Industry Committee on Feb. 12th, 2007

[The Chair, Conservative, James Rajotte]

One quick question.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

When should that start to happen, before or after deregulation?

[Hank Intven]

Well, I'm not sure.

[The Chair, Conservative, James Rajotte]

Is that a quick answer?

[Hank Intven]

I think it's a separate issue from deregulation.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go now to Ms. Davies for five minutes.

[Libby Davies, NDP, Vancouver East, BC]

Thanks very much, Mr. Chairman.

I was going to ask you about foreign ownership as well, so I'm glad it came up. It seems to me that if you follow your line, which is that you support the free market.... I actually don't know what the “free market” is. It's something that's used a lot. There are regulations, and I think we're debating how many or how few. So as to all this idea of a free market, even under trade agreements we've seen the impact of that.

In terms of foreign ownership, I think a lot of people would be very concerned about the slippery slope and where that would take us. You're saying, well, we should not have restrictions on foreign ownership on the basis of carriage, but in terms of content, maybe we should. But it seems to me that we would be creating an environment where there would be enormous pressure, where we would be allowing huge multinational corporations to come into Canada with virtually no restrictions. It would be a deregulated environment, and then somehow we're going to say we'll still preserve Canadian content, while we're completely relying on these huge conglomerates that are foreign-owned.

I think that's something that is incredibly huge in terms of a direction that we would take, but is that something that you advocate, that we basically remove the restrictions on foreign ownership?

[Hank Intven]

Our recommendations—and they weren't even recommendations, but our thoughts about it—were set out in the afterword. We did not make specific recommendations for removal. But we said essentially what I said earlier, that the reasons for maintaining foreign ownership restrictions in the carriage area really are not nearly as strong as they are in the content area.

We have many types of industries, from the pharmaceutical industry to the automobile industry, where we have Canadian regulations that apply regardless of nationality. In principle, there's no reason why you couldn't have mandatory carriage rules that applied as much to a cable television company, to use an example, whether it was Canadian-owned or foreign-owned.

It probably doesn't come as a surprise to you, but the Canadian telecom and cable companies are also large, profit-seeking companies, and they don't necessarily conduct their business solely in the public interest. It's the role of government, as you said, to set the appropriate rules or regulatory framework for those companies to operate within. Whether they're Canadian-owned or foreign-owned, in the carriage industry I'm not sure it would make a lot of difference.

[The Chair, Conservative, James Rajotte]

Thank you, Ms. Davies.

We'll go to Mr. McTeague for five minutes.

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

Let me come back, Mr. Intven, to what I understand the report of you and your colleagues to have done and to what is in fact before us from the minister.

I have cited a couple of examples in the fourth chapter, but I've also gone to the fifth chapter. Every one of those recommendations begins with a comment. In recommendation 5-1:

The wording of subsection 43(5) of the Telecommunications Act should be expanded to ensure that the CRTC has a clear power to resolve disputes....

I go to the next recommendation:

The CRTC should be empowered to resolve disputes over the terms and conditions of access....

Recommendation 5-3 begins:

The CRTC, prior to making an order to resolve a dispute....

I understand that these are technical regulations. I also understand these to be areas that your panel felt important enough to put in as a safeguard to ensure that we made the transition to the open market.

Given, as you have acknowledged, that the CRTC has been completely removed from this process, and given that the traditional role of the Competition Bureau, using the standard “rule of reason” test, as it normally does, has been set aside in favour of an untested “competitor presence” model....

Actually, I'm wrong. It was tested in the United States. The FCC has concluded that it has led to a decline in competition.

How can you be comfortable with what you now see before you? It seems to me that what they have done is not only taken the CRTC and thrown it in the wastebasket, but the order itself has now basically cherry-picked parts of your report.

Is it really possible to have the kinds of conclusions you wanted, given that so much, in a significant way, has been stripped away? I understand your point about new technologies. But I also understand those new technologies can take their place under the current and existing regime.

If we're going to set aside these things and throw away the safeguards, Mr. Intven, how can you even stand here and support any aspect of this order, given that it has done so much to run contrary to the very things you recommended?

[Hank Intven]

Mr. McTeague, we're hopeful that the government will move in the other areas in which we made recommendations. We recommended that the policy direction go into place as a first step, because we recognize the complexities of preparing, debating, and implementing legislation to cover the many other areas where we made recommendations.

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

Is that before or after a market analysis took place—a substantial one consistent with international norms?

[Hank Intven]

That's a particular issue, the forbearance issue.

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

But it's an important one, sir.

[Hank Intven]

It's an important issue.

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

You want to know the market you're testing before you in fact make decisions.

[Hank Intven]

Right. Is there a huge risk in applying the market threshold test, the competitive presence test that the government has implemented? I don't think so.

And sometimes it's worth trying these things out. We tend to be overly protective, sometimes. If it really does transpire that there are serious problems with competition evolving outside of the 20 top Canadian markets, then it wouldn't be too late, in our view, to....

[The Chair, Conservative, James Rajotte]

Sorry about that. That's the competition commissioner phoning again.

[Some hon. members]

Oh, oh!

[The Chair, Conservative, James Rajotte]

Mr. Intven, I apologize. Go ahead, please.

[Hank Intven]

I was going to say, I don't think we believe that having the competitive presence test applied for a few years is too great a risk for Canadian society or the economy.

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

But, sir, on the issue of a presence test, whether or not someone is actually playing in the market, I could open up a shed tomorrow and say it's Dan's Telecommunication, not have a single customer, and that constitutes presence. You didn't talk about this in your report.

[Hank Intven]

That's very fair. I think in the end it should be the job of a regulator to look at the actual level of competition in a market, because it is hard to prescribe a bright-line test. Many have tried. The commission tried with its 25% rule, and government is now trying with its competitive presence test. Ultimately this should probably devolve back to a regulator, which is why we recommended the TCT.

But is the presence of three independent players in a market a bad starting point? We don't think so.

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

On win-backs, finally, is it your view that only those who actually abandon the service will profit from this? Ordinary consumers who don't walk away from one of the incumbents certainly won't make any headway.

[Hank Intven]

I really haven't thought that through.