Evidence of meeting #45 for Industry, Science and Technology in the 39th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was crtc.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Richard Dicerni  Deputy Minister, Department of Industry

4:15 p.m.

Conservative

The Chair Conservative James Rajotte

Your time is up, Mr. McTeague. It's 5:08.

We'll go to Mr. Shipley.

4:15 p.m.

Conservative

Bev Shipley Conservative Lambton—Kent—Middlesex, ON

Thank you, Mr. Minister, for coming today. It's good to have you back to our committee.

I'll just go back a little bit, if you'll allow me. I come from a riding in southwestern Ontario, basically rural and small towns. My largest town is 14,000 people, and I have about 55 other towns that make up my riding, along with many who are in rural areas.

Mr. Angus is gone, but I certainly don't have people as rural as Mr. Angus has up north. Yet I can tell you that in the Internet service part, which is not regulated, a few years ago we didn't have anything, and now, quite honestly, it's amazing what has happened in terms of access to the Internet, especially high-speed access.

It still raises some concerns that have come from some of the stakeholders and customers, and I'll raise them because I have the rural issue and the small communities. In our rural communities the concern is that under your policy directive these communities could be left vulnerable to only monopolies or duopolies. Could you help and explain whether this would be true or not?

4:20 p.m.

Conservative

Maxime Bernier Conservative Beauce, QC

Thank you for your question.

I want you to know that your riding is very much like my own. The Beauce region is partly rural and partly urban. That is why we decided to deregulate, based on the 3-3 test, only where competitive infrastructure is in place. As you know, remote or rural areas will continue to benefit from the CRTC's economic regulation.

You talked about remonopolization. We believe that all the players operating in a market where there is a traditional telephone network, a wireless network or cable telephone service, are subject to healthy competition. I do not believe there will be remonopolization because, as you know, Jim Shaw, of Shaw Communications Inc., issued a press release saying that he is prepared to compete with the former monopolies and that his business wanted to do that and was prepared to do that.

The President of Cogeco also made comments that were reported in La Presse when we announced our policy direction. It was reported that Cogeco has an advantageous cost structure and that it is capable of competing if there is a price war.

It's important to realize that these large cable companies have invested millions of dollars in their network and infrastructure. Having done that, they are prepared to meet the competition. I don't believe those major players will simply drop out of the market overnight. On the contrary, competition will benefit consumers.

In that regard, prior to price deregulation in the long distance market in 1998, the average cost of a long distance call was 30¢ per minute. After the CRTC deregulated that market, the average cost of a long distance call fell to 10¢ a minute. That allowed Canadians to reap the benefits and make long distance calls at very competitive prices.

My hope is that what happened in the long distance market will happen as well in the local telephone service market as a result of our deregulation. There will be competition where deregulation occurs; and where there is no competition, or where our test is not validated, it will be the status quo. Prices will continue to be regulated, and Canadians will benefit from competitive service offers.

4:20 p.m.

Conservative

The Chair Conservative James Rajotte

You can have a brief question, Mr. Shipley.

4:20 p.m.

Conservative

Bev Shipley Conservative Lambton—Kent—Middlesex, ON

Yes, it's just a quick one.

I go back to your comments on the CRTC and long distance. It was a big issue at the time whether those of us in rural communities especially would get the benefit of those cuts, which are good for the consumer, and they have. I'm wondering now what role, in a deregulated telephone market, the CRTC is going to play.

4:20 p.m.

Conservative

Maxime Bernier Conservative Beauce, QC

The CRTC will have an important role to play in the future also. As you know, in telecom they have responsibility for social regulation, which is still there. They're also going to regulate in a market where we won't have regulation, where our treaty tests won't be met by the market. Social and economic regulation in remote areas of this country will be the responsibility of the CRTC.

The CRTC has a role to enforce and regulate. As a government, we have a role to set the policy direction. That is why we decided last spring to table the policy direction that is in force now. We'll use the power we have in the legislation to issue a policy direction.

In the end, it will be profitable for all Canadians and the CRTC. They know where the government is concerning the telecommunications sector, and they know what they believe in. They have a responsibility, and I'm very confident that they are going to execute their responsibility in the best manner, as they have in the past.

4:25 p.m.

Conservative

The Chair Conservative James Rajotte

Thank you, Mr. Shipley.

We'll go to Mr. Vincent.

4:25 p.m.

Bloc

Robert Vincent Bloc Shefford, QC

Thank you, Mr. Chairman.

Minister, welcome.

