Evidence of meeting #61 for Industry, Science and Technology in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was coverage.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Alain Beaudoin  Acting Assistant Deputy Minister, Spectrum, Information Technologies and Telecommunications, Department of Industry
Pamela Miller  Director General, Telecommunications Policy Branch, Department of Industry
Chris Padfield  Director General, Digital Policy Branch, Department of Industry
Daniel Rubinstein  Policy Analyst, Policy and Research, Federation of Canadian Municipalities
Michael Buda  Director, Policy and Research, Federation of Canadian Municipalities

3:30 p.m.

Conservative

The Chair Conservative David Sweet

Good afternoon everyone.

Welcome to the 61st meeting of the Standing Committee on Industry, Science and Technology regarding a study on broadband and Internet access across Canada. We have the Department of Industry before us for the first hour. The second hour, colleagues, will be with the Federation of Canadian Municipalities. We'll shorten that second one to 45 minutes so we can discuss a path forward, considering the changes that have happened due to the budget this week.

Also, our witnesses before us have asked for a little bit of extended time for the presentations, which they feel will be much more fulsome for our information and for our capability to be able to ask good questions.

We have Alain Beaudoin, who is the acting assistant deputy minister of spectrum information technologies and telecommunications. We also have Director General Chris Padfield from the digital policy branch, and Director General Pamela Miller of the telecommunications policy branch.

I believe it's you, Monsieur Beaudoin, who's going to be giving the opening remarks. After you're done we'll go to the alternating questions.

Please proceed.

3:30 p.m.

Alain Beaudoin Acting Assistant Deputy Minister, Spectrum, Information Technologies and Telecommunications, Department of Industry

Thank you very much, Mr. Chair.

Your committee is undertaking a study on broadband and Internet access in Canada. We would like to take this opportunity to provide the committee with an overview of the role of the Internet and broadband in spurring economic growth.

First let me clarify, for the purpose of today's presentation, that the term “broadband” commonly refers to high-speed Internet access. It can be simply defined as a fast connection to the Internet that is always on. Broadband service provides higher speed of data transmission and allows more content to be carried through the transmission pipeline. For example, it provides access to various Internet services, like streaming video, voice-over IP, and interactive services.

Today we would like to focus on three important ways in which the Internet and broadband contribute to the economy. First, look at how companies invest in digital technologies that help them innovate, increase productivity, and open new markets. Second, look at how the ICT sector develops and sells innovative products and services that both support and leverage broadband and Internet development. Finally, we will touch on the economic benefits that arise from investing in the networks themselves.

Digital technologies can be classified as general purpose technologies, and they are transforming the way companies do business. However, it is very difficult to predict where these transformations will lead to in the future. Who would have predicted how transformative and innovative the smart phone has been in recent years? It is equally challenging to predict where it will bring us in the future. We are not here to speculate today. But the one certainty is that there will be continuous change driven by exponential growth in processing speeds, memory capacity, sensors, and so on. That growth is going to create even more disruptive products and services, which in return will continue to change how businesses operate and help them become more innovative and competitive.

Many of these new products and services are already having a significant impact. Let me highlight two on this slide.

First, faster wireless speeds and the increasing prevalence of cloud computing are giving firms the ability to access and share large amounts of data across their entire organization from any location around the world. This in turn not only helps these firms be more efficient, but it allows more innovation. Second, machine to machine communications, which are only really just starting to emerge, allow for a greater array of remote monitoring and sensing that have lots of applications in almost every sector of the economy. Ericsson, for example, estimates that there will be 50 billion devices of all sorts connected to one another via the Internet by 2020. This, in essence, defines what some refer to as the “Internet of things”. It will not only spur new technologies and applications, but also new markets that are difficult to fathom today.

Canadian companies are increasingly investing in these technologies. In 2012, Canadian investment in ICT was $33.7 billion in computers, software, and communications equipment. Those figures do not capture the other substantial investments companies are making in products that already have digital technology embedded in them. New services like cloud computing and software as a service—precisely because they are services and not investments—also do not get captured in these figures, but increasingly companies are using these services. There are many examples across the country of leading firms leveraging these products and services to great effect. Overall, there is an opportunity for the private sector to do more to exploit these technologies. For example, when we compare our ICT investment to the U.S., Canadian firms overall have been slower to invest, and invest only 58% of what U.S. companies do in ICT.

Let's turn now to slide 6.

