Time to cut up your debit card?

Letter to the Minister of Finance about “No-Name” Bank Machines (October 12, 1999)

Hon. P. Martin P.C., M.P.
Minister of Finance,
Department of Finance,
21st floor,
140 O’Connor Street,
Ottawa, Ontario, K1A 0G5
Dear Minister Martin,
It has come to our attention recently that Ano-name@ or Awhite-label@ automated teller machines (ATMs) are appearing at more and more locations across Canada. The proliferation of these ATMs is bad news for Canadian consumers. This letter will outline our main objections to the current situation, and our suggested course of action.
The Ano-name@ ATMs charge consumers a fee in addition to their regular banking fees. However, consumers already pay fees for the using their debit cards; these fees alone should ensure that the customer has convenient access to ATMs. Offering Ano-name@ ATM service at convenient locations is price-gouging consumers who might for various reasons have trouble getting to a regular ATM. For instance, someone may feel more comfortable, late at night, using an ATM in a convenience store than at a deserted bank branch. It is quite cynical of the industry to exploit this type of situation to extract higher fees from consumers.
Moreover, the fees at these ATMs are not regulated and allow for exorbitant rates to be charged. Consumers have little choice but to pay these rates if other machines are not available or become Awhite label@ as well. If the industry were interested in offering consumers convenient access to their money at reasonable rates, there is a way they could do; they could encourage the use of Acash-back@ at the till with the debit card. It is our understanding that where they are located, the Ano-name@ ATMs will replace or pre-empt Acash-back@.
It is well known that there is a problem with access to banking services in poor urban areas, as well as rural and remote areas, and the problem is getting worse as more bank branches close. We are very concerned that Awhite-label@ or Ano-name@ ATMs will move into these areas, offering vulnerable consumers limited service at unacceptably high prices. Centretown in Ottawa is a very good example. In the area around Gladstone and Bank Street, there used to be four bank branches. Now there are no branches, no ATMs, and only a Money Mart nearby (another company that charges unacceptably high prices for basic bank services). The Ano-name@ ATMs could soon move in.
It may seem reasonable for the banks to place ATMs only where they can make a profit. However, it is important to remember that banks are addicted to a very high rate of profit, and have little incentive to provide service that might yield a more normal rate of profit. We are concerned that, instead of ensuring that all consumers have convenient access to ATMs, the industry will withdraw its services to make way for the Ano-name@ ATMs. The Ano-name@ ATM operators will then be free to raise their fees even further.
One of the main operators of the Ano-name@ ATMs is actually a bank subsidiary. In this case, there is no real competition with the major banks; it is simply a bank using the unmarked ATMs to charge extra fees. The bank in question could withdraw its services from many more locations, and let its subsidiary take over in order to make higher profits.
The financial services market is clearly failing ordinary Canadians. The new financial consumer agency should be given the authority to develop regulations in this area, in order to protect consumers and promote fair access to banking services for all Canadians. This issue should be a priority for the new agency, since the Ano-name@ ATMs operators are not bound by any rules or codes of practice. We would like to see the new Agency develop a national strategy to promote access to bank services. As well, the new agency should convene regular public proceedings to review trends and pricing in financial service offerings. The activities of these Ano-name@ ATM operators should not be allowed to prevent fair solutions to the access problem.
Yours sincerely,
Michael Janigan
Executive Director
cc.
Frank Swedlove
Executive Director, Financial Sector Review Group
Department of Finance

Consumer Protection after the OECD Guidelines

What’s Next? Consumer Protection after the OECD Guidelines

Speaking Notes – Philippa Lawson
Public Voice 99 Conference

• We need first to be clear on what our goal is. Our goal is not simply to promote electronic commerce as a way of improving economic opportunity and choice – that, our business colleagues are doing very well. We, the public voice, recognize that the social and economic transformations brought about by electronic commerce may not all be positive, and that the public interest lies not in promoting a particular mode of commerce over others, but rather in maximizing the benefits (e.g., improving worldwide access to the Internet) and minimizing the costs (e.g., socioeconomic dislocation, privacy invasion, barriers to consumer redress) of an inevitable market development.

Electronic commerce is happening; we don’t need to promote it. Our goal, in respect of consumer protection, should therefore be to minimize the consumer problems associated with ecommerce. It is in the interests of both business and consumers to focus on this goal.

• In this context, the OECD Guidelines are just one piece of a much larger puzzle, a first step on the way toward a truly consumer-friendly electronic marketplace. Much more work still needs to be done.
• Gaps remain in the OECD Guidelines, largely as a result of the compromise that was necessary to achieve consensus on this document. A critical gap is on the issue of jurisdiction: will consumers be able to rely upon the laws and courts of their own country with respect to electronic transactions that they conducted in that country? Another gap involves the failure to set out consumer rights and liabilities in the event that the merchant does not comply with the Guidelines (e.g., fails to provide full or accurate information, fails to provide a reasonable opportunity to cancel or correct an error in the order, or simply fails to deliver).
• There are a number of challenges ahead, including:

a) finding the right mixture of legislation and self-regulation in the implementation of these Guidelines;
b) dealing with a likely proliferation of certification schemes and reliability marks – who is the consumer to trust?
c) developing international standards of consumer protection, so as to avoid the creation of “consumer fraud havens, or trade disputes over the legitimacy of national consumer protection laws; and
d) ensuring that authentication and security mechanisms respect consumer privacy.
We have a number of tasks ahead in order to achieve our goal of minimizing consumer problems in the electronic marketplace. We must:-continue to remind policy makers that market forces won’t solve all consumer protection issues, that market forces in fact create problems for consumer, and that governments ave a responsibility to protect consumers from market abuses, both within countries and across borders;

• continue to work domestically to implement the OECD Guidelines and other necessary and corollary protections (such as the consumer’s right to reimbursement when the merchant fails to deliver);
• continue to monitor and report on problems encountered with electronic commerce (here the OECD can play an important role);
• continue to educate consumers about the risks associated with ecommerce, and about their rights and remedies; and
• continue to assist our governments in expanding cross-border cooperation in the enforcement of both consumer protection laws and court judgements.

In addition, we need:

• within the OECD, to ensure that the critical role played by the Consumer Policy Committee is appreciated and that this Committee is provided with sufficient resources to do its job well into the future, and to work with the OECD to improve the mechanisms by which the public voice can be heard;
• to find an appropriate multilateral forum within which to “internationalize” the OECD Guidelines, beyond this relatively small group of countries;
• to ensure that minimum standards of consumer protection, including data protection, are treated as minimum standards, and don’t become ceilings above which protections risk being challenged as trade barriers, leading to a “race to the bottom”;
• to become more active at the international level, as BIAC, AGB, GBDe and other business groups have done, to ensure that the public voice is heard as loudly as the business voice in policy-making fora;
• to work with business to help them develop effective self-regulatory regimes, as well as an appreciation of the need for consumer protection and privacy laws;
• to work with government and business to develop international standards for voluntary codes, complaint and dispute resolution processes, which will be such an important element of consumer-friendly ecommerce. Such “standards for standards” will be important,
  • so that consumers can judge the effectiveness of self-regulatory efforts,
  • so that they can easily identify hollow assurances and misleading claims,
  • so that they can navigate among a potentially large and diverse array of reliability marks and certification schemes, and
  • so that business has some kind of baseline for its self-regulatory efforts.

The time is ripe for an international initiative in this respect, so as to avoid marketplace confusion (and its potentially damaging effect on electronic commerce) due to a proliferation of self-regulatory schemes of varying effectiveness, to build consumer confidence in this new medium, and more importantly, to ensure that such confidence is deserved.
END

Remarks to the Ad Hoc Committee on Air Transportation (1999)

Remarks of Michael Janigan
Executive Director/General Counsel
of the Public Interest Advocacy Centre (PIAC)
to the Ad Hoc Committee on Air Transportation

 
The Canadian Association of Airline Passengers is an ad hoc coalition of consumer and public interest organizations which has been assembled both to respond to the current merger discussions and to advance the interest of airline passengers in the operation of airline services in the future. The coalition was formed in part, because the public discussion was focusing on issues other than the concerns of ordinary airline passengers. These included the size of the ONEX offer, the job security of airline employees, the golden handshake for executives and the various legal and procedural maneuvering associated with the various merger proposals. This story has been unfortunately covered like a hockey game with Canadian consumers largely relegated to the role of spectators and the Competition Bureau referee banished to the penalty box while the opposing teams slug it out.
Some important points should be made:
1. The market for airline services exists independently of the two competing entities Air Canada and Canadian Airlines. These are not the Wright Brothers who have just discovered flight. These are companies driven by the interests of their shareholders to maximize return on their investment. It is up to public policymakers to devise the rules for the market that force the financial interests of these companies to align with the public and consumer interests.
To return to the hockey analogy, this is not a case where one team is to be cheered over the other. From the consumer standpoint, we must ask how will any new arrangements benefit consumers. Bad government policy making usually eventuates from the assumption that a particular business or company should be the focus of a policy, rather than ensuring the provision of a level playing field or appropriate industry wide regulation.
2. The commencement of the current crisis has left most non-insiders confused. How can the longstanding dismal financial performance of Canadian Airlines merit the extraordinary treatment provided by the Minister of Transport with the consent of the Minister of Industry under section 47 of the Canadian Transportation Act. If the financial health of a competitor warrants government intervention to suspend the operation of as fundamental a set of principles as the the Competition Act when does consumer dissatisfaction with pricing, quality of service, and safety merit comparably drastic government intervention.
3. Let us also make one thing perfectly clear: We are not seeing a proposal to migrate from a workably competitive airline market to an unregulated monopoly but rather the demise of a duopoly that provided intermittently successful competitive substitutes. While both major players responded with gusto and deep discounts when their market shares where threatened new market entrants such as Greyhound and Vista Air, pricing on high traffic routes such as Ottawa to Toronto has steadily increased almost 50% since the demise of those former market entrants. There is much anecdotal evidence suggesting an unacceptable level of market power possessed by the current players.
4. Longstanding safety and health concerns remain unaddressed without the market cachet or the government interest to bring them forward. Some of the organizational participants here today are better able to address these issues which should have particular resonance regardless of the outcome of the proposed merger.
Accordingly, we have set out in this initial effort entitled Airline Passenger Bill of Rights, some terms which we think are essential and should be part of the conditions of service of any airline. This document which is based upon, in part, the US Congressional model, and sets out minimum terms which most passengers would agree with as constituting standards of services which should be adhered to by airlines. Many of these standards must be government mandated as market forces may be either too slow or ineffective to allow implementation of important public concerns.
Returning to central theme. There are some pertinent analogies to be made with respect to the banking industry. Last year, the proposed mergers of the major banks obscured the central issues from the consumer standpoint: namely the need for enhanced minimum consumer protections and mandated accessibility to banking services. While the proposed bank mergers were likely to be unhelpful for competition in the long run, their disposition without implementation of consumer protection would not have represented any consumer triumph.
In this case, we have substantial consumer concerns that have not been addressed, on top of a contemplated cratering of the entire airline competition policy. To make matters worse, we have the temporary decoupling of the Competition Commissioner from the merger process.
We don’t need another solution brokered to secure shareholder investment. We need an environment where, yes investors can make a fair return but consumers are protected either through real competition or realistic effective regulation. I am far from certain we are now going down the right road.

Newsletter – August, 1999 Vol.6, No.2

IN THIS ISSUE
Consumers Benefit Through New Federal Banking Policies and Regulation
Consumers Finally to Get a Say in Some Basic Cable TV Prices
New Report: “Consumer Issues in Electronic Commerce”
Legislated Privacy Protection Still in Limbo

Consumers Benefit Through New Federal Banking Policies and Regulation

For years, PIAC and other public interest groups in Canada have advocated greater consumer rights and protection in the financial services sector in Canada. These efforts have met with considerable success with the announcement by the Minister of Finance on June 25 of a new policy and regulatory framework for Canada’s banking system. Key benefits for consumers include:

• legislation guaranteeing consumers access to banking services and a low-cost account. More than 600,000 adult Canadians currently do not have access to a bank account, largely because banks would not provide service to these low income individuals;
• a new independent regulatory agency that will ensure that banks adhere to consumer protection policies and to provide consumer awareness and education about banking services;
• the establishment of an independent ombudsman office that will mediate problems and complaints between individual customers and their bank;
• incentives for the development of more community and national banking services to increase competition in services and choice for consumers.
• new restrictions that prevent banks from requiring customers to buy a second product in order to buy the product or service they want. This ‘tied selling’ strategy will now be prevented through an amendment to the Banking Act.

