Industry Committee on Feb. 12th, 2007

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

I think you did. It was in the report.

Thank you.

[The Chair, Conservative, James Rajotte]

Okay, thank you, Mr. McTeague.

I'm using the chair's prerogative to take the next Conservative spot.

Mr. Intven, thank you very much for being with us here today. I do want to follow up on my dear friend Mr. McTeague's topic, which is the implementation of your panel report.

Your panel, obviously, was appointed under the last government, and reported to this government. Yet if you look at how the minister is going about implementing this and you turn to page 13:

The Panel suggests that the government should implement its recommendations in two phases:

In the first phase, the government should issue policy statements endorsing the development of a national ICT adoption strategy as well as the implementation of a new regulatory framework, and take steps to reform the policy-making and regulatory institutions. In addition, it would use its powers under the Telecommunications Act to issue a policy direction to the CRTC to interpret the policy objectives of the Act in a manner that is broadly consistent with major reforms recommended in the Panel's report.

During the second phase, recommendations requiring changes to existing legislation should be implemented.

When I read the policy direction and the proposed order from the Minister of Industry, it seems as if, to me, reading this, he's using the language that you recommended in your report. The language seems to be very consistent with what you recommend in your report. So it seems to me, as an outside observer, that the minister is doing exactly what you said in terms of the implementation on page 13.

So can I just get you to say, broadly speaking, if the minister follows through on the second phase—and my understanding is he will be doing that—that the minister is in fact following the path that you outline in your report?

[Hank Intven]

Yes, he is. If the government follows through on the rest of our recommendations, which we're hoping will happen, that would be the case.

Let me tell you a little bit about why we put the recommendation for the policy direction into the report. It was a bit of an afterthought. What we were concerned about is the great fear of anyone who devotes a little bit of their private time, as we did, to a public initiative such as this, to spend the time and hard work to write a report. You're always worried that it ends up on a shelf and nothing is going to happen with it.

I was also very conscious of how long it takes to get legislation through. Shortly after I left the CRTC and went back into the practise of law, I was recruited in 1987 to work on a new Canadian telecommunications act, and it took until 1993 to get that act through. In between, there were always political issues and some very important ones, involving national unity and others, during that period. But the reality is, telecommunications policy never got high enough on the political agenda to see anything actually happen in those six years.

We were concerned that the CRTC would find itself with a government report, and even if they respected the thinking in the report, they would find themselves in a very difficult position, not knowing whether they should act in accordance with the report or just apply their own thinking to the issues. So we felt that the best way to get things moving in the right direction was to have the government implement a policy direction, and that's why we thought that should be done.

[The Chair, Conservative, James Rajotte]

Thank you very much for clarifying that.

The second question I want to raise with you is that there seems to be a lot of discussion over the government's market presence test, about which there are two broadly held views. One is that for issues such as forbearance, the CRTC and the government ought to rely on a certain percentage, i.e., 25% market share, in order to allow new entrants to gain some access to that market. The second view, which I think was eloquently stated by the Commissioner of the Competition Bureau, is that you ought to look at the competing services available, rather than a specific percentage.

You indicated that you might not exactly endorse the government's market presence test. One of the concerns raised by some of the witnesses was that the Competition Tribunal and the Competition Commissioner do not act as quickly as the CRTC, so they prefer the CRTC.

But if in fact you adopted what I believe is chapter 4 of your report, where you adopt the telecommunications competition tribunal, this would in fact work very well with the new market test itemized by the minister, and certainly supported by the Competition Commissioner. So if you were to move to that type of a tribunal or panel, that would address the concern about a timely response by the CRTC new competition panel.

[Hank Intven]

I think that's very true. There are always real concerns about deregulating in an area and what might happen if the market is allowed to run amok and cause problems. But the reality is, in the very regulated markets we've had in the telecommunications area over the last decade, we've had dozens and probably closer to hundreds of companies—CLEC and others—go out of business, notwithstanding a significant amount of regulatory oversight.

Allowing the market to work on its own for a while and seeing what emerges in the way of competition is certainly no worse than the situation over the last decade.

[The Chair, Conservative, James Rajotte]

Thank you very much for that.

We have two final questioners, Mr. McTeague and then Monsieur Arthur.

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

So we don't confuse you completely, Mr. Intven, and not to differ with the chair, but your test on implementation on page 13 reads:

In the first phase, the government should issue policy statements endorsing the development of a national ICT adoption strategy as well as the implementation of a new regulatory framework, and take steps to reform the policy-making and regulatory institutions.

In your mind, sir, does that work include the CRTC, or the TCT as you proposed?

[Hank Intven]

Yes. I think what we had hoped for was that in addition to the policy direction, the government would endorse some of the new regulatory framework recommendations made in our report.

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

I wanted to thank the chair for endorsing the view that the Liberals have been taking, which is absent here.

Mr. Intven, I don't want to belabour this, but regarding the last point about win-backs, if we have a situation such as the wild west, where only the deepest pockets survive—sorry, maybe it's the lawless east—is it possible in this kind of circumstances that only those...?

I understand you've written at great length about win-back programs and that there ought to be some regulatory oversight, again directed by the CRTC or the TCT, which is now absent in the minister's request. You said:

One justification for the win-back restrictions is that customers should be given an opportunity to try a competitor's service and judge the quality and reliability before being exposed to the incumbent's win-back efforts. In effect, the rules created a temporary protection for the new entrant against targeted marketing efforts by the ILEC.

Recognizing that we all want to have the situation where the customer benefits, would you not suggest that this condition should also be part of the minister's order, at least to ensure that all consumers benefit from this new-found open market, or just the few who happen to walk away from the ILEC?

