Industry Committee on March 26th, 2013

[The Chair, Conservative, David Sweet]

Good afternoon, ladies and gentlemen. Bonjour à tous.

Welcome to the 62nd meeting of the Standing Committee on Industry, Science and Technology. We are continuing with our study of broadband and Internet access.

I understand, Mr. Braid, you have a brief bit of committee business.

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

Yes. Thank you, Mr. Chair.

To allow us to continue this important study, I want to very quickly move this motion:

That, in relation to the study of Broadband and Internet access across Canada, the proposed budget in the amount of $3,900.00 be adopted.

[The Chair, Conservative, David Sweet]

It is seconded by Mr. Thibeault.

(Motion agreed to)

[The Chair, Conservative, David Sweet]

Thank you very much, ladies and gentlemen.

Now I'll get on to introducing the witnesses.

Yes, Madame LeBlanc?

[Hélène LeBlanc, NDP, LaSalle—Émard, QC]

Since we are going to be interrupted by a call for vote, would it be possible for our presenter to have a seven-minute presentation, giving us more time for the questions and answers?

[The Chair, Conservative, David Sweet]

Actually, all of them have come prepared with a five-minute presentation.

[Hélène LeBlanc, NDP, LaSalle—Émard, QC]

Oh, so it's five minutes.

[The Chair, Conservative, David Sweet]

Yes.

[Hélène LeBlanc, NDP, LaSalle—Émard, QC]

That's easy, then. We have good negotiations. We appreciate that.

[The Chair, Conservative, David Sweet]

I'm glad. This is a very harmonious committee, as you can see.

[Hélène LeBlanc, NDP, LaSalle—Émard, QC]

Thank you very much.

[The Chair, Conservative, David Sweet]

I'll introduce the witnesses.

From the Canadian Wireless Telecommunications Association, we have Bernard Lord, the president and chief executive officer. With him is Devon Jacobs, senior director of government affairs.

From Xplornet Communications Inc., we welcome Allison Lenehan, president, and C.J. Prudham, executive vice-president and general counsel.

From Communitech, we have Avvey Peters, vice-president, external relations.

And ladies and gentlemen, all the way from Melbourne, Australia, we have Catherine Middleton. I know it says she's a professor at Ryerson University, but she's not local; she's actually in Melbourne, Australia, and I think fifteen hours ahead of us. We want to first say thank you very much for getting up profoundly early.

Colleagues, it's always easy to forget the TV screen, but particularly because of Ms. Middleton's Herculean effort to be with us, please remember that we have this witness before us.

I'll begin with Mr. Lord, who will have the opening remarks for the Canadian Wireless Telecommunications Association.

Please proceed, sir.

[Bernard Lord, President and Chief Executive Officer, Canadian Wireless Telecommunications Association]

Thank you very much, Mr. Chair.

It is a pleasure for us to meet with you today to discuss broadband and Internet access.

I am very pleased to be here on behalf of the Canadian Wireless Telecommunications Association, and to be with our senior director of government affairs, Devon Jacobs.

We have presented a slide deck that you have in front of you. I'm not going to go through all of it, but I want to present it to you for information purposes. I would ask you to follow with me on some of the items.

As you will see today, wireless service in Canada really is the future of the digital economy. The future of the digital economy is mobile and it is wireless.

Wireless in Canada is competitive—it's jobs, it's investments, it's growth, it's smart phones, it's Canadians having access to the service, where they want, when they want, to do whatever they want, basically.

Let's look at some quick facts—that's slide 3 of the presentation. Wireless coverage in Canada reaches over 99% of the population, and 99% of the population has 3G coverage or faster.

In Canada we have deployed, and we are deploying, LTE, the fastest wireless technology available in the world. Canadians are known to be among the world's fastest adopters of smart phones and tablets. In fact, when you look at the younger generation of Canadians, from 18 to 34, you'll see that over three-quarters of those Canadians already have a smart phone or a tablet.

