Information & Ethics Committee on Feb. 13th, 2018

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

Go ahead.

[Dennis Béland]

It's about the innovative concept of spectrum neutrality that he spoke about this morning.

However, in answer to your question, Canadian suppliers are well established in Canadian law. Canadian authorities award the most essential resource for the spectrum. As you heard this morning, yes, there is a potential impact on Canadian suppliers. If the Americans began to manage their interconnection and Internet traffic regime in a discriminatory way, there would be a potential impact, but we have not yet seen any intention on the part of Americans to do so, nor do we know what repercussions that would have on Canadian suppliers or suppliers of Canadian content. We will have to watch the situation closely and assess it over time.

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

As for neutrality, do you have anything else to add?

[Dennis Béland]

Oh yes!

I'll respond in English, if you don't mind, to this innovative concept of spectrum neutrality.

In my remarks on net neutrality, I mentioned that there's probably a different definition of net neutrality for each intervenor. Well, for spectrum neutrality I think you would see multiple definitions as well.

If I were to take on the subject, I would begin perhaps with the fact in the 1980s the largest and most valuable swath of low-frequency spectrum was granted—mark the word “granted”, not “auctioned”—to Canada's three largest wireless companies. How neutral is that? If I were to engage in a debate about spectrum neutrality, I might want to take that on and hear about Telus' point of view.

We have authorities in Canada, in the industry department, that have shown competence over many years in determining how spectrum is allocated in this country and determining an appropriate balance of low-, medium-, and high-frequency spectrum among the multiple carriers, both incumbents and new entrants, and they've done a very good job. They continue to do a very good job, and we see the results concretely in terms of, for example, prices paid for wireless services by Canadians.

Prices in Quebec are lower than in the rest of Canada, and it's not just Vidéotron's prices: the incumbents' prices are also lower in Quebec than in the rest of Canada. If we want to engage in a debate about spectrum neutrality and the impacts of alternative spectrum neutrality approaches, Vidéotron would welcome the occasion. We would come back for you, and we would spend the whole day with you if you would like to discuss that subject.

[The Chair, Conservative, Bob Zimmer]

Thank you, Mr. Gourde.

Next up, for five minutes, is Ms. Vandenbeld.

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

Thank you.

I would like to continue with that question about spectrum neutrality for a moment, because we're hearing from Mr. Béland that there might be very good reasons, particularly for consumers, with pricing.

Mr. Woodhead, I believe you indicated, if I'm not paraphrasing incorrectly, that spectrum neutrality and net neutrality are actually part of the same thing. I'm hearing two different things, so I would like to have all of you comment on that. What would be the rationale for the proposal that's coming from Innovation Canada, and then what would be the impact, positive or negative, on your ISPs?

Mr. Béland—

[Ted Woodhead]

Since I started it, I suppose—

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

Sure. Okay.

[Ted Woodhead]

My point here is simply that the thrust of our presentation—outside of a very critical piece of it, which is health and what net neutrality means for delivering very critical social services—was that net neutrality isn't an issue in Canada. It just isn't. It has been enshrined in legislation since 1906.

My secondary point was simply that.... Maybe I'll phrase it a different way. I find it curious that family-controlled cable companies controlled by billionaires are being offered spectrum on a preferential basis, spectrum that is critical to the delivery of services in rural areas, in particular using the use case that Dr. Guerriere mentioned. That's my point in a nutshell.

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

Mr. Béland, would you comment?

[Dennis Béland]

Spectrum allocation is obviously critically important, and the best way I can describe it to you is....

I've sat in every spectrum auction war room at Québecor since 2008. When Québecor is bidding on spectrum, we're looking at it through one calculus, which is by asking ourselves what our business case is for using this spectrum. In our case, it's for providing services to Quebeckers. How much is it going to cost, and can we make that work? That's our calculus.

