Industry Committee on Feb. 8th, 2011

[Paul Andersen]

Yes, if you look, at least in the last decision that was approved, which is now under some review and I haven't had a chance to see the notice today, it's very specific on the cap levels that I as an end user have to provide. If I want, for instance, to offer a slightly higher or slightly smaller one, or offer a flat rate one, it's nearly impossible to get into that. For me to be able to offer the service and have any chance of making a small profit, I pretty much have to match their caps and their overage fees. When it did look like this would be the decision that was going to be implemented and a few ISPs started to post their rates, that's effectively what we saw. We saw that across the board, the independent ISPs felt the only option they had was to implement the caps equally, and now, of course, the consumer has lost choice.

[Brian Masse, NDP, Windsor West, ON]

It sounds like the oil and gas industry, which we've been debating here quite a bit.

Now we have some of the highest prices, some of the lowest speeds, and we have the caps. Is that not an indicator that this model doesn't work?

[John Lawford]

If by this model you mean we have what I think Harvard's Berkman Center said was a lukewarm effort at wholesale regulation, then yes, this model doesn't work. If you're strict about your wholesale regulation, you say cost-based and the wholesalers can do whatever they want, then I think it may work fine. But we have to be very careful, because we have such a small market and there's not much competition.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Lawford. Thank you, Mr. Masse.

Now we'll go on to Madam Coady for five minutes.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

Thank you very much.

Thank you, gentlemen, ladies, for appearing before us this afternoon.

I'm just going to pick up on something my honourable colleague from the NDP was talking about. This was about the CRTC reconsidering the decision.

Michael Geist, the Canada research chair of Internet and e-commerce law at the University of Ottawa, has written that--and I'm just going to quote from him--“Sending the decision back to the CRTC for reconsideration virtually guarantees months or years of additional costly hearings and litigation.”

I'd just like to ask the presenters today from the telecoms whether they consider that to be a concern.

[Paul Andersen]

Well, there's always concern. There has been, I think, some concern expressed by many of my fellow ISPs that on this and other decisions the regulatory cost has been quite great, because the proceedings can take a long time and they're very costly in a participation. Of course that is the uncertainty that exists while we're waiting for this decision.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

So there's a cost to participation in the hearings, but is there a cost to the consumers as well because the UBB is continuing while this is ongoing?

[Paul Andersen]

My understanding is that the UBB has been suspended until....

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

Okay. Right on. Thank you very much.

I'm just wondering as well.... Critics of the UBB have called it an economic disincentive or a tax on Internet use. Those who are proponents of the UBB say it's necessary for network congestion.

Are you finding that there's a network congestion? I know my honourable colleague, Mr. Braid, raised this earlier, but perhaps you could talk, Mr. Bergeron and Mr. Andersen, about this whole decision or the whole viewpoint that's held by the CRTC that ordinary Internet users should pay for the bandwidth consumed by heavy users, and that there is this network congestion.

[Alain Bergeron]

If I may, I will answer in French. To some extent, heavy users may cause some congestion in a network, and ultimately it is the direct supplier that has to deal with that.

If there is congestion, if the heavy users all decide to put excessive demand on the Internet at the same second, Oricom's pipeline to the Internet via Bell will be blocked. Oricom's customers are the ones that will suffer the effects of the congestion. Not Bell's customers. That is what has to be understood. Our company rents a pipeline of a certain size. We pay the wholesale price to Bell every month to rent that pipeline. If, for example, we have 2,000 more customers and we forget to call the supplier, which is Bell, to tell them to enlarge the pipeline, there will be congestion. That's our problem, we handle it and we bill our customers accordingly, based on various marketing strategy models available to us. It isn't Bell's problem. If Bell wanted to deliver its IP television on the same pipeline, for example, there might be congestion. It isn't caused by Oricom's customers. It's a different problem. I would say the engineers are very good in general at finding bypasses for problems. But if our customers create congestion, we are the ones they are going to complain to, no one else, and we will have to handle the problem, and solve it and invest in a more robust network. It is no more complicated than that.