Traditionally regulation has protected large institutional investors and ensured banks’ dominance of the market place. This is the first time that consumer protection legislation has been introduced to the market.
Earlier this year, PIAC, in a coalition with the consumer groups Action Réseau Consommateur, the National Anti-Poverty Organization and Option Consommateurs, issued a Consumer Charter for Financial Services Reform. The provisions of the Charter were:
1. Creation of a Consumer Protection Bureau.
An independent regulatory agency should be established. The agency’s members should include consumer representatives. The agency’s mandate should include consumer protection rules, regulation and compliance, as well as industry auditing and consumer education initiatives.
2. Federal Legislation Guaranteeing Access to Financial Services.
Legislation is required to ensure that: all Canadian have access to a bank account; minimum standards be created for a minimum level of final services; no fee and no minimum balance bank accounts be available; federal government cheques can be cashed at any bank branch.
3. Support for Research, Industry Oversight and Advocacy for Consumer Organizations.
Adequate funding should be provided by the Federal government to maintain and extend the expertise of consumer organizations in representing the needs of Canadians in the areas of policy, regulation and consumer awareness.
4. Ensure that Bank Closures are Handled Responsibly in the Public Interest.
A federal consumer protection bureau should be mandated to ensure that banks are accountable to the communities and neighborhoods where branches are located. Legislation should ensure that when a branch closes that the bank assists in establishing an alternative financial institution that is acceptable to the community.
5. Improve Disclosure and Transparency.
A new consumer protection agency should have the authority to establish regulation and penalties to ensure that: agreements, contracts, service fee billings and marketing documents are available in understandable language and standardized forms; disclosure is mandatory on fees and commissions to third parties; and unilateral amendments to financial services consumer contracts are prohibited. Mandatory disclosure of service fees should also be required.
PIAC’s input is reflected in the policy changes for the financial sector which I announced on June 25, 1999.
The Department looks forward to working with PIAC during the process of developing legislation on these matters.
The Hon. Paul Martin, letter, July 19, 1999.
We were pleased to see that many of these issues were addressed in the proposed new financial services policy. PIAC will continue to push to have the unresolved matters addressed by the Department of Finance and the new regulatory agency over the next few years. As the proposed legislation is passed and the new consumer protection agencies are established, consumers should begin seeing a fairer set of rules and practices in their everyday dealing with banks.
While many of the changes proposed by Minister Paul Martin on June 25 are important steps in balancing consumer rights with those of the banks, there are still a number of issues that have not been fully addressed. One area is bank branch closures. Many Canadians, both in rural areas and in some neighborhoods in cities, are seeing their local bank branch close. Often these branches provide the only banking service in their area. The new bank policy will require banks to justify a branch closure to communities, and will require some consultation with the community to mitigate the affects of the cessation of service. However, the problem of ensuring that some form of banking service will still exist in a community has not been addressed. Other areas of concern include: the lack of clear rules on how long a bank can ‘hold’ a cheque before the funds are made available to a customer; the need to improve physical access to branches for disabled Canadians; and increasing difficulty of receiving “in-person” service from a teller as opposed to the increasing use of banking machines.

Consumers Finally to Get a Say in Some Basic Cable TV Prices

On July 7, the CRTC issued a decision (Public Notice CRTC 1999-108) whereby cable companies will now be required to obtain approval from CRTC before increasing their basic monthly fee when the fee increase is the result of adding a specialty service to the basic package. Specialty services are those channels which generally offer a special theme such as news, sports, or music, etc.. Consumers have long complained to the CRTC about the cable companies arbitrarily adding channels and raising rates in basic service. The CRTC proposed to amend the Broadcasting Distribution Regulations earlier this year (Public Notice CRTC 1999-56) and asked for public comment. In its submission to the CRTC, PIAC supported the proposed amendments and argued that public participation in CRTC decision making should involve all channels which are included in the basic package, including specialty channels.
Under the new rules, cable subscribers will have to be notified about proposed price increases and will have 30 days to voice their concerns to the CRTC. The cable companies will also be required to file information with the CRTC to justify why a specialty channel should be added to basic service. With these changes, the CRTC will be able to suspend or disallow a proposed fee increase if it determines that such an increase is not justified. This is a good victory for consumers. In spite of the hype about competition, most Canadians do not have a choice of who provides their cable service, and where choice does exist, e.g., satellite tv, it is not a comparable option because it can be more expensive than the traditional wire-line cable service.

New Report: “Consumer Issues in Electronic Commerce”

Five years ago, almost no one imagined that consumer activity would shift to a new electronic medium at the rate that it is doing. Electronic commerce has been used by businesses for many years, but only recently has it caught the attention and interest of individual consumers. People can order books, reserve airline tickets, or transfer funds between bank accounts at any time of the day or night, as long as they have a working computer, modem, and Internet service provider.
But is it all a bed of roses for consumers? PIAC’s new report, “Consumer Issues in Electronic Commerce” examines the implications of buying online, and highlights the risks and potential problems of this new medium.
In particular, electronic commerce provides new opportunities for abuse both by the deliberately dishonest and by the careless or cavalier. How do you judge the reliability and integrity of online merchants? As a now famous cartoon put it, “the great thing about the Internet is that no one knows you’re a dog.” Unscrupulous merchants can disguise their identity, and hide behind sophisticated websites that mislead consumers into a false sense of security.
Previously marginal problems such as pyramid selling become far more serious on the Internet, where millions of consumers worldwide can be accessed at very little cost. Consumers are more vulnerable than ever to false and misleading claims, insecure handling of sensitive data, hidden privacy invasions, and lack of effective cross-border enforcement mechanisms. The need for effective consumer protection laws and mechanisms is therefore greater than ever before.
TIPS FOR E-COMMERCE CUSTOMERS
Online consumers should:

• look for information confirming the vendor’s identity, location, and reliability before making online purchases;
• confirm any claims to membership in a quality assurance program such as BBB (eg. confirm with the program that the organization is indeed a member in good standing – this should be possible by clicking on the program logo);
• navigate carefully through retail websites, so as to avoid unintentional transactions;
• read all contractual information presented online before agreeing to purchase, and be sure to obtain a copy of the contract for your own records;
• take reasonable precautions to keep your credit card and/or PIN number confidential;
• be comfortable with the security features employed by the vendor to safeguard the confidentiality of financial information exchanged (NEVER send confidential information by e-mail!);
• make sure the vendor’s privacy policy meets your needs for privacy protection;
• look for the vendor’s policy regarding complaints, returns, cancellations, warranties, etc. before transacting; and
• be aware of potential difficulties obtaining redress across borders, in the event of a dispute.

The report can be obtained from PIAC (piac@web.net, or tel: (613)562-4002 x.60, or fax: (613) 562-0007) for a price of $20 plus postage. For French versions contact Action Réseau (actionrc@total.net, tel: (514) 521-6820,fax: (514) 521-0736).

Legislated Privacy Protection Still in Limbo

In our May 1999 Hotwire, we highlighted the problem of personal information abuse in the private sector and the need for legislated rules establishing the right of individuals to control over their personal data.
Bill C-54, the federal government’s proposed legislation to protect personal information in the context of commercial activities, was introduced last fall, but never made it through Parliament before the summer break. The government, however, has promised to push the Bill forward when Parliament reconvenes in the fall, and to fulfil its commitment to passing privacy legislation by the year 2000. We intend to hold the government to its promise.
However, the Bill is still in rough waters. Some business groups and government agencies have expressed opposition to the legislation. The Ontario Ministry of Health is lobbying to have personal health information exempted from the Bill, so that it would be completely unprotected under the federal regime. The insurance industry doesn’t like having to get individual consent to share personal information among themselves for the purpose of detecting fraud. Bankers (and others) don’t want to be subject to spot-audits of their privacy practices.
If you want legislated protection of your personal information in the private sector, make sure that your M.P. knows! Tell our legislators how important it is that they pass effective data protection legislation without any further delay. More background information is available on the PIAC website at http://www.piac.ca

Newsletter – May 1999 Vol.6, No.1

IN THIS ISSUE
Action Alert: Personal Information Privacy in Peril!
CRTC Holds New Media Hearing
PIAC Working with Industry to Develop Code of Practice for E-Commerce
Benefits of Long Distance Competition in Question

Action Alert: Personal Information Privacy in Peril!

You are undoubtedly aware of the increasing loss of control that we are all experiencing in respect of our personal information. Commercial entities are collecting, trading and using our detailed personal information, without our knowledge or consent. It’s time to reclaim the right to control over our personal information.
Bill C-54, The Personal Information Protection Act, is now before the House of Commons, and once passed, will be sent to the Senate Committee on Trade and Commerce for review. It is imperative that our legislators hear from the public on the need for legislated privacy protection – you can bet that they will be hearing the other side of the story from industry lobbies. Please tell your MP, and the Senate Committee, how important it is that they pass effective data protection legislation for Canadians without delay. A sample letter with addresses can be found at the PIAC website: http://www.piac.ca
The following is an excerpt from a letter recently sent to all MPs and Senators by nation-wide coalition of groups campaigning to save Bill C-54. Together with PIAC, these groups include the B.C. Freedom of Information and Privacy Association, Canada’s Coalition for Public Information, the Canadian Health Coalition, the Consumers’ Association of Canada, Electronic Frontier Canada, Democracy Watch, the National Privacy Coalition, and the University of Ottawa Human Rights Research and Education Centre.
“Legislation governing private sector collection and use of personal information is long overdue. The technology for data collection and distribution, and market pressure to exploit that technology, have developed far more rapidly than legal protections against unauthorized use of our personal information. It’s time to bring our laws into line with our technological capabilities and market realities.
Computer technologies now make it possible to compile, store, match and trade personal data at minimal cost. Although it is the desire and expectation of Canadians that their personal data will be used only with their knowledge and consent, this is generally not reflected in business practice. Private companies are routinely collecting, using, and disclosing personal information for their own benefit, without regard to the individual’s right to privacy.
Evidence of this growing trade in personal information abounds, as Canadians are increasingly bombarded with unsolicited, often highly targeted marketing via phone, fax, mail, and now, e-mail. We are finding our confidential information published in print directories and available on-line to anyone with elementary computer hacking skills. Employees are being surreptitiously monitored. Many people are denied services on the basis of inaccurate information about them held by private companies. Most of the unauthorized data collection and trading goes on behind our backs, but the evidence of it is everywhere. It’s time to act.
Control over one’s personal information is a fundamental element of the broader right to privacy. Privacy is a fundamental element of free speech and democracy. Without privacy, individuals are stripped of their autonomy, dignity, and self-determination. It is critical that we establish now a comprehensive legal framework for privacy protection in this country. Bill C-54 is a key element of that broader framework.
Many of us would like to see stronger and more specific data protection rules than those set out in Bill C-54. However, we recognize that political and constitutional realities require compromise, and it is on this basis that we are urging you to see that the Bill is passed without any additional exceptions for certain business sectors or investigative agencies.
We are particularly concerned about proposed new clause 7(3)(c.1). This amendment would place an organization in the untenable position of having to choose between safeguarding the privacy of its clients/employees (which is the thrust of Bill C-54) and being a good corporate citizen by cooperating with law enforcement agencies. Police do not need this leeway – they can always access personal information through the use of warrant procedures.
Given the hidden nature of most privacy invasions, it is essential that the Privacy Commissioner be empowered to conduct random audits of private organizations. If anything, para.18(1) of the Bill should be strengthened by permitting spot checks. It certainly should not be weakened.
We are also very concerned about the suggestion from some quarters that Bill C-54 creates too onerous a regime for personal health records. Indeed, health records need stronger protections than those in Bill C-54. Until we have those stronger protections, health records should not be excluded from Bill C-54.
The urgency of the need for private sector data protection laws for consumers and employees cannot be overstated. Quebec is the only Canadian jurisdiction to have enacted such legislation – other Canadians deserve similar protections.
It is no coincidence that Bill C-54 has received wide-ranging support from responsible industry associations, independent experts, consumer advocates, and civil liberties groups. Effective data protection laws will level the playing field for responsible businesses vis-a-vis their non-compliant counterparts, will improve consumer confidence in electronic commerce, and will enhance trade opportunities with Europe. It is in everyone’s long term interest that reasonable ground rules for the management of personal data are set out now. Those rules must be based on the fundamental right of individuals to exercise control over their personal information.”
For more information on Bill C-54, see the PIAC website at http://www.piac.ca. You can access the Bill at the Parliamentary website http://www.parl.gc.ca, under “Parliamentary Business”, and then “Government Bills”.

