Industry Committee on June 6th, 2019

[The Chair, Liberal, Dan Ruimy]

Okay, everybody. We only have an hour today, so we'll skip the preliminaries and get right to it.

Welcome to the Standing Committee on Industry, Science and Technology. We pursue the reference from Wednesday, May 8, on the study of M-208 on rural digital infrastructure.

Today we have with us from the CRTC, Christopher Seidl, executive director, telecommunications; Ian Baggley, director general, telecommunications; and Renée Doiron, director, broadband and network engineering.

From the Canadian Wireless Telecommunications Association, we have Robert Ghiz, president and chief executive officer; and Eric Smith, vice-president, regulatory affairs.

From Telesat Canada we have Daniel Goldberg, president and chief executive officer; and Michele Beck, vice-president of sales, North America.

Welcome, everybody. We have a very short agenda today so you each have five minutes for your presentation and then we'll go into our rounds of questions. We'll be starting off with the CRTC, Mr. Seidl.

[Christopher Seidl, Executive Director, Telecommunications, Canadian Radio-television and Telecommunications Commission]

Thank you, Mr. Chairman.

We appreciate this opportunity to contribute to your committee's study of M-208. This study addresses important areas within the scope of Canada's telecommunications regulators, being Innovation, Science and Economic Development Canada as a spectrum regulator, and the CRTC.

Reliable and accessible digital infrastructure is indispensable to individuals, public institutions and businesses of all sizes in today's world, regardless of where Canadians live.

That's why, in December 2016, the commission announced that broadband Internet is now considered a basic telecommunications service.

The CRTC's universal service objective calls for all Canadians to have access to fixed broadband at download speeds of at least 50 megabits per second (Mbps) and upload speeds of 10 Mbps, as well as an unlimited data option.

As well, the latest mobile wireless technology not only needs to be available to all homes and businesses, but also along major Canadian roads. Our goal is to achieve 90% coverage by the end of 2021 and 100% as soon as possible within the following decade. We want all Canadians—in rural and remote areas as well as in urban centres—to have access to voice and broadband Internet services on fixed and mobile wireless networks so they can be connected and effectively participate in the digital economy. Reaching this goal will require the efforts of federal, provincial and territorial governments, as well as of the private sector.

We're taking action on multiple fronts to realize that goal. One of our most important initiatives this year is the CRTC broadband fund. The commission established the fund to improve broadband services in rural and remote regions that lack an acceptable level of access. The broadband fund will disburse up to $750 million over the first five years to build or upgrade access in transport infrastructure by fixed and mobile wireless broadband Internet services in underserved areas.

The contributions to the broadband fund are collected from telecommunications service providers based on their revenue.

The fund is meant to be complementary to, but not a replacement for, existing and future private investment and public funding. Up to 10% of the annual amount will be provided to satellite-dependent communities. Special consideration may also be given to projects targeted to indigenous or official language minority communities.

Earlier this week, we launched the first call for applications for funding from the broadband fund for projects in Canada's three territories as well as in satellite-dependent communities. According to the latest data, no households north of 60 currently have access to a broadband Internet service that meets the CRTC's universal service objective. Only about one quarter of major roads in the territories are covered by LTE mobile wireless service.

The digital divide is also evident in satellite-dependent communities across the country where there is no terrestrial connectivity.

Canadian corporations of all sizes: provincial, territorial and municipal government organizations; band councils and indigenous governments with the necessary experience or a consortium composed of any of these parties can apply for funding.

The CRTC will announce the selected projects from the first call for applications in 2020. A second call, open to all types of projects and all regions in Canada, will be launched this fall.

The CRTC's fund is only one part of the work that must be accomplished by the public and private sectors. To this end, we noted in the most recent federal budget a commitment of $1.7 billion in new funding to provide high-speed Internet to all Canadians. The government intends to coordinate its activities with the provinces, territories and federal institutions such as the CRTC to maximize the impact of these investments.

We support the government's efforts to the extent we can under our mandate and status as an independent regulator.

Mr. Chairman, even with the financial support from the CRTC broadband fund or other public sources, some Internet service providers may still face challenges and barriers that limit their ability to improve broadband access in rural and remote areas.

For this reason, we are planning a new proceeding related to rural broadband deployment. We will examine factors such as the availability of both rural transport services and access to support structures. These services are crucial to expand broadband Internet access and to foster competition, particularly in rural and remote areas. Extending broadband to underserved households, businesses and along major roads is an absolute necessity in every corner of the country—including rural and remote areas.

Extending broadband to underserved households, businesses and along major roads is an absolute necessity in every corner of the country—including rural and remote areas.

