Industry Committee on April 13th, 2010

[Mike Wallace, Conservative, Burlington, ON]

Would your opinion be that the loosening of those restrictions on the potential for foreign investment, which has happened in the 30 countries you've studied, including those in Europe, has helped add competition, reduce costs, and improve services for customers?

[Dimitri Ypsilanti]

I'd say that most certainly it did. There are markets that still need much more competition, but many markets that once had poor service, high prices, and a monopoly carrier are now considered to be very competitive and have very fast Internet connections at relatively cheap prices. Certainly, I think, competition and the openness of the market helped in that context.

[Mike Wallace, Conservative, Burlington, ON]

When you're doing your study, or your group of studies, what is the methodology to compare doughnuts to doughnuts, as we say here?

We have different densities. We have different sizes of countries. We have different levels of usage. I think usage in Canada is about 400 minutes a month or something, and I think it's much less in some countries in Europe.

Is there a way, through your methodology, that you're able to equalize those differences, or are they actually highlighted within your study?

[Dimitri Ypsilanti]

Your question is quite wide, because there are different sectors or segments of the telecommunications sector. For example, when we look at the mobile sector, we do have a methodology that compares prices across the OECD countries in the mobile sector. To compare prices, we tend to take the dense urban areas in each country--a major city, so usually Toronto rather than Ottawa. We certainly don't compare prices across Canada. We take one or two cities and compare prices, on the assumption that where you'll have the most competition is in those cities.

[Mike Wallace, Conservative, Burlington, ON]

My final question is on what we're hearing from some of our witnesses regarding the issue of culture and the risk that if we were to have foreign ownership Canadian culture would also be at risk.

Just for my understanding, are the telecommunication companies you've studied in other countries integrated like some of our companies that are in both the telecommunication business and the broadcasting business? Could you let me know, from your work in looking at other countries, whether there has been any impact on cultural broadcasting in those countries?

[Dimitri Ypsilanti]

I assume when you say “broadcasting”, you mean terrestrial free-to-air broadcasting, such as the CBC.

Let me break down the question. Most telecom operators that are offering broadband Internet access have been offering bundled packages for a number of years, which include Internet TV. They're offering 100 channels on their IP networks, on their Internet network. France Télécom has 100 channels, for example, but these are online.

Obviously some operators in Europe own cable companies, and that has caused problems in terms of competition. The cable companies offer Internet access, cable modem access, and the telecom companies offer broadband access, and they tend not to compete with each other because they have joint ownership. A limited number of countries have that.

To my knowledge, there are no countries where the telecom operator actually owns broadcast facilities in the sense of terrestrial broadcast facilities. But as I said in my earlier remarks, there is no evidence at all that there's been dilution of local content or local content regulations because of entry by telcos in the market for content.

[The Chair, Conservative, Michael Chong]

Thank you very much, Mr. Wallace and Mr. Ypsilanti.

We'll now go to Mr. Masse.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

Thank you, Mr. Ypsilanti, for being with us here this morning.

I know that in your document you have some good numbers on evaluating other countries and their pricing, but I'd like to ask you for your comments on reliability. What I mean by reliability is the success of the service in regularly providing the level of service that someone has purchased.

I'll use an example. In Windsor, I've used Cogeco Cable for many years, and it has been very, very good and reliable. I've had relatives who have gone to Bell, which has sent them the wrong equipment. As well, that service has operated at full capability not on a regular basis, but only intermittently.

You were looking at costing and so forth in these countries. Has there been an evaluation of the reliability of the provision of that data management service and the broadband used to deliver it, which users are paying for? Has it been evaluated at all?

[Dimitri Ypsilanti]

In short, no, because it's extremely difficult to get data. The data have to come from the companies themselves, which are obviously reluctant to provide that data. There are a lot of so-called war stories about how everybody used to hate their cable company and now they hate their Internet service provider. That, I think, happens across the OECD.

However, there are regulators that are now looking at some quality parameters, mainly at speeds, because, as you know, Internet service providers advertise that you will be getting eight megabytes or twenty megabytes per second, but when you're at home, you may end up getting only one or ten megabytes per second. There are regulators who are trying to impose a truth in advertising requirement that would give you a good idea of what speeds you will actually be getting. But in terms of quality, of how many times the network goes down, etc., I think there are very few regulators, if any, that are actually collecting those data.

[Brian Masse, NDP, Windsor West, ON]

That's one of my concerns as we try to evaluate some of this. Maybe you can confirm this again, just to make sure. We're relying on the companies' data in terms of what they're actually saying they can provide, but we're not measuring that in any country. Is it correct that no country is actually measuring this?

I know there are advertisements that we can go to and check the package and so forth in terms of what we're supposed to get. For example, I buy a package that has unlimited downloads. Other people buy smaller packages that have containment...the purchasing price. Is what you're saying that no country is actually measuring whether they're able to live up to those expectations? Is that happening anywhere? Or is it just us? Are we the only ones looking at Internet pricing and what they're saying?

[Dimitri Ypsilanti]

For speeds, and I'm just referring to the speed you as a customer get, in the U.K., the regulator is Ofcom. When you sign up to a package, once the operators know in which suburb and city you live, they can tell you that normally customers who live in your particular area get a speed of x or y. So some information will be given.

