Why CRTC chairman won’t get a second term

To no one’s surprise, Konrad von Finckenstein won’t be appointed to a second five-year term as chairman of the country’s telecom and broadcast regulator.

According to news reports on Tuesday, von Finckenstein told his staff at the Canadian Radio-television Commission (CRTC) he won’t be back after his term expires in January.  Later, Sébastien Gariépy, press secretary to Heritage Minister James Moore, said in an e-mail to Network World Canada that a process for selecting a new chair will be announced soon.

Arguably his future became apparent in February when Prime Minister Stephen Harper and Industry Minister Tony Clement bluntly announced the government would overturn the commission’s decision allowing BCE Inc.’s Bell Canada to impose a usage-based billing (UBB) on independent Internet providers buying wholesale connectivity from the telco.

The government, they made it clear, wouldn’t tolerate Bell interfering with independent Internet service providers.

At the time, former commissioner Richard French, now at the University of Ottawa, complained von Finckenstein and the commission had been treated shabbily by making public remarks.

For a government that told the commission in 2006 to only regulate “to the minimum extent necessary,” it was apparently the last straw and civility wasn’t necessary.

“He has tried to balance pressures for market forces with a reasonable deference to the sub-economic size of the Canadian market for most communications industries,” French said in an interview Tuesday.

However, he added, “occasionally, he’s his own worst enemy, because he’s an impatient, emotional, committed person” French said.

Iain Grant, managing director of the SeaBoard Group, a Montreal-based telecommunications consultancy, saw the government’s decision as an act of revenge for issuing more than one decision it doesn’t like.

“How many times does the government have to clear its throat for the commission to get it?” he asked.

By naming a new chairman, the government will be able to ensure the remaining commissioners get it. (And in case they don’t, the terms of four commissioners will expire next year, and four more in 2013.)

Von Finckenstein was not an unknown when Harper appointed him in January, 2007. At the time he was a Federal Court judge, but before that had been head of the Competition Bureau and a deputy minister of Industry.

Both French and Grant praise von Finckenstein for ensuring commission decisions are made quicker than those by previous chairmen.

But the government should have known what it was getting, says Grant.

“He does think for himself,” he said. “If they had wanted a rubber stamp, they chose poorly.”
Few telecom and broadcast companies have nice things to say about the decisions under the von Finkenstein regime, although they are not disinterested parties. Big carriers want the commission to get out of their way, smaller competitors want it to protect them.

The government, for all its talk of minimal regulation, sometimes sends out conflicting signals. In the UBB case, for example, the government said the commission was wrong not to interfere with Bell’s wholesale rates. In 2007, it decided to encourage wireless competition by not allowing a winner-take-all spectrum auction but to set aside frequencies for new entrants.

In the kind of decision that drives big carriers mad, earlier this month the CRTC said integrated communications companies – like Bell [TSX, NYSE: BCE], which owns the CTV network, or Rogers Communications Inc. [TSX: RCI.A and RCI.B]

, which owns seven TV stations — can’t offer generally-available TV shows exclusively on their wireless networks. Instead, competitors have to be able to buy them as well, under “fair and reasonable terms.”

“Canadians shouldn’t be forced to buy a mobile device from a specific company or subscribe to its Internet service simply to access their favourite television programs,” von Finckenstein explained in a press release.

On the other hand, the companies could offer exclusive wireless programs if it is made only for an Internet portal or mobile device – for example, original interviews.

The commission also said that at least 25 per cent of specialty services distributed by a large integrated communications company must be owned by an independent broadcaster. In addition, broadcasters launching a new pay or specialty service must make it available upon request to all distributors as an individual service.

It was the way the government treated the CRTC after its UBB decision that was striking.

There’s a formal way for politicians to deal with decision by a regulatory body: Wait until an affected party appeals the decision to the Federal Court — in which case the cabinet stays quiet – or wait until a party appeals directly to the cabinet – in which case the politicians stay quiet until their written decision is released.

That’s what the government did when in 2009 it overturned the commission on the controversial question of whether Globalive Wireless Management Corp., the parent of Wind Mobile, was controlled by Egypt’s Orascom Telecom.

Industry Canada had already cleared Globalive, but the commission saw the facts differently. Nevertheless, the cabinet held their tongues and issued a written order  (which is being challenged before the Supreme Court by Public Mobile).

In the case of the commission’s UBB decision, Harper and Clement made no effort to be diplomatic or formal. In comments to the press, or, in the case of Clement, tweets over the Internet and testimony to a parliamentary committee, they made it clear the decision was uncalled for and dead.

So von Finckenstein came before the same parliamentary committee to say the commission would reconsider its decision. Later, it decided to hold a new hearing on UBB. Its decision is pending.

Appointed in January 2007 by Harper to head the commission, von Finckenstein and other 12 commissioners enforce the Telecommunications Act, which regulates telecom carriers, and the Broadcasting Act, which governs radio and TV stations.

It doesn’t set telephone or wireless rates consumers pay, but it does control a range of things that affect them, such as approving wholesale rates and tariffs, amending broadcast licences and trying, within its powers to increase competition.