The Economic Impact of The New Telecommunications Legislation

By: David Lister

Canada has been transformed in recent years into an information based
society. Nearly half of the labour force in Canada works in occupations
involving the collection and processing of information. In a society in which
information has become a commodity, communications provide a vital link that can
mean the difference between success or failure. Telecommunications is a
fundamental infrastructure of the Canadian economy and society. For these
reasons, an efficient and dynamic telecommunications industry is necessary to
ensure economic prosperity. Deregulating the Long Distance Industry is the only
sure way to ensure that prosperity.
Telecommunications in Canada, which include services and manufacturing,
employ more than 125,000 people and generate over $21 billion in revenues (Dept.
of Communications, 1992, p7). Telecommunications helps to overcome the obstacles
of distance in a vast country such as Canada, permitting remote communities to
benefit from services taken for granted in large urban centres. More than 98
percent of Canadian households have a telephone, and there are more than 15
million telephone lines for a population of nearly 27 million(Dept. of
Communications, 1992, p7). It is therefore not surprising that Canadians are
among the biggest users of telecommunications in the world. For example, in 1990,
Canadians made more than three billion long-distance calls (Dept. of
Communications, 1992, p8).
Innovations made possible through telecommunications have also
contributed significantly to the phenomenal growth of the Canadian
telecommunications industry. For example, the total value of the major telephone
companies\' investment in their facilities rose from $17.8 billion in 1979 to
$40.3 billion in 1990. In the same year, Canadian telecommunications companies
reported more than $15 billion in revenues, accounting for an estimated 2.7
percent of the Gross Domestic Product (GDP). In addition, in 1990 the telecom
industry achieved a real growth rate (after inflation) of 8.6 percent compared
to 0.3 percent for the Canadian economy as a whole. Telecommunications is also
Canada\'s leading high-technology industry; its Research and Development costs of
$1.4 billion in 1990 represent about 24 percent of total expenditures in this
area. This shows how telecommunications has come to play such a vital role in
our society, in addition to being our most important high technology industry
(Dept. of Communications, 1992, p9-12).
Changes are constantly taking place in the telecom industry. These
changes are caused by rapid progress in telecommunications technology, growing
demand for new services, the globalization of trade and manufacturing operations,
and increasing competition worldwide. It is also important to note that the
Canadian telecommunications market of $15 billion is small compared to those of
our major trading partners, the United States ($185 billion), the European
Community ($125 billion) and Japan ($65 billion) (Blackwell, 1993, p26). These
factors were a mounting source of pressure on the previous regulatory structure
of the Canadian telecom system. As regulation was eased in other countries
around the world, Canada was beginning to lose its competitiveness. The USA and
Britain have made strategic decisions to increase competition in
telecommunications services and to modernize their "information infrastructures".
Other countries such as Japan, Australia, and New Zealand are following their
lead. The European Community is considering legislation to unify the European
telecommunications market next year (Blackwell, 1993, p22). In order to not be
left behind, Canada updated its telecommunications legislation to bring it in
line with world developments. For example, a key piece of legislation that
regulated telecommunications, the Railway Act, dated back to 1908 (Beatty, 1990,
Clearly, with such "ancient" legislation, new policy was required that
would allow a more flexible regulatory system, and not hamper the development of
our telecommunications industry (as the Railway Act did). The first steps toward
such a policy were taken in 1987 by the Minister of Communications, who outlined
three basic principles to guide telecommunications policy making:
Maintaining a basic telephone service which is affordable and
universally accessible;
Encouraging development of an effective and efficient telecommunications
infrastructure; and
Permitting Canadians in all regions to have access to the same levels of
competitive services (Beatty, 1990, p42). Bill C-62 - the Telecom Act, passed in
June of 1993, brought these principals to reality. In addition, the legislation
gave Canadian Parliament legislative authority over the principal
telecommunications "common carriers" (i.e. Bell Canada, Alberta Gov\'t Telephone,
BC-Tel) in Canada.
The new legislation defines the powers of the federal government and the
regulation that is required to bring Canada\'s telecommunications policy into the
twenty-first century. It ensures the efficient operation of our
telecommunications system, maintains and promotes and internationally
competitive telecommunications industry, and guarantees all Canadians access to
reliable, affordable, and high-quality services. In order to achieve this, the
new law centres on two major principals: the first is