The Coming Revolution in Telecommunications

MR. JOLLIFFE:

On March 25th, 1878, only two years after applying for his patent, Alexander Graham Bell made a bold prediction which might be called the charter of modern telecommunications. He said: "It is conceivable that cables of telephone wires could be hid underground, or suspended overhead, communicating by branch wires with private dwellings, country houses, shops, manufacturers, etc. etc., uniting them through the main cable with a central office where the wires could be connected as desired, establishing direct communication between any two places in the city. Such a plan as this, though impractical at the present moment will, I firmly believe, be the outcome of the introduction of the telephone to the public. Not only so, but I believe, in the future, wires will unite the head offices of the telephone company in different cities, and a man in one part of the country may communicate by word of mouth with another in a distant place. I am aware that such ideas may appear to you Utopian . . ."

Utopian or otherwise, Canada paid heed to Bell. By last count, Canadians were making more calls a year than any other country--about 680 per capita. To some, this is not an unmixed blessing. Ogden Nash complained:

"Some one invented the telephone,
And interrupted a nation's slumbers,
Ringing wrong but similar numbers."
And Sir Alan Herbert told the British House of Commons:
"Great science nobly laboured to increase the people's joys,
But every new invention seemed to add another noise;
One was always on the telephone or answering the bell,
And everybody wondered why the population fell."

Since August, 1968, our distinguished guest of today has been President of Bell Canada, our largest company. After graduating from the University of Toronto in Modern History, he joined Bell in 1937 and rose rapidly through operating and staff management positions in Brantford, Hamilton, Windsor, Ottawa and Montreal, becoming Executive Vice-President in 1965.

Mr. Scrivener is a director of other companies and he has distinguished himself in public service, notably on behalf of United Appeals, the Montreal Theological College and the Royal Victoria Hospital. Under his leadership pioneer work continues toward another revolution in communications. Mr. Robert Carlton Scrivener.

MR. SCRIVENER:

For many years the Empire Club has provided a public forum of national and historical importance. I greatly value this opportunity to appear before you, especially as I was born in Toronto and have lived here as a boy, a student and a business man at different times for a total of some twenty-five years. I recall well twenty years ago the far-sighted developments which led to Fred Gardiner's great contribution in the creation of Metropolitan Toronto as an effective and constructive organization.

It is easy for me, one who knows greater Toronto, to observe and be impressed by the growth and vitality everywhere I go. Toronto is not the only metropolitan area in Canada where there are many and massive signs of expansion, but it undoubtedly has the most extensive evidence of new construction which reflect Toronto's economic leadership.

Toronto has a key role in Canada because of its position as the major centre of industry, commerce and finance, as a throbbing metropolis to which Ontario's and Canada's futures are hinged.

In the recent Federal-Provincial conferences it is evident that Ontario has assumed a place of leadership not by insisting on its own interests to the exclusion of others, but by clearly indicating its breadth of vision for all of Canada. This is the face of Toronto that the rest of the country should understand better, its concern for national unity, regional disparities and urban megalopolis problems. Success always creates resentments and the responsibilities of success transcend the fact that you won't be thanked. Don't be discouraged or over react to your critics, whatever their motives. Canada needs, must have, Toronto's type of activism, the involvement of constructive achievement and not that of imported anarchists and divisive elements.

In 1967, many of you thrilled with all of Canada to the excitement of Expo. That the promise of that effort has not been fulfilled is very disappointing to all of us. Just at the time we started to see real progress in integrating some of the different viewpoints in Canada, just as our leaders were giving us some reason to be encouraged we have seen outbreaks of savage violence. These acts of destruction have at least had the effect of shocking Canadians into realizing that trained revolutionaries under organized direction have been taking advantage of the great Canadian language and culture debate. We cannot afford to be naive about this and I sincerely wish that the authorities with knowledge would better inform the Canadian public of what they know and what they suspect.

In addition to my years in Toronto, I have as student and businessman lived almost as many years in Montreal. It is my good fortune to travel widely throughout Quebec and to talk the language of the majority there. Without this double background of knowing both provinces it is very difficult to understand, sense and evaluate the tremendous change taking place in your neighbouring province. Rapid evolution comes close to revolution yet I can assure you and can cite the words of leaders in Quebec from all sides to indicate their complete repudiation of acts of violence or of political rupture. Let me deal with one aspect only of this rapid and all embracing change.

The educational system in Quebec is being completely rebuilt at all levels. It is being brought forward 50 years in 5. Involved are the government, the teachers and professors, students and parents. It will be another five years before the education system in Quebec will take its fully modern form and before the full impact of this revitalization will start to be felt. This period is bound to be upsetting, of traditional approaches and power centres. It is releasing new views, new energies and is producing great debate. It is turning loose a completely new generation with modern desires.

Education is the main-spring of progress and Quebec is setting up a system which, when applied to its young people, will produce the greatest new outpouring of modernly trained talent in Canada's history. Ontario is used to this. This Quebec talent will not be, cannot be, confined within provincial boundaries but will be found in business, professions and schools throughout the country.

