A Social History of Canadian Telecommunications

Dwayne Winseck (Leicester University)

Abstract: To appreciate the implications of recent government and regulatory decisions advancing competition in certain local network and long-distance telecommunications services, new regulatory and pricing mechanisms, and even an entirely new legal framework, it is necessary to recover the historical origins of the regulatory concepts and industry structures that are being deregulated out of existence, or said to be altered by technological circumstances and economic imperatives. The purpose of this paper is to reconstruct the historically specific, mainstay categories of the Canadian telecommunications system, such as private and public ownership, the split jurisdictional legal structure, the regulated natural monopoly concept, and other key regulatory principles. Furthermore, in order that the history of telecommunications policy can be considered on terms not reducible to economic imperatives, technological innovation or a discourse saturated with technical and legal jargon, this study considers the active role of labour unions and other social forces in shaping the early Canadian telecommunications regulatory environment.

Résumé: Des décisions gouvernementales et réglementaires récentes ont mené à: la concurrence dans certains réseaux locaux et certains services de télécommunications de longue distance; de nouveaux mécanismes de réglementation et d'ajustement des prix; et même un système législatif complètement nouveau. Pour bien saisir les implications de ces décisions, il faut étudier les origines historiques des concepts réglementaires et des structures industrielles que la déréglementation est en train de faire disparaître, ou que dit-on des circonstances technologiques et des impératifs économiques sont en train de transformer. L'objectif de cette étude est ainsi de reconstituer les composantes fondamentales et historiquement spécifiques du système canadien de télécommunications, telles que la possession publique et privée, la structure législative divisée, le concept de monopole naturel réglementé et d'autres principes réglementaires de base. En outre, afin de considérer l'histoire des politiques en télécommunications d'un point de vue qui ne se réduit pas aux impératifs économiques, à l'innovation technologique ou à un discours saturé de jargon légal et technique, cette étude tient compte du rôle actif qu'ont joué les syndicats et d'autres forces sociales à former l'environnement réglementaire initial des télécommunications canadiennes.

To appreciate the implications of recent government and regulatory decisions advancing competition in certain local network and long-distance telecommunications services, new regulatory and pricing mechanisms, and even an entirely new legal framework, it is necessary to recover the historical origins of the regulatory concepts and industry structures that are being deregulated out of existence, or said to be altered by technological circumstances and economic imperatives. The purpose of this paper is to reconstruct the historically specific, mainstay categories of the Canadian telecommunications system, such as private and public ownership, the split jurisdictional legal structure, the regulated natural monopoly concept, and other key regulatory principles.

In order that the history of telecommunications policy can be considered on terms not reducible to economic imperatives, technological innovation, or a discourse saturated with technical and legal jargon, this study considers the active role of labour unions and other social forces in shaping the early Canadian telecommunications regulatory environment. Once this is done it is more difficult to reduce the public's interest to an administrative object, cajoled and controlled by market or ill-defined public interest government regulation.

Historical investigation reveals that many of the same conditions currently used to support "regulatory liberalization" or "competition" have been fundamental attributes of the telecommunications industry and regulatory structure since the adoption of the Bell charter in 1880. This is obvious as soon as three major periods in early telecommunications history are considered: the 1880 federal charter giving the Bell Telephone Company of Canada powers to develop a national telephone network; the competitive situation in telephony between 1893 and 1920; and the emergence of semi-corporatist political economic arrangements from the midst of debates occurring over capitalism and socialism as economic systems and forms of political governance. When these three periods are considered it can be seen that there are fundamental similarities between contemporary debates and historical developments at the level of international political economy, the use of telecommunication policy as instruments of economic development, constitutional law, the use of the price mechanism to bring about certain economic, social, and political policy objectives, the reliance on scientistic and legalistic regulatory methodologies to control public input into the regulatory process and certain key terms.

Federal control, the telephone network,
and the task of nation building

To extend its reach across Canada the Bell Telephone Company of Canada needed capital and a secure legal mandate. The first condition was obtained by aligning the company with the National Bell Telephone Company in the U.S., and with the emerging Canadian commercial, financial, and mercantile elite (FCC, 1938, p. 19; Babe, 1990, pp. 68-69). The American contingent appointed to the Canadian company's board included William Forbes, president of U.S. National Bell, Theodore Vail, National Bell's general manager, and Charles F. Sise, National Bell's U.S. representative to Canada. Given the growing nationalist sentiment, it was also decided that the company should have Canadian representatives on its board. Through such appointments the company established connections with leading Canadian financial, industrial, and political institutions, such as the Royal Trust, the Bank of Montreal, Banque Canadienne Nationale, La Caisse d'Economique du Québec, Continental Life Insurance Co, Sun Life Insurance Co., Molson Breweries, Canadian Industries Ltd., CPR, the Liberal Party, etc. (Huyek, 1978, p. 32).

A stable legal context for the extension of a national telephone system was secured when the federal government asserted legislative control over the telephone system and granted the company a Charter with extensive rights. The charter was introduced into Parliament on February 23, 1880, and was passed less than a month later by both the House and the Senate. The only substantive debate was whether or not the Bill usurped too much power from the provinces and municipalities, as it stripped them of any power to control the company's operations (Canada, 1880, pp. 151, 264-267). Only momentary attention was given to the Bill's dubious effect on competition in the telephone industry. The Charter gave Bell the right to

manufacture telephone and telegraph equipment; construct, acquire, maintain, and operate telephone systems in Canada and elsewhere; connect with other telephone and telegraph companies in Canada and elsewhere; construct lines along any and all public rights-of-way...; and amalgamate with or become a shareholder in companies owning telephone or telegraph lines or possessing power to use communication by means of the telephone. (Babe, 1990, p. 68).

The charter also prohibited appropriation of the company's system by provincial or municipal governments (Mavor, 1917).

The charter and Bell's plans also complemented the conclusion of negotiations to begin the cross-Canada railway. Using exclusive contracts with Canadian Pacific, Bell's westward expansion paralleled that of the railroad. Typically the Telephone Company agreed to

furnish to the Railway Company at all points in the Dominion of Canada... connection between the offices and stations of the Railway Company and the exchanges of the Telephone Company, long distance passes free of charge. [In return] the Telephone Company shall have the exclusive right of placing telephone[s]... in the stations, offices and premises of the Railway Company throughout the Dominion of Canada.... [E]ach company... grants to the other company facilities for carrying its wires and lines... [a]nd the Railway Company will not grant similar facilities to any other telephone company. (Canada, 1905b, pp. 183-184)

These agreements excluded competitive telephone companies from railway premises, which were often the centre of commercial activity, and allowed Bell and the railways, who operated an extensive telegraph system, to share one anothers' facilities, at the expense of denying competitors' access to their emerging national information grid. As Babe notes, the separation of different communication sectors did not stem from anything inherent in the technologies available at the time, but rather from "corporate collusion" (1990, p. 16).

