Telecommunications

Telecommunications is defined as the electronic communication of information over distance. In theory, this definition covers all forms of electronic communication and does not distinguish between different kinds of information: voice, data, text and video. In practice, however, the term has usually referred to the telephone system and point-to-point forms of communication. This narrowing of the term reflects distinctions adopted during the early part of the twentieth century between publishing, broadcasting, computing and telecommunications, primarily as a result of rivalry between major players in the communication industries and on account of government policies. Only recently have technological, economic and regulatory changes promoting media convergence worked to restore the original expansive definition of telecommunications.

The first method used to send messages by electricity was the TELEGRAPH. Although the American Samuel Morse is usually credited with sending the first telegraph message on 24 May 1844 - "What hath God wrought!" - the telegraph was first used in Britain by the railways in 1837. The telegraph was introduced into Canada in 1846, and, over the next 50 years, systems of wires were constructed across the US, Canada and other countries, bringing a revolution in the speed of communication over distance. The main purpose of the telegraph in Canada was to distribute news and information services to the press. Because of the interest in news flows between Europe and North America, the telegraph developed most rapidly and extensively in the Maritime provinces.

The Scottish-born Alexander Graham BELL was the first to file patents for the TELEPHONE, although many others were successfully working on the development of the telephone at the time. The telephone was first introduced into Canada in 1878 by two telegraph companies, the Montreal Telegraph Company and Dominion Telegraph Company. The two companies engaged in local telephone competition in Ottawa, Montréal, Québec City, St John's and several other Canadian cities. However, after two years of price wars, the two companies declared bankruptcy and abandoned their telephone systems to the Bell Telephone Company of Canada (seeBCE INC. Bell Telephone began operations in Canada after receiving a government charter in 1880.

Although the other major Canadian telecommunications company of the time, Canadian Pacific Telegraph Company, could have competed with Bell, it did not, except in a few specialized services (eg, data transmission, microwave communications, etc). Throughout the early history of the telephone, regular bouts of competition were quickly followed by monopoly. Between 1880 and 1893, the telephone system was characterized by the unregulated monopoly of Bell. Afterwards, the expiration of Bell's patents in 1885 (in Canada) and 1893 (in the United States) and the start of telecommunications regulation in Canada (1906) led to a period in which competitive and independent telephone companies flourished. By 1915, there were over 1500 telephone companies in Canada, either competing with Bell or extending service to areas not yet reached by the telephone. Instead of adopting a regulatory system, government ownership of the telephone system was established in Manitoba (Manitoba Telephone Service) in 1908, Saskatchewan (SaskTel) in 1909 and Alberta (Alberta Government Telephones) in 1906. Despite the success of competitive telephony, actions by Bell and several regulatory decisions between 1912 and 1916 led to the disappearance of competition. From this period until approximately 1985, telephone service in Canada developed as a natural monopoly. The telephone companies and government regulators argued that this was a good thing as it allowed the companies to exercise end-to-end control over a very technologically sophisticated system and to use revenues from long-distance and urban areas to cross-subsidize local and rural telephone service.

By 1920, coast-to-coast telephone service was possible, and thereafter most local telephone systems were upgraded to long-distance standards. The integration of the national telephone system was furthered in 1932 when the largest regional telephone monopolies formed a consortium, the Trans Canada Telephone System (seeSTENTOR). Sending voice signals across the ocean proved more difficult, although submarine telegraph cables linked North America and Europe by 1865 and had encircled the globe by the turn of the century. Experimental uses of short-wave radio made voice communication between the continents possible by 1920, but it was not until 1926 that shortwave radio was regularly used for this purpose. The first ocean telephone cables were laid in 1956 between Scotland and Newfoundland with a capacity of 60 telephone circuits. These cables have been followed with many additional cables of substantially increased capacity connecting many locations throughout the world. Satellites became available for international service in 1964 and domestically in Canada in 1973.

The telephone system has been associated mainly with simple voice communications, although this is changing dramatically as many new telecommunications services become available. Local telephone service provides access to telephones in the local area, and recent technological innovations (digitization, fibre optic cables, computerization, etc) have created "intelligent networks" that offer users services such as voice mail, call forwarding, speed dialling, number display, and so on. Local telecommunications facilities also interconnect with private networks and local area networks to carry private voice, video and data signals that are separate from the local public telephone network. Although the introduction of fibre optic cables and digitization makes it possible for these services to be carried entirely over the public telecommunications system, this possibility raises questions about who should pay for upgrading public networks to standards required only by the most sophisticated users. The local public telecommunications network also provides access to the public long-distance network and to national networks for video or data signals, eg, airline reservation systems, the Internet, etc.

The conversion of the public telecommunications system has brought about many new services, but it has been costly, and many of these services are neither needed or desired by the majority of the users. This combination of more services and higher costs has fundamentally affected the regulation of telecommunications in Canada. While plain old telephone service (POTS) has long been regulated in terms of quality of service, prices and universal access, many of the new, so-called enhanced services (call forwarding, voice mail, Internet, data communications, etc) have not been regulated.

