Industry Committee on Oct. 19th, 2006

[The Chair, Conservative, James Rajotte]

Does anyone else want to comment?

[Yves Mayrand]

I totally agree with Jim's position. But I should add that we've just purchased a cable telecommunications company in Portugal, and we've been able to do this for the simple reason that throughout Europe it's the policy that there should be no foreign ownership restrictions for wire-line telecommunications. We benefit from that. We're in this world where capital is invested in telecom facilities. It's a very capital-intensive industry, and we think we can't have it both ways.

[Luc Lavoie]

We've never taken a position, officially or publicly, on whether we support the idea of lifting foreign ownership restrictions. But we've said publicly several times that we don't oppose it. So I'm playing a little game here...I'm not really playing a little game. We're not for sale. It wouldn't affect our business. We're more diversified than just the cable. Cable is a major business for Quebecor, but we're a company that has annual revenues of $10 billion, and cable is about $1.3 billion of it. All in all, we think the foreign ownership restrictions in place are probably outdated, but we would not be completely fair and honest to take part in this debate. Really, it doesn't affect us.

[The Chair, Conservative, James Rajotte]

Mr. Engelhart.

[Kenneth Engelhart]

In much the same way, we're not advocating foreign ownership liberalization at this time. But if you did liberalize it for telecom, you would have to do it for cable as well.

[The Chair, Conservative, James Rajotte]

Thank you, panellists, for being with us today and for being so succinct in your responses. We appreciate that.

Sorry, I forgot. We actually have a few more minutes, so if you could stay, we have Mr. Bélanger.

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

Merci, monsieur le président.

I've been listening very attentively, and I'm fascinated by the future studies on the impact of deregulation on the companies that have transformed themselves into income trusts. It'll be fun to watch.

I was going to ask about foreign ownership, but that's been put on the record. There's another question.

My question is in response to comments by Mr. Shaw and also, in part, by Mr. Lavoie.

I agreement with Mr. Arthur when he says that competition was virtually non-existent for a period of 10 years, one year according to Mr. Shaw. You, Mr. Lavoie, say that it took a decade in the telephone sector. Perhaps it will take a decade for wireless.

[Luc Lavoie]

No, no, I was misunderstood. I was talking more about...

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

All right, but can we agree on the fact that, when we talk about telecommunications, telephone companies, and when we talk about broadcasting, broadcasters, two different kinds of public policies apply?

[Luc Lavoie]

When you talk about broadcasters, what are you referring to?

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

To the broadcasting companies, the television companies.

[Luc Lavoie]

The content media.

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

Yes.

These are two different public policy regimes. Telecommunications and broadcasting can have similar problems or challenges, but they definitely also have challenges that are not the same.

Personally, when I hear the suggestion that everything concerning content broadcasters should be deregulated, I'm a bit troubled.

Do you all believe that, if we decide to deregulate the telecommunications industry, we should do it for broadcasters as well?

[Luc Lavoie]

If I may, I'll answer first, Mr. Bélanger. Fundamentally, at Quebecor, we think that there's too much regulation and too much of it in virtually all sectors of Canadian society, that there's too much of it in broadcasting, too much of it in telecommunications as well, that there's so much that you don't have any idea of the time we waste and the money we have to invest just to understand what the documents we receive from every direction mean. Fundamentally, we have to agree that regulation has to be reduced virtually everywhere, because we're ultimately going to suffocate.

[Yves Mayrand]

To add to Mr. Lavoie's remarks, I think we share the opinion that an effort must be made to simplify matters for the content media and for the regulated media. Furthermore, however, there's this entire and very interesting matter that has been raised—some rightly say, while others believe that was part of the review panel's mandate—that is the matter of the desirable scope of deregulation. In part of its report, the review panel observed that the Europeans observed some time ago. The Europeans conducted an in-depth revision of their telecommunications regulatory framework, but that included all forms of electronic telecommunications. The finding was that media convergence completely changed the situation and that we must review our approach to the way we manage the various services in our telecommunications systems. That necessarily includes content, which represents a large part of the traffic.

Our position at Cogeco is clear: the government must focus on that aspect as well. We're not talking about full deregulation, but the rules that concern us must be reviewed; you have to stop focusing on details that were relevant in 1975 and that are clearly no longer relevant today.

[Luc Lavoie]

You have to be vigilant. I referred to cellular telephony...

[The Chair, Conservative, James Rajotte]

Very briefly, let's go to Mr. Engelhart. Mr. Shaw will wrap it up.

[Kenneth Engelhart]

I'd agree with you that the broadcasting and telecom regimes really have very different purposes. In the telecom regime we're trying to simulate market forces until market forces take over. In broadcasting we're really trying to prevent market forces from fully taking over, because probably in a fully competitive market we wouldn't have Canadian content, so we need Canadian content, and we need market protections to get there.

We support that, but as my colleagues have said, the extent to which the rules micromanage our businesses to try to achieve that end is out of proportion. We can protect Canadian content with much simpler, more market-based rules. In fact, I think some of the rules we have today are having a perverse result, in that they're making a regulated system vulnerable to attack from the unregulated system. So simplification on the broadcasting side is absolutely critical if we're going to maintain the Canadian content we need.

[The Chair, Conservative, James Rajotte]

Mr. Shaw.

