Chair and CEO Scott Streiner addresses the RBC Canadian Automotive and Industrials Conference on May 18, 2017
Check against delivery
I'd like to start with a question: when you hear the word "regulator", what images spring to mind, what feelings emerge deep in your soul?
I'd like to imagine that the image is of a conscientious yet witty individual who looks quite young for their age, and the feelings are of warmth and security, bordering perhaps on infatuation.
For some of you, this may be true. And for that, you have my eternal gratitude and, I'm sure, that of my colleagues, the Superintendent of Financial Institutions and the Chairs of the CRTC and Canadian Nuclear Safety Commission. You are clearly fine judges of both appearance and character!
But for others, "regulator" may elicit a more ambivalent reaction. On the one hand, you no doubt recognize that regulation is required to keep us safe, ensure that investors know what they're buying, and check abuse of market power. On the other hand, you may be concerned that regulation can add to business costs and inhibit innovation, thereby reducing returns to shareholders and service to customers.
I believe it is possible to achieve the positive outcomes of sound regulation, while minimizing the negative.
Today, I want to talk about how the Canadian Transportation Agency, the CTA, is working to deliver its responsibilities in ways that protect the public interest and help markets function effectively.
With your indulgence – and apologies to Julie Andrews – let's start at the very beginning.
The CTA's origins and mandates
That beginning is in 1904, the year the CTA was established in its first incarnation as the Board of Railway Commissioners.
The Board was set up during a period of rampant rail construction and multiple bankruptcies. Its role was to help ensure the orderly and sustainable development of the railway sector and the provision of predictable, affordable service to that sector's customers.
When the proposal to set up the Board was being debated in the House of Commons, the Minister of Railways and Canals explained that it was to be "composed of members independent of the government, independent of parliament …and capable ... by experience and ability, of making thoroughly effective the legislation."
There was a reason the Minister – who would become the Board's first Chair – emphasized these points. The Board had been preceded by the Railway Committee of the Privy Council, which was established in 1888 to regulate freight rail rates and hear complaints. But that body was comprised of politicians who lacked technical expertise, did not travel outside Ottawa, had no permanent staff, and were seen as less than the embodiment of objectivity. The design of the new Board in 1904 was intended to correct these deficiencies.
The Board was given the powers of a Superior Court, regulatory authority, and a team of professional public servants. All these features exist to the present day.
So was born Canada's first independent regulator and tribunal. The fundamental principles of independence, expertise, and impartiality have remained at the heart of the CTA's work over its 113 years.
But of course, Canada, its national economy, the transportation industry, and attitudes about the relationship between public institutions and markets have all changed dramatically since the early 20th century.
Railways and airlines are no longer owned by government. Flying across the country and around the world has gone from a luxury enjoyed by a few to an integral part of our professional and personal lives. The average length of freight trains has doubled in a few decades. Computing power and automation have transformed everything from the way planes fly to the way ships dock to the way rail traffic is managed – and may be coming soon to a car or truck near you.
As the context has evolved, the CTA has evolved.
The CTA's enabling legislation has been modified many times, but for all their complexity, these amendments ultimately tended to produce two effects: wider coverage and more strategic, targeted action.
Wider coverage has come through expansion of the CTA's jurisdiction:
- In 1938, its role in helping to keep the rail system running smoothly and efficiently was extended to the air and marine sectors.
- In 1988, it was given a human rights mandate to ensure that federally-regulated transportation services are accessible to persons with disabilities.
- And in 2000, it received clear responsibility for providing consumer protection for air travellers.
More strategic, targeted action has come in part through the removal or narrowing of the CTA's oversight authorities in a number of operational areas. These include the establishment of freight rail rates and the approval of airlines' plans to eliminate unprofitable routes. At the same time, the CTA has been given the ability to address more systemic issues by, for example, undertaking inquiries on its own initiative with respect to the terms and conditions for international air services. Finally, two decades ago, an over-arching policy statement was added to the Canada Transportation Act, deeming competition and market forces the prime agents in achieving viable, reasonably priced transportation services, and reserving regulation and public interventions for the pursuit of outcomes that competition and market forces alone cannot achieve.