That brings us to our second point, the ICT sector.

The overall ICT market is expected to grow by 4.5% per year over the next 4 years. Now we could spend a lot of time looking at numbers for the ICT sector. But, given the time we have, let me emphasize a few points.

Although this growth rate might seem relatively modest for the ICT sector overall, specific sub-sectors are growing much faster. For example, smartphone shipments increased by almost 400% in the last 4 years and are expected to continue to grow significantly in coming years.

As the market for tablets like the iPad was almost non-existent in 2010, we can expect that ICT companies will continue to develop products and services we never thought or dreamed about.

My last point is that a lot of future growth will occur in emerging economies, while growth in traditional markets like the United States and the European Union, while still robust, will be slower. As such, Canadian ICT companies will need to diversify their exports and move increasingly toward these new markets in order to grow.

We turn to slide 7.

This is the third point. Broadband networks are the core of realizing the benefits of broadband. Canadians have access to broadband over a variety of technologies, and these networks allow Canadians to engage in the digital economy, facilitating the use of voice messaging, Internet, and data applications, as I mentioned earlier. The digitization and growth in broadband speeds are leading to convergence, the expectation that online services are accessible at any time, anywhere, and on any device.

We turn to slide 8.

The tremendous growth of the Internet over the past decade and the rise of mobile within the past several years has led to an exponential increase in global online traffic.

The Canadian marketplace is no different.

In 2016, global Internet traffic is forecasted to grow to nearly 4 times the level it was in 2011. It is anticipated that mobile network growth will be 14 times higher during that period.

We turn to slide 9.

The good news is that Canadian industry is pouring significant amounts of capital back into its networks to meet this growing demand. Investments in Canada were $9.4 billion in 2011, up from $8.4 billion in 2010. Canadian capital intensity, which is a measure of the ratio of telecom capital investments to telecom revenues, was 22% in 2011. These investment levels fared very well internationally, and if you look at the graph here, Canada is ahead of peer nations such as the U.S., Japan, and the U.K. in terms of its capital intensity. According to the OECD, we've also been above the OECD average since 2005.

Let's turn to slide 10.

So the billions invested annually by Canadian telecom carriers is resulting in higher-speed broadband coverage. Canada has near ubiquitous coverage of broadband and mobile networks, which are available to 99% of Canadians. Network providers are also rapidly deploying what we call next-generation networks to meet growing demand and the needs of advanced applications. For instance, wired 50-megabit-per-second networks are available to over 75% of Canadian households, up from 30% in 2009. Advanced mobile LTE networks, or long-term evolution, known as 4G as well, were available to 45% of the population at the end of 2011 and reached two-thirds coverage at the end of 2012.

We turn to slide 11.

There is no question that in the years ahead, demand for broadband and mobile technologies will continue to grow. We anticipate that the private sector will meet the challenge of the next wave of broadband-enabled applications by continuing to do what it does best: invest and innovate.

We foresee wired providers continuing to deploy fibre deeper into their networks, providing users with higher speeds. Wireless carriers are anticipated to continue to upgrade their existing mobile networks to the advanced mobile LTE platform, which offers significant improvements in speed and capabilities over previous networks.

In summary, Mr. Chair—and this is the last slide—digital technologies will continue to evolve at an exponential rate and change the way we do business and live.

As previously mentioned, in some cases we are only beginning to see the potential and changes that are resulting through the development and use of these technologies. As this growth continues, Canadian companies will be presented with even more opportunities to innovate, be competitive, and expand globally.

Thank you very much for the opportunity to come before the committee today. Before my colleagues and I take your questions, I would like to mention that there is an additional slide in the annex that shows a Canada-U.S. comparison of broadband coverage and speed.

Merci beaucoup.

3:40 p.m.

Conservative

The Chair Conservative David Sweet

Thank you, Monsieur Beaudoin.

Now we'll move on to questions from members. We'll begin with the Conservative Party, Mr. Lake, for seven minutes.

3:40 p.m.

Conservative

Mike Lake Conservative Edmonton—Mill Woods—Beaumont, AB

Thank you, Mr. Chair.

Thank you to the witnesses for the presentation.

It's a little bit like drinking out of a fire hydrant. There's a lot of information there in terms of taking it all in.

I want to come back to where you started, with the definition of broadband. When we talk about broadband, what exactly are we talking about? Canadians who might be listening to this broadcast—I'm sure there are many millions of them—would be listening in from a whole bunch of different levels of understanding. If you were to explain broadband, what uses of technology would fall under that category versus other categories? What other categories would there be there?

