Information & Ethics Committee on Feb. 6th, 2018

[Christopher Seidl]

Absolutely. We would like to see competition with providers that create their own networks. That would improve services in Canada. If there is not enough competition in Canada, we can implement wholesale services. We have opened the network of other suppliers to give consumers more options. We always give appropriate rates to suppliers who invest in networks so that wholesale services and retail services are profitable for them.

[Jacques Gourde, Conservative, Lévis—Lotbinière, QC]

Would the new providers who would like to enter the Canadian market and create that competition be charged fees for the infrastructure that the other providers have paid for or would it be free for them?

[Christopher Seidl]

No, it would not be free.

There are very complex mechanisms for determining the appropriate cost of network access. In our terminology, we call it phase 2 of the costing process. It is a mechanism that enables us to estimate the costs associated with the network, including a profit margin for the companies. We use this mechanism to set the appropriate cost for wholesale services.

In some cases, the major providers do not offer their services entirely willingly. We have to regulate access to certain types of high-speed Internet services to ensure that services such as broadband are offered.

[Jacques Gourde, Conservative, Lévis—Lotbinière, QC]

It is surprising that it is still difficult today for many Canadians in relatively sparsely populated areas to get high-speed Internet. The service they have uses the old frequencies. People who have a business or work from home are at a disadvantage as compared to the rest of the market.

Is there some way to exert pressure to resolve this or will that be done through the market? Perhaps this situation will never be resolved.

[Christopher Seidl]

In 2016, we decided that all Canadians should have home access to high-quality Internet service at a speed of at least 50 megabytes per second. We decided that a fund must be established to enable providers to extend their networks and offer services in remote regions. We are in the process of clarifying the details for this type of fund.

[Jacques Gourde, Conservative, Lévis—Lotbinière, QC]

We are talking about the Internet and everything on it. Do you think that the Netflixes of the world and all the services that require a lot of data to be downloaded pollute the Internet in a way for those who use it for work? Is it true that recreational use of the Internet will take up more and more space and that this has an impact on the ability to provide information?

[Christopher Seidl]

The quantity of data on our networks and the number of applications increase every year. Providers keep expanding their networks and offering more services. We cannot control access to content. We have to continue investing in networks so that Canadians have more choices.

[The Vice-Chair, Liberal, Nathaniel Erskine-Smith]

We're at around six minutes, so thank you, Mr. Gourde. If you have additional questions, I expect we'll have time at the end.

There are five minutes for Ms. Vandenbeld.

[Anita Vandenbeld, Liberal, Ottawa West—Nepean, ON]

Thank you very much for being such strong proponents of net neutrality. I think this issue is of serious concern. I've heard from my constituents about this, that having all voices heard on the Internet and making sure there is no censorship matters significantly to Canadians. Thank you for that.

When you said that Canada was one of the first countries that was actually regulating in this area, I was interested to note that you have the flexibility, that these principles go all the way back to the Canadian Railway Act, and that sections 36 and 27 of the Telecommunications Act have given you the flexibility to be nimble, to be able to regulate without being overly regulatory and find that balance to make sure the content flows freely.

There have been some who have talked about the need for more legislation or legislation in this area to make this stronger. It sounds as if you feel you have that within the Telecommunications Act. Is there something we can do, as a committee, something to recommend to government, that would give you more tools, that would give you more ability, whether it's legislation or otherwise, to be able to continue to be proponents of net neutrality?

[Christopher Seidl]

I know the government is planning to launch a review of both the Broadcasting Act and the Telecommunications Act, and there'll be an opportunity to look at changes to them.

I think the government has been very active in modifying the Telecommunications Act over the years. In particular, the ability to directly regulate resellers is one of the changes that has already been introduced in the act, and the ability to offer up administrative monetary penalties as well, so that when someone is offside, we can actually enforce our regulations. A lot of the changes have come into place.

There are probably a few minor areas where we would comment that changes need to be made. However, from a net neutrality perspective, as I mentioned, what we have today gives us the powers and the flexibility we need to put the rules in place.

[Anita Vandenbeld, Liberal, Ottawa West—Nepean, ON]

You mentioned enforcement mechanisms. Do you feel you have enough to be able to enforce?

[Christopher Seidl]

Yes.

[Anita Vandenbeld, Liberal, Ottawa West—Nepean, ON]

Thank you.

You also mentioned that Canadian content is not something that can be preferred, or there's a balance there. Can you explain that a little bit?

[Christopher Seidl]

When we looked at the differential pricing, some proponents were suggesting that we should prefer Canadian content over other content. We gave the view that doing that might advance some of the objectives in the Broadcasting Act, but on balance we felt that it wasn't an appropriate mechanism to do that and that it would be very difficult to try to enforce and put in place. We want to ensure that Canadians get access to all quality content, and that Canadian content has pride of place as well. We didn't feel that using the transmission controls that an ISP might have to influence that is the right vehicle.

[Anita Vandenbeld, Liberal, Ottawa West—Nepean, ON]

Okay, but are there other vehicles?

[Christopher Seidl]

In supporting Canadian content, there are many vehicles out there.

[Anita Vandenbeld, Liberal, Ottawa West—Nepean, ON]

I was interested to hear you say that some of the content providers might connect directly in Canada as a result of the changes in the U.S. regulation. Do you think that might inspire more innovation in Canada, that other app or content providers might try to set up shop here in order to have the net neutrality?

[Christopher Seidl]

It's possible. If some of the smaller new start-ups can't penetrate the U.S. markets because the ISPs put rules in place that block or impede their success, you might see them come to Canada or to other countries that have a strong net neutrality regime and try to gain a stronghold here before they go elsewhere.

[Anita Vandenbeld, Liberal, Ottawa West—Nepean, ON]

I was interested in your response to Mr. Kent about the meetings between regulators across countries internationally.

I understand that it's probably fairly technical, but is that a forum in which Canada could advocate and could be a proponent in advocating net neutrality in other jurisdictions as well? Obviously we have no mandate, but would it be an area where we could get together with other countries and try to put on some pressure to ensure net neutrality around the world?

[Christopher Seidl]

Those forums are really to share information and not really to advocate one way or another. I think having strong net neutrality rules.... I've heard from other jurisdictions that they actually look to Canada's rules and try to model them. I think having strong rules that provide success in the marketplace is probably your best argument.

[Anita Vandenbeld, Liberal, Ottawa West—Nepean, ON]

Okay. Thank you very much.

[The Vice-Chair, Liberal, Nathaniel Erskine-Smith]

With that, we have another five minutes with xx Mr. Kent.

[Peter Kent, Conservative, Thornhill, ON]

Thank you.

I only have one question, but I would like to thank you for giving us a grounding for the further study that the committee will be conducting into this whole challenging issue.

You mentioned earlier, with regard to providers, CRTC considerations of profit margins. What is the range of acceptable profit margins that the CRTC enforces?

[Christopher Seidl]

As I mentioned, we're talking about wholesale services. When we set any tariffs, when we look at them for the wholesale side, we look first at all of the costs that go into a provider's network and make sure they can recoup those costs. Then we look at potentially a markup. That's the term we use to identify common costs, such as overhead and so forth. Then, if there's any risk involved, we would look at whether there's a need to ensure that there's enough incentive to the person providing the network to continue to invest and to those using the service to actually invest themselves and go into offering innovative services from that.

We try to get the right balance and the right service level. It's a very complex and detailed analysis that we do.

[Peter Kent, Conservative, Thornhill, ON]

Do you have a percentage range?