Industry Committee on April 13th, 2010

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

Thank you, Mr. Chair. I'll be sharing my time with Mr. McTeague.

I have a very brief question.

The OECD report that was referred to earlier--and this will be in the same vein as Mr. Masse's questions--reported that in the countries that have liberalized their rules, there seems to be an initial push, where you have multiple people or corporations competing, but they all end up with three or fewer. That seems to be where we are now.

My concern is that we seem to have more companies coming in, which, as you mentioned, will have better pricing, and that better pricing, I honestly believe, will happen in Toronto, Montreal, and Vancouver. I'm in northern Ontario, Mr. von Finckenstein. Where does that leave me in northern Ontario where the population is sparse and the service is not great right now?

We've seen historically that the service we've had has lagged behind that of major centres and that we have technology that may not be the finest. It's usually second-rate technology and it puts us behind the eight ball. How do you see further competition helping us?

Also, do you see regulation coming from the CRTC? Or should we have, in this new combined regulation, something enticing or regulating the people who are providing service to major centres to provide that service to northern Ontario or to rural Canada?

[Konrad W. von Finckenstein]

Are you talking mostly about wireless?

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

Yes. Right now, wireless.

[Konrad W. von Finckenstein]

Part of it is price, of course, as you say. The other thing is technological innovation, which will come. And it has come. Actually, I think that we are one of the only countries that has a coast-to-coast high-speed wireless access network right now. So we're not doing badly. Especially given our land mass, this is quite something.

You're quite right when you say that it's spotty in certain areas. In your part of northern Ontario, I believe you have one only provider. But is it different in wireless than in any other industry? Unfortunately, it's part of the economic.... But digitalization has actually meant a lot of advancement on that front, by taking away regional disparities and allowing people even in remote locations to have access to communications, to markets, etc., which they otherwise didn't have.

There will be some innovations to satellite. There's no question about it. As these markets are hauled out, you also have this innovation called fixed wireless. As you know, you bring it to a certain point by satellite and then you distribute it by land line, or vice versa--you can bring it by land line to one point and then go wireless. All of this will happen. The more players you have, the more the market becomes saturated in some area, and people will push out into the hinterland. That's a normal economic evolution.

We do our best in terms of wireline, in terms of cross-subsidization of lines. We have not done that in wireless because there has been no need. As I said before, unless there's real market failure, we're very reluctant to do that. There is a huge price to be paid every time you intervene in a regulatory way into the natural rollout of an industry.

My colleague, Mr. Katz, spent years developing the wireless industry for Rogers. Maybe he can add something.

[Len Katz, Vice-Chairman, Telecommunications, Canadian Radio-television and Telecommunications Commission]

There's no doubt that back in 1985, when cellular was first introduced, the thought that this much coverage in this country could be fathomed. Technology has changed dramatically.

It continues to change, as the chairman said, and it's not only satellite-based technology; Wi-Fi technology is pushing it as well and is providing access to broadband services through that wireless technology. Even in the more remote areas, it is getting there. It may not be getting there as fast as some people would like to see, perhaps, but it is moving out. I have no doubt that if you were to look in a crystal ball you would see that five or ten years out it will be virtually ubiquitous.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Katz.

I believe Mr. McTeague has a question.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

Thank you, Chair.

Mr. von Finckenstein, Mr. Katz, and Mr. Keogh, it's good to see you here today.

I understand that you've worn a couple of different hats in the past. I'm glad that one isn't me appearing before the Federal Court in front of you, but I've worked with you in other files in the past.

I'll say this very quickly. You've sawed off the possibility of Canadian ownership at 49%. That assumes that you believe correctly that there is enough finance, that there is a capital pool available within Canada to continue the mission of ensuring that consumers are protected with a variety of competition as well as decent pricing and innovation.

Can you guarantee this committee....? In your understanding of the industry right now, apart from bringing together all the pieces of legislation on telecom--the Radiocommunication Act and of course the Broadcasting Act--are you convinced that the 49% threshold will continue to satisfy the ability to bring services to Canadians at competitive prices?

[Konrad W. von Finckenstein]

I wouldn't make the recommendation if I wasn't satisfied of that. I think the international financiers who control finance, etc., appreciate that various countries have rules providing for national control. As long as the rules are clear and justly administered, etc., then it becomes a business decision. Whether you invest or don't invest is a question of the returns you get. Traditionally, we have done very well under that model, and I don't see why it would be any different.

[The Chair, Conservative, Michael Chong]

Thank you very much.

Mr. Lake.

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

Thank you, Mr. Chair.

Thank you, Mr. von Finckenstein.

In taking a look at page 3 of your opening statement, I was interested in the second paragraph, where you say “the legislative and regulatory structure we administer still preserves the old distinctions of broadcasting and telecommunications, or in other words”--and this is the part that I thought was interesting--“the distinctions between content and carriage”. As you go forward, you refer to those as “artificial and outdated concepts”.

When you're talking about the distinctions between content and carriage, I find it interesting that you would call those “artificial and outdated concepts”. It seems to me that the differentiation between content and carriage is the critical question as we move forward in this world of convergence. It seems to be the whole question of Canadian content and culture versus what we're talking about in terms of carriage, in terms of liberalizing the rules regarding carriage without actually impacting the rules regarding content.

Maybe you could clarify what you meant by that.