CRTC Holds New Media Hearing

During the Fall of 1998 and into the early part of this year, the CRTC held a public proceeding on New Media. The CRTC held the proceeding to consider: 1) how new media may affect the regulation of traditional broadcasting undertakings; 2) the degree to which new media may be broadcasting or telecommunications activities, and, if they do, how they should be treated with respect to the objectives of the respective Acts; and, 3) to identify broader policy issues to the federal government. PIAC and the Action Réseau Consommateur of Montreal jointly intervened in this proceeding (PIAC/ARC). PIAC/ARC argued that new media should not develop in a wholly unregulated environment. Decision making by companies about new product development and availability will be informed by their own interests. Broader economic, social and cultural goals, as in the past, will require some degree of government policy or regulation to ensure their realization with new media products and services. Many intervenors argued that new services, such as the Internet, should or could not be regulated. PIAC/ARC argued that while this may be the case in the near term, there may be occasion in the future for some selective regulatory interventions, such as dealing with the issues of market power and concentration of ownership. PIAC/ARC also argued the need for policy clarification by the federal government about whether the Internet and some aspects of content, such as public information and services, are to be considered essential services, like basic telephone, or optional services. Such clarification is becoming increasingly important if the intent of government is that Canadians’ will need to be able to access and use up-to-date communications, such as the Internet, in order to be full participants in an information-based society. PIAC/ARC argued that as part of this policy vacuum, issues relating to the means and cost universal access from the home, and the creation of a diversity of commercial and non-commercial content to meet economic, social and cultural needs must be addressed. Specific recommendations by PIAC/ARC included:
– the CRTC should conduct periodic reviews (3 years) to determine which services and content are essential;
– the government of Canada should clarify its policy position on whether the Internet and some forms of new media are essential services;
– telecommunications service providers should be required to make contributions of up to 5% of gross annual revenues to create a fund. In priority, the purposes of the fund would include: facilitating technical access to basic telecommunications services in high cost areas and individual affordability; to sustain not-for-profit community-based Internet access services; to develop not-for-profit Canadian local, regional and national content; and to augment other Canadian content new media funds.
It is expected that the CRTC will issue a report on the New Media proceeding in June of this year.

PIAC Working with Industry to Develop Code of Practice for E-Commerce

Over the past several months, PIAC has been actively working with industry representatives, through a multi-stakeholder group chaired by the Office of Consumer Affairs, Industry Canada, to develop guidelines for the conduct of on-line commerce. We are close to finalizing a set of consumer protection principles that will include:

• Provision of full, accurate and timely information by on-line vendors, in respect of their products and services, as well as their location and identity;
• Consumer control over contract formation (via a triple-click confirmation process, for example);
• Consumer control over the collection, use and disclosure of their personal information (including control of spam, or unsolicited commercial e-mail);
• Security of electronic transactions and electronically stored data;
• Protection against consumer liability for unauthorized transactions;
• Consumer access to inexpensive, accessible, effective dispute resolution mechanisms; and
• Improving consumer awareness of the risks in electronic commerce and of ways in which to minimize those risks.

Given the global nature of electronic commerce, the effectiveness of domestic regulation is limited. That is why we are working with the Canadian government as well as consumer groups in Canada and other countries to develop international standards for consumer protection. Efforts are currently underway within the Organization for Economic Cooperation and Development (OECD) to develop a set of principles for consumer protection in electronic commerce, similar to those in Canada, for use by all OECD member countries. International cooperation in this area is essential in order that global commerce benefits consumers as well as businesses.

Benefits of Long Distance Competition in Question

When it comes to savings on long distance, residential consumers have been the poor cousins of big business users, according to a new study by the Public Interest Advocacy Centre (PIAC).
Big business long distance rates have plummeted between 1992 and 1996. In contrast, the study shows that many residential consumers, as much as half the population in some regions of the country, were still paying the same high rates in 1996 as they were in 1992. Less than a quarter of Canadians have reaped the full price benefits of competition by subscribing to an alternative service provider. When basic local service is taken into account, the situation is even worse, since most Canadians’ phone bills have actually gone up since long distance competition started.
PIAC’s study suggests that the recent price war may not make long distance savings available to many more residential consumers. In a market in transition from monopoly to competition, consumers have trouble benefitting from the discounts offered. The study points to low levels of consumer knowledge, aggravated by complexity and lack of comparability of long distance pricing, as key factors in consumer inertia. PIAC is calling upon the CRTC, and the Ministers of Industry and Heritage to take measures to ensure that residential consumer benefit more over the next five years of long distance competition than they did over the last five years. Public information programs, and better tracking of market indicators, are among the measures that PIAC is advocating. Copies of the report in English (100 pages) are available at $20 each.

Improving Internet Access: The Canadian Approach

hilippa Lawson
Public Interest Advocacy Centre, Ottawa, Canada

Paper for “Computers, Freedom and Privacy: The Global Internet”

The Internet holds great promise as a facilitator of social and economic development. Indeed, we are already experiencing the tremendous empowering effect that it can have on otherwise disadvantaged individuals and groups: witness, for example, the successful campaign by citizens’ groups to derail the Multilateral Agreement on Investment, the growth of community networking, and the explosion of individual websites. The potential of this new medium to empower citizens, as well as reduce government expense, improve delivery of services, and enhance competitiveness, has not escaped notice.
But with this great promise comes danger. If Internet access remains a preserve of a social elite, existing social disparities will only widen. If we fail to achieve universal access to the Internet, those who are already privileged will be further empowered, while those who lack basic amenities such as telephone service will be further disadvantaged.
In the new knowledge-based economy, democratic governments are recognizing the importance of universal access. In the race for global competitiveness, they understand the benefits of a connected and knowledgeable workforce, a vibrant electronic marketplace, and a citizenry able to use information and communications technologies in new and innovative ways. As we come to depend increasingly upon electronic communications, the realization of democracy comes to depend upon universal access.
Unfortunately, universal access to the information highway is one of those things that the market cannot achieve without government intervention. Left to its own devices, the market provides amply for those of us with financial resources, but offers limited access to those without. It provides abundant and cheap service to urban dwellers, but offers limited and expensive options to rural and remote dwellers. The evidence of this disparity in access is most stark at the international level, but it is also present domestically.
Allowing market forces alone to shape the Internet is undesirable for a second reason: it paves the way for domination of the electronic media by commercial interests. If it is to be meaningful, access must be to more than an electronic marketplace. The “electronic commons” must include public space, within which citizens can share ideas and information freely, away from commercial pressures and above the hubbub of the marketplace.

Canadian Statistics

Canada is proud of its achievements in respect of telephone service penetration. Under a system of monopoly regulation, we have achieved an overall penetration rate of over 98%, excluding Indian reserves and the far north.(1) This rate falls to 94% for households at the lower end of the income scale. Penetration of cable TV is also high in Canada, with 74% households subscribing (65% of low income households).(2)
Canada is also one of the most connected nations in the world: recent surveys indicate that 40%-55% of Canadians have Internet access, and that over 25% of Canadian households have Internet accounts.(3) Not surprisingly, this rate is significantly lower for low income households (16% vs. 46% for higher income), the less educated (12% vs. 44% for University educated), and seniors (6% vs. 39% for those under 25 years).(4)
Low income Internet users tend to rely more on access from school and public sites, while higher income users access the Internet from home and work. Rural dwellers are less likely to have access from the home than are urban dwellers.(5)
Recent surveys indicate that the rate of growth of Internet access in Canada is levelling off, although use by those connected continues to grow.(6) If true, this is a disturbing trend. Efforts are clearly needed to avoid the entrenchment of existing social disparities in Internet access.

Market Developments

The telecommunications industry in Canada is in transition: competition in the provision of long distance service is vigorous, while competitors for local telecommunications service are just getting off the ground. Long distance rates have plummeted, while local rates have more than doubled since competition was introduced. Wireless competitors are attracting more and more consumers, although they are not yet considered a substitute for basic wireline service.
The market for Internet access in Canada is also booming. Recent indications suggest that there are 700-800 Internet Service Providers (ISPs) in Canada, of which 100 account for 90% of users and 80% of traffic.(7) Some of the largest Canadian ISPs are affiliates of telephone companies. In addition to commercial ISPs, Canada has a variety of non-profit, community-based networks. For example, Web Networks, a non-profit online community of over 3500 Canadian non-profits and social activists, offers full service Internet access for a monthly fee.(8) At the other end of the spectrum, dozens of local community networks offer low fee or free access to community information, services and discussion groups as well as the Internet. In 1997, two thirds of Canadian Internet subscribers obtained service from an independent ISP, 21% from the telephone company ISP, 5% from the cableTV ISP, and 4% from community networks.(9)

Community Networks

Community networking is a growing movement in Canada, with approximately 50 community networks now in operation, and over 100 more in development. According to Telecommunities Canada, the national voice for community networks, close to half a million Canadians have been or are members of a community network, while many more access the information or use the services provided by these grassroots organizations. It is noteworthy that community networking in Canada predates commercial ISPs.(10)
Community networks are defined generally by their local focus, non-profit status, non-commercial nature, open membership, equitable (in many cases, free) access policies, partnerships with other community-based organizations, provision of a broad range of information of interest to the local community, and encouragement of the free exchange of ideas and information among members. They permit low speed, text-based access as well as graphical interfacing, so that citizens with early model computers and modems can still access the network. All community networks share the primary goal of providing access to those who cannot otherwise afford Internet access. They tend to rely heavily on volunteers.
The most advanced community networks in Canada offer access to an extensive array of local information and services, as well as access to the WorldWideWeb. They provide training in computer use, facilities for those in need, e-mail service, discussion forums, and much more.
Partnerships with other community organizations form the basis of much service and information delivery on the network, while corporate partnerships bring valuable donations of equipment and services. The National Capital Freenet (NCF), for example, benefits from the donation by Mitel Corporation of its telephone lines and Internet connectivity after business hours. The NCF’s partnership with local libraries means that it can offer some 61 public access terminals throughout the city of Ottawa.
Some community networks rely primarily on government grants for their operations, others on donations, and others on membership fees. Financial sustainability is an ongoing issue, especially for those community nets wishing to maintain a policy of free access to this non-commercial electronic space.

Regulatory Developments

The Canadian Radio-Television and Telecommunications Commission (CRTC) is under a statutory mandate to regulate the provision of telecommunications services where market forces cannot be relied upon “to render reliable and affordable telecommunications services of high quality accessible to Canadians in both urban and rural areas in all regions of Canada”.(11) The CRTC has overseen the introduction of competition in both long distance and local telecommunications markets, and is currently examining regulatory issues arising out of new media such as the Internet.(12)
Long distance rates have been deregulated, and funds have been established for the continued subsidization of basic local residential telephone rates in a competitively neutral manner.(13) In light of rising rates for basic local service, the Commission is monitoring telephone penetration and disconnection rates, with a view to establishing discount rates for low income households (similar to the Lifeline and LinkUp programs in the USA) should the need arise.(14) Selective regulation of the telecommunications market will continue to be needed in order to address systemic market failures and inadequacies that threaten to impede access.
Competition should be allowed to flourish where it can best achieve our ultimate goals of affordable, universal access. But this doesn’t mean turning a blind eye to the market. Indeed, governments must guard vigilantly against anti-competitive behaviour and harmful mergers in the markets for computer hardware and software, as well as Internet service provision. The outcome of the Microsoft anti-trust case, for example, will have important ramifications for access. Healthy competition in the markets for computer products is essential in order to avoid monopolistic pricing and other practices harmful to consumers.
The CRTC has established regulatory safeguards against anti-competitive behaviour by incumbent firms and other market players, while the Bureau of Competition – Canada’s anti-trust authority – reviews mergers and investigates and prosecutes violations of the Competition Act. Both bodies are currently dealing with complaints of predatory pricing of ADSL-based retail Internet access by affiliates of Bell Canada.(15)

