Industry Committee on Feb. 8th, 2011

[Anthony Rota, Liberal, Nipissing—Timiskaming, ON]

Okay. Very good.

I just wanted to clarify that, because there are questions that come up from people. They ask, why are you allowing them to compete on...?

In any case, I'm going to move on to the next one.

IPTV is something that came up the other day in our questioning. I actually asked the commissioner of the CRTC about IPTV. He said that doesn't count; that's separate. Demand comes through the pipeline. You're all using the same pipeline, yet his comment was that there's a separate pipeline for IPTV. What I'm seeing is Bell, or the provider, the backbone, providing limits to you, the ISPs, but to themselves they're leaving a pipe that's separate.

Is this a separate pipe, or is it all part of the same...? How will that affect people who want to watch independent TV, as opposed to, say, IPTV?

[Matt Stein]

There are two questions in there, and I'll very quickly try to answer them both.

The first question is, is this truly a separate pipe or is it all connected? You can't ask us. You would need to look at the submissions. You would need to ask Bell themselves. However, an important piece is the second part, when you ask how it affects. If you choose to use Bell's Internet product, their retail home Internet product, and you have a 25-gig cap, then you choose to use their television product that rides right on top of it. They say as much bandwidth as that is, they're not going to count it. But if you choose to use somebody else's Internet television product, they say they're going to charge that. That racks up the bill.

If you chose to use Primus or any competitive ISP's Internet product, and you choose to use Bell's Internet television product, they say they're not going to charge you for that anyway, because that's okay. But if you use Primus' Internet television product or somebody's independent television product, they're going to charge you for that.

[Anthony Rota, Liberal, Nipissing—Timiskaming, ON]

So someone's getting squeezed out of the market here.

[Matt Stein]

That's one way to put it.

[The Chair, Conservative, David Sweet]

Okay, very good.

We'll let Rocky....

[Rocky Gaudrault]

I can add a little bit to this as well. If they're going to make statements that say include/exclude costs, different network or not, then we need to start taking things into the context where they start talking about investments, this $6 billion or $8 billion question. They need to section off what is IPTV, what is television, what is Internet, what is mobile. They make blanket statements that say they're spending huge money, and in the middle of saying this, IPTV is separate? I think not, at that point. That needs to be put into perspective.

[The Chair, Conservative, David Sweet]

Okay.

Mr. Mezei.

[Jean-François Mezei]

During the proceedings, the question was asked about how much is shared, and Bell refused to divulge specifics. It admitted that it was somewhere between the BAS and the DSLAM. If you look at my little graph on pages 7 and 8, it joins up, and a big portion of it is shared.

What's interesting is the amount that's shared between the Bell retail Internet and Bell's IPTV. That segment is about what the GAS uses as well. Where we share the Internet with Bell--Bell's retail Internet--is also where Bell shares it with IPTV. There's one area where all three--

[The Chair, Conservative, David Sweet]

I've been waiting for you to come to a conclusion. We're way over time.

I'm sorry, I need to be fair to all the members.

Mr. Wallace for five minutes, please.

[Mike Wallace, Conservative, Burlington, ON]

Thank you, Mr. Chair, and I want to thank our guests for coming today.

I'm going to be a bit of a devil's advocate at this end, because we're hearing it in our constituency offices and here on the Hill. I would like your response to some of the things we're hearing--and some of them have been on your side and some of them haven't been--and then if I have time, I want to ask you about your position going into this next 60 days.

At my house, I'm very good. I changed my lights bulbs to a low-volume use of electricity. I turn off every light when I leave the house. My neighbour beside me leaves his lights on all day long, all night long, all through the house. He pays for use. I pay for use.

Why would that not apply in the Internet services business?

That's a question I'm getting from constituents.

[George Burger]

The answer to that, frankly, is pretty straightforward: because that electricity costs money to create. It doesn't just cost money to get to your house, but the source of it costs money. Similarly with gas; you use more gas than your neighbour, you should pay for more gas, because gas is a resource that has value in itself.

Bits, as Matt said earlier, have no value. They're light. They're pieces of air. The value they have is the value that comes with the creation of it by you when you write an e-mail, when someone else writes a story. It has no intrinsic value. The only thing that has value is the pipes, and you pay for that once and for all.

[Mike Wallace, Conservative, Burlington, ON]

We'll use natural gas as an example. I'm a Union Gas user; I make no bones about it. Other people will knock on my door and will try to sell me gas contracts, but Union Gas cannot say they're only selling that individual customer so much gas; they don't cap how much gas I can use. I can use as much gas as I want, and it depends who I'm with.

Is that basically the same issue you're having with the...? Bell owns the pipe in this case--we'll use Bell as an example, but there are others; I'm actually with Cogeco. Bell owns the pipe, so they should be able to charge for the use of the pipe but not cap how much use I can have in my house. Is that your argument?

[Rocky Gaudrault]

We already do that right now with the gateway access service. That's what we pay for right now. Usage-based billing is going beyond that point.