Data traffic in Canada is growing extremely fast—and I'll share with you why—at a rate of almost 5% on most of our networks. In fact, an Industry Canada report released last summer projected that there would be a 30 times growth of data traffic on wireless networks in Canada over the next five years.

Canadians sent over 274 million text messages per day this year. That's more than 10 million every single hour.

One thing about the Canadian wireless marketplace is that it is very competitive. If you look at slide 5, you'll see where we stand compared to other OECD markets, in terms of concentration of markets. Canada is one of the least concentrated marketplaces in the OECD, so you could say that Canada is one of the most competitive marketplaces in the OECD.

If you look at slide 6, you will see some of the benefits of wireless in Canada.

We see that the wireless industry has added approximately $43 billion to the Canadian economy, including $18 billion to GDP directly and roughly $16 billion in economic benefits indirectly.

As for investments, let us look at table 7. We can see that major investments have been made over the last few years. Over $11 billion has been invested in the wireless industry from 2008 to 2011, and close to $24 billion over the past decade.

If you combine slides 8 and 9, you will see there's a growth in terms of subscribers in Canada. You will see that when subscribers switch from a traditional cellphone to a smart phone—this is slide 9—that's like adding 35 other people to your network, because they now consume more bandwidth through data consumption. This is an important slide to take a look at because you can see how it is represented when they move from a traditional phone to a tablet or a computer connected through a dongle.

One area in Canada where we don't fare as well is in fees that are paid to the government for licensing. We have one of the highest administrative licence fees paid to governments in the G-8. This is slide 11. Luckily, the Government of Canada, about three years ago, announced it was freezing the formula, which is good. Over time, we would like that formula to be changed to fall in line with other G-8 countries.

I'm moving very quickly here because there are a lot of things to talk about when we talk about wireless, broadband, and Internet access. But one thing we are doing, and what the industry is doing, is we are working better with our partners. We asked the CRTC last year to work on a national code of conduct for wireless services. Those hearings were held last month. There is one key thing we're looking for: we want a national code that applies from coast to coast.

We believe it is essential to have the same code of conduct for all provinces across the country.

We're also working more closely than ever before with the Federation of Canadian Municipalities when it comes to antenna siting. In fact, just a couple of weeks ago we signed a new protocol with FCM on how we will work together to improve coverage in cities and municipalities across the country.

We also launched a new initiative to fight device theft. You can get the information on slide 15. I am moving along.

On slide 16 you will see all the social responsibility initiatives we have launched as an association with our members, from recycling, to wireless amber alerts, to the Mobile Giving Foundation, and more.

I'll be happy to answer any questions on this. I just want to take the last 30 seconds to really focus on the key recommendations.

One, include a recommendation in the committee's report that the government should set out a timetable for bringing the administrative fees paid by Canadian wireless carriers in line with other G-7 counties.

Two, issue an updated spectrum release plan for Canada. This is essential. If we want to be able to meet the growing demand in Canada for wireless, we need more spectrum. Without more spectrum, Canadians will feel the data crunch and they will not be able to have access to the services they want.

Three, earmark sufficient funds for upcoming wireless spectrum auctions to contribute to strategic initiatives identified by the government as priorities in the digital economy. That could be lawful intercept requirements for telecommunication service providers.

Four, the Government of Canada should defend its jurisdiction over telecommunication when it comes to antenna sitings and when it comes to consumer code for mobile wireless services.

Thank you.

[The Chair, Conservative, David Sweet]

Thank you very much.

It's over to Xplornet Communications. Mr. Lenehan, will you be the one with the remarks?

Okay, please go ahead.

[Allison Lenehan, President, Xplornet Communications Inc.]

Mr. Chair, members of the committee, Mr. Clerk, thank you very much for the opportunity to speak on this very important issue.

I am Allison Lenehan, president of Xplornet Communications. We are Canada's leading provider of rural broadband. We only serve rural Canada.

