Industry Committee on April 13th, 2010

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

You've just touched on one of your recommendations, which is to increase to 49% the amount of issued voting shares that can be owned by a foreign entity. In the presentation before yours this morning, we heard from a representative of the OECD, who indicated that out of the 30 OECD countries, Canada in fact has the most restrictive regulations with respect to foreign ownership.

Do you have a sense as to what this recommendation would mean, this increase to 49%, within the context of the OECD?

[Konrad W. von Finckenstein]

Well, the OECD always makes these wonderful studies. I've spent a lot of time at the OECD in Paris, etc. It's very hard to compare France and Canada or Korea and Canada. For one thing, they're not right next door to the largest communications and broadcasting market in the world. Second, they don't share, to a large part, the same language, etc. Plus, our geography and demography are quite different. So I take those comparisons with a good grain of salt.

I think you have to look at the actual situation. We are aware of where we are located geographically and what our challenges are. I think we're overprotective and we're too complicated right now. Make it clear. Make it simple. So that if somebody wants to put something in Canada, he knows that he can't be in control and that he can own only 49%, and that he can basically bet on a Canadian to make a lot of money for him. That's how it works and that's how it should work.

Let whoever runs the Canadian communications companies go to the States, Europe, Japan, Asia, or China and get some money, etc. and say that the rules are clear: “I'm in charge, but here, you have 49%”. Let them say that they are obviously going to listen to those people very carefully, etc., but that they have to make this enterprise work and become profitable within the confines of the laws of Canada, which say that a Canadian has to be in control and the communications system has to reflect Canada.

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

You recommend that we consider unifying the three acts for telecom, broadcasting, and radio communications, and you indicate that other countries have already done this. Which countries have done so? Which countries offer close comparisons to Canada?

[Konrad W. von Finckenstein]

The two that come to mind are Australia, where you have ACMA, the Australian Communications and Media Authority, and the States, where the Federal Communications Commission is largely in charge of all CMs and CIOs.

Because, again, the States.... Every country has slightly different statutes that now have authority within the state governments, etc., and then, of course, there's always something left in our ministry or something.... The greater policy lines, of course, are determined by the administration and the Department of Commerce, and the same thing would be in place in Canada, you see, if principles develop.

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

You do agree, though, that we do need increased competition in Canada. Is that correct?

[Konrad W. von Finckenstein]

Absolutely. You're talking to a former Commissioner of Competition. I spent seven years in this country trying to foment competition.

[The Chair, Conservative, Michael Chong]

It's your last question, Mr. Braid.

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

Specifically, why do you believe we need increased competition in Canada in the telecommunications area?

[Konrad W. von Finckenstein]

In every industry, competition brings a discipline into the market. You have to make sure that you have innovation and good service, and that the consumer benefits. If you have a lack of competition, those three things disappear over time.

[The Chair, Conservative, Michael Chong]

Thank you very much, Mr. Braid and Mr. von Finckenstein.

Mr. Masse.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

Thank you for appearing today.

I think everybody wants increased competition. It's the obvious thing. But just like the oil and gas industry, where you have vertical integration, you don't necessarily have to have collusion. You just have the fact that Petro-Canada, for example, ships in Esso gasoline and sells it to other stations. There just isn't the competitive approach anymore.

One of the things I have a concern about is how, for example, Globalive--which is, some allege, and I think there's some truth to this, really just a front for an Egyptian billionaire--has been very much on the front of the New York Times and other papers, saying that the next generation of development is actually acquiring medium and other types of telco sector providers right now, as the next wave. They could actually come into our market, and, right now, when we have an issue of competition--I think that's fair, and very clear out there--we could have another model brought on us where we have one or two operators after a couple of years and no real competition.

I'd like your comments on that, because that's one of the fears being expressed out there. When we look at some of our domestic players, they're not the big fish in the sea. They're the ones who right now provide us services, but they could be very vulnerable, or they could be very interested in being purchased or in selling significant parts of their operations to foreign investors, with not necessarily a new competitive model coming into place.

[Konrad W. von Finckenstein]

Let's not make a comparison between gasoline and telecommunications. They're quite different industries.

You're talking about telecommunications, particularly wireless. We now have three national coast-to-coast, very high-speed, state-of-the-art wireless carriers, notwithstanding our “lack of competition”. We just had the last auction, and we have three new entrants coming in: Globalive, which we've talked about; Mobilicity; and also Public Mobile.

Plus, in Quebec we will have Quebecor entering. In the west we will have Shaw.

