Industry Committee on March 1st, 2011

[Serge Cardin, Bloc, Sherbrooke, QC]

Thank you, Mr. Chair.

Ladies, gentlemen and Minister, good afternoon and welcome.

This all began with the 2006 Bernier decision. We see that, in your Order in Council P.C. 2009-2007, you directed the CRTC to review Broadcasting Decision 2008-117 and Telecom Order 2009-111 regarding speed matching. However, at that time, the CRTC was clearly protecting ISPs' competitiveness against the wishes of incumbents. Despite that, you ordered the CRTC to review those decisions and give priority to Bell's arguments.

Why were the CRTC decisions on speed matching perceived as poor? Why did they need to be invalidated?

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

Certainly again our guiding principle is competition and choice.

We base ourselves on consumer choice and competition principles.

[Serge Cardin, Bloc, Sherbrooke, QC]

Yes, but, in that case, Minister...

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

I believe our dialogue with the CRTC on that issue, the speed-matching decision issue, does correlate to those principles. We wanted to make sure that Internet markets were constructed in such a way that Canadians can receive the full benefits of the Internet and the digital economy. So when as a cabinet we directed the CRTC to reconsider those decisions, that purpose was clearly framed in that reconsideration. We said in the order in council that it's critical that the regulatory regime provide a cohesive, forward-looking framework that provides the proper incentives for continued investment in broadband infrastructure, encourages competition and innovation, and leads to consumer choice.

In my view, it all fits within the idea that competition and choice are important for consumers and important for our economy.

[Serge Cardin, Bloc, Sherbrooke, QC]

This is the default response to almost all questions.

However, in this particular case involving variable speeds, this approach directly favours Bell. People who spend less time on the Internet choose Bell as their service provider, and the competition is completely eliminated. We are wondering if Bell now has the power to order your government to review the CRTC decisions. Is Bell now in charge?

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

No. Clearly we look at each issue independently, but with a view to being consistent in the dialogue that we have with the CRTC. I think in that case we were consistent, that we wanted to give consumers the best services available. That's what speed matching is all about. I think it has borne itself out as the right decision. Maybe, Monsieur Cardin, you and I disagree, but I think ultimately we are being consistent and being in favour of the consumer.

[Serge Cardin, Bloc, Sherbrooke, QC]

You know that, since the Conservative government has been in power, several decisions have been made that were not in the best interests of consumers, ISPs and competition in the Internet-providing community.

While decisions were favourable to Bell or other incumbents, the government never got involved.

The one time the CRTC protected competition, your government asked it to review its decision and prioritize Bell's key arguments.

Do you not feel that you are sending the CRTC totally conflicting messages by asking it to review its decisions on usage-based billing, which was fully compliant with the spirit of your Order in Council 2009-2007?

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

I think it is important to have a network that works for the consumers. It is important to have, as I said before, choices and competition on the market. The 2006 decision clearly outlined our position.

You asked me whether I'm doing Bell's bidding. I don't think Bell would come here and say I'm doing Bell's bidding when it comes to usage-based billing, I can assure you of that. They have a very different position from what I have, and I say that with respect, but that's the reality of the situation.

I think for our economy to not only survive, but thrive, we do need more choice and more competition. This particular segment of our economy is moving at the speed of light, and we have to ensure that interests are well balanced and that if a particular provider is not providing good service or good choices or pricing packages that meet the consumers' needs or a small-business person's needs, or a creator's needs, that there be other choices available to those people in our society. I think that's very important.

[Serge Cardin, Bloc, Sherbrooke, QC]

Some 500,000 people speaking out against a decision in a short period of time can obviously influence you. This kind of reaction can make you change your mind about Bell. However, you never gave any orders; Bell asked the CRTC to provide the 60-day report. After that, one thing led to another. You had to reluctantly support this request, since it complied with the Bernier decision, which calls for the least amount of regulation possible. This is clearly confirmed by one of the directives you gave the CRTC as part of your Order in Council, and it states the following:

(d) the impact of these wholesale requirements unduly impairs the ability of incumbent telephone companies to offer new converged services, such as Internet Protocol Television (IPTV).

