Competition Regulation and Internet Policy

If you’re interested in domestic internet governance in Canada, you need to know something about competition regulation. The same is true in much of the rest of the world where the telecom industry underwent liberalization (was opened to market competition) and also exhibits high levels of concentration and regulatory concerns about market power. For instance, Uta Meier-Hahn’s survey of network operators found that competition regulation was one the most common forms of interconnection regulation reported by participants. Here in Canada, telecom competition has been regulated ever since we moved away from monopoly control. This is why it’s inaccurate to describe what happened in the 1990s as deregulation. The neoliberal fantasy may have been to get government out of the way and turn everything over to market forces, but government decided it was going to take some purposeful regulation to get us there, and we never got there.

I’d like to distinguish between two basic kinds of competition regulation that matter: positive and negative (modifying this previous contrast I used to talk about ISP responsibilities). The first mode of regulation is the set of regimes, like mandated wholesale, that specify how competitors are required to behave and relate to one another, and other ways of addressing imbalances or insufficient competition in the market. This includes the way that smaller companies or “new entrants” are given certain advantages and protection (“set-asides”) in spectrum auctions. All of there rules are justified as promoting more, better, or fairer competition — they are positive forms of regulation, in that they create, cultivate, and encourage that which is desirable. They are premised on the idea that competition is a problem and that liberalization is incomplete. In other words, the market is not competitive enough and whatever the goal that the policy transformation of the 1990s was meant to achieve, has not been reached. The state can structure and configure conditions so as to improve things, or to set up market actors in a way that increases competitiveness. These are the kinds of competition regulation that matter most in the day-to-day of the telecom industry, and are often structured through a system of CRTC decisions (ISED when it pertains to spectrum).

The second set of regulations are essentially negative — they ward off the undesirable. Where positive regulations try to seed and fertilize the field (giving more fertilizer to the plants that need it the most), negative regulations tear out the weeds. This metaphor helps to show how this distinction is not entirely neat, since tearing out weeds creates better conditions for growth (there is a positive aspect to negative regulation and vice versa), but hopefully you get the idea — this is a heuristic.┬áBoth are forms of regulatory action, but the first promotes the good while the second restricts the bad. Negative regulations focus on what will not be tolerated and work to eliminate or prohibit these. They impose sanctions or consequences for undesirable conduct, drawing lines across which market actors shall not cross.

Canada’s Competition Bureau is a key actor when it comes to these negative forms of regulation, not only in the way it punishes abuses of market power (albeit rarely in telecom) but also the distinctions it makes when approving or rejecting mergers. There is a positive dimension here, in that a merger or consolidation can be approved along with conditions that are meant to promote competition, and the Bureau generally holds that mergers are good for competitiveness, but it also draws lines that big businesses wishing to swallow competitors will not cross. These lines can be quite permissive, as in Bell’s recent acquisition of MTS, but with so few major players left in the telecom market, further consolidation among these giant firms (the recurrently raised prospect of a Bell-TELUS merger) would be tricky. While positive regulations try to foster competition, negative regulations prevent us from slipping back to monopoly.

This is why issues around concentration of power and competition are so fundamental for internet governance — domestically, they make the difference between a world of multiple interconnected networks, and a world under monopolistic control. On that note, Dwayne Winseck and his team at the Canadian Media Concentration Research Project have been an important resource for tracking shifts in consolidation and concentration in Canadian media, ISPs included. With the latest annual update just released, I encourage you to check it out for lots of details and background. One of the takeaways is that when it comes to internet access in Canada, things are holding relatively steady. This means that the positive regulations aren’t being very successful in effecting change in the market, while the negative ones help maintain the status quo.