Industry Committee on Oct. 19th, 2006

[Colin Carrie, Conservative, Oshawa, ON]

Are there any other comments on that one?

[Janet Yale]

I was just going to add that the TPR exercise was really an opportunity to catalogue the issues associated with the current regulatory environment, and we think the direction is an important first step in implementing reform. But I think the comprehensive nature of the recommendations in that report and the legislative package that is associated with it are really kind of the blueprint for addressing the key defects that we see in the current regulatory environment.

[Colin Carrie, Conservative, Oshawa, ON]

Do I have time for one more quick one? Okay.

You mentioned other countries have gone through it. Britain went through it. How did the deregulation of retail services affect consumers over there?

[Lawson Hunter]

In July of this year, the U.K. removed all retail price caps. They said there was sufficient competition. They did provide some protection for the disadvantaged or low-income consumers, but they basically said competition will protect consumers. As I mentioned in my remarks, that's in an industry where only 25% of households have cable.

We basically have two ubiquitous networks in Canada. Others have done it too. Australia has done it. The European Union is moving away from this ex ante type of price control into more of an ex post regime.

It's a little bit like what my mother used to say: everybody is out of step but Johnny. We really are falling behind in Canada. In our view, the telecom policy review panel will leapfrog Canada to the forefront. There has been a lot of international recognition.

[The Chair, Conservative, James Rajotte]

Okay. Let's go to Mr. Masse.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

Thank you for appearing today.

It is a very important issue. I view this as a national infrastructure. We have a lot of knowledge as consumers who are dependent upon these services, but there is also the matter of the way this country is able to respond at a business end, and this is also a security matter to the world around us.

One of the concerns I have is with regard to deregulation, which is seen as the solution to a lot of problems. Why for wireless, for example, do we have higher prices, less broadband coverage, and inferior service compared to other industrialized nations? They are not being regulated. How can you explain the differences between service in Canada and the service the other countries are experiencing?

[Lawson Hunter]

I'm not convinced that wireless prices are out of line with those in the OECD world. It is true that certainly if you look at average minutes of usage per month, we are very competitive with prices in the United States, which arguably is the most important one for us to compare ourselves to.

As you know, when you get to Europe and other countries, their wire-line network may not be so good, and the way in which they bill.... It's a different sort of environment. But compared to prices in the U.S., those in Canada are quite competitive.

This issue as well is regulation. By the way, that is why the United States has moved away. They had deregulated because they were concerned that the regulatory environment they had, particularly on wholesale access, was actually preventing investment that was necessary for the infrastructure you've discussed.

You're absolutely right. We must have leading-edge infrastructure, but if our regulatory environment prevents people from getting a return on that investment, then we won't invest. That is what happened in the United States. That is why they changed.

[Brian Masse, NDP, Windsor West, ON]

I am concerned, though, looking at the United States, that Canada has a land mass and population that are quite different from those of the United States. That creates different challenges to being able to make a profit in rural and other areas. Urban areas might be very successful, but considering the expense in rural areas, what guarantee can we get that the coverage will roll out to rural and remote areas?

[Janet Yale]

The fact of the matter is that nobody is suggesting that deregulation is appropriate where there aren't competitive market forces. So let's draw a clear distinction between where there is and isn't competition. That is the first point.

The second point is to say that where you create cheap access to somebody else's infrastructure, there is no incentive to build your own.

I can speak from a TELUS perspective. When we started moving into Ontario and Quebec, we had infrastructure investment plans that predated the CRTC's decision about some unbundling and mandated access to telco infrastructure. I can tell you that those plans got put on hold because of the CRTC's decision to mandate cheaper access to infrastructure. There was no incentive for us to invest in Ontario and Quebec in infrastructure--this goes back some years--because of the fact that the CRTC made cheap access to other infrastructure possible.

At the end of the day, those rules matter. If you want to encourage investment in infrastructure, the best way to do that is not to require access to somebody else's infrastructure unless those are essential services. That is very consistent with what's in this direction.

[Brian Masse, NDP, Windsor West, ON]

I'm still concerned that you'd just get one operator in certain areas and wouldn't have competition.