So there are actually five new entrants. In any market, five new entrants will have a huge effect in terms of price--

[Brian Masse, NDP, Windsor West, ON]

So are you suggesting that none of those entrants will merge?

[Konrad W. von Finckenstein]

Of course they will merge. Of course they consolidate. Will they all consolidate together? Will we wind up with three or will we wind up with four or five? I'm sure there is not a place, in a market as small as Canada, with this huge geography that we have and its thinly distributed population, that has six or seven wireless carriers. But we have now three as a result of this--

[Brian Masse, NDP, Windsor West, ON]

That's the whole point, though. You've hit on it right there. The whole point is that there isn't the space for seven or eight carriers in there for competition, so there will be consolidation.

Allowing the new entrants means, in itself, the way the government has done so, especially with the significant special treatment that Globalive has received with a cabinet decision, that we are not necessarily going to have the seven or eight entrants competing. We actually could be back to, in a couple of years, two or three entrants in the market, and not necessarily having reduced prices or increased service in Canada.

[Konrad W. von Finckenstein]

Just a second; you're making a huge number of assumptions here.

First, you're assuming that all of those mergers will pass the review by the Competition Bureau--

[Brian Masse, NDP, Windsor West, ON]

Well, it could be overridden. I mean, that's what has happened.

[Konrad W. von Finckenstein]

I'm talking about the Competition Bureau, I'm not talking about me. The Competition Bureau can't be overridden. That's number one.

Two, notwithstanding our huge land mass and sparse population, our wireless network is equal to anyone's in the world, which is a phenomenal achievement to be considered.

We now have all these entrants. I'm sure all of them will not succeed. Some of them will merge and so on. But as a result of these new entrants, there is more competition, and you will see it in terms of greater variety of products and lower prices, etc.

As I say, we have institutions to make sure that the very thing you suggested--an over-consolidation, resulting in a overly tight market where you in effect have conscious parallelism and no competition--does not result.

[Brian Masse, NDP, Windsor West, ON]

What I worry about, though, is that just doing this on its own--opening up or allowing foreign ownership--seems like a Hail Mary pass for consumers hoping to get better service and lower pricing. I have a speech from you in which you talked about having to bring the acts together in terms of broadcasting and telecommunications. I think that's probably the better approach to dealing with this issue, because once again, I just don't see.... This seems to be in isolation: if we just open this up, magically we are going to get lower pricing. I don't see that as the case.

[Konrad W. von Finckenstein]

Mr. Masse, you have my presentation before you. I suggest that you should deal with both of them when I say to liberalize, but do not open it up globally, to save 49% but make sure that Canadians can control it and it stays in Canadian hands. We are largely in agreement. Because of digitalization, I think dealing with one and not the other makes no sense.

[Brian Masse, NDP, Windsor West, ON]

I'm not trying to attack you. I'm just trying to make sure it's clear to people out there who are looking at this issue, because I think it has become quite simplified to a large degree, in that if we just reduce these shares.... Because right now, as you noted in your presentation, you can invest; it's just the controlling share aspect that seems to be the thing.

I think it's correct, too, to look at some of the geography issues, because we have some ridings in Ontario that are basically the size of France. There are different factors at play here.

If I have time, Mr. Chair, I will just finish off. I would like to get your opinion in terms of what should be done. You have it noted in your presentation that there are “conflicting decisions”. In your opinion, what should be done outside of this particular committee right now for a policy that would modernize our industry? In the bigger picture, what are the things that should be done immediately?

[Konrad W. von Finckenstein]

Could you be more specific? I want to make sure....

[Brian Masse, NDP, Windsor West, ON]

Yes. Do we need absolutely new legislation or separate legislation for the sector? Can we continue to work within the existing framework of legislation that we have now or do we need something unique or that is different from what we have done before?

[Konrad W. von Finckenstein]

If you want to effect a progressive reform rather than a wholesale one, and you want to start with foreign ownership, then I'd say to do the same thing for both acts. Both acts now have essentially the same ownership restrictions. If you want to liberalize them, fine, liberalize them. What I'm suggesting is to go to 49% and Canadian control.

You certainly can do that and I don't think it would do any harm to either act. Then, later on, look at how you merge the two, how you address convergence, and how you come together in it. Also, bring in the whole issue of spectrum, which is becoming more and more important. Mobile devices are becoming a huge part of the industry. We at the CRTC deal with the wireless side, but the spectrum side is being dealt with by Industry Canada. That's one issue that has to be addressed in regard to how to resolve it or how to better coordinate it.

[The Chair, Conservative, Michael Chong]

Thank you very much.

Mr. Rota.