Industry Committee on May 5th, 2014

[The Chair, Conservative, David Sweet]

Good afternoon, ladies and gentlemen. Welcome to the 20th meeting of the Standing Committee on Industry, Science and Technology.

We are here today pursuant to Standing Order 108(2), the study of the subject matter of clauses 175 to 192, the Atlantic Canada Opportunities Agency and Enterprise Cape Breton Corporation; clauses 239 to 241, Telecommunications Act; clauses 317 to 368, amendments relating to international treaties on trademarks; etc.

We have before us two witnesses. We have two panels today, ladies and gentlemen.

Because we've gone to a straight timing with no first or second round, we will have five-minute slots for everybody, for all nine members of the committee, after Ms. Miller gives her opening remarks. Then we will go to a second panel after this one. The second panel will be from the Department of Industry.

Before us right now we have Pamela Miller, director general, telecommunications policy branch; and we have Christopher Johnstone, senior director, industry framework policy.

Ms. Miller, perhaps you could ahead with your opening remarks, and then we'll go to our routine rounds of questioning.

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

Thank you very much, Chair.

We're pleased to be here this afternoon to explain section 16 concerning wireless roaming rates and to respond to your questions.

To start, I would like to explain what is meant by roaming rates in this amendment. This amendment addresses wholesale roaming rates, that is, the rates that are charged among companies to use each others' networks. So that their customers have access to services outside of their network footprint, wireless companies must enter into roaming agreements with other wireless service providers. This is particularly important for new competitors entering the market, because as you can appreciate, they would not have as extensive a network and they would need to roam on other providers' networks.

This section would amend the Telecommunications Act to prohibit Canadian carriers from charging their Canadian competitors wireless roaming rates that are higher than what they charge their own customers. Industry Canada does mandate that carriers offer roaming services to other carriers, but it does not regulate the price of that access.

We understand that the roaming rates that Canada's largest wireless companies are charging other domestic providers are significantly above the rates they charge their own customers; that is, they have wholesale prices that are higher than retail prices. These high wireless roaming costs negatively impact competition, as new entrants must either pay these costs themselves or pass them on to the consumer. In a submission to the current CRTC proceedings, the Competition Bureau indicated that incumbents have retail market power and therefore have an incentive to ensure that new entrants are not fully effective competitors.

The amendments set out the wholesale mobile roaming services that would be capped—wireless voice, text, and data services—and include a formula for the cap based on a carrier's average retail rate for the service. Regarding how this measure relates to CRTC regulatory processes, the CRTC will be responsible for enforcing the roaming cap. The CRTC has launched two proceedings to examine wholesale wireless roaming, and the government has indicated this measure will be in place until the CRTC makes a decision on roaming rates. The amendments provide that a wholesale roaming rate established by the CRTC would take priority over the legislated rate.

To summarize, these amendments provide a cap on the rates charged among companies to roam on each other's networks. Capping domestic rates will help Canadian consumers benefit from more competition in the wireless market.

Thank you very much, and we welcome your questions.

[The Chair, Conservative, David Sweet]

Thank you very much, Ms. Miller.

Colleagues, I'm going to ask you to forgive me in advance because we have two panels, so I have to stay really tight to the time, and accordingly, with the witnesses as well.

Ms. Gallant.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Mr. Chairman, do we have the speaking notes for our presenters in English and French so that we can read them?

[The Chair, Conservative, David Sweet]

No, we don't, Madam Gallant.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Thank you.

[The Chair, Conservative, David Sweet]

I apologize. We weren't able to get them translated quickly enough.

On to the first five minutes. Ms. Bateman.

[Joyce Bateman, Conservative, Winnipeg South Centre, MB]

Thank you very much, Ms. Miller and Mr. Johnstone.

I just want you to take half a minute to define the impact, because my perspective is that a reduction in roaming charges is going to be very helpful for businesses, and it's going to be very helpful for families. Certainly anybody with teenagers, such as me, is going to notice the change.