[Lawson Hunter]

Could I answer? As I mentioned before, it's very important to actually know what the situation is in Canada. As I said before, the cable plan in Canada reaches 98% of all households. The telephone business is about 99%, so both are roughly ubiquitous--and by the way, we're significantly higher than the United States; the United States is in the range of 95%.

Second, the cable industry has upgraded their plan to provide broadband access, which is how they're going to provide all of these services--including voice--and it is now in over 90% of all households.

We are nowhere near 90%. We're at 85%, and we're all approximately the same.

You have two pipes into the home, and consumers are very fortunate in this country that we do have two industries, let alone what wireless is going to provide, and we have not seen the end of wireless. I think we're in a better situation than you think we are. We have a bit we have to finish--I don't deny that--but we are in a situation in which we can have robust competition here and we should just let it happen.

[Brian Masse, NDP, Windsor West, ON]

I know the U.S. has a universal access charge to deal with some of their coverage issues, but I think this is important to TELUS and Bell.

I'd like to understand, in terms of your...I know you've already moved to an income trust and you're considering it. How does it affect your ability to add infrastructure in the future, and your business plans, especially as we go through a shift? There are also issues about competition, and I know consumers are concerned about it. There is a survey here from the Public Interest Advocacy Centre, and they note that over 52% of consumers still are concerned about competition.

In your situation, how does changing your actual company structure affect your ability to achieve the goals you're saying you can achieve?

[The Chair, Conservative, James Rajotte]

We've got twenty seconds.

[Janet Yale]

I think it will actually enhance our ability to do that. The tax efficiencies associated with the conversion will actually give us more money to invest.

As we have said many times, we are a capital-intensive industry. We've invested over $42 billion since 2000 in capital operating expenses and acquisitions. We've announced a three-year, $600 million program of further broadband infrastructure upgrades, and when you see our 2007 guidance in December, which will indicate our infrastructure plans for 2007 and beyond, you will see that the income trust conversion is expanding, if anything, our ability to continue to make significant capital investments in this country.

[The Chair, Conservative, James Rajotte]

Mr. Hunter, I'm sorry, we're over time. Is there anything more specific?

[Lawson Hunter]

No, I would say there isn't.

[The Chair, Conservative, James Rajotte]

Okay, great. Thank you.

We'll go to Mr. Bélanger. We have a couple of minutes.

[Mauril Bélanger, Liberal, Ottawa—Vanier, ON]

Thank you very much, mesdames et messieurs.

I'm not a regular member of the industry committee, but I'm very interested in this matter. I come at it from the heritage point of view, being the heritage critic. My understanding is that in the TPR, they didn't really have a mandate to go into certain areas. They did go into one in particular, which is the matter of foreign ownership and foreign ownership restrictions. Because of convergence, you can imagine that this is causing some elements some reasonable disquiet in other areas. I must admit to some sympathy to the position you're advocating, but I cannot be unaware of these other concerns.

In your comments to the TPR, did you address the matter of foreign ownership? If so, would you share your comments with us?

[Colin Carrie, Conservative, Oshawa, ON]

Mr. Chair, if I could just make a point of order, the idea today, according to the orders of the day, is that pursuant to Standing Order 108(2), this study is to be on the policy direction to the CRTC, not on foreign ownership or anything like that. There are a lot of witnesses today.

[Mauril Bélanger, Liberal, Ottawa—Vanier, ON]

That policy direction, if I may, Mr. Chairman, was included in the directives. The government has embraced the policy directive, and it's included in the TRP, so I'll just finish my questions.

[The Chair, Conservative, James Rajotte]

I think it's related enough to the issue of the day--

[Mauril Bélanger, Liberal, Ottawa—Vanier, ON]

Well, it's convergent, so let's not try to shut off the cultural side.

[The Chair, Conservative, James Rajotte]

--but if we could put the question--

[Mauril Bélanger, Liberal, Ottawa—Vanier, ON]

Yes, so it's fortunate--

[Brian Masse, NDP, Windsor West, ON]

On a point of order, it's also been raised by witnesses and it's part of the actual report, so it's obviously part of these discussions--