The Economic Impact Of The New Telecommunications

Legislation Essay, Research Paper

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,

p135).

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

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