Canadian Heritage Committee on Nov. 2nd, 2010

[The Chair, Conservative, Michael Chong]

Welcome to the 27th meeting of the Standing Committee on Canadian Heritage, this Tuesday, November 2, 2010. Pursuant to Standing Order 108(2), we are examining the topic on the agenda, emerging and digital media: opportunities and challenges.

We have in front of us this afternoon representatives from the Canadian Radio-television and Telecommunications Commission, Mr. Traversy and Mr. Anani.

Welcome to you both. You may begin with an opening statement.

[John Traversy, Executive Director, Telecommunications, Canadian Radio-television and Telecommunications Commission]

Thank you for the opportunity to be with you today.

My name is John Traversy. I'm the executive director of telecommunications at the CRTC. I am joined today by Namir Anani, executive director of policy development and research.

We would like to focus our comments on the following question, which was included in your study's terms of reference: what could be done to ensure that all Canadians, no matter where they live or what their socio-economic status is, have access to emerging and digital media.

As you know, digital media is part of how Canadians live and conduct business. Canadians are getting more and more of their information and entertainment from the Internet and through mobile devices. Content is available from almost anywhere at any time. This has given consumers more control over what they watch and when they watch it than ever before, and as a result business models are evolving to keep pace so that Canadian media companies can compete in the global environment.

Of course, none of these things are possible without an Internet connection, and more often than not in today's world, a broadband Internet connection. Through the regulation of telecommunications services, the Canadian Radio-television and Telecommunications Commission has a large role to play in making sure that Canadians have access to the Internet.

As to where things stand today, over the past four decades the commission has used economic incentives and other regulatory tools to ensure the deployment of telephone and cable television networks across the country. These nearly ubiquitous networks now serve as the underlying platforms for Internet access. We have relied primarily on market forces to encourage companies to upgrade their networks or to build wireless and satellite networks in order to allow for broadband Internet access.

Where market forces have not been sufficient, targeted subsidies from both provincial and federal governments have helped to expand broadband to rural and remote areas. Industry Canada funded a $225 million broadband Canada program to connect rural Canadians to the Internet. Several provinces have forged partnerships with the private sector to extend coverage to their residents. Prince Edward Island, New Brunswick, and Nova Scotia now claim to be at 100% coverage.

As a result of these efforts, broadband Internet services are widely available in Canada. Broadband Internet services are available to 95% of Canadian households through telephone, cable or fixed-wireless networks. Most households that do not have access to these services can still get broadband Internet through a satellite connection. In addition, 96% of Canadians can access the Internet using a mobile device.

l'd now like to turn to the CRTC's role in ensuring that all Canadians have access to basic telephone and Internet services.

Given that Canada has a small population spread across a vast and diverse landscape, it has been a challenge to deliver a high-quality, reliable, and affordable telephone service to all. In the late 1990s the CRTC instituted measures to ensure that all Canadians had access to basic telephone service regardless of where they lived.

As part of these measures, the commission developed a minimum target for residential services that included access to dial-up Internet services at local rates. These measures have worked well for considerably longer than 10 years. Today, over 99% of Canadians have access to telephone services that meet or exceed our basic requirements.

However, dial-up Internet just does not cut it anymore for many consumers in light of the significant competitive and technological developments over the last few years. In response, the CRTC is in the process of reviewing its approach to basic telecommunications services.

I was at a public hearing that began in Timmins last week on October 26 and continued this week in Quebec on November 1. The CRTC has invited a range of interested parties to provide views on a number of key questions.

Not surprisingly, the most pressing questions revolve around the Internet. Does the CRTC have a role to play in the provision of high-speed Internet services where these are not currently available? Should a goal be set whereby all Canadians have access to high-speed Internet services; if so, at what speed and in what timeframe? The commission expects to publish its determinations by March 2011.

Mr. Anani.

[Namir Anani, Executive Director, Policy Development and Research Sector, Canadian Radio-television and Telecommunications Commission]

Thank you, John.

Now I'd like to turn the focus to the framework for Internet traffic management practices.

Traffic over Internet networks has been increasing at a steady clip, with online video content now emerging as the largest category of data. With more and more people accessing the Internet through broadband connections, there is the likelihood that demand will exceed capacity. When that happens, users may find themselves in the cyberspace equivalent of a rush-hour traffic jam.

In October 2009, the CRTC announced a framework for Internet traffic management practices. As a starting point, the commission recognized that users should have as much freedom as possible to explore the Internet. But at the same time, Internet service providers, ISPs, should have the flexibility to manage the flow of data over their networks to ensure that their users receive an acceptable level of service.

