Industry Committee on Nov. 6th, 2014

[The Chair, Conservative, David Sweet]

This is meeting number 28 of the Standing Committee on Industry, Science and Technology where we will be studying Bill C-43.

I received a letter from the Chairman of the Standing Committee on Finance, dated November 4, where he asked us to consider certain portions of Bill C-43 that were germane to the industry department and that's what we're pursuing right now.

I'm going to introduce our witnesses in a second.

Colleagues, if I could just do a bit of business. I will take the opportunity to forward this letter to you, but I wanted to just bring it up at a committee meeting.

We were invited by an organization called Startup Canada to partake in an information breakfast with them with prominent entrepreneurs. One of the hosts will be Sir Terry Matthews, accompanied by Dr. Adam Chowaniec.

I will make sure that this information gets to your offices. I wanted to let you know that it will be on November 25 and you're expressly invited as members of the Standing Committee on Industry, Science and Technology.

Monsieur Côté.

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

Could we please set aside 10 minutes at the end of the meeting to discuss committee business and witnesses, among other things?

[The Chair, Conservative, David Sweet]

Mr. Côté, we have two panels today, just one hour for each panel. I was already expressing some concern that that always means some members may not get the full portion of questioning.

We'll try to squeeze in as much as we can at the end. I want to respect your request and I want to respect all of the members' capability of questioning. I have no problem with that, but we'll try to keep it as brief as we can.

Also on that point, I wanted to mention that my legislative assistant had called everyone's office to let them know that we need to have all of the witness lists in for the study by next Monday, if we can, so that we'll have a good opportunity to question the material regarding Bill C-43.

If you could do that, our clerk could make the most of his time and make sure that when we come back, panels will be set up, so that we can continue our study. That would be appreciated.

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

Thank you, Mr. Chairman.

I would like to make sure we hear from an optimal number of witnesses. That was one of the reasons why I wanted to set aside 10 minutes. We could also limit that to five minutes, if you agree.

[The Chair, Conservative, David Sweet]

Yes, Mr. Côté, that would be great.

I do note that the parliamentary secretary isn't here today, so we may actually have to reserve some of the back and forth dialogue until we return back. Certainly, I understand you're trying to be efficient and we'll do that.

Are there any other comments in that regard?

Mr. Wallace.

[Mike Wallace, Conservative, Burlington, ON]

Does this committee operate with a subcommittee on agenda?

[The Chair, Conservative, David Sweet]

No, primarily we do our business meetings as a whole, Mr. Wallace, and try to be as consensual as possible. We're a very friendly committee here, actually.

[Mike Wallace, Conservative, Burlington, ON]

You should come to justice, it's beautiful.

[The Chair, Conservative, David Sweet]

Continuing on that beautiful note, may I introduce our witnesses for today?

We have with us, all from the Department of Industry: Lynne Fancy, senior director, spectrum management operations; Amy Jensen, policy analyst, spectrum management operations; and Adam Scott, director of business and regulatory analysis, telecommunications policy branch, strategic policy sector.

From the Department of Canadian Heritage, we have Helen Kennedy, director general, broadcasting and digital communications.

I didn't get an opportunity before the meeting to ask, how many have opening comments? Just Mr. Scott and Ms. Fancy.

Ms. Fancy, please go ahead and if you could try to keep it to five minutes, that would be great.

[Lynne Fancy, Senior Director, Spectrum Management Operations, Department of Industry]

I'd like to thank you very much for inviting us here today to discuss the amendments proposed to the Radiocommunication Act. The Radiocommunication Act regulates radio frequency spectrum. This is an important and scarce resource that is used to provide all wireless communication services to Canadians. Spectrum is increasingly a valuable resource as more and more of our communications use wireless devices. We not only use these devices to talk and text but also to access a wide variety of applications on our smart phones, all of which rely on the availability of wireless spectrum.

The wireless sector is also increasingly important to the Canadian economy and our society as it is a growing source of jobs and key to businesses and communities across the country. It is the key part of the tool set for our first responders: the police, the firefighters, and the ambulance. Industry Canada manages spectrum with licensing processes that impose terms and conditions on users. We also regulate radio equipment to ensure it meets the standards and it's safe for Canadians.

The current act provides a number of enforcement mechanisms, which are used by Industry Canada to ensure that the requirements of the licences and the standards are met. But these provisions have not been updated for 25 years and they should be modernized to keep up with the changing spectrum regulatory environment.

