action agenda makes some commitments to public interest objectives, many of thepolicies outlined may not realistically achieve these objectives. The agenda defines three main policyobjectives:* create jobs through innovation and investment in Canada;* reinforce Canadian sovereignty and cultural identity;* ensure universal access at reasonable cost.” [Canada’s Information Highway’, August 1994, p. 3]The latter two of these objectives are consistent with previous government policy objectives in other areasof communications; as previously discussed, the promotion of Canadian culture has been an importantpolicy objective with respect to cable regulation and universal access has been an important policyobjective with respect to telecommunications regulation. While these three objectives are sometimesreferred to as if they are equivalently important, there are suggestions throughout the government’sliterature that this may not be the case. The Industry Canada paper describes the relative importance of thefirst objective by claiming “Job creation and economic growth are the top priorities.” [“The CanadianInformation ...“, April 1994, p. 8]. I believe that the policies espoused by the government do favoureconomic concerns in cases where there may be considerable conflict with the public interest objectives ofcultural promotion and universal access.Access RevisitedThe government literature describes two access issues - availability and affordability. The term “access” isused to refer to the first of these issues, availability. Availability encompasses physical availability, that isthat a physical link is available and services are available through this physical connection. It is recognizedas “a necessity, not a luxury” [“Canada’s Information Highway”, August, 1994, p. 62]. The “suggestedpolicy guideline” is that single line telephone service be available to all Canadians, and that additionalaccess be provided through public access sites such as libraries. Affordability is not precisely defined, butlevels of affordability are suggested by the statement that “basic telephone and cable connections in Canadaare affordable” [“Canada’s Information Highway”, August, 1994, p. 64]. The Decima Research report-31 -outlines many issues which were raised by affected parties as well as making statements about the state ofaffordable access which currently exists. Among the issues raised is the affordability of access to networksin remote regions. The reasons cited included the high cost of leased lines and the inability to share leasedlines, making access to high speed connections in rural areas near impossible, the limited number ofInternet access nodes, and long-distance tolls. Also mentioned is the concern about access for individuals,and the growing disparity between information “haves” and “have-nots”. The report recognizes that thegrowing number of Free-Nets - community based network access free to users and supported by donation -are a response to the lack of affordable network access through commercial sources. The report concludesthat access is currently restricted to most users because of high costs, that “Canada will benefit from agreater use of networks by all individuals and groups”, and that consequently,“To the extent that access and service costs are a barrier, it is in the public interest for all network pricing tobe kept as low as possible. This is an argument for across-the-board rate minimization, not targetedreductions. Widespread reductions are best achieved through effective competition.” [“Canada’s InformationHighway’, August, 1994, p. 861Only education and health care are indicated as groups which may require subsidies, because they “furtherimportant public policy goals” [“Canada’s Information Highway”, August, 1994, p. 861 and are funded bythe government, contributing to the deficit.The discussion on access presented in government position papers has many omissions and fails toconsider many possible policy options. These include:* Access is defined only in terms of reception of information, not production. Although there arereferences to the need for two-way communications systems, there is little concern for contentdiversity, bias and censorship except with respect to Canadian content considerations.* Affordability only takes into consideration network connection charges, not the cost of end devices forusing the network. Based on the history of penetration of other communication devices, such as videocassette recorders and fax machines, for example, it is clear that the cost of these devices will affectpenetration rates.* The conclusion that across-the-board rate minimization is required is faulty. It seems to be primarilyjustified by the need for low-cost access in remote communities, where current long-distance chargesmake network connections prohibitively costly. However, although the distinction between local andlong-distance service may no longer correspond to the distinction between basic and luxury service,this does not imply that all services of the infrastructure will be basic and therefore no cross-subsidiesshould exist. The level of bandwidth is an obvious candidate for defining levels of service.- 32-....many representatives of community groups, small and medium businesses, schools and healthcare organizations said that their needs today are far simpler. In the future, they say, they may needor want access to applications which need high bandwidth connections; but for now, they would besatisfied by much less ambitious initiatives.’ [“Canada’ Information Highway”, August, 1994, p. 64]* The relationship between moving to a competitive market and the effect this will have on access,particularly with respect to low-income earners is not explored. The need for competition in all levelsof the infrastructure is assumed, and no policy alternatives which may better ensure universal accessare seriously considered.* There is no discussion of specific methods of network pricing. Concern has been raised in the UnitedStates that Network Access Providers (NAPs) will move from fixed rates to metered rates and theconsequences this will have on the content of the Internet.“We are concerned about the future pricing systems for Internet access and usage. Many users payfixed rates for Internet connections, often based upon the bandwidth of the connection, and do notpay for network usage, such as the transfer of data using email, ftp, Gopher or Mosaic. It has beenwidely reported on certain Internet discussion groups, such as com-priv, that the operators of theNAPs are contemplating a system of usage based pricing.Usage based pricing would also introduce a wide range of problems regarding the use of ftp, gopherand mosaic servers, since it is conceivable that the persons who provide “free” information serverswould be asked to pay the costs of “sending” data to person who request data. This would vastlyincrease the costs of operating a server site, and would likely eliminate many sources of data now“published” for free.” [“Taxpayer Assets Project - Information Policy Note”, May 7, 1994]Pricing structures on networks could have a significant effect on the costs of distributing as well asreceiving information across the network.Cross OwnershipA policy decision for the information infrastructure is whether to allow cross ownership between carriersand content providers. In Canada we have chosen different levels of cross ownership regulation in differentindustries, ranging from very strong regulation in the telecommunications sector essentially disallowingcontent creation and distribution, to much less in the cable industry, primarily regulating only Canadiancontent, and almost none in other media. The trend is generally for greater cross ownership restriction incommunications systems which have a greater tendency towards monopoly and which are deemed a limitedresource or a public utility.The Decima report cites industry representatives proposing that current regulations be altered toreflect the changing nature of industry boundaries. They suggest,* Rules for the carriage component of cable networks - the information carrying capacity, as distinctfrom the content - would be similar to those applied to telecom carriers.- 33 -* Rules for any content services provided over the telecommunications network would be similar tothose applying to content services provided over the cable networks, or by satellite or radio.’[“Canada’s Information Highway, August, 1994, p. 1231This suggestion would effectively apply the least stringent content regulations to both telecommunicationsand cable companies, weakening the current regulatory environment. Allowing carriers to become contentcreators and distributors would give the carriers a large competitive advantage firstly because they wouldbe in a position to favour their own products, and secondly because they would dwarf other potentialcontent providers simply by their magnitude. The consequences of such a policy could be to reduce theeffectiveness of competition within the content market and therefore reduce the diversity and quality of thecontent itself. A choice more likely to fulfill access and Canadian content objectives would be precisely theopposite of this suggestion - that is to increase the content restrictions on all carriers so that carriers areprohibited from being content suppliers or distributors.The Physical Infrastructure - Control and DesignAn information infrastructure will incorporate both a physical network as well as services and contentdistributed on the network. The physical network will likely be developed primarily by the companieswhich already have nation wide communications systems - telecommunications and cable companies. TheCanadian government envisions an infrastructure “built and operated by the private sector” [“The CanadianInformation ...“, April 1994, p. 101. Just as these systems now incorporate a hybrid of technologicaldevices, ranging from satellite to microwave to optical fibre, an information infrastructure will probablylook similar. Telephone and cable companies already have high bandwidth trunk lines which span Canadaand provide international interconnection. The gap in bandwidth occurs in the connection from main trunksto local exchanges and into residences and businesses. Ideally, the infrastructure would be composed ofpoint to point fibre optic cable; however the costs of this alternative are currently prohibitive. Otheroptions include extending fibre links into neighbourhoods and then using existing cables, as outlined abovein the discussion of new technologies. This option gives the cable companies an advantage because coaxialcable is much higher bandwidth than twisted copper pair wires used by the telephone companies. How theconnection into the home is established could