Irving Gerstein explains Canadian telecom policy

Irving Gerstein is the chief fundraiser for the Conservative Party of Canada. In the informal constitution he must rank closely behind the Minister of Finance and the Chief Justice of Canada in importance, as long as the Tories reign. He spoke about how the political system works a year and a half ago and I want to pass his message on.


The analysis I offer is unusually frank and political. It may offend certain sensibilities, particularly if you believe that the regulatory process ought to, or in fact does, proceed independently of governments of the day. On the contrary, governments impose policy at the CRTC through the appointments process, and chairmen are sent in to accomplish certain tasks. Von Finckenstein’s task was to unblock the regulatory process that the previous chairman Charles Dalfen had, in his perfectionism, seized up, and to get decisions issued, which he did, but he was not sent there to disrupt the relationship of the regulated industries to the regulatory process. When Jean-Pierre Blais was sent in, his task was to turn the place into a consumer-friendly regulator. The problem, as I see it, is that Bell has not seen that the government was not just making cosmetic changes. It was embarking on a new course, one that has not prevailed in my thirty seven years of being in and about telecom regulation.

As Michael Geist has shown on his blog, Bell continues to act as if the CRTC were stepping out of line, and cannot quite believe the audacity of the regulatory commission in its failure to see Bell’s point of view on a number of issues important to the company. The company keeps acting as if they owned the government, and the government owed Bell something. I state this in the sincere belief that the company at one time did own the government, but that it does no longer, and that the head office is having cognitive dissociation from the current realities.


When I say own the government, I am speaking loosely but in the sense elaborated in John Ibbitson’s Collapse of the Laurentian Consensus[2], which is one of the finest pieces of political analysis I have seen about why Canada is now governed from the West by disguised Reformers called Tories. Ibbitson talks of the change this way:


Despite the rising power and influence of the West, the Laurentian elites could have retained power….

They did not. Why?

It happened for one simple reason: Ontario voters broke ranks.

This was the great, shocking shift: the formation of a Conservative Coalition whose leadership was Western, whose values were Western, whose most fervent supporters were Western, but which came to power through the support of millions of Ontario voters.


Ibbitson explains that more and more Ontario voters saw they had much in common with Westerners, and less with their urban elites.

The first change was a move westwards in the centre of political gravity, discussed by Ibbitson. This brought us the Reform Party, disguised as the Conservatives. They were used to being a despised insurrection of the lower orders against the might, majesty, and condescension of people who thought, and still think, that they are their social, moral and intellectual betters.  The outcome of this attitude has been the Conservative’s grand strategic aim: the total destruction of the Liberal Party. They may yet achieve it, but that is another story. 

For any corporation that was in tight with the former regime, Bell is already in the government’s sights. Bell was a significant contributor to the Grits, in its capacity as a regulated industry. By social and business connections, by elite ascription, by a hundred informal links, regulated industries of the past smell Liberal to the holders of the Reform faith. Strike one.


The second great change in Canada, proceeding from the Reform insurrection against the Laurentian consensus, has been a radical reformation in how political parties are financed. The first step was the poison pill that Prime Minister Chretien left behind for his arch-nemesis, Paul Martin, by banning corporate donations. The second was Prime Minister Harper’s abolition of the scheme of matching grants from the public purse[3]. Parties are now exclusively financed by individuals.

This means, in turn, that parties are financed by people able to send fifty or a hundred bucks to a political party, and this group, though it numbers in the hundreds of thousands, or low millions, is not a majority of the Canadian population. It is the sometimes angry, motivated social core of society, whether left or right, the ten percent who are accustomed to getting things done, and making their views known. They were early adopters of computers. They join societies, not-for-profits, and unions, they go to fundraisers, they vote. Ex-Reform, Tory or Liberal or NDP: it does not matter.

And this brings me to the article by Kenneth Whyte[4] in McLean’s magazine of nearly two years ago, which deserves to be passed out to all students of Canadian politics for study. If your lobbyists are not conversant with it, fire them.