This was the directive given, and the way to meet it is through usage-based billing, ostensibly to free up the network, which would include IP television.

Could you explain to us why Decision 2008-117 and Order 2009-111 on speed matching were not compliant with the 2006 Bernier decision?

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

As I said, we had a back and forth between the cabinet and the CRTC. The CRTC concluded that without wholesale services at higher speeds that match retail offerings, you have a duopoly between telco and cableco in that area, unless it matched. Therefore, the duopoly would be continued. I think that's the decision of the CRTC. We let that decision stand, and ultimately I think give-and-take is important.

You mentioned earlier in your remarks about the response we got from Canadians. I make no apologies for reading e-mails and reading tweets. If people want to send me smoke signals, that's okay too. The fact of the matter is, by good coincidence and by good policy, Canadians agree with us. Usage-based billing imposed on wholesalers is a bad thing for consumers, for small businesses, for entrepreneurs, and, by good policy and by happy coincidence, we're on the same side as Canadians.

[The Chair, Conservative, David Sweet]

Monsieur Cardin, I know there are lots of questions, but your time is way over. I was trying to allow the minister to answer your questions.

Now we need to go to Mr. Lake for seven minutes, please.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Thank you, Mr. Chair.

When we were hearing from witnesses before the committee, one of the things referred to was that only 6% of Canadians are actually affected by this decision. Maybe you could speak to the importance of that 6% of Canadians and the ISPs that serve them, in terms of competition in the marketplace.

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

I think this is an important point, because while they represent a small segment of the marketplace, in many cases they can help drive choice and competition. That's how competition works. If you know that a competitor of yours is offering a product that is gaining traction and ground and support, and consumers are attracted to it, then as a provider you're more likely to rearrange your offerings to meet that competitive threat.

While it is simply 6% of the market, I think it is important to realize that competition does exist, that people, if they so choose, can make different choices. That's why, by forcing a similar pricing model on those wholesale independent ISPs, what you're doing is eliminating the choice. That is what I've found most concerning about the original CRTC decision.

It's a small part of the marketplace. I get that, but at the same time it's an important part of the marketplace, so that we can preserve some balance. Otherwise you would have basically a monochrome product offering and less choice in the marketplace, as a result.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

There's been a lot of talk about the 2006 policy direction. Opposition members have talked about it a lot. I wonder as I read it, though, if they've ever actually read the policy direction, because it talks significantly about the market; it talks significantly about competition and competitive neutrality. As you mentioned, it instructed the CRTC to rely on market forces to the maximum extent feasible, and when using regulatory measures, to ensure technological and competitive neutrality where possible, to enable competition from new technologies, and not to artificially favour either incumbents or independent ISPs.

Maybe you can expand on that a little bit. It seems to me that when I read that, this decision does not meet those criteria.

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

The CRTC did a lot of work after the policy direction, not only working on the directive itself on a forward-looking basis but also doing a comprehensive review of the current policies that were in place at the time—in 2007 and 2008. When it completed its reviews, there were a lot of measures it took to be more consistent with the policy direction. It really was a watershed moment for our government and for public policy in this area.

The commission changed its administrative rules, changed some of the requirements, found that some of its earlier requirements were disproportionate or irrelevant relative to a market-based approach. It really was a whole architecture that was created as a result of that.

The next big step was of course on the wireless side, reserving spectrum for new entrants. That's an important element of this, I believe, as well—when you look at telecom from the broader perspective, not just the Internet perspective. Again, consistent with competition, consistent with choice, it was a huge decision, which allowed for more competition in the wireless.

We're seeing the benefits of that. We're seeing even the incumbents offering more services that are geared to what they see as the competitive threat from the new entrants. That's all good. That's the kind of thing you want to see in the marketplace: choice, variation on pricing models and service models, and so on.