The development of the telephone system paralleled the development of the railway, thus becoming a symbol of national integration (Babe, 1990). This aspect of telephony not only inhered in its use as a means of communication but also by integrating other aspects of the nation-state, such as the police, military outposts, mines, and nascent business communities. As Smythe notes, the telephone system complemented efforts to "limit United States military forces to the official border,... control the territory... against native peoples and Metis, and... accommodate a vast flood of European migrants" (1981, p. 142).

Yet this national aspect of the Canadian telecommunications system should not obscure the fact that the Canadian telephone system was integrated into the U.S. network from the outset through a complex of ownership, patent licenses, manufacturing subsidiaries and cross-border purchasing agreements between Canadian Bell and AT&T (Smythe, 1981, p. 143). However, the amount of ownership in the Canadian system by AT&T changed substantially over time, ranging from 50% at the outset to 40% in 1905, 30% at the end of the 1920s, and almost zero by the middle of the 1970s. These arrangements disadvantaged Canadian telephone subscribers by requiring them to pay dividends to AT&T "for... patents [that] had long since expired" (Canada, 1905b, p. 9; Canada, 1928b, p. 3135; Canada, 1976, p. 7).

The Canadian telecommunications system was also physically attached to Britain and was implicated in that country's plans to build connections to Russia, China, and India for commercial purposes and the administration of Britain's colonial interests. This was necessary for Britain to avoid the vulnerability associated with having great portions of its imperial communication network traversing non-British territory. Western Union Telegraph also planned to make use of Canadian facilities in its earlier aborted attempt to build a line across to Russia from the United States (Fleming, 1882, pp. 5-7).

Early regional and popular efforts to control
the development of the telephone system

As the telephone system was implemented in Canada cleavages opened up between business and residential customers; urban and rural areas; large and small communities; capital and labour; federal, provincial, and municipal governments; and corporate-sized versus independent providers of telephone service, etc. (TWU, 1988, pp. 2-5). By the turn of the century the utility of telephone communication for homes, businesses, and communities had already been observed. Canadians were among the world's heaviest users of the telephone, with some of the more sparsely populated prairie provinces, like Manitoba and Saskatchewan, leading the world in the number of calls per telephone by a large margin. Socially, the telephone served as "a great... factor in binding people together in scattered communities" (Canada, 1928b, p. 3990).

It is also true that the telephone was used "primarily as a business tool" (Pike & Mosco, 1986, p. 20). The telephone served commerce by allowing businesses to co-ordinate their activities with train schedules and to access metropolitan distributing and producing centres. In fact, the first users of the telephone system in any area tended to be "banks and leading business men" (Canada, 1905b, p. 623). As well as uneven development between businesses and residences, the early potential of the network was offset by urban and rural disparities. By 1898 municipalities and farm communities were "agitating" for government control over the system. In 1899, Manitoba amended its provincial legislation to accommodate municipal and provincial ownership (Mavor, 1917, p. 15). Dissatisfaction with Bell in soon-to-be-Alberta intensified in the early 1900s. In cities the Trades and Labour Councils were encouraging municipal ownership. In some northern communities miners tried to assume control over the local telephone service as part of their overall project to construct social and political institutions outside the direct control of mine owners and their company towns (N. Morrison, vice-president, Telecommunications Workers Union [TWU], personal communication, September 9, 1992).

The expiration of important Bell patents in 1893 and 1894 and public discontent fueled the independent telephone company movement (TWU, 1988, p. 2; Babe, 1990, p. 79). Independent companies were often monitored and made accountable to municipal governments through the use of limited and renewable franchises. One such franchise was granted for 10 years by the Edmonton town council in 1893 to the privately owned Edmonton District Telephone Company (Cashman, 1972, p. 69). Despite the expiration of its patents and proclaimed disinterest in unprofitable areas Bell continued to threaten independents with expensive litigation (Canada, 1905b, p. 646).

In 1905 the government of Manitoba studied the feasibility of public ownership, and lobbied the federal government to amend Bell's charter to allow provincial appropriation of its property in the province (Mavor, 1917, p. 16). Manitoba's inquiries were joined by petitions from Trade and Labour Councils, the Union of Canadian Municipalities, the Montreal Chamber of Commerce, retail merchants of Ontario, numerous municipalities, private citizens, and independent telephone companies. Each petitioner alleged inadequate service and anti-competitive actions by Bell, and asked for some form of government ownership of the telephone system (Canada, 1905b, pp. 101, 170; Canada, 1909, p. 1763).

Although the federal government did not directly entertain the requests, it convened a committee to investigate the telephone system in Canada and elsewhere. The Mulock Committee, named after its chairman, sat 43 times and received interventions from members of the public, co-operatively run telephone companies, municipal governments, foreign telephone systems and experts, and Bell management, among others. The scope of the proceedings testified to the increasing national importance of the telephone, set an example for achieving some measure of public control over the telephone network (in contrast to the method of ad hoc dispute settlement through the courts) and suggested that telephone operations were still within the realm of permissible public debate.

At the time the form of ownership and control to take place in Canadian telecommunication were far from settled questions. During the hearings, reference was made to municipal ownership, conditional municipal franchises, ownership and regulation by the Postmaster General, private ownership of local networks and state ownership of the long-distance network, state ownership, privately owned co-operative, as well as government chartered private companies. Throughout the hearings Bell was criticized for its: excessive long-distance rates; high urban rates; almost complete lack of rural service; neglect of small towns and villages; anti-competitive practices by way of establishing restrictive covenants with public places such as railways; refusal to interconnect with independent telephone companies; and higher costs and lower general availability in comparison to countries like Denmark, Norway, Sweden, and Britain (Canada, 1905b , pp. 8-17, 400).

Bell countered that the problem was basically one of economic principles, and the maintenance of technical standards for network integrity. As the company said:

If it is a question of erecting an exchange in one large place and of giving a service needed by 1 000 people we certainly...give preference to the needs of a large number rather than to a lot of farmers.... [I]f a line is required to give a service to the... mercantile community of Montreal and Toronto, and on the other hand the same amount of money is required for farmers' lines... on any proper business principle anyone would say: Build the long line, and give the service to the greatest number of people to whom it is of the greatest value. (Canada, 1905b, p. 622, emphasis added)

Essentially, Bell wanted to engage in cream skimming, serving areas of substantial economic development and easily accessible by major waterways or railways, rather than undeveloped and less lucrative areas. At the close of the hearings the committee's invited expert, Francis Dagger, recommended that the government spend $3,300,000 to assume ownership over the local networks and long-distance facilities, while allowing local municipalities to retain the right to construct their own systems or grant conditional franchises. He also suggested that technical standards and attachment privileges be legislated in order to allow interconnection (Canada, 1905b, pp. 16-20).

