Industry Committee on Feb. 27th, 2007

[John Meldrum]

We certainly will continue to be supportive of the federal government moving on all of the TPR recommendations. To hold off any meaningful reform until legislation gets passed through the House, or the new competition tribunal gets set up, to me is so far off into the future as to continue to really not be appropriate and do the status quo.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Crête.

Now to Mr. Carrie, please.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you very much, Mr. Chair.

Thank you very much for coming today. I enjoyed the presentation last time and I enjoyed your presentation today. I do want to clarify something, though, because we keep on hearing from the opposition that the government and the minister are cherry-picking from the panel's recommendations.

I'd like to refer the opposition to the executive summary on page 13. I'd like to read the paragraph. It says:

The Panel suggests that the government should implement its recommendations in two phases:

In the first phase, the government should issue policy statements endorsing the development of a national ICT adoption strategy as well as the implementation of a new regulatory framework, and take steps to reform the policy-making and regulatory institutions. In addition, it would use its powers under the Telecommunications Act to issue a policy direction to the CRTC to interpret the policy objectives of the Act in a manner that is broadly consistent with major reforms recommended in the Panel’s report.

During the second phase, recommendations requiring changes to existing legislation should be implemented.

In other words, we have the panel recommending that the government take this exact action, which the government is taking right now.

I was wondering, on the record, if you could describe this in any way, that the government is cherry-picking from the panel's recommendations. Or are we simply implementing the recommendations of the panel, the panel that was formed by the previous Liberal government, to move this forward?

[John Meldrum]

I'd say the Government of Canada is in the process of implementing those recommendations that can be easily implemented. I think that was something the Telecommunications Policy Review Panel struggled with, as to how to actually begin to move the yardsticks in terms of regulatory reform. I think when Mr. Intven was here he indicated that certainly the direction of the Government of Canada was consistent with the report.

[Colin Carrie, Conservative, Oshawa, ON]

So, in other words, it's not cherry-picking; it's doing exactly what the panel recommended. Right?

[John Meldrum]

For sure. I wouldn't agree that it's cherry-picking at all.

[Colin Carrie, Conservative, Oshawa, ON]

All right. Thank you very much.

In your last presentation you mentioned that SaskTel is also involved internationally. There are different parts of the world where we're trying to seek out new business for our telecom industry. So far you've been fairly successful in working that way. What would happen if the government decided to drag its feet on these recommendations instead and waited perhaps a couple of years before modernizing the regulatory framework for the industry? What do you think would happen to your company internationally, with your ability to compete, and with the industry as a whole?

[John Meldrum]

Certainly the notion that we have to lose 25% market share before we can fully compete is extremely problematic for us as a smaller company.

Today, the economics work for SaskTel as a crown corporation; we're able to provide high levels of service to the most sparsely populated province in Canada. To save this, we have to give up 25% of our core market and yet still continue to fulfill all those policy goals of getting high-speed to the hinterlands and cell service to all the unserved areas. I'm not sure the economics will necessarily hang together for SaskTel just within the province of Saskatchewan.

In terms of going outside of the province, we still have an international division. Again it depends upon the resources from the phone company. The extent to which we continue to be squeezed economically will limit our opportunity to provide international services and continue on the path of innovation, which our company has been known for over the decades.

[Colin Carrie, Conservative, Oshawa, ON]

Do you know of any other countries out there that have regulations such as ours, with this 25% rule?

[John Meldrum]

We competed in New Zealand in the 1990s. We had a cable partner in Wellington, and we went in and competed against Telecom New Zealand. There wasn't even a regulator in place when we first went in; there was only the threat of regulation.

We were able to negotiate agreements with Telecom New Zealand, and we built and operated a telecommunications system in Wellington. We did it successfully, and when we sold out, we made money on the venture.

Interestingly, in that case, we had to build from scratch, as opposed to the operators. When they turned on, they covered the entire serving area. In Wellington, we had to build from scratch, and we were faced with Telecom New Zealand changing their prices on a street-by-street basis. We still managed to be successful.

[Colin Carrie, Conservative, Oshawa, ON]

Do you know of any other country in the world that has a 90-day win-back rule?

[John Meldrum]

Not 90 days. I believe other witnesses talked about a few of the states having sort of a 12- or 13-day period of time, in terms of no win-backs. I'm not aware of any others.

