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It has been introduced into contemporary debate about social justice by Amartya Sen. Welfarism is a term denoting all theories that demand that we judge the state of a society in general, and just distributions in particular, by the welfare of the people concerned, and by their welfare only. Welfare is an emotional state, subjectively experienced by the person herself. In Chapter 2, I wrote that the concept of distributional justice only makes sense for transferable goods: goods that it is possible to portion out and transfer to individuals.

Now, welfare is obviously not transferable in this sense. Nor is it clear that welfare is a scarce good. It is far from obvious that my welfare can only be increased at the expense of the welfare of another person. Man does not live by bread alone, but the welfare of a hungry person increases when she is given bread to eat, or money to buy bread. So, distribution of economic goods is up to a point distribution of welfare. Welfarism implies that the distribution of economic goods is evaluated by the effect it has on the welfare of the persons concerned.

There are several welfarist schools of thought. Two notable examples of welfarist theories are utilitarianism and welfare economics. A typical statement from an economist is: The measurement of welfare forms the foundation of public policy analysis. A full consideration of taxes, subsidies, transfer programs, health care reform, Welfarism: utilitarianism and welfare economics 21 regulation, environmental policy, the social security system, and educational reform must ultimately address the question of how these policies affect the well-being of individuals.

Slesnick The quotation above is from a survey of methods for measuring welfare. The short answer is that it cannot. For instance, if we can assume that the welfare of an individual increases when income increases, ceteris paribus, income can be used as a proxy for welfare. Suppose two people have the same incomes. Can we conclude that their welfares are also equal?

This question raises two distinct problems. The second is that of interpersonal comparability. If two people have identical preferences, we may tentatively conclude that equal incomes will provide them with equal welfares. The conclusion is tentative, because of the second problem. Many thinkers claim that it is meaningless, impossible, to compare the emotional state of different persons.

In this chapter, welfarist theories of justice will be discussed as if individual welfares are both fully measurable and comparable from one person to the other. The reason is that mathematical analysis is a useful tool for investigating the logical implications and other properties of welfarism, and mathematical analysis presupposes that welfare can be meaningfully expressed in real numbers. When practising welfarist policies, we do not in general need the high level of precision of some of the following analysis.

No distributional policy is tailored to the exact needs of the single individual. Utilitarianism Utilitarianism is a philosophical and ethical system covering both personal ethics and social justice; however, only those aspects that have a bearing on distributional justice are being considered, here. Jeremy Bentham who is quoted at the beginning of this chapter is considered to be the founder of utilitarianism. Note that the welfare of every individual contributes equally much to total welfare; in this sense, utilitarianism treats all persons as equals. The above two formulations of utilitarianism are equivalent when the population number is constant, but may lead to different conclusions about population policy.

In the following, I shall let utilitarianism be represented by the version in equation 4. Within this framework, there are also several versions of utilitarianism. One distinction is that between rule utilitarianism and act utilitarianism. Rule utilitarianism concerns, as the name makes clear, the basic principles and rules of society. Act utilitarianism analyses concrete actions here and now. A well-known example may illustrate the difference. The most widespread version of modern utilitarianism is preference utilitarianism. A leading modern utilitarian, John C.

Harsanyi, writes: More fundamentally, preference utilitarianism is the only form of utilitarianism consistent with the important philosophical principle of preference autonomy. By this I mean the principle that, in deciding what is good and what is bad for a given individual, the ultimate criterion can only be his own wants and his own preferences. In particular, it does not assume that individuals are egoistic, or that welfare is decided purely by economic goods. Also, a preference utilitarian does not, or not necessarily, assume that people always act so as to maximise their own welfare.

Why should a government aim to maximise the sum of individual welfares? One answer may be that it goes without saying that a government should act for the good of the inhabitants of the country, at least in a democratic society. Furthermore, it is self-evident that in a democratic society, the good of every citizen should count equally much. But, as we shall see, it is not self-evident that the good of the citizens should be their subjective sense of welfare.

Nor is it self-evident that the good of society should be a simple sum of the good of each citizen; there are other ways of ensuring that each person counts the same as every other person. Another answer is that utilitarianism is what every citizen would choose as the basis of government policies in his own enlightened self-interest if he had to choose a policy from behind a veil of ignorance.

This way of justifying utilitarianism was developed by John Harsanyi and is described in Harsanyi To explain the reason behind this manner of thinking, assume that individual welfare is determined by income only, and imagine a citizen choosing how income should be distributed if she did not know where in the distribution she herself would end up. Equation 4. A self regarding person would wish the government to act so as to achieve the highest possible welfare according to her own preferences. In order to obtain the rule that government should respect the different preferences of citizens, the terms of the choice have to be put in a slightly different way.

The moral preferences are those of a benevolent and impartial observer of society. Being benevolent, the observer would favour the welfare of every citizen; being impartial, he would give the welfare of all citizens equal weight. Harsanyi then proves that, under certain technical assumptions, the observer would decide that society should maximise average individual welfare, as described by equation 4.

Another basis for equation 4. Kolm postulates a society consisting of n individuals with different, but given, 24 Theories of justice preferences, and that each person has to choose how income should be distributed if he knows neither which preferences he will turn out to have, nor what his income will be. Their way of formulating the problem is very similar to that of John Rawls.

The problem and possible solutions will be further discussed in Chapter 5. In economic analysis, the welfare of the individual is called utility, U for short. As income increases, utility increases, but the higher the income the smaller is the increase. The increase in utility due to an increase in income of one unit, is called the marginal utility of income. The utility curve in Figure 4. There is unfortunately no agreed terminology. The so-called pure distribution problem is the problem of how to distribute a given total income among several persons.

It is solved differently by different welfarist principles. Three of them are possible in the simple case presented here: equality of welfare, equality of income and utilitarian equality. The implications for the distribution of income of two egalitarianisms, welfare egalitarianism and utilitarianism, will be considered. A welfarist egalitarian holds that welfare should be equally distributed. The ensuing distribution of income depends on the shape of the utility functions. If two persons have identical utility functions, equality of welfare always implies equality of income.