The beginning of federal regulation of telecommunications

Although the retirement of Mulock from the committee and his replacement by Bell's legal counsel, A. B. Aylesworth, suggested that nothing would come of the committee's efforts, important consequences slowly emerged. First, in 1906, two years after its inception, the mandate of the Board of Railway Commissioners (BRC) was enlarged to include the regulation of the telephone system (BRC, 1908, pp. 1-3). The delegation of telephone matters to the BRC suggested an analogous relationship of the telephone to the railroad in terms of infrastructural importance and anti-trust considerations. It was at this point that the telephone companies, like the railway operators, began to come within the conceptual framework of regulated natural monopoly doctrines. Consequently, issues in regulation and public policy would be primarily defined by considerations of economic infrastructural development, anti-trust law, and general economic policy (Benidickson, 1991, p. 1245).

This economistic emphasis insured that costing, pricing, and accounting issues would be salient and durable features of the Canadian regulatory scheme. Thus, it is not surprising that the primary responsibility of the BRC, and all subsequent regulatory agencies, has been to ensure that telephone rates were "just and reasonable" and "not unjustly discriminatory or unduly preferential" (Railway Act, 1979, c.R-2). Through successive amendments to the Railway Act, by 1908, the BRC regulated the telephone system by determining the terms of compensation for interconnection between local and long-distance networks, setting technical standards for interconnecting networks, and requiring the telephone companies to file their tolls and tariffs with the Commission (Canada, 1908, p. 10654; BRC, 1908, pp. 1-3). The arrangements were, for the most part, considered to be technical and limited in nature, with the companies periodically submitting requests for interconnection and tariff adjustments.

Despite the semi-autonomous agency status of the BRC, Parliament retained control over it and telephone matters in the following regards. First, every 10 years or so, chartered telephone companies, such as Bell and B.C. Tel, came before Parliament to amend their charters, usually to increase their rates of capitalization. Because capitalization rates were the most important telephone issue, affecting the rate base, the cost of telephone service, and the companies' construction plans, Parliament decided to retain authority over this matter. Most often companies requested charter amendments so they could develop new technologies and expand their service areas. In this way the private interest of the company and technological progress were considered to be coequal with the public interest. On every occasion politicians refused to second guess companies' capitalization requests, despite the protests of labour, provinces, municipalities, and public interest groups (Canada, 1906, pp. 5995-5998).

The government also retained power over the BRC by allowing those affected by the regulator's decision to petition the government. The government could overturn the regulator's decision, refer it back to the board or dismiss the petition. The government was reluctant to second guess or pre-empt the regulatory decision making process, and those appealing agency decisions were unsuccessful (e.g., Canada, 1922, p. 227). This process inoculated the government from criticism, isolated telephone problems to a specific area of the bureaucracy, and legitimated the regulatory process as a proper institution within the political legal system.

The Commission began using its powers rather cautiously. Between 1909 and 1911 it established an annual telephone company survey to collect data to inform its policies and regulatory decisions, and adjudicated individual challenges to Bell local and toll rates (BRC, 1912b, p. 8). An action with greater implications was the Commission's announcement that it was favourably predisposed to allowing independents to connect their systems to local railway stations (BRC, 1911, p. 302). This suggested that inter-corporate, restrictive covenants were becoming intolerable and might be removed to further a competitive telephone industry.

The Commission began to expand its agenda in 1912 by prohibiting restrictive covenants between Bell and other companies that denied interconnection to third parties (BRC, 1912a, pp. 218-220). In the same year the Commission ordered Bell to reduce its rates in Montreal, develop a more equitable rate structure for large and small, urban and suburban users, and to extend its flat rate calling areas so that they were commensurate with civic boundaries. The BRC also spent a great deal of effort trying to achieve adequate accounting methods so that fair distribution between local and long-distance tariffs could be established (BRC, 1914, pp. 19-35).10 Overall, these actions indicated that the concept of natural monopoly had not yet become hegemonic, nor had the power of Bell or other regional monopolies.

However, the extent of the Commission's progressive policy positions were quite limited, as the following five instances show. First, the Commission steadfastly refused to take an expansive view of its interconnection policy, limiting such privileges to non-competing telephone systems only (BRC, 1915, p. 7). Second, in the matter of interconnection, the Commission noted that its powers could be narrowly construed to incorporate only the cost of physical interconnection, or broadly to consider "the effect of such connection upon the local service of the Bell company" (BRC, 1916a, p. 180; Ingersoll Telephone Co. v. Bell Telephone Co. of Canada, 1916). The decision was a turning point towards acceptance of natural monopoly in the field of telephony, since the BRC set the precedent of protecting Bell's revenue base from the effect of the Commission's decisions and competition.11 A bill was entered into Parliament to rectify this situation, but defeated (Canada, 1917, pp. 3543-3548).

Third, because the power of the BRC superseded that of local governments, the federally regulated companies began to use the Commission to escape local regulation and the conditions of agreements made earlier with municipalities (BRC, 1919, p. 19; BRC, 1922, p. 124). The BRC obliged such manoeuvres by not recognizing earlier arrangements between the telcos and provincial or municipal authorities. As Bernard suggests, the transfer of B.C. Tel to federal jurisdiction was calculated to avoid "political demands for nationalization and local regulation, accountability and control" (1982, pp. 74-77).

Fourth, moving the focus of regulation away from Parliament diffused public participation. Although interveners were mainly limited to BRC commissioners, telephone company officials, and lawyers, there were exceptions to this rule, such as in 1921 when a large and varied group of interveners appeared before the board opposing Bell's request for an across the board rate increase of 12%. In the end the board accepted the request, instituted a new "service connection charge" and allowed the company to increase the rate at which it could write off its investments. This was justified as a necessary measure to extend the telephone system and to maintain the company's 8% return on investment, an integral component of the rate of profit regulatory scheme adopted by the agency (BRC, 1922, p. 247; Canada, 1928b, p. 3133).

Fifth, in the early 1920s the BRC declared that Parliament had not given it any authority to inquire into companies controlled by Bell (Canada, 1928a, pp. 3134-3137; Babe, 1990, pp. 178-179).12 The effect of this was to leave the relations of Bell to its subsidiary Northern Electric, and to AT&T (which still controlled 32% of the stock in Bell and 43% of the stock in Northern Electric), outside the scope of regulatory control and public scrutiny.13 Arguably, this had the effect of inflating the rate base upon which rate cases were adjudicated, hampering indigenous control and development of telecommunications related technology, and finally, crippling the potential of meaningful public participation in the regulatory process. Secondly, the decision indicated further acceptance of the natural monopoly concept.

