Quebec under Free Trade : Making Public Policy in North America

15. Telecommunications and Information Technology

Telecommunications and Information Technology Hervé Déry* Industry Canada Telecommunications in the last 20 years have had a dramatic influence on personal, business and social life styles. Hence, adequate communications facilities are necessary to promote economic development. As economies continue to shift toward service-based economic structures, the relative importance of communications is undeniably increasing. In the telecommunications industry, change is perhaps the only constant. The development of the telecommunications industry has traditionally taken place within a heavily regulated environment characterized by intense public policy debate. This chapter presents an overview of the Canadian and Quebec Telecommunications and Information Technology industry as well as an analysis of its regulatory and public policy environment in the context of a continental economy. It analyses the North American Free Trade Agreement (NAFTA) in relation to this industry and outlines the industry’s Research and Development capacity. Furthermore, it introduces key concepts (such as information highway) and key activities (such as spectrum management) related to this industry. * Thanks are due to Hélène Asselin, Richard Bourassa, Keith Chang, Denis Lachance, JeanFran çois LeMay, Alain Robillard, Len St-Aubin and Michael Tiger for information provided or comments on initial version of the paper. The views expressed in this chapter are those of the author alone and should not be attributed to Industry Canada or the individuals named above. 364 Quebec under Free Trade INTRODUCTION In the last 20 years, telecommunications have had a dramatic influence on personal, business and social life styles. Telecommunications and information technologies are influencing the growth of national economies and their level of development. The increasing impact of technology is also creating new opportunities ; so much so, that in the telecommunications industry, change is perhaps the only constant. The social and economic benefits of telecommunications investment are now widely understood, and it is recognized that adequate communications facilities are necessary to promote economic development. Telecommunications services are no longer considered a supportive industry but rather a forerunner of development. It is also recognized that adequate telecommunications foster important objectives such as national integration and decentralization of economic activities. As economies continue to shift toward service-based economic structures, the relative importance of communications increases. Necessarily, the benefits of improved telecommunications services are more evident in information-intensive sectors such as banking and finance, wholesale and retail trade, transportation, storage and distribution and accommodation and tourism. Furthermore, automated teller machines, point-of-sale systems, and credit and debit cards have already changed the way consumers bank, shop and make payments. Large businesses spend up to 5 % of their total expenditure on telecommunications services, accounting for a significant portion of their overhead costs. Undeniably, telecommunications has become an important element of competitiveness in an increasingly global market. The development of the telecommunications industry has traditionally taken place within a heavily regulated environment characterized by intense public policy debate. This chapter presents an overview of the Canadian and Quebec Telecommunications and Information Technology industry. It is divided into four sections. The first section deals with the terms and conditions of the 1987 CanadaUS Free Trade Agreement (FTA) and the subsequent North American Free Trade Agreement (NAFTA) as they related to the telecommunications industry. The subsequent section presents the regulatory and public policy environment in which the industry operates. Include in this section are policy issues related to the creation of a Canadian information highway. The third section presents a statistical overview of the Canadian and Quebec Telecommunications and Information Technology industry. Included in this section is information on Northern Telecom, the largest Canadian manufacturer of telecommunications equipment. The fourth section presents an outline of the industry’s Research and Development capacity, including information on Canadian regime of spectrum management. Telecommunications and Information Technology 365 INTERNATIONAL TRADE AND NAFTA The 1987 Canada-US Free Trade Agreement (FTA) was the first bilateral agreement with a significant trade-in-services component. The FTA guaranteed a national treatment1 for all future government measures that affected the provision of enhanced telecommunications or computer services. The FTA also confirmed that markets for such services would remain open and competitive. However, basic telecommunications networks and services were excluded from the overall Agreement. The North American Free Trade Agreement (NAFTA) is similar to the FTA but goes a few steps beyond in some obligations. It has created the world’s largest telecommunications equipment and computer market. All internal tariffs will be eliminated over ten years and, at the end...