[Konrad W. von Finckenstein]

Traditionally we have said that telecommunications companies are carriage companies. They don't have anything to do with the content; they just carry it from here to there, etc. They are impartial providers. Broadcasting is something different. You create content and influence content, and we want to make sure it reflects Canada.

Along comes digitization. Everything gets converted to bits, so it's convergence, and the technology bits essentially become one. The companies have formed themselves and have consolidated to do both. Let's take the example of Rogers. Rogers owns a wireless network, a wireline company, and a cable company--all three distributing. It also owns a specialty television channel and a television network--clearly broadcasting. All of that is together.

If you are going to liberalize one side and not another, you will be saying to Rogers that in their empire there, in that part, they can have foreign control, etc., and you don't care because they're just carrying. But you'll be saying that in this other case they have content and you care very much what they do. Then we come to the application that Madam Lavallée is referring to and where do they fall in? Also, where do you fall in when you have programs that have interactivity, which is the craze right now and is something that young people very much want? Do you treat them as content or carriage? Because there are aspects of both.

It just doesn't make sense anymore. It was perfectly level.... You had a different world when you didn't digitize everything. Now, with digitization and convergence, everybody has seen the light. The way to do it is to put it all together and find the most efficient way of producing and distributing it.

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

When we're looking at the words, even as you describe them, it seems to me that we're talking about one mode of carriage versus another. We're not really talking about content. But I certainly see what you're talking about in terms of convergence and some of the challenges.

I talk to other consumers out there. We want the advantage of having the very best technology in the world in terms of the way we consume our content. We want to have the best prices in the world. I think that has been recognized as a significant challenge here in Canada. The previous witness brought that up. It seems to me that we can achieve this through some of the measures we're talking about in terms of competition, yet still apply rules for Canadian content to any telecom company operating in Canada regardless of the ownership structure.

Can you comment on that?

[Konrad W. von Finckenstein]

It's the same answer that I gave your colleagues. Of course you can do it, but you create artificial distinctions and artificial structures that don't really reflect the economic or the technological reality. That's exactly why I'm saying this: let's face the fact that we are looking at a converged world and legislate for a converged world. Don't legislate if the convergence doesn't happen and then have people adapt to that legislation and create artificial separations and inefficiencies.

[The Chair, Conservative, Michael Chong]

Thank you very much, Mr. Lake.

Thank you, Mr. von Finckenstein.

Lastly, we will go to Monsieur Cardin.

[Serge Cardin, Bloc, Sherbrooke, QC]

Thank you, Mr. Chair.

In your presentation, you suggested a maximum of 49% of shares with voting rights, in any form, directly or indirectly. You also recommend keeping an eye on de facto control. You also refer to the merging of the Telecommunication Act with the Broadcasting Act.

Today, according to your recommendations and proposals, the situation would seem to be urgent. With the Globalive case, we can clearly see the government's desire to open this field to financial interests. In addition, in the budget bill—which is currently being studied in the House—satellites will be opened to foreign ownership as soon as the bill is adopted in Parliament.

Given this convergence and this control, what do you think of the fact that foreign entities can control Canadian satellites?

[Konrad W. von Finckenstein]

I don't see a problem in this case, first because other satellites have access to Canada, and also because our satellite company Telesat carries out very few activities in Canada. In fact, most of its activities consist in selling satellites abroad. It competes with other countries. In my opinion, we are really talking about the production of devices. I do not see that it is in our interest, as a nation, to keep that sector in Canadian hands. It's like the motor vehicle sector, except that we have no restrictions. Satellites are very sophisticated and high-tech devices that happen to be in a global market. I do not understand the purpose of imposing restrictions.

[Serge Cardin, Bloc, Sherbrooke, QC]

In the current context of convergence, a cell phone can easily broadcast a number of things because it can receive just about anything, whether it be broadcasting or telecommunications. In addition, a satellite belonging to foreign interests could potentially control all of the content.

In this situation, don't you think that the control over content that you are trying to obtain by merging the two acts may elude us?

[Konrad W. von Finckenstein]

To position a satellite serving Canada in the sky, we have to have a spot, and we obtain it from ITU in Geneva. The Department of Industry determines what percentage of a satellite will be used to serve Canada, the United States, etc. It has nothing to do with the ownership of the satellite. It occupies a space reserved for Canada, and the Department of Industry determines how the satellite will be used.

[Serge Cardin, Bloc, Sherbrooke, QC]

But when the ownership is—

[Konrad W. von Finckenstein]

It has nothing to do with the ownership of the satellites.

[Serge Cardin, Bloc, Sherbrooke, QC]

But once they are owned by foreign entities, the problems of content, the services offered, to whom and how, will automatically come up.

[Konrad W. von Finckenstein]

We now purchase Canadian and foreign satellite broadcasts to serve Canada, and the same thing will apply in future. I don't see how the ownership of satellites can have the least influence on Canadian programming. I don't see the connection.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Finckenstein.

Thank you, Mr. Cardin.

I'd like to thank our three witnesses for appearing in front of us today.

If I could make one final point, if the witnesses and the members of the media wish to have further discussions after the meeting is adjourned, I'd ask that they take those discussions to the Hall of Honour, because there is another standing committee that is to commence their meeting at 11 o'clock.

Without further ado, our meeting is adjourned.