On the basis of these observations it seems that Bell had considerable grounds for accepting the emerging regulatory scheme.14 Although Bell was content, calls for public ownership persisted, suggesting that the regulatory regime did not have widespread appeal. Calls for public ownership and/or nationalization were raised often and vociferously in 1906, 1908, 1909, 1911, 1914, and 1917 (Canada, 1906-14, 1917). Nonetheless, by the early 1920s it appears that the original progressive impulse of regulation had been transformed into minimal public regulation of privately owned and controlled natural monopolies.

Public ownership and control in the Prairies

Although Bell avoided the move towards public ownership in Ontario and Quebec, the hearings legitimated public ownership in the Prairies. In 1905, the Manitoba government announced that the

telephone is... one of the natural monopolies, and yet is one of the most... necessary facilities for the despatch of business and for the convenience and pleasure of the people.... [T]he price... should be so low that laboring men and artisans can have convenience and advantage of the telephone, as well as the merchant, the professional man and the gentleman of wealth and leisure.... (Mavor, 1917, pp. 17-18)

Three years later Manitoba purchased Bell's system for $3.3 million. At the time of purchase there were about 700 employees and 14,042 subscribers. Although the original plan called for municipalities to operate local exchanges, while the province would manage the long-distance network, many municipalities balked at the undertaking and the province had to go it alone (Manitoba Telephone System [MTS], 1991, p. 7).

Early on the government established a commission to oversee the administration and advancement of the telephone system. Although directed to behave in a non-partisan manner, the Commission's expansion policies greatly favoured farmers, despite the lack of economic return involved with such service (MTS, 1991, p. 2). As a result, rural subscribers paid about half of what it cost the government system to provide the service ("Manitoba telephone surplus," 1946, p. C1). As an early annual report noted, "the system was obligated to some extent to extend the value of its service even at a loss, to points that have no other means of direct communication, as telephone service is one of the greatest factors in the development of the province" (cited in MTS, 1991, p. 9).

To achieve this policy the government rebalanced rates in 1909 so that businesses assumed more costs while residential fees fell. At other times, proposals for competition in the largest urban area, Winnipeg, were rejected as uneconomic entry and a threat to the social policy built into the Manitoban system. Because of this policy, Manitobans enjoyed some of the lowest rates in the world despite the fact that the "number of calls per subscriber [was] more than double that in the cities of Great Britain, Germany, Australia, and the United States...." By 1910 the number of subscribers had doubled. The number doubled again to 46,000 subscribers by 1914 (Mavor, 1917, pp. 91-94; MTS, 1991).

Alberta followed Manitoba's lead in 1906, allocating $25,000 of its $2 million budget "for preliminary work in establishing a government telephone system" (Cashman, 1972, p. 130). In 1907, the Alberta Government Telephone system began with the purchase of several independent systems followed by outright purchase of the Bell system for $1.9 million in the following year (Babe, 1990, p. 110).

In 1909 Saskatchewan joined the Prairie-wide movement by buying out Bell for $369,000 and "the independent Saskatchewan Telephone Company... for...$150,000" (Cashman, 1972, p. 188; Babe, 1990, p. 107). As in Manitoba, a policy was adopted of allowing municipal development and control over local exchanges, government provision of long-distance facilities, and government supply of local exchanges in areas where municipal control was declined (Saskatchewan, 1908, p. 9; Saskatchewan, 1915, p. 43). For the most part the efforts of the provincial, publicly owned telcos were successful. For instance, the extent of telephone "saturation" in Saskatchewan after only 12 years of service was "the highest...in Canada" (Bernard, 1982, p. 75).

However, after establishing public ownership, the Prairie telcos received much criticism for their faulty bookkeeping. It was alleged that questionable accounting practices were hiding the fact that the Manitoba system was being run at a deficit. The principal criticism was that the provinces were not setting aside a depreciation fund, instead funding expansion, maintenance, and repairs out of general revenue, consequently showing a profit where there normally would be none (Mavor, 1917; Babe, 1990, p. 104). A later publication by MTS concedes the point, noting that the government telephone system "lost money every year" up to 1912, whereas government reports at the time showed a surplus (MTS, 1991, p. 8). Despite this recantation it must be pointed out that even Bell did not establish a depreciation reserve until it became advantageous to do so after regulation was established in 1906 (Canada, 1928a, p. 3136).

Besides academic and Bell-sponsored criticism of the Prairie telcos, there was also discontent brewing within the provinces themselves, such as when Manitoba proposed local measured service in 1912. So strong was the protest that a provincial Royal Commission was called, the measure rescinded, and the Public Utilities Commission (PUC) created. The creation of the PUC was primarily intended "to regulate rate changes and serve as a non-political regulatory body between MGT and the government" (MTS, 1991, p. 9), although Babe asks if it was not also an attempt "to depoliticize telephones in the midst of a controversy" (1990, p. 105). A similar regulatory framework prevailed in Alberta. There the Public Utilities Board encouraged public interventions and undertook an explicit policy of maintaining low local and rural rates through a series of cross-subsidies. The Saskatchewan system was regulated through ministerial oversight, the provincial legislature, and the board of directors. Citizens wishing to press claims on the system did so through their local political representatives and the provincial legislature. This system still prevails in Saskatchewan (J. Meldrum, vice-president, Sasktel, personal communication, September 3, 1992).

Telecommunications, regulation, economic development,
and social control: The early crisis in capitalism

The development of regulatory structures within the federal and provincial governments, public ownership in the Prairies, and the increasing acceptance of the natural monopoly concept throughout Canada all pointed to a more general social transformation. These actions marked the beginning of regulated capitalism, the bureaucratic state, and social welfare democracy. The maturation of telecommunications bore the stamp of these developments.

The birth of the BRC signalled the development of the federal regulatory bureaucracy. It was the first independent regulatory agency created by the Canadian Parliament and there was much hesitation expressed over whether Parliament could delegate its powers to such an institution (Benidickson, 1991, p. 1224).15 Even if Parliament possessed such authority, it was asked if the creation and expansion of the BRC had not improperly altered the Constitutional balance of power between the federal government, provinces, and municipalities (Canada, 1908, pp. 10632-10655). The federal government recognized the sensitivity of its position and refused to exercise control over the provincial telcos, despite the confirmation of its constitutional powers in telephone matters (Toronto v. Bell, 1905, p. 371). In the Prairies, government control over the telephone system greatly increased the scope of government activities, while at the same time offering a concrete alternative to private ownership. With the ascendancy of public ownership of the telephone systems in Manitoba and Alberta, total public expenditure in each province immediately increased by 100% (Mavor, 1917, p. 9). The moves also expanded the government payroll. By 1915 1,130 employees were added to the Manitoba government system, 574 to the AGT system and about 500 to SaskTel (BRC, 1916b).