Today, the CTA has three primary functions:
- It makes and applies ground rules of the game, which can take the form of regulations or less binding codes, guidelines, or interpretation notes.
- It resolves disputes between transportation service providers on the one hand, and their customers and neighbours on the other.
- It provides information on the rights and responsibilities of transportation providers and users, and on its own services.
The CTA is distinct from Transport Canada – which regulates for safety and security, manages grant and contribution programs, and is the Minister of Transport's principal source of public service advice. It is also separate from the Transportation Safety Board – which investigates accidents in the rail, air, marine, and pipeline sectors.
The legislation administered by the CTA continues to evolve. On Tuesday, the Minister of Transport introduced the Transportation Modernization Act, which includes a number of amendments touching on the CTA's responsibilities and authorities. If passed by Parliament in more or less its current form, this Bill will give the CTA the authority to make regulations specifying air travellers' rights if their flights are delayed or cancelled, if they are bumped from their flights, if their bags are lost or damaged, if they are travelling with children or musical instruments, and if they experience tarmac delays of over three hours. As the administrator of the current regime, the CTA knows it has been confusing and caused frustration for many travellers. The provisions contained in the Bill will significantly strengthen the tools we have to protect the rights of air travellers.
The Bill also proposes a number of changes related to freight rail, including creation of a new a new option called long-haul interswitching. Long-haul interswitching will entitle shippers who are served by a single class 1 railway company to have that company move their goods to an interchange point up to 1200 kilometres away, where the goods can be handed over to another railway company for delivery to destination. This has the potential to create more competitive tension in the freight rail system.
If a shipper and railway company can't agree on long-haul interswitching arrangements, the CTA will be able to make an order that sets out a rate and service terms, with the rate no lower than the railway company's average commercial rate for transporting comparable cargo.
These are important steps, but they leave in place the core philosophy of the legislation, which I would summarize – this time with apologies to William Lyon Mackenzie King – as "regulation and intervention if necessary, but not necessarily regulation and intervention".
Why it matters
Getting this balance right matters.
It matters, quite simply, because transportation is the backbone of the Canadian economy.
Canada becomes a little more prosperous – and the ties between its citizens and regions, and between the country and the world, become a little stronger – every time a train unloads commodities or manufactured goods at the Port of Vancouver; every time a flight takes off from Pearson filled with businesspeople and leisure travellers; every time a ship docks in Halifax or St. John's; every time a passenger train pulls into Montreal's Central Station or Toronto's Union Station.
Consider the data:
- $1.7 trillion of the national economy is tied to transportation.
- Canada's ports handle $400 billion worth of goods every year.
- Canada's railways move the fourth largest volume of goods in the world. Between them, our two largest railway companies, CN and CP, generated more than $18 billion in revenues in 2016.
- More than 130 million passengers – and growing – get on and off planes in Canada annually. Our two biggest airlines, Air Canada and WestJet, had about the same combined revenue as our two largest railways last year: over $18 billion.
In short: an efficient, competitive, accessible national transportation system is critical to the economic and social well-being of Canadians.
The CTA, as the system's regulator, has a key role to play in advancing these objectives. To ensure that we do so with focus and drive, we've established four strategic priorities:
- A healthy, high-performing organization
- A modern framework
- Excellence in service delivery
- Stakeholder and public awareness of our roles and services
I'd like to discuss each of these priorities, starting with a healthy, high-performing organization, which is foundational for the other three.
I started as CTA Chair, Member, and CEO in July 2015. Each of these three roles involves specific responsibilities. As Chair, I set the overall tone for the organization, assign and supervise the work of its Members, and serve as its primary public voice. As a Member, I make adjudicative decisions and regulatory determinations, and may act from time to time as a mediator or arbitrator. And as CEO, I am responsible and accountable for building a strong team; providing that team with clear goals, guidance, and training; using the budgets allocated to the CTA by Parliament efficiently and prudently; and helping the organization stay nimble and keep pace with the changes around it.
I am committed both to setting a high bar for individual and organizational performance, and to creating a work environment that is respectful, collaborative, and open to fresh thinking. These are, I believe, complementary goals. Effective delivery of our mandates depends on a motivated workforce that feels connected to the organization and has a clear sense of purpose.