In Whyte’s report, Irving Gerstein was one of two speakers at this conservative convention, the other being the Prime Minister. Mr. Gerstein said:

“To raise money successfully,” said the senator, “a political party must appeal to Canadians of ordinary means . . . The Conservative party’s fundraising success is built not on the depth of our donors’ pockets but on the breadth of our donor base and that is what the other parties do not understand and why they are lagging behind.”

Conservative fundraising prowess, says Gerstein, has been key to the party’s three consecutive election victories. He was careful not to take all the credit. He shared some with his Prime Minister. And that is where he got profound.

If there is one thing he has learned about raising money, said Gerstein, it is that what comes out of Harper’s mouth determines what falls into the bagman’s boots: “Message creates momentum creates money.”

Think about that for a minute. What Gerstein told the world Saturday afternoon is that the Prime Minister gets to keep his job so long as his message—his policies, stances, decisions—moves Conservative activists to send cheques.

Gerstein stopped short of saying that the government adjusts its message to improve its finances but, come on . . . there’s a majority on the line.”

In short, Bell Canada does not count; its subscriber base does. Bell is in good company. Bank presidents scarcely count, either.

The implications of this may not have yet been absorbed by broad reaches of corporate Canada. What follows from the manner in which parties are financed is this:

  • Ten thousand Canadians sending fifty dollars to the governing party will get their immediate attention, $5million worth of attention;
  • 150 corporation presidents have no money to give them, and can be ignored;
  • No change of political party, Prime Minister, or CRTC Chairman will affect this situation; it is structural for as long as current political financing laws remain.

This means is that no personality or policy clashes between any corporate executive of a regulated industry, say for instance, Kevin Crull and a CRTC Chairman, are of any permanent significance. They are just surface noise.

I first became aware of the importance of the consumer revolt when, as a Commissioner, I witnessed the blow-up over bit caps and Internet access pricing. It was a long day of Full Commission in summer, and sometime in the afternoon, we Commissioners were presented with staff advice about how to approve Bell’s plan to price Internet access, and in particular, Internet access for smaller ISPs who lease capacity from Bell. Typical CRTC, after spending hours on broadcasting regulatory trivia, the billion dollar issues came up around 2pm.

If I had had my wits about me I would have argued from first principles that, in an era of Moore’s law[5], we ought to encourage the most extravagant usage of bandwidth. Usage that looks extravagant one year will be socially normal in 18 months. Mea culpa; it was the mistake of my CRTC career. I ought to have gone ballistic; I did not.

A week or so later a political eruption in the people of Canada who use computers has shaken the summer’s torpor.

The government learned an important lesson, that an obscure pricing decision by a regulatory agency with which it had scarcely any communication could threaten its existence, unless they made the right decisions immediately. The Internet matters extremely to the people who are able to spare $50 for a political donation. It was not just the Open Media[6] types who were in an uproar; the old Reform base was among the first to rely significantly on computers, well before they had caught on with the mass of the population[7]. Strike two.

The result was eventually the selection of Jean-Pierre Blais as Chairman of the CRTC to succeed Konrad von Finckenstein. The consumer agenda that the CRTC is acting upon, under Blais’ supervision, is only the expression of a much deeper correlation of forces acting upon the Canadian polity. Civil servants are steel ball bearings; the best roll in any direction required. Blais is rolling towards goals set out for him by Harper, and Harper is responding to a political market of his own contribution base. Wrangling with Blais without understanding why he was put in charge of the CRTC may be satisfying, but we are not in a world any longer where the CRTC Chairman can be overly concerned with his regulated industries. He is answering to Harper and Harper is answering to contributors.

The same advice applies to Rogers, Shaw, Cogeco, Videotron, Eastlink, Corus and the CBC.

 “A little humility might suit you better, Mozart” said the court chamberlain to the composer in the movie Amadeus[8]. A little humility is needed by every corporation head to read the signals right, confess to error, change course, and spend no further time being wrong.

My advice is to any regulated company is: don’t waste a minute more being wrong. The government has no particular interest in any regulated industry or company. Your actions can only lose them votes, and they can only gain votes by doing as their contributors ask. You have no money to offer the party system. And if that means the government will regulate you more, to increase voter satisfaction, that is what will happen.







[7] The author joined the Reform Party in 1989 and participated in its Ontario regional structure.


To top