Canadian Heritage Committee on May 31st, 2016

[Pierre Nantel, NDP, Longueuil—Saint-Hubert, QC]

You have said many times that you really want your members to apply best practices. I agree with you. That said, the use of waves belonging to Canadians is a business opportunity that comes with responsibilities. Businesses and Canadians will have to decide what should be done about the system. I don't want to blame you, but it's clear that the Internet has been a game changer, so that everyone is now wondering what to do.

So I expect there to be a full conversation that will involve all the players.

I will now turn to Mr. Cox.

You talked earlier about advertising money being lost.

I'll speak English for you.

You talked about the advertising market leading the way for social media and stuff. When I was a kid, I remember in the paper there was something called publireportage, kind of semi-news but advertising something. Isn't that exactly what Facebook is into when they are promoting stuff? Even myself, I can promote something good I did on Facebook. Isn't it fake advertising or fake real stuff? The consumer thinks, “I'm being fooled here. I thought this guy was my friend. He's actually selling me a Chevette.”

[Bob Cox]

Yes, typically the name we use for that is “sponsored content”. You see a lot of it. Even in larger newspapers like The Globe and Mail, you'll often see sections that are really written by the advertiser or for the advertisers. There is a lot of controversy over that. Our newspaper hasn't gone into it to the same degree, but it's a large source of revenue.

What's happening is newspapers and other media are so desperate for revenue, or new sources of revenue, that they have gone to this. It actually has threatened the ethical standards of journalists and of news publication.

[Pierre Nantel, NDP, Longueuil—Saint-Hubert, QC]

Isn't this what—

[The Chair, Liberal, Hedy Fry]

Maybe we can let Mr. Cox finish his thought.

[Bob Cox]

A lot of publications feel they have no choice, but really there are no standards about how this material should be identified, whether it's clearly an ad or clearly journalism. A lot of times there's confusion. It's a very murky area right now, and it could use some clearing up.

[The Chair, Liberal, Hedy Fry]

Thank you.

Now we go to Mr. Samson from the Liberals.

[Darrell Samson, Liberal, Sackville—Preston—Chezzetcook, NS]

Welcome. We really appreciate your presence.

Mr. Lord, I have three or four questions for you. We have seven minutes, so let's try to keep it tight.

As the former premier of New Brunswick, you have a great deal of experience in decision-making. I would even say that you began your career as a decision-maker, then played the role of a stakeholder, and then you became a decision-maker again.

You're talking about the taxation problem. I'm putting you in a hypothetical situation where you have to decide. Let's suppose that you have two years to solve the problem. What would you do?

[Bernard Lord]

At the outset, I would make the decision to resolve the issue. That's the first decision that must be made. We must have the will to solve the problem. Then we have to consider the situation, and we have an opportunity today to talk about it.

It's not a matter of blaming anyone for what has been done in the past. This is an evolving industry. Twenty years ago, there was no such problem, as the industry did not exist. Ten years ago, it began to emerge, and today, our world is transformed and has become, as I said earlier, a mobile-first world. It's not just a digital world, but a digital world where hand-held devices are preferred.

As a result, we created networks. However, as Mr. Nantel was saying, the situation has become rather ironic. We have created networks that enable foreigners to sell products in Canada. That's not a bad thing—I would in fact say that there is some good to it—but we have to make sure that it is done in a competitive manner. We should not adopt a tax policy that puts a Canadian company at a disadvantage compared with an American or international company.

So the first decision that must be made is to solve the problem. Then, we have to figure out how to do that, and that's where things get a bit more complicated. We have to work with the provinces, as well, because sales taxes come under the jurisdiction of both the federal government and the provinces. We must either increase taxes on products from abroad, or....

[Darrell Samson, Liberal, Sackville—Preston—Chezzetcook, NS]

Mr. Lord, you are a decision-maker, so it's up to you to decide. You are doing what you think is best.

[Bernard Lord]

I would personally choose one or the other. I want a level playing field.

Other countries have addressed the issue. The European Union has. I also mentioned countries such as New Zealand, South Korea, Japan, Norway and Australia, which have all adopted certain models to remedy the situation.

[Darrell Samson, Liberal, Sackville—Preston—Chezzetcook, NS]

Thank you very much.

In other words, you represent the creators of mobile applications. Can you tell us about the kind of content Canadian developers of mobile applications are managing? What is our situation like compared to that in other countries around the world?