Xplornet has raised and invested over $800 million of private capital. We have done what other telecom companies and government thought impossible. We have made high-speed Internet available to 100% of Canadians. That's right, 100%. There's nowhere in Canada we cannot reach with high-speed Internet.

First, I have a note on what rural means. Rural is not a place; it is a density. On page 4 of our handout we are showing you just outside the city limits of Waterloo, Ontario. It looks the same outside every city and town in Canada. We need to use the best technology to fit the density. If there are fewer than 30 households per square kilometre at any given place, then using wires to deliver broadband to homes and businesses is uneconomical. There you use fixed wireless or satellite. We simply cannot wire the second largest country in the world, nor do we need to.

We use two technologies to serve rural Canadians, both wirelessly based to enable ubiquitous coverage. For more than 92% of Canadians, it means 4G service. We were the first telecom in Canada to launch a national 4G network specifically for rural broadband, using hundreds of 4G wireless towers and two new high throughput satellites to deliver 4G service from coast to coast.

All this technology means that rural Canadians in the 4G footprint will, starting next week, have access to speeds of 10 megabits per second at prices similar to what urban Canadians pay. That is twice the CRTC goal of 5 megabits per second and ahead of schedule.

The remaining 8% of Canadians will have access to speeds of 3 megabits per second. That means every home in Canada will have access to at least 3 megabits.

On page 6 you will find the details of our service packages. That is not mobile broadband like the one used to do light Googling on your smart phone. This is real broadband for the home, just like urban customers use at their home or office.

That's the good news, but there are challenges: one, capacity to meet future needs, and two, adoption of broadband. We can address adoption once we have solved the first problem of sufficient access capacity. The capacity situation is more ominous. There is the potential for one of our game-changing technologies to be literally choked off by policy.

Slides 8 through 14 tell the story. To deliver wireless Internet, we need radio spectrum. As consumer demand continues to grow, the need for spectrum grows. Spectrum is optioned and licensed by Industry Canada, but the nature of the rules around the auction and licensing processes are such that rural ISPs—Xplornet and hundreds of others—cannot buy spectrum because spectrum is auctioned in blocks that include major cities.

For example, to buy Durham, Ontario, we have to buy all of the greater Toronto area. That is not feasible. The end result is that rural ISPs cannot get spectrum and the big telcos end up with vast amounts of rural spectrum far beyond what they could ever use for mobile cellular services that go unused.

Slides 10 and 11 show excess rural spectrum that is a vital resource, which can be used, as opposed to completely wasted, when desperately needed rural Internet services can be provided.

Industry Canada has made no plans to make spectrum for rural Canadian Internet, when it would be easy to do so. It could be done either by designating some spectrum to be for rural Canada or by simply taking back spectrum that has been hoarded and unused by Canadian companies and assigning it for rural broadband use.

Please don't just take our word for it. Attached at the back of your packages is the support of a couple of our municipalities.

Finally, we are pleased to have worked so hard to get rural Canadians access to real affordable broadband in their homes. In the next three to five years, we could deliver 100 megabits per second to all Canadians, but only if we have access to affordable spectrum. The private sector has the money and technology. We need your help with the public spectrum.

Thank you.

[The Chair, Conservative, David Sweet]

Thank you very much.

Ms. Avvey Peters, please go ahead for five minutes.

[Avvey Peters, Vice-President, External Relations, Communitech]

Good afternoon, everyone. Thank you very much for the invitation to appear before you today.

I represent Communitech, which is the Waterloo region technology organization. We're home to almost 1,000 companies in the region.

Given the matter under consideration today, I want to share with you a perspective that goes beyond Waterloo region tech companies, one that we've gained through our national initiative, the Canadian Digital Media Network. We launched the CDMN, as it's called, in 2009 in an effort to connect the Waterloo region tech cluster to clusters across the country. We now have 21 hubs on this network, from Vancouver through to Fredericton.