I think we can look back on this past five years and say we have ushered in a revolution, when it comes to these very important areas of our economy.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

You've indicated that regardless of the CRTC decision, cabinet will be overturning the ruling. I want to talk a little bit about that sort of relationship between the CRTC and the government. You mentioned this a little earlier. How many times has the government overruled the CRTC?

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

There were something like 2,200 decisions just in the telecom space, not even including broadcasting, because obviously the CRTC is the regulatory body for both telecom issues and broadcasting issues. Carve away the broadcasting issues for a second. I believe there were something like 2,200 rulings by the CRTC over the course of our tenure in government. Of those, we varied three, and we referred back another three. That's six out of 2,200.

This whole accusation that we are stripping away all the authority of the CRTC, that somehow we have now stood in the place of the CRTC, that's just not accurate. But when we have to defend the policy directive, choice, and competition for consumers, we will do so.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Okay, that's what I was going to ask. There are some who would ask, regardless of the numbers, why the government should be allowed to tell the CRTC, an arm's-length agency, how to do their job.

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

The first thing I'd say is it's in the act. The Governor in Council, the cabinet, has the ability, the right, indeed the obligation under the Telecommunications Act to vary or refer back a decision that cabinet feels is contrary to public policy. And you don't do that, believe me, every day of the week. You use that power sparingly, but in certain instances it is necessary to use it if we feel that the CRTC has in some way veered away from the sound public policy that has been put in place. That's the only time we should do that, and that's the only time we do it.

[The Chair, Conservative, David Sweet]

Ladies and gentlemen, one thing that is not covered under the CRTC regulatory regime is how close your BlackBerry is to the microphone. The interference makes it impossible for the translators to translate. If you could make sure it's a distance away, then we won't get the interference.

Now on to Mr. Masse.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

Thank you, Minister, for being here.

The revolution you brought in has led to a consumer revolt in this country. That's what we are seeing with the UBB, the pressure coming from some of the incumbents for everything from throttling to attempting UBB. You look at the headlines, even today: Rogers to Take Fight Over TV Fees to Country's Top Court After Narrow Loss; Gloves Are Off Over Wireless Airways Space; Get Ready to Pay More For TV.

There were several complaints prior to this by all those in the industry. There were decisions that led up to this moment. But what we have now is a dog's breakfast. You say you want to improve competition, and then you talk about the spectrum option that we had, but you screwed up the last one. We now have a court case and greater uncertainty.

What makes you think that Canadians can trust you with this important asset for the next round?

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

I guess I disagree with your characterization of my tenure as industry minister. I hope you don't mind if I do that.

I would also say that we have been crystal clear. We favour policies that give more competition and choice to consumers, whether in wireless, Internet, or other aspects of the sector. And if we feel that something might be threatening that competition, we regard it as a huge threat to the future of our economy. For example, Canada should be a leader as a venue for cloud computing, but if we have the wrong structure in place then that will not occur in this society. The stakes are high.

You talk about some of the disagreements I've had with the sector. I make no apologies for that. I think I'm sticking up for consumers, creators, businesses, innovators. That's my job.

[Brian Masse, NDP, Windsor West, ON]

How good is it for them now? The system that you put in place, or the process for the last spectrum option, now has a Canadian government in the courts, because you overturned the CRTC. How is that good for consumers? How is that good for a company looking to invest in Canada? You allowed different rules for that spectrum option, and others who came into the market felt that it was not fair, went to the courts, won, and now you're going to have to see a court case unwind maybe all the way to the Supreme Court. So there's uncertainty about investing in the company. There's uncertainty about others investing and who the real competition is.

Then, too, we have another spectrum option coming up. What's going to happen? Are we going to have another court case for the spectrum option? That kind of thing delays innovation and investment in the industry. What are you going to do about this spectrum option this time?

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

First of all, no one likes being in court, but there are times when one has to be....

[Brian Masse, NDP, Windsor West, ON]

But you put yourself in that position.