When incumbent carriers who were in the market 20 years before us are sitting in their war room, they have two calculuses. One is the same as ours, which is what's the spectrum worth to us in providing services, what's the business case, how much is it going to cost, and does that calculus work? Their second calculus is what economists refer to as the foreclosure incentive, which is, “How much can I hurt this disruptive new guy by keeping low-frequency spectrum out of his hands?” They add together those two calculuses, and that's how they come up with their bids.

That's the sort of inequity, that's the sort of distortion, that's the sort of non-neutrality that the industry department addresses through pro-competitive measures in the auction design—which, by the way, are widespread across the world. Don't let anyone tell you that purely free market spectrum auctions are the norm in the world. It's precisely the inverse. Very rarely do you see purely free market spectrum auctions across the world.

[Ted Woodhead]

Thanks for that. The point, then, I guess.... Let's look at this a bit objectively. Vidéotron bought 700 megahertz and 2,500 megahertz outside the province of Quebec. It never deployed it. It bought it at subsidized prices. It's a Canadian public resource that is owned by all taxpayers in this country. If memory serves, they sold it for $430 million to Shaw.

If that is efficient use of a public resource, then someone else can explain it to me, but I don't believe it is.

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

I don't want to start a debate here. I did want to ask about the U.S.—

[Ted Woodhead]

I thought this is where debates happened.

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

It is where debates happen. I think this is a little—

[The Chair, Conservative, Bob Zimmer]

Thank you, Ms. Vandenbeld. Your time is up.

Next up, for five minutes, is Mr. Kent.

[Peter Kent, Conservative, Thornhill, ON]

I cede my time, Chair.

[The Chair, Conservative, Bob Zimmer]

We'll go to Ms. Fortier for five minutes.

[Mona Fortier, Liberal, Ottawa—Vanier, ON]

Good morning. Thank you for being here this morning.

The digital space is constantly evolving. The CRTC is currently consolidating its commitment to net neutrality, and you all seem to support that. That is the current situation.

One of my concerns is protecting consumers and ensuring that suppliers give them access to content, including francophone content, right across the country and not just in Quebec.

To facilitate an active offer of content in both official languages, what are you doing to protect Canadians in the context of net neutrality?

You are all invited to answer that question.

[Pam Dinsmore]

I'll respond in English.

It's interesting, because when we went to the differential pricing practices proceeding, one of the issues there was whether the commission should require or allow for the prioritization of Canadian content, whether it be French language content or English language content. This issue has come up a number of times in CRTC proceedings. As I think Chris Seidl pointed out the other day, the commission decided not to go down that path. It decided that it would be very difficult for an ISP to determine the definition of Canadian content that meets the test to get prioritized.

There's a lot of content out there. Some is Canadian by CAVCO rules and some is not; it all depends. Neither did the commission go down the path of allowing us to favour things like Internet relay service for the deaf. There were very good social goods considered at the time of that proceeding, and the commission ultimately came out and said the only things that could be zero-rated were data usage and billing. That's where we ended up on that one.

[Mona Fortier, Liberal, Ottawa—Vanier, ON]

Thank you.

Mr. Béland, what is your answer?

[Dennis Béland]

I can answer with respect to the Music Unlimited Program, which the CRTC unfortunately decided to end.

When we created the program, we were aware of the challenges regarding net neutrality. We opened it to all music streaming services that met the technical requirements, which in passing were not difficult to meet. As a matter of basic principle, we thought that this service should be tax free and offered to those who are able to meet the technical requirements.

At one time, at the height of things, there were approximately 18 music streaming services. We did not consider it appropriate to give preferential treatment to Canadian services in one language or the other.

At Videotron, we made a special effort to ensure that Canadian providers knew that they could offer their music for free through our service. Let me give you an example...

[Mona Fortier, Liberal, Ottawa—Vanier, ON]

Please be brief because I'd like to hear what the two other witnesses have to say.

[Dennis Béland]

Okay. I'm sorry.

[Mona Fortier, Liberal, Ottawa—Vanier, ON]

Mr. Malcolmson, we're listening.