Government Initiatives

The Canadian government, eager to capitalize on our comparative advantage in the development and use of communications technologies, has publicly committed itself to making Canada the most connected nation in the world by the year 2000. The government’s agenda of “Connecting Canadians” includes a number of strategies for improving Internet access, and relies upon funding partnerships with the private sector as well as other levels of government.
Under the Community Access Program (CAP), 5000 rural and remote communities and up to 5000 urban centres are to have public Internet access sites by early 2001. The program is designed to provide Canadians with affordable public access to the Internet and the skills to use it effectively. Matching grants are provided to local non-profit organizations who then act as “on-ramps” to the Information Highway. Close to 4,000 CAP sites have been established to date, most in libraries, schools or community centres. Each site is staffed with trained personnel.
All CAP sites provide Internet access to the public, some for free and others for a fee. Terminals also typically offer access to government services, educational resources, and in one quarter of cases, public e-mail. Training in computer use, Internet navigation and/or web page development is offered by three-quarters of CAP sites.
CAP sites have been successful in raising public awareness about the Internet, and in providing access and training to citizens in a number of communities. However, their sustainability in the absence of continued government funding is questionable. One third of CAP sites recently surveyed in New Brunswick indicated that they would have to close immediately if government funding were withdrawn. Only 18% thought that they could remain in operation without cutbacks (e.g., to training services). Efforts are therefore underway to develop models for the sustainability of CAP sites. Approaches include user fees, private sponsorships, and partnerships with other community organizations, educational institutions and government programs (e.g., employment offices) with a view to reducing cost. The imposition of user fees is particularly controversial as it risks defeating the main purpose of community access sites: to provide a means of access to those who can’t afford a home computer.
SchoolNet provides Canadian schools and public libraries with on-line access to Internet-based resources. The government aims to have all of Canada’s 16,500 schools and 3,400 libraries connected to the Internet by March 31, 1999.
What it means to be “connected”, however, is not at all clear. While some schools have been able to take advantage of this new resource, most haven’t yet determined how or why they want to use the Internet. In a time of significant cutbacks to education budgets, most schools don’t have the money to train teachers in Internet usage, or support staff in equipment maintenance. Teachers have yet to be provided with the necessary training for this program to achieve its potential.
As part of the SchoolNet program, Computers for Schools provides Canada’s schools and libraries with surplus computers and software from governments and the private sector. In workshops set up across the country, students are given on-the-job experience refurbishing computers for use by schools and libraries.
VolNet is a new program jointly administered by government, private and voluntary sector interests. It aims to connect 10,000 charitable and non-profit organizations to the Internet by early 2001, thereby helping them to play a stronger role in Canadian society. In addition to Internet access, the program will provide recycled computer equipment, Internet skills development, free or low-cost software, and electronic information.
Under the Smart Communities initiative, the federal government seeks to assist communities in the effective use of information and communications technologies with a view to transforming the social and economic circumstances of the community. The goals of this program are lofty, and include empowering citizens, stimulating economic growth, and improving education and health care. It is expected that financial and technical assistance will initially be provided to selected communities across the country, with a view to establishing 20 demonstration “smart communities” by the year 2000.
This program appears to be a response by the Canadian government to the international “Smart Communities” movement, to which other countries have already dedicated substantial government resources. Canada does not want to be seen as lagging in any respect. However, it has been noted that many of Canada’s community networks are already fulfilling the role of “Smart Communities”. It is unclear how this new initiative differs from the grassroots community network movement, except that it involves more “top-down” direction, at least initially. The Report of the Panel on Smart Communities to the Canadian government stated:
Given the innovation already apparent among Canadian communities, it is fair to question the need for any kind of national overview of plan. Indeed, it is reasonable to assume that over the next few years, left to their own devices, Canadian might well see the blooming of several hundred community initiatives. However, rather than taking a laissez-faire approach, Canadians should actively promote the adoption of best practices across and beyond communities to share knowledge and experience more quickly and effectively.(16)
It remains to be seen how the “Smart Communities” initiative will interrelate with existing community networking initiatives.
Provincial governments have their own array of programs designed, in part, to improve access by their citizens to the Internet. For example, Ontario’s Telecommunications Access Partnerships “provides assistance to encourage businesses, economic sectors, public institutions and communities to work together in innovative ways on information highway projects”. In British Columbia, an “Electronic Highway Accord” among government, industry, labour and community groups sets out a vision, guiding principles, objectives and targeted outcomes, with a view to providing all British Columbians with “affordable electronic access to networks and services enabling them to communicate, learn, be entertained, work, and prosper in an information-based society”.(17) Under the guidance of this Accord, the B.C. government has provided significant financial assistance to community networks and related initiatives. Other provinces have similar programs.

Public Interest Group Proposals

A number of academics and public interest advocates concerned about access in Canada have developed a proposal for a “National Access Strategy”,(18) which builds upon the initiatives described above. This coalition views the government’s connectedness agenda as too narrow, leaving “serious gaps in terms of the conception of access, who is served, the consultative process, formative assessments, and governance.” Their proposed strategy focuses on access as a multi-dimensional phenomenon aimed at empowering citizens, especially those who are currently marginalized. It emphasizes social discourse rather than service delivery, communication rather than commerce, and equity rather than efficiency. It calls for much greater government support of non-profit community initiatives to improve access, and the establishment of an independent, public interest body responsible for implementing the national access strategy.
Other public interest advocates argue that the efficiency, effectiveness and sustainability of access initiatives can be improved through greater use of partnerships, both within and outside of government, but that ongoing government funding of community initiatives is both necessary and appropriate.(19)

Conclusions

There is a great deal happening in Canada, both at the grassroots and the government policy level, to improve Internet access. Community networks and libraries have been in the forefront of this movement, while governments are providing significant funding, direction, training, and other resources for the expansion of access at all levels. Key issues that remain to be resolved include the sustainability of government-funded initiatives, the provision of training and resources in order that schools can take advantage of new computer facilities, and the preservation of non-commercial, public space on the Internet to which all citizens have access. Canada has set an ambitious goal for itself: to be the most connected nation in the world by the year 2000. We’re well on the way, but there is still much work to be done.
1. Penetration in many northern communities and Indian reserves is much lower.
2. Statistics Canada, Household Facilities by Income and Other Characteristics, 1997; Cat. no. 13-218-XPB, Table 1.0.
3. Comquest Research, Latest Canadian Internet Trends, Feb.1999 (www.comquest.ca); Ekos Research, The Information Highway and the Canadian Communications Household, Dec.1998.
4. Ekos Research, op cit.
5. Comquest Research, op cit.; Ekos Research, op cit.
6. Comquest Research, op cit.
7. Canadian Association of Internet Service Providers (www.caip.ca).
8. See www.web.net
9. Ekos Research, op cit.
10. The National Capital Freenet was formed in 1992, with the Vancouver Community Network and the Chebucto Community Network (Halifax) coming on stream in 1993.
11. Telecommunications Act, S.C. 1993, c.38; s. 7.
12. See the CRTC website (www.crtc.gc.ca) for information on past and current proceedings.
13. The existing Funds only operate in territories where competition has been introduced. The CRTC is currently deliberating on the appropriate model for subsidizing service delivery in high cost areas within and outside of these territories. In addition, the current system of collecting contributions only from long distance providers (based on minutes sold) is being reconsidered.
14. Anti-poverty, seniors, and other consumer groups have argued for some time now that affordability of basic phone service is already a serious problem for large numbers of Canadian households, and that measures such as a targeted subsidy are needed now. They point out that penetration rates are misleading, given the essential nature of the service: people can’t afford the price, but at the same time, they can’t afford to do without telephone service. The most recent Canadian statistics indicate that app. 126,000 Canadian households are doing without telephone service because they can’t afford it.
15. Competing ISPs argue that Bell is abusing its market dominance by offering ADSL-based Internet access to retail customers for a fraction of the cost to either Bell or its ISP competitors. It remains to be seen how this dispute will be resolved.
16. Nov. 1998, p.10 (see http://smartcommunities.ic.gc.ca)
17. www.ista.gov.bc.ca/pubs/accord.html
18. “Key Elements of a National Access Strategy: A Public Interest Proposal” (August 1998); www.fis.utoronto.ca/research/ipirp/ua/
19. See Andrew Reddick, “Community Networking and Access Initiatives in Canada” (PIAC, 1998).
 

Achieving Universal Access to the Internet: An Impossible Dream?

University of Ottawa, Department of Communications Speaker Series on Communication, Social Justice and the Common Good

Philippa Lawson
March 18, 1999
I work for the Public Interest Advocacy Centre, which is a small non-profit organization based here in Ottawa, devoted primarily to representing the residential consumer interest in the regulation of public utilities and the provision of essential services. PIAC has been around since the mid-70’s, and has been particularly active in the regulation of telecommunications services during this time.
Let me tell you a bit about my clients: they live on low, often fixed incomes, which do not leave a lot of room for discretionary spending. A lot of them are seniors, who have difficulty adapting to new technologies. A lot are single parents, struggling to raise children while making ends meet. Many are unemployed, and looking for work. A disproportionate number cope with physical disabilities, and like many seniors, find it difficult to get out of the house.
These are the people who would benefit most from being electronically connected, but they are also the people for whom a computer with Internet connection is a luxury which falls outside their budget. As a result, they fall, disproportionately, into the category of information “have-nots”, which just compounds the social marginalization they already suffer.
My work on behalf of these people over the past eight years has focused on maintaining the affordability of basic telephone service. This has been a major battle. The forces of competition and globalization, we found out, are insurmountable. However, we have won a few skirmishes, and in the process, obtained concessions that should prevent, or at least mitigate, some of the excesses of free reign market forces. Yes, basic local phone rates have doubled since competition was introduced, but a mechanism is in place to limit further increases, the number of homes without phones is being monitored with a view to potentially establishing a targeted subsidy for low income households, and various rules are in place to protect consumers from abusive behaviour by marketers.
Until recently, groups like the National Anti-Poverty Organization did not consider Internet access to be an essential service – by essential, I mean necessary for full participation in society. In fact, I can’t say that they consider it essential right now, in the same way that phone service is essential, but they do recognize the speed with which this new electronic medium is catching on, the tremendous potential that it holds for their constituents, and the risk of increasing marginalization that unequal access to the Internet poses for their already disadvantaged members.
As a result, they are calling on the federal government and the CRTC to ensure, through regulatory mechanisms or otherwise, that all Canadians have access to a defined set of basic telecommunications services, including, but not limited to single line service (as opposed to party line service), flat rates for local calling and local access to the Internet at speeds that meet contemporary standards.
I’m quoting from a document entitled “Consumer Charter for a Connected Canada” – a manifesto of sorts signed by over 150 organizations from across the country, and presented to the CRTC and the government during the CRTC’s recent proceeding on high cost areas. The Charter calls for comparable rates and quality of service in rural and urban areas. It calls for affordable prices for “basic service”, and for public input into an ongoing process of determining what constitutes “basic service”. And it calls for subsidies to achieve these ends.
One thing that these groups share is the knowledge that market forces tend to work in favour of the already privileged and to the detriment of the vulnerable; that one of the most important roles of government in the information society is to intervene in proactive ways so as to harness technology and market forces for the benefit of society.

Access to What?

The Internet is not easy to describe, because it is sui generis – it’s a completely new thing.
When radio was first introduced, it was referred to as “wireless telegraph”. People were groping for familiar concepts that they could attach to it. It took some time before everyone understood what radio was. Similarly with the Internet: we’re still getting used to the concept.
I initially used the term “information highway” in my title. But like “wireless telegraph”, it’s an inadequate analogy. What we are talking about is far more than a route – it’s also the destination. It’s not just a mode of transport – it’s also the act of driving. It’s about more than information – it’s also about communication.
The Information Highway Advisory Council characterizes the Internet as “rather than a highway, ….a personalized village square where people eliminate the barriers of time and distance and interact in a kaleidoscope of different ways.” Others have referred to it as an “electronic commons”. But we’re not just talking about public space here, although that might be exactly what we need to focus on. We’re also talking about individual and commercial private spaces, which can be accessed through this common medium.
Certainly, the highway metaphor doesn’t capture the participatory nature of this medium, nor the fact that information exchange and interactivity on the Net has a cumulative, multiplier effect: the whole is greater than the sum of the parts. Nor does it capture the multiple roles which a single user can play: as author and reader, producer and consumer, teacher and student.
The problem is that there doesn’t seem to be a term that encapsulates what electronic networks can do and are doing for people. There doesn’t seem to be a perfect analogy for the range of applications that the electronic media present: e-mail, listservs, websites – both commercial and non-commercial, discussion groups, government information and services, consumer transactions, distance education……
So let’s just use the term “Internet” – that’s what it is. We’re reaching the stage where we don’t need to analogize.
Here’s what people are using the Internet for right now: [show slides with survey results]

The Importance of Access

Why is access to the Internet so important?

