Industry Committee on March 1st, 2011

[The Chair, Conservative, David Sweet]

Bonjour à tous. Welcome to the 59th meeting of the Standing Committee on Industry, Science and Technology.

Today we have the Minister for Industry, Science and Technology with us, Minister Clement.

Just before I go to Minister Clement's opening remarks, Mr. Rota, did you want to mention your notice?

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

Yes. I've got a motion before the committee that notwithstanding any previously scheduled committee activity, the committee invite Tony Clement, the Minister of Industry, and Gary Goodyear, Minister of the Federal Economic Development Agency for Southern Ontario, to testify on the supplementary estimates (C) 2010-2011, on March 10, 2011, from 3:30 to 5:30.

I think it's fairly straightforward. The minister is here, and we're just so happy to have him that we want him back.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Rota.

We won't have anybody speak to that right now. That's simply a notice of motion by Mr. Rota for that to be discussed on Thursday.

Now, Minister Clement, we're glad to have you here, and we'll go to your opening remarks, sir.

[Tony Clement, Conservative, Minister of Industry]

Thank you, Chair.

Thank you, colleagues of the committee. Thank you for inviting me here today to share my thoughts on the topic of usage-based billing for wholesale Internet services, as well as some broader thoughts.

As Canada's Industry Minister, it is my job to help encourage an innovative and competitive market place, and to ensure Canadian consumers have real choices in the services they purchase.

While information and communication technologies represent only about 5% of our country's GDP, I truly believe—and the statistics bear this out—that they drive the performance of the other 95%. ICT is the engine that propels us and the fuel that drives us, and we must never lose sight of the importance of information and communication technologies.

That's why I've made ICT and the digital economy, more broadly, one of my personal priorities as industry minister, and it is why I will be launching Canada's first comprehensive digital economy strategy later on this spring.

I want to make sure, as well, that consumers are not left out when we talk about Canada's digital economy and plan for it. Of course businesses are important, and I'll speak about that in just a couple of minutes. Of course academia and government initiatives are important too. But if we lose sight of the consumer, I think we lose sight of something critically important to the success of the digital economy strategy and of the economy more generally.

Now, what do I mean by that? Well, it's clear that more competition and more choice for consumers helps the adoption of the digital economy. It helps us to be competitive. It helps us to be innovative. It helps us to be creative as citizens, and it also helps our small businesses to succeed. All of these things are going to be necessary for a society that is built on the knowledge economy.

Our goal is to find the right balance for the marketplace to provide the right environment for entrepreneurs to flourish, for innovative new ideas to take root, and for real opportunity and real job creation.

We need to make sure that government telecommunications policies encourage investment and competition, increase consumer choice, minimize regulation and allow market forces to prevail. These are our policies and this is our focus.

Without doubt, Canadian telecommunications carriers have made significant infrastructure investments in the past few years. As a result, Canadians now have access to multiple advanced networks and world-class services across Canada.

Canadian carriers are investing because it pays for them to do so. They are responding to demands from customers. They also themselves stimulate demand to add new services and higher speeds via their advertising and promotion.

In response to this new consumer environment, back in 2006 our government issued a policy direction to the CRTC that recognized the importance of competition and fairness.

The Policy Direction instructed the CRTC to rely on market forces to the maximum extent feasible and, when using regulatory measures, to ensure technological and competitive neutrality where possible, to enable competition from new technologies and not to artificially favour either incumbents or independent Internet service providers.

The policy direction stated that regulation, when necessary, should be light-handed and proportionate to its purpose.

Turning directly to the issue of usage-based billing, let me say that access to the Internet is an increasingly important part of the lives of Canadians. And I would say that it's more than just important; actually, it means that in today's day and age, Internet access is fast becoming a crucial part of the social and economic fabric of the country. Affordability and choice are central to the ongoing dialogue. We are certainly all well aware of the importance of broadband networks for business innovation.

In this context, the CRTC decision on usage-based billing for wholesale ISPs is quite simply the wrong way to proceed, and is inconsistent with good public policy. Independent ISPs must not be forced to adopt the same retail pricing strategy as the incumbents. To do so is to limit consumer choice and remove meaningful competition from the market.