If not it does not. Figure 4. The solution to this maximising problem is to distribute income so that the marginal utilities of Ivar and Kari are equal. The distribution of income maximising total welfare is shown in Figure 4. The utility functions are the same as in Figure 4. Favouring Kari increases social welfare more than favouring Ivar.

We have seen then, that when utility functions are different, equality of welfare implies neither equality of income nor maximum welfare. Neither the welfare egalitarian nor the utilitarian cares how it comes about that Ivar and Kari have different preferences. Let us say that Ivar has a physical handicap, he is blind for instance. On the other hand, Ivar may have expensive tastes and be unable to achieve welfare without enough money to pay for luxury cars and hand-made shoes. In that case, equality of welfare between Ivar and Kari might well seem ethically unacceptable.

It is an example of a social evaluation function. Such functions are widely used by economists when analysing distributional issues. A social evaluation function is any rule ranking the outcomes of the economy by means of a real number. In welfarist analysis, the outcomes are evaluated by their effects on individual welfares, and the social evaluation function serves to weigh the individual welfares against each other. The evaluation function is then usually called a social welfare function, and its values are called social welfare, W , as distinct from the individual welfares U.

The utilitarian rule in equation 4. In the present chapter, we shall study welfarist social evaluation. The concept of social welfare functions was introduced by the economist Abram Bergson There is no agreement among economists that social evaluation functions are useful. One criticism is that they are meaningless, since individual welfares are neither measurable nor comparable. Another, and a more general, line of criticism is that there is no basis for postulating that a democratic government should, or would, base its policies on a social evaluation function.

Arrow showed that, given some very weak assumptions that should apply to any democracy, there is no way of decision-making among citizens that would lead them to adopt a social evaluation function whatever their preferences. This means that for every democratic procedure, it is always possible to imagine individual preferences that would block a social evaluation function. The members of a society may well have preferences and procedures that result in a social evaluation welfare function; Arrow has proved that this cannot always be the case.

For the reasons outlined above, many economists feel that their discipline should not concern itself with issues of justice in distribution. On the other hand, many economists do address issues where questions of just distribution arise, and when they do, their analysis is based on a welfarist social evaluation function more often than not. Such functions therefore represent a widely used way of thinking about distributional justice.

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A useful way of studying the properties of social evaluation functions is by diagrams like Figure 4. For practical reasons, we again assume that there are just two persons in the economy. The curves are so-called social indifference curves: along a social indifference curve, no point is socially preferable to any other.

The social indifference curve therefore shows all possible distributions of individual welfare which are equally socially acceptable. The straight lines in Figure 4. An increase in the welfare of one person while that of the other is unchanged, is called a Pareto improvement. The straight line A—B illustrates a Pareto improvement in favour of Ivar.

We see that a Pareto improvement increases utilitarian social welfare. It is in this sense that utilitarianism treats all persons as equals. Now, imagine that society disposes of a given amount of welfare, and that individual welfare may be freely transferred from one person to the other. The utilitarian social indifference curve represents points where the sum of individual welfares is constant. It follows that any transfer or redistribution of individual welfares will leave the utilitarian social evaluation of society unchanged.

The utilitarian social welfare function is inequality neutral in individual welfares. The state of society can only be improved by increasing the individual welfare of one or more of its members. The inequality neutrality of utilitarianism has been criticised by John Rawls and Amartya Sen, among others. Note that here, Rawls implies that a transfer of welfare from the well off to the worse off does not contradict the Kantian principle.

They are called Bergson—Samuelson social welfare functions. For the purposes of studying distributional justice, inequality averse and symmetric social evaluation functions are of special interest. These do not have any particular name in the literature, for convenience I shall call them Sen functions. The social indifference curves of a Sen function are shown in Figure 4.

Like the utilitarian social evaluation function, the Sen function is symmetrical round the equality line, and so treats all persons as equals. Such transfers are called equalising transfers. A Sen function is therefore said to be inequality averse. The shape of the function decides how the two possibilities of social improvement should be weighed one against the other.

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To the extent that individual welfare depends on wealth, the social evaluation function is an instrument for measuring the trade-off between wealth and equality. In the case of only two individuals, the degree of inequality aversion is easy to read off graphically by the degree of curvature of the social indifference curves. In the more general case, measuring inequality aversion is more complicated. Note also that the degree of inequality aversion of a given evaluation function does not have to be the same in all states of society.

The claim that greater equality leads to a decrease in the size of the pie is contentious. However, even if the claim is true, a social evaluation function may well prefer an equally distributed small pie to a bigger pie distributed unequally. The trade-off is illustrated in Figure 4.

Ivar is a disability pensioner, say, and dependent on the income generated by taxing Kari. Welfarism: utilitarianism and welfare economics 31 less the more she has to pay in taxes. On this assumption, transfers from Kari to Ivar decrease total wealth. Increasing taxation makes Kari produce less. A utilitarian social evaluation function will decide that U is the best state achievable. The result of a Sen evaluation depends on the degree of inequality aversion; a moderate inequality averse function chooses the point S.

Note that neither the utilitarian nor the Sen evaluation function ranks the point of maximal production, L as the best. Welfarism and ethics Some consequences of welfarism contradict several fairly widespread ethical intuitions. Then some ethical criticisms of welfarism will be presented and discussed. Ethical properties of welfarism Individualism Welfarism is individualist; it is based on normative or ethical individualism. Society, the community, the nation have no intrinsic value for welfarism, and there is no such thing as the common good, existing independently of individual welfare.

Humanism Most versions of welfarism are also humanist, or as some would put it, anthropocentric. Only the welfare of human beings count. Effects on the environment will be of importance to the state of society to the extent that environmental conditions determine the individual welfare of human beings, but only to that extent. Respect for preferences Most versions of welfarism, and especially welfare economics, respect the preferences of the individual.