We know that the Competition Bureau will be paying close attention to the players to ensure that there is healthy competition. However, in my riding, consumers are puzzled about all this. Previously, the Competition Bureau conducted an investigation regarding gas prices, and its decision left people completely baffled. According to that study, there was no monopoly, and everything was absolutely perfect as far as prices were concerned.

How will we go about convincing people that this same Competition Bureau can shed some light on this and determine whether there really is competition in the telecommunications industry in an urban or rural area?

4:25 p.m.

Conservative

Maxime Bernier Conservative Beauce, QC

As I mentioned earlier, the Competition Bureau has an important role to play. It must ensure that we have dynamic and competitive industries all across Canada. The Competition Bureau will fulfill its role in the telecommunications industry just as it did, with great success, in the transportation industry when it was deregulated. The Competition Bureau played an important role. At the time, the government had given it the power to impose monetary penalties on any players that did not comply with the Competition Act, that engaged in anti-competitive behaviour or abused their dominant position.

It is our hope that the Competition Bureau will have the same powers in the telecommunications industry. That is why we have tabled Bill C-41, which takes its inspiration from a bill tabled by the previous government that confers the same powers on the Competition Bureau. So, it is our hope that this legislation can be passed as quickly as possible, in order to afford greater protection to consumers in deregulated industries.

4:25 p.m.

Bloc

Robert Vincent Bloc Shefford, QC

Minister, I asked you how we could restore consumer confidence. We know that gas prices at the pump are different from one corner to the next. How can we ensure that people are confident that, if action is taken to deregulate the telecommunications market, someone will be checking to see whether there is collusion?

I'm going to try and give you an example. Imagine a rural area where both Vidéotron and Bell Canada provide service. We know that a third player is needed for there to be competition. If, in that area, nobody wants to invest, that may allow Bell and Vidéotron to choose a competitor and let it use their lines or wires, so that it can become the third player. We also heard that the Competition Bureau can determine that there is competition even if two companies have 95 per cent of the market and another one has only 5 per cent.

Will it be possible for two major companies to decide to allow a small competitor to use their lines and say that there is healthy competition, even if it only has 2 or 3 per cent of the market? It seems to me that's cheating in a way.

4:30 p.m.

Conservative

Maxime Bernier Conservative Beauce, QC

Are you referring to the test applied to determine whether a market will be deregulated or not? You're talking about the market share loss test. Well, as I stated earlier, we have a test that applies to the different players in the market. So, it's important. Deregulation will only be effective…

4:30 p.m.

Bloc

Robert Vincent Bloc Shefford, QC

No. My question is: if nobody wants to go into a rural area because setting up a system there will be too costly and they won't be able to make any money from sales, is it possible that the two major players could ultimately choose a competitor?

4:30 p.m.

Conservative

Maxime Bernier Conservative Beauce, QC

The rural areas—and this is an important point—have not been deregulated. They still benefit from CRTC regulations and standards that are currently in effect. It's the status quo.

So, we are applying our test to the market, as it currently exists. Cities like Toronto and Vancouver could benefit from deregulation when this test is applied by the CRTC and put into effect. So, we are giving the CRTC a tool with which to expedite deregulation in the urban centres, where there is already healthy competition.

As regards areas where there is no competition—in other words, where there are only one or two players—we will not be applying that test. I hope that we will one day be in a position to create competition and deregulate those markets. It's in the interest of consumers, so much so that according to one study, a 1 percent drop in rates in the local telephone service market, following deregulation, would affect approximately 60 per cent of markets in Canada and result in annual savings of $29 million a year for Canadians. That's a lot of money. That's the reason why we want consumers to benefit from this competition as quickly as possible.

We have to decide whether we are going to allow that deregulation to occur immediately or later. Should we apply the 3-3 test or the market share test?

We have decided to apply the 3-3 test, which is simple and non-arbitrary, to allow the CRTC and markets to apply it where there is competition, so that consumers can benefit and save money.

4:30 p.m.

Conservative

The Chair Conservative James Rajotte

Fine. Thank you.

Okay, merci.

We'll go now to Mr.Van Kesteren.

4:30 p.m.

Conservative

Dave Van Kesteren Conservative Chatham-Kent—Essex, ON

Thank you, Mr. Chair.

Thank you, Minister, for coming. I want to congratulate you on work that was done on an important issue that was brought forward a year ago. You've moved forward on that, and we thank you for your attentiveness and for coming here to answer some of these questions.

My riding, Chatham--Kent--Essex, is probably one of those ridings that represents all areas, much the same as the riding you talked about. We have an urban centre, Chatham, with a population of 40,000. It has good representation from all parts of telecommunication. Then we have rural areas with very little representation, and in some cases they need high-speed Internet. I'm concerned about them.

