Evidence of meeting #65 for Finance in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was spectrum.
A video is available from Parliament.
6:50 p.m.
Conservative
The Chair Conservative James Rajotte
Okay, thank you.
Thank you, Ms. Nash.
Mr. Hoback, go ahead, please.
6:50 p.m.
Conservative
Randy Hoback Conservative Prince Albert, SK
Thank you, Chair.
Thank you, gentlemen, for being here this evening.
I come from Saskatchewan. SaskTel has a general excitement about this auction because the type of megahertz—the 700 MHz scale, what it can do, how it can penetrate the rural areas of Saskatchewan—is substantial, if not huge.
I know they're very excited in trying to figure out how they can participate in the auction. They're very excited to see this move forward because they want to get established and get moving fairly quickly too.
One things talked about in Mr. Paradis' March 14 speech was the sharing of towers and the sharing of roaming.
I'll start with you, Mr. Bibic.
One of the complaints that I have, coming from Saskatchewan, is that we've seen some companies are more than happy to set up services in large centres, where there's a population, but not so happy to do it in areas where there is less population, but there’s growth because of mining, because of other activities going on in the region.
When it comes to tower sharing, what do you see...?
What steps will you guys be taking to improve the wireless service in rural Canada, and how do you view the tower-sharing policy that's coming forward?
6:50 p.m.
Executive Vice-President, Chief Legal and Regulatory Officer, BCE Inc. and Bell Canada
Bell takes rural coverage extremely seriously. In 2009, when we launched a new network that put Canada at the forefront of wireless technology, we covered 96% of the Canadian population. That was with the technology called HSPA plus. That 96% covers thousands and thousands of small towns and cities in the country. There is a new technology now called LTE, or long-term evolution. We started deploying that. We're at about 16 communities. After this auction for 700 MHz, we want to accomplish the same thing and cover 96% or more of the Canadian population. Of the companies here today, we are the one delivering the broadband to rural areas.
The point I keep harping on is that if somebody like AT&T comes in, the way the auction is designed, if they won spectrum they would have absolutely zero obligation to hit any rural areas. They'd hit the urban markets first. So if we're going to allow them to come in, let's create an environment that allows for open bidding and for the market to deliver the auction outcomes we want.
As for tower sharing, there are rules the government has, and we respect those rules. Disputes between providers about sharing space can be resolved through private arbitration under the current rules.
6:55 p.m.
Conservative
Randy Hoback Conservative Prince Albert, SK
Mr. Wong, your company seems to be sticking to major population centres. How will tower sharing work for you guys, and will that be something you'll be taking advantage of?
6:55 p.m.
Director, Legal Affairs, Data and Audio-Visual Enterprises Wireless Inc., Mobilicity
We are completely and utterly in support of tower sharing. I think it is one of the ways to make rural build-out make sense. To take the easiest example, if building a tower in a rural area where it is less densely populated costs $100, it would take one person one year of revenue to cover this. If someone else were to share the tower and rent out the space, the person who provides the tower—say Bell—would get revenue more quickly because they would be receiving rent. Their rate of return would be quicker and earlier and they would get their money back more quickly. I see no reason why there shouldn't be tower sharing. I think tower sharing is completely aligned with rural build.
6:55 p.m.
Conservative
Randy Hoback Conservative Prince Albert, SK
Mr. Lockie, you talked about capital requirements, and of course it is a capital-intensive sector that you're in. Will the changes in the budget make it easier for capital requirements to be met and for rural expansion to take place?
6:55 p.m.
Chief Regulatory Officer, Wind Mobile
Unquestionably. I can talk about tower sharing until 7:30 if people want me to, but what I'll say is that removing the restrictions as proposed isn't going to solve the tower-sharing issue. The truth is, capital is required. How you deploy that capital is a luxury to figure out once you have it, and you can't get it on reasonable terms under the existing rules. That's really what we're trying to resolve.
I said this wasn't a magic bullet, and it's not. Whether you are backed by Canadian money or American money, your decisions on where you deploy and where you see you can make a return on your investment are identical. So frankly, the only connection here is a net positive one—you have more capital in the country and people are going to find a way to get a return on that capital. Rural isn't as quick a return as an urban centre, so that's where people are going to focus initially. But people are making rational economic decisions, and it doesn't matter where the capital behind those decisions comes from.
6:55 p.m.