Every year, the CDMN embarks on a series of regional meetings designed to gather the perspectives of industry, academic, and government leaders. We are measuring progress against an agenda that we affectionately call our moonshot: that anyone can do anything online in Canada by 2017. The moonshot has five priority areas, one of which is connectivity for Canadians of any financial status and geographic location. l'd like to share with you today a few of the highlights of those regional consultations around the priority of connectivity.

In Stratford, Ontario, our participants emphasized the importance of Internet soft infrastructure as a vital counterpart to the physical infrastructure that connects the nation. Just as road and rail are vital to the health of manufacturing, so is fast and affordable connectivity considered critical to the health of digital companies and the technology industry.

In Stratford, they shared a significant interest in private-sector-led solutions to Canada's connectivity challenges. Companies like Fibernetics, with its Fongo application, and Google, with its Fiber to the Home project in Kansas City, are showing how market solutions can address both affordability and connection speed.

In Vancouver, B.C., our delegates told us that the broadband infrastructure, particularly in the City of Vancouver, is not adequate to their needs and not affordable for small business. The most significant issue that they identified is a lack of fibre, which restrains digital media and gaming technology companies. Vancouver-based companies in that niche feel that they're at a competitive disadvantage because they're having difficulty transferring content to their customers.

In response to this level of access, some individual companies are developing their own solutions, but this means that improvements are happening at a micro level, not a macro level.

Northern Canadian delegates gathered in Ottawa and suggested that a national bandwidth development strategy could help address the severe connectivity issues faced in the north. They pointed to business opportunities that could be enabled with improved connectivity. One example that was shared was a Nunavut business trying to communicate with distant customers; they were shipping Arctic char to restaurants in New York City.

In Calgary, delegates agreed that soft infrastructure is critical to the success of commercial activity, but they also argued that the value proposition to companies has to be clear. The private sector needs to demonstrate how faster and less expensive Internet access will allow for the exploration of new companies, new job possibilities, and new wealth creation.

In Fredericton, our participants agreed that Canada's success in the digital economy requires a close, holistic examination of national connectivity. The New Brunswick delegates affirmed that content is actually key to user engagement, and that improving the quality and quantity of digital content will drive greater demand for connectivity. They called for a more transparent connectivity framework and emphasized the importance of convergence between content and infrastructure.

In conclusion, I wanted to relay to the committee what we've been hearing, which is that ubiquitous, affordable, high-speed broadband is a critical investment in Canada's future. We've heard that connectivity is a key factor in new business creation and growth. While no single set of solutions has emerged from our consultations, the CDMN and its partners are eager to participate in discussions like the one you're having here today. Please count on us as a resource to help as you go forward.

Thank you very much.

[The Chair, Conservative, David Sweet]

Thank you very much, Ms. Peters.

Now we'll move to Ms. Catherine Middleton, who is joining us, as I mentioned already, from Australia.

Please go ahead for five minutes.

[Dr. Catherine Middleton, Professor, Ryerson University, As an Individual]

Great. Thank you very much for making this possible.

My name is Catherine Middleton. I'm an academic at the Ted Rogers School of Management in Toronto. I have focused on the development and use of broadband networks in Canada since the late 1990s. My focus is primarily residential and consumer use.

I want to make four points. I want to talk about the vision for broadband in Canada. I want to ask some questions about what kinds of networks we need to realize this vision, a question of supply. I have questions about how we ensure broad uptake of these networks to enable socio-economic benefit across society, and think about how we track our progress—that's a data question.

If we look at vision first, the question is, what do we want to be able to do with broadband connectivity? Other countries have articulated a set of objectives. They have national broadband plans; they have digital strategies. At present, Canada doesn't have either of these. The digital economy consultation paper done in 2010 notes that Canada needs a world-class digital infrastructure, but at the moment it's not clear exactly how Canada is going to develop that infrastructure without a clear vision to guide it.

