Mobile Internet
Re: "Canada lags in mobile Internet use, report says," Jamie Sturgeon, June 24
It is unfortunate that misleading headlines result from a report that provides only a limited snapshot of data from 2010. No less than four major consumer surveys in the last month alone have found that Canada is experiencing world-leading adoption of smartphones. In fact, the latest study released by TNS, the largest-ever global research project into today's mobile consumer, finds that Canadians are leading the mobile technology drive, with 41% of Canadians having a smartphone, compared with the global market average of only 28%.
Oddly enough, the same OECD study that misrepresents the state of Canadians' mobile Internet use reports that Canada has the second-highest observed average mobile connection speeds across the OECD countries. It also notes that Canada is one of only four countries with monthly average mobile data consumption of more than one gigabyte, and, specifically, the users of a Canadian provider consumed more than seven GB per month, which was exceptionally large.
Wireless carriers in Canada continue to report record quarterly smartphone activations and wireless data growth. And when you consider that Canada has more advanced HSPA+ wireless data networks than any other country on the planet, it comes as no surprise that Canadians are among the heaviest smartphone users in the world.
Bernard Lord, president and chief executive, Canadian Wireless Telecommunications Association, Ottawa
Aitken's AMPs
The federal Parliament in 2009 handed Canada's competition commissioner, Melanie Aitken, awesome legal power, and she is using it. She is free to do so -pending potential court reversals, or pending legislative change -but the current law raises serious concerns among economists and legal scholars. It also threatens big costs for businesses -which are inevitably passed to consumers -and a potential chill on competitive behaviour.
The concerns arise from amendments to the Competition Act in 2009, which gave power to the commissioner, through the Competition Tribunal, to seek from businesses that she believes have offended particular non-criminal sections of the act administrative monetary penalties, or AMPs, which to most of the rest of us look like criminal fines.
This might seem a minor matter of process, but it is important: Impugned offenders, who might otherwise be tempted to stand their ground and defend their business practices, face big penalties without the commissioner needing to meet a tough evidentiary standard, or seeing the issues freely aired. Economists call this legal chill -the threat of huge penalties inhibits both business choices and businesses' ability to defend them.
AMPs are applied in particular in cases of abuse of market dominance, where firms are believed to engage, for example, in price discrimination (charging some customers too much) or predatory pricing (charging customers too little). They are penalties, not fines, as explained by the Competition Bureau, because they are civil remedies intended to "encourage compliance with the Competition Act, and failure to pay one may be enforced civilly as a debt due to the Crown. A fine, by contrast, is a punishment imposed by a court upon conviction of a criminal offence.. "
That much is true, but other points of similarity and difference are more important. The potential civil remedy, the AMP, is enormous: $10-million on a first occurrence and $15-million for subsequent occurrences. Such penalties have been sought for Rogers Communications Inc., and now BCE Inc., over their allegedly deceptive advertising practices, not abuse of dominance, but the legal issue is the same in the end. The penalties are not recoveries of damages of the sort that private plaintiffs seek in ordinary civil proceedings, or recoveries for consumers. They look and feel a lot like criminal fines, and in fact are much larger than fines typically seen in criminal matters.
Now, Parliament can set whatever penalties it sees fit. However, the Supreme Court has said that if a proceeding has a "true penal consequence," which explicitly includes a large fine, then it brings with it the legal protections of Section 11 of the Charter of Rights and Freedoms. Section 11 guarantees, among other things, a presumption of innocence, which presumption can be overturned only if a court or proceeding finds otherwise, beyond a reasonable doubt. Under the civil proceeding that the commissioner has pursued in the cases of Rogers and Bell, on the other hand, the evidentiary standard is much weaker -she must prove that an offence under the act had occurred only on a balance of probabilities, not beyond a reasonable doubt, and there is not necessarily full disclosure of evidence.
By implication, Parliament believes that it has escaped Section 11 Charter requirements by describing a $10-million levy as a penalty, not a fine. This is an issue on which legal scholars legitimately differ, and one which deserves a full hearing, eventually at the Supreme Court.
As suggested above, however, the problem is not only a legal one. The threat of the AMP raises the likelihood of chill or other unfortunate outcomes through the murky process of a consent decree. Consent decrees potentially amplify the problem with AMPs, owing to a process change that granted the commissioner the ability, having struck a consent agreement with a presumed offender, to file a notice of consent with the Competition Tribunal, a separate federal body, absent public hearings or economic analyses of the merits of a case.
Consider a scenario whereby the Competition Bureau comes to suspect that a business or organization uses its position in the market -a dominant position, for the sake of argument -to pursue what the bureau sees as anticompetitive practices, such as undercutting the competition on price to drive competitors out of the market.