[Hank Intven]

I'm not sure there is much I can add to what we've said about win-backs in the report.

The one comment I would make is that there has been a lot of concern—and I've heard the comment hundreds of times that you've made, Mr. McTeague—that the person with the deepest pockets is going to be the only one left standing.

In this respect, you may have noted a very important thing happened two weeks ago. Rogers Communications Inc. became the largest telecommunications company in Canada by market capitalization, bigger than BCE and Bell Canada.

We think what's happened here is that the competitors—and I say that with great respect for Ted Rogers and his colleagues, who have created an awful lot of value in that company doing it.... But the constant concerns that a little company can't grow, because they're going to be subject to some destructive anti-competitive conduct unless they're watched at every move, exaggerates the real concerns. In the real marketplace, things should not get--

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

You'll not find me defending Rogers, being the guy who led the cable revolt in 1994, Mr. Intven.

But let me ask you this: In the time you have given us here today and the time in which you wrote the report to now, have you had any offers from any of the companies, Rogers, or perhaps Bell Canada or Telus, along your way to help them develop a draft implementation or anything along that line? Or have you just been able to preoccupy yourself with a checklist of what has been observed or what has not been observed?

[Hank Intven]

I've spent the last three months trying to buy a satellite company. That answers the question.

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

Thank you.

[The Chair, Conservative, James Rajotte]

We'll go finally to Monsieur Arthur.

You have five minutes.

[André Arthur, Independent, Portneuf—Jacques-Cartier, QC]

Good afternoon, sir.

I think it's quite evident that it took a lot of courage from the Liberal government before to give you their beloved regulator and say try to do something with that. Big players were there, sacred cows were present, and regulation was seen in Canada, and is still seen in Canada, as the only thing that separates us from the U.S. as far as broadcasting is concerned.

I also think it took a lot of courage for the present government to receive your report and try to start implementing it.

If the CRTC were not the society for the preservation of sacred cows, fat cats, and phoney consumer groups, could it have started the deregulation itself if it had the vision to do it?

[Hank Intven]

Without accepting any of the assumptions in your question, I would say yes, it would have been possible, I think, for the commission to move toward deregulation more quickly, because, as I pointed out, the law is so broad and vague that it essentially gives the regulator a very broad degree of discretion to apply policies. But the fact is it did move.

We should not underestimate the degree to which the CRTC over the last two decades has promoted competition and started the deregulation of the industry. Our concern was simply that we found that at this point in time, looking at it objectively, it was time to accelerate the process.

[André Arthur, Independent, Portneuf—Jacques-Cartier, QC]

If the CRTC had taken the leadership in deregulation, maybe it would not be necessary at this time in your report to recommend the creation of three other regulators to do its job.

[Hank Intven]

In defence of our report, we did not recommend three new regulators. We recommended--

[André Arthur, Independent, Portneuf—Jacques-Cartier, QC]

You mean a tribunal, an agency....

[Hank Intven]

I realize there are those who believe that any new creation of a government agency is per se a bad thing. What we recommended--and I regret that this has not been looked at more carefully to date, and I thank you for the question--was for the telecom consumer agency to be an industry-funded, industry-run, self-policing group under the supervision of the CRTC. It's a model that's worked well in other countries. It can work here and it can protect consumers, we believe.

Secondly, there's the TCT, the telecom competition tribunal. Somebody asked me how many people would you need to staff that, and I think the answer is about four people. You need an independent chair and you probably need a little secretariat function, and the whole idea is that the rest of the resources will come jointly from the CRTC and the Competition Bureau. You would actually take these two agencies that have wonderful expertise in their own silos and get them to put them together to work together to try to do that properly. So we do not see that as a major new regulatory body.

[André Arthur, Independent, Portneuf—Jacques-Cartier, QC]

Please educate me. What went wrong in New Zealand? Why did it fail?

[Hank Intven]

New Zealand is very interesting. They had a number of totally libertarian economists come to advise them around the time that....You may recall that in the early 1980s New Zealand technically went almost bankrupt. The International Monetary Fund came in and a number of steps were taken to privatize industry and to try to get the country back on track fiscally.

As part of that process, they experimented with something no other country had done, and they said we'll do without a telecom regulator, and they had some economists who advised them that economy-wide competition law was sufficient and their competition authority could do the job. For ten years companies, including a company called Clear Communications, which at that time was partly owned by Bell Canada and MCI, tried to get interconnection with Telecom New Zealand. After ten years of fighting in the courts and going to the competition regulator, they were unable to achieve interconnection.

Finally, the government said enough is enough; we want to see some real competition in this country. So they established a new office of the telecommunications commissioner within their commerce department. They selected a very good man, Doug Webb, who became the first commissioner. He essentially became the telecom commissioner, and since then competition has started to develop.

[André Arthur, Independent, Portneuf—Jacques-Cartier, QC]

Thank you very much.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you very much, Mr. Intven, for your time here today, for all your answers, your presentation, and thank you very much on behalf of the committee for the report as well. We appreciate your work.

We will be suspending, members, for about two to three minutes, and then calling the next witnesses forward. Thank you.

[The Chair, Conservative, James Rajotte]

Okay, members, let's find our seats.

We'll start with the second part. It's a 30-minute session, a panel with Internet providers and wireless.

We have two witnesses with us here today. First of all, we have Ms. Kirsten Embree, who is with the Canadian Association of Internet Providers; and secondly, from the Canadian Cable Systems Alliance, we have Mr. John Piercy. Welcome to each of you.

I know it's a short session. We did have an extra-long session with Mr. Intven, so I apologize for that.

You have opening statements of up to three minutes each, and then we'll go immediately to questions from members.

Ms. Embree, would you like to start?