In economics, this principle is called consumer sovereignty. In utilitarianism, as we have seen, it is called preference utilitarianism. The state of society is assessed entirely by outcomes. Ethical principles, rights, liberties, have no intrinsic value, but are deduced from their effects on the welfare of individuals. What counts is individual welfare, not how that welfare is obtained.

It should be emphasised that none of the above implies that welfarism assumes human beings to be anthropocentric, or individualist in the sense of being egoistic or unconcerned with society and the common good. Critique of welfarism A respectful welfarist does not try to determine what is good for people, but relies on people deciding that for themselves.

Whatever the individual herself regards as good for her, and for whatever reason, is good for society. Tobacco is a good as long as there exist persons who prefer smoking to not smoking. It is up to the smoker herself to weigh the pleasure of smoking against the harmful effects as far as her own health is concerned.

A respectful welfarist will recommend that measures be taken against smoking only in so far as smoking adversely affects others than the smoker herself. This respect for preferences may create ethical problems. There are people who have repulsive and ethically unacceptable preferences. One extreme example is sadism. Welfarist ethics will not normally accept sadistic behaviour. Envy is a less extreme but in some ways more problematic example. When distributing income between an altruistic person and an envious person, an inequality averse welfarist may plausibly decide to compensate the envious one for the loss of welfare caused by envy.

Another much discussed problem is that of expensive preferences, thoroughly analysed by Ronald Dworkin a. Some people are content with a simple life, others are unhappy without vintage champagne and caviar. The latter group clearly need a higher income than the former to achieve the same level of welfare.

Is such a distribution just?

The consequences for distribution of economic resources of repulsive preferences or expensive tastes depend on how these traits affect the mathematical shape of the utility function as well as on the shape of the social evaluation function applied. For the utilitarian, the only aspects of preferences that count when distributing income are those that affect the marginal utility of income.

Welfarism: utilitarianism and welfare economics 33 On the other hand, there may be other reasons than a penchant for luxury goods why a person needs extra money to achieve a given level of welfare. Harsanyi proposes two methods. One method is to distinguish between irrational and true preferences, where the true preferences: are the preferences he would have if he had all the relevant factual information, always reasoned with the greatest possible care, and were in a state of mind most conducive to rational choice.

In particular, we must exclude all clearly antisocial preferences, such as sadism, envy, resentment and malice. A person displaying ill will toward others does remain a member of this community, but not with his whole personality. The second problem is: who decides which preferences are antisocial, and by which criteria? Other cases are less clear. There are many instances of disagreement and serious public debate about which preferences should be allowed and which prohibited, and concerning what kind of preferences have ethical relevance.

Sexual harassment is one example. The altruist obtains welfare from the well-being of one or more other persons. Even if none of the others is envious, an inequality averse welfarist distribution of income will be unfavourable to the altruist.


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Also, the problem of expensive tastes, which may be either frivolous or due to physical or mental ailments, is not solved by excluding antisocial preferences; a taste for vintage champagne can hardly be considered antisocial. A utilitarian would give Tiny Tim a higher income than others less fortunate while a welfare egalitarian would give him less: both distributions seem equally arbitrary.

A related problem stems from what is called adaptive preferences. A famous example is given by Sen. He cites an Indian survey from which showed that just 2. The survey was carried out in Bengal the year after the Great Bengal Famine. The survey showed, not that the widows were in good health, but that they had resigned. Their expectations had adapted to their surroundings. What is needed are criteria for which preferences to respect and which to ignore, and these criteria cannot be based on the same preferences that they are to judge.

One way of tackling the ethical problems of welfarism is suggested by the distinction between rule utilitarianism and act utilitarianism. We can think of justice as being decided on in two stages. These rules are then binding constraints on the social evaluation in the short run. This kind of procedure has been suggested by Y. Ng But then again, we meet the problem of which preferences to apply to the long-term decision about rules.

Our preferences are, at least to some extent, shaped by the society we live in. If these same preferences are then used to judge this society, a circularity arises. An even more fundamental critique of welfarism is the following. Not every person sees the pursuit of her own individual welfare as the ultimate purpose of her life. She may pursue goals like doing her duty, carrying out the will of God, contributing to the good of humanity or writing the Great American Novel. But then, a truly respectful theory Welfarism: utilitarianism and welfare economics 35 of distributional justice needs another concept of the good to be justly distributed.

Welfarism need not be respectful. The opposite of respectful welfarism is paternalism: the relevant authorities decide what is good for you. But paternalistic welfarism can easily become more authoritarian than benevolently paternal. He writes: [These principles] are meant to regulate basic institutional arrangements.

Our common sense intuitions of the former may be a poor guide to the latter. Such a basis of society is different from a society built on common ethnicity, religion or language, factors which are more commonly assumed to create the nation state. The Rawlsian society is a liberal one. Rawls a: 13 It is often thought important that society should be organised so as to retain the voluntary cooperation of its most resourceful and gifted members.

Therefore, the important point is indeed to secure the voluntary cooperation of the least successful. The original position Rawls bases his theory of the just society on a version of the social contract. Since agreeing to it is a voluntary act, the contract must be such that it can be unanimously agreed upon. Rawls argues that we can deduce the contents of this contract by a thought experiment.

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Imagine an original position, where all members of society meet to negotiate a contract that can be unanimously adopted. In this original position, the participants are ignorant of their own position in society. A veil of ignorance hides from them their sex, talents and other genetic endowment, their place in the distribution of economic and other resources, their place of birth, the economic and social positions of their parents, even their tastes and preferences, or life plan, as Rawls prefers to put it.

From behind this thick veil of ignorance, the contracting parties are to decide upon what the just distribution of goods and burdens should be in a society that they themselves would want to live in. On the contrary, Rawls writes: It is taken for granted, however, that they know the general facts about human society. They understand political affairs and the principles of economic theory; they know the basis of social organization and the laws of human psychology.

Indeed, the parties are presumed to know whatever general facts affect the choice of principles of justice. The uncertainty concerns where in the distribution of goods and burdens each particular individual will end up as well as what kind of life she will prefer to live. The choice concerns, among other features, which form of distribution the rational individual would then prefer.