3:40 p.m.

Pamela Miller Director General, Telecommunications Policy Branch, Department of Industry

I can respond to that.

In the past, broadband was mostly delivered over wired networks. That would be telephone networks and cable networks. What we're seeing now, with rapid advances in technology, is that we not only have significant upgrades through the telco and cable networks with fibre upgrading, but we see fibre to the node that is bringing significantly higher speeds. We also see with mobile broadband that over wireless devices it's possible to approach the same high speeds.

We also see advances in satellite technology. There are high-speed satellites that are coming online now. In the past, satellites were considered to be a lower speed, but now, with the high-speed satellites, they are again reaching up to 5 to 10 megabits in terms of speed. There are also technologies known as fixed wireless that are particularly well suited to reaching rural areas.

Through all of these different types of technologies, we see considerable advances in innovation and lots of choices in terms of service offerings, and we do see considerable advances in speeds. As was noted in the presentation, in Canada we now have 75% coverage at 50 megabits. This is due to the advances in fibre to the node, and also with LTE, which is a long-term evolution technology from mobile, we are seeing very high speeds that can be delivered through mobile devices. So you will see that there's a variety of technologies that can deliver broadband.

3:40 p.m.

Conservative

Mike Lake Conservative Edmonton—Mill Woods—Beaumont, AB

What is the threshold where something would be considered broadband versus not broadband? Is it just defined specifically based on speed?

Alain talked about high-speed access and then “always on”. Those were the two things that you used to describe that. What would be the definition?

3:40 p.m.

Director General, Telecommunications Policy Branch, Department of Industry

Pamela Miller

Usually we would define broadband by the speed tiers, and we would start with 1.5 megabits. That's what we would consider the minimum, and then it would go up from there into what you consider next-generation networks. With a next-generation network you'd be looking at 25 to 50 megabits and beyond.

What it basically means is that you could do your applications a lot faster, and in a household setting, you could do multiple applications at the same time. I think the “always on” is a component where if you have the types of network availability, for example, with your mobile device, you expect it to be readily available and accessible. In general, the definition of broadband, as I said, usually goes by the speed of the technology.

3:40 p.m.

Conservative

Mike Lake Conservative Edmonton—Mill Woods—Beaumont, AB

So just to clarify, when you say 99% of Canadians have access to broadband coverage, would you say that 99% have access to 1.5 megabits?

3:45 p.m.

Director General, Telecommunications Policy Branch, Department of Industry

Pamela Miller

That's right.

3:45 p.m.

Conservative

Mike Lake Conservative Edmonton—Mill Woods—Beaumont, AB

Okay.

How does the wireless spectrum auction announced and discussed in the last couple of weeks fit into the mix in terms of availability?

3:45 p.m.

Director General, Telecommunications Policy Branch, Department of Industry

Pamela Miller

The wireless auction is very important from two components. It is making more of the valuable wireless spectrum available for companies to be able to deploy these advanced services to Canadians. We've undertaken in the next years to have a total of 700 megahertz of commercial mobile spectrum available. By releasing the 700 megahertz combined with the 2,500 megahertz, we will be more than two-thirds along to meet that target. The reason you need that spectrum is that without that bandwidth you won't be able to actually have that high speed and deliver to Canadians.

The other reason 700 is important is for promoting competition, because through this auction we are enabling entry of a fourth player in every region. So we have the goal of ensuring competition, but also innovation and availability of world-class services to Canadians.

3:45 p.m.

Conservative

Mike Lake Conservative Edmonton—Mill Woods—Beaumont, AB

In terms of the 99%, is there a similar statistic or measurement in regard to the percent of Canadian businesses that have access to broadband?

3:45 p.m.

Director General, Telecommunications Policy Branch, Department of Industry

Pamela Miller

That would be similar because this is ubiquitous coverage. I would say especially in urban centres, where we would find our very high coverage, where we have the 75% availability at 50 megabits, that would pertain to most businesses and beyond; they would have even higher speeds than that.

3:45 p.m.

Conservative

Mike Lake Conservative Edmonton—Mill Woods—Beaumont, AB

Taking a look at the number on the annex that you talked about, clearly the 1.5 megabits were at 99% but as we move further to the right, it's kind of interesting to note that in the mid range we're lower than the Americans, and then as we get to the higher range we're higher again. Why is that? Is there any explanation?

