Industry Committee on Feb. 26th, 2007

[Michael Janigan]

In my estimation, we're starting off with circumstances where most of the incumbent telephone companies sell about a 90% share of residential markets. If you're starting off implementing reforms that effectively free them up to make greater inroads presumably in that market share, I would suggest that you're likely going to see a solidifying of their dominant position, and at best a duopoly position in the different markets.

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

What you're describing is the market for the Annapolis Valley, where the incumbent has 96.9% of the market. In places like Cape Breton, it's 98.4%. But rural and small town communities, by and large, do not enjoy a significant level of competition.

Mr. Munro, you mentioned that they'll have deregulation where competitors are present. We've heard from a number of smaller players who are in the cable side who are saying absolutely that they will not invest the millions required to enter the telco side in their local markets if we eliminate the market share test in favour of a mere presence test and if we eliminate the win-back blackout period.

The smaller players have been consistent that in their local markets they will not risk their private capital, because they do not believe they will be able to enter those markets successfully, and they believe there will be a predatory approach from the big telcos.

So your assertion that there will be deregulation only where competitors are present is fine, but what we're hearing from the potential competitors is that they won't enter those markets, so there will not be that competition.

How would you respond to that?

[Ian Munro]

I find it a bit difficult to fathom that whether there is a 30- or 60- or 90-day win-back provision in place would be the sole criterion upon which these potential competitors would or would not choose to enter the marketplace.

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

I'm sorry to interrupt, but the presence test, in place of the market share test, is a significant change as a barrier to entry for a new competitor.

[Ian Munro]

Sure, and in some small areas, yes, it may take a long time for competition to arrive, the same way that there is less competition in lots of other services in those areas. So we're not going to see every small town with three competitors in the next few months or so.

But I think what we have seen in other areas when the competition has begun is that the new entrants have been able to ramp up quite quickly. I still wonder if these smaller players may not reconsider their situation.

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

Under the previous approach we saw new competitors, but you're acknowledging that in fact this increases the barriers to entry in areas that are currently served by only one player, or primarily by one player.

[The Chair, Conservative, James Rajotte]

Could we have your final answer, Mr. Munro?

[Ian Munro]

Sorry, which barrier is being increased?

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

You just acknowledged that these changes have increased the barriers to entry to new competition in areas that are currently dominated by the incumbents.

[Ian Munro]

No, I don't think we have increased any barriers at all. They are free to enter at any point.

[The Chair, Conservative, James Rajotte]

Okay, thank you.

You're over a minute over, Mr. Brison. Sorry.

We're going to Mr. Van Kesteren.

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

Thank you, Mr. Chair.

Thank you, witnesses, for coming.

May I have just a clarification on the TPR suggestions? There were two phases to the implementation. In the first phase, the government would issue statements endorsing the development. In the second phase, the recommendations and required changes to existing legislation would be implemented.

I think we need some clarification on that. It was stated that there were some areas of concern about those TPR suggestions, but again, the implementation was in two stages.

I want to speak about cherry-picking too. We hear an awful lot about the cherry-picking in the recommendations by the TPR, and that the minister is cherry-picking these recommendations.

Mr. Munro, I understand that the Atlantic region is the most competitive region and market in Canada. That, of course, speaks volumes because there is obviously a desire for those who are in the industry to commit themselves to the process of investment and to going after the market. And you've proved that.

I want to ask you, when we talk about the minister's recommendations, can you comment on the consultation of the process? Can you just quickly comment on that?

[Ian Munro]

Sorry, on which consultation process do you mean?

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

I mean the consultation of the process, of the implementation.

[Ian Munro]

I'm still not sure I understand your question, sir.

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

We had some criticism as to whether or not the minister was correct in his implementation, and I just want your comment on the process.

[Ian Munro]

Sure. Thank you for the clarification.

I don't think cherry-picking is really the right phrase. The panel, and Mr. Intven last week as well, suggested certain measures that could be implemented before legislation was changed, such as the one before us now, which I think is the correct way to go.

If we were to wait to have every possible change enshrined in a new legislative change, I don't know how much further behind we'd be in getting that process completed, and all the while many consumers would be denied the benefits of the full competition that could be afforded to them.

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

The other thing we keep hearing about is the threat of re-monopolization. Could you comment on that? What are your feelings towards that?

[Ian Munro]

Again, as I said before, I just don't think that's credible. The cable and wireless players are well-financed, well-known competitors with long-standing customer relationships. That the phone companies would be able to drive them out the marketplace I just don't think is a likely or credible outcome, so I don't think that re-monopolization is something to be worried about.

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

Do you have any comments on the Competition Bureau as a regulator?

[Ian Munro]

I think the general approach of moving those economic issues away from the commission and towards the bureau or a new panel that would bring in the expertise of the bureau, and leaving the more cultural questions with the commission, is a sensible thing to do. The bureau is the area with the economic expertise.

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

I have one last question. I was just preparing my notes. The biggest area of concern--I find, at least--is that of the smaller companies that need to compete against the giants. How did that wash out in the Atlantic provinces? Is it a concern that you think is properly addressed? I mentioned the implementation. Are the smaller companies properly protected, or is that an area that the minister has to address?

[Ian Munro]

Well, I don't think that's an issue. I apologize. Maybe I misunderstood Mr. Brison's question before, so maybe I can attempt to answer it here.

I don't think the point should be to try to protect smaller companies. Competitors compete; some win and some lose. Some gain market share and lose market share over time, and it goes up and down. I think the focus should be on the consumer and on doing whatever can be done to ensure the maximum level of competition for those consumers.

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

Okay, thank you.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Monsieur Vincent.