have significant consequences if an option is chosen in whichthe upstream bandwidth is not equivalent to the downstream bandwidth. This outcome is more likely whencoaxial cable is used because the inherent design of the cable system favours downstream communication.Another critical design decision of the physical network is the topology used. If the infrastructureis built and operated by telecommunications and cable companies it is very likely that some type of startopology with central exchanges will be implemented using a protocol such as Asynchronous TransferMode (ATM) or something similar. This would be the easiest type of system to implement because theprotocol can be used on top of existing systems. The consequences of this type of design are that one- 34 -institution will have control over all the information flowing through the network. This is in stark contrastwith the Internet, in which control is distributed among all the nodes of the network with each nodedeciding what to accept on their local machines. A distributed system seems clearly favourable from theperspective of ensuring access, since in such a system it is to everyone’s advantage to cooperate, allowingall information to be routed through any node and not censoring or restricting information distribution,except at the local level. Distributed control reduces the need for regulation, or a non-discriminatorycommon carrier. In addition, price structures and other decisions which affect network users would bedecided collectively in a distributed system, favouring the users of the network rather than the owners ofthe network. Thus, for example, it is unlikely that prices would reflect demand rather than cost.The government vision of the physical network seems to be a hybrid between the Internet modeland the cable/telephone model. The proposed agenda stipulates that “no single entity or industry shouldcontrol the entire network, either in the access network or in the backbone circuits” [“Canada’s InformationHighway”, August, 1994, p. 5]; however, this does not rule out oligopolous situations. The agenda goes onto mention a previous report which recommended that interconnection and integration of networks shouldbe industry driven. Each of these entities may have a very large portion of market share within their area ofspecialization. It is likely possible that some industries will resist interconnection, as has been the casehistorically with telephone companies operating in an open market. The policy paper recognizes the failureof industry to promote interconnection in the recent past and suggests that government exert regulatorypressure to force interconnection and interoperability. If interconnection between the telephone and cablesystems occurs, because the cable systems only operate regionally, it is not certain to what extent they willbe able to compete at the transnational level. A possible outcome is a physical network which at the toplevel is effectively owned and operated by a handful of companies each forced to permit interconnectionand equal access, similar to the current arrangement in the long distance telephone sector. Thuscompetition may exist at the service level, where service providers are leasing circuits from the physicalnetwork owners, but not at the physical level, until demand for leasing circuits increases. It is also possiblethat mergers and agreements between companies will create a market in which only communicationspackages are available to the consumer, forcing the use of certain software products, or access to onlycertain networks.National SovereigntyInformation networks have the unique ability to drastically reduce the importance of geographic distance.Unlike traditional distribution systems moving goods, the relative difference in both time and cost betweentransmitting information across a city and across the world is fairly small. This provides the opportunity todevelop economic and cultural relationships without geographic discrimination. Geographic equity both- 35 -reduces the need to rely on neighbours for international trade, as well as increases Canada’s ability to createa more cohesive community by linking our geographically disparate population centres. Theoretically,new communications systems should enhance our ability to further our national interests; however this isnot always the case. The effects of the existence of high-speed communications systems may lead toeconomic losses for Canada.‘In 1977 a government study was made of 400 US-based companies operating in Canada to establish the levelof cross-border data flow. The information gathered indicated that the value of computing services importedinto Canada would amount to some 300-350 million dollars in 1978...it was estimated that by 1985 the valueof imported computer services will have increased to about 1.5 billion dollars, It was further estimated that,as a result, some 23,000 directly related jobs will have been lost to the Canadian economy by that time.’