Moreover, in this year, in 2011, designated by our government as the “Year of the Entrepreneur”, if such a decision were allowed to stand, the effects would be far-reaching not only for consumers but also for entrepreneurs, creators, innovators, and small businesses throughout the country.

Furthermore, there are many new and innovative businesses taking root right here in Canada that depend on being able to provide services or content to their customers over the Internet. The cutting edge of cloud computing services relies on customers and clients--many using residential lines--having fair and affordable Internet access. Without the right competitive pressures, usage-based billing threatens to choke off these types of innovative businesses and the benefits they can bring to Canadian consumers and Canada's digital economy.

Turning now to the independent ISPs themselves, the fact is that in many cases these companies are doing far more than simply reselling incumbent network services. Indeed, they often provide more than simple Internet access. Many provide a different end product to their users, sometimes serving niche markets that, while relatively small as compared with the retail market of incumbent carriers, are vital to promoting innovation, competition, and consumer choice.

Chair, I have heard from a great many Canadians on this file. I've had the benefit of literally hundreds of thousands of Canadians communicating with me and the government on the issue before the CRTC and also on broader issues--retail pricing, service quality and availability, the current state of choice in Canada, net neutrality, and other related issues. I want to thank Canadians publicly for participating in this ongoing and critical discussion of these matters.

I think the point that is key right here, right now, the point that I take away from that ongoing discussion with Canadians--for now--and the point that has been articulated by many, including the wholesale ISPs themselves, is that the best way to generate real consumer choice and an alternative to UBB is to ensure that there is in fact vigorous competition.

The CRTC does not regulate retail pricing, and as long as we address the issue before us today to ensure robust and fair wholesale competition, there should be no need to regulate retail in the future as well.

I do believe that network owners have a reasonable expectation to be fairly compensated for their ongoing investment, but this must be done in a way that does not limit consumer choice. I expect that a variety of stakeholders will raise better alternatives to what was originally contemplated by the CRTC in the CRTC's review process, and that the CRTC no doubt will consider these options.

We all benefit if Canadians have access to the advanced networks, the choice of service offerings, and the opportunities to benefit from emerging technologies and services, which together constitute a vibrant digital economy.

The government will continue to monitor industry developments to ensure that Canada's policy and regulatory frameworks remain effective.

If the CRTC's decision does not adequately address the needs of Canadian consumers, small businesses, and innovators and creators, the government has powers under the Telecommunications Act to intervene.

Finally, Chair, on the question of throttling and congestion, when the CRTC does look at issues of network congestion and how it affects Internet service providers, there's already a framework under which Internet traffic management must be handled. The first priority for managing congestion must be investment in newer and better networks. Clearly it's in the best interests of all ISPs to continually work to provide better network access and speeds as part of a competitive business mode.

However, investing in networks may not be able to solve every problem, or it may not be the most practical way to overcome a given challenge. In these cases the CRTC allows for transparent economic measures to be used to help ease network congestion—the key word here is “transparent”.

The issue of network congestion and whether it in fact exists, and if it exists at a level that incumbent ISPs claim, is a subject of some debate. However, what is clear is there is nothing transparent about applying or imposing usage-based billing on independent ISPs. There's nothing transparent about how the imposition of this business model has any direct correlation to the real costs of provision of wholesale services.

In conclusion, Mr. Chair, our government is focused on the economy and creating a positive environment for job creators and for businesses to flourish. Canadians can count on us to do what is in the best interests of consumers.

Thank you for the opportunity to speak here today. I'm pleased to take any questions the committee may have.

[The Chair, Conservative, David Sweet]

Thank you, Minister Clement.

Now we'll go to the first round of questions.

Mr. Garneau, for seven minutes.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Thank you, Mr. Chair.

Thank you, Minister, for appearing today.

You'll forgive me for some skepticism. I think you're very good at talking the talk, but you have a less than stellar performance in terms of walking the talk.

I have also listened to a great many Canadians and many of the players in the telecom sector. You mentioned thousands, and I trust we're not simply talking about tweets here, that we're actually having serious conversations—you, being the Minster of Industry.

I sense a giant policy vacuum in this country. Your government has been in power for five years, and what I'm hearing from the telecommunications sector is a crying demand for some policy direction. It is not that surprising that you frequently overturn the CRTC when they make a decision because they themselves are working in a policy vacuum. They are also in need of direction from you and from Industry Canada, so when they do make a ruling it is not something that ends up being overturned; you in fact are speaking to them and you're on the same wavelength. In the proper order of things, overruling of the CRTC should be an extremely rare event.