Access to digital technologies will enhance public safety and enable all Canadians to take advantage of existing and new and innovative digital services that are now central to their daily lives.

I'd be pleased to answer any of your questions.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

We'll move on to the Canadian Wireless Telecommunications Association.

Mr. Ghiz.

[Robert Ghiz, President and Chief Executive Officer, Canadian Wireless Telecommunications Association]

Thank you very much.

Good morning.

Thank you for giving us the opportunity to speak here this morning.

Motion M-208 asked this committee to study fiscal and regulatory approaches to encourage investment in rural wireless infrastructure.

Since Canada launched wireless services, Canada's facilities-based providers, the companies that invest capital to build networks and acquire spectrum rights, have embraced the challenge of building Canada's wireless network infrastructure across our country's vast and difficult geography.

To date, Canada's facilities-based wireless carriers have invested more than $50 billion to build our wireless networks. This is more, on a relative basis, than any other country in the G7 or Australia. They have also spent approximately $20 billion at spectrum auctions and in annual spectrum licence fees. Our members are also funding the new CRTC broadband fund.

As a result of these investments, Canadians enjoy the second-fastest networks in the world, twice as fast as those of the United States. According to the CRTC, 99% of Canadians have access to LTE wireless networks where they live.

While this is a great achievement, much work remains. In just the last few months we have seen announcements of significant investments that will bring increased coverage to rural areas.

For example, Bell announced expansion of its fixed wireless services to more than 30 small towns and rural communities in Ontario and Quebec. Rogers announced investments of $100 million to bring mobile wireless coverage for 1,000 kilometres of rural and remote highways across Canada. Similar investments are being made by regional wireless providers, such as Freedom Mobile, Vidéotron, Eastlink, Xplornet and SaskTel.

Unfortunately, investment, especially in rural areas, faces an uncertain future. As motion M-208 recognizes, regulation can encourage investment but can also have the opposite effect.

Unfortunately, investment, especially in rural areas, faces an uncertain future. As motion 208 recognizes, regulation can encourage investment. But it can also have the opposite effect.

Canada's telecommunications policy has long recognized the importance of facilities-based competition as the best way to encourage investment. Under policies supporting facilities-based competition, sustainable competition in the wireless retail market is starting to gain momentum, resulting in continuing growth in the number of wireless subscribers, increased data consumption, declining prices and more choice for consumers.

Equally important, ongoing investment by Canada's facilities-based carriers is continuing to expand the reach of Canada's wireless networks for both fixed and mobile wireless services. Yet at a time when the government is stressing the importance of continuing to invest in and expand wireless infrastructure and when they are introducing targeted fiscal measures towards this goal, government is considering measures that, if they proceed, will discourage investment and disproportionately harm rural Canadians.

Earlier this year, ISED issued a proposed policy direction that would direct the CRTC to give priority to the goals of increased competition and more affordable prices when making regulatory decisions. We support these goals, but we were surprised by the absence of any mention of investment in infrastructure by facilities-based carriers.

During the consultation period, we've asked the minister to revise the policy direction to include a reference to encourage investment in infrastructure as a key priority for the CRTC. At the same time, as part of its review of the regulatory framework for the wireless industry, the CRTC has stated its preliminary view that mobile virtual network operators or MVNOs should be given mandated wholesale access to the wireless networks of the national wireless providers.

MVNOs do not invest in wireless infrastructure or spectrum. Rather, they pay wholesale rates set by the regulator to use the facilities-based carriers' networks and use this mandated access to compete against facilities-based carriers for subscribers—the very carriers that are making the investments and expanding the networks.

In countries where this has been tried before, it has resulted in significant decreases in network investment. Those same countries are actually now trying to reverse course.

The CRTC has twice previously declined to mandate MVNO access, knowing it would undermine investments in wireless networks. It is not clear why it is now being considered, especially when both ISED and the CRTC have made connecting all Canadians such a large priority.

If government truly believes that connecting Canadians is such a major priority, policies should be aligned with this goal. With respect, today's policy confusion will only harm rural connectivity. We want to work with government. We want to work with the CRTC to ensure that the 99% of coverage goes to 100%, and that Canadians can have access to the best wireless networks in the world.

Thank you very much. We look forward to your questions.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

Moving on to Telesat Canada, Mr. Goldberg, you have five minutes.

[Daniel Goldberg, President and Chief Executive Officer, Telesat Canada]

Thank you, Mr. Chairman, for inviting Telesat to participate today. Thanks also to each of the members of this committee for their commitment to improve rural broadband connectivity and to bridge the digital divide in Canada.

