Finance Committee on May 30th, 2012

[Dave Van Kesteren]

I'm going to give Mr. Lockie a chance to respond.

[The Chair, Conservative, James Rajotte]

Just a short response.

[Simon Lockie]

Thanks.

Very quickly on that, I think a lot of people probably wouldn't think it was a bad idea if AT&T did come up here. The simple reality is that what we're talking about, what Mr. Bibic is talking about, is 5 MHz of comparative spectrum. They have close to 400 MHz of spectrum. AT&T is not rubbing its hands together at the prospect of trying to compete against Bell.

The other point I want to make is this. It would take us a long time, but I just want to be very clear. The economics are very different when you already have an oligopoly, when you already have a massive retail presence, when you have a 30-year head start. Just because AT&T has the money does not mean it's stupid enough to bid against Bell, Rogers, and Telus to get the extra block. It simply won't happen. Check it in 2013.

[Mirko Bibic]

If it doesn't happen, my proposed fix does no harm.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Van Kesteren.

Mr. Caron, please.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you very much. Very good questions to ask in five minutes.

I want to quickly come back to what Ms. LeBlanc was talking about. The objective that was announced by the government, by Mr. Paradis during his announcement, relates to rural service and was to have 90% of the country covered in five years, and 97% of the country covered in seven years. Is this objective realistic or not under the rules that have been presented?

I would first like to hear from Mr. Bibic, then Mr. Lockie.

[Mirko Bibic]

If we can get two blocks, yes, Bell Canada will be obliged to build a wireless network, the new LTE technology, on 97% of our territory. So, for us, it would be realistic if we get two blocks.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Mr. Lockie.

[Simon Lockie]

For Mr. Simms, where he already has Bell coverage, the practical realities are that he will get 700 MHz deployed if he happens to be within the 90% of the population coverage within that licence area in five years—97% after ten years.

Again, just to return to the point, the access to capital, lifting these rules, will not solve any rural issue. The spectrum policy, in my view, triggers certain consequences to an entity that buys two blocks. It only covers the existing HSPA footprint. Let's just be clear, that is mobile broadband. It's not as fast, but you don't have to deploy LTE with 700 MHz.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you very much.

Mr. Bibic, you mentioned that you are limited to one block. But when Mr. Paradis appeared before the Standing Committee on Industry, Science and Technology, he, in fact, said that you have an advantage because you are currently partnered with Telus. So you could combine these two blocks. You are independent buyers under the auction, the rules that were submitted, so you will have your two blocks.

[Mirko Bibic]

If Bell Canada gets one block and Telus gets one block and we agree to share them—those are the three conditions—in this case, we will be obliged to build a network on 97% of our territory. As I said in response to your first question, if we get two blocks, whether we got them or combined the two blocks, in this case, yes.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

You have an advantage over Rogers, for example, because you have that possibility and the possibility of establishing an LTE system that will work, whereas Rogers, for example, or even the new entrants, will not have that possibility.

[Mirko Bibic]

Rogers has the opportunity of getting two blocks as well: they can buy them or partner with my colleagues here. They can partner with WIND Mobile, with Vidéotron in Quebec, with Shaw out west, with EastLink in the east. They can also partner with Telus or Bell Canada. Nothing has been established for the future.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

I had two more questions, but I will ask just one. Ms. Nash spoke about the issue of having different rules for the new entrants and stakeholders who are present here. Eventually, a new entrant bought by AT&T could end up with 15% of the market, if that was the case, and Bell Canada could drop to 15% of the market. So the weight would be similar but, despite everything, different rules would apply.

There is something else that comes into play: the broadcasting legislation. Vidéotron and Shaw are new entrants. They have less than 10% of the market and could be bought. But those two companies also have two of the four largest private television networks: TVA and Global. So, how would what was presented by the Conservatives and Mr. Paradis with respect to foreign ownership have an impact on broadcasting?

Mr. Coles, could you answer?

[David Coles]

At one time people thought the broadcasters were going to own the telephone companies. That's not the case. The telephone companies deliver the product, the pipe, and the receptacle, and they create a considerable proportion of good Canadian jobs.

A concern of ours with foreign ownership is to know what the driver would be to have any Canadian content on any of the services provided. There's an issue here around culture and around Canadian content as well.