1. The value of any network increases with the square of the number of individuals connected. This is what makes networks unique among other utilities like roads, transportation, electricity, etc. – their economic value depends upon their coverage. Imagine if we had a number of separate telephone networks, each an entity onto itself. Any one network would be of limited value, since it would allow you to reach only a limited number of people. So, the more people hooked up, the more valuable the network is to its existing subscribers. (This applies to users both as consumers and producers: commercial entities benefit from universal access as well.)
2. Telecommunications links are particularly valuable to those living and working in rural and remote areas, where people often have no other option for communicating with family, friends, government agencies, or service providers, or for conducting business. Good telecommunications links allow for the revitalization of rural communities, through the opening of new economic opportunities, as well as the delivery of new educational and health care services
Native peoples living in Canada’s north have long cited reliable, affordable communications facilities as a top priority in order for their cultural and economic survival. A representative from the Eastern Arctic told the CRTC in its hearings last spring that:
…the basis of the whole Government of Nunavut and our ability to compete in a global economy is going to be dependent on telecommunications services. Though right now people may be focused on basic services, the whole future, the one thing we have more than anything else is distance and isolation. Telecommunications will allow us to bridge those.
In fact, the CRTC heard over and over again from people in rural and remote areas how important it is to their communities and economies that state-of-the-art telecommunications service, including Internet access, be provided at affordable rates.
As the Mayor of Yellowknife stated,
One of the great ironies of living and working in the North is that its remoteness and challenging environment have resulted in both the highest cost for and greatest reliance upon telecommunications in all of Canada.
If made available at affordable prices to people in rural and remote areas, the Internet has the potential to significantly reduce regional disparities.
It also has the potential to bridge distances, both nationally and internationally. While language differences will continue to be an obstacle, increased communication between people of different cultures and nationalities can contribute to global cooperation and international understanding. People with common interests worldwide can share their knowledge and enthusiasm. Families can maintain close links over large distances. The world can be a better place.
3. The most important reason why we should be working to achieve universal access to the Internet is its potential for individual and community empowerment. Not only can Internet access break down regional barriers, it can also break down social barriers. Individuals can, at minimal cost, set up websites, promote themselves, advertise and publish their work. People suddenly have vast quantities of information at their fingertips, an unprecedented opportunity for personal growth and learning. With e-mail, we now have a revolutionary new way of communicating. This is about much more than consumerism (assuming that commercial interests don’t take over the Internet); it’s about empowering people in their social roles as citizens and community members, as well as in their economic roles as producers and consumers.
I’m sure that you’re all familiar with that saying “The great thing about the Internet is that no one knows you’re a dog.” Well, it’s been pointed out that on the Internet, no one knows that you’re homeless. In fact, homeless people are using free e-mail and Internet access at public sites like libraries to inform themselves, to communicate with others.
Listen to what this senior has to say about the National Capital FreeNet:
“As a senior, a lot of time housebound, my computer is my best friend… to contact my friends, to learn and keep up with the world… and as a retired teacher, I also communicate with the schools and write to the students who have written on their school’s page….I enjoy my computer and the Internet… as a friend… as an escape when I cannot go out… to keep my mind working, to learn, to continue to learn… while I am still alive.”
But just as the Internet can break down social barriers, it can further reinforce them. The knife cuts both ways: if we don’t achieve universal access, if Internet access remains a privilege of the social elite, we risk exacerbating existing social disparities and creating an even more polarized society of “information haves” and “information have-nots”. The stakes are high.
It’s another story at the level of communities – and I don’t just mean geographic communities. Here, the Internet is proving itself to be a tremendously powerful tool of influence. It has been said that “the easier it is to communicate, the faster change occurs”. Advocacy groups can now share information, network among themselves, and mobilize their members like never before.
Look what happened to the MAI when the word got out over the Internet. Look what happened to Suharto, when students used the Internet to organize their movement for democracy in Indonesia. Look what has happened to Pinochet, now that human rights groups can mobilize in support of the Spanish prosecution. These are wonderful examples of citizen empowerment, that were made possible in large part by the Internet.
Individual empowerment, citizen participation and advocacy, community development – THIS is why access to the Internet is so important.
But there is an awareness hurdle ahead of us. Significant proportions of Canadians don’t appreciate the benefits that Internet access can bring them. According to a 1997 survey of Canadians by Ekos Research, almost half of those without a computer at home cited as the main reason that they didn’t need one, or weren’t interested in having one. Over half of those without Internet access from home cited lack of interest or need as the main reason. One quarter of non-Internet users in Canada think that the Internet has no information of interest to them. These people are primarily older, lower income and rural. In some respects, they are the very people who could benefit most from the technology.
More recent statistics show a disturbing trend: since the Fall of 1996, the percent of Canadian adults with access to the Internet (from home or work) has grown from 37% to 55%. But, it’s stayed at 55% for the last several months – we seemed to have reached a plateau in access. At the same time, those connected (largely upper income, urban, young and male) continue to increase their usage.
Lest we get too excited about the potential of the Internet, I feel obliged to point out a few sobering statistics. These shouldn’t really surprise you:
51% of weekly web users in Canada (26% of Canadian adults) say that they get frustrated. (When I told my husband this, he asked “what are the other 49% smoking?”)
According to the Ekos survey, a significant minority (42%) agreed with the statement that “the Information Highway is destroying human relationships with its emphasis on keyboards and impersonal contact”.
The same proportion (43%) said that they actually knew “some people who spend so much time at home using the Internet and other computer activities like games, that it has had a negative impact on the quality of their family life”.
The Internet has tremendous potential as an agent of social change, but this potential is not unmitigated.

The Meaning of Access

A great deal of work has been done by Leslie Shade, Andrew Clement and others on the conceptualization of access: breaking the concept of access down into its various elements, and thereby broadening the discussion beyond mere connection to include content, literacy and governance. I’m going to assume that you are familiar with the seven layer or “rainbow” model of access that Leslie and Andrew developed, and instead give you a slightly different, but complementary, analysis.
I see access as having five constituent elements: availability, affordability, accessibility, operability, and governance. In each case, we are talking about the individual not just as a consumer, but also as a producer; not just as a receiver, but also a provider. Interactivity is fundamental to our concept of access.

1. Availability

Many people – most people worldwide, and some within Canada – do not even have available to them a means of connecting to the Internet. I’ve referred to a recent CRTC proceeding on high cost areas – we found out, in that proceeding, that many Canadians, particularly in northern areas, don’t even have phone service, not because the rates are unaffordable, but because the service is simply not available. Many more with telephone lines still don’t have access to the Internet, whether because of poor line quality or lack of a local Internet service provider (ISP).

2. Affordability

Providing a means of physical access is of limited value unless people can afford to take advantage of it. We need to find ways of achieving affordable access without stifling competition among service providers. Postal service used to be our primary method of distance communication. Telecommunications, and increasingly the Internet, have taken over that role. Just as rates for postal service were regulated to be equitable and affordable for all Canadians, rates for basic telecommunications service, the platform on which Internet access is built, need to be maintained at equitable and affordable levels.
But the physical network is not the only expensive part of this equation. You need a computer and a modem in order to connect with the Internet. You need software. You need an network access provider. No wonder that there is a “digital divide”! No wonder that half as many low income Canadians use the Internet as do higher income Canadians. No wonder that less than half as many low income Canadians have a computer in the home, and only a third as many have Internet access from the home. No wonder that 38% of Canadians without a home computer cite cost as the main reason. (Interestingly, only 20% of those without Internet access cite cost as the main reason).
Affordability is an issue at every stage: computer hardware prices, software prices, rates for the underlying facilities over which the Internet will be reached, and rates charged by the gatekeepers to the Internet.

3. Accessibility

The service may be available and affordable, but if it’s not designed so that everyone can use it, including those with disabilities, then we will be once again further marginalizing an already disadvantaged population. Devices need to be easy to use – for everyone. And speaking from personal experience, we need to do something about repetitive strain injury.

4. Operability

Computers, interactivity, e-mail, the Web – it’s a whole new language, a completely strange and unfamiliar medium, which intimidates people (at least, adult people). Concepts such as websites, search engines, newsgroups, modems, Internet Service Providers – these are all foreign to many people. Sure, some people can pick it up fast, but I can tell you from experience that many more have real difficulty.
Take my father: even after three or four years of writing almost daily letters to the editor on his computer, I’m still not sure that he understands the concept of files and directories. He’s become a big e-mail user, but has barely ventured onto the Web – it’s just too much: too much information; too much frustration, in his view.
And that’s assuming that everything is working properly. Things go wrong far too often. It’s a legitimate question whether computers in the workplace have actually improved productivity. Think of all those files you’ve lost, time you’ve spent trying to access e-mail attachments, or frustration you’ve had dealing with viruses. Why can’t my colleagues with Microsoft Word read my documents in WordPerfect? Why doesn’t the help menu ever have what I’m looking for? Why do my return e-mails to spammers always come back “undeliverable”?
A key element of access is overcoming these obstacles to frustration-free usage. Computer systems and programs will have to become more inter-operable, less prone to breakdown, and more dummie-proof, if the vast population of non-users is to be convinced.
In the meantime, training and support will continue to be an critical piece of the puzzle. People need to be taught this new language: it is not going to come naturally.

5. Governance

Finally, and in some ways most importantly, is the issue of governance. Like availability, affordability, accessibility and operability, the issue of governance arises at all levels of access: at the level of the markets for computer hardware and software; the provision of underlying facilities; the provision of Internet access; and the Internet itself – Who controls domain names? How are technical standards and protocols decided? Who ultimately controls the Internet?
In each of these areas, there must be a structure of governance that is accountable to the public, that has as its overriding concern the public interest, however elusive that concept might be.
Looking first at the markets for access services and devices, we have learned over and over again the impermanence and limitations of competition and market forces. Regulatory bodies such as the Competition Bureau and the CRTC are essential in order to cultivate healthy competition, to guard against anti-competitive mergers and business practices, and to fill in the gaps that market forces leave open.
The Microsoft case currently underway in the US, in my view, is a good example of governments acting in the public interest to promote real, sustainable competition in an important market. The CRTC’s recent ruling requiring service providers to contribute toward the subsidization of rates in high cost areas is another good example of appropriate regulatory intervention.
And the process followed by the CRTC in coming to its decisions is public and open. The CRTC’s recent proceeding on New Media is a great example of appropriate public consultation, of including the public in policy-making right from the beginning.
Regulation and governance pose much more difficult issues at the international level, where the predominant ethos is one of laissez-faire, and where multinational corporations seem to be running the show. We must beware that our national governments don’t bargain away in trade negotiations their rights to take regulatory measures designed to improve and extend access.
Turning to the Internet itself, things get messier. We don’t have existing structures or even models of governance appropriate to this strange creature. We have to come up with something entirely new. The prevailing belief out there seems to be that the Internet is a well-functioning anarchy, and that we can and should just let it be. I’d like to believe that too, but unfortunately, the facts tell a different story. The are, in fact, a number of control points which provide tremendous power over the Internet to those in charge.
Until recently, the US government was in de facto charge. It provided the brains and the funding behind the various ad hoc processes and structures in control of the Internet. That has changed. A new, non-profit organization called ICANN (Internet Corporation for Assigned Names and Numbers) has been formed to take over the centralized decision-making functions necessary to the operation of the Internet. This private-sector model of Internet governance has been endorsed by 17 national governments, including Canada, who take the position that solutions to the fast-moving evolution of the Internet must be market-led.
It remains to be seen how the public interest will be served by a private body with no clear lines of accountability. One can’t help but be reminded of the IOC and its recent shananigans. Even more disconcerting is the potential for private commercial interests to take over what was a model of user participation and cooperative processes and procedures.
I agree with those that advocate moving the ICANN process to an international agency representative of and accountable to all those communities that use the Internet, and that make up the global public interest. We need to ensure that whatever governance processes develop, they are subject to influence by the full range of public interests worldwide and are not beholden to the interests of a dominant country or stakeholder sector.
So, that’s what I mean by “access”.

“Universal Access”

Which still leaves open the question of what we mean by “Universal Access” – where’s the limit? How much are we willing to spend to hook up those in really isolated locations? to bring broadband access to every home? How far do we go pushing this on people who aren’t keen?
At some point, the cost/benefit scales shift. This is a difficult call to make, and I can tell you that no one wants to make it. I suspect that it will continue to be made by default, and that we will have enough trouble extending access to those in need that we won’t have to worry about overextending. The good news is that costs continue to decline, and as they do, the limits of what is economically feasible and publicly acceptable continue to be expanded.
In the meantime, the Canadian government is doing the right thing under its agenda of “Connecting Canadians”, by concentrating efforts on supporting community initiatives and by providing Internet access in public places like libraries and community centres. Recent surveys show strong public support for these initiatives. They also show that a slight majority of Canadians would consider going to a community access site in order to use the Internet free of charge.
It’s also important not to get so carried away with access initiatives that we lose sight of the context. Many people don’t want access – they have cottages precisely to get away from it all. For many, the last thing they want to do after a day of staring at a computer screen developing carpal tunnel syndrome at the office is to come home and do more of the same. There’s no need to subsidize home access for these people, and we certainly shouldn’t be pushing something on them that they don’t want.

Conclusions

Is universal access an impossible dream?
I don’t think so, at least not in Canada. Relative to most other countries, we are well on the way – we have high telephone penetration rates, high cable TV penetration rates, and relatively high Internet access rates. Our government has made a serious commitment to connecting all Canadians, and is putting a lot of effort into seeing this happen.
But there’s a lot more work to be done.
We need to focus on the less privileged end of the social spectrum, and direct government subsidies and programs to the most needy.
We need to follow up on the provision of equipment and connections, with adequate support and training.
We need to create sustainable community access initiatives which cultivate public space on the Internet, where citizens can engage in discussion and learning away from the hubbub of the marketplace.
We need our governments to intervene in the market when competition is not doing the job, or when healthy competition is being threatened by dominant players.
We also need our governments to develop publicly accountable and participatory models of governance for the Internet.
We’re well on the way, but it’s no time to relax.
Thank you.
 

