Industry Committee on Feb. 7th, 2007

[Scott Brison, Liberal, Kings—Hants, NS]

If they take a more aggressive pricing strategy in more competitive markets, in some of the larger markets, is there the potential, from a profit perspective, for the incumbents of large telcos to actually raise prices in some of the less competitive markets? Is there that potential in some of the rural and smaller-town communities?

[The Chair, Conservative, James Rajotte]

Just briefly, Mr. Peirce, we're running out of time.

[Chris Peirce]

You already heard a sort of analog to that, on Monday, with Bell's rate increases. Bell has applied to increase rates by 80¢ a month for all its subscribers and is removing its service connection fee to those who are moving. It says it's doing that to meet competition. It describes that as revenue neutral. It's not lowering prices, it's raising prices across the gamut to deal with those instances where it feels it needs competitive advantage.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Mr. Arthur, for five minutes.

[André Arthur, Independent, Portneuf—Jacques-Cartier, QC]

Thank you.

Let's see—

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

On a point of order, Mr. Chairman.

[The Chair, Conservative, James Rajotte]

Mr. Crête.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

I agree to letting Mr. Arthur speak.

[The Chair, Conservative, James Rajotte]

Thank you, Monsieur Crête. It's very kind of you to allow Mr. Arthur to speak, but he has every right to speak, as a member of this committee.

Monsieur Arthur.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

He is entitled to speak, but I am giving my consent so that he can speak during this round.

[The Chair, Conservative, James Rajotte]

Monsieur Crête, as the chair, I am the person who recognizes members, and I recognize Monsieur Arthur for five minutes.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

I am entitled to raise a point of order.

[André Arthur, Independent, Portneuf—Jacques-Cartier, QC]

Now that the pettiness is over, I will speak.

Good afternoon.

Let's see if I understand. The telcos are too big, and the cables soon will be. You need big brother CRTC to protect you in the schoolyard, which is a little tumultuous. The government says you won't have this protection for very long.

If you can't stand the heat, why do you stay in the kitchen?

[Chris Peirce]

I could respond to that. There's a lot of talk about protecting competitors. I think people forget that an explicit goal of our regulatory framework since competition was opened up, since 1992, has been to keep the incumbents whole. So actually the policy, since competition, has been to protect the incumbents from the consequences of competition, to make sure that their rate of return has remained at least what it was when it was guaranteed. In fact the rate of return of all incumbents since competition opened up, after 100 years of monopoly, has been better than or above what it was when that rate of return was regulated.

The policy of the government is to invite Canadians--only Canadians--to invest in competing network facilities that were built at no risk by the incumbents. So Canadians are being asked to invest completely at risk. As Ken Engelhart mentioned, what happened in the late 1990s and early 2000s--to my company included, which was AT&T Canada then--was that all of those investors lost their money because the incumbents were kept whole but none of the competitors were. So competitors don't come before this committee or the government today asking for protection. They ask that if the government's going to have a policy of competition, it pursue competitive market forces, not market forces that favour monopolies.

[André Arthur, Independent, Portneuf—Jacques-Cartier, QC]

Then why should I be a customer of yours?

[Chris Peirce]

You should because I'll offer you better service, more choice, and competitive pricing.

[André Arthur, Independent, Portneuf—Jacques-Cartier, QC]

Okay.

And that's not enough for me to be a customer of yours? Your selling points to me, as a customer, will never be up to the level of what Bell Canada or Cogeco or Vidéotron can do? You'll always be losers? You have decided that you will always be losers, and you will always need somebody to protect you?

[Chris Peirce]

No, I've mentioned a protection point, but actually we do have loyal customers, including the Government of Canada. In terms of our business markets, there is the Canadian Federation of Business, small- and medium-sized business across the country. We're talking to you about the reality, in facing up to what was a monopoly for 100 years, of gaining and winning customers when, as Mr. Chislett mentioned, you have a former monopoly incumbent that can always come back on a far greater economic scale and take back a specific customer with specific pricing.

[André Arthur, Independent, Portneuf—Jacques-Cartier, QC]

So your argument to me, to be a customer, will be price and price only?

[Chris Peirce]

No.

[André Arthur, Independent, Portneuf—Jacques-Cartier, QC]

What would it be? What are your points? What are your advantages that you want to put forward to make me a customer, even though Bell Canada will undercut you after a few months?

[Joe Parent]

Let me, if I may, turn the answer around and share with you what it's like to be a competitor, what it's like to become a customer of Vonage Canada. First of all, I have to convince someone who's been with a monopoly phone company for quite some time to try out a new technology. I need to spend significant amounts of money to advertise to them. I don't have an existing relationship with them.

[André Arthur, Independent, Portneuf—Jacques-Cartier, QC]

You're not answering my question, sir. I understand your right to say whatever you want. My question was this. Give me specific points that will make me a customer of yours, even though Bell Canada can undercut you. Why should I be your customer? What do you have that the others do not have? Small is beautiful? If that's the point, say it. But give me a good reason to be a customer of yours.

[Joe Parent]

I would be happy to. Small is beautiful, absolutely. And hopefully it will remain so--small, agile, focused on customer service. Price to me and to our customers is simply a price of entry. It's just a method of providing savings. Savings alone will not keep our customers. We have to provide a superior level of customer service to that of any competitor that we've had. We have to do so with less of an infrastructure to do it on. So I have to be smarter and faster. I have to deliver more innovative services, because if they can get exactly the same service by not doing anything or by going to a cable company and getting the same thing, with a well-known brand that's been around for quite some time as well, what's their incentive? I need to be more innovative, bring new technologies and services to them, and I need the chance to be able to do that--

[André Arthur, Independent, Portneuf—Jacques-Cartier, QC]

Do you think that I, as a Canadian customer, am too dumb to realize that and that I will fall prey to a reduction of $2 a month by Bell Canada?