Industry Committee on Oct. 31st, 2011

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

Mr. Reed, Mr. Glick made some comments about the U.K. numbers. I made some notes because I was curious about embracing e-commerce in some of these geographically smaller countries. How much of the impact might be due to shipping costs? How would shipping costs in Canada compare with shipping costs in most of these smaller European countries?

[Gordon Reed]

The smaller the country, the greater the density, so your total shipping costs are going to be lower in many small countries. There are parts of Canada that are tremendously expensive to bring transportation to. There are other spots where it's economical. Some of the best rates in the world can be in the GTA and southern Ontario. We have great density in those areas. If you are living in Kenora, the costs are going to be significantly higher than they would be in Burlington or any other city.

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

I think you were comparing the U.S. with Canada. Geographically, they are not far off size-wise, but the U.S. has 10 times the population built into its geographic footprint.

[Gordon Reed]

Yes.

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

That has to have some impact.

[Gordon Reed]

If I look at our cost to serve in Canada versus the United States, it is significantly lower in the United States. The density is there. They don't have our vast space with no population. The overall cost to serve is significantly lower as a result.

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

One of the benefits in this country is that, with technology being what it is, you can set up in a beautiful, more rural location and have a little bit more fresh air and everything that goes along with that and still conduct business. What would you advise someone, taking into account the cost structure, if he or she were doing something like that?

[Gordon Reed]

That person is going to need to look where they are, and might need to be innovative in getting their products to market. Shipping from your back door on an individual basis may not be the most economical thing. Maybe you need to do a hybrid movement where you move goods in bulk to Toronto and distribute out of Toronto, or use a third-party logistics warehouse to do that distribution for you while you run your business from a remote area.

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

I'm going to use the chance to have Mr. Maduri and Mr. Rupcic together here. You have some similarities in some of your business. What would be the difference between the technologies your companies use and whom you serve?

[John Maduri]

It's apples and oranges. I serve homes and businesses. I put an antenna at the roofline of the customer's home. I install a device. I'm up 18 feet. I'm not mobile. If we were to look at CRTC statistics, the average in 2010 was roughly 15 gigabytes of monthly download. That's what my customers use in comparable communities. That's a mobile solution, and if I could guess, the monthly usage for a mobile broadband customer in Canada is about 1 to 2 gigabytes per month.

[Ante Rupcic]

Actually, it's a lot more, surprisingly. We have customers who are well over 100 or 200 gigabytes per month.

[John Maduri]

And the average for the group?

[Ante Rupcic]

Let me say that we have categories. We have the heavy users, who go that high; and then we have the normal users, the smart phone users, who are at 9 or 10 gigabytes; and the data stick users are greater than that.

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

Being an Edmonton Oilers fan and spending a lot of my life here in Ottawa, I've signed on to a GameCenter package on my iPad, and am able to watch hockey games over 3G. I imagine that would be one of the things that would drive up usage over time.

[John Maduri]

Absolutely.

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

What other things would?

[Ante Rupcic]

We hired a company to look at the different applications that our customers are using. Netflix, for example, is certainly present on our network. YouTube streaming, and peer-to-peer file sharing—though maybe not as high as before—are some of the top applications being used.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Rupcic, and Mr. Lake.

Now we go to Mr. Thibeault for five minutes.

[Glenn Thibeault, NDP, Sudbury, ON]

Thank you, Mr. Chair.

Mr. Maduri, in no way do I want to say this applies to Xplornet, but what I've heard from some constituents and others who are in the rural areas is that the satellite costs are just so much higher than what you can get in the community, that it's just not a viable option for many people in rural areas. Is that a myth? Can you debunk that? Is that accurate?

[John Maduri]

That's absolutely correct, and it's about to change.

[Glenn Thibeault, NDP, Sudbury, ON]

Okay.

[John Maduri]

The fundamental issue has not been technology. Government, the military, and large enterprises have been using satellite communications for truly mission-critical applications for the last 40 years. If you think of applications that move out of the military, large business, and government into the consumer realm, the challenge has been for us to bring in more capacity and reduce the cost per megabit, the cost of a unit of capacity. In essence, that's what these two new satellites are all about.

This isn't just an Xplornet or a Canadian phenomenon. All across the globe high-throughput satellites are being deployed that increase capacity by multiples. In our case, I think we'll be bringing to Canada 10 or 12 times more capacity at, in essence, the same cost. So that improves our cost structure and allows us to price more effectively.

Having two satellites covering areas of Canada offers the opportunity for reliability. So satellite broadband is about to get dramatically better, cheaper, more reliable, and it's all about the investment in this next generation of technology.

[Glenn Thibeault, NDP, Sudbury, ON]

That's very exciting.

[John Maduri]

It is. It's a game changer for rural Canada.

[Glenn Thibeault, NDP, Sudbury, ON]

It is. I guess that's part of the frustration for many of the folks, specifically in northern Ontario and those outside the greater city of Sudbury.

So, first, maybe you could explain the turnaround time for that, if you have any dates.

Secondly, I think it's important to elaborate on your earlier discussion about the urban versus rural partition. I want to get this correct, which is why I'm asking you to repeat it, that you're not necessarily looking for competitive advantage. Can you explain why you want that?