Over the last two years, we've taken a series of steps in pursuit of organizational renewal:
- We've developed and implemented a workplace action plan with 22 concrete measures aimed at fostering sound people management, employee development, transparency, collaboration, and innovation.
- We've launched a Mental Health strategy that aims to end stigmatization, provide all managers with mental health first aid training, and create avenues for peer support.
- We've implemented a major reorganization that clustered related functions to achieve synergies, reinforced capacity in key areas, cut the number of managers by a third, and directed more resources to service delivery.
- We've mapped and re-engineered business processes to find and streamline elements that slow us down without adding much value.
- We've sent Members and staff on learning tours to rail, shipper, and port facilities to see, up-close, the realities of the businesses that are affected by our decisions.
These actions are helping the CTA – a small agency with big mandates – become more agile, engaged, and energized. All organizations are, in some sense, works perpetually in progress – but some have progressed further than others. The CTA is ready to meet the challenges before it.
One of those challenges is modernization of legislative and regulatory frameworks, the second of the CTA's strategic priorities. Legislation, of course, is the purview of the Government and Parliament. The CTA's role, as an independent regulator and tribunal, is to offer observations on any issues observed in the law's administration, and to provide Ministers and Parliamentarians with whatever information and analysis would be helpful as they weigh legislative options.
While the Government has been preparing the proposals tabled this week and as Parliament gets ready to examine them, the CTA has been focusing on improvements to the ground rules that fall within its bailiwick: namely, the regulations for which it is responsible.
Last May, the CTA launched its Regulatory Modernization Initiative, or RMI, which involves a comprehensive examination of every regulation we administer. Many of these regulations haven't been looked at for two decades or more and have failed to keep pace with business models, user expectations, and best practices in the regulatory field.
The RMI is anchored in three goals:
- Ensuring that industry’s obligations are clear, predictable, and relevant to a range of existing and emerging business practices.
- Ensuring that the demands associated with compliance are only as high as necessary to achieve the regulations’ purposes.
- Facilitating the efficient and effective identification and correction of instances of non-compliance.
As we pursue these goals, we're asking some important questions. For instance, should accessibility standards, which protect fundamental human rights, continue to be expressed mainly in voluntary codes rather than mandatory regulations? Which aspects of railway costing rules made 37 years ago are still relevant, and which need to be updated or discarded? Where airlines are required to get CTA approval for operational decisions, in which cases does that actually advance a public good and when is it no longer serving a clear purpose? What obligations should an airline have towards passengers if something goes wrong with a flight?
Answering these sorts of questions requires the input of stakeholders, experts, and other interested Canadians. We've divided the RMI into four consultation phases, one each on accessible transportation, air transport licences and permits, rail-related matters, and consumer protection for air travellers. The first two phases are already well-advanced. The timing of consultations on rail matters and air traveller protection will depend on the progress of the legislation tabled on Tuesday. But our target is to have updated regulations approved by both the CTA and Cabinet – and brought into force – in 2018.
This is the most ambitious regulatory review in the history of the CTA. It is long overdue. Sound regulations create reasonable and predictable ground rules for industry – a framework within which the market can operate. And they protect customers and investors, in part by establishing incentives for socially-important outcomes, like accessibility for persons with disabilities.
Clear, effective regulations are the goal. We've covered a lot of ground since firing the starting gun for the RMI a year ago. Let's hope that a year from now, the finish line will be in sight.
This brings me to the CTA's third strategic priority: excellence in service delivery.
When Canadian businesses and individuals interact with a public institution like the CTA, they don't want to wade through impossibly long forms, have to decipher arcane jargon, or wait months for any sign as to the status of their files.
Canadians pay for the services of the CTA through their taxes. And they have a right to expect that those services will be timely, fair, and effective. Let me share some ways we're working to meet those expectations.
I'll start with our dispute resolution services, which are critical to keeping the national transportation system running smoothly. Frictions between transportation service providers and users will happen, but if left to fester, those frictions can produce a lot of noise and heat. The CTA helps parties search for mutually acceptable solutions, and if those can't be found, we consider the facts and make binding rulings.
