Industry Committee on Feb. 5th, 2007

[Colin Carrie, Conservative, Oshawa, ON]

At the CRTC, how do you go about implementing change? What is the process?

[Richard French]

As a quasi-judicial tribunal, we have certain framework requirements that come from the law and jurisprudence of quasi-judicial tribunals, our particular acts, the requirements of natural justice, and the requirements of the judicial review process under which we are subject to the Federal Court of Appeal, and we try to observe all those. We therefore try to have a procedure—and you appreciate that I'm not a lawyer, but the lawyers among you will agree—and requirement for the opportunity for everyone to know what's on the table in order to have sufficient time to respond effectively; to understand how they respond; to make comments on the responses of others; and to be assured that the people who make the decisions are unbiased and untainted. We have all those requirements that the energy board or any range of other administrative tribunals would have to meet.

Is that a fair way of responding to your question, or is there something more detailed that you'd like to know?

[Colin Carrie, Conservative, Oshawa, ON]

No, that's very good. Thank you.

We notice that with these changes, some companies seem to be happy with the changes, and some people aren't so happy with them. Overall, with the players that are in the market these days, would you say these companies can compete on their own, or do certain companies out there need the protection?

[Richard French]

That's a pretty vague question, Mr. Carrie, with the greatest respect. There are dozens and dozens of companies out there.

[Colin Carrie, Conservative, Oshawa, ON]

What about the major players?

[Richard French]

I said before that the major cable companies that have offered VOIP products are, as one can see by reading their marketing and financial reporting, very pleased with the performance of their voice-over-Internet products. If we look at the data, we can see that they are making rapid incursions into the marketplace historically dominated by the incumbent companies.

We could give you data if you're interested, or leave it with the committee. Those data suggest that the market share of competitors, in the twenty months from December 2004 to August 2006, tripled to about 11% or 12%. That's a rate of change that, if it occurred in the beer industry, in the entire marketing apparatus of all the beer companies, would see everybody fired overnight. It's a very rapid change in market shares by the standards of most businesses, and certainly by the standards of the telecom business.

I'm talking about residential, Mr. Carrie; I'm not talking about business markets. I said it's where the cable companies are competing, and they're not competing in the business market, generally speaking.

[Colin Carrie, Conservative, Oshawa, ON]

I'm curious. What is the CRTC–Competition Bureau working group? What have they been working on? Could you explain that to us?

[Richard French]

In a way, we're going to have to hand the ball off to our colleagues in the Competition Bureau. I think it's fair to say that we both hope there will be legislative amendments to our respective legislation that will clarify that hand-off and make it more effective, but we've been working together in the absence of those changes to try to ensure that we understand their position, and they understand our position.

They recently published their draft information bulletin on the abuse-of-dominance provisions as applied to the telecommunications industry. That was in September 2006. It was fully their responsibility, but it was the product of long conversations with us. We tried to benefit from their knowledge of competition law and economics and they tried to benefit from our knowledge of the telecommunications industry and the technological implications of different forms of anti-competitive behaviour or potentially anti-competitive behaviour.

The product is, I think, a much more solid relationship than historically had been there, and we hope—and you can ask Ms. Scott—that the legislature may, in the medium term, help us to clarify our relationship even more. There are some problems of arrimage, some problems of relationship between the two laws.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you, Mr. French.

[The Chair, Conservative, James Rajotte]

We'll go to Mr. Masse.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

Thank you, Mr. French and panel, for attending today's session.

Minister Bernier has had an interesting record with the CRTC in the past year, to say the least. He has called on the CRTC to reverse some major decisions on voice-over-Internet protocol. He has proposed an executive direction to the CRTC. He has introduced a bill replacing the CRTC's proactive power. He has also proposed a cabinet order that would lead to premature deregulation of the local telephone service.

I'm not asking you, Mr. French, to comment with your opinion on it, but in comparison to that of previous ministers, how would this activity relate in terms of their interaction with the CRTC to this current situation?

[Richard French]

I think, speaking as someone who's been knocking around this area for 20 to 25 years, there is no precedent for this degree of initiative on the part of the political executive.

[Brian Masse, NDP, Windsor West, ON]

I want to understand about your decision on a voice-over-Internet protocol. Can you explain to the committee a little bit how you go about the process to come to that conclusion? My concern is that it was a pretty significant step that he called for in reversing that decision. Can you provide what the parameters are of the CRTC when you do make a decision such as that?