[Murphy, Brian, 1983, p. 54-55 paraphrasing the Report of the Consultative Committee on the Implication ofTelecommunications and Canadian Sovereignty, 1979]Coupled with this technological “global village” is the political drive to reduce international tradebarriers, enacted in the Free Trade Agreement (FTA) and more recently in the North American Free TradeAgreement (NAFTA), as well the General Agreement on Tariffs and Trade (GATT). The essence of theseagreements is to prohibit protectionist measures by any of the agreeing parties. These agreements can havea detrimental, rather than a positive effect on our level of sovereignty. Comor, studying the relationshipbetween the policies of the Department of Communications1and the Free Trade Agreement, concludes that“the FTA has institutionalized Canada’s dependency on U.S. culture and information products” [Comor,Edward, 1991, p. 239]. While reducing trade barriers may appear to create a more open market place, theinherent advantage of large corporations within the world market creates a situation where increased marketopportunities leads to the expansion of market share by those companies which are already in a dominantposition. Thus Comor rightly questions, “the logic underlying the federal government’s push to facilitatethese corporate interests at the direct expense of Canada’s capacity to produce its own information andculture resources” [Comor, Edward, 1991, p. 258]. Future international agreements may affect Canada’sability to enforce Canadian content restrictions. The government acknowledges that “the CRTC isobligated to enforce programming requirements, regardless of the transmission technology used’[“Canada’s Information Highway, August, 1994, p. 1251, but how this enforcement is to be implemented isnot clear. If we are subject to international agreements which prohibit anti competitive practices, our policyoptions may be limited.1 The Department of Communications is the previous incarnation of Industry Canada.- 36 -Chapter 5 Conclusions and RecommendationsAs Canada chooses to adopt technologies which place increasing importance on the role of the exchange ofinformation within our society, it is critical that we take advantage of those aspects of the technologieswhich are within our control. Many aspects of the emerging electronic communications infrastructure areunique in that the technologies required to create them are not rigid. This is unlike the telephone andbroadcast systems, in which the technology determined many aspects of the design of the system. Becauseof this, other factors will play an important role in determining how and what becomes Canada’sinformation infrastructure. Most notable is the role of government policy and regulation. It is essential thatgovernment policy promote and protect the public interest.We are also in the fortunate position of having previous policy examples in the communicationsindustry which can help determine which policies best achieve the stated objectives, or, how we can avoidpast mistakes and recreate past successes. In my opinion the greatest success in serving the public interestin the communication sector has been the creation of one of the most advanced telecommunication systemsin the world which is truly affordable to all Canadians. This has been achieved through theimplementation, within a regulated monopoly, of a system of cross subsidy in which luxury servicesubsidizes basic service. The notion of cross subsidies should not be abolished because long distance ratesaffect rural access. Instead new ways of defining basic and luxury service should be explored and methodsto implement cross subsidies based on these new distinctions created. Because technologies will continueto change rapidly, it is also important to reevaluate what is “basic” service regularly, to ensure that socioeconomic necessities are accessible to all Canadians. Although there are legitimate criticisms of the systemof regulated monopoly, it should not be excluded as a policy option given that it has been a successfulcommunications policy with respect to universal access in telecommunications systems. In addition,various other systems which incorporate public ownership should be considered as policy alternatives.One of the opportunities afforded by the development of electronic communications networks isthe ability to provide a cheap and fast method of distribution. This should enhance the range and variety ofinformation and services available, giving more people access to an information distribution system. Theonly way to ensure that such systems are not plagued by censorship and abuse of control is to enact a- 37 -complete separation of carriage and content. Thus the convergence of telecommunications with cableshould be dealt with by introducing more stringent restrictions on cable, so that both types of carrier aretreated equally.Finally, among the failures of previous communications policies has been the lack of evaluation ofthe degree to which policies meet the objectives they are designed to achieve. This has been a failure in theregulation process. If our communications policies are to be successful, the implementations of thesepolicies - at every level and branch of government - must be regularly evaluated within the context of theirstated objectives to ensure that our government is acting on behalf of the best interests of all Canadians.- 38 -Bibliography“All the news That Didnt Fit’, The Georgia Straight, April 15-22, 1994, pages 7,8.Babe, Robert B. Canadian Television Broadcasting Structure, Peiformance and Regulation. A studyprepared for The Economic Council of Canada, Minister of Supply and Services, 1979.Babe, Robert E. Telecommunications in Canada: Technology, Industry, and Government. 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