Canadian Heritage Committee on Nov. 1st, 2016

[Jeanne Pratt]

I guess I'd speak from the merger perspective.

We're looking at whether it's going to be negatively impacted by a particular transaction. Generally, we're looking at aspects on which the parties compete. Those would be things like service, quality, price, whether we're going to see a decrease in the drive to innovate as a result of a merger.

Those are our predominate focuses when we're conducting a merger review.

[Mark Schaan]

I'll just add that for new entities, organizations that wouldn't be as a function of a merger or an acquisition, one of the drives towards innovation within Innovation, Science and Economic Development is to facilitate ease of doing business. That is one of the reasons why incorporation in Canada remains an easy process. It's an online process. It allows for the entity to be able to set up relatively quickly. Then, in terms of regulatory burden, we have a consistent eye in trying to ensure that there's a relative ease.

In this particular market, for an Internet news entity, the barriers to entry would be relatively low.

[Larry Maguire, Conservative, Brandon—Souris, MB]

In regard to—

[The Chair, Liberal, Hedy Fry]

Thank you. That's it, Mr. Maguire.

Now I go to Mr. Vandal, three minutes.

[Dan Vandal, Liberal, Saint Boniface—Saint Vital, MB]

Okay.

There's data that show that five of the largest broadcasters own 85% of the revenues in broadcasting. Several witnesses we've had over the last few months have indicated that there's not enough competition in the industry.

Do you have an opinion on that?

[Jeanne Pratt]

I'll say what I've said before. My opinion is formed on the basis of each transaction as it comes. Market shares in and of themselves are not a focus of ours. It is a sign that we will probably look a little deeper when we're looking at a transaction. It's likely that we will be taking a lot more time to look at the facts to see what the impact of the proposed transaction will be. However, it's not necessarily a cause for us to intervene in and of itself.

[Dan Vandal, Liberal, Saint Boniface—Saint Vital, MB]

Do you have anything to add, Mr. Brazeau? No?

Okay, I'm going to reference the graph that Monsieur Breton referenced, which says that in my province, 98% of the residences or households already have broadband access to Internet. That was quite surprising to me. Across Canada, it's 98% or 99%. It's higher than what I thought. Although not everyone is subscribed in Manitoba, 74% of the households are subscribed.

In what regions it is most difficult to access broadband or Internet in Canada? I know it's largely in the north, but could you be a little bit more specific than that?

[Adam Scott]

The communities that are most in need, we identify as satellite-dependent. These are communities where there is not terrestrial infrastructure in place. They need to rely on a satellite, which means they're shooting a signal literally into space and waiting for it to come back down.

There are 25 communities in Nunavut that are satellite-dependent. There are no roads, no access to the electrical grid. They're fly-in communities. There are 14 satellite-dependent communities in northern Quebec, in the Nunavik region. There are several in northern Manitoba, first nations communities primarily in the northern part of the province that are also dependent on satellite. Those are by far the most difficult to serve. You don't have existing infrastructure that you can build on. You don't have hydro towers that you can string fibre optic across. Those are extremely challenging. Those are the remote communities.

We talk about two parts of the network. There's the last mile, and then there's the first thousand miles. The nature of the problem is different. In some areas, the reason you don't have Internet service is because with the distance from one customer to the next, the density is not there. With others, it is literally building that first thousand-mile infrastructure to even get a connection into the community or into the region.

So there two different types of problems.

[Dan Vandal, Liberal, Saint Boniface—Saint Vital, MB]

Given the fact that—

[The Chair, Liberal, Hedy Fry]

Thank you. Sorry, Mr. Vandal.

Mr. Nantel, for three minutes, please.

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

Thank you, Madam Chair.

Mr. Schaan, our study on regional media clearly showed that many jobs are changing. For example, the local weeklies told us that their work used to be focused on analyzing and checking news about community events, news that they published once a week. Today, however, the weeklies have to publish information every day. So they need a huge amount of assistance.

We agree that, ideally, the Department of Industry would do well to take an interest. There are certainly adjustments to be made, as in every industry faced with competition, whether from outside or inside. Programs must be put in place to support this industry. It is particularly important because it allows communities to express themselves, to have a voice, and not to feel isolated at the end of a side road surrounded by countryside. Basically, they also need to know what is happening where they live.

However, culturally, the Internet does not just present a challenge or competition in terms of advertising, but it also has exclusive streaming providers of music, television and film. So that raises challenges in terms of access to those platforms. It is as if these new media outlets had invented a machine and that people had to get used to a new production format. But the content is not new.

Let me explain. Culture is still compatible with the technology, but our industrial system is not at all set up for it. At the moment, the system has been caught with its pants down. We were able to see during Minister Joly’s consultations last Friday that there is certainly a great opportunity for our cultural industry to get access to those streaming platforms. However, there is also a huge challenge for the cultural industries, which, if they can use the global platforms, have to be part of a major international supply of content. That is the current challenge.

