Industry Committee on Feb. 10th, 2011

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. Van Kesteren.

Now we'll go to the Bloc and Mr. Bouchard. Vous avez cinq minutes.

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

Thank you, Mr. Chair. Good afternoon, ladies and gentlemen.

Earlier, my colleague asked Mr. Hémond some questions. I would like to hear from the other witnesses. I would like to begin with Ms. Song. Do you feel that the government should regulate further or do you feel that it should deregulate, as it seems to be wanting to do now?

I would like to hear from the other witnesses. We have heard from Mr. Hémond, but I would like to hear from each of you in this matter.

[Monica Song]

Thank you for your question.

I want to make a distinction between the retail market and the wholesale market. I think it would be fine to leave retail markets to the operation of market forces to the maximum extent possible, as long as we have a robust wholesale regime. That used to be the philosophy of the commission a long, long time ago, but we've deregulated retail telecommunication markets almost wholly and the stopgap, the backstop, has been removed.

I think that's the problem. If you're not going to provide a robust wholesale regime that allows competitors to enter into the market, then your only options are to consider more obstructive measures, such as retail re-regulation or structural separation, which others have suggested, and certainly there are governments across the world that are considering that for telecommunications because it's an industry that has huge sunk costs. There's a balance to be struck there, and I think we've lost that balance.

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

Ms. Griffin-Muir.

[Teresa Griffin-Muir]

I would agree with Ms. Song.

Since almost all services are deregulated on a retail basis, there has to be a framework that supports competition through wholesale regulation and that ensures access to incumbent networks. Those networks, by and large, were built over a long period of time under a very different framework, one that guaranteed an opportunity for return on investment. There has to be recognition that it is not only more economically viable to not fully duplicate every network, but it's not even economically possible to do so. There has to be a framework that acknowledges that and that gives competitors access to those networks at reasonably economic rates.

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

Do you want to respond to those comments?

[Christian Tacit]

I just want to say that I agree fully with that. It really does amount to proper wholesale regulation. It will not only serve to help the retail markets. You may actually see the cable companies and the phone companies competing for the wholesale business as well if they know that they are consistently, in a principled way, subject to economic regulation that does not allow them to turn themselves into a strictly duopolistic market.

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

I would like to ask you a question, Mr. Hémond. My colleague asked you some questions about deregulation, particularly with respect to order 2009-2007. In your opinion, do the CRTC decisions on usage-based billing respect the spirit of the requests made by the government in decree 2009-2007?

[Anthony Hémond]

Do you mean in applying the order to bill for usage? I find it difficult to see the...

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

Did the CRTC in its decision comply with order 2009-2007 regarding usage-based billing?

[Anthony Hémond]

At the time, the 2009-2007 government order was aimed at protecting Bell Canada's investments. Usage-based billing shows the will to protect the investments made by Bell Canada. Usage-based billing, it is argued, is aimed at protecting investment. It has to do with the enforcement of this order, for there should be a very specific field, which would be limited to speed matching, or equivalent speed. However, it has overstepped the boundaries of its application.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Hémond, thank you, Mr. Bouchard. Mr. Lake, you have five minutes.

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

Thank you, Mr. Chair.

Thank you to the witnesses for coming.

Just taking a look at the actual order from 2006, it says pretty clearly that the commission, “when relying on regulation, use measures that are efficient and proportionate to their purpose and that interfere with the operation of competitive market forces to the minimum extent necessary to meet the policy objectives”.

It goes on to say that the commission, when relying on regulations, should use measures that satisfy the following criteria, namely that if they are of an economic nature, they neither deter economically efficient competitive entry into the market nor promote economically inefficient entry.

There's a lot of talk in there about competition. That's what this is all about today.

As we go through this process, in the end we're going to have to come up with a report and ideas. I want to focus this last round of questions on ideas moving forward.

In your view, as we look to increase competition, increase innovation, and bring prices down for Canadian consumers, what do you suggest? There's a lot of talk about the problems with the decision. What are your suggestions?

I'll start with the bigger organizations. Maybe I'll start with Kate and then go to CNOC.

[Monica Song]

If I can say one thing, one guiding principle that would be of assistance would be to return wholesale regulation to a true cost-based regime and don't impose charges where there are no underlying average costs underlying the proposed charges.

I could say a lot more, but I'll leave it to some of my colleagues.

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

I'll come back to you if everybody else finishes.

Go ahead, Mr. Sandiford.

[Bill Sandiford]

Ms. Song took some of the words out of my mouth. We want to be able to fairly and adequately compensate incumbents for the services we use on a cost basis, not on a value basis. We want to compensate them based on what their actual costs are to provide the services to us, plus a reasonable markup, as opposed to what their perceived value of the services is, minus a discount. We want a cost-based regime, not a retail minus-based regime. We need that to effectively compete.

[Christian Tacit]

If I could just add very quickly, if you look at the three bullet points on page 3 of our opening statement, that's really our prescription right there, so I won't repeat it.

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

Okay.

Ms. Griffin-Muir.

[Teresa Griffin-Muir]

I have to agree. Actually, MTS Allstream has long been an advocate for cost-based pricing and competitively and technologically neutral pricing, so we're not frozen in time. We seem to be very good at breaking up dominance, not very, very good, but better than at actually anticipating that as services become available in the market, the underlying infrastructure also has to become available on a wholesale basis.

I would agree that the more robust the wholesale framework, the more likely there will develop competition between incumbent service providers at the wholesale, not just the retail, level.

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

Okay.

Monsieur Hémond.

[Anthony Hémond]

The most appropriate response would be, as I mentioned, a separation of functions to allow for investment at that level of the network of companies and thus ensure that there will be competition. In the network, there are some places that cannot be duplicated or rebuilt, and thus we should guarantee the openness of the network so that the competitors can get connected. The advantage is that the company who would be in charge of the network would be very interested in seeing a great deal of competition because its sales would go up. It would make a profit, and it could reinvest in the network and improve it. These results were encouraging in Great Britain and in New Zealand. Therefore, let us take that as an example so that we can have a potential for competition and openness and investment in our networks.

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

Mr. Anderson.

[Steve Anderson]

I agree with all of that, but I think also we need to remove the incentive to be anti-competitive between different markets, because the wholesale and retail are different markets, so I think we should separate those, as well as the television market. I think also we need accountability and transparency in the market. All of these billing practices, traffic management, should be subject to audits and the results should be made public.

[The Chair, Conservative, David Sweet]

Thank you very much to the witnesses.

We're going to suspend right now for about three minutes, and then we will stay on track for the next panel, if the new witnesses would like to come forward as the old witnesses exit.

Thank you very much, ladies and gentlemen.

We'll suspend for three minutes.

[The Chair, Conservative, David Sweet]

Ladies and gentlemen, we're back with the 56th meeting of the Standing Committee on Industry, Science and Technology.

We'll go first to our two witnesses. We have Bell Canada and Shaw Communications.

First we'll go to Mr. Bibic, senior vice-president, regulatory and government affairs, Bell Canada.