Some members of Parliament called these developments "socialistic," or characterized them as an abdication of government responsibilities to unaccountable officials (Canada, 1906, pp. 6213-6216). On the other hand, the unwillingness of the federal government to exercise public ownership reinforced the ascendancy of capitalist democracy by legitimating the efficacy of private ownership and indirectly refusing to enhance the position of Canadian labour in general, and in the telephone industry in particular. In countries like France, Germany, and Switzerland, where the development of the telephone system was under public ownership and regulation, pressure was brought to bear on the state to augment labour's position in terms of working conditions, the formation of public policy, and in relation to capital in general. This was consistent with the Hegelian notion that the state is the highest expression of social rationality (Holcombe, 1911, pp. 256-351). By refusing public ownership, the relations of power between labour and capital in the telephone industry were reaffirmed. The federal government's "conclusion that private ownership with government control" was the best solution in the populous provinces of Quebec, Ontario, and, later, British Columbia, allowed private ownership and minimal regulatory control to prevail over outright nationalization and a dramatic realignment of class-based political power (Canada, 1908, p. 10635).16 Thus, federal regulation was a system of control not only on unbridled capitalism, but also on labour and the political process in general, rather than the beginning of socialism.

The measures adopted assured the emergence of large corporate forms in the telephone industry, expansion of the telephone network, and the advent of a large and organized work force. Whereas the number of telephone companies exploded after the expiration of Bell patents in 1893, most obviously between the years 1911 and 1915, thereafter a process of consolidation proceeded unabated.17 By that time Bell and the six other largest telcos provided 76% of all telephone service and employed about 82% of all telephone workers. Bell alone controlled approximately 45% of the country's telephones and about 56% of the labour force. At the same time there was a sevenfold increase in the number of phones per capita between 1905 and 1915 (BRC, 1916b; Canada, 1905b, p. 8).

With the increased number of companies, the emergence of large corporate organization in the field of telephony and the expansion of the network, the number of people employed in the telephone industry grew from 10,425 to 15,072 between 1911 and 1915 (BRC, 1916b, p. 11). In the Prairies part of the growth was due to the integration of the publicly-owned telcos into a broad program of economic advancement, job creation, and skills development designed to attract settlers and offset the centrifugal force of central Canada's political, commercial, and cultural domination.

As the structure of the industry stabilized, labour organizations developed, indicating a change over previous practices in the telephone industry where work had been parcelled out on a daily basis to people who had come out of the telegraph system or who had no experience at all. Unions first took hold in western Canada when British Columbia Telephone Company (B.C. Tel) workers joined the International Brotherhood of Electrical Workers (IBEW) in 1901 and 1902. By 1907 the IBEW organized the line-workers at the Alberta Government Telephone system (AGT). The union represented plant workers at MGT seven years later, and operators by 1917 (Canada, 1905b, p. 229; Cashman, 1972, p. 184; Bernard, 1982, p. 15; MTS, 1991, p. 11).

The institutional nature of work in the industry also developed at other large telephone companies, most notably Bell, albeit without the benefit of union representation for workers. Indeed, Bell imported the methods of Henry Ford, employing vertical integration to maintain control over all aspects affecting the price, quality, and supply of material used in its production process (Canada, 1928a, p. 3134). This also meant employing engineers and "scientific methods" to control the work force.

In 1906 Bell commissioned a consultant from AT&T in the U.S. to report on the working processes of operators in the busy Toronto exchange. The consultant suggested that the performance of the operators could be considerably improved with an increase in hours and marginal increases in wages18 (Canada, 1907a, pp. 8-9; Sangster, 1978, p. 112). Within a year the company duly extended the operators' hours without consultation or an increase in pay. The operators walked off the job. To underscore its aggressive management style, Bell refused the aid of a government mediator and brought in strikebreakers from Montreal to avoid disrupting service at the commercially important exchange (Canada, 1907a, p. 25).

With no official union representation the operators became linked to the labour movement through Labour Temples (Canada, 1907a). The Labour Temples in cities across Canada offered the Trades and Labour Councils, those without a union or people affiliated with the labour movement a safe place to meet, talk politics, and organize strategy in labour's battles with employers and employer associations. In this particular instance the Toronto Labour Temple brought together 400 operators with a wide group of individuals united by the causes of economic democracy, public ownership of the telephone system, and concern for the welfare of the women working for Bell (Sangster, 1978, p. 113).

At the behest of Toronto's mayor, a Royal Commission was convened to adjudicate between the striking operators and Bell.19 Most interestingly, the mediator linked the welfare of the operators and their wages to the defacto monopoly in telephone services held by Bell in the city. As the Commission noted, the two were linked because

there is one company carrying on the telephone service for the entire city, and whether they like it or not the public generally of the city... is obliged to pay the Bell.... Viewed in this light... an element is introduced which justifies...due regard for the welfare of employees which might be urged with less reason in the case of competitive industries. To the extent to which the Bell Telephone Company has... secured services at a rate which would not have enabled those who rendered them to have lived, but for the support received from members of their own families, or in ways other than those provided by the company,... the profits of the company have been derived by a species of sweating, or by the levying of a tax upon homes and individuals for which no compensation has been made. (Canada, 1907a, p. 37)

As public policy measures had been instituted to secure an adequate relationship between telcos and the communities they served, it seemed that henceforth government would intervene to secure de minimus standards of equitable relations between monopoly capital, the labouring classes, and the public interest. For its part Bell realized that co-operation was necessary to avoid further public attention, labour militancy, and the possibility of more government intervention.

Later that year an Industrial Disputes Investigation Act was passed, echoing many of the principles outlined in the above case (Canada, 1920). The legislation not only secured de minimus standards of labour relations but also instituted mechanisms of social control by prohibiting labour's right to strike without first going through the newly constituted Labour Board's grievance and arbitration procedures. In the first appearance of telephone workers before the Industrial Disputes Investigation Act Board in 1911, the B.C. Telephone workers, represented by the IBEW, brought forward a wide range of grievances, including the right to a closed union shop, the length of the work day, job classification, and wages. Although the board ruled in the union's favour on the issue of wages, it did not consider the other issues raised. Because of the constrained focus of the inquiry process, the B.C. Tel workers took an ambivalent attitude towards the board. Appearing before the board in 1917, the union had a similar experience. The board again adjudicated in favour of the union on the issue of wages, but refused to expand the scope of its considerations to demands for a "closed shop" and the use of unskilled labour (Bernard, 1982, p. 37).