[Jim Shaw]

I'd just like to finish by saying I was able to bring the broadcasting handbook with me. It's a solid 1,000 pages of rules that govern Canada's broadcasting system. We call this the cable handbook, and I'm lucky enough to get to carry it all the time. It grows by about a half an inch a year because one rule has to fix the next rule. I think that makes my point.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Shaw.

Thank you, Mr. Bélanger.

Again, thank you very much for being with us and for your succinct answers.

We'll suspend for a few minutes while panel three comes to the table.

[The Chair, Conservative, James Rajotte]

Members, please take your seats.

We have with us the third panel. It's the largest panel, so I think it will be the toughest for us to get through in the time we're allotted.

This is a panel of new entrants and the public interest. We have with us six representatives here today. From the Public Interest Advocacy Centre, we have Michael Janigan, the executive director and general counsel. From MTS Allstream Inc., we have John MacDonald, who is the president of enterprise solutions. From the Quebec Coalition of Internet Service Providers, we have Sophie Léger as spokeswoman; she is the president of Inter.net and the chief operating officer of Universe Communications Corporation. From the Canadian Cable Systems Alliance, we have John Piercy, chair of the telecom committee and president of Mountain Cablevision. From L'Union des consommateurs, we have Geneviève Duchesne, who is an analyst of telecommunications, broadcasting, and information highway policies and regulation. And finally, from Primus Telecommunications Canada Inc., we have Ted Chislett, who is the president and chief operating officer.

Welcome to all of you.

That's the order I have down on my sheet, so I think that's the order we'll be following. Again, I'd ask that we keep opening remarks to three minutes to allow as much time as possible for questions and answers from the committee.

We'll start with Mr. Janigan, for three minutes.

[Michael Janigan, Executive Director and General Counsel, Public Interest Advocacy Centre]

Thank you very much, Mr. Chairman. I believe you've been given some speaking notes from me that set out the substantive and technical objections we have to a proposed direction. I don't propose to read those speaking notes. They're too long to meet the minutes. I'm going to try to compress the main points into my address.

In general, we find the direction to be unnecessary, potentially outside the power of the minister and disruptive to the proper functioning of a regulatory agency. For better or for worse, the commission has set a course for transition to competitive markets where possible and has got out of the business of regulating most telecommunications services. There is enough competition to protect consumers.

The CRTC, by its current legislative mandate and practice, must let go of regulation. The fuss that now comes about is because the big telephone companies think they should be deregulated sooner than the commission does. What deregulation will let them do is what they call one-on-one marketing, and that's to charge rates and give services to a customer, much in the same way the banks do now. If your constituents like that kind of treatment, namely the bigger the customer, the more urban the location, the better the price and the service, then they'll be ecstatic with the plans of the big telephone companies. If you don't want the CRTC to worry about things like whether there is actual competition to protect consumers, then this direction may be very appealing. If your constituents live in a small town, you may wish to ask yourself if they're going to be happy with increases to pay for discounts to customers in denser urban areas, particularly if there's not enough competition to discipline the provider.

I would add that most Canadians don't like this idea of carte blanche to telcos. Our survey shows that only 20% back the big telephone company plans, and a majority don't even think the CRTC test of one cable provider is enough.

This direction is supposedly modelled on the recent telecommunications review panel report. It actually only reflects certain sections of that report. It leaves out whole sections of improvements to consumer protection by way of a new agency, a special review of competition-based matters, and more resources to the commission.

As well, we believe the wording of this direction is excessive and potentially biased. With respect, in its current form, this direction reads a little bit like a free enterprise version of Mao Tse-tung's little red book. Look at the language: “Rely on market forces to the maximum extent possible”; “Provide for maximum efficiency”; “Each regulatory measure shall demonstrate compliance with the policy direction”, etc. All that's missing is a slogan like “Let 100 flowers bloom”, or “The collective must meet its quota”. This is ideology, not economics, and from experience, this rarely works.

It's not good policy, and possibly without proper jurisdiction, to jump in on one aspect of the commission's mandate and objectives and try to make everything bend to a view of that one aspect.

I understand why the big telephone companies want to do this, but in my view it's shortsighted. You shouldn't corrupt powers and objectives given by legislation to an independent body by insisting they feature the flavour of the month. What happens if a public outcry about the industry moves a minister to issue a direction that the needs of an average consumer should take precedence over carriers? Is that good regulation? How do you apply something like that to the power set out in the act?

Coming back to this case, why is it reasonable to make everything else in the act, like consumer access, affordability, regional economic development, and culture subordinate to the deregulate decision in the act? The big problems in the industry don't come from the regulated remnants. They come from the parts that have never been regulated.

[The Chair, Conservative, James Rajotte]

Mr. Janigan, if we could ask you to conclude....

[Michael Janigan]

I've just got about thirty seconds more.

Our wireless lags in penetration and customer discounts. Our broadband is effectively a duopoly with the resultant price parallelism and slowing penetration levels. Why all this attention to the remaining regulatory services, which are delivering high-quality service at acceptable prices to 99% of Canadian households? It can't be the financial performance of the big telephone companies, because they're booming and awash in cash from their recent income trusts. There's no public interest addressed by this direction. It simply takes sides.

To sum up, we don't think this direction is about either being in favour of competition or being in favour of regulation. It's taking a side and cheerleading deregulation regardless of the state of competition. In our view, this direction should be sent back to the minister for retooling or discarding.