The amendments before you today would improve Industry Canada's existing compliance tool kit. We have a continuum from education all the way through to revoking a licence but these amendments introduce new measures. Reflecting the fact that spectrum is being used in new and innovative ways, the amendments would provide enforcement tools that are in the middle of this continuum, tools that are flexible and efficient and that will help us focus on encouraging compliance.

The primary change in the amendments today introduce an administrative monetary penalty or an AMP regime for certain violations of the act. The proposed regime would provide for penalties up to $10 million for the first violation and $15 million for a second or subsequent violation. These maximums are consistent with penalties that may be imposed by the Competition Bureau or by the CRTC with respect to the Canadian anti-spam legislation and they're also the same as those that Adam will talk to you about in his opening remarks with regard to the Telecommunications Act.

For individuals—and individuals could be someone, for example, who is using a jammer near an airport—the amounts of the AMP would be much smaller, up to a maximum of $25,000 for a first violation and $50,000 for a subsequent violation. But the amounts of any particular penalty would be determined by taking into account a number of factors such as the scope and the nature of the violation as well as the size of the violator. AMPs will not replace the existing enforcement measures available under the act but they add a more robust compliance continuum that will allow the department to apply the most appropriate measure to any given incidence of non-compliance. The first tool that we always try to use is education.

A number of additional measures are included in these amendments that are also focused on improving the compliance regime. First of all, the amendments clarify language in the act to explicitly prohibit jammers. These are devices that disrupt legitimate wireless communications. Limited exemptions to that prohibition may be made for reasons such as public safety.

Additionally, the amendments will allow Industry Canada to enforce any requirements that have been established for spectrum auctions. Spectrum auctions are a very important part of the release of new spectrum. Additional amendments will also modernize outdated language concerning inspectors' powers and allow the inspectors to gather information from computers instead of just from paper records.

Finally, the amendments would allow Industry Canada to share information with domestic and international agencies for the purpose of regulating radio communications.

For example, if we are trying to stop jammers from coming into Canada, there would be a great benefit to being able to share information with the U.S. border services. But in order to enact this part of the act, there are very strict boundaries with regard to the use of the information and the confidentiality of that information.

Those complete the amendments to the Radiocommunication Act.

Thank you very much for your time.

[The Chair, Conservative, David Sweet]

Thank you very much, Ms. Fancy.

We'll now go to Mr. Scott for five minutes, please.

[Adam Scott, Director, Business and Regulatory Analysis, Telecommunications Branch, Strategic Policy Sector, Department of Industry]

Good morning.

It's my pleasure to be here today to explain division 11 of part 4 concerning amendments to the Telecommunications Act, as well as a related amendment to the Broadcasting Act, and to answer your questions.

I would start by noting that this section of the bill supports commitments made under the government's “consumers first” agenda, which is to support and protect Canadian consumers.

I have a number of clauses to go through. I'll tackle them sequentially.

First up is the issue of pay-to-pay, also known as paper billing fees, which is addressed starting at clause 192 and running to clause 194.

The amendment to the Telecommunications Act is a direct response to the government's commitment to end pay-to-pay. The amendment prohibits telecommunications service providers from charging their customers for bills in paper form. A parallel amendment has been put forward for the Broadcasting Act to address providers of television services and subscription radio services.

Together, these two amendments will capture the full suite of services that customers are accustomed to getting from their communications service providers. It covers telephone, wireless, Internet access, and broadcasting services. Providers of these services will be prohibited from charging a fee for the issuance of a paper bill.

The amendment at clause 193 benefits consumers by allowing the CRTC to impose certain conditions—here we're talking about things like a requirement to provide 911 service, or a requirement to provide services to disabled Canadians—on providers of telecommunications services that are not communications carriers. Currently the act allows the CRTC to impose such conditions only on companies that own or operate their own networks. There is another class of service providers, frequently referred to as “resellers”, that the CRTC cannot impose conditions on directly. An example of this would be something like President's Choice Mobile or similarly branded smaller providers of telecommunications services.

The CRTC has only been able to impose conditions indirectly on such companies. They do this through managing the contracts that carriers have with these smaller companies. The amendment extends this power so that consumers will be able to benefit from the same safeguards regardless of which type of service provider they choose.

The set of amendments at clause 195 allow for information-sharing between the CRTC and the Commissioner of Competition in order to facilitate the presentation of more specific, evidence-based interventions before the CRTC, allowing for better decision-making. While the CRTC can currently release confidential information to the Minister of Industry or the chief statistician, it cannot share such information with the Commissioner of Competition. For clarity, I would note that here we're talking about commercially sensitive information. We're not talking about the sharing of private information of Canadians.