Privacy in Canada: A Public Interest Perspective

Address to the Riley Conference on Privacy and Bill C-54 by Philippa Lawson (February 1999)

Address to Riley Conference on Privacy and Bill C-54 Privacy in Canada: A Public Interest Perspective

It’s been said that privacy is the civil liberties issue of our era. We used to take it for granted, but all that has changed with computers. As David Flaherty said, our technocratic societies can now accomplish what George Orwell could only dream about. But it’s not just government that’s finding ever more privacy-invasive uses of information technology; it’s also business.
The public is gradually waking up to the fact that they have lost all control over their personal information with the advent of increasingly powerful computer technologies. And they are not happy about it.
I’ve been working as a consumer advocate for eight years. Over that period of time, concern over consumer privacy has steadily grown.
First, it was junk mail and telemarketing – consumers did not like getting unsolicited mail and certainly not unsolicited telephone calls, especially during dinner time. Telemarketing was – and still is – seen as an unwelcome intrusion into the privacy of one’s home, violation of the “right to be let alone”.
What’s interesting here is that the mere act of calling a stranger to make a commercial solicitation was considered a privacy invasion, even before taking into account the unauthorized collection and disclosure of personal data that made the call possible. At the time, consumer complaints focused on the physical privacy invasion, without fully appreciating that such invasions were based on a growing trade in personal information.
Then came the use by some commercial marketers of automatic dialling and announcing devices – known by their acronym as ADADs. The use of this technology to speed up the dialling process and replace human interaction generated unprecedented volumes of consumer complaints – people reacted even more negatively to computer recordings and dead air – for some reason, this seemed more of a privacy invasion than when humans were on the other end of the line.
Parliament responded by including in the Telecommunications Act of 1993 a provision which empowers the CRTC to prohibit or regulate the use of Canadian telecommunications facilities for the provision of unsolicited telecommunications. For its part, the CRTC established various rules for telemarketing, including time of day restrictions, identification and disclosure requirements, and the consumer’s right to have themselves removed from marketing lists.
But these were merely band-aid measures in relation to the underlying problem.
They didn’t even purport to limit the unauthorized collection, trading and use of personal information.
Around the same time, came a new telecommunications service known as Call Display. Suddenly, Canadians found themselves put in the strange position of automatically sharing their phone number with others, whether they meant to or not. While the service has its privacy enhancing side, and proved to be quite popular, its introduction served as a wake-up call for Canadians who had until then taken their privacy for granted. There was a public outcry. The CRTC was forced to retract its original decision to permit a 75 cent charge each time a caller blocked the display of their number, and to permit such blocking free of charge.
Even with free blocking, many people felt cheated of their legitimate privacy rights by this new technological invention. The tables had been turned; the default was now disclosure, they were now required to make an effort in order to maintain the same level of privacy, through anonymity, that they originally had.
As Internet usage blossomed, and electronic commerce for the masses was born, consumers learned about cookies, about information brokers and about data mining.
They found their confidential information published in alternative telephone directories, without their knowledge or consent.
They received unsolicited e-mail messages, offering the means to “find out anything about anyone on the Net”.
They discovered how easy it is for strangers to get hold of everything from a list of their assets, to a detailed map showing the way to their house.
They continued to be bombarded with unwanted commercial offers targeted at them personally.
Consumers are now beginning to appreciate the enormity of the problem – that all of this reflects a wholesale loss of control by individuals over their own personal information.
The problem is a consumer problem in the sense that the information is gathered largely through consumer transactions, and is used largely to induce further consumer transactions. But it goes much deeper – to the values at the core of civil society: liberty, freedom of speech, security of the person, individual autonomy and human dignity. Consumers are also citizens, and as citizens, they are demanding legal recognition of a basic right: the right to control who gets hold of their personal information, and over the uses to which such information can be put.
Some say that market forces will work this one out, that we don’t need legislation protecting personal data in the private sector.
The evidence against this view is overwhelming: unauthorized collection, use and disclosure of personal information continues apace. Businesses (and governments for that matter) find that the financial gains from trafficking in personal data are just too tempting. And consumers are too rushed, too trusting, and too resigned to put up a fight.
In many instances, consumers are told they can only get the product of service if they provide the information, regardless of how necessary that information is to the transaction in question.
In other instances, consumers are wrongly assured that the information will be used for no other purposes.
In still other cases, consumers don’t even know that their personal information is being recorded, or assume, quite reasonably, that the information will not be sold to other entities. They simply don’t know enough to complain or refuse
Clearly, data protection requires legislative action. The right to privacy that Canadians assert needs to be explicitly recognized in law. This is one of those areas in which societal rules for the protection of the weak from the strong have not kept pace with technological change. It’s time for us to bring our laws into line with our social values.
Bill C-54 is a major step forward in this respect. While limited in application to federal employees and commercial activities, apparently because of the limited scope of the federal “trade and commerce” power, it provides a model which can be used by the provinces to legislate data protection in respect of all activities, not just commercial.
Let me tell you some of the things that we, as consumer and privacy advocates, like about Bill C-54:
We like the federal government’s willingness to act where provinces fail to do so. All Canadians deserve the same legislated rights and protections in respect of their personal information. They don’t want to be deprived of protection simply because their provincial government has failed to act. Moreover, they don’t want a patchwork of different standards and regimes across the country, especially when the problem of data flows so often crosses borders. This problem is not a local issue: it transcends provincial, even national, boundaries. It’s solution must similarly transcend provincial and national boundaries.
We like the definition of personal information as “information about an identifiable individual that is recorded in any form”. It is important that anonymized information be treated as personal information as long as it can be re-personalized, through whatever means, be it code matching or analysis of other data in the record, such as the date, location and type of treatment that a particular patient received. As long as the individual can be identified, through whatever means, associated information must be protected.
We like the protection of all personal data, including that which is already available to the public. Just because personal information has been released into the public sphere does not mean that it should now be “fair game” for any and all commercial interests. In many cases, individuals have no choice but to allow their personal information to be added to a public register, in order for example, to purchase a house or obtain a driver’s licence. Surely it cannot be said that these individuals have thus consented to the subsequent collection, use or disclosure of that information by any private entity for any commercial purpose. Indeed, they may not even be aware of the fact that this information is now publicly available.
Furthermore, much personal information is improperly published without the individual’s knowledge and consent. Treating this improperly published information as “fair game”, especially with respect to further disclosure, is clearly unacceptable and contrary to the purpose of the legislation.
We like the broad mandate and powers given to the Privacy Commissioner for research, education, and promotion of effective privacy practices, and especially for publication of the results of his investigations. Publicity is probably the strongest tool for enforcing the rights and obligations in this Bill. No company wants bad publicity. In contrast, fines can be considered a mere cost of doing business, if they are not of sufficient magnitude.
We also like the powers of the Commissioner to initiate a complaint himself, and to take complaints to the Federal Court for binding orders as necessary.
In order for the benefits of these powers to be realized, it will of course be necessary that the Privacy Commissioner have significantly more financial resources than he now has. We therefore join the chorus of parties urging the federal government to increase the Commissioner’s budget accordingly.
What don’t we like?
We don’t like the subsuming of privacy rights within legislation designed “to support and promote electronic commerce”. Privacy rights should stand on their own legislative ground. They should be legally recognized on their own merit, not as enablers of electronic commerce.
We are concerned with the wholesale importation of an industry code, which has a number of deficiencies, two of which stand out in our view:
First, is the failure of the Code to limit the purposes for which personal information can be collected, used or disclosed. Under the Code, organizations must identify their purposes internally, and must make reasonable efforts to ensure that the individual is advised of those purposes. However, there is nothing to stop organizations from collecting or using personal information for objectionable purposes, as long as they have identified such purposes.
In our view, this is a major gap that should be filled with a clause clearly limiting the term “purposes” to those which are legitimate, justifiable in the circumstances, and reasonably expected in the circumstances. Or, as Val has suggested, “purposes” should be limited to those which can be demonstrably justified in a free and democratic society – thus importing the Supreme Court’s jurisprudence on section 1 of the Charter.
Secondly, the Bill fails to separate the requirements of knowledge and consent in those situations where the requirement for consent is waived. People deserve to be notified of information collection, use and disclosure in almost all cases. Yet, the Bill, like the CSA Code, treats knowledge and consent as one and the same thing. Wherever the requirement for consent is waived, so is the requirement for notification. We hope that this is an oversight that will be corrected. In all but a few exceptional cases (such as the investigation of fraud), individuals deserve to be told what is happening with their personal information.
We are very concerned about the broadly worded exceptions for “statistical, or scholarly study or research, purposes”, especially in respect of disclosure. There is no limit to the types of organizations and activities which can qualify under these exceptions. The term “statistical purposes” is particularly subject to abuse, as Canadian consumers well know from the endless clever marketing solicitations they receive. Even “scholarly research” opens the door to significant abuse, unless it is further qualified. At a minimum, the use of personal information for research should be permitted only where anonymous information will not suffice, and only with approval from the Privacy Commissioner.
Fourth, we think there should be strong whistleblower protection. Privacy abuses are often invisible to the individual concerned. We must therefore rely upon those working for data users to disclose privacy violations. Those with the courage to blow the whistle on their employer must be properly protected.
We don’t like reliance on the Federal Court for binding orders. The Federal Court is not accessible to the ordinary citizen. It requires the assistance of a lawyer, and a significant financial investment. Only the most determined and financially able complainants will pursue their wrongdoers under this regime. Instead of being able to rely on consumers to discipline wrongdoers through the court system, the Commissioner will have to do so on their behalf. The Bill thus places an even heavier burden on the Commissioner than appears at first blush.
A preferable approach would be to establish a small, accessible, inexpensive tribunal to handle enforcement and redress matters. One way to keep such tribunals accessible to the public may be to follow the Australian example of prohibiting lawyers from appearing on behalf of others.
We also don’t like limiting punitive damages to $20,000. Personal information is valuable. There may well be cases in which such a penalty constitutes nothing more than a cost of doing business, from the perspective of the wrongdoer.
Finally, while we strongly support the granting of audit powers to the Commissioner, we do not think that they should be limited to cases in which the Commissioner “has reasonable grounds to believe that the organization is contravening [the Act]”. Given the invisible nature of privacy violations, audits are an important tool for obtaining compliance, and should be available even where no complaints have been received.
Even if our legislators get it right, Bill C-54 can only go so far. Not only is the federal government limited by the constitution and political realities within Canada, but domestic legislation can only address a fraction of this worldwide problem. Let’s face it: the globalization of commerce has severely limited the abilities of individual states to protect their citizens from commercial abuses. Multinational firms require multinational responses. It’s therefore essential that countries work together to develop consistent, comprehensive laws and enforcement mechanisms for the protection of personal information.
I’d like to wrap up by quoting from Edward Ryan, who recognized in 1972 that:
“Privacy is not just an individual interest, but is first and foremost a political value of the highest order. The creation now of a conceptual rubric under which privacy can be protected, both legally as well as ethically, will be as important to the functioning of western democracy at the end of the twentieth century as was the existence of a viable concept of freedom of speech at its beginning.”
Thank you.