Can there be anything more constructive than this? Don't be confused by the screeching and violence of extremists. They represent an ever present element of rapid change but not the long run basic goals or purpose of the majority. Canada has great need for more and better managers and Quebec will produce more than its share in the next generation.

Managing our economy will require greater attention from those who create wealth than from those who specialize in spending it. We are now trying to cope with the aftermath of the great governmental spenders, spending unrelated to our ability to pay, the result, a frightening taste of inflation. Inflation robs all of us by destroying the value of our investments, our savings, our insurance, our pensions, our wages and salaries. It hurts the little man, the worker more than anyone else.

Spend, spend, spend and tax, tax, tax is NOT an acceptable philosophy. Today's governments are paying a heavy price for the massive forward commitments of their predecessors but this does not relieve them of responsibility for the belt tightening necessary for correction. Yet, failure to really check and control inflation now will erode all our gains and eventually require even more Draconian measures that would drastically slow the growth of the economy.

Frankly I'm on the side of those who believe that balancing income and out-go has merit. You might say my economics are closer to those of Macawber than to those of Keynes. Utilities are particularly sensitive to inflation and its effects because of their huge fixed investments and their continuing need for capital. We know well that inflation can defeat our best efforts to improve service and lower prices. It isn't just our view that any deterioration of telecommunications will act as a serious brake on Canada's progress.

Today's economy and that of tomorrow will possibly be called the electronic era. Canadians take for granted the fact that they have a telecommunications network equal to the best in the world and to use it costs less than in any other country in the world. This network is the result of the far sighted cooperative effort of the carriers. This network is a fundamental and essential requirement of Canada's future progress--today it is unexcelled in the world in quality, scope and reliability. Let us not lightly consider actions which can destroy what has brought this about voluntarily and cooperatively by the telecommunications companies of Canada and without, may I add, any subsidy, and without internal or inter-provincial squabbles and name calling. It has been done quietly, effectively and harmoniously. This is so unusual, it's not surprising that it hasn't received the notice it deserves.

The network is used for talking, for interconnecting electronic machines, for television and radio networks and for national defence. Tomorrow we will use it for many new applications involving completely instantaneous interconnections of people and machines by voice, digital data, and pictures. Telecommunications are the life lines of the wired city and tomorrow's global village.

A highly sophisticated telecommunications network is an essential ingredient of national growth and prosperity and to this end, the industry has publicly stated its principles and purpose.

I'd like to outline the key points in our telecommunications policy--to state them publicly for you to hear.

1. Canada is a widely dispersed country. The telecommunications network must reflect local judgements. The flexibility in planning using efficiently the most economical of the best in modern technology must provide a reliable network not vulnerable to natural or other hazards. Local systems cooperating together will provide a truly national network.

2. Modern up-to-date service must be available when required and where required and must be reliable and free from flaws and defects in quality as judged by its users. Privacy has to be an essential ingredient of telecommunications and the right to use the network is an extension of the right of free speech.

3. The whole network must not only be integrated and compatible within Canada but also with the North American continental network and with the rest of the world. This compatibility has to be based on far sighted overall system planning, on detailed component standardization, on coordinated timing by specially trained engineers and managers cooperating with one another and with the other countries.

4. The telecommunication carriers and regulation must protect the network against electronic pollution and degradation caused by attaching to it apparatus which may benefit a few at the expense of the majority and which can prevent the optimum service and economic development of the network.

5. Despite all the technological complexities the system must be instantly available and easy to use and the costs of use must be such as to promote and encourage maximum development of all services so that service is truly universal and its use not restricted. Leadership in innovation and productivity is the basis for achieving this growth.

6. Planning must anticipate growth and demand and the need to modernize so that the facilities you will require are available in advance. This requires forward commitment of much capital and resources. It means taking substantial risks. It is the responsibility of telecommunications management to avoid mistakes of omission or commission which would penalize the public or investors.

7. Anticipating the total environment in the planning and the creation and management of this telecommunications system requires many skills, many disciplines and great dedication. The rewards and challenges must attract the best people and they must be encouraged and trained to get better and better so that Canada will always be a world leader in telecommunications.

8. The total effort should be primarily Canadian in its direction, in its research and development, in the equipment it uses and in the operation of the companies so that it represents a Canadian achievement in the interests of Canada. This doesn't mean turning our backs on skills, knowledge or money from outside the country but it means we should use them to enhance and improve our own situation and control.

9. Relations with labour and its representatives have to be based on mutual respect and trust so that continuing complete discussions of current and future affairs develop the necessary common goals, the earned rewards, the personal satisfactions and the pride that come from creative performance.

10. Regulation of basic telecommunications is required in the public interest to verify that our responsibilities have been discharged in relation to both the quality and value of service. Regulation will serve best to the extent that it motivates, encourages and rewards performance today and looks ahead anticipating and preparing for what has to be done tomorrow. The public interest is served by obtaining the commitment of workers, management and investors who themselves are all entitled to fair treatment for their contribution to customer service and productivity.