At the same time, the CRTC is addressing issues that are increasingly linked to competition and the competitiveness of the telecommunications market. These amendments will allow the CRTC to share information with the Commissioner of Competition so that he can make more informed interventions. Information shared with the Commissioner of Competition would remain confidential, and could only be used in relation to matters before the CRTC for consideration.

The amendments at clauses 196 to 199 deal with certification of telecommunications apparatus. These amendments simplify and streamline the process for demonstrating that telecommunications apparatus meet technical requirements and provide the Minister of Industry with the authority to register apparatus for use in Canada. Here we're talking about equipment that plugs into the phone network—literally a wired telephone, a fax machine, a modem. We're streamlining the process for ensuring that such handsets are certified for Canadian operation.

The amendments at clause 200 modernize language around the CRTC's inspection abilities. This change has been made to support clauses coming at 201 and 208, which provide the CRTC with the authority to impose administrative monetary penalties, or AMPs, on companies that do not comply with its decisions and regulations. As a key commitment under the government's consumer agenda, the AMP amendments will improve the CRTC's existing compliance tool kit by giving it the ability to impose penalties of up to $10 million for a first violation for companies that break the rules. For individuals, the amounts are much smaller, up to a maximum of $25,000 for a first violation. Here I would note that when we refer to individuals, we're not talking about users of services, we're talking about individuals who are providing services, i.e., individuals working for a telecommunications company.

ln all cases, the amount of the penalty will need to take into account a list of factors stipulated in the legislation, including the nature and scope of the violation, the ability to pay, and the benefit derived from the violation.

Finally, the last amendment at clause 210 stipulates that the amendments relating to “technical apparatus” will come into force September 30, 2015, to provide an opportunity to communicate with the industry and to make follow-on changes to regulations and procedures. All other amendments will come into force upon royal assent.

Thank you very much.

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. Scott.

Now we'll move quickly because, again, we have two panels so we have a limited amount of time. For those who are new to the committee, we just go straight across with time. This was a tradition we began some time ago, so we'll just be doing four minutes each until we exhaust the time we have.

Mr. Daniel.

[Joe Daniel, Conservative, Don Valley East, ON]

Thank you, Chair.

Thank you, witnesses, for being here.

I'm just going to focus on the sale and competition regarding the wireless spectrum. How often does this come up? How often are we selling spectrum?

[Lynne Fancy]

Spectrum is licensed on a daily basis. There are different types of spectrum. On a daily basis, someone like a police agency may want to come to get spectrum, and they can do that by making an application. On a larger basis, we also auction off large chunks of spectrum that are used for wireless. That is done—

[Joe Daniel, Conservative, Don Valley East, ON]

Yes, that's commercial.

[Lynne Fancy]

That's commercial mobile spectrum, correct. That is done less frequently. We just recently released the 700-megahertz spectrum. For 2015, there are two auctions planned for two additional blocks of spectrum.

[Joe Daniel, Conservative, Don Valley East, ON]

Typically, how much does this auction cost if somebody's buying a certain bandwidth? How much do they pay for it?

[Lynne Fancy]

Dependent on the perceived value, it's at market rates, so the auction determines what would be paid. The maximum that has been gained at auction was the most recent 700-megahertz auction, which was considered to be extremely valuable spectrum. The eight companies that acquired spectrum paid over $5 billion.

[Joe Daniel, Conservative, Don Valley East, ON]

You mentioned that the penalties you were seeking were something like $10 million and $15 million.

[Lynne Fancy]

Correct.

[Joe Daniel, Conservative, Don Valley East, ON]

That seems somewhat low for a bandwidth they're paying $5 billion for. What's your opinion on that?

[Lynne Fancy]

An AMP regime is to encourage compliance. It's not a punitive regime; it's a civil remedy. These amounts are in line with what has been considered appropriate for things like the anti-spam law and the Competition Act.

[Joe Daniel, Conservative, Don Valley East, ON]

Why do the minister and the commissioner of the CRTC need administrative and monetary penalties to help enforce our government's wireless policy?

[Lynne Fancy]

It allows the compliance continuum to be better filled out. Currently we use a lot of education, suasion to encourage people to meet the rules. On the other end, we can revoke a licence, which is a very heavy hammer to use. The AMP regime provides a tool in the middle that helps to encourage compliance.