Of course, for us to help, the dispute has to be brought to our attention. We've tried to make this as simple as possible, especially for individuals. Anyone who wants to submit a complaint regarding air travel or accessibility can do so using plain language, user-friendly online forms that were posted last year and take less than 10 minutes to complete.
Once a complaint is received, a CTA officer will call the individual within a week. The officer will then see if the issue can be resolved through facilitation, an informal process of back-and-forth calls with the complainant and transportation company. In more than 9 out of 10 cases, the complaint is addressed in this way – saving both parties time, money, and frustration.
Where facilitation doesn't result in a mutually acceptable outcome, the parties can opt for mediation – which lasts a maximum of 30 days, unless progress towards a settlement is being made and both sides agree to an extension.
We believe mediation can be a powerful tool, and is sometimes under-utilized, including in situations where freight rail companies and their customers are at loggerheads and could benefit from the confidential assistance of a neutral mediator with industry expertise. The same goes for the CTA's confidential arbitration services, which can be used to determine rates or service levels when negotiations between a freight rail company and shipper haven't produced a deal.
A small number of cases end up in adjudication, where the CTA functions like a court of law. Adjudication is a more formal and adversarial process, but sometimes the gaps between the parties are so great, the issues are so complicated, or the outcome is so potentially precedent-setting that adjudication is the most appropriate way of dealing with a disagreement.
Once a file reaches adjudication, all the rules of natural justice and procedural fairness apply, making it difficult to rush things along. Still, we're taking steps to make our adjudications as efficient as possible – because getting to a balanced, well-reasoned decision sooner rather than later is in everyone's interests. At one end of the spectrum, we're piloting a Fast Track process for straightforward air travel disputes – a sort of small claims court approach that will produce rulings in 30 business days. At the other end of the spectrum, we're returning, after a 9 year hiatus, to holding oral hearings for complex cases, especially where a large volume of competing evidence and argument needs to be weighed.
If dispute resolution is about reducing frictions in the system, another of our services – compliance monitoring and enforcement – is about making sure the system's rulebook is being followed. You may not be inclined, at first blush, to think of this as a service, but it is. It's a service for every transportation company that meets its obligations and doesn't want to face unfair competition from those who don't meet theirs. A service that creates the proverbial level playing field. A service that ensures respect for the will of Canadians, as expressed in legislation and regulations adopted through democratic government.
As Adam Smith noted in The Wealth of Nations, the rule of law is a prerequisite for a well-functioning market.
But there are all sorts of ways to go about monitoring and achieving compliance. The CTA is in the midst of bringing its compliance program into line with the best practices of 2017, drawing on the experiences of a wide range of our fellow regulators. Our updated approach will be systematic, data-driven, and risk-based.
In simple terms: we will look at information on all regulated entities to assess, first, where non-compliance is most likely and, second, where the impacts of non-compliance would be greatest – and then we'll direct our compliance monitoring resources accordingly. In addition, we'll seek to expand the range of infractions for which administrative monetary penalties, or AMPs, can be applied. AMPs are a far less costly and cumbersome way of dealing with non-compliance than more formal legal processes. Over the last five years, the CTA has issued 84 Notices of Violation and levied $700,000 in penalties.
One final CTA service that will be of interest to some in this room is our determinations of whether an airline offering domestic service is controlled in fact by Canadians, as required by the Canada Transportation Act. This matter has been in the news lately. In part, that attention has stemmed from the Government's move – reflected in the Bill tabled this week – to allow foreign investors to hold up to 49 per cent of the voting interest in a Canadian airline, as long as no single non-Canadian investor holds more than 25 per cent. In part, it stems from several well-publicized proposals to establish ultra low-cost carriers in Canada with the support of foreign investors.
I won't, of course, talk about the specifics of any file that could come before the CTA, but I will let you know that we've been consulting on how we make these control-in-fact determinations. We want to ensure the criteria we apply are rigorous, predictable, and up-to-date, and the process we use is clearly communicated and well-understood. But there are challenges. Some relate to the complexity and variability of corporate governance arrangements – which mean each case is unique and many require in-depth analysis. And some relate to the commercial sensitivity of the information submitted to us – which may constrain our ability to be as transparent as we'd otherwise like regarding the applications we receive and the determinations we make.