During the First World War the loose strands guiding labour militancy gained clarity and focus in some areas of Canada, as an acute shortage of skilled labour occurred, a high demand for economic supplies put a premium on productivity, inflation raged alongside low wages, and the federal government invoked an unpopular policy of conscription (Penner, 1973, p. xiii). Discontent came to a head in the Winnipeg General Strike of 1919. From the outset Manitoba telephone workers, represented by the IBEW, joined other labourers in the two month strike (MTS, 1991, p. 11). The conflagration was triggered by the Winnipeg municipal council's efforts to legislate "no strike" provisions for all civic employees. The day after passing an amendment rescinding unions' right to strike, telephone workers and 95 other unions engaged in a city-wide work stoppage. Most of the unions in the city and nearby areas of the province followed suit (Penner, 1973, p. xxvi; Bercuson, 1990, pp. 60-65; Canada, 1921, p. 3359).

In B.C. a general strike was called in sympathy for workers in Winnipeg and against the government's use of militia and other state powers to quell the unrest there. In fact, telephone operators in British Columbia were among the last to stop their strike action. But more than just striking in sympathy for workers in Manitoba, B.C. Telephone workers became part and parcel of the broad-based opposition to efforts to restrain labour's power, to the industrial organization of work processes, and to a high rate of inflation (Bernard, 1982, p. 79; Bercuson, 1990).

The effects of the general strike were mixed. Despite the temporary expression of labour solidarity, the strike divided the labour movement within given localities and nationally. In B.C. it caused a significant division among the telephone workers that, by 1926, contributed to the emasculation of their union and loss of benefits won in earlier struggles. The strike also opened tension between labour on an east-west dimension, the western labour organizations feeling that there was a lack of support coming from their counterparts in central and eastern Canada. The division still permeates the organization of telecommunications labour (J. Kincaid, regulatory affairs advisor for the CWC, Ottawa, personal communication, July 7-10, 1992). The strike also revealed the extent to which government could marshall a variety of powers against perceived antagonistic forces, such as violence, incarceration, repressive legislation, deportation, and suspension of civil liberties.

The strike brought debates about capitalism, communism, and socialism to the fore of public and parliamentary discussion for the next 10 years (Canada, 1919, pp. 12-13; Canada, 1921, pp. 3359-3361; Canada, 1927, pp. 2236-2237; Canada, 1929, pp. 2367-2369). The debates were particularly interesting in two regards. First, they indicated the seriousness given to the crisis and the possibility of radical social transformation. The General Strike had brought about "condition[s]... so serious that revolution was threatened and the future of Canada was imperilled" (Canada, 1921, p. 3359). Second, the debates did not seriously consider the principles of competing forms of economic arrangements and systems of political governance, but were constrained to utilitarian considerations of how freedom of speech, education, labour organizing, and state funding of industry could diffuse dissent and channel energies toward the support of capitalism and parliamentarian democracy.

More positive outcomes of the strike for labour were its subsequent successful efforts to achieve representation at all three levels of government, a pattern of political representation that persists to the present in some Prairie provinces (Penner, 1973, p. xxii-iii). It also brought increasing efforts from some political parties to incorporate labour in their platforms. Shortly after the strike the Liberal Party, under the leadership of MacKenzie King, won national elections. Part of the victory reflected King's attempts to address labour and include them in his party's "corporatist style" policies. As Penner notes, the consequences of the General Strike were not the eradication of labour militancy or the end of capitalism, but rather the beginnings of "liberal democracy" (1973, p. xxiii).

The emerging trend towards liberal democracy did not translate into enhanced political participation of the public, redistribution of wealth and economic control, or an increase in unionism, but rather became part of a larger tendency to integrate capital, the state, community, and labour into formal structures of problem resolution and class harmonization. Political structures and the policy process were used to eradicate the radical edge of political dissent by invoking common interests and consensus around, for instance, the need to increase productivity for the betterment of society (Whitaker, 1977, pp. 138-169). The ascendancy of corporatism meant that notions of irreconcilable class antagonism and direct democracy would be jettisoned in favour of technocratic planning of economic processes and representative political democracy. The effort of the corporatist prototypes, the BRC and IDIA Board, to limit their considerations to issues of prices and wages ably illustrated how the view of economics as a scientific method coincided with desires to use the policy process as an exercise in economic development, technical planning, and social control.

In the telephone industry corporatist relations were evident in attempts to enhance the regulatory framework, the acceptance of "natural monopolies,"20 and the development of company-sponsored employee associations. As such measures were implemented calls for radical reform and public ownership were muted (Canada, 1928b, pp. 3132-3139, 3986-3994; Canada, 1929, pp. 118-122; Canada, 1938, p. 937). By the late 1920s and early 1930s the regulatory bureaucracy was no longer a contested feature amongst contemporary political and economic institutions. As organizational imperatives superseded market considerations, "uniform" administrative "systems" for clerical, accounting, and task co-ordination functions were created, so too was a large body of clerical workers (Bernard, 1982). An important outgrowth of these changes was the development of employees' associations. Bell, taking heed of its earlier experience in labour relations, committed to avoiding unions and, cognizant of the emerging political climate, made the employee association an adjunct to its overall management practices (Sangster, 1978, p. 125). This augmented the company's aim to replace the operators' union that had formed under the auspices of the IBEW in 1918, and remain union free.

Even though the operators had pursued unionization for some years after the lockout in Toronto, their experience with unionization only lasted a brief three years. By 1921, a number of factors, not least of which was the chauvinistic disposition of the IBEW towards women members, conspired to bring about a replacement of the union with a company-sponsored employee association (Sangster, 1978, pp. 126-127). In the U.S., AT&T had used the employee association in the "hope... [that]... the employees of the Bell System throughout the country will have no affiliation with any labor organizations and will co-operate thoroughly for the good of the business" (Schact, 1985, p. 15). Like its counterpart, the Canadian Bell organized employee consultative committees, raised wages, and instituted stock ownership plans to advance amicable labour relations within the company (Canada, 1928a, p. 3133). By the early 1920s a combination of elite political consensus around "liberal democracy," organizational imperatives, company desires, and union conservatism meant the demise of unionism and militant labour relations. This pattern of labour relations prevailed into the 1940s in the Prairies and for well over 50 years at Bell.