The framework makes it clear that when congestion occurs, an ISP's first response should always be to invest in more network capacity. That being said, the commission recognizes that expanding and upgrading a network is not always the most practical solution. Other practices can be employed to ensure a network's integrity at peak usage times. These practices fall into two categories: economic measures and technical measures.

The main points of our framework can be summarized in the following way.

When traffic management is necessary, it should be done through economic means. Consumers should know in advance what they will be charged for the amount of bandwidth they need.

Technical measures should only be used as a last resort. The means employed must be as targeted and minimal as possible to achieve the desired results. They also must be non-discriminatory and cannot give an advantage to the network operator employing the measures.

We now require ISPs to inform their customers in advance if they intend to use an Internet traffic management practice. Customers must be told how the practice will affect their service, including the specific impact on speeds.

We developed a framework to review Internet traffic management practices that raise concerns or generate complaints. The framework spells out how we will judge complaints. The commission has received only a small number of complaints over the course of implementing the framework this past year. They have been resolved with minimal regulatory intervention.

Now I would like to address the new media exemption.

The CRTC has also been working to ensure that its regulatory approach to digital media remains effective in the context of changing needs and technological developments. In June 2009, the Commission announced that it would continue to exempt from its licensing requirements services that deliver broadcasting content over the Internet or through mobile devices. This decision reflects the Commission's view that these platforms currently act in complementary fashion to the traditional broadcasting system. Any regulatory intervention would only get in the way of innovation.

The Commission also made a reference to the Federal Court of Appeal to find out whether the Broadcasting Act applies to ISPs to the extent that they provide access to broadcasting content. In July, the court ruled that the Broadcasting Act's reach does not extend to ISPs. Given the dynamic nature of the digital media environment, the Commission expects to review the regulatory approach within the next four years.

The Commission also looks forward to the results of the recent consultation on a digital economy strategy and will consider how it can best contribute to the government's efforts in this area.

In conclusion, digital media continue to change our world at a rapid pace. The CRTC recognizes this new reality. We are working to ensure that our regulatory approaches continue to be appropriate for the competitive and technologically driven environment of today. We will continue to look for modern tools with which we can do this effectively.

In particular, one of the tools we are hoping to acquire is the ability to impose administrative monetary penalties across all our activities. This would allow the commission to adopt a less restrictive approach to regulation and ensure a level playing field for all competitors as we move forward into the opportunities of tomorrow.

Thank you very much. We would be pleased to take your questions.

[The Chair, Conservative, Michael Chong]

Thank you very much.

We had originally planned for five-minute opening statements, but that statement was ten minutes long, so there will be only 35 minutes for questions and comments by members of this committee, beginning with Mr. Simms.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Thank you, Chair.

Thank you to our guests who have come to us from the commission.

I would start by saying that I enjoyed seeing some of the emphasis placed on access to broadband Internet. My riding has 191 communities, and 54 communities have no access whatsoever to broadband Internet.

The problem with that is not just a consumer problem, but a business problem. It's hard for a small community that loses its plant to attract business when it doesn't carry broadband Internet, because companies now buy capital assets through the auction houses and these sorts of things—through the Internet—and it's just impossible for them to do.

But where do we go at this point? My understanding is that over the years it has always been that the CRTC relatively had its hands off the Internet, certainly when it came to content. How do you do this? How do you push the fact that we need 100% penetration across this entire country?

[John Traversy]

Well, setting a goal might be an important starting point.

The testimony we've heard over the last couple of weeks, starting in Timmins, was interesting. The statistics that are currently being provided to us are quite impressive, and our own monitoring report shows also that broadband is currently available to about 95% of the Canadian population. That's excluding satellite and mobile wireless, and it's using a broadband definition of 1.5 megabits per second.

It's interesting that we had some representatives from Barrett Xplore in Timmins last week who were telling us that they already cover, in their view, the last 5% of Canadians. Of course there have been pricing issues and there could be capacity issues with satellite, but they went on to explain that they have recently concluded transactions for a couple of high-throughput satellites, and as a result, in their view over the next 12 months they will be able to deliver a 10-megabit service to residents and perhaps a 25-megabit service to businesses. We'll wait to see how that turns out.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Okay. But in the meantime, if we are going to promote 100% penetration, obviously we're in a position in which we have the P3 system of public-private partnership and so on. I still don't know what the role of the CRTC is in this and in mentioning it.

Given the way you regulate, I don't see how it's going to work out. For instance, you indicate in your notes that you're okay with live streaming of content from a television station over the Internet as well as over a PDA, because you already regulate TV signals in general. Is that correct? Am I reading this correctly?

[Namir Anani]

Maybe I can expand on that.

As you know, as a result of the new media hearing there was overwhelming evidence that this environment is very innovative and experimental, and a hands-off approach was necessary.