[Richard French]

I was not a member of the commission when the initial decision on voice-over-Internet protocol was made, but I've read the decision. The commission at that time asked itself, is voice-over-Internet protocol a new service, or is it a new technological fashion of delivering an old service to local telephony? It concluded the second, and it said that given that it was sold as local telephony, that it was understood by the customer to be local telephony, that it was, as it were, transparent to the customer--who picked up the phone and dialed it exactly the same way and got the same kind of service with possibly some additional features--then, to the extent it was offered by the former monopolies, it should be regulated as local telephone service. That was the initial VOIP decision, for the reason I've stated.

There have been two or three subsequent chapters. I don't know if you want to go through them. The basic premise was at that time—we're talking two and a half years ago—the VOIP product offered by competitors had not made major incursions into local service, and the commission felt it was important that the VOIP product be regulated as local service, just like standard circuit-switch telephony.

I hope I've answered your question.

[Brian Masse, NDP, Windsor West, ON]

You have. Just a further question about that process, though, the commission uses researchers, legal experts--there's a whole bunch of background—

[Richard French]

There is a large and complex process of canvassing of opinions of a systematic nature with a series of dates so that everyone submits their own view. The commission can ask questions of the people who submit their views, and these people have to answer those questions, all in public. Other parties can comment inter se on other people's views, and we do our own analysis of all this material. It's a record, just like a judicial record. We then analyze it and make recommendations to the commission. The commission debates the issue. It probably votes. It did in that case. There were dissents, so there were some members of the commission who felt differently than the majority. Then we finalize the decision, translate the decision, and that process will take nine months, twelve months, fourteen months, depending on the depth and complexity of the issue.

[Brian Masse, NDP, Windsor West, ON]

It is important to put that on the record, because, unlike the CRTC, the minister can make policy on the fly and is not held to the same account. That is where the criticism of the minister is, in the sense of violating the act, or at least the spirit of it, with regard to calling for the reversal of decisions and in tabling some of the legislation.

If I can, I'll move quickly to another question I have with regard to a different subject. On the ombudsman position, about the office, what is the status of that? Is it going to be created, and how quickly can it be done? I have grave concerns with the issue over deregulation and this not being in place, as well as with the consumer protection rights aspect.

[Richard French]

Mr. Masse, we receive thousands of complaints about telecommunications services a year. The provincial consumer offices receive thousands of complaints a year, and the various NGOs who work in support of consumers receive thousands of complaints a year. The commission in its decision on forbearance proposed to the industry that the industry, with forbearance in view, should establish its own telecommunications ombudsman and should finance it in the interests of ensuring that it, as an industry, effectively serves consumers.

We are not well equipped to respond to those complaints. The provincial consumer offices are not well equipped to respond to those complaints, and the NGOs, goodness knows, don't have the financial resources or the personnel to respond to and follow up effectively on those complaints. So we are strongly of the view, as a commission, that either a government-established or an industry-established, or some combination of the two, telecom ombudsman would be a highly desirable thing.

[Brian Masse, NDP, Windsor West, ON]

Do I have time for a quick question?

[The Chair, Conservative, James Rajotte]

You're running out...but one more question.

[Brian Masse, NDP, Windsor West, ON]

With regard to the Bell issue that Mr. McTeague raised, I have a concern to express to make sure I understand it correctly. If they're going to reduce their original fees coming in, if they are going to tag that on to an annual bill that would happen every single month, I don't know how it could be revenue neutral. I'm just concerned about that aspect of—

[Richard French]

Mr. Masse, I can well imagine how you can't imagine it's revenue neutral, but believe me, it's something that we do in our industry regularly, and I don't claim to you that we get it to one dollar, totally, precisely.

The real issue here, to be honest with you, is that people who don't move are going to be subsidizing people who move often. That's what's going to happen in that deal. It's not that we'll be able to calculate the total amount of money they make and make a trade-off that will be fairly well controlled, but the issue is the one I've just stated.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

[The Chair, Conservative, James Rajotte]

We'll go to Mr. McTeague again.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

I may just ask Mr. McCallum at the end...for a split second. I think he has one small question.

I'd like to follow up on that last point, Mr. French. I don't want to belabour it, but I am concerned. Our understanding is that the increase was for all phone customer services and that it was not revenue neutral for loyal, existing customers whose rates are going up. It would appear that they've also increased, at the same time, business rates, including that of the Government of Canada, by 10%.

I'll leave that, because I think the real issue that is of great concern to us is that normally, in the past, section 34 of the Telecommunications Act calls on the CRTC to find as a question of fact that competition is sufficient to justify forbearance in any given situation. Given that you've been removed, and to use your words that there's no precedent for this removal from the equation, how are we then to determine whether or not forbearance can in fact take place in the retail pricing structure of a company? How are we now going to do it? We've removed our eyes, our ears, our ability to see what's happening. We've thrown this over to the Competition Bureau, which will be another question I have. How do you expect to be able to do this? Is there a chance of reversibility if this is wrong?