Once the consultations are done and we've had a chance to consider the views and advice sent to us by stakeholders and experts, we'll look at what adjustments, if any, are required to our approach to control-in-fact determinations.
Delivering services in the areas of dispute resolution, compliance monitoring, and statutory determinations is a big part of the CTA's raison d'etre. We'll continue our efforts to make sure those services are both responsive and rigorous. And in addressing the questions, concerns, and requests brought to us by Canadians, we'll be guided – wholly and exclusively – by the evidence before us, the language and purpose of the legislation and regulations, and relevant jurisprudence.
Let me turn, now, to the fourth of the CTA's strategic priorities: stakeholder and public awareness.
Most of you are from the private sector, and you know that it's not enough to offer excellent and innovative products and services. You also need for people to know that you're offering them.
Of course, some of the CTA's clients realize we exist because they simply can't operate without getting a green light from us. There's nothing like the power of permission to make people aware of your presence. For those of you who are parents, just think about your teenagers asking for the car keys!
But some Canadian businesses and individuals have to deliberately seek out our assistance, because it's optional, not required. If they don't know we're here to help, the goals of the legislation aren't fully being met.
Last summer, we concluded that this was an issue – so we undertook modest efforts to inform stakeholders and the travelling public about the CTA's roles and services. We did so carefully, always sticking to the neutral tone that's appropriate for a regulator and tribunal. But factual and balanced doesn't have to be boring. We believe in the importance of being truthful, but not necessarily the importance of being earnest.
So while we haven't gone all "Oscar Wilde", we are trying to be creative and impactful as we reach out to Canadians:
- We have, for example, produced a series of short videos on the rights and responsibilities of airline passengers and airlines. You can find those videos on our website and Facebook page. And airports across the country have started running them on their screens, reaching millions of travellers.
- We've become much more active in the social media space, and will be using online tools as a way of crowdsourcing the input of Canadians when it comes time to consult on air traveller protection regulations.
- My colleagues and I have met with numerous stakeholder representatives in the last year, including transportation companies and associations, shippers and their associations, consumer rights organizations and representatives, and disability rights groups.
- Through direct outreach at the CEO level, we secured the agreement of the country's five largest airlines to post plain language versions of their terms and conditions of service in a prominent place on their websites, and to place information on customer recourse in their in-flight magazines and entertainment systems.
Our efforts have borne fruit. Between fiscal years 2015-16 and 2016-17, the number of accessibility-related complaints brought to the CTA jumped from 69 to 145, an increase of 110 per cent. And the number of air travellers who turned to us went from 826 to 3367, a rise of over 300 per cent and a record number for the organization.
These statistics bear out our hypothesis from last summer: many Canadians just didn't know we could be of assistance. So we'll continue to get the word out – but always in a way that's consistent with our obligation to be, and to be seen as, fair and impartial.
Let me conclude by returning to the question I posed at the outset: when I say the word "regulator", what images now spring to mind, what feelings now emerge deep in your soul?
I'm not sure that after 35 minutes, I've pulled any of you into the "infatuation" column. But I hope that my remarks have served to highlight some of the ways a modern regulator can be engaged and relevant.
For all the initiatives I've discussed, the CTA's core objective is simple enough: fostering an efficient, competitive, accessible national transportation system by delivering independent, expert regulatory and dispute resolution services.
That's our North Star. That's our destination. How we get there has evolved – and will continue to evolve – as the world around us changes, and changes at an accelerating pace. Every day, we'll ask: are there improvements to our tools, our processes, our ways of doing business that will allow us to more effectively discharge the responsibilities Canadians have entrusted to us?
The answers depend in part on feedback from those touched by our work. My colleagues and I would welcome your suggestions, whether in this forum or others. And equally, I welcome your questions – particularly the hard ones – because it is through genuine dialogue that public institutions keep pace with developments on the ground, keep their thinking sharp, and keep the confidence of Canadians.
Thank you for your attention.