The Dynamics of Market Power: Power and Control in Canadian Communications
Opinion by Georgia Evans. This piece is part of the Corporations and Competition, a series by Georgia Evans on Canadian Telecommunications policy.
Market power and political power are mutually reinforcing. Big businesses – especially in new and essential industries – use their market power to influence the political agenda and, in turn, use that political power to sustain their market power.
In this series so far, we have taken an economic lens to understanding the different types of market power and some of the policies that facilitate the further growth of these big businesses. But we can’t ignore the circumstances unique to the industry in question in this series. By understanding the regulatory and political contexts of the Big Three, we can begin to understand how to solve the problems they create like high prices and the digital divide.
Exploring how, over time, these players have influenced the minutiae of telecommunication and internet regulation is complex and hard to boil down to one root cause, especially considering how long these players have operated in Canada. This article will instead explore the current state of play in the Canadian telecommunications and internet markets.
According to Carleton University Professor Dwayne Winseck, Chair of the Canadian Media Concentration Research Project (CMCRP), it is important to understand how the Big Three facilitates our access to different forms of communication [1]. While today we can access Twitter and make Facetime calls from a whole range of devices, there are different infrastructural means of connecting. Telecommunications and internet infrastructure ranges from plain old telephone services to mobile wireless to fixed wireless to wireline internet and more [2] [3]. Irrespective of how you connect, the Big Three have had a direct impact on these markets and how they are regulated.
The power of the Big Three can, in part, be attributed to their vertical integration and their continued success in acquiring any competition they face. Vertical integration in technology, media, and telecom is larger and more complex than in other industries [4]. Vertical integration is when one company owns and controls the supply chain for the product or service they sell to consumers [5]. Bell, Rogers, Shaw, and Quebecor are “vertically integrated communications and media conglomerates” [6]. They own, operate and sell the physical infrastructure for connectivity, the means to connect, and the content to connect to.
For example, Bell Canada Enterprises owns the telecommunications company Bell Canada, as well as its media subsidiary Bell Media. Suppose an internet user wanted to watch MasterChef Canada. They log onto their computer and connect to their internet, which is provided by Bell. They go onto Crave TV, the online streaming service owned by Bell Media, and choose MasterChef Canada. MasterChef Canada is created by CTV, which is also owned by Bell Media. In this example, Bell Canada Enterprises owns the cables connecting the user to the internet, sells the user the ability to access the internet, and owns the content they’re accessing online. There is so much power in this, and this example didn’t even consider Bell’s control over cellular access. The fact is for Bell, less than 15% of their revenue even comes from their media content, and all comes from their control over peoples’ connectivity [7].
The power of these vertically integrated players has recently been demonstrated through a request from Bell, Rogers, and Quebecor for a website-blocking injunction. The three internet-media entities are requesting that internet service providers (ISPs) block the IP addresses of websites that are illegally broadcasting pirated National Hockey League (NHL) games [8]. Bell and Rogers both have stakes in the Toronto Maple Leafs, as well as owning the sports broadcasting companies, TSN and Sportsnet (respectively), that air the games. If this order goes through, then ISPs, including Bell and Rogers, will be compelled to block access to pirated games in order to protect the revenues of their broadcasting companies and the team they own. It is a disturbing display of power, and we could even go so far as to call it “industrial sabotage” [9].
In addition to the power stemming from vertical integration, these major players have had the benefit of operating in ‘new’ and essential industries. As a ‘new’ industry, the narrative of investment and innovation is used to support these large companies from being overly regulated, leaving Canadians’ connectivity almost entirely up to market forces. Moreover, Bell has been at the forefront of various forms of connectivity since the telephone was created in 1880. As the regulatory landscape has developed over time, it has been bent to their whim. For example, TELUS and Bell have greatly benefitted from their position as incumbent local exchange carriers (ILECs), the original telephone companies that had had a monopoly in their areas [10]. As incumbents, they are in a privileged position that has hampered competitors’ abilities to connect various communities.
In a Canadian Radio-television and Telecommunications Commission (CRTC) public consultation about barriers to deploying broadband networks in underserved areas, several telecom players identified the practices of ILECs. Competitive carriers rely on electrical utility poles and ILECs’ poles to deploy their networks. In some cases, ILECs share the electrical utility poles [11]. Currently, ILECs have unlimited discretion for reserving the poles they own for their own future use. When they reserve capacity for themselves, other competitors are unable to deploy networks using the poles [12]. When there is opportunity for competitors to use the electrical utility or ILEC-owned poles, there are significant cost barriers for the competitors stemming from complicated regulations and the market power of the pole owners. Therefore, Bell and TELUS’s position as an ILEC gives them even more power in the telecommunications and internet sectors. The next article in this series will explore the CRTC’s contentious decisions about leasing network infrastructure to mobile virtual network operators and internet service providers.