The basis for the criticism seems to be that there is no plurality of voices and points of view represented; 38 Theories of justice essentially, the parties in the original position are several copies of one single human being. Feminist critics have pointed out that, in particular, no women are present. The parties in the original position do not engage in conversation or exchange points of view.

The criticism is in a sense correct since the parties are without individual traits or characteristics beyond being human. On the other hand, every conceivable kind of human being is a party to the Rawlsian social contract because the contracting parties have to take into account the possibility of turning out to be of this kind. We must think of the parties as souls, as Roemer calls them, souls that may be incarnated in any and every possible human shape.

When choosing a society that they themselves would want to live in, it is clear to the contracting parties that they must choose a society they would want to live in whatever their place in that society turns out to be. Women are represented in the original position by the fact that the souls, when incarnated, may turn out to be women. In fact, there is a probability of almost 50 per cent of being incarnated as a woman, which should ensure a contract with equal rights and opportunities for women and men.

The original position is not a description of human behaviour or of any situation that has actually occurred; it is a model or a metaphor to enable us actual living human beings to reason about the just society. Brian Barry puts it like this: There never was and never will be an original position. Talking about what would go on in it is supposed to be a way of doing moral philosophy, not a branch of imaginative literature.


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Barry The people actually doing the moral philosophy will represent a diversity of characters and points of view. But, again, this assumption is not an assumption about actual human beings. The souls, when incarnated, may turn out to be egoistic, altruistic or envious, or to possess a mixture of all these three traits. Impartial justice is justice taking the rational self-interest of every single human being equally into account. Rawls a: 60 Rawls maintains moreover that the principle of equal rights to extensive liberty will take lexical, or absolute, priority before the second principle.

The priority follows from the fact that the parties are ignorant of which lifeplans they will prefer. Therefore they will choose to allow any lifeplan, except lifeplans that limit the liberty for others. Here, for practical reasons, the least advantaged is understood to be the least advantaged group, not individual, since the least advantaged group is the easier to identify. This last version is also called the maximin principle by many commentators, though not by Rawls himself.

It is the outcome of a trade-off between absolute equality and total wealth, and accepts certain, but not all, inequalities. Illustrations of the difference principle Figures 5. For simplicity, they all assume that there is only one good to be distributed, called income. Choosing between distributions Figure 5. Imagine that all the persons in a society are numbered according to the size of their income, the poorest is number 1 and the richest number n. Full equality appears as a straight line FE , and is the benchmark distribution. The distribution IE is an unequal one, but where all are better off than in FE.

Figure 5. It shows a case where IE gives a worse result for the poorest than FE, but a better result for nearly everyone else. By the indifference principle, distribution FE is to be chosen as the just one. This result has bothered many critics of Rawls. It would quite obviously not be the outcome of, say, a utilitarian evaluation. The principle is violated, according to Rawls, when a person is forced to lose something, even if very little, in order to advantage someone who is better off than himself.

In the distribution IE, the situation of the majority is improved at the cost of the admittedly very small minority of the very poorest. When transfers decrease the size of the pie Another illustration of the difference principle is shown in Figure 5. It is almost the same graph as in Figure 4. The good to be distributed in Figure 5. The curve shows all possible distributions between Ivar and Kari, L being the income produced when Kari is allowed to retain the whole for herself. Here, the greatest possible income for Ivar is obtained.

The point E is the point of absolute equality. Here both Ivar and Kari receive less than in R. By the indifference principle, the distribution chosen will be R. For comparison, the points U and W show the optimal distribution of a utilitarian social evaluation function and a Sen social evaluation function respectively assuming Kari and Ivar have equal preferences.

The diagram shows that the indifference principle gives shares that are unequal, but less unequal than a utilitarian distribution. The criticisms concern both the maximin principle that Rawls deduces from his original position, 42 Theories of justice and his way of specifying the original position itself. Many commentators, for instance Barry , Kolm and Roemer claim that the difference principle is not the correct solution to the Rawlsian problem of choice under uncertainty. Rawls himself writes that his theory of justice is part of the general theory of rational choice.

The parties in the original position have to choose one of a class of possible distributions of economic goods without knowing what their own place in the distribution will be. The outcome for each individual is decided by the shape and location of the distribution, as visualised in Figures 5.

The greater the equality of the distribution chosen, the smaller the probability of either great poverty or great riches. This choice is formally the same as the choice to be made by an investor between several investment projects with uncertain outcome. As explained in Chapter 4 and Appendix A, the investor will choose the distribution that maximises his expected utility.

The corresponding choice for parties in the original position would be a social contract based on a utilitarian social evaluation function. Rawls thus seems to appeal to the theory of rational choice under uncertainty without being willing to accept the results of that theory. I am not persuaded that this line of criticism is well taken. It is not clear to me that a social contract designing the basic institutions of society can be found with the methods of conventional uncertainty analysis.

Now, the choice of distribution of lifetime income would seem to be of far greater import, and to call for a far greater degree of caution risk aversion than a single investment project affecting only a part of your life. Ideally, telecoms policy builds on these values to bring about goals thought socially desirable.

Often the aim is to increase access to communications media, a goal pursued through universal service and "just and reasonable pricing. Common carriage, thus, can help sever mediated communication from the distorting influence of power that stems from ownership and control of the means of communication, a point unique to telecoms.

By mediating relationships between technology, industry, and society, policy stamps its imprint on the evolution of telecoms. Telecoms policy has traceable consequences for:. Despite the decline of the "natural monopoly" concept and regulatory liberalization, telecoms policy is as consequential as ever. One example used to illustrate this point in this paper is Stentor's 2 proposal to build integrated broadband networks IBNs or "information highways" if the government agrees to remove measures preventing telecommunications companies telcos from delivering information and video services.