Many economists and consumers will note at the outset that aggressive pricing indeed could be predatory, or anti-competitive behaviour -or it could be tough competition, of benefit to consumers. Which it is will depend on the facts and economics of the case.
As things stand, however, the commissioner may seek a consent agreement with the presumed offender, in a situation where the business in question knows that declining consent will lead either to an AMP or an expensive higher-court challenge to the AMP's legitimacy, or both. And upon achieving a consent agreement, the commissioner files it with the Competition Tribunal, where it is more or less rubberstamped, rather than taking advantage of the tribunal's economic expertise and airing out the arguments. This process may well suit the impugned business, but prior to the time of filing, there is no public examination of the economic merits of any allegations -and neither is there a window for public judgment on whether the consent agreement in fact serves consumer interests.
Concern over AMPs is not new in the economic and legal communities. When the changes I describe were the subject of consultations and early legislative attempts in the past decade, many stakeholders, including legal scholars, objected. The current, enabling Competition Act amendments, however, were attached to the federal stimulus budget bill in early 2009 and never received serious examination in the relevant House and Senate committees, instead being rushed through -over protests -in the wake of a financial crisis.
Whether AMPs have economic and legal merit or, indeed, are constitutionally sound, is a legitimate question. What is clear is that Parliament did not, when authorizing them, give them serious debate. This may change -while BCE has agreed to pay its AMP, Rogers will defend its position at the Ontario Superior Court of Justice. If or when AMPs arrive at the Supreme Court of Canada, this thorny issue will finally get a decent airing, and we will find out if Ms. Aitken's impressive power will withstand constitutional scrutiny.
? Finn Poschmann is vice-president, research, at the C.D. Howe Institute, where he chairs the institute's Competition Policy Council.
Greece, euro still face their real tests
Greece's current debt problems were created by government officials who used underhanded financial mechanisms to hide the size of the nation's debt and exposure to risky assets from their foreign creditors. Once these problems were revealed, the Greek economy began an endless downward spiral.
In order to protect its own banks from exposure to debts in Greece and other fiscally struggling nations, the European Central Bank created the European Stability Fund to provide bailouts. But these payments are conditional on recipient nations adopting very stiff austerity policies.
The latest round of Greek austerity measures is meeting with violent resistance on the nation's streets. The next vote could support or sink the entire bailout enterprise, with potentially huge consequences for the ECB's financial sectors and the survival of the euro.
With the twin spiral of imploding private and public sectors, it's difficult not to sympathize with Greek demonstrators. This is a problem created not by them, but by their elected officials. Yet in its outcome, it is very similar to the situation that proponents of government service and insurance provision fear and wish to protect against: a steep and economy-wide recession from distant and uncontrollable economic shocks and market failures. We need to acknowledge the significant possibility of government failure and understand how Greece got there.
Greece owed US$587-billion to foreign creditors as of December 2010. Of that, US$280-billion was owed to foreign governments and US$290-billion to foreign banks.
The country's debt problem has two features: insolvency of the government and insolvency of its banks. Bailouts from other eurozone countries and the International Monetary Fund can temporarily stave off government insolvency. Bank insolvency is a more difficult problem: As foreigners continually withdraw their investments from Greece, the nation's private banks are being forced to liquidate their assets, starving businesses of the credit they need to continue operating.
In a vicious cycle, worsening business prospects in an already uncompetitive economy are inducing additional capital flight from Greece. By the end of 2012, analysts expect Greek bank deposits to shrink by 40% compared with their amount in mid-June 2010. And ECB members are demanding additional austerity policies to bail out the state: cutting payrolls, laying off government workers, reducing public services and scaling back the overly generous (even by EU standards) retirement and health benefits of public workers and retirees.
The weight of expert opinion now is that unless it is rescued, Greece's economy will implode. But the provision of periodic bailouts may prove to be yet another government failure because they work only when the recipient institution is economically viable but short on liquidity, not when it is insolvent, as the Greek state and its financial sector are.
Moreover, defaults on foreign private-sector loans will adversely affect other ECB nations, chiefly Germany, where banks are exposed to Greek, Irish, Portuguese and Spanish debt; all those nations are also facing sovereign-debt problems.
With a shrinking economy, it's difficult to predict when the Greek economy will stabilize, but that's key because the capacity of ECB nations to provide bailout funds is limited. That's when the ECB's financial system and the euro will face their true test of survival.
? Jagadeesh Gokhale is a senior fellow at the Cato Institute, a member of the Social Security Advisory Board, and author of Social Security: A Fresh Look at Policy Options.
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