To conclude, we can certainly compete with Bell in some areas with packages it doesn't offer. Doctors, for example, need a lot of bandwidth for some applications. We are going to put together a special package for them, one that seems a little disadvantageous for other customer groups, but it is what enables us to exist, to differentiate ourselves.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

Thank you.

I want to go back to the doctors case, because I did ask the CRTC concerning that specifically.

Mr. Lawford, the previous panel noted that a new competitive framework needs to be put in place as designed specifically for the Internet. What would this leadership look like? And how does this differ from the 2006 policy directive?

[John Lawford]

Mr. Masse also touched on a couple of ideas. You can be quite aggressive. I don't think this would happen in Canada, but you could require the large incumbents to cut off their network arm, their retail arm, and have two separate ones. I don't think we need to go that far. What you need to have is strict wholesale rules where the access is as high in the network as possible, so that the service differentiation can start as close to the Internet as possible.

The commission has been reluctant to do that. I am afraid I have to lay a lot of the blame for their timidity at the feet of the policy direction. It could be that it just needs to be rethought or clarified, but it seems to keep coming back.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Lawford. Thank you, Madam Coady.

Now we will go on to Mr. Van Kesteren.

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

Mr. Lawford, I appreciate what you're saying about our having a large country with few people in it. That really has a role to play. But the technology is the last mile, if I am correct in saying that. Mr. Masse talked about the obvious gap that we have in the rates we're charged, compared with those of other countries. Is that gap caused by policy, a lack of competition, or the failure of our service providers to develop more technology? Are we lagging behind other countries in that last mile, the technology?

I would presume that Mr. Bergeron and Mr. Andersen would probably be innovators in technology, so after Mr. Lawford, maybe I'll ask them what kind of innovation they have come up with and how it's been impeded.

[John Lawford]

I went through a hearing recently about getting Internet out to the rural areas, determining whether satellite was affordable, and whether other technologies like WiMax could work.

They can. They haven't been really pushed. When Bell got money from the deferral accounts, which was leftover money from, we think, overcharging subscribers some years ago, they first put DSL out as an option. In other words, they were going to improve their DSL footprint, and then they changed it to wireless.

There are problems with that, but at least they were showing they were trying some new ways of getting the information out there. We don't know, because at the moment if you're in the incumbents' territory, it's mostly the incumbents who choose what technology they're going to use. If they don't have competition, they won't have anyone like these guys nipping at their heels. Then they won't try new things. They won't be forced to do that.

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

Mr. Bergeron, then Mr. Andersen, what examples do you have of new technology and innovation that has enabled you to be more competitive and, as a result, offer more to your customers? Are you able to do that, or are you being impeded?

[Alain Bergeron]

The first example I can give you is IP television which is emerging more or less everywhere. As a supplier, we are called on to invest in innovation projects in this area. But the usage-based billing that is in effect at present doesn't allow us to go ahead with these new technologies in an economically viable way. There is no relationship at present between the real cost and the cost billed to us, and it hasn't been billed as an essential service for a long time. That is Oricom Internet's incentive to develop diverse products. At the global level, the existing market is demanding video and things like that.

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

Mr. Andersen.

[Paul Andersen]

There are definitely impediments without access to a cost-based central product where we can try to get as close to the customer as possible. It makes it difficult. TV is almost impossible in that framework because of the bandwidth caps and the amount of the bandwidth. There are also services, like voice over IP, where we're not able to offer the same quality that a competitor can, because we're reliant on the competitor's network for a certain portion.

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

I assume that in your brief, in line 52, that is what you're making reference to.

[Paul Andersen]

The answer is yes.

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

How would you describe the relationship between you and Bell, and Bell and its users?

[Paul Andersen]

Do you mean between Bell and my end users?

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

I mean their end users. Do they treat you the same way they treat their customers?

[Paul Andersen]

There are definitely a lot of examples where we have concerns as competitors that we're not being treated on the same level.