We view the win-back restrictions as being anti-consumer, in terms of our experience with our marketplace.

[Colin Carrie, Conservative, Oshawa, ON]

In your opinion, if the government doesn't move forward as recommended by the Liberal-appointed panel, how is that going to negatively affect your company and business?

[John Meldrum]

We'll certainly soldier on, really competing with one arm behind our backs.

Unless the current forbearance decision is changed dramatically by the CRTC, over the course of the next six to twelve months we don't expect to ever be able to apply for forbearance. One of the issues is the quality of service requirements on the competitors. The way they put it together, it doesn't work.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Carrie.

We'll go to Mr. Masse.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

Thank you for appearing before us again.

With regard to your presentation, I was interested to see 85% of the population with high-speed Internet service. How does that compare to other provinces and maybe even states around you? I'd be interested to know how you compare to those around you.

[John Meldrum]

Eighty-five percent is not that large a number, but because 42% of our customers are in high-cost rural and remote areas, it's very good. If all you were serving were the urban areas, then you could get 58% of the marketplace pretty easily, but that other 42% would be quite challenging, in terms of being able to provide high-speed to those locations.

We've done very well in rural Saskatchewan. We pioneered fibre optics in this country, and we have continued to use that infrastructure to expand and provide high-speed to locations that most provinces wouldn't think would ever be covered--villages of 200 people, farms, and various places such as that.

[Brian Masse, NDP, Windsor West, ON]

You mentioned that this is because of public policy and the political will to implement programs or initiatives. What have you done in the public policy format to get this to people, to provide high-quality service?

[John Meldrum]

The government has had two programs: CommunityNet Phase 1 and CommunityNet Phase 2. Essentially these involved us entering into a five-year agreement to provide high-speed to schools, health facilities, and other government offices in all of the small towns.

That contract gave us enough revenue to then be able to expand the broadband. Once we got base broadband into the particular location, then we were able to offer it to the citizens and businesses in the area.

[Brian Masse, NDP, Windsor West, ON]

And that public policy comes from the provincial government, obviously.

[John Meldrum]

It does. There was some involvement with the federal government, a small amount of money.

The second aspect of that program has involved some wireless high-speed, and that's when you start to get to the farms. In that case, SaskTel ate 100% of the $34 million that went into that program.

[Brian Masse, NDP, Windsor West, ON]

Okay. This is the trouble I'm having right now with the way we're going. The public policy aspect is one that's very important. You can call it what you want, cherry-picking, being selective of the easiest things to do, things they agree with and don't agree with, whatever it might be. The telecom review policy was set up after we had a review in 2002 and we didn't have legislation brought forward by the previous government. It has already been a year and we haven't seen any legislation from this minister. He's had that report completed and we haven't seen legislation. My concern right now is as we go through this process there's a vacuum of public policy.

It's a telecom review policy initiated by a previous minister who crossed the floor to the current government, which set up his expert panel that he cherry-picked himself. There are a series of recommendations, over 100 of them, and now the current minister, whom he now sits with, is selecting from that process.

I understand your concerns about no reform happening quickly enough, but at the same time, wouldn't it make sense for all the players, especially given that this industry has been very successful in Canada compared to the United States...that we actually have a legislative policy at the end of the day to framework this, as opposed to having one person doing orders in council at his own discretion?

[John Meldrum]

It would certainly be nice if all the parties could get together and draft a new Telecommunications Act over a period of months, but from my experience in the industry, it'll be a long period of time before something like that happens.

[Brian Masse, NDP, Windsor West, ON]

It is frustrating, but we have to go back. This is the thing. Overturning CRTC decisions and a series of different measures like that have made for a rocky start. That's why I think it's important that we have some perspective about where these recommendations come from. They're not from a public policy perspective; they're from a political agenda, and they're done through previous ministers who have had views on things and appointed the people they have.

This committee had no role whatsoever in selecting the people on the panel. It was done by the minister himself.

Mr. Chair, I have one last quick question with regard to foreign ownership and restrictions. Does SaskTel have a position with regard to the removal of controlling shares in terms of the restrictions on that?

[John Meldrum]

We do. I think it was in this very room that we presented that we don't see a real need at this point to get at the foreign ownership issue, and if we do, we think it should be in the context of getting something forward as part of overall trade negotiations.

I certainly would caution that we shouldn't leap ahead of the United States, because they still have some restrictions in terms of the ability to hold licences.