With their dominant position secured, the large, federally regulated telcos avoided rate increases for better than 20 years, while their continuing efforts to consolidate control over the industry proceeded unabated and unencumbered (Canada, 1948, p. 4263; Babe, 1990, p. 123; Bernard, 1982, p. 77).21 In 1948, Bell representatives demonstrated the company's generosity by pointing out that "by reason of economies and technological improvements in telephony we have been able to maintain our present rate structure since... 1926" (Canada, 1948, p. 4263). Again technology assumed historical agency, obscuring the relationship of regulatory constraints and political pressure to the company's "willingness" to exercise restraint. Furthermore, it has been noted that there are many ways in which the company could "milk" excess profits from the regulatory arrangements, despite the avowed intent of rate of profit regulatory regimes to subordinate capital accumulation and organizational prerogatives to public interest considerations (Canada, 1928a, p. 3991; Babe, 1990, pp. 170, 190).

In large part this latter phenomenon was an attribute of the regulatory framework's tolerance for vertical integration. Although there has been a hands-off approach to vertical integration within the telephone industry, the practice did occasionally get attention and criticism in Parliament, and by different groups, including labour, municipalities, academics, and would-be competitors (Canada, 1928a, p. 3991; Canada, 1939, p. 937; Canada, 1964, p. 10814; "Congress asks . . . ," 1952, p. 19; Canada, 1951, p. 4176). The arrangements were also subject to inspection under the Combines Investigation Act in 1976 and 1983, although nothing substantive came of the investigations (RTPC, 1982; Babe, 1990).

Ironically, the Depression solidified the emerging consensus at the same time that it brought forth criticism of the telcos. The telephone companies were chastised for not living up to their end of the bargain by laying of some 16,000 employees during the recession. Bell laid off 4,000 employees and exacted concessions from others, while improving its business prospects and profits (Canada, 1938, p. 941; Canada, 1939, p. 3139).22 B.C. Tel was also admonished for using the Depression to roll back benefits, institute a series of layoffs, implement pay reductions, and use job reorganization as a way to undermine the gains made earlier in the century by workers (Bernard, 1982, pp. 80-85).

That even the publicly owned prairie telcos instituted layoffs and cut back on plans to extend their networks indicates that the telcos were universally faced with hard times. The point, nonetheless, is that some of the large private companies not only responded to the occasion in a prudent manner but used it to reclaim power lost to labour organizations earlier and maintain profits at the expense of labour. This latter feature was not present in the publicly owned telcos where layoffs were accompanied by reductions in the number of subscribers and a precipitous drop in profits (Saskatchewan, 1934, p. 14; MTS, 1991, p. 16). The criticism of the privately owned telcos seems to confirm that part of the emerging corporatist regime was predicated on some form of labour rights within the industry, that included at least a conscientious attempt to maintain employment stability. Despite this criticism there were only weak calls for public ownership mixed with stronger admonishments for the companies to "remember that these men who work for you have hearts and souls, have wives and families who have to be looked after. Spread work out among your employees;... and forget during this time of stress and strain in Canada that yearly dividend or yearly balance sheet with its big profit" (Canada, 1938, p. 941). Thus the Depression appears to have allowed the institution of private enterprise to become unassailable, and the political economic system of capitalism hegemonic. Afterwards, speaking of public ownership required a salutary and prefatory pledge of allegiance to private ownership and capitalism before explaining the peculiar circumstances that raised the spectre of public ownership (Canada, 1948, pp. 4266, 4519).

Despite the end of the Depression around 1937, the onset of the Second World War extended the stagnant patterns of telephone growth for another decade. Besides the implementation of automated direct dialing equipment in some areas, and the development of the Trans Canada Telephone System in 1932, other activity in the telephone system was minimal. From the beginning of the 1930s until after the war the domestic network underwent only enough growth to maintain parity with pre-Depression rates of availability (DBS, 1962, p. 15). During the war developments in the public network were pre-empted by military applications and the diversion of supplies to the armaments industry. The most obvious development during this time was the length of the waiting list for a telephone in all areas of the country (MTS, 1991, p. 21; Saskatchewan, 1948, p. 2).


By the end of the Second World War, fundamental features of the Canadian telecommunications system had been constructed. Most importantly this system consisted of regulated natural monopolies, private and public ownership, split regulatory jurisdiction, the notion of public interest regulation grounded in company Charters, the mandates of regulatory authorities (cumulatively defined through the actions of the BRC, Parliament, and provincial authorities), a more stringent set of labour standards applying to monopoly telcos, and the beginning use of the pricing mechanism to bring about public policy objectives like community telephone service, rural service, affordable residential service, and to some extent universal service. However, universal service remained elusive until the 1960s when more than 93% of homes received telephone service (DBS, 1962, pp. 9-12).

Noting this larger social and historical context within which industry structures develop, legal frameworks are formalized, and technologies inserted allows us to refute contemporary arguments that promote a one-to-one relationship between technological change, economic imperatives, and the need to transform the regulatory framework governing telecommunications.

By paying attention to particular groups like labour unions in the telecommunication industry and in public policy we move outside the domain of one-sided explanations and start to recover the historically specific essences of key aspects of the Canadian telecommunications system. Furthermore, observations of the experience of groups like labour unions also provide empirical, historical evidence that substantiates a real public interest in telecommunications matters. Consequently, we can begin to counter developments in regulatory policy that try to collapse all discussions into the categories of economic growth and technological innovation, and lately, competitiveness, without considering the implications of regulatory policy in terms of equity, public life, and democratic practices.

If the collapse of public policy and regulation into the exclusive discourse of economics and technology continues, the possibility of extending the concept of electronic public space beyond the remedial efforts of the past century may be forever surrendered to colonization by technical and instrumental interests. Thus it is necessary to reconstruct the historical public interest in communication as a guide for erecting new "radical participatory" models of media democracy that transcend contemporary and historical models of regulation based on the market, paternalism or ill-defined notions of the public interest.