[Bernard Lord]

There is a growing industry of mobile content creation in Canada. This holds true in traditional industries, such as newspapers that produce digital copies, but for mobile devices. They have applications that are specifically designed for mobile devices. It's not just about taking the same application used for a computer connected to the Internet, but about generating content that would be easier to view and use on a mobile device—so on a smaller screen.

We see this in the news, as well as in the entertainment and business sectors. It's very important to remember that this is a business tool, an economic tool—a tool for economic development. The networks we have in Canada are not just used to help more Canadians watch YouTube videos more easily. It's true that Canadians are among the biggest users of YouTube. However, Canadian networks also help business development. So it's a tool that helps Canadians in all aspects of the life they want to participate in.

When it comes to taxation, a Canadian consumer who decides to buy a product online for a mobile device often has the choice between a Canadian product, which is subject to rules, and a non-Canadian product, which is not subject to the same rules. In that case, we have to ensure that they are not forced to pay 15% more if they choose the Canadian product.

[Darrell Samson, Liberal, Sackville—Preston—Chezzetcook, NS]

Okay, thank you.

What are you doing to encourage the expansion of wireless services across Canada?

[Bernard Lord]

We are doing a lot.

The most important objective for our members is to continue expanding networks. We estimate that the demand over the next five years will grow by 600%, as I mentioned earlier, and we have to ensure that we are able to meet that demand. There are two things we can do to achieve that goal. We have to continue increasing the capacity of networks in areas where they already exist—in other words, improve the existing service. In addition, a service has to be provided in places where there isn't one currently. So it's a matter of increasing the service area and increasing the capacity of existing services.

[Darrell Samson, Liberal, Sackville—Preston—Chezzetcook, NS]

In your role as a decision-maker, how could you make this service more affordable for Canadians?

[Bernard Lord]

It's a....

[Darrell Samson, Liberal, Sackville—Preston—Chezzetcook, NS]

Please answer me as a decision-maker, and not as a businessman, as the two approaches are totally different.

[Bernard Lord]

I always like hypothetical questions. They are put to me on a daily basis.

Someone mentioned earlier the love-hate relationship with service providers, and I understand the expression well. In reality, the unit price is continuing to drop. The cost of 1 gigabyte of data has decreased in Canada compared to how much it cost five years ago. However, consumption is increasing. As a result, Canadians' monthly bill is higher, but it's because they consume a lot more. It's like going to the grocery store and filing up the cart with a lot more products than the previous week and then being surprised that the grocery bill is higher. In reality, it's the consumption that is higher.

[Darrell Samson, Liberal, Sackville—Preston—Chezzetcook, NS]

I agree with you, but you are now a decision-maker.

[Bernard Lord]

Yes.

[Darrell Samson, Liberal, Sackville—Preston—Chezzetcook, NS]

The decision-maker's objective is to lower the price and look into what can be done to do so.

[Bernard Lord]

Yes. There should also not be too much regulation. We have to ensure that consumers and service providers can make their choices freely, and enable them to take risks and profit from them.

We have a highly competitive system In Canada. We have smaller providers, and we have large ones. However, we always have to remember that even the large providers in Canada are small compared with international providers.

[Darrell Samson, Liberal, Sackville—Preston—Chezzetcook, NS]

Thank you.

[The Chair, Liberal, Hedy Fry]

Right on time, Mr. Samson. Very good.

I think we've come to the end of this session because of the time limits. I wanted to ask one question, though . Mr. Vandal asked it earlier on, and it is about the quality of journalism.

Given that anyone can now post news online, how do we encourage journalists to come and stay? You don't have to travel or live in small communities anymore, but you can be in a small community and cover all sorts of news. How do we get that to happen? Moving forward, how do we keep that integrity in online journalism?

[Bob Cox]

It comes back to creating an environment that replicates the old idea of the community newspaper. You had a family that owned a family community newspaper; they would live in a small town or city, they would run it, and they would do it more for the love of telling people what's going on than anything else. I think you can recreate that in the digital world.

There are lots of people who want to live in communities, who want to tell stories about their communities, and who want to do it in a professional, reliable, and responsible way, but they have to earn a living. The people who volunteer to write about their kids' soccer games or who post things on Facebook or tweet out what they happen to have eaten for breakfast aren't the reliable people who are going to provide information that communities need.

You need an environment in which there can be a digital start-up that can attract enough revenue through some kind of business model, be it through advertising or through a subscription service, that can serve a community. If you do that, then you'll continue to have professional journalism in these communities, but there has to be an environment in which there are paid professional journalists. Otherwise, all you have is a rabble. You just have people talking and gossiping, with no control over the quality.