Industry Committee on Feb. 8th, 2011

[Serge Cardin, Bloc, Sherbrooke, QC]

Let's go back a bit to what happened in 2006. The order in council seemed to advocate more deregulation of the Internet. That was during Mr. Bernier's brief moment. When we see the chain of events, we are entitled to ask ourselves about the government's position today. Was this not to ensure that the CRTC would make decisions so that in practice, as my colleague was saying, Internet service suppliers would disappear and Bell and the others would come back out on top?

Don't you feel that, fundamentally, the CRTC has met the government's expectations with the last decision it made?

[Alain Bergeron]

The market is no longer what it was in 2006. This is 2011 now and network needs have grown enormously. In 2011, we have to look to the future and adapt to the public's current needs in terms of networks. The CRTC has to work toward that. We can't be looking to the past too much.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Bergeron and Mr. Cardin.

We'll now move on to Mr. Braid, for five minutes.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Thank you, Mr. Chair.

Thank you very much to our panellists this afternoon.

Mr. Lawford, if I could start my questions with you, just at the end of your presentation you made a very brief statement you wanted to elaborate on, and that was the impact, the effect of the UBB decision on innovation in Canada. Could you just elaborate on that?

[John Lawford]

Sure. Usage-based billing, as it becomes widespread, asks people to restrict their usage of bandwidth. And it enforces it with a very effective thing, and that's by price. And it is effective because people do reduce their bandwidth when they get the monthly bill.

But if you are trying to sell high-bandwidth services, that will make it very difficult for you to attract capital because anyone you go to—if you're not already making a deal with Bell or with one of the cable providers where it doesn't count towards your capital—the first question from a banker, I'm sure, would be, “So how are you going to get this through the network? It appears you use this many gigabytes per item, per film or whatever.” It would be a very difficult thing to capitalize.

And then on the other end, as your customers want to create businesses, they can't bring data down, they can't push it back up. It just creates an environment of almost fear, really. It's not a matter of something you can see specifically, but I think it's one of those situations where you have what-ifs: what if this company—the next Netflix—could have come out of Canada? We'll never know. What if there was an independent film producer who could have had a hit film and could have got it out through the Internet? It's not going to happen.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Thank you.

Why are caps so much lower in Canada than they are in other countries?

[John Lawford]

The caps have never been in place. In the United States there were practically citizen revolts there when they tried to be implemented by the cable DSL Internet providers.

There is very little competition in Canada. The only competition you have is from small ISPs with a wholesale access, and that is the only way to prise this open. I have to lay it at that. And that's what the Berkman-Harvard study said, and that's what the OECD said, that we have a very small market and you have to be extremely careful in those circumstances.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

And could you clarify your position with respect to the debate about Internet traffic congestion and peak periods?

[John Lawford]

The peak period is what should be driving this whole debate. You only have problems when your capacity is full. It doesn't matter who is causing it, it just has to be managed. The CRTC said, in the traffic management decision, first, we want carriers to build their networks up; second, we want them to use economic measures; and third, we want them to throttle, if they have to.

I don't see any evidence of their doing the first, mostly because the companies refused to provide these figures for competitive reasons, as the excuse. But Canadians don't know how much they're investing in the networks.

Second, if they're going to use economic measures, it would be much more sensible to use ones where you push people off peak time all equally, as with electricity, to off-peak. That may not be very palatable to the average consumer, but it's much more fair.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Thank you.

Mr. Andersen, do you make investments, as a company, in your own networks, or do you rely on the large providers to make those investments?

[Paul Andersen]

We constantly look to invest. First, as I said in my opening statement, the Bell portion is only a bit. We have to invest in all the other equipment and portions of the network, buying bandwidth to the greater world so that our customers can reach whatever site they want to get.

The problem we have is that if we want to be more facilities based and build out closer to the end-user, we're not able to do that right now under the current framework.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

And how do we do that?

[Paul Andersen]

There was discussion at the last essential services hearing about something I mentioned in my opening, about ADSL-CO, which would allow competitors such as myself to build out closer to the end-user at the local central office and then pick up there. And there are a lot of benefits. First of all, it's obviously encouraging investment. It's also taking our traffic off Bell's aggregate network and moving it onto our own. But unfortunately the CRTC did not allow that.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Andersen and Mr. Braid.

Now on to Mr. Masse for five minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

I think we're hearing some expectations and I want to put on the table where we are. I think it's important as the witnesses come forth.

First, the 2006 Bernier decision created the new contextual rules that favoured the companies versus consumers. Second, when this decision came down, I think it's important to note, although there were tweets and some discussion, Charlie Angus immediately put out a press release condemning it, but the minister vacillated, as well as the Prime Minister, tweeting and so forth. Then we came to committee and we're having hearings today, but that was done against the intentions of the Conservatives here, who voted against having these hearings. You can read that, actually. You can read that transcript. It is actually in the blues and you can follow the dialogue at that time.

The expectations of where we're going really lie in the fact of the CRTC being able to rework its decision, but here's what they posted today, which gives me concern. There are two principles on which they're going to review the decision. One, as a general rule, ordinary consumers served by small ISPs should not have to fund the bandwidth used by the heaviest residential Internet consumers.

[The Chair, Conservative, David Sweet]

Mr. Lake.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Mr. Chair, I'd like to raise a question of privilege.

[A voice]

A point of order.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

No, it's a question of privilege, actually.

The member referred to a vote that actually happened in camera.

[Brian Masse, NDP, Windsor West, ON]

No, it wasn't in camera.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

What happened out of camera was a vote on the order in which we were going to study things. The vote on whether or not to study this was held in camera. The member is actually wrong on the information that he's giving.

[The Chair, Conservative, David Sweet]

Mr. Lake, I will have the clerk pull the blues and I'll examine it. Of course, if it was a decision that was made in camera, then I'll come back to the committee with a ruling.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair. I was entirely referring to the discussion out of camera, which is available on the blues on the Industry Canada website.

We're back to the point where unless we get the minister to change the mandate, we're not likely to have a different decision. In your opinion, does a mandate have to change or be altered to some degree? We need to get to that point first if we want to get ourselves out of this box.

[John Lawford]

I looked at the telecom notice of consultation that came out today, and as Rocky said earlier, I found it very leading, in the sense that it's talking about a general rule that ordinary consumers, whether they're those of the small ISPs or not, shouldn't have to pay for the heavy users. Again, that's an assumption. I don't know if it's based on the policy direction or not. Our only experience with the policy direction has been that when there is a matter of interpretation of the policy direction, it seems that either the wrong section is used, or the most favourable one to the companies is always used. Whether that means you should repeal it or give direction as to how to implement it more precisely is a fine question, which I would leave to the government or to the other parties to work out, whenever they get that chance.

The policy direction has proved to be a problem at every turn from a consumer protection point of view. The only thing I could add to that is we will see in this proceeding, but there may be some room to refine that policy direction or to take bits out, because it's going to keep coming back to you guys.

[Brian Masse, NDP, Windsor West, ON]

And that will be the problem. If we're making submissions to the CRTC, they could rule those out of order because they're not consistent with what they want to hear in terms of point one and point two. That's what I'm worried about as we go through these 60 days.

Mr. Andersen, you made a good point about a business model being dictated to you. Could you highlight that? I think that's important, especially when we want to look at independent decisions.