[Mike Wallace, Conservative, Burlington, ON]

That's what I'm saying. That's the system that's there now. The capping, or the user pay, would be able to cap off how much I'd be able to use. That is the difference.

How come you lost that argument at the CRTC? You've obviously analyzed why. I heard a little bit from Mr. Burger on it. They tend to listen to the big boys--we'll call them that--the main users. If you can tell me without giving away the trade secrets of what your plan is, why did you lose, and what are you doing differently in the next 60 days to convince them otherwise?

[Matt Stein]

Unfortunately, why it lost is very long and drawn out, and it is actually a series of things that happened over many, many years. But it sort of goes back to the idea that there is regulatory symmetry: what is on one side and applied to cable gets applied on the other side equally on phone.

Years and years ago, when nobody was using resold or wholesale cable, the cable providers said they would like to charge the wholesalers, of which there were effectively none, the same thing they charged in retail, and nobody really objected particularly strenuously--nobody used it.

Well, now Bell has rightly said, “Look, you allow it over there.” Rather than going back and fixing the wrong from many years ago, they used it, and said, “Yes, okay, that's a fair point. We have allowed this for years on cable, so we should allow it on telephone-based services as well, on DSL.” That's why this change.

[Mike Wallace, Conservative, Burlington, ON]

Do you think there is an opportunity...? Let's be frank. The political will for something to happen is obviously here, so you could sit back and rely on politics to solve the problem for you and hope for the best, or do you think there actually is a solution between you and the major deliverers, the Bells of the world in the next 60 days?

[Matt Stein]

Let me ask you to clarify. When you say “a solution”, as in something potentially that we could negotiate with them...? That door is pretty much closed. In submissions, in filings, and in oral testimony delivered at the CRTC, Bell and Telus have been very clear that this is not the kind of thing they negotiate.

[George Burger]

The fact of the matter is that the reason we're here, and the reason we applaud the minister's initiative in trying to take some charge over this matter, is that we're in a situation simply because there's been an ongoing distortion of, really, the way market forces should operate in a society like our own.

I think right now the fact of the matter is that we are where we are because Bell and other incumbents frankly don't want competition. They want to split up this market. They want to be able to make as much as they can for their shareholders. That's perfectly legitimate, but right now the only solution, frankly, is looking for a completely new competitor framework to be introduced. That really rests in the hands of the government and this panel.

That's why we're here. We cannot continue to look back and wonder why the CRTC chose this or that. We think we're beyond that.

[The Chair, Conservative, David Sweet]

Mr. Burger, thank you very much. We appreciate it.

For the Bloc Québécois, quatre minutes, monsieur.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Thank you, Mr. Chair.

I would like to thank the witnesses for being here this afternoon.

We know that the Conservative government has asked the CRTC to rely on the free market as much as possible to achieve the objective in section 7 of the Telecommunications Act. Do you think the government's deregulation order is in part responsible for the CRTC's recent decision? Mr. Burger can answer that question perhaps.

[George Burger]

If I understood the question correctly, I think the government did not decree deregulation. I wasn't there, and, frankly, I'm not an expert in the area, but I think what the government did try to do was to create a framework that tries to adhere to free markets as much as possible. But of course we've seen very clearly from what happened in 2008 that nobody is really an advocate of having a completely unrestrained free market. The world economy nearly crashed because of this unrestrained free market.

I think what we have to do is expect our regulators to have some degree of judgment when it comes to interpreting general objectives like that, so that you can come up with a result where you don't have hundreds and hundreds of thousands of Canadians up in arms over the fact that they're being gouged and paying for something that has no value. I'm not sure where the fault lies, but I'm really not sure that the seeds of it are in that particular piece of paper.

[Jean-François Mezei]

When I was writing my petition to the Governor in Council, I read and reread the directions. I saw a document that struck a good balance between regulation and deregulation of market forces. I didn't see a direction that we deregulate blindly. From what I have been able to see, the CRTC is to all intents and purposes letting Bell Canada charge what it wants, on the pretext that the directions entitle it to do that. There is an interpretation problem, either on my part or on the part of the CRTC. Letting Bell impose usage-based billing and charge unjustified unpredictable rates for a regulated service makes no sense. There is a problem.

The direction says that where there needs to be regulation, it should be good. Where there needs to be regulation, it stays. Accordingly to the direction, there doesn't need to be regulation anywhere. But in fact it is needed here and there. And the direction recognizes that. If it is poorly written or if it allows for a bad interpretation, however, there is a problem. The CRTC has interpreted it badly.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Does that mean there is bad regulation at present?

[Jean-François Mezei]

At page 11 of my presentation, I included a list of all the decisions made in the last few years. We can also see how one decision served as a precedent for another. Telecom Decision 2008-17, which is central, called GAS non-essential. That was based precisely on the direction, and specifically on an approach that advocates deregulation, forbearance.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Could this deregulation, which you call bad, cause your loss, your death?