Industry Committee on May 12th, 2014

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Thank you very much, Mr. Chair.

I would like to thank the witnesses for being here today.

The first issue I would like to raise pertains to the conditions in which we are studying this very important issue. The Standing Committee on Finance has asked us to study this issue, but unfortunately, we cannot undertake an in-depth examination separately from the omnibus bill, nor present amendments. This is truly deplorable.

Nonetheless, I thank you for appearing today and sharing your point of view with us.

During the single hour we dedicated to discussing this issue with government officials, and more particularly during the consultations we had outside the committee, it's become clear that this problem is far from being easy to resolve. In the Canadian market, there are disparities in the costs for services offered to consumers. In some provinces, costs are lower. Sometimes, lower costs do not necessarily entail quality service. There are clear examples of this across the world. I would like to hear your comments on this subject.

Could you please tell us about the situation in Canada? What would your priority be? Quality of service or pricing? At the end of the day, are these two aspects compatible on the Canadian market?

[Steve Anderson]

I think in terms of having new players and lowering prices, if you look at Saskatchewan or Manitoba, they pay a decent amount less than the rest of the country, and I think that's a good window into having a fourth player. If we enable the range of start-ups, we could have much lower prices.

I don't subscribe to the notion that having more choice will somehow lead to degraded service. I think it could create more incentive and more competition to enable and encourage and incentivize investments in the networks. There are other places in the world where complex factors are at play, but I think if you look at Ireland or France, they certainly have kept up with their networks and they have four or more players in the marketplace.

[John Lawford]

We completely share Mr. Anderson's point of view.

In the areas with four players, the quality of service is approximately the same, if not superior, as Steve has mentioned. Problems with roaming fees are not necessarily tied to the quality of service received, unless calls are being dropped along the way.

[Geoffrey White]

Thank you.

I think I would just add that we're living with the learnings of the 2008 spectrum auction, in which the regulator recognized the need to have these measures to promote competition, and these specific measures were the mandated roaming and the mandated tower-sharing. There was a learning experience with that and realizations that the process didn't necessarily move quick enough to let the new entrants realize their full potential. We did see a positive pricing, though, in the markets where there were the fourth players, in fact, and this isn't just about cost and low cost necessarily. It's about removing the barriers to entry so that these more innovative players and the regionals as well can add that competitive fourth that the incumbents respond to.

So I say the evidence shows that there was better pricing in those fourth markets, and I'll just end with that. When you saw the new entrants enter, you saw them offering unlimited talk and text plans. You saw the big three react with flanker brands and also similar offerings. So that's evidence that it's not just about cost; it's about competitive choices.

[The Chair, Conservative, David Sweet]

Thank you, Mr. White.

Thank you, Mr. Côté.

Now we'll go on to Madam Bateman, for four and a half minutes, please.

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

Thank you very much, Mr. Chair.

Thank you to all of our witnesses. We very much appreciate your being here.

I want to follow up on the comments you've both made with regard to the work currently under way with CRTC and Industry Canada.

But I can't resist giving you the first comment, John Lawford, because your quote from the wireless policy piece that I've picked up here is Canada's wireless policy, which presumably is Industry Canada's wireless policy, “will increase investment in wireless networks and lower prices”.

Would you just take a moment to expand on that? That's wonderful news for all of us, and I'd love to hear a little bit more about that.

[John Lawford]

Sure. Thank you for the question.

It's long been our position that more competition actually spurs investment because of a need to keep up with, as Geoff mentioned, innovative product offerings, and that the new entrants trying to break into the market now, or the regionals trying to build out, have to be innovative. They have to steal customers from the big three that have holdings as well and wireline phone and Internet and things that they can sell as a bundle. So those companies, to the extent that they enter the market, have to be very innovative, and that leads to really interesting packages, which then make the big three turn around and try to match or top. That causes them to direct more money to investments, less away from shareholder return, and that makes the system better for consumers. That's our view on it.

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

Geoff, you made some comments in your remarks.... Forgive me for calling you Geoff. You made some comments in your remarks about the CRTC and what is currently under way and how it's going to change things. Could you expand on that?

[Geoffrey White]

Thank you. Yes.

Our point there is that the CRTC has done a fact-finding exercise to look into the issue of what the incumbents are charging the smaller competitors and regional players for this roaming. It's come to light that the incumbents are charging up to 10 times, perhaps more, for this essential service, a functionality for when you leave your home network and travel across Canada.

The CRTC has done two processes, and our comment there is simply that the CRTC is the expert regulator. It has all the facts before it. It's experienced with this sort of wholesale costing and rate setting and referencing. It's a pretty nitty-gritty process, and the bill speaks to this, that the amendments fall away once the CRTC has done its work and comes to a different conclusion.