This confronts the Canadian Radio-television and Telecommunications Commission CRTC with the option of using regulatory policy to prevent , permit, or promote these far-reaching proposals Elton, While each choice entails a different degree and kind of regulatory involvement, none eliminate government's role in making policy decisions that will affect telecoms for years to come.

The important questions deal with how competing interests will be reconciled in the context of "information highways," who will shape the regulatory agenda, and how concerns with democratic communication will fare in the ensuing battle over the evolution of the new telecoms Mansell, In Canada there are 61 telecoms carriers.

Most, but not all, are privately owned and regulated by the CRTC. The Telecommunications Act Canada, and recent court decisions brought these companies and independent telcos under the federal regulatory authority of the CRTC. Independent telcos have furthered universal service by providing services to remote areas thought unprofitable by Stentor members or would-be competitors. The major providers and general conditions of the telecoms industry are outlined in Table 1. As Table 1 indicates, despite the many companies in the Canadian telecoms industry, control of the telecoms system For much of this century, telecoms services in Canada have been governed by three factors: the status of service providers as common carriers , a belief that telecoms services were natural monopolies , and public interest-oriented regulation by a semi-autonomous regulatory agency now the CRTC.

These factors have left an indelible imprint on the evolution of telecoms and continue to set the baseline for discussions about the future of the industry, the role of policy, and the contributions telecoms can make to economic welfare, social interaction, and democratic communication. The following pages survey these principles and consider their future viability. The Railway Act the guiding legislation for telecoms from until ; Canada, and the Telecommunications Act Canada, stress that telecoms are point-to-point communication systems that carry all forms of content.

These definitions distinguish telecoms from other forms of electronic communication in two important ways. First, the emphasis on point-to-point communication distinguishes telecoms from electronic mass media which distribute messages from one point to a large number of receivers -- the so-called mass audience. Second, telecoms rests on the separation of carrier and content supply functions, unlike the electronic mass media. This separation is known as the common-carrier principle. This common-carrier principle is rooted in the perception of telecoms as a part of the social and economic infrastructure of a community.

Like railways and other services of value to a community, telecoms has long been guided by the idea that common access would best facilitate the free flow of services, in this instance, information Chitty, Yet the principles of common carriage did not automatically apply to the first technological innovations in telecoms.

Courts in North America were reluctant to apply the common-carrier principle to telegraphy because information and communication were intangible and thus not encompassed by the idea of services assumed by definitions of common carriage Baxter v. Dominion Telegraph Co. John Silver and Abraham Martin Payne also found telecoms and the press to be interdependent, and that therefore they should be regulated by the same laws. This changed in the first decade of the twentieth century in response to complaints by news agencies that some telegraph companies were interfering with the free flow of information by charging discriminatory rates between their own wire services and that of others Babe, ; Board of Railway Commissioners, ; Nichols, The view of telephone systems as common carriers subsequently evolved piecemeal through interpretations of the Railway Act , amendments to this Act , and changes to the laws governing telecoms providers in Canada.

Until recently, the common-carrier concept contained three principles: control of content should be separated from control over networks, network access should be non-discriminatory, and rates should be just and reasonable. These principles have been implemented by policies that prevented carriers from influencing the messages flowing through their networks and required them to offer non-discriminatory access to their system on the basis of "just and reasonable" rates Canada, , s.

In return, policies limited carriers' liability for messages communicated through their networks Canada, , s. Section 5 of the Bell Canada Act unequivocally states that the company "shall neither control the contents nor influence the meaning or purpose of the message emitted, transmitted or received" nor "be the holder of a broadcast license" Canada, , p. These provisions were extended to all carriers by the Telecommunications Act , although it allows the CRTC to grant waivers to such a policy -- an issue discussed further below Canada, , s.

According to Eli Noam , such policies create a communication system that is decidedly different from the mass media, where access is discretionary, the conditions of access are governed by private contracts, and responsibility for contents is enforced through libel, indecency, and slander laws. According to some critics, these conditions create a system of electronic mass media where media freedoms belong to those who own the media, since citizens' access to the media is entirely dependent on their discretion although this freedom is qualified by the cultural policy orientation of the broadcast regulatory regime, public access cable channels, and a minimal right of public access to over-the-air broadcast facilities [CRTC, ; Juneau, ].

In contrast, the common-carrier principle prevents private arrogation of freedom of expression by erecting barriers to censorship by the state and private interests. Table 2 outlines some of the differences between the competing network access regimes for telecoms and the electronic mass media. The common-carrier principle is crucial because it provides an entry point for discussing the relationship between telecoms policy and democratic values -- a discussion seldom undertaken because telecoms interests are biased toward technical and economic considerations while communications research predominantly focuses on media content rather then the institutions and infrastructures of electronic media.

This is no longer desirable as telecoms policy moves to the fore in debates over the organization, control, and use of new media technologies. A key issue is whether common carriage should be imported wholesale into the nascent telecoms policy regime to preserve "freedom of expression" independent of ownership and control, be adopted for limited public access "set asides," or be sacrificed at the altar of "information highways.

As the above discussion indicated, one concern of the common-carrier principle has been to prevent the ownership of telecoms networks from translating into the exercise of power over those producing and distributing media content. Conventional views of telecoms as a natural monopoly made concerns about concentrated economic power, market behaviour, and the public interest even more salient. Indeed, some suggest that the entire regulatory edifice for telecoms has been tied to the natural monopoly concept.

Yet what is a natural monopoly? If policy was contingent upon it, does competition render telecoms policy obsolete? Until recently, the natural monopoly view stemmed from the observation that in most countries, or regions within a country, one firm controlled the supply of telecoms services, from the manufacture of equipment to the telephone in peoples homes.

Yet competitive and independent telephone systems thrived from about until It was only after a series of efforts to establish dominance within telecoms and several regulatory decisions that the Bell Telephone Company of Canada and six other telcos consolidated control over the industry after Board of Railway Commissioners, Thereafter, the theory of natural monopoly became unassailable in telecoms policy circles. The main explanations for this exceptional view was that the technical characteristics of the industry inexorably lead to " natural market failure " Wilson, , p.