3:45 p.m.

Director General, Telecommunications Policy Branch, Department of Industry

Pamela Miller

It's simply the build-out of the networks. As we have cable networks upgrading to what we call DOCSIS 3.0, to higher-grade technologies, fibre to the node, I think you'll find in those categories it will even out over time. It's simply the implementation in both countries. We're very similar in terms of our approach to promotion of private-sector-led approaches and promoting investment.

As you will see, this is very significant coverage and it does very well on an international scale.

3:45 p.m.

Conservative

Mike Lake Conservative Edmonton—Mill Woods—Beaumont, AB

Just looking at the very highest end there, as we try to move from 75% in the 50 megabits range to 99%, to match what we have, or thinking optimistically down the road, how do we best accomplish that? What is the gap right now? How do we close the gap?

3:45 p.m.

Director General, Telecommunications Policy Branch, Department of Industry

Pamela Miller

We have seen very significant progress over time, as you'll notice in the chart that was in our presentation. You will see that the private sector is driving that growth. So for 50 megabits you'll notice that only two years ago we were at 30% and now we're at 75%. This is very significant and rapid progress.

Our approach is that we don't want to crowd out the private sector. We want to have private-sector-led investment. Some other countries have taken a more direct investment approach, which is very costly. We are relying on the private sector, and it is certainly delivering in terms of getting the higher-speed capacity.

3:45 p.m.

Conservative

The Chair Conservative David Sweet

Madame LeBlanc, you have seven minutes.

3:45 p.m.

NDP

Hélène LeBlanc NDP LaSalle—Émard, QC

Thank you very much, Mr. Chair.

Thank you very much to our witnesses for being here. I think we can benefit from your expertise.

I often hear from representatives of the private sector. I think it's great that you mentioned the private sector has to invest. But what should the public sector or government do to encourage network deployment? We know this is a vast country made up of numerous regions. We want to make sure that all Canadians in all regions have Internet access because, as you pointed out, it's a testament to a region's prosperity and development.

What should the public sector do? What role should the government play to support the deployment of that network, especially in terms of infrastructure and incentives, so that small and medium-sized businesses benefit, regardless of the region they're in?

3:50 p.m.

Acting Assistant Deputy Minister, Spectrum, Information Technologies and Telecommunications, Department of Industry

Alain Beaudoin

Thank you for that question.

My answer will echo what my colleague mentioned about coverage. On the whole, 99% of the population has access to a minimum speed of 1.5 megabits. Furthermore, the measures Minister Paradis announced on March 7 are primarily intended to increase competition and expand spectrum deployment so that private businesses can benefit.

So from the government's standpoint, its role is to establish policies that ensure fair competition, so that businesses can innovate and invest, while benefiting Canadians.

Private sector investment was mentioned. With the framework and policies in place, private businesses are confident so they are investing more and more in networks. That, in turn, benefits Canadians. Also, perhaps—

3:50 p.m.

NDP

Hélène LeBlanc NDP LaSalle—Émard, QC

We know, however, that the public and private sectors have different missions, and that's how it should be. The private sector has to be able to make money if it's going to offer service in more remote regions.

In that respect, do the policies that have been established, for spectrum in particular, include incentives that encourage companies to deploy networks? Do the measures put in place ensure that people in all regions of the country can benefit from the prosperity that comes with high-speed Internet access and new technologies?

3:50 p.m.

Acting Assistant Deputy Minister, Spectrum, Information Technologies and Telecommunications, Department of Industry

Alain Beaudoin

Thank you for that question.

A few years ago, the government launched a program called Broadband Canada. It was designed to foster partnerships with businesses for communities that were not covered by private sector business plans because they weren't deemed profitable markets. The goal was to connect Canadians in remote regions who did not have access to a minimum service speed of 1.5 megabits. The investments made through that program made it possible to bring broadband access to 218,000 more households over the years.

3:50 p.m.

NDP

Hélène LeBlanc NDP LaSalle—Émard, QC

You're talking about the program in the past tense.

3:50 p.m.

Acting Assistant Deputy Minister, Spectrum, Information Technologies and Telecommunications, Department of Industry

Alain Beaudoin

It ended on March 31, 2012.

3:50 p.m.

NDP

Hélène LeBlanc NDP LaSalle—Émard, QC

That means that all communities across the country now have access.