So that's our point, that this is being studied and we expect the CRTC will arrive at the right outcome.

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

Okay.

Maybe, Mr. Anderson, could you expand on your comments about the differential...? You also spoke of positive movement with regard to CRTC and Industry Canada. Your comments about Manitoba and Saskatchewan are particularly of great interest to me, being an MP from Manitoba.

[Steve Anderson]

In Manitoba, the services are generally getting more positive reviews and the prices are generally lower.

But I think I would like to insert a little caveat into what John and Geoff were saying in that I think Industry Canada and CRTC are moving in the right direction. These steps are positive, but I think that the key metric we need to look at is whether, at the end of all of this, the big three still control 90% of the market. I'm not sure that this is going to be enough. I would encourage—

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

I'm sorry, but can you say that again?

[Steve Anderson]

The big three control 90% of the market, and I'm not sure that the measures we're talking about today—or what the CRTC is doing—are going to be bold enough to undo the years of regulatory coddling that have led to this point. So I—

[The Chair, Conservative, David Sweet]

Thank you, Mr. Anderson. That's all the time we have.

Thank you, Madam Bateman.

Now we'll go on to Madam Sgro for four and a half minutes.

[Judy Sgro, Liberal, York West, ON]

Thank you, Mr. Chair.

To our witnesses, thank you for being here.

You spoke about what you think prevents new entrants from entering the telecom sector, but can you tell us more about what you think we need to do to fix the problem? What does the government of the day need to do? Specifically, do you think the changes mentioned here in Bill C-31 are significantly going to change that and open up the marketplace?

[Steve Anderson]

Yes, this is a good segue into what I was just talking about. Personally, I'm skeptical that we've gone far enough with these measures. We'll have to see what the CRTC process leads to.

I think what the government should consider is a policy directive, calling on the CRTC to open the network infrastructure to wholesale and MVNO access also—mobile virtual network operators. This second category is the example I was talking about with regard to Ting. It's that kind of wireless start-up that's delivering service to the U.S. but not Canada that I don't think is necessarily going to be captured by the CRTC process. That's an additional step that I would encourage the government to consider.

[Judy Sgro, Liberal, York West, ON]

Mr. Anderson—just before you answer, Mr. White—do you think doing that, though, opening up the network, will allow more of the small entrants to come in and get started?

[Steve Anderson]

Absolutely. I've talked with the people at Ting and with other providers who have said that they have written and actually have asked Bell, Rogers, and Telus if they could come to market. But they've just said, “No, we're not giving you access.” So absolutely, there would be a range of service providers.

[Judy Sgro, Liberal, York West, ON]

Mr. White.

[Geoffrey White]

Thank you.

I think the question was about whether we think this particular bill is going to solve the problem facing wireless competition and the market power of the incumbents. I think the short answer is no. Our recommendation is that the CRTC process, which is much broader in scope and resides in the expert regulators that have all the facts before them...it's these processes that we think are the proper place to resolve the broader issues.

Also, we don't think a policy direction is necessary. The CRTC has all the tools it needs. We could debate that. We could go into segues on that, but the Telecommunications Act has, under sections 24 and 27, the undue discrimination and just and reasonable rates provisions. The CRTC has these tools already, and that's their basis for going into this.

So again, to recap, no, this isn't a fix to all the problems, but we appreciate it in the interim.

[Judy Sgro, Liberal, York West, ON]

Are these changes being proposed here by the minister eventually going to undermine the role of the CRTC in any way? If you were the chair of the CRTC, what would you think?

[John Lawford]

I think the chair of the CRTC has been very sanguine about this and has just said that they will take the bill into consideration, as they should, but that they are going to continue with their hearing.

Listen, it's a difficult situation, I think, to be told that you have what I called in another forum a “peekaboo amendment”—it comes in and it goes out—but the rationale, as I understand it from the government, which fits with what we've been saying today, is that there is a very difficult problem with pricing for roaming, and this bill does seek in the meantime to bring it from where it is up there, down to here. Maybe the rate should well be set somewhere down here, but the government is moving it down in a rapid fashion, because CRTC processes unfortunately do take time, and the new entrants and the regionals need to gain market share quickly.

[Judy Sgro, Liberal, York West, ON]

What else needs to be done when we're talking about opening up the marketplace for more entrants? I have met with a lot of the smaller providers. Clearly they want more opportunity to have spectrum and to seriously be part of the landscape over and above the big three. What else do we need to be doing to make sure we have a system across Canada? What do we need to do over and above what we're specifically talking about today?

[The Chair, Conservative, David Sweet]

You have 15 seconds.

[Steve Anderson]

I'll add one thing, which would be to give the CRTC monetary penalty powers, because right now if people break these rules we're talking about, there's no financial cost to it.