Trades and Labour Councils (TLC) were early co-ordinating and representative organizations for unions and employee organizations. There tended to be TLCs in each city or town that would act as labour's co-ordinating agent. The TLCs had national affiliation through the Trades and Labour Congress (Bernard, 1982, p. 50).
Numerous times, intervenors addressed the restrictive practices of Bell in regard to interconnection. The originator of a rural telephone service stated that there were plans "make it into a co-operative farmers' concern, but the Bell...took it over...[and] raised the rates. It is really better...because they have a railway connection....The Bell...brought pressure to bear,...they insinuated they would put us out of business..." (Canada, 1905b, pp. 59-61). Another noted that it was "almost the unanimous opinions of the business men that it is against their interests and a great public inconvenience that the Canadian Pacific Railway should make such an agreement with the Bell.... [T]here have been protests by the dozens, and the council protested about their difficulties, and presented their demands to the railway commission...and brought the telephone company into court" (Canada, 1905b, p. 100).
Bell did agree to interconnect with some independent companies, but usually under the following two conditions: the companies agreed not to compete with one another in their respective areas; and the interconnecting companies would purchase equipment exclusively from Bell (Canada, 1905b, pp. 249-254).
Even more important, evidence presented to the committee already demonstrated cross-subsidies flowing from business to residence in each of the telephone systems surveyed, regardless of ownership type or regulatory regime present. Essentially this principle worked to allow residents to be served at cost while business were charged the full cost of network access, plus assigned exclusive responsibility for maintenance and depreciation costs (Canada, 1905b, p. 400).
It appears that it was during this hearing that Bell first employed the "end-to-end" or "system integrity" argument to prevent the interconnection, and hence, long-term viability of competitor telephone systems. This theme eventually became a standard feature in Bell's arguments, trotted out each time regulators, competitors or new services threatened its monopoly. Yet, committee members countered Bell's arguments numerous times by saying that even given technically compatible equipment Bell still refused interconnection on competitive grounds (Canada, 1905b, pp. 622-623).
Section 320 of the Railway Act, up to the passage of the new Telecommunications Act in 1993, remained the primary source of regulatory power in telecommunications, although it is considered in a much more liberal manner than probably ever thought possible by the BRC (Babe, 1990, p. 168; Janisch, 1986, p. 586). Similar wording in the new legislation suggests its continuing relevance to the new telecommunications environment.
It must be noted that since an amendment to its charter in 1893 Bell had to seek permission from the Governor in Council to raise its rates. The difference between the two methods was the transfer of regulation from Parliament to the BRC and, ostensibly, the greater publicness of the latter (BRC, 1914).
Bell increased its capitalization by $5 million in 1906, $75 million in 1928, $500 million in 1948, $750 million in 1967, and $3.25 billion in 1976 (Canada, 1906; Canada, 1928b; Canada, 1948; Canada, 1967; Canada, 1976).
Another avenue of appeal was the courts.
Surprisingly the "unscientificness" of the process did not undermine the belief in the technical nature of regulation. That the process remained laden with political overtones is evident in the frequency with which telephone issues were raised in Parliament, and the number of appeals (petitions) to Parliament attempting to overturn regulatory decisions (for one example among many, see Canada, 1922, p. 227).
This did not mean that the natural monopoly concept had not been considered before. Indeed the concept was the basis of calls for public ownership and, as will be seen below, was the basis of public ownership in the Prairies. The point is that the decision here marked a turn away from the support of competition in the federally regulated area towards the idea of a regulated natural monopoly. That the policy had this effect, Babe (1990) notes, is evidenced by the disappearance of the last competing telco in 1925.
Although bills were introduced in 1928 and 1929 that would allow the BRC to increase its powers to investigate Bell's affiliates, they were never passed into legislation. It must be noted that the Commission was not undesirous of such powers, since "some members of the board...were anxious to get further information as to the affairs of the Northern Electric Company." There seems to have been a division of opinion within the Commission between the chief commissioner and other members on this question (Canada, 1928a, p. 3986; Canada, 1929, p. 118). Finally, after numerous intervening inquiries, legislation was passed in 1987 that somewhat enhances the regulator's powers to investigate the intra-corporate relations of Bell Canada (Babe, 1990, pp. 194-195).
AT&T availed itself of increased revenue each time the regulator granted rate increases. Between 1923 and 1927 rate increases escalated the flow of revenue from Canada to AT&T from $330,000 to $510,000 (Canada, 1928a, p. 3135).
As a Globe and Mail editorial noted, "There are few corporations in the country but would welcome a guarantee of...earnings such as the Bell company obtains" (cited in Canada, 1928a, p. 3990).
Perhaps this is why the government retained the prerogative of reviewing regulatory decisions through the Petition of the Governor in Council process.
Where this still did not work, independents flourished or the government itself developed and managed telephone networks until they became profitable, at which time they would be sold for nominal funds, mostly to Bell (Canada, 1921, p. 3088; Canada, 1922, p. 2012). For instance, it was acknowledged that "[i]t [wa]s...the policy of the government to enter into telephone services where...the investment of private capital would not be warranted and would not be compensated..." (Canada, 1931, p. 2830).
The situation in Canada had parallels in the U.S., where a brief period of competition existed between 1893 and 1914, after which the Bell system began to again assert its dominance (FCC, 1938, pp. 138-139).
The primary operator "performance" criteria being, then and still, the number of calls handled in an hour, percentage of errors on incoming calls, and the time taken to respond to incoming calls. In the consultant's report on the situation in Toronto it was suggested that answering between 210 and 225 calls per hour, each within four seconds of coming in, was not unreasonable (Canada, 1907a, pp. 9-19; L. Renaud, president, Windsor and area operators of CWC local, personal communication, July 20, 1992). Bell also extended its management of the labour process to include the amount of information that could be proffered by an operator in the course of her or his duties and even the range of movements that could be undertaken.
The Commission was headed by William Lyon MacKenzie King, Deputy Minister of Labour and later head of the Liberal Party and Prime Minister.
Despite the ascendancy and rather solid acceptance of the natural monopoly concept by the 1930s there continued to be a large number of independent telcos, as well as the telecommunications networks of the CN and CP railways. These companies had a mixed relationship with the telcos, having joint sharing agreements for some purposes and competing in other areas. For instance, the railways provided intercity links for the telcos before the completion of the Trans Canada Telephone System in 1932, while the telcos allowed the railways access to their local loops for other limited purposes. In their entirety these joint operations created a national telecommunications network. In other specialized services, like private line services, microwave transmissions, data transfer, and message switching there was limited competition (CRTC, 1979, pp. 8-35; also see Babe, 1990). Although some recent revisionist histories of Canadian telecommunications claim that this represents the historical existence of competition and a favourable government predisposition towards competition (D. Mozes, Telecommunications Policy Branch, Department of Communications, personal communication, July 30, 1992), such assertions are undermined by the collusive nature allowing such circumstances to flourish, the undeniable dominance of the telcos in all areas of telecommunications and the reliance of all telecommunications providers on Northern Telecom for most of their equipment (CRTC, 1979, pp. 18-19).
That criticism and discussion of Bell or the telephone system temporarily drops altogether from the record of Parliament and the Senate during the depression in the 1930s suggests that it had become an accepted institution of the times and that its contribution to economic and social stability in immiserating times would more than offset the perceived evils of concentrated capital and political power.
Huyek cites Bell annual reports from 1929 to 1936 to show that the reduction in staff was even greater, somewhere around 8,500 people (1978, p. 44). She also states that the effects of the Depression were aggravated by the company's decision to implement automated dialing equipment, which resulted in technological displacement. Perhaps the difference between the number she cites and the number reported in Parliament is the difference between the layoffs attributable to the depression and those to technological displacement.


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