[The Chair, Conservative, James Rajotte]

Thank you. Merci.

We'll go to Mr. Adler, please.

[Mark Adler, Conservative, York Centre, ON]

Thank you, Mr. Chair.

I've been listening with great interest to this dialogue. It's a fascinating discussion. I'm reminded of when I was a young boy and I went to the butcher shop with my grandmother. She was going to buy a chicken. She picked out a chicken from behind the glass and told the butcher that was the one she would like to have. The butcher said, “You don't want that one. It has a broken leg.” She said, “I'm going to eat it; I'm not going to dance with it.”

Things aren't always as they appear. What I would like to know—and from the perspective of both Bell and one of the other companies, paint me a picture here, moving forward—is what this means, not as far as your companies are concerned, but for the consumer, in a best-case scenario and a worst-case scenario.

Let's start with Mr. Bibic.

[Mirko Bibic]

The best-case scenario is that each of the national players obtains 700 MHz of spectrum. While my friends talk about how the three national players have a lot of spectrum compared with them.... None of us has 700 MHz, and 700 MHz is what we need to deliver national wireless broadband to all small towns and communities and to the large centres.

So the best-case scenario is that each of the three gets spectrum that they need in order to build national networks and compete against each other and the new entrants. Then—there's additional spectrum on top of that—the new entrants get the additional spectrum and they continue to offer competition. In terms of public policy, hopefully they extend to rural areas, because right now they're not there.

The worst-case scenario is what I indicated concerning unintended consequences in my opening statement, that through the loophole I mentioned, the large behemoths come in with no obligations and an advantage, and then they cream-skim Toronto and Montreal. Bell, Rogers, and Telus are then going to have to deploy all of their resources to compete in Toronto and Montreal and the rural areas are left behind for a very long time.

[Mark Adler, Conservative, York Centre, ON]

Before we move on, under the worst-case scenario, what would this mean, in terms of potential investment that Bell would make outside of the areas in which they would have to compete—in the larger urban centres—for Bell's potential investment moving forward?

[Mirko Bibic]

If the large international competitors come into the urban areas, it is absolutely crystal clear that we're going to have to devote all our resources there, because without making the profits in urban areas, we can't go to rural areas. We're going to deploy all our resources there and we're going to leave the rural areas with what they have today—which is fantastic service, because right now it's a world-class service, but in three years it's not going to be a world-class service; it will be 2009 service. That's what the rural areas will have.

[Mark Adler, Conservative, York Centre, ON]

Okay.

Mr. Kirby or Mr. Lockie?

[Bruce Kirby]

I could say it's the opposite of what he said.

The best-case scenario is that you create an ongoing, vibrant, competitive environment in the wireless industry in Canada.

Mr. Bibic's bogeyman of AT&T coming into Canada isn't bad for Canadian consumers. First of all, AT&T coming in, even if they bought up a whole pile of small players and grew to 10% of the market, would be 10% of the market against 90% for the incumbents. They would still be a tiny player, relatively speaking.

Being big in the U.S. or elsewhere doesn't make them big within this market, and what matters is how big you are within this market. T-Mobile in the U.S. is controlled by Deutsche Telekom, a bigger European carrier. It doesn't make them any bigger in the U.S.; it doesn't make them any more competitive in the U.S. If someone, whether they or anyone else, wanted to come in and make the investment and was able to get a hold of sufficient capital and sufficient 700 MHz spectrum, they would be going out to build up the rural areas, because you're ultimately going to want to have a network that covers those areas and allows you to compete with the incumbents.

The worst case for Canadian consumers is to go back to where we were in 2008, to an environment in which Canada was the only wireless market in the world in which the average price per customer went up. This was because you had three players who were well balanced in a cozy oligopoly and could protect themselves, and who were very careful, in their phrase, to maintain “rational pricing” all of the time.

That's what would happen.

[Mark Adler, Conservative, York Centre, ON]

Mr. Bibic, I'm going back to you for a second.

[The Chair, Conservative, James Rajotte]

Very briefly.

[Mark Adler, Conservative, York Centre, ON]

Comparing Apple phones to Apple phones, you gave us the price comparison between Canada and the U.S.: that it's cheaper here and better value here in Canada.

Banks used to get the bad rap. Why are cell companies now getting the bad rap? If the empirical evidence is there, what's the problem?