Industry Committee on Feb. 14th, 2007

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

When the CRTC has to make a decision about an area where 15% to 20% of clients live, it will look at what is happening in the rest of the world, in the rest of the country, and it will be influenced significantly by this. Let us take the example of Quebec. In Montreal, Bell and TELUS compete, as they do in other large centres, and suddenly some territory will be regulated. Whether we like or not, the CRTC, or some other body, will say that the telephone market as a whole means that the trend exists. Is that not so?

[Janet Yale]

I don't agree. The test for deregulation is done exchange by exchange. In an exchange where there is competition and we pass the test, we'll be deregulated. And where there isn't, which will be in very large geographic regions.... As has been pointed out by a number of people here, there are vast geographic regions with small pockets of population, and I think the appropriate and remaining role for regulation is to ensure that consumers in those regions and in those areas continue to be protected by the CRTC.

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

Earlier, I asked a question to which I did not get an answer. I mentioned the fact that consumer groups have told us the exact opposite to what you are telling us. We are going to have to choose, or at least to understand the two messages. Essentially, the consumer groups say that it is not true that we're ready for total deregulation. They prefer the approach of the CRTC, even if the percentage were lowered.

What should convince us that the situation is as you describe it, and not as they describe it? They have a past and they know that the consumer, with the exception of the price, does not have much control over what is offered.

Just in closing, I would like to give you what I think is an eloquent example from the aviation sector. The aviation sector was deregulated, and now it is terrible trying to get from Rimouski to Ottawa. It costs a great deal of money, and there are almost no flights. If the same were to happen with telephone service, it would not be good.

[Janet Yale]

I think it's the law that's the safeguard. The Telecommunications Act requires the CRTC to regulate, except where there is sufficient competition to protect users. The law is not changing, so where there isn't competition, the law requires the CRTC to continue to regulate. I don't know why consumer groups would think the CRTC is going to abandon its responsibilities under the law to do so, because it's the law that requires them to.

[The Chair, Conservative, James Rajotte]

Okay, thank you.

We'll go now to Mr. Shipley, please.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

I have just a quick question. The whole telecommunications field is changing so quickly, and you've made reference to that a number of times today. In fact, we're sort of surprised to hear you talk about 5% to 10% of some areas where they actually don't use their phones, they use wireless.

You make an interesting comment on the first page. You said Shaw has signed up close to 300,000 of your customers. You have to remember that Shaw was a small independent just a few years ago that has now taken off. Yet you're talking to us about the significance of and how important it is for the panel's recommendation to go forward and for deregulation to go forward.

You're saying, we've just lost 300,000 customers, but we still agree that for the customer it's still the best thing to happen. Is that a true statement?

[Janet Yale]

We're watching those customers walk out the door because we don't have a competitive offer. Shaw's the only one putting their best offer on the table. Our price, every aspect of what we do, is completely regulated. So where is the vigorous competition that's trying to allow the customer to choose from two great offers?

Shaw has their great offer. Our price is the same price as it's always been. It's completely regulated. We can't bundle. We can't have flat-rated long distance the way Shaw does. There are a whole bunch of things we just can't do, so that's why they're walking out the door in droves. It's very frustrating. Competition is absolutely working in one way, in one direction.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Will that deregulation, then, in your opinion, help those customers?

[Janet Yale]

Well, for sure. It'll help all customers. Where Shaw's offering service, customers will have to choose between their best offer and our best offer. Right now Shaw puts an offer on the table and we can't match it.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Shipley.

Mr. McTeague.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

I just wanted to build on what Mr. Shipley has just talked about, and I think he referred to it a little bit as wireless. I'm interested in getting the opinion of your company. It has a significant role to play in a relatively unregulated market, recognizing, of course, the spectrum licence you've had for some time.

We've seen the exits of two vigorous competitors, and concomitant with that has been the complete rise or similarity in prices between the two competitors that remain. We also see here, from the TPR report, that Canada lags in the world in many new mobile wireless services and features. Perhaps the largest gap between Canada, the U.S., and other countries is with respect to the implementation of third-generation high-speed data services.

I go back one more page, page 1-18 of the report, where it talks about mobile wireless subscribers per 100 inhabitants of OECD countries: Canada is second to last at 47.2%, between Turkey and Mexico.