I'm wondering, sir, if you can tell us how this new policy direction would benefit them. Or would it hinder them? Would it cause a slowdown in having the services they so desperately need and want?

4:30 p.m.

Conservative

Maxime Bernier Conservative Beauce, QC

Thank you very much.

Following 60 days of consultation and the tabling before Parliament, for a period of 40 days, of the policy direction we issued, and which has been in effect since December, we were able to make certain changes to the CRTC policy direction in order to ensure that suppliers of wholesale broadband access are still able to access the networks of former monopoly undertakings.

Following consultations, the policy direction issued to the CRTC was amended somewhat. I will read you part of what we amended in order to ensure that suppliers of wholesale broadband access will always have access to former monopolies' core networks.

We amended the policy as follows:

...to determine the extent to which mandated access to wholesale services that are not essential services should be phased out and to determine the appropriate pricing of mandated services...

So we want to be sure there is an industry offering wholesale access services to Canadians. We asked the CRTC to have a look at this in their usual, very conscientious and professional way. I know right now they have some hearings concerning this, and I'm looking forward to the decision of the CRTC, to make sure the companies will be able to offer these wholesale services—again, in the new context. In the end, it will be good for customers because we're going to have more competition.

4:35 p.m.

Conservative

Dave Van Kesteren Conservative Chatham-Kent—Essex, ON

Thank you.

I just want to switch gears a little bit.

When we're talking about the submission, based on content—not on process, but on content—have you received from the members of this committee any recommendations or submissions at all for policy direction? Again, this is based on content, not on the process.

4:35 p.m.

Conservative

Maxime Bernier Conservative Beauce, QC

What do you mean by content? The content of the—

4:35 p.m.

Conservative

Dave Van Kesteren Conservative Chatham-Kent—Essex, ON

The content of your submission.

4:35 p.m.

Conservative

Maxime Bernier Conservative Beauce, QC

Yes, we received 71 recommendations and pieces of advice from the public after the 60 days of consultation. These were very useful for us before issuing or putting into force the policy direction. These recommendations were based on the experience of the industry and all consumers across the country, and it's why we made some modifications in the policy direction. If you compare the policy direction we proposed and the policy direction we enforce, they are a little bit different, because we were able to have access to and received good comments from Canadians.

4:35 p.m.

Conservative

Dave Van Kesteren Conservative Chatham-Kent—Essex, ON

Did you have any recommendations from the committee?

4:35 p.m.

Conservative

Maxime Bernier Conservative Beauce, QC

No. I'm waiting for your recommendations on the forbearance decision. If I could maybe receive a letter from the committee next week, or something like that, on the forbearance decision, I'd be pleased to take that into consideration.

4:35 p.m.

Conservative

The Chair Conservative James Rajotte

Okay. Thank you, Mr. Van Kesteren.

We'll go now to Mr. Masse.

4:35 p.m.

NDP

Brian Masse NDP Windsor West, ON

Thank you, Mr. Chair.

Thank you, Mr. Minister for being here. I apologize for being late, but I have had a chance to go through your remarks.

I want to clarify a couple of process issues as you're looking at deregulation and the model you have proposed.

Obviously, you're coming with the conclusion that those with the three services in their communities are being overcharged; hence, the current regulation is one that isn't of benefit to the consumer. By how much do you estimate the consumers in those areas who are going to be deregulated are actually being overcharged right now by the incumbent providers at the actual places of business?

4:35 p.m.

Conservative

Maxime Bernier Conservative Beauce, QC

Thank you for your question.

I'm not saying that some telephone companies are charging too much. I'm simply saying that we want to enhance competition. Normally, in any deregulated industry, competition leads to better prices and better service for Canadians.

Based on the test that is proposed here, approximately 60 per cent of the major markets here in Canada will be deregulated once it has been applied by the CRTC. For consumers, that means stiffer competition in the telecommunications industry, where the players are very healthy, financially. There are major players in both the cable and traditional telephone market segments and these people are prepared to compete.

When we apply our test to the major urban centres, the result is that there is less economic regulation affecting the major players. Experience has shown that less price regulation leads to much lower prices; in any case, that is what has happened in the past.

Earlier, I used the example of long distance pricing, which went from 30¢ a minute in Canada, before deregulation, to 10¢ a minute. Do I have any assurance that this will occur in a deregulated industry? Well, I don't have a crystal ball, but I can tell you that competition always benefits consumers, and we are undertaking this reform in the interests of consumers.