Industry Committee on Feb. 14th, 2007

[Janet Yale]

Are you referring to small competitors to Bell, or small telephone companies?

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

The small telephone companies.

[Janet Yale]

Well, I think you have to distinguish between regions of the country where there's likely to be competition and regions where there isn't. Certainly I can speak better about British Columbia and Alberta. Just to give you a high-level sense, Calgary, Edmonton and the Lower Mainland represent about two-thirds of our population. So there are large geographic regions that may not see competition because they're not where the cable companies are. Cable companies choose where they will offer service, and unlike them, we have an obligation to serve everywhere.

Where there's no competition, nothing changes: CRTC regulation continues, consumers are protected by regulation rather than competition, and that's the end of it. This is really, I think, a debate about where competition will come, not where competition isn't.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

So there's really nothing founded in regard to their concerns that they're going to be eliminated. They can still compete and can still exist in the new climate that's going to be created? Nothing's changed?

[Janet Yale]

Where things have changed is where there is a full facilities-based entrant in the consumer market, and other than wireless, which is for the most part where the cable companies offer service—Where they are, there's vigorous competition; and where they aren't, regulation will continue to protect consumers.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

That's all, Mr. Chair.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Van Kesteren.

We'll go to Mr. Masse, please.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

And thank you to our witnesses for appearing.

I want to go to the first part of your page here to get a particular picture of what's happening at Telus. I know you've been making a lot of headlines recently with your phone pornography situation, but can you give us a better understanding as to what exactly is happening in your industry? Your basic telephone service is down 37%, but are your other services up or down, or is it just the telephone service?

[Janet Yale]

From 2000 to 2006, we've grown our revenues from roughly $5.7 billion to $8.6 billion, so this is a growing business. And at this point, wireless alone counts for about 50% of our revenues.

[Brian Masse, NDP, Windsor West, ON]

So it's only that one segment of your--

[Janet Yale]

Right. So we're looking at the changing pie, if you will, in terms of the composition of our revenues. We made a bet, if you will, in 2000, in recognition that competition was coming, and that both from a competition and technology substitution.... As I said, 8% of households in Alberta and 10% of households in the Lower Mainland do not have a home phone. They don't have a home phone. They use wireless or other means to communicate for their primary communications. We saw that coming and said, how are we going to still grow and thrive in that environment? So we made a bet on data in terms of our Internet business, and we made a bet on wireless. So our business has grown dramatically on that side, even though we are, as a result of competition and technological substitution, seeing a shrinking voice communications business.

[Brian Masse, NDP, Windsor West, ON]

You benefited quite well from regulations in the past, and I guess one of my concerns is that it seems that if we make some of these decisions, there would be very little to go back on in terms of changing the market again back in favour of consumers. We see in the oil and gas industry—and this was brought up here a number of times—you don't have to have collusion when there's actually no competition, because you have vertical integration in the entire industry. One of my concerns about communication and the infrastructure that we developed, at the end of day, is that it swallows itself up so much that there's only a few competitors.

Maybe you could respond to that. You've benefited from previous regulatory practices. How would there be a sense of fairness to making sure other markets are protected?

[Janet Yale]

The last market, if you will, that's regulated is the local telephone market. All the other aspects of our business are deregulated. We have been waiting anxiously, in fact, for the arrival of competition so that we can see that part of the regulatory landscape change as well. I think internally at Telus we wouldn't always agree that regulation has worked to our advantage, and I won't get into some of those debates. But there is a different view, I can tell you, around the executive table.

Having said that, regulation is a substitute for competition in terms of consumer safeguards and consumer protection. I can tell you that Shaw entered Fort McMurray, which is a huge and growing community, and now has 30% of the market in less than a year. These are new households. People come in, they know and understand they have a choice between Shaw and Telus, and more than 50% of new households are picking Shaw relative to Telus, which is why we've lost 30% market share in a year. Competition, where it exists, is vigorous and is the best protection for consumers.

Having said that, do you have to have safeguards? Absolutely. Has the commission put those in place in its decision on deregulation? Yes, they have. So there are lots of safeguards. The only question that's left is, at what point do you have sufficient confidence in competition that you can let go on regulation? We believe the minister's test is the more appropriate test than the one the commission put in place.

[Brian Masse, NDP, Windsor West, ON]

That's fair enough. What I'm concerned about, too, is that we're talking about consumers, and everyone says to defend them, but the minister also never said anything about a consumer bill of rights, as well as the ombudsman office, and those things that are supposed to be done. But I want to move quickly to another question.

[Janet Yale]

No, no, but on that—

[Brian Masse, NDP, Windsor West, ON]

That's a statement, not a question. Let me move to my question. I only have a couple of minutes left.

It's on foreign investment. There's a myth out there that there can't be foreign investment; the restriction is on controlling shares. I want to make that clear, but I would like to get your position on that situation, because it is being danced about in different ways in this debate.

[Janet Yale]

We have—

[The Chair, Conservative, James Rajotte]

Ms. Yale, you have a minute. But Mr. Masse, if you make a statement, Ms. Yale does have the right to at least respond to the statement.

[Brian Masse, NDP, Windsor West, ON]

With all due respect, Mr. Chair, I can make a statement during my time period—

[The Chair, Conservative, James Rajotte]

And the witness has a right to respond to the statement.

Ms. Yale, you can respond to both or you can choose.

[Janet Yale]

Thank you.

The only thing I was going to say in response to you was that I think we support the TPR report as a whole. We support the implementation of its recommendations, and as I've already said, I don't believe the minister's order, which was about forbearance, which was explicitly not part of TPR, is taking the report out of context. And I've said that already.

As far as foreign ownership is concerned, we are on record as supporting liberalization of foreign ownership rules subject to the view that we should have our domestic house in order, in the sense that we should get the domestic regulatory rules right and then deal with foreign ownership liberalization. So our view is that the implementation of the TPR report and all of its recommendations, including recommendations around liberalization of foreign ownership, is the right way to go.

[Brian Masse, NDP, Windsor West, ON]

Do you see a big difference between controlling shares versus non-controlling shares? There can be unlimited investment right now in non-controlling shares. It's really about who controls?

[Janet Yale]

Not exactly, because at the end of the day you have to be able to demonstrate that control in fact is not exercised by non-Canadians. So if non-Canadians have less than the voting control but own most of the non-voting, then you tread into the ground of whether or not control in fact is in the hands of non-Canadians.

Having said that, you're right, there is lots of opportunity for foreign investment under the current rules. The last bastion, if you will, is whether or not we tip over into control.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Masse.

We'll go now to Mr. Rota.