According to Babe , three arguments supported the idea that telecoms were unable to sustain a competitive industry structure: economies of scale, the need for systems-wide cross-subsidies to bring about universal service, and systems integrity. The high cost of constructing universal telecoms networks created enormous economic barriers to market entry. Besides, it was thought inefficient to duplicate networks, especially since economies of scale meant that extending existing networks to embrace additional subscribers was cheaper than reaching these same people through the construction of competing networks.

Thus a single network served the public interest, as the declining cost of serving additional subscribers meant that average costs for all subscribers would decline. This also enhanced the value of the telecoms network for all users, since additional subscribers were potential communicative partners for everyone else connected to the network. As a framework for harmonizing divergent interests, the natural monopoly concept appeared to be as good as they come. The final major argument supporting natural monopoly was that of systems integrity.

According to the telcos, the complexity of the technologies used and the importance of uninterrupted telecoms services to the public required unified, end-to-end control of the network by one company. Representatives of Bell Canada put the case before Senate hearings this way: "[t]he company feels very strongly that it should have complete control over the system, firstly in order to protect the equipment.

Similar arguments have been put forth by Bell since at least Canada, Mulock Committee, The argument cloaked the monopolistic structure of the telecoms industry in the shroud of technological necessity. A second effect was to present competition as unfair in the sense that competitors would only enter the most profitable areas -- a process known as "cream-skimming" -- thereby undercutting the telcos' ability to use revenues from these areas to subsidize unprofitable rural and remote areas. Once again, natural monopoly aligned the telcos with the public interest through recourse to the goal of universal service.

Yet, as Babe observes, the position ignores the independent telcos -- about 1, in -- who drew their existence from the failure of Bell and the other large telcos to serve remote areas. Critics of natural monopoly point out that monopolies always seek legitimacy through reference to the public interest. They argue that the natural monopoly explanation is historically inadequate and based on reasons that are neither necessary nor of the magnitude claimed. In contrast to natural monopoly explanations, it is necessary to consider how the entire communications system has been shaped historically through extensive struggles between civic associations, labour unions, farmers, independent telephone companies, large corporations, and government agencies.

One intense period in telecoms politics coincided with the flourishing of competitive and independent telcos circa that was briefly described above and drew its energies from the fact that the organization of the communications industries was still undetermined and up for grabs. This quickly abated once control in the communication industries was consolidated on the basis of powerful ties between the media industries and the Canadian government, and between the Canadian communications system and its U.

Besides adopting the natural monopoly concept as the cornerstone of telecoms policy, the most significant outcome of this historical period was the segregation of communications industries between telephony, telegraphy, publishing, and broadcasting. This was not due to technical requirements of different media, but to struggles for dominance in sub-sectors of the communications field involving skirmishes over patents, restrictive covenants, and subsequent legal frameworks that protected these exercises of corporate power.

As Babe stresses, the division of the communications industries and separate legal regimes developed for each thereafter resulted from. In fact, the opposite was the case: the two fields diverged through corporate agreement. Without these practices, the issue of media re convergence now so prominent may have been settled in the s and s instead of the s: the Bell Telephone Company may have extended its early trials with radio to become not only the dominant telephone company in Canada but also the largest commercial broadcaster.

For their part, policymakers noted that these dealings violated anti-trust laws, then adopted them as the basis for the United States' Communications Act of and, in Canada, continued to separately regulate telecoms under the Railway Act and broadcasting through a series of legislation leading up to the Broadcasting Act of By the end of the s the natural monopoly concept underpinned the position of the major telephone companies within telecoms while corporate agreements secured their positions across the divided communications industries.

But could such arrangements last, especially in the face of an onslaught of technological innovations such as cable television? The short answer is yes, until a more compelling alignment of interests was constructed! That compelling alignment of interests is taking shape now, amidst the experimental use of new media such as the Internet and jostling amid strategic interests over the institutional boundaries and telecoms policies that will govern the convergence of IBNs, ownership of the emerging networks, and conditions for offering services on the so-called "information highways.

In the to year span between segregation of the communications field and the present, a penumbra of policies inhibited media convergence, cross-media ownership, and delivery of content services that seemed to cross imaginary technological boundaries. The CRTC regularly put forth policy statements and decisions disallowing telcos from holding a cable television license, preventing the undue reliance of cable systems on the telcos, and hindering efforts by SaskTel and MTS to provide cable television services CRTC, , , In addition, Parliament amended the Bell Canada Act to prohibit Bell from exercising editorial influence over information flowing through its network or from holding a broadcasting license Canada, , s.

Although digitization, computerization, and visions of "wired cities" animated public discourse during the late s and s, barriers between the media industries were not being eroded, but reinforced. The telcos acquiesced willingly. As Bell chairperson A. Faced with the option of preventing, permitting, or promoting network convergence, most institutional actors involved in telecoms policy chose the first option: there were to be no breaches in the regulatory walls separating electronic media.

The natural monopoly concept within telecoms and government-sanctioned corporate agreements structuring institutional arrangements across the communications industries meant that any role for communication markets was purely residual. In the place of communication markets there developed the concept of public interest-based regulated industries. In areas under federal jurisdiction, Bell and B. More crucial than who regulated who is that the transition from competitive telephone systems to the monopoly provision of telecoms services early in the twentieth century dissolved the potential for the industry to claim that markets could adequately represent the public interest.

According to classical economic theory, competitive markets accomplish two things: efficient allocation of economic resources and commutative and distributive justice -- fairness in relations of production, exchange, and in the distribution of income. The natural monopoly concept displaced both goals.

Macpherson explains, "with the twentieth-century decline of competition the market could no longer claim exemption from non-market ethical standards Moreover, the state, which now shares the allocative function [of markets], must, in so far as it is a democratic state, claim that its Within the context of telecoms, the state stepped into the regulatory and ethical void created by "market failure" through the use of policies designed to secure what markets no longer could: efficiency, social justice, and the public interest.