You have, in effect, a fairly strong presence in the wireless market, and everyone turns to the wireless market as being the solution of the future. But if it's any indication, and by these kinds of examples, I think the committee's rather nervous that, given what we see in wireless here, we may in fact see the re-monopolization among three players in local telecom, such that you might see what has happened south of the border in the United States, where a number of entrants have simply left, leaving consumers with less innovation, fewer new products, and of course with stable higher prices.

How do you square the position of your company in wireless with these high prices, as demonstrated by Merrill Lynch's comparison with the United States and with what the TPR report had to say?

[Janet Yale]

Obviously we have a different view of the competitiveness of the wireless market. Living it on a day-to-day basis, I can say that it certainly feels vigorously competitive when you're out there trying to win customers.

We believe the industry is indeed competitive. There are many brands out there. It's not just the three players who have their own infrastructure. There are other brands to choose from—Virgin, Fido, and so on. I think it's misleading to look at the market from just a customer perspective in terms of the three players who have their own infrastructure.

Secondly, there have been significant decreases in prices over the years. We actually prepared a study that examined the state of competition in the wireless industry. We'd be pleased to provide a copy of that to you. The study has quite a different view of the facts than the ones you suggest.

One difference between Canada and the U.S. that you have to take into account is where we are in the state of evolution of wireless competition. Wireless competition started in Canada a number of years later than in the U.S. If you actually compare us in terms of the number of years there's been wireless in the market, we're kind of on par with the U.S.

I could go on and on here, giving you a whole bunch of examples to show you the facts with regard to the state of competition in wireless. I don't think there's any risk of a lessening of competition in the wireless market, and I don't think, in the wireline local telephony market, there's any risk of re-monopolization. We have two wires into every home—the cable wire and the telephone wire—both of which are now broadband wires that can offer a full suite of telephone service, Internet service, and television service to the benefit of consumers.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

Pardon me; that is something that does interest us, but I was referring to several facts and figures that were here in the TPR report, without drawing conclusions as to what they mean. Of course, the recent decision by Merrill Lynch, which also, as it turns out, did a primer on this originally—

[Janet Yale]

And the study I'm referring to, by Gerry Wall, addresses very much the facts in that report. We would be pleased to provide the committee members with copies.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

Okay.

With 99.5% wire coverage of the Canadian population, and 97.5% wireless, can you explain to me why the rates in Canada are higher, relatively speaking, than the rates in the United States?

[Janet Yale]

In wireline, as I already indicated, that's not the case.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

In wireless, sorry.

[Janet Yale]

Right.

I've given you some examples of why I don't think that's an accurate reflection. Our pricing is competitive when measured against the pricing of most trading partners. It's broadly similar relative to the United States.

As I said, I think it would be most helpful if I provided to you the details from the Wall report, because I don't think that's an accurate portrayal.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

Mr. Chair, I'm just going by what is written here in the report. These are not my opinions, they're the opinions of the blue ribbon panel.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. McTeague.

I'm going to take the next Conservative spot. It's the chair's prerogative.

Obviously implementation was one of the issues raised here. The telecom panel clearly says, I believe on page 13, that the minister should have started with a policy directive with the proposed order, implemented it that way, and then amended the Telecommunications Act in a second step.

One thing that was raised, and very legitimately, by the vice-chair was with regard to the fact that the CRTC—and witnesses have said this—is quicker in its decisions than the Competition Tribunal. That's one of the concerns. Therefore, the TPR panel recommended a telecom competition tribunal.

Now, I just want to get this on the record, although I believe I know the response: Telus supports the establishment of such a telecom competition tribunal.

[Janet Yale]

Yes.

[The Chair, Conservative, James Rajotte]

Okay. I just wanted to get it on the record, that this obviously should be part of the implementation.

I want to make a second point, Ms. Yale. You mentioned Shaw's 30% penetration rate in Fort McMurray. I want to deal with the Edmonton area. Obviously, coming from there, I know the city very well. It's a city with suburbs of about a million people.

What percentage of the telephone market would Shaw have at this time, best estimate?

[Janet Yale]

That's not a public figure. The Fort McMurray figure is public only because we have actually put an application in front of the CRTC for deregulation in Fort McMurray under the commission's original deregulation tests.

[The Chair, Conservative, James Rajotte]

You can't say, then?

[Janet Yale]

Well, obviously it's competitively sensitive information for us to talk about city-specific losses.