Obviously the commission made the decision to exempt that environment going forward. And since then we have seen evidence that competition is taking place in that environment. We have seen Rogers On Demand, we've seen illico from Quebecor, we've seen others who are presenting portals online and presenting content online. The approach the commission took in exempting that environment led to the industry's competing in that environment more aggressively.

You raise the issue of the content aspect. Let's not forget that there are several different funds available for content development. The CMF goes a long way towards providing, in its new form, content that supports the development of different programming on different platforms.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

But you don't regulate whatsoever. You're just saying it's hands off the Internet, period.

[Namir Anani]

That's correct.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Okay.

Do you want to ask a question?

[The Chair, Conservative, Michael Chong]

Go ahead. You have some time. It's very limited.

[Bonnie Crombie, Liberal, Mississauga—Streetsville, ON]

With respect to exempting broadcasting content over the Internet, do you think Bill C-32 goes far enough in supporting your decision to exempt?

[Namir Anani]

Well, I think this issue is being debated today, so we'll wait to see how it evolves.

[Bonnie Crombie, Liberal, Mississauga—Streetsville, ON]

You spoke of penalties, and an issue has come up in the legislation called “notice2notice”. Are you in agreement with notice2notice?

[Namir Anani]

The penalty approach that we are emphasizing here is that.... If you look at several countries that took different strategies, whether Digital Britain, or Digital France 2012, or others, they had several pillars: access, content, and so forth. But they're also addressing components of what type of modern regulatory environment we need going forward.

I think it's important to look at the tools regulators such as we are would need within that environment. When we mentioned AMPs, the administrative monetary penalty tool, it's because we need to move from an environment that is restrictive, in which we ask industry to come back to us for pre-approval of every change they make, to an environment in which we'd act only when we have non-compliance.

[The Chair, Conservative, Michael Chong]

Thank you very much, Mr. Anani.

Madame Lavallée.

[Carole Lavallée, Bloc, Saint-Bruno—Saint-Hubert, QC]

Thank you, Mr. Chairman.

Good afternoon, gentlemen. It's a pleasure to meet you.

There are some things I don't really understand. In your presentation you say this: In June 2009, the Commission announced that it would continue to exempt from its licensing requirements services that deliver broadcasting content over the Internet or through mobile devices.This decision reflects the Commission's view that these platforms currently act in complementary fashion to the traditional broadcasting system

We agree that "mobile devices" means telephones. If I understand correctly, you made this decision assuming that, in any case, this was supplementary; that it was broadcasting, but that you were nevertheless going to exempt it. So you decided not to regulate mobile telephones.

Then you say you "made a reference to the Federal Court of Appeal to find out whether the Broadcasting Act applies to ISPs." I don't know why you yourselves made the decision in one case and referred to the Federal Court of Appeal in the other. If I understand correctly, you didn't ask whether that applied to mobile telephone services "to the extent that they provide access to broadcasting content."

In addition, when your chairman, Mr. von Finckenstein, appeared before the Standing Committee on Industry, Science and Technology, he said he wanted the three acts, the Broadcasting Act, the Telecommunications Act and the Radio-Communication Act, to be merged. Allow me to tell you that I am absolutely confused about the orientations that have been adopted, the means used to justify those decisions and the fact that your chairman concluded that these three acts should be merged.

I am very confused, and, very fortunately, I am not the only one. Today, for the average person, the telephone, Internet service, computers and television are starting to resemble each other quite a bit. Furthermore, when you plug a PlayStation console into your television set, you have the Internet directly on your television. I don't understand. Explain that to me.

[Namir Anani]

I'll try to do that. We did make that request. On a number of occasions, our chairman started a debate on convergence, on the fact that we need a communication act that, in a way is convergent. We can cite England's Ofcom agency as an example.

The reason is simple: for a number of years now, we have noted that there increasingly is convergence and consolidation in this environment. Recently, there was a merger between Shaw and Canwest. We are studying that between CTV and Bell. Everyone thinks they should offer innovative services on new platforms.

All that to say that we are currently subject to two acts: the Broadcasting Act and the Telecommunications Act. The rules are different in some instances. However, it is important, in an environment where convergence prevails, for the rules to be clear, simple and easy to enforce by means of modern tools that enable us to move forward. That's why we have started the discussion on a potential convergent communications act.

[Carole Lavallée, Bloc, Saint-Bruno—Saint-Hubert, QC]

I find it interesting you that should mention rules that are "clear, simple and easy to enforce" because that's exactly what the entire industry is demanding from the CRTC. However, we can see that the situation is entirely the contrary in the case of mobile telephones and Internet service providers. Your approach and your reasons were different. We don't understand why, in order to enforce clear rules, the CRTC first of all did not strongly defend the need not to exempt other mobile telephones or Internet services.