While vertical integration and incumbency serve to benefit these players, they have more tricks up their sleeves. Bell, Rogers, and TELUS all own flanker brands. These flanker brands are used to appeal to different market segments and give an illusion of competition. Bell owns Virgin Mobile and Lucky Mobile. Rogers owns Fido and Chatr. TELUS owns Koodo and Public Mobile [13]. On the surface, it looks like those are six extra players to drive down prices. But because they’re owned by Bell, Rogers, and TELUS, they’re not real competition and only serve to benefit the Big Three’s bottom line. Moreover, the Big Three repeatedly acquire their competitors. For example, Bell acquired Manitoba Telecom Services in March of 2017, despite the Competition Bureau’s recognition that this player provided real downward pressure on the Big Three’s prices in the area [14]. This anti-competitive behaviour sustains their power.
The Executive Director of OpenMedia, Laura Tribe, has boiled down the problem of market power quite clearly: “at the end of the day it is about who has the power and who has the control?” [15]. It’s clear, when the CEO of Bell has beers with the Chair of the Commission tasked with regulating his industry [16], that Bell has the power. And Rogers has the power. And Telus. And SaskTel, Quebecor, and Shaw. What’s left at the end of the day is a Canadian connectivity landscape where Canadians provide these companies with the highest average revenue per user for the lowest amount of data used [17]. What’s left are low-income families who sacrifice other essentials, like groceries and clothing, to pay for their communications bills. What’s left are unconnected Indigenous, remote, and rural communities, who haven’t been able to meaningfully access a critical resource during a 15-month long crisis. Something has got to give.
Professor Dwayne Winseck (Chair of the Canadian Media Concentration Research Project), in Conversation with Georgia Evans, May 28, 2021.
Dwayne Winseck, “Media and Internet Concentration in Canada, 1984-2019,” Canadian Media Concentration Research Project Carleton University, 2020, https://doi.org/10.22215/cmcrp/2020.2
The Canadian Radio-television and Telecommunications Commission, “Communications Monitoring Report,” 2020, https://crtc.gc.ca/pubs/cmr2020-en.pdf
Margaret E. Slade, “Vertical Integration and Mergers: Empirical Evidence and Evaluation Methods,” Organization for Economic Co-operation and Development Competition Committee, September 17, 2020, https://one.oecd.org/document/DAF/COMP/WD(2019)68/en/pdf
Anastassios Gentzoglanis, “Vertical integration and monopoly regulation: case-study of the Bell Canada-Northern Telecom complex,” McGill University, 1983: pp. 1-116.
Dwayne Winseck, “Media and Internet Concentration in Canada,” p. 20.
Ibid., p. 22.
Michael Lee-Murphy, “Bell, Rogers, and Quebecor seek first-ever ‘dynamic’ site-blocking order,” The Wire Report, July 08, 2021.
Professor Dwayne Winseck (Chair of the Canadian Media Concentration Research Project), in Conversation with Georgia Evans, May 28, 2021.
Canadian Radio-television and Telecommunications Commission, “List of Registered Telecommunications Providers: Incumbent Local Exchange Carriers,” Date Accessed July 08, 2021, https://applications.crtc.gc.ca/telecom/eng/registration-list?pt=41
Howard Slawner, “Intervention: Potential barriers to the deployment of broadband capable networks in underserved areas of Canada,” Rogers Communications Inc., May 07, 2020.
Ibid.
Stephen Clark, “Bell vs Rogers vs Telus: What’s the Difference?” WhistleOut, March 16, 2021, https://www.whistleout.ca/CellPhones/Guides/bell-vs-rogers-vs-telus
Competition Bureau, “Competition Bureau statement regarding Bell’s acquisition of MTS,” Competition Bureau, February 15, 2017, https://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/04200.html
“Canadian IGF Talks: Does the Government of Canada Still Support the Open Internet?” [Video] Canadian Internet Governance Forum, July 06, 2021, https://youtu.be/eajAvEXA3Io
Gary Ng, “TekSavvy Blasts CRTC Chair for Having Beers with Bell Exec at Pub,” iPhone in Canada, June 24, 2021, https://www.iphoneincanada.ca/carriers/teksavvy-blasts-crtc-chair-for-having-beers-with-bell-exec-at-pub/
Gary Ng, “Canada’s Mobile Data Prices vs the World in One Chart [PIC],” iPhone in Canada, July 12, 2021, https://www.iphoneincanada.ca/carriers/canadas-mobile-data-prices-vs-the-world-in-one-chart-pic/