Residential Consumers and the Transition to Competition in the Long Distance Market

Still A Long Distance To Go

Residential Consumers and the Transition to Competition in the Long Distance Market
By Angie Barrados
This study measures the effects of the first five years of long distance competition on residential consumers. It examines how competition theory has informed the development of competition in the long distance market, and contains a quantitative analysis of the extent to which residential consumers have benefited from long distance competition. The study documents that the real benefits the average Canadian has experienced from changes in the long distance market are surprisingly modest.
100 pages $20
February 1999

Executive Summary

When long distance competition was being considered, its major promoters were big business and its representatives. Since competition was introduced, long distance rates for big business have plummeted. Typically, when the success of long distance competition is discussed, it is the success of long distance competition in the business long distance market that is being referred to. This study shows that the real benefits the average Canadian has experienced from the changes in the long distance market are surprisingly modest. To date, residential long distance users have been the poor cousins of big-business users.
Regulators thought that competition would provide important benefits to residential consumers, such as lower prices and increased choice, without sacrificing the achievements of universality and network reliability attained under monopoly regulation. These ideas, used to justify and shape policy towards competition, have not been tested by empirical study. The aim of this study is to fill this gap by measuring the effects of long distance competition on residential consumers.
The study has two parts. The first examines how competition theory has informed the development of competition in the long distance market. A review of the major decisions on long distance competition, which considers the main concepts and debates in competition theory, is provided. The most recent events in the long distance market are also considered.
This review of competition theory related to the long distance market shows that the CRTC has been quite optimistic in its view of how strong competition is in this market. The CRTC has not fully taken into account the degree to which market flaws can reduce positive outcomes for consumers. Some of the key market flaws that are present to some extent in the residential long distance market are market segmentation and consumer inertia. Also, the large regional telephone companies still dominate the long distance market, a situation that is known to aggravate market flaws. The analysis strongly suggests that the actual outcomes of long distance competition for residential consumers should be verified to ensure that the market is operating effectively.
The second part of this report is a study measuring the extent to which residential consumers have benefitted from long distance competition. The study period covers the five years between June 1992 (when facilities-based competition was permitted) and July 1997. Indicators were selected to measure both the benefits and the costs that residential consumers have experienced from changes in the long distance market over this five-year period.
The findings of the study lead us to believe that the overall savings for residential consumers are far less than for business consumers, though overall actual price reductions enjoyed by residential consumers are difficult to quantify. Price reductions were available over the study period, and enjoyed by some customers (most of whom stayed with a Stentor company and received 15% discounts, while a smaller portion switched to competitors and received higher discounts). But a surprisingly large number of customers, more than half of Canadian households, did not appear to enjoy any price reductions at all, and were still charged the high “DDD” rates. Not only are these high prices unfair to the consumers being charged them, but they also dampen competition by allowing the dominant firm to exploit a market flaw.
The results of this study show that the overall phone bills for most Canadians have increased significantly over the study period, because of increases in local rates. Most low-income Canadians, who can least afford the increases, have had significantly increased phone bills. There is no evidence that the overall benefits to the economy stemming from long distance competition have helped low-income people to afford these increased prices for telephone service.
In the absence of competition, the price reductions, while lower in magnitude, would have been equally distributed amongst residential consumers. This situation would have offered more savings to many Canadians that did not receive any benefits during the study period. High users of long distance are better off with competition, but most Canadians would have lower telephone bills without competition.
Without competition, consumers would not have had choice. But, during the study period, choice was a mixed blessing for consumers. Significant transaction costs, and lack of knowledge counterbalanced the benefit of choice. Also, the competitive environment increased annoyances such as telemarketing, and disruption of service.
The recent price war suggests that residential customers may have been able to benefit more from the long distance market in 1998 than between 1992 and 1997. It would be quite unwise, however, to conclude that all the issues raised in this study have been solved. Indeed, this study shows that the presence of discounts in a market in transition from monopoly does not automatically lead to consumer benefits.
The findings of this study point to two main areas in which action should be taken by the federal government. The first main action area is monitoring of the long distance market, a theme that emerges at many points this study. The state of the long distance market should be monitored, so that policy-makers and the public have information about the status of the transition from monopoly to competition. Regulatory decisions of the past should be evaluated so that lessons can be learned in the future.
Monitoring is important so that there can be some public scrutiny of trends in the market. Public scrutiny in itself can be a deterrent to undesirable business practices. Monitoring also allows market failures to be identified early, and addressed before they become major problems. It is very unfortunate that no government agency seems to be taking responsibility for monitoring the long distance market, or even collecting basic data on residential long distance prices and usage.
The second action area involves considering some corrective action to ensure the benefits of long distance competition are more widely distributed in the residential market. Widespread consumer inertia has meant that many consumers have not had any savings on long distance in the first five years of competition. Also, it means that market forces in the residential market as a whole are weak, perhaps too weak adequately to protect consumer interests. The amount of consumer inertia should decrease as competition unfolds. It is important that consumer behaviour is monitored to ensure that this indeed happens. If consumer inertia does not decrease, or is replicated in the local service market once local competition is underway, the CRTC should reconsider the need for public information programs.
The study concludes that the overall experience of residential consumers during the first five years of long distance competition illustrate the need to ensure that the potential benefits of competition in a formerly monopolized market actually materialize for all consumers. In long distance, business consumers benefitted from competition, but many residential consumers were left behind. Now that competition has been in place six years, it is time to implement the monitoring and public information policies that will ensure that the benefits of competition are more widely distributed throughout the residential market.
Loin des yeux, loin du compte
La concurrence dans le marché de l’interurbain et les abonnés résidentiels

Sommaire

À l’époque où l’on étudiait la question de la concurrence dans le secteur de l’interurbain, la grande entreprise et ses porte-parole s’en faisaient les principaux partisans. Or, depuis l’arrivée de la concurrence, ce sont précisément les tarifs de l’interurbain pour la grande entreprise qui ont chuté. Lorsque l’on parle de réussite dans le cas de la concurrence sur le marché de l’interurbain, on fait généralement référence à la concurrence dans le marché d’affaires de l’interurbain. Contrairement à ce qu’on pourrait croire, la présente étude démontre que les avantages réels dont le simple citoyen a pu bénéficier en raison des changements effectués au sein du marché de l’interurbain sont somme toute modestes. Jusqu’à maintenant, les clients résidentiels de l’interurbain sont traités en parents pauvres par rapport aux clients de la grande entreprise.
Les autorités réglementaires ont pensé que la concurrence se traduirait par d’importants bénéfices au profit des abonnés résidentiels, dont une réduction des tarifs et un choix plus diversifié, sans pour autant sacrifier l’universalité et la fiabilité du réseau établi durant la période du monopole. De telles hypothèses, qui ont servi à justifier et à orienter la politique devant nous mener à la concurrence, n’ont jamais été éprouvées dans le cadre d’études empiriques. La présente étude vise à combler cette lacune en mesurant les effets de la concurrence dans le marché de l’interurbain sur les abonnés résidentiels.
L’étude se divise en deux parties. La première examine comment la théorie de la libreconcurrence a influencé l’instauration de la concurrence sur le marché de l’interurbain. On y fait l’examen des plus importantes décisions en matière de concurrence dans le marché de l’interurbain, reprenant les principales thèses et les grands débats de la théorie de la libre concurrence. On y note également les plus récents développements dans le marché de l’interurbain. Cet examen de la théorie de la libre concurrence appliquée au marché de l’interurbain démontre que le Conseil de la radiodiffusion et des télécommunications canadiennes a entretenu une vision plutôt optimiste de la force qu’aurait la concurrence dans ce marché. Le CRTC n’a pas tenu suffisamment compte, en effet, des irrégularités de marché et de leur rôle dans la réduction des avantages positifs qu’en tireraient les consommateurs. Au nombre des irrégularités que l’on retrouve en partie dans le marché résidentiel de l’interurbain, on compte la segmentation du marché et l’inertie des consommateurs. D’ailleurs, les grandes compagnies régionales de téléphone dominent toujours le marché de l’interurbain, une situation qui accentue comme on le sait les irrégularités de marché. L’analyse laisse supposer que les résultats concrets de la concurrence sur le marché résidentiel de l’interurbain doivent être vérifiés, pour veiller à ce que le libre marché fonctionne comme prévu.
La seconde partie du rapport se consacre à une étude devant mesurer les bénéfices tirés par les abonnés résidentiels du régime de concurrence dans le marché de l’interurbain. L’étude couvre une période de cinq ans entre juin 1992 (moment où l’on autorisait la concurrence au plan des équipements) et juillet 1997. On a choisi des indicateurs permettant de mesurer sur cette période autant les avantages que les coûts reliés aux changements dans le secteur de l’interurbain pour la clientèle résidentielle.
Les résultats de l’étude donnent à croire que les économies globales réalisées par les abonnés résidentiels sont très inférieures à celles réalisées par les clients d’affaires, bien que le total des réductions de tarif dont bénéficient les abonnés résidentiels soit difficilement quantifiable. Des réductions de prix sont survenues au cours de la période couverte par l’étude, réductions dont certains abonnés se sont prévalus (la plupart ayant conservé le service offert par une compagnie membre de Stentor et bénéficiant d’une réduction de 15 %, tandis qu’une minorité a profité d’une réduction plus substantielle en changeant de fournisseur). Or, un nombre surprenant d’abonnés, soit plus de la moitié des ménages canadiens, n’ont en apparence bénéficié d’aucune réduction de prix et continuent de devoir payer les tarifs élevés de type “DDD”. Des tarifs aussi élevés que ceux-là sont non seulement injustes pour les consommateurs qui doivent les acquitter, mais ils nuisent également à la concurrence en permettant à l’entreprise dominante de profiter d’une irrégularité du marché.
Les résultats de la présente étude démontrent qu’en raison de la hausse des tarifs locaux, la facture globale pour les services téléphoniques chez la plupart des ménages canadiens a considérablement augmenté au cours de la période de l’étude. La plupart des ménages à faible revenu, ceux qui ont le plus de mal à absorber les hausses de coûts, ont fait face à une facture de téléphone considérablement plus élevée. Rien ne démontre que les bénéfices économiques globaux issus de la concurrence en matière d’interurbain ont aidé les ménages à faible revenu à absorber ces hausses de prix du service téléphonique.
En l’absence de concurrence, les réductions de prix, bien que d’une importance réduite, auraient été réparties également entre les abonnés du secteur résidentiel. Cette situation aurait offert des économies plus substantielles à bon nombre de ménages canadiens qui n’ont récolté aucun bénéfice au cours de la période étudiée. Si les grands consommateurs de communications interurbaines s’en tirent à meilleur compte avec la concurrence, la plupart des ménages canadiens auraient au contraire vu leur facture de téléphone diminuer si la concurrence n’avait pas été introduite.
Sans cette concurrence, les consommateurs n’auraient pas eu de choix. Toutefois, en ce qui concerne la période étudiée, ce choix s’est révélé être un bien pour un mal en ce qui concerne les consommateurs. Des frais de transaction non négligeables et l’ignorance ont annulé les avantages de ce choix. De plus, l’environnement concurrentiel a augmenté les nuisances comme le télémarketing et les interruptions de service.La récente guerre des prix pourrait laisser penser que la clientèle résidentielle a pu profiter davantage du marché de l’interurbain au cours de l’année 1998 que ce n’avait été le cas entre 1992 et 1997. Il serait cependant prématuré d’affirmer que tous les problèmes soulevés dans la présente étude ont été réglés. L’étude démontre en effet que l’existence de rabais dans un marché en transition entre le monopole et la concurrence ne se traduit pas nécessairement par des avantages pour les consommateurs.
L’étude révèle deux domaines d’intervention principaux où le gouvernement fédéral devrait prendre des mesures. Le premier domaine d’intervention se situe dans un suivi du marché de l’interurbain, un thème qui revient souvent au cours de l’étude. Il faudrait surveiller la situation sur le marché de l’interurbain, de sorte que les décideurs et le grand public puissent savoir à quel stade nous en sommes dans la transition entre le monopole et la concurrence. Les décisions prises par le passé en matière de réglementation doivent faire l’objet d’une évaluation afin que nous puissions en tirer les enseignements qui s’imposent pour l’avenir. Un suivi est important afin de pouvoir débattre publiquement des tendances observées sur le marché. Le débat public pourrait en lui-même dissuader un certain nombre de pratiques commerciales indésirables. Le suivi permettrait en outre de cerner rapidement les irrégularités du marché et d’y remédier avant qu’elles n’occasionnent des problèmes importants. On doit déplorer le fait qu’aucun organisme gouvernemental ne se charge d’effectuer un tel suivi du marché de l’interurbain, ni même de colliger des données de base sur les tarifs et l’utilisation de l’interurbain dans le secteur résidentiel.
Le second domaine d’intervention concerne l’étude de certaines mesures correctives pour veiller à ce que les avantages de la concurrence dans le secteur de l’interurbain soient plus équitablement répartis dans le marché résidentiel. L’inertie généralisée des consommateurs en a privé un grand nombre de toute forme d’économie au chapitre des communications interurbaines au cours des cinq premières années de la concurrence. De plus, une telle situation dénote la faiblesse des forces de marché dans le marché résidentiel, une faiblesse qui se révèle probablement trop importante pour assurer la protection adéquate des intérêts des consommateurs. L’inertie des consommateurs devrait normalement diminuer à mesure que s’instaure la concurrence. Il importe toutefois de bien suivre l’évolution des comportements des consommateurs afin de vérifier si cette hypothèse se confirme. Si l’inertie des consommateurs ne devait pas s’estomper, ou s’il s’avère que le phénomène se reproduit avec l’introduction de la concurrence sur le marché local, le CRTC devra se pencher de nouveau sur la nécessité d’offrir des programmes d’information publics.
L’étude en vient à la conclusion qu’au cours des cinq première années de concurrence sur le marché de l’interurbain, un marché auparavant détenu par un monopole, l’expérience générale des abonnés résidentiels démontre la nécessité de veiller à ce que les avantages potentiels de la concurrence se matérialisent véritablement pour l’ensemble des consommateurs. En ce qui concerne l’interurbain, on constate que la clientèle d’affaire a bénéficié de la concurrence, tandis que bon nombre d’abonnés résidentiels sont restés en plan. Après six années de concurrence, il est maintenant temps d’instaurer des politiques de suivi et d’information publique qui assureront une meilleure répartition des avantages de la concurrence dans l’ensemble du marché résidentiel.

