A policy on hold : regulating telephones in Canada

In February, 1992, a new Telecommunications Act was tabled in the Canadian House of Commons. This bill has been awaited, with varying degrees of eagerness, by the industry, policy analysts and community groups, for more than14 years. However it has not answered what was for most people the burning question: will the telephone industry be deregulated, and competition to the dominant regional monopolies be permitted in the long distance voice market? The regulatory agency, after nearly a decade of denying applicants such competitive entry, is still struggling with this question with regard to yet another application, and a decision is not anticipated until the summer. In the meantime the United States regulator, after breaking up the monopoly telephone company AT&T more than a decade ago, has allowed competition into all viable sectors of the industry. A multitude of new products and systems has emerged, long distance rates have dropped (although with the corollary that local rates have risen), and Canadian businesses are threatening to bypass the Canadian system if the same advantages cannot be obtained here. The objective of this thesis is to explain why the Canadian government, despite its Conservative ideology, has found it so difficult to grasp the nettle and follow the United States down the deregulation road. Barriers to change have been erected by provincial governments, consumer groups, unions, and social welfare advocates, all of whom see the telephone as an instrument of social policy, and consider that deregulation would be a threat to universal accessibility and affordability. This study explains the complexities of the telephone industry, especially the way in which the long-distance and local calling systems are linked so that cross-subsidization of customers has been possible. It discusses the problems that such linkage causes for fair and accurate allocation of costs, and the effect that this has had on the debate about deregulation. It also looks at the various statist, pluralist and political culture explanations for the prolonged procrastination of the Canadian government, with emphasis on the opportunity which both policy-makers and interest groups have had to learn from the American experience. In addition to an examination of explanatory factors, the argument is made that the regulated status quo has many advantages for Canada, despite the costs it may impose on the business sector. The telephone is an integral part of the daily lives of all Canadian citizens, and changes in regulatory policy will affect every one. This thesis analyses the development of such policy in Canada and explores the opportunity costs for all sectors of our society.Arts, Faculty ofPolitical Science, Department ofGraduat