11. The savings of thousands of Canadians and those of other productive people in many countries will have to be invested in huge amounts to develop this essential network. The ability to attract this capital and to adequately reward it is the cornerstone of the financial responsibility of the industry. The industry must so conduct itself and regulation must be so directed that this capital will be attracted and rewarded in order to provide the service required by the Canadian public.

The communications companies of Canada have produced dramatic results while making very few headlines. There are several parts to this industry. The eight major provincial telephone systems including Bell provide most of the local communications service. In addition, there are some two hundred smaller telephone companies which connect to the major systems. The eight major systems work together as the Trans-Canada Telephone System to provide the inter-provincial and national network which you can use without being in the least aware that your call passes over the lines and through the offices of several companies. The TransCanada Telephone System owns no facilities itself. It is a voluntary association to develop plans and standards and to assure Canada of a vast network based on integrating the services of the local systems. There is also the separate and competitive system of the railways, CN-CP Telecommunications which specializes in telegraph and special services. Finally there is the Canadian Overseas Telecommunications Corporation which as a federal crown corporation is Canada's overseas telecommunications carrier. Does it not surprise you that all these organizations work so well together, have resolved their own differences, have been able to find solutions which integrated and strengthened their combined efforts to the benefit of the public.

This network works because the general interest is Paramount. The carriers are charged with responsibility to serve. They are subject to regulation to assure that they give value. The carriers are naturally anxious to maximize the use of the network but they must be sure that no user can damage the service or increase the costs of others for his own advantage.

Many electronic devices are being and will be developed to generate and receive signals over the network, many businesses will grow up based on use of the network for pictures, digital data and voices in factories, offices and homes. This is the use the network is intended to serve.

In order that it may do so, it must be maintained and extended with complete compatibility. It is a most complex system where minute electrical signals travelling at the speed of light, control and direct its functioning. It is constantly and continuously being enlarged and improved. The value of the network therefore rests on retaining its high quality and making it available to all who wish to use it. No one user or group of users should be given unfair advantage or be permitted to use the network for their benefit but to the detriment of or at the expense of others.

To accomplish this there must be rules of use and rules governing what is attached to the network. The carriers have the responsibility for developing and administering these rules under regulation. To avoid electronic pollution and degradation of the network, the signalling devices, the strength of the electrical signals and the electronic characteristics of the equipment connected are best provided by the carriers or connected through protective devices of the carriers. For a system as delicate, extensive, intricate and complex as the telecommunications network, divided responsibility for quality and maintenance would cause not only confusion but duplication and degradation leading to poorer service and higher costs to the user.

Use of the network is an extension of our use of speech and as such, is entitled to all the rights and responsibilities of free speech in a democracy. Use of the network must then be governed by the same limits the parliaments we elect set on freedom of speech. The carriers, again under regulation, cooperate with law enforcement agencies so that these agencies can carry out their responsibility to enforce parliaments laws.

We have made representations to Ottawa about such matters as wire tapping and offensive usages. At no time should the telephone company act as a law enforcement agency, nor should it ever presume to substitute its judgement in this area for that of the elected representatives of all the people.

Any enterprise, public or private, which has the monopoly responsibility for an important public service should properly be subject to regulation by a suitable government agency. I would apply this approach to the autonomous crown corporation which has monopolistic characteristics as well as to the private company. However, there is no valid argument for extending such regulation beyond those services which are truly basic and monopolistic. The theory of regulation is that a substitute for market place competition is required for basic public utility services.

The three parties interested in any regulated enterprise are the user who wants quality service at low cost, the employee who wants job satisfaction and high wages, and the investor who wants security and reward, for his savings, equal to comparable investment opportunities.

All three have to be rewarded to their satisfaction or they will not cooperate. So regulation has the responsibility for being forward looking because of the rapidity of technological change and because all parties interested are far more concerned for the future than for the past. Regulation should be searching but its purpose must be to establish the conditions under which Canada's electronic highways and telecommunication network will always be the best in the world and available at the lowest cost in the world. Surely this objective justifies the best treatment of investors who contribute their savings in such large amounts.

To attract investors to place their savings in the securities of a public utility requires that there be a clear statement of objectives by the utility and by regulation. The initiative rests with the utility.

We have stated our objective of earning sufficiently on the total capital invested in the business to permit rewarding our shareholders in a manner that compares favourably with opportunities in comparable securities. We have set out to do this and will take all steps necessary to succeed.

We have enough of negative thinking which results in limiting the opportunities for the private tax-paying sector and expanding those of the tax-spending public sector. The job at hand is to motivate, to offer rewards so that individual and group initiative is discovered and encouraged.

Let us all focus on the building up not the tearing down. Let's shake our Canadian inferiority complexes and set out to compete and win against the best in the world. Torontonians have the experience and the resources to lead in the positive approach. Give the rest of the country this lead. The country needs you and you need a united Canada.

Thanks of the meeting were expressed by Mr. A. J. Langley.