Beginning in the late 1970s and early 1980s, the CANADIAN RADIO-TELEVISION AND TELECOMMUNICATIONS COMMISSION (CRTC) began allowing more and more areas of telecommunications to escape the influence of regulation. Beginning in 1979, the CRTC allowed private lines to be interconnected with the public telecommunications network. Three years later, subscribers were allowed to purchase their own terminals from any supplier and plug them in like electrical appliances.

Perhaps the most important decisions in terms of their long-term impact on the future of telecommunications in Canada occurred in 1984 and 1985, respectively. In the first decision, the CRTC agreed to deregulate "enhanced services." While the "enhanced services" decision had the benefit of allowing many more information service providers into the market, it also capped the concept of universal service. Historically, the policy of universal service has governed POTs and other basic communication technologies such as television and radio and contributed to their widespread availability and affordability. The fact that 99% of Canadians have access to these technologies attests to the success of this approach. However, because new enhanced services are not covered by these goals (and, indeed, many should not be), many new forms of communication are not required to be made universally available. The most notable "enhanced service" is the INTERNET and, not surprisingly, it is far from universal. Less than 20% of Canadian households have Internet access, and the gap between the richest and poorest Canadians is enormous, with those at the top of the income scale seven times as likely to have access to the Internet from home than those at the bottom of the scale.

The CRTC's other key decision mentioned above occurred in 1985. In this decision, the CRTC accepted the principle of competition in long-distance telephone service. However, if rejected the application of CNCP (the telecommunications company formed by the integration of CANADIAN NATIONAL and CANADIAN PACIFIC's communications wings) to initiate competition on the grounds that CNCP would be unlikely to succeed while at the same time contributing to universal service goals. By 1992, the CRTC had become so enamoured with competition that it agreed to permit Unitel (a company jointly owned by CNCP and ROGERS COMMUNICATIONS) to compete on the market. The verdict is still out on whether or not this move will be as beneficial as initially hoped.

On the one hand, there is no doubt that the cost of long-distance service in Canada has dropped precipitously to the benefit of all who make such calls. In addition, a host of new companies, including Sprint, AT&T, London Telecom and over 150 resellers have entered the market to compete with the old regional monopolies. The decision also opened the door to additional regulatory changes and mounting pressure for competition to be allowed in local telecommunications. Under this pressure, the former alliance of regional monopolies, Stentor (BELL CANADA, BCTel, Telus, SaskTel, MTS, NBTel, NfldTel, Island Tel and Telesat), has come under pressure and reduced its role in co-ordinating the national telecommunications system.

On the other hand, local costs have risen considerably for all users, and it appears that competition mainly benefits larger users and those who make a lot of long distance calls. More importantly, competition has created a species of regulated competition and strategic rivalry. The CRTC's role in regulating telecommunications has not diminished but become one of insuring that competition works. The competition that is taking place is mainly between the former monopolies and a few large competitors. Bell continues to retain around 70% of all long-distance revenues while the two main competitors, AT&T and Sprint, share most of what is left over and numerous companies compete for the crumbs and in specialised niches. Competition also led to the demise of the century old CNCP Telecommunications' and Rogers Communications' forays into long-distance competition, after Unitel continuously verged on the edge of bankruptcy before being taken over by three Canadian banks and, finally, by AT&T. Lastly, competition has led to a significant decline in the amount of money being invested in the telecommunications infrastructure and to a loss of jobs in this sector, factors that could be crucial as Canada moves toward the knowledge-based economy and society.

Just as important as the changes taking place within Canadian telecommunications are those that have taken place in global telecommunications and across the communication industries as a whole. With respect to global telecommunications, Canadian players like NORTHERN TELECOM and BCE have taken on significant international profiles. The NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA)and the World Trade Organization agreements on telecommunications are very significant influences on telecommunications in Canada and globally. These agreements require national telecommunication markets to be opened up to foreign competition and, like the CRTC's 1984 enhanced services decisions, constrain the extent to which policy makers can require telecommunications companies to meet public policy aims.

Two features of these agreements may affect Canadian communication policy in the near future. First, even if Canadian communication policy makers wanted to expand the concept of universal service to cover new media like the Internet, it is unlikely that they could do so on account of their NAFTA and WTO obligations. Second, the process of media convergence that is bringing together telecommunications, broadcasting, computers and publishing will make it difficult for Canada to uphold cultural policy commitments in broadcasting, film and publishing. As these media forms increasingly commingle in telecommunications networks, it will be difficult to draw the line between NAFTA and WTO restrictions on the regulation of "enhanced services," on the one hand, and Canada's desire to continue to apply cultural policy to audio-visual forms of expression regardless of which medium they are carried through, on the other.

After years of preventing media convergence - for example, the refusal to permit telephone companies to become broadcasters or cable television system operators - the Canadian government is now promoting media convergence. Whereas competition has brought about significant changes within telecommunications, the promotion of media convergence will likely have a sweeping effect across the communication industries. The telephone companies are readying themselves for media convergence by getting into direct-to-home satellite broadcasting, Internet services, new media content production firms and plans to build an information highway available to 80% of all Canadians by the year 2005. These changes are likely to be even more radical than those ushered in by competition in telecommunications. In the end, these efforts will depend on the cost of building the new information highways, people's demand for the new services and, crucially, whether the information society in Canada will involve a commitment to a universally available, high quality communications system or to one that serves to reinforce the boundaries between the information rich and the information poor.