The Economic Impact of Telecomunications Deregulation in Canada

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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 over the principal telecommunications "common carriers" (i.e. Bell Canada, Alberta Gov't Telephone, BC-Tel) in Canada. The new legislation defines the powers of the federal government and the regulation that is required to bring Canada's telecommunications policy into the twenty-first century. It ensures the efficient operation of our telecommunications system, maintains and promotes and internationally competitive telecommunications industry, and guarantees all Canadians access to reliable, affordable, and high-quality services. In order to achieve this, the new law centres on two major principals: the first is to open the telecommunications market by having a workable policy for the whole country under the guidance of a single regulatory agency (i.e. the CRTC); the second is to establish a more flexible regulatory framework. The new legislation modernizes and improves the existing system in three ways: 1. By updating and modernizing existing legislation that governs telecommunications. Namely, the Railway Act, the National Telecommunications Powers and Procedures Act, and the Telegraphs Act. 2. By making a single agency responsible for regulating telecommunications, and 3. By ensuring consistent conditions in regards to access to facilities, local and long-distance rates, and introduction of competition for providing telecommunications services across the country (Beatty, 1990, p42). In addition, the legislation resulted in the creation of a more open domestic market so that all Canadians will have access to relatively high-quality services, regardless of where they live. Advances in telecommunications technology enable companies to offer a wide variety of new services to satisfy the needs and interests of consumers. One of the goals on the legislation is to ensure that all Canadians benefit from innovations in communications. In addition to promoting the economic benefits of telecommunications technology, the legislation also tackles the social needs and interests of users. The legislation also contains measures to protect consumers against possible abuse, including the sending of unsolicited information by telephone or fax machine (Beatty, 1990, p66). The Telecom Act gives the government the power to issue licenses to Canadian telecommunications companies and to set standards for equipment and facilities. In order to be eligible to hold a telecommunications license, the company ,must meet specific requirements respecting Canadian ownership and control. A main requirement is that 80 percent of the companies shares must be owned and controlled by Canadians (Angus, 1993, p17). The legislation, and related regulations, therefore promote Canadian control over the country's information infrastructure. As well as this, the new legislation ensures that telecommunications policy takes into account the interests of the regions and provinces. Given the fundamental role of communications in Canadian society, and the vital importance of this sector in the Canadian economy, deregulation (or more accurately, easier regulation) of the te

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