Passing over the issue of UBB itself, I would like to ask about the procedure by which you notified the president of the CRTC that you were going to object to his ruling.

I spoke to Konrad von Finckenstein when he appeared in front of our committee a little while ago, and I asked him how he was notified that you did not agree with the CRTC's ruling. He told me that neither you nor the ministry were in contact with him, but that he found out like everybody else, through one of your tweets.

Are we in fact setting government policy and decisions by means of 140 characters that you send out in the middle of the night to tell the CRTC, a respected regulatory body, how decisions are made in this country?

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

Let me comment on a couple of things you've said, if I may, Mr. Garneau.

First, I dispute your characterization of government policy. I think our government policy is quite clear, and we actually have it in the form of a policy directive to the CRTC. We're in favour of choice, and we're in favour of competition. I don't think anything could be clearer.

Throughout my tenure as industry minister I've used that as the guiding light for policy decisions, some of which do tend to be controversial. It's the same test I used to implement the wireless auction results to make sure we had new entrants in wireless. It's the same test I use in terms of Internet access.

I think Canadians understand that policy. I believe the players in this particular area, the telecom players and the Internet players, understand that policy: competition and choice. I know it's your job to disagree with that, but that's pretty clear.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

But I would say to you, Minister, that the reason you overturned the CRTC is that the CRTC is trying to interpret its mandate. For example, it argues that in 2006 it interpreted in its fashion the directives it received from one of your predecessors, Mr. Bernier, with respect to how it should deal with competition. Now, we can agree or disagree, but the point is that obviously your opinion is different from what Minister Bernier had decided back in 2006, so you overturned his decision.

On the question of Globalive, which is another matter on which you overturned the CRTC decision, of course now we're taking it to the courts.

The point is that in a proper working government it seems to me there should be very few instances in which the CRTC is overturned.

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

And there are. I can't remember the exact numbers, but of some 2,200 CRTC decisions, we varied three and referred three back. I really think this is the exception rather than the rule. So I disagree with your characterization.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Minister, where are--

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

Can I answer your questions? Is that possible?

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Well, I think you just did.

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

Well, I haven't answered all of your questions. I'd like to continue on and turn to the other topic you raised, which was my use of Twitter.

I would just say to you that we as public officials and as politicians should use every means at our disposal to have a dialogue with Canadians, to be accountable and responsible with and to Canadians.

I have probably thousands among my followers--

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Should that include contempt for Parliament?

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

Excuse me....

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Should that include contempt for Parliament?

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

Of course it doesn't.

So I would say of the 12,000 followers I have, probably 2,000 to 3,000 of them are media, a great many of which are Canadian media. So articulating government policy via social media is no different from issuing a news release or holding a press conference or using other means that have traditionally been available to politicians. I don't think you should fear that. I would encourage you to open your arms to that.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

I would say to you that when I was president of the Canadian Space Agency--and it was before tweeting--if the Minister of Industry wanted to make me aware of something, he or she informed me so that I would know before it became public to everybody.

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

Well, I can assure you that my first allegiance is to the people of Canada, not necessarily to the chair of the CRTC, and I make no apologies for that.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

I think you made that very clear.

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

But I still respect him.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

What is your policy on net neutrality, Minister?

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

I think I raised that issue in my remarks, Mr. Garneau. I indicated that the CRTC has a policy they have articulated on net neutrality, which indicates to the incumbents and other Internet service providers that they cannot simply shape traffic via throttling if they have not successfully used other tools. The other tools that are available to deal with net neutrality, which I favour, of course, are investing in your network and using other less intrusive means of dealing with traffic shaping, if that is your goal, and you have to be transparent about it.

So I agree with the CRTC that a provider can't just wake up one morning and decide to shape its traffic without having a dialogue with its customer or consumer, and without organizing its affairs so that it uses other means available to deal with congestion, if it does exist, before using throttling.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

You realize, Minister, we're hearing about this for the first time today. Where is your policy?

[The Chair, Conservative, David Sweet]

Mr. Garneau, you're way over time. Thank you.

Mr. Cardin, you have seven minutes.