This was done through the common-carrier principle, rate regulation, universal service goals, and balancing citizens' and corporate rights to freedom of communication. Should telecoms policy promote the economic value of information or expand potentials for democratic communication? Irresolvable in theory, the tension is preserved in the transient balancing of interests and rights obtained through the politics and power relations endemic to telecoms policy. This point is illuminated below in reference to three key areas of telecoms policy: pricing, universal service obligations, and the concept of "freedom of expression" that held sway in media policy in the s and into the s.

One of the most salient issues in telecoms policy is pricing. It is also one of the most complex areas, where extensive political issues are easily obscured by economic and scientific models designed to distribute costs across various users and to promote competing policy ends, such as universal service, growth in the electronic services industry, and international competitiveness. Telecoms policy has conventionally employed "rate-of-return" regulation to set monopoly telecoms operators' TOs' profits in the absence of competition.

Ideally, rate setting by regulators balanced the interests of the TOs in a reasonable profit and users' interests in, and legislative requirements for, "just and reasonably" priced telecoms services. Of course, these competing interests and the fact that what was "just and reasonable" was a malleable concept meant that rate setting was inherently political.

Moreover, many claimed that "rate-of-profit" regulation contained incentives for telecoms companies to build "gold-plated" networks, as the costs could easily be passed through regulators and onto users. Yet, regulators did supervise construction plans to avoid overbilling and to see that network construction was reasonably balanced across geographical and economic zones. Currently, rate-of-profit regulation is being replaced by "price-cap" 10 regulation. Price caps are positively perceived by many regulators and TOs since it allows the TOs some flexibility in setting prices across a range of services, so long as they do not surpass the "ceiling price" for the whole "basket of communication services" covered by the price-cap plan.

Several issues are important here: the size of telcos' profits under this regulatory regime versus the rate-of-profit regime, how broadly the "basket of services" is defined, how stringent the "price-cap ceiling" is in relation to the consumer price index CPI , the effects of price-cap regulation on network investment, and the ability of TOs to assign high prices to services in the basket where competition is weak and demand inelastic e.

References - Oxford Handbooks

Despite this benefit, the price-cap approach pits the telcos, who have an interest in narrowly defined "service baskets," against users and those interested in social justice, who seek broader definitions. Also, price caps contain incentives to reduce investment in network development and to reduce the workforce in order to increase profits for shareholders, setting the interests of telecoms workers against those of the companies Carsberg, ; Hills, Thus, contrary to efforts to harmonize competing interests under rate-of-profit regulation, price-cap regulation contributes to a complex system of class conflict.

In contrast to much of the literature on deregulation, this expands the role of the state as regulators such as the CRTC become embroiled in the mediation of conflict through the telecoms policy process. The complexity of pricing issues is aggravated by the range of "subsidy myths" in popular circulation. At one end of the spectrum is the argument that there has been historically a cross-subsidy from long-distance to local services. The effect of this subsidy was to artificially inflate the price of long-distance services and underprice local services, which was, in effect, a hidden income transfer from business users dependent on long-distance communications to local users.

According to this myth, the entire framework was legitimated through references to universal service and idealistic notions about the role of communication in strengthening local communities. On the other hand, William Melody argues that the subsidy was the other way around. Melody claims that networks were built to the demands of heavy-volume users for data communications and to access long-distance networks, regardless of whether residential users required these capabilities.

Since local users were paying for "gold-plated" network designs that outstripped their requirements, they were subsidizing big business Melody, , cited in National Anti-Poverty Organization, NAPO, Other important issues in telecoms pricing are emerging as regulators revisit the controversy between flat-rate and measured-service pricing. Flat-rate pricing sets fees for a period of service irrespective of telecoms facilities usage, whereas measured service is charged according to how much one uses communication facilities.

Because it is insensitive to usage, flat-rate pricing can encourage communication, enhance social interaction, and further goals of democratic communication. Furthermore, flat-rate pricing may spur the development of electronic network services, since large amounts of time and vast fluctuations in the volumes of information involved in, say, a telephone conversation, the delivery of a large document, or a video feed can outstrip small users' ability to pay when charged on a volume-sensitive basis Connell, Recently, local users and service providers in Germany derided substantial local rate increases, claiming this would dampen the growth of electronic network services dependent on local network access points.

Issues in pricing policy are closely linked to universal service goals. Universal service is often claimed to be one of the most important objectives of telecoms policy -- historically, politically, and in terms of the legitimacy of the regulatory framework. The goal of universal service is to allow all people access to broadcasting, telephone, and more advanced network technologies. The concept emphasizes affordability, availability, and the needs and interests of all users. In Canada, these aims have historically been pursued through provisions in the Railway Act that required all telephone rates to be "just and reasonable" and "not unjustly discriminatory or unduly preferential" Canada, , s.

Similar clauses are included in the new Telecommunications Act Canada, Universal service is influenced by available communication technologies, social and political factors, and assumptions in the theory and praxis of democracy prevailing during any point in time. The concept is derived from premises in democratic theory that link access to information to effective citizenship. Over time, universal service has expanded from concerns with literacy to include education, access to libraries and government information, and broadcasting and telecoms.

Universality underpins representational aspects of democracy by providing access to broadcasting agencies who, at least in theory, function on behalf of citizens e. As Jill Hills notes,. It is no coincidence that where civil and political rights have been denied, although Telecommunications enable citizens within a democracy to receive information on which to determine their The centrality of universal service to Canadian telecoms policy has extended telecoms services to As the analysis of access to these technologies presented in Figure 1 suggests, divisions between "information rich" and "information poor" closely parallel income distribution in the country Statistics Canada, , Table 3.

Given these trends, a key issue in telecoms policy is how universal service should be defined. The first position is consistent with the history of attempts to expand the theory and praxis of democracy, while the latter subordinates such values to instrumental concerns. Current trends in telecoms policy point toward a significant narrowing of the concept.