Because we don't have vision, it's not entirely clear what kinds of networks we need, so I believe there needs to be a discussion about what we want broadband networks to be able to do. Once we understand that better, then we can understand the sorts of networks that should be available. The questions we need to consider are the sorts of speeds we need, and not just download speeds but upload speeds as well. What quality of networks do we need? We clearly need to have reliable quality networks. Do we need quality of service guarantees on these networks?

Do we need to have uniform networks? Is it important that Canadians across the country have access to similar networks so that we can roll out services across the country? Do we need ubiquitous connectivity? I'm thinking partially about mobile connectivity. While a lot of discussion about broadband is about fixed broadband, what sorts of plans should we have in place to consider mobile broadband connectivity? If we were to develop a target for broadband going beyond the CRTC's target of a five-megabit-per-second download and a one-megabit-per-second upload service available to all by 2015, should we be looking at a similar target for mobile broadband connectivity?

How do we encourage broad uptake of broadband networks so they enable socio-economic benefit across Canadian society? This is really a demand question. Unfortunately, we don't have a huge amount of recent data; 2010 is the latest publicly available Statistics Canada data. It suggests that 80% of Canadian households had Internet access. Almost all of that was broadband, but it was unevenly distributed. So 97% of the top-income quartile of Canadians had access, compared to 54% of the bottom quartile. We still have a digital divide, and this is a challenge we have to address.

In 2010 half the households that had no Internet access said they had no need for it. Is this a problem? Isn't this a problem? We need to better understand what is and isn't driving people to use broadband networks, and then if it's part of our national vision that everybody has access to broadband, we need to start thinking about how we can encourage more people to make use of these services and to obtain them in the first place.

One of the numbers provided by the CRTC in its communication monitoring report is that 75% of Canadian households had access to broadband services at download speeds of 50 megabits per second or higher—this is 2011 data—but at that time only 0.3% of households subscribed to these speeds. So there's clearly a gap between the supply of very high-speed broadband networks and actual demand for these networks, the uptake.

Are Canadians making extensive use of these networks? We don't know, and that brings us to a question of data. How do we track our progress? We have some high-level metrics, we have some maps that provide an overview of basic coverage, but we don't really understand in great detail what people are doing online. We don't really understand their vigorousness levels. We don't fully understand the reasons that Canadians who are not currently online or are not regular users have chosen not to make use of these resources. While we have some information on availability, we need much more fine-grained data on upload and download speeds, on quality, on price, allowing us to think about affordability, the number of providers to look at, the choice that people have, and the uptake of various speeds.

I'll stop there.

[The Chair, Conservative, David Sweet]

Thank you very much, Ms. Middleton.

We'll now move on to the questions.

Mr. Braid, for seven minutes.

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

Thank you very much, Mr. Chair.

Thank you to all our witnesses and representatives for being here today and for contributing to this important discussion and study.

Ms. Peters from Communitech, perhaps I could start with you. You talked about the importance of “connectivity for Canadians”. Could you elaborate on why the issue of connectivity is so important for Canadians, for Canadian businesses, for Canadian communities?

[Avvey Peters]

From our perspective, the technology companies we're working with largely reside in the ICT and digital space, and good connectivity represents a huge business opportunity for them. Every day we're seeing new areas of exploration amongst our companies.

We run a digital media facility in the Waterloo region. It is populated with a couple of hundred tech businesses. Google is our upstairs neighbour. The latest company to move into that facility is actually Canadian Tire. They're there because they see a huge opportunity in e-retail and e-commerce. They're trying to take advantage of the business opportunities that connectivity will provide.

That's just one example of where we see productivity gains that can be made by companies that are able to maximize that opportunity.

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

Great.

You mentioned fibre technology during your presentation, which is a newer and more evolving technology. How prevalent is the use of fibre technology in Canada? If this is an important part of the solution to enhance connectivity, how do we expand the use of this particular technology?

Do you have any thoughts or recommendations on that?

[Avvey Peters]

I will defer that question to the experts here.

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

To Mr. Lord?