You have to remember that quality for Internet access is of course to a large part dependent on the operator and the service that it provides, but it's also dependent on you, the customer, on your inside wiring, your computer, your modem, etc., so it's quite hard to measure speeds. There are attempts to measure speeds, but they are often measurements of speeds outside the home because that's much more pure, if I can say it that way; it's not tainted by domestic equipment.

If I can add to that, in the early days of telecommunication, regulators did collect a lot of data on different qualities of service parameters, for the offer of telecommunication voice services basically, and because quality did increase significantly as we went to digital networks, many of these measures have disappeared. Because on the voice side, using normal copper networks, normally quality is good. It's only in the ISP area where quality can be shaky.

[Brian Masse, NDP, Windsor West, ON]

Thank you. That's very helpful, because it's not talked about a lot in terms of how we standardize our measurements with regard to this whole issue.

I do want to quickly add that in Canada we don't have any restrictions on foreign investment; rather, it's controlling shares where there are restrictions. What would be the primary motivation for foreign investment if we reduced our controlling share element versus what it is right now, where it's open if you wanted to actually invest in non-controlling shares?

[Dimitri Ypsilanti]

Let me go back a little. You do not have restrictions, as far as I understand, for resellers, so if there is an Internet service provider that uses unbundled lines or wholesale lines from Bell Canada, for example, it can be wholly foreign owned, as far as I know.

But many of these companies would perhaps like to get into networks and to build their own networks, or to build their backbone networks, at least, not necessarily all the way to the home. They would like to control their network much more than they are controlling. I think that is a key aspect in allowing foreign companies to come in: to allow them to have a better control over the network. Because, going back to your earlier question, when they have to rely on an incumbent--Bell Canada or whoever-- the quality of that network is not under the control of the wholesale user. It's dependent very much on what is given to them by the other company.

[The Chair, Conservative, Michael Chong]

Thank you very much, Mr. Masse.

Thank you, Mr. Ypsilanti.

Monsieur Coderre.

[Denis Coderre, Liberal, Bourassa, QC]

Kalispera, Mr. Ypsilanti. How are you?

[Dimitri Ypsilanti]

I'm very well.

[Denis Coderre, Liberal, Bourassa, QC]

That's good.

Because you also had the privilege to study in Canada and you know the geography of Canada, I'd like to come back to the kind of one-two punch of culture and telecommunication. Because of course we have a situation here, as you know.... If Italy is buying France Télécom, I'm not sure that we'll have Italian content in France, but when you're in Canada, we're looking to what is going on in the United States and it's a bit tricky because of the geography.

So first, do you believe that we don't have any choice in Canada but to have some regulation because there is a close link between the content and the distribution?

[Dimitri Ypsilanti]

I don't think that link is there. If you want to control Canadian content, that's fine. You can do it with regulations on the broadcaster, which you have already in place, or you can do it on a telco that is providing Internet protocol-based television. You can put the same restrictions on them if you wish.

You're certainly not in a position to control content on the Internet, and I think no one does that. But if you want to control programmed television—whether it's provided free to air, on cable networks, or on high-speed Internet networks—you can do that directly with regulations, many of which you have in place already, without necessarily going all the way back to the network and restricting investment in the network. I find that totally unnecessary.

[Denis Coderre, Liberal, Bourassa, QC]

My only concern here is that—as you've said in one of your answers to my colleague Mr. Wallace—Canada is kind of unique. Because the telecommunication companies are also broadcasters and own cable distribution at certain levels, there is co-ownership. So do you believe that, although we need more competition, regulation is also quite necessary because of the unique situation?

[Dimitri Ypsilanti]

I think you have to separate regulation that creates network and service competition and regulation that controls the content of the service. Here I am referring to the service in terms of preprogrammed service, such as broadcasting. That's a whole different area of regulation.

As you probably well know, the French are very attached to French culture, and they would certainly not allow Italian culture to...[Inaudible--Editor].

[Denis Coderre, Liberal, Bourassa, QC]

You noticed my accent, “eh”?

My colleague, Mr. Garneau, has another question for you.

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

Yes.

Thank you, Mr. Ypsilanti.

As you know, the Broadcasting Act in Canada says that the broadcasting system is to be effectively owned and controlled by Canadians, and it's not open for renegotiation at this point.

If the telcos—and there are not very many pure telcos in this country—are allowed to have greater foreign ownership, how do you reconcile that with the Broadcasting Act, since some of these companies in the telecommunication sector will also have broadcasting interests?

[Dimitri Ypsilanti]

I think we're tending to use the term “broadcasting” a bit differently, because for me “broadcasting” refers to the use of the airwaves, so that's free-to-air broadcasting, much like CTV or CBC does, rather than using cable networks or high-speed Internet networks to send you content.

But having said that, you can control the amount of ownership—

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

Just to clarify, regulation here on the broadcasting side does touch the cable side of things. It's not just for over the air.

[Dimitri Ypsilanti]

Sure, but you can control the percentage of programming that is Canadian owned or produced or has Canadian content or whatever criteria you want to use, irrespective of the network. All you need is a regulation stating that what we call a “linear” program.... In other words, if you have a schedule of programming for a number of shows on your IP network, then these should have x% that are Canadian shows, Canadian-produced shows, or whatever. All it requires is that you regulate that.

My point is that to achieve that you do not need heavy-handed regulation to stop investment and to stop competition on the telco side and on the network investment side.