The CRTC has come up with figures from its analyses. I do not know whether all members of the committee are aware of them. Last week, that CRTC presented data in La Presse that showed that 61% of young people from 18 to 34 use Netflix. That is a huge penetration rate that, in industrial terms, Canada cannot achieve for all kinds of broadcasting reasons. Do you think that we can expect specific attention to this situation from Industry Canada, including monitoring and recommendations?

[Mark Schaan]

At Innovation, Science and Economic Development Canada, one of the tenets of the inclusive innovation agenda was the adaptation to the digital world, recognizing that a huge piece of the economy of the future, the modern economy, will be in this new world of Internet of things and streaming platforms and access to these sorts of digital industries.

In the same way that Minister Joly is consulting currently with respect to what that means for cultural policy, with a linkage over to what Minister Bains has been consulting on with respect to what that means for an innovation economy, we very much pay close attention to what this means, both in my world in terms of what that means for marketplace frameworks and what we need to provide as a foundation for innovation, but then also at the broader level of what sorts of supports, potentially, and even the linkages.... That is more outside of my remit, but some of my colleagues are looking at things such as the coding capabilities of young Canadians and the degree to which we're incentivizing and ensuring that we have both the talent and the workforce required to be able to participate effectively in that global digital world, but then also the business smarts and savvy to be able to create and adjust to those platforms.

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

Thank you.

[The Chair, Liberal, Hedy Fry]

Thank you, Mr. Nantel.

Before we leave, I have a question. What we have heard from witnesses over the course of this study and what we want to know as we develop a study and recommendations have not really been addressed, and I wanted to ask you some questions. They may sound very simple, but they are at the heart of what we're trying to find out.

For the Competition Bureau, you have said it is about the economics of the whole thing. That's what you look for in your objectives and your bottom line. At the same time, you're saying if it spurs innovation... We're finding that because those monopolies don't pay any taxes in Canada, such as Google, Facebook, and Netflix, etc., they have a competitive advantage over our telecom industry, that has to pay taxes. As a result, things like shomi and other broadcast media have died the death. We're finding that our own telecom competitors and broadcast competitors can't afford to compete because they have to pay these taxes and these others don't. They have full access, as industry would say, to our airwaves. They have full entry and full access, but they don't pay any taxes. They have a huge advantage.

We're looking at competition, and at the same time not just in economic outcomes. If we look at the very heart of a democracy, it requires a diversity of voices and requires local voices to inform, so that Canadians can make informed choices, and that's not happening. We're finding that is going. It's not there anymore. Journalistic integrity, independence of journalism, and diversity of voices, those things are being harmed daily in this country.

My first question is about finding that there isn't any better innovation being spurred by this competitive disadvantage that our telecom industries and broadcast industries face. Secondly, what about democracy? What about diversity of voices? Has Industry Canada looked at it from that perspective? That's an important piece to look at.

If you could each try and give me a quick and dirty answer on this, I'd be happy to hear it.

[Mark Schaan]

I'll start at the policy level on the diversity of voices piece.

With respect to the specific aspect of diversity of voices, as my colleagues from the bureau have indicated, it's not in their act to necessarily look at transactions within that lens. There are aspects of diversity of voices that are captured by lenses that are afforded to the bureau, particularly when it looks at the degree of competition, the number of competitors in a space, and the degree to which one competitor may negatively impact the overall state of the sector. While it's not a formal lens necessarily that we apply or that we've given to the bureau to look through, their economic analysis does have implications for the diversity of players in the marketplace, because lots of those economic impacts would be driven by the number of players in that zone.

I would like to answer the question of whether there is sufficient diversity of voices for the democratic function and for the civic function. I would say that part of the rationale for the Public Policy Forum study that we've commissioned is to try and understand what role that's playing, both from an economic perspective at Innovation, Science and Economic Development Canada, and also for my colleagues at the Department of Canadian Heritage, to try and ensure that we have had some assessment to look at what the marketplace may require to ensure that the vibrant marketplace in a digital era, as well as compelling that rationale for the civic function is maintained.

[The Chair, Liberal, Hedy Fry]

Thank you.

Perhaps the Competition Bureau can answer my question about the fact that, indeed, there's an economic disadvantage. Our telecom and broadcasters are losing this battle. What is your comment on this?

[Julien Brazeau]

With the issue of regulation, I think you've pointed to Netflix and others as not being regulated the same way in Canada as it is in other countries. That is a concern that we have heard in the past. I would say that within the four corners of our act that's not a consideration that we take a look at particularly for whether the company is subject to any type of regulation, whether it be income tax or other considerations within the country. We do look, as my colleague Jeanne has mentioned, at the economic impact of a given transaction, and that really is the focus of our lens.

[The Chair, Liberal, Hedy Fry]

At the moment, there is a negative economic impact in terms of Canadian telecoms and Canadian broadcasters.

Anyway, thank you very much. It was very good to have you here. Hopefully you've answered some of the questions that are flitting around in our little brains here, trying to make sense out of what we've been hearing from so many people with regard to access.

Thank you very much.

Would someone move that the meeting adjourn?

[Peter Van Loan, Conservative, York—Simcoe, ON]

I so move.

[The Chair, Liberal, Hedy Fry]

The meeting is adjourned.