Perhaps you could define exactly what the impact is going to be from the industry's perspective, if you'd be so kind.

[Christopher Johnstone, Senior Director, Industry Framework Policy, Department of Industry]

In terms of the roaming rates as they stand now between carriers, as Ms. Miller stated, the carriers right now are charging other carriers a rate that is much higher than what they currently charge their own customers on average.

[Joyce Bateman, Conservative, Winnipeg South Centre, MB]

When company A comes to province B and uses supplier C, they are charged more than if they were just living in that province and were dealing directly with supplier C.

[Christopher Johnstone]

That is correct.

On average when the government announced its intention to move forward with this measure in December it was stated that the roaming rates that Canada's largest wireless companies are charging for the customers of new entrants can in some cases be more than 10 times higher than those they charge their own customers.

[Joyce Bateman, Conservative, Winnipeg South Centre, MB]

Ten times higher.

If I were the company doing that—I'll let you finish first. It strikes me that this is a lucrative pool of revenue for them. While we view it as negative to business and negative for families, this is going to meet with some resistance.

[Christopher Johnstone]

Right.

I would reiterate again, as Ms. Miller said, for clients of that new entrant, for example, when those customers roam outside of that provider's network when their provider is being charged those high roaming rates by the other provider, they either need to absorb those costs or pass those costs on to the consumer. That obviously impacts either the consumer or that company's ability to be competitive in the marketplace and offer—

[Joyce Bateman, Conservative, Winnipeg South Centre, MB]

What are the incremental costs to the provider? In using the example, we have the business person with company A and he's now in a province that's only serviced by company C.

What are the costs to company C? What are the incremental costs to company C to provide that service?

[Christopher Johnstone]

We don't have data on the incremental costs of—

[Joyce Bateman, Conservative, Winnipeg South Centre, MB]

On what basis do the companies that feed into you calculate the amount that they're billing their client? It must be on something.

[Christopher Johnstone]

Do you mean in terms of the amount that they're billing the other company or their own clients?

[Joyce Bateman, Conservative, Winnipeg South Centre, MB]

Absolutely.

Maybe I'm being a little bit old-fashioned here, but it would be nice if it was based on actual costs. Are they just pulling the number out of the air and saying they can charge people 10 times more? I don't quite understand.

[Christopher Johnstone]

In terms of what they charge their own customers, obviously that's a function of competitive dynamics in the marketplace. In terms of what they charge other companies, that's also a function of—

[Joyce Bateman, Conservative, Winnipeg South Centre, MB]

A captive market?

[Christopher Johnstone]

As Pam said, the Competition Bureau indicated in their submission to the CRTC that—I'll read you exactly what they said because it's relevant to your question.

[Joyce Bateman, Conservative, Winnipeg South Centre, MB]

Thank you.

[Christopher Johnstone]

In their submission to the CRTC the bureau stated:

The terms of such roaming agreements—

—that is, what they're charging the other company for their customers to be there in that area—

—are a strategic tool that incumbents can use to protect their market power.

Furthermore, they stated:

In the Bureau's view mobile wireless markets in Canada are characterized by high concentration and very high barriers to entry and expansion.

Later, they say:

Given these factors the Bureau's view is that the incumbent service providers have market power in Canadian retail mobile wireless services.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Johnstone.

Thank you, Madam Bateman. That's all the time we have.

We'll move on to Ms. Nash now for five minutes.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Welcome to the officials. We appreciate your being here.

This is a difficult process for us, because what we're discussing here are elements of the omnibus budget implementation act, which are really before the finance committee, and we don't have the ability here to vote on any of these proposals. So we're going through an odd process here, to review these changes in the bill, but we have no power to amend or to vote on the outcome of any of this.

Nevertheless, we do have some questions for you. We want to take advantage of your being here, and appreciate your time today.

In the NDP we've felt for some time that we should crack down on these wholesale roaming fees. These have been agreements the companies have negotiated between each other. Do you think this has been a barrier for smaller carriers entering into the Canadian market, that this is something that's been wholly in the control of the telecoms?