[Namir Anani]

I'm going to go back to the hearing on new media. The people who testified clearly said they wanted the new platforms not to come under the CRTC's jurisdiction. The reason is simple: those people want to be competitive in that environment. However, the rules set for a limited spectrum period and a very specific Canadian geography do not apply in that environment. We found that the witnesses' information was complementary. That's why we made the decision to exempt that environment. We are nevertheless going to monitor that closely.

[The Chair, Conservative, Michael Chong]

Mr. Angus.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Thank you, Mr. Chair.

I'm so glad you are here today, having launched the hearings in Timmins last week, where I was expected to be. However, in the world of politics, the person who is higher up than I am in the food chain is the whip, and he said it didn't matter that there were national CRTC things happening in my hometown. He said I was to take my spade and get back in my trench and keep digging here in Parliament, so that's where I was dutifully doing my work.

If I had been in Timmins, I probably would have started off telling the story of my daughter, who was in Kigali, Rwanda, on an education program and who came back and said, “Gee, Dad, it was amazing being in Rwanda, because they have free Wi-Fi in Rwanda and much better high-speed Internet and than I can get in downtown Ottawa.” Of course we expand that out into the jurisdictions.

Like my colleague Mr. Simms, I represent a riding bigger than Great Britain. It is true that for perhaps 95%, broadband is available, although I would certainly question that number. When I talk to the telcos, they tell me that in terms of obligation to serve, dial-up is as far as they want to go. Dial-up--why don't we just use tin cans and string? I'm sorry, but 1.5 megabits is not high speed. It's not. If we are doing long-distance education programs with anything less than a 5-megabit download, people can't access their programs. In my region, where I have people in isolated little communities who want to get retooled in education, if they can't do this online program, then it doesn't really exist.

I'm looking at the role, and clearly it is an obligation of industry. It's an obligation of government to put the standards in place. When we look at Australia, which is undertaking the largest infrastructure program in their history, to have 93% hooked up at 100 megabits per second, it seems to me we're saying that we're going to go from the horse and buggy to the Model T, and we're going to get it up and working in 95% of our communities across Canada while Australia is at 100 megabits, Sweden is at 100 megabits, Korea.... Do you think, from what you're hearing, that we just have a really meagre vision of what is possible in terms of broadband speeds?

[John Traversy]

The questions and analogies you raise are the exact reasons we decided we would include broadband in our current review of what should be included in basic telecommunication services. What speeds there should be, what the target should be, how fast we should roll out: all those things are currently on the table in the proceedings that we've been hearing. We've heard a wide variety of testimony, and as you say, some don't think there's any role for the CRTC or really, for that matter, government, besides maybe setting an overall general strategy of what the target should be while letting the private sector and market forces do their work. Arguably, there have been some strides made in Canada to roll out broadband to Canadians.

There are others, of course, who, like you, are putting out on the table the targets they've come up with in other countries. They're clearly in front of us, and there is a wide variety of targets. Some have come forward and said it should be 100 megabits by 2015 or 2020 and have compared that to what the Australians have done. They have compared it to the broadband strategy they came up with in the U.S., that very shortly it should be four megabits, and then we should have a further strategy to get us to 100 megabits for a certain percentage of the population by a certain timeframe. All those things are in front of us, and we agree that this is important, and that's why we're taking a look at it right now.

[Charlie Angus, NDP, Timmins—James Bay, ON]

One of the concerns of the New Democratic Party is that we feel there aren't enough tools in the tool box. That was one of the reasons we wanted to amend the Telecommunications Act: we don't believe subsection 27(2) and section 36 give enough tools to ensure there's no monkeying around with content.

We believe the issue of net neutrality is becoming more important. We have Rogers On Demand. We have Vidéotron and Quebecor as basically one entity now. Shaw runs its own television station. Bell is running its television station. They have small third-party ISPs who are very concerned about usage billing and whether they're going to be snuffed out by anti-competitive practices. We don't have very many players in this market in terms of ISPs, in terms of phone operations. They are the same people who are now controlling much of the content.

We feel we need very clear rules to ensure, number one, that the Internet continues to develop, and number two, that there are no anti-competitive practices. I'm interested in your recommendation for administrative monetary penalties. We've gone through this a few times in the past with Shaw and Vidéotron in particular, and it appears to us that unless we have some enforcement measures, we can be in a situation in which you can say what you want and we can say we want, but it would be very clearly anti-competitive. Frankly, actions contrary to the rules of the Telecommunications Act can be flaunted.

What would you suggest in terms of making these administrative monetary penalties come into law, and how would you see them being utilized?