Liberal
6:55 p.m.
Voices
Oh, oh!
6:55 p.m.
Liberal
Scott Simms Liberal Bonavista—Gander—Grand Falls—Windsor, NL
You were talking about Bell having restrictions on many things, more so than the others. For those of you who are getting less than 10% of the revenue, you now have the ability to grow beyond the 10%, without the same restrictions as Bell. Am I correct in saying that?
6:55 p.m.
Executive Vice-President, Chief Legal and Regulatory Officer, BCE Inc. and Bell Canada
Correct, in the sense that Bell, under the rules, will never be able to have foreign capital beyond the current limitations of 20% direct foreign investment, whereas my colleagues here will be able to be 100% foreign owned.
6:55 p.m.
Liberal
Scott Simms Liberal Bonavista—Gander—Grand Falls—Windsor, NL
So lifting that to 49% alleviates a lot, but it doesn't alleviate everything. Is the potential here that they're going to be as big a name in this business as you?
6:55 p.m.
Executive Vice-President, Chief Legal and Regulatory Officer, BCE Inc. and Bell Canada
If AT&T comes in and buys all of them, the answer is yes, in fact ten times bigger.
The quarrel isn't with that; the quarrel is that in that environment, why should Bell be limited to one block whereas those behemoths get two spectrum blocks? That's the issue I'm putting forward today.
6:55 p.m.
Liberal
Scott Simms Liberal Bonavista—Gander—Grand Falls—Windsor, NL
Okay.
You look like you're about to respond.
6:55 p.m.
Chief Regulatory Officer, Wind Mobile
Yes, it's just a question of picking which part.
As a practical matter, if AT&T, to use Mr. Bibic's example, were to come in and snap everyone up, they would have 45 MHz of spectrum relative to the 400 that the oligopoly has. It's not a question of how much capital you have; it's how much spectrum you have, and they're not making any more of it.
It's a question of how that gets deployed by the government. That's the first observation I would make.
7 p.m.
Liberal
Scott Simms Liberal Bonavista—Gander—Grand Falls—Windsor, NL
Are you planning to roll out in rural areas? I want to go back to Mr. Hoback's question. You say it's great that you can get a better return when you're tower sharing. That doesn't necessarily mean you're going to actually get into these markets.
I'm from a rural riding, and I mean rural. I have a Bell phone, but I can't get yours. Why can't I get yours? Or will I get yours, I should say?
7 p.m.
Vice-President, Strategy and Business Development, Public Mobile
There are two issues around getting to any of these rural areas. One is having the capital to build out the network and make the investment, and the second is having the spectrum.
Mr. Bibic keeps talking about how they rolled out HSPA to 94%. They did so on spectrum that Bell received, not through an open auction, without any competitive process whatsoever, which is the 800 MHz spectrum they were granted by virtue of being an incumbent phone monopoly. They can use that because it's this spectrum that allows you to build out efficiently those rural areas.
That's why it's been so critical in this debate around the 700 MHz option, because this is the first time there's an opportunity for a competitor to those incumbents to get hold of spectrum that actually allows you to economically build these rural areas. With the spectrum all of us hold now, you can build into other cities and to some of the suburban areas, the smaller towns, but the actual rural areas you can't build as economically as you can with the spectrum that the incumbents are already using and have had for 25 years.
7 p.m.
Liberal
Scott Simms Liberal Bonavista—Gander—Grand Falls—Windsor, NL
Mr. Bibic says he wants to be lifted to 49%. You wouldn't agree with that, would you?
7 p.m.
Vice-President, Strategy and Business Development, Public Mobile
It's a completely meaningless change to the existing set of rules. It would have no effect on the ability to raise capital—
7 p.m.
Liberal
Scott Simms Liberal Bonavista—Gander—Grand Falls—Windsor, NL
For the sake of spectrum. Is that what Mr. Lockie's saying? Is that why?
7 p.m.
Chief Regulatory Officer, Wind Mobile
Yes. Bruce has put it exactly right; it is meaningless.
Let's be clear, no one wants this change more than we do. No one wants the restrictions to be lifted to allow access to capital, and I say to you, absolutely seriously, don't bother making that change. It changes nothing for us. With all respect, that's why Bell is recommending it. It changes nothing.
A 20% voting share to a 49% voting share changes nothing. You still have this subjective....
Sorry?