The CRTC narrowed the concept of universal service in its long-distance competition decision and in a subsequent decision where it adopted the Bell Canada-inspired redefinition of "basic" services as "utility" services CRTC, , b. The European Unions Bangemann Report Bangemann, on the information society makes a similar point.

Of course, proponents of such measures would not agree that they are aiming to narrow the range of communication services available to citizens. Rather, regulatory policy is claimed to objectively draw lines between "basic services" that fall under regulatory jurisdiction and other "value-added" services that are subject to market regulation.

The basic controversy is whether universal service "should be extended to newer services," not where regulatory lines should be drawn on the basis of supposed technical considerations p. The crucial point is that all communication services "add value" p. As the previous discussion of pricing and universal service indicates, telecoms policy remains captive between cross-cutting pressures to realize the economic value of information on the one hand, and efforts to expand the historical link between communications and democracy on the other.

Despite being riddled with such conflicts, the natural monopoly-based telecoms policy regime did partially harmonize the interests of monopoly TOs, labour unions, large users, and citizens. The balance struck between competing values by telecoms policy reflected general shifts in the Canadian political economy, other areas of media policy, and in the courts.

Indicative of general trends in how communications issues were being thought about, courts continued into the s to reaffirm freedom of expression as a political right of citizenship, rather than a commercial one. In arguments about the competing values in communications policy, the Ontario High Court of Justice made two crucial points.

First, the Court stated that in "a democratic society the economic realm must be subordinate to the political realm" "Klein and Law Society of Upper Canada," , p. Second, it distinguished between freedom of expression as a commercial right versus a political and civil right, stating:. Pure commercial speech says nothing about how people are governed, or how they should govern themselves.

Indeed, it stands outside of public discourse: it could be said in a tyranny or a democracy, a monarchy or a society without a government at all. Providing no support to a democracy, it does not claim constitutional protection. Essentially, the Court was reaffirming that there is a hierarchy of values covered by constitutional protections for media freedoms, and that in this schema commercial values are subordinate to political and civil ones.

In an address to the Canadian Association of Broadcasters, Juneau stated that when media owners' rights to freedom of expression conflicted with those of citizens, the latter should prevail. For Juneau, the crucial concern of communications policy has to be with "the freedom of people, that's the important principle that we have been talking about for centuries, not the freedom of opinion of the owners of the transmitters and their small group of employees" , p.

Although neither of these examples, nor any other "freedom of expression" case law, explicitly references telecoms policy, their ranking of speech rights is consistent with the balance of interests achieved by the common-carrier principle, that is, the subordination of telcos' editorial discretion to the rights of those whose information is carried over telecoms networks.

For now, we can note that by the s, communications policy -- through pricing, universal service, and the balancing of freedom of expression values -- had furthered an expansive idea of citizens' communication rights in practice. However, for some, the inclination of telecoms policy toward political and civil rights suggested that it had been diverted from its original mission towards a far more expansive social policy agenda.

As a result, markets were overrun and the benefits of new technologies were not passed on to major users and the economy as a whole. This was particularly problematic in the context of long-term declining rates of growth for the Canadian economy. Coupled with the thesis that industrial economies were being transformed into information economies, these growth rates suggested the need to unshackle the economic potential of telecoms from the social-policy orientation of previous telecoms policies.

From a different perspective, C. Macpherson argues that what was really at stake was a trade-off of civil and political rights for promises of economic growth. From this view, attempts to reinstate the priority of economic goals involved depoliticizing and disconnecting government policies from their normative roots and making efforts to secure citizens' consent to this narrowing of the political sphere through promises of higher material standards of living Habermas, It also meant stripping communication of its links to theories of democracy and public interest connotations.

During the s and s the boundaries of state action and telecoms policy have been redrawn to expand the role of communication markets, rebalance the prices of telecoms services for large and small users, ensure that competition works, and enforce a narrow view of the public interest. The processes of regulatory liberalization began in the s by removing services from the natural monopoly framework and public interest-oriented regulation. As the decade progressed, the CRTC allowed private lines used to supply competitive data services to be interconnected with the telecoms network, completely eliminated the telcos' monopoly over equipment attached to the network, adopted distinctions between basic and enhanced services that limit the scope of monopoly services while expanding competitive markets, and accepted the principle of long-distance competition CRTC, , , , The Commission extended this approach during the s by allowing resellers to offer local and long-distance services, approving facilities-based competition in local and long-distance telephone service, and adopting a new regulatory framework CRTC, , , b.

By the mids, these actions had created one of the most competitive-oriented telecoms systems in the world, at least in theory if not in practice. A corollary of expanded communication markets is the narrowing of universal service and public interest concepts. For its part, as noted above, the CRTC restruck the balance between economic imperatives and civic values by redefining "basic services" as "utility services" and by promoting distinctions between these and "enhanced" services.

Such attempts to depoliticize and narrow the scope of telecoms policy are often confused with deregulation -- the reduction of regulations governing the sector. For advocates of these initiatives, deregulation does not reflect changes in the political economy of telecoms but is the natural outcome of changing technology. Government reports, industry statements, academic writing, policy-position papers by telecoms labour unions, and the popular press all suggest that telecoms policy is "rapidly being undermined by technological change" Addy, , p.

Given these trends, rather than speaking of deregulation, it is more appropriate to speak of regulatory liberalization -- a process changing the focus of telecoms policy from protecting natural monopolies, industry boundaries, and balancing competing interests towards expanding markets, ensuring that competition works, and reconciling the contradictory interests between historically dominant TOs, new competitors, and large users.

These changes in telecoms policy are most evident in the evolving approaches to the new telecoms, media reconvergence, and to so-called "information highways. According to the U. White Paper , policy for broadband communications networks should be guided by the following five principles:.

A key question that the CRTC has had to face is whether or not policy should prevent convergence, permit it, or take an active promotional role towards this possibility as part of larger industrial and social policy initiatives Elton, None of these options presented itself as the best one, each involved different trade-offs, and none could lead to state withdrawal from telecoms. Products of this store will be shipped directly from China to your country. Products of this store will be shipped directly from Japan to your country.

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