Deregulation of the Canadian Natural Gas Market

The Deregulation of the Canadian Natural Gas Market: A Consumer Progress Report

This report examines the ongoing process of gas deregulation in Canada and evaluates the results from a consumer perspective. The report finds that while deregulation has the potential for efficiency gains and increase customer choice, the changes have brought about unanticipated results that have compromised the achievement of the sought after efficiency gains.
60 pages $20.00

Introduction

The international trend to introducing competition into industries such as energy and telecommunications that have traditionally operated as regulated monopolies, has been driven by numerous factors. Potential new entrants have recognized that regulatory change is a prerequisite for expanding their opportunities in regulated businesses. As a result, they have been prepared to invest heavily in reducing regulatory barriers to their activities. The incumbent regulated companies also have realized that deregulation creates significant opportunities, as well as risks, for them. Large customers often see deregulation as a means of enhancing their ability to exploit their “buying power” to obtain better prices in marketplace.
Regardless of the potential benefits motivating each interest group, the central theme of most of the arguments in support of deregulation is the potential for efficiency gains and increased customer choice. With these objective in mind, the regulatory environment within which these industries operate has been restructured, leading to significant transformations of the markets they serve. These changes, however, have brought with them unanticipated results that have compromised the achievement of the sought-after efficiency gains. It is now clear that deregulation can create a wide range of problems for industry players, regulators and consumers. The success of deregulation initiatives is therefore dependent on the ability of the deregulated ­ or re-regulated ­ industry to address the problems that arise.
Deregulation of the Canadian natural gas industry began with the elimination of the regulated well-head price for natural gas more than a decade ago. This change has led to increasing pressure for change in all sectors of the natural gas business, from transportation and distribution, to storage, and to retail services.
In order to anticipate the potential impacts of further deregulation, it is useful to consider the nature and historical evolution of the natural gas industry in Canada. Exploration of the US and Australian experiences are also helpful in this respect. Benefits of further change must be examined in light of potential adverse affects on sub-categories of consumers. In particular, low volume residential users may find further natural gas deregulation detrimental, especially if there are no practical mechanisms implemented to provide vital public goods that the competitive marketplace may not be able to provide effectively.

The Halloween Agreement of 1985

Prior to 1985, the commodity price of natural gas in Canada was set by agreements between the federal government and the Province of Alberta. Canadian gas prices were based on crude oil prices; local gas distribution companies (LDCs) in those provinces which had a gas supply had their rates and terms regulated by provincial regulatory boards.
A variety of political and economic reasons led to the formulation of the 1985 Western Accord on Energy Pricing and Taxation. The Accord led to the October 31st, 1985 Agreement on National Gas markets and Pricing (the Halloween Agreement). The Halloween Agreement was signed by the Government of Canada and by the Governments of the three major gas producing provinces in Canada namely, Alberta, British Columbia and Saskatchewan.
The differences in views on gas pricing between the federal government and the gas producing provinces prior to 1985, were considerable. At the centre of those differences was the Western Canadian opinion that gas pricing linked to crude oil not only deprived gas producers of the perceived price benefits of a competitive market, but distorted the economics of increased gas production. On the other hand, in the wake of the oil shocks of the mid-70’s the federal government was keenly aware of the interests of the large consuming provinces in market price of gas that was determined by the economics of natural gas in Canada rather than the economics of oil internationally.
Despite these conflicting motives, the four governments involved agreed that the creation of a more flexible, market-oriented gas price system would be in the interests of both the producing and the consuming provinces. The agreement eliminated regulation of gas commodity prices; the price would be determined instead in the competitive gas market that would develop as a result of the changes introduced by the Halloween Agreement.
The major participants in this new market were familiar; the gas producers in Alberta, BC and Saskatchewan; NOVA and Transgas still operated their intra-provincial pipelines and Trans-Canada Pipelines Ltd. (TCPL) still operated the major interprovincial pipelines. New players referred to as gas agents, brokers and marketers (or the acronym ABMs) entered the market, however.(1)
Prior to the Halloween Agreement, LDCs in Canada obtained the bulk of their gas supplies through long term contracts with TCPL. These contracts involved both the supply and transportation of gas from Western Canada to the LDC’s franchise areas. In that pre-1985 market no end user of natural gas, from industrial companies to individual residential customers, was able to arrange for and procure their own supplies of gas.
Thus, before the Halloween Agreement was struck, TCPL was the prime long-term supplier, transporter and seller of natural gas in Eastern Canada; the LDCs were under long term contractual obligations to TCPL both for their gas supply and their transportation requirements. Following the Halloween Agreement, gas customers in Eastern Canada had the ability to displace the LDCs’ volumes by purchasing their supplies directly. Initially, the financial penalties known as unabsorbed demand charges (UDCs) were levied by TCPL on LDCs’ short falls in the previously contracted long term contracts resulting from this displacement. In addition direct purchasers holding transmission capacity on TCPL were also liable for UDCs in respect of their short falls. Various decisions by the National Energy Board (NEB) and provincial regulatory boards alleviated this problem so as to enable direct purchases to displace LDC gas and transportation contracts without undue penalties.

Development of the Direct Purchase Market

Two principal forms of direct purchase have developed in the Post-Halloween Agreement phase. These are Transportation Service (T-Service) and buy sell agreements (buy-sell).
T-Service is generally used by larger users of natural gas such as industrial or large commercial companies, frequently with the assistance of consultants or agents who arrange for the direct customer to acquire gas, matching transportation over TCPL, and delivery to the customer’s premises by an LDC. Large customers utilize both “unbundled” T-service, by which the customer contracts for only for transportation of gas on TCPL and “bundled” T-service by which customers pay a transport rate with the addition of a bundled charge for all of the LDC’s service (including storage and load balancing) in connection with the transaction. In neither service is LDC gas is supplied to the customer. The availability of T-service has been of considerable economic importance in that it has allowed many large industrial customers to significantly reduce the prices they pay for natural gas.
Buy-sell arrangements involve customers, or their agents, purchasing gas in a producing province and selling it to their LDC at the LDC average cost of gas (the “buy-sell reference price”). By buying gas on shorter term supply arrangements than those of the LDCs, buy-sell customers were able obtain a better price in the market than was paid by the LDCs. The difference would cover the agents and provide a rebate to the buy-sell customer.
Buy-sell customers pay the same charges as all system (non-direct) customers of the LDC. However, their effective gas cost would be reduced by the rebate earned through the buy-sell transaction (i.e., a buy from a producer, combined with a sell at a higher price to the LDC).
Buy-sell arrangements are used by industrial and commercial customers who consider the requirements of T-service contracts to be too onerous for their circumstances. In addition, the near-universal arrangement for the aggregators serving small residential and commercial customers was the buy-sell. These arrangements, however, have had difficulties such as:

1. aggregation through less than ethical door-to-door, telephone or direct mail techniques,
2. reliance on misleading or insufficient information in signing up customers to contract terms that were typically five years or longer, and
3. inefficient or insufficiently financed direct sellers.

These difficulties (and others) have been a source of concern to provincial governments and regulators. Regulators for example have required that certain consumer protection practices be incorporated into contracts to reduce irregularities in this area of direct selling.
From 1997 on, Ontario LDCs obtained approval from the OEB to operate a form of T-service that was practical for use in the small volume market. This service, known as ABC (agent billing and collecting) T-service has enabled ABMs to offer contracts that fix the price of gas at a level that is not related to the LDC’s cost of gas. The ABM pays a transaction fee in respect of the billing service to the LDC which identifies the direct seller by name and telephone number on the LDC portion of the bill in respect of gas costs. The LDC collects a gas charge that is set by the ABM from its customer and remits it to the direct seller. ABC service obviates the need for two bills (LDC for delivery & ABM for the commodity) being sent to a direct customers.
Regulatory bodies have used the introduction of ABC service to require increased customer protection measures and the inclusion of enhanced information about direct selling inserted in monthly gas billings.

The Challenges Ahead

The changes described above have allowed an increased degree of choice and flexibility within the market. Simultaneously however, they have resulted in the creation of a new set of problems for industry participants, regulators, and consumers. Change has therefore contributed to calls for more change which in turn will lead to a greater need for mechanisms to study and cope with the affects of shifting industry structure.
In particular, the shift from system supply to direct supply has given rise to the concern that a secure gas supply system might be compromised and that system benefits such as low income protection, universal access to service, environmental protection and energy efficiency will not be provided for within a competitive environment. This is a particularly thorny issue in light of calls for the exiting of LDCs from the merchant function, which would result in LDC’s no longer supplying gas (in addition to distribution services) as they do presently. Gas supply could be wholly competitive, with non-regulated affiliates of the LDC competing with other marketers following the LDC’s exit from its merchant function. There is a fear that the new industry participants lack the ability and the desire to work together so as to provide the public goods and services that the LDCs have maintained within a regulated environment. The potential LDC merchant exit and the proliferation of affiliate marketers also bring into play potential abuse of market power concerns. While the potential for LDCs to engage in cross subsidization, predation, cost shifting, and discriminatory self-dealing can be dealt with by regulators, the LDCs’ informational advantages such as brand name recognition, possession of customer databases and basic organization still give them that the advantages for the moment. Thus, even if the maximization of competition within the marketplace is viewed as a good in and of itself, the residual power of the LDCs raises the question as to whether a competitive environment can be created and sustained.
Even given the existence of effective competition, considerable doubts exist as to whether customers will have the ability to make informed choices in the marketplace. Available options are technical and confusing and there is a lack of effective consumer education programs which serve to deal with these problems. This basic problem raises issues concerning the need for marketing oversight agencies, codes of conduct, transparency and dispute resolution procedures.
These are not issues unique to Canada or specific to the natural gas industry. Deregulation of energy sectors is occurring in many countries. Indeed, it is impossible to study the course of industrial change with regard to natural gas without looking at developments within the electricity sector. After all, there is much talk of the idea of ‘convergence’, meaning that in the future energy and other services may be provided by mega-distributors using parallel networks. The rise in the number of mergers between energy marketers within North America may be viewed as a foreshadowing of this trend. Government regulators, industry groups, consumer organizations and individual consumers are all grappling with past change and the potential for more. This has led to the adoption of a variety of approaches in different countries, states and provinces. It is instructive to compare these approaches when assessing and evaluating options for the future.

Study Plan

Section One of this study examines how the industrial pressures created by pipeline access and pricing changes have been dealt with by different jurisdictions within Canada. In particular, experiences in Ontario and British Columbia are compared and contrasted. Section Two explores the federally mandated open access regime in the US as well as subsequent state unbundling and aggregation initiatives. The specific experiences of California, Ohio and New York are examined. Section Three provides a case study of the Australian natural gas industry, highlighting the implementation of a Commonwealth framework and the unbundling initiatives in the state of New South Wales.
The remainder of the paper focuses on consumer protection issues which are implicitly raised within Sections One – Three. In particular, problems surrounding the potential LDC exit from the merchant function are examined and the mechanisms for redress suggested by various jurisdictions examined and evaluated. Section Four focuses on the potential for market power abuse by industry ‘incumbents’ through cross-subsidization, cost shifting, discriminatory self-dealing and the exploitation of informational advantages. Section Five examines threats to system integrity through a discussion of the obligation to supply, non-discriminatory access, and supplier of last resort issues. Methods for the provision of demand side management and the maintenance of system benefits are explored. In light of these risks, predictions of consumer savings are examined and assessed. Section Six focuses on the protection of meaningful consumer choice within a more devolved natural gas industry. In particular, informational challenges and the control of ABM practices are examined. The impact of marketing oversight agencies, industrial codes of conduct, and standard form contracts are explored. Section Seven sets out the report’s conclusions in light of stakeholder views on future developments.
1. The term ‘agent’ refers to companies that arrange contracts on behalf of customers (i.e., acting as their agents). Brokers act as a middle-man, facilitating transactions between buyers and sellers for a brokerage fee. Marketers seek customers for producers or on their own behalf, to purchase gas. ABM’s frequently act as “aggregators”, so named because they aggregate either gas producers (supply aggregator) or gas end users (demand aggregator). In the present stage of development of the gas market, parties or companies supplying gas directly are often referred to as the ‘ABM’ sector of the market.