Government Protection of Domestic Communications as National Defense: Assessing Canadian Government Policies

Abstract

In the nominal interest of promoting a national identity and a stronger federation, a range of public policies have been implemented by the Canadian government to encourage and facilitate cross-subsidization in the Canadian telecommunications and broadcasting industries. The main policy instruments involve government regulations and foreign ownership restrictions that contribute to higher revenues for domestic producers of communication services than would otherwise be realized. The quid pro quo is that domestic telecommunications carriers and broadcasters must undertake costly and unprofitable actions that involve subsidizing activities such as rural telephone services and “Canadian entertainment content.” Unfortunately, there is little evidence that the relevant policies promote the goal of strengthening Canada’s national identity. Furthermore, they are inefficient, as well as nontransparent. The fact that several other countries, particularly France, have lauded Canadian content regulations as a “model” for smaller, open economies, they are more appropriately viewed as the socially undesirable outcome of a muddled public choice dynamic.

Keywords:

• national identity
• Canadian telecommunications
• Canadian broadcasting
• regulation
• public policy

Acknowledgments

The author thanks two unidentified reviewers of an earlier draft for helpful comments and criticisms.

Notes

1. Note that the policy is an anomaly in the context of overall trade and investment liberalization with the United States. There are other countries that directly or indirectly promote their domestic entertainment industry.

2. For a more extensive discussion of the relevant laws and regulations, see Globerman (2014).

3. An important point to note here is that the increased earnings of inputs such as performers, directors, producers, and authors can be very unequally distributed, so that many Canadians working in the entertainment industry earn relatively low incomes, as is the case in other countries.

4. It is illegal for Canadians to receive US broadcast signals directly from US satellite services. The fact that some Canadians have violated this restriction by acquiring US satellite receivers using false US addresses attests to some unsatisfied demand for US-originated programming.

5. It might be argued that with many channel offerings available, Canadians are hardly restricted in what they can view; however, the preponderance rule prevents Canadians from choosing the mix of foreign versus domestic programming that they might prefer.

6. Increased production specialization subsequent to reductions in trade barriers is a common experience of many Canadian industries (Baldwin and Wulan 2004).

7. Huhmann and Saqib (2007) also credit government subsidies to the Canadian publishing industry for reducing the private financial risk of starting new magazines aimed at smaller, special-interest target markets and language minorities.

8. It should be noted that many additional employees are involved in designing and administering direct funding programs, particularly for the entertainment and culture industries. For a discussion of these programs, see Globerman (2014).

9. The interview is reported in September 26, 2013, “One-Third of Canadians Watch TV Online.”

10. This preference for transparent direct subsidies is not applicable solely to the communications sector. Direct transfers of income generally cause smaller economic distortions than indirect transfers.

11. It is unlikely that this narrowly focused subsidy would be challenged by Canada’s trade partners, particularly if the subsidy is made available to both domestic and foreign-owned companies.

Additional information

Notes on contributors

Steven Globerman

Steven Globerman is the Kaiser Professor of International Business and the director of the Center for International Business at Western Washington University. He is also an adjunct professor at Simon Fraser University and a Senior Fellow at the Fraser Institute. He has published extensively on a range of public policy issues and has consulted for businesses and for Canadian government departments and agencies.