It would be difficult for my colleagues and me at Telesat to overstate how strongly we share your objective to deliver in a timely manner affordable, state-of-the art Internet connectivity to the millions of Canadians who lack it today. The good news is that Telesat has a concrete plan to do just that, and we can deliver. Telesat is one of the largest, most innovative and most successful satellite operators in the world. We have a proud 50-year history of delivering mission-critical satellite services to enterprises and governments operating throughout the world, including, of course, right here in Canada, where we started. We have offices and facilities across the globe, but our corporate headquarters is just down the hill on Elgin Street. That's where we fly our global satellite fleet, do all of our R and D and advanced engineering, and otherwise run our business in the highly competitive, rapidly evolving global communications services market. We invite any one of you to come down the street and visit us at our headquarters.

In addition to the millions of Canadians lacking high-quality broadband connectivity, there are another roughly four billion people in the world on the wrong side of the digital divide. Connecting them all is an enormous technical, operational and financial challenge. It's also a critical public interest objective, as well as a compelling business opportunity, for the companies that have the expertise and the ambition to take it on.

Telesat has been working intently on solving this challenge. I'm pleased to say we're on the cusp of moving forward with the most innovative, advanced, powerful and disruptive global broadband infrastructure ever conceived. That's not hyperbole. Specifically, we've designed a constellation of roughly 300 highly advanced satellites flying approximately 1,000 kilometres above the earth. The satellites, which will be connected to each other using optical laser technology, are in a patent-pending, low-earth orbit architecture—hence the term LEO. Picture a fully meshed, highly flexible, space-based Internet infrastructure capable of delivering terabits of fast, affordable, reliable and secure Internet connectivity anywhere in the world, including every square metre of Canada. It's a highly innovative design developed by Telesat's world-class engineers.

Our current satellites are in geostationary orbits nearly 36,000 kilometres above earth. Although there are many benefits from this, a big drawback is the amount of time it takes for signals to travel to and from our satellites. That signal delay is called latency. It's not a big deal when used for broadcasting TV shows to households, but it's a very big deal when trying to provide the kind of super-fast, low-latency broadband you need to surf the Internet, engage in e-commerce or use other Internet applications like e-health and distance education. Low latency is going to be even more critical in a 5G world. By moving the satellites roughly 30 times closer to earth, our LEO constellation can deliver connectivity with latency equal to, or better than, that which fibre or terrestrial wireless services can achieve.

At Telesat, we don't provide broadband service directly to consumers. Instead, we provide a broadband pipe to telephone companies, mobile network operators and ISPs, who then provide the last-mile connection to rural consumers and other users. Telesat's LEO constellation will support delivery of affordable Internet connectivity with minimum speeds matching the CRTC-mandated 50 megabits down, 10 megabits back, and it can readily reach gigabit speeds. Telesat LEO will also help wireless carriers to economically extend the boundaries of where they can provide both LTE and 5G.

We plan to select a prime contractor to build the Telesat LEO constellation in the coming months. Our objective is to start launching satellites in 2021, begin service in Canada's north in mid-2022 and commence full global service in 2023.

Although other companies—including Amazon, SpaceX and SoftBank—also have plans to develop LEO constellations, Telesat has a significant competitive advantage by virtue of our deep technical resources, strong track record of innovation and unsurpassed commercial and regulatory expertise.

In this regard, Telesat’s LEO constellation represents not only the best opportunity to definitively bridge the digital divide, but also a unique opportunity for a Canadian company—and the Canadian space industry more broadly—to take the lead in the burgeoning new space economy. That, in turn, will promote sustainable high-tech job creation and economic growth throughout the country for years to come.

With industry and government working together, the Telesat LEO constellation will revolutionize the delivery of high-performing, affordable broadband service throughout Canada and the rest of the world. It will also place Canada at the forefront of the new space economy.

Thank you.

[The Chair, Liberal, Dan Ruimy]

Thank you very much. We're going to move right into questions.

We're going to start with Mr. Amos. You have seven minutes.

[William Amos, Liberal, Pontiac, QC]

Thank you. I'll be sharing my time, if there's any left, with Member Graham. I'm going to be very clipped in my questions; we only have a very short period of time.

My first question is to our hard-working public servants at the CRTC. Thank you for being here.

My 41 mayors in the Pontiac are very frustrated with the state of Internet. Our constituents are extremely dissatisfied. When I knock on doors, this is a top issue. I would be telling an untruth if I didn't say that the disappointment was palpable when I had to inform constituents that the first call for applications for the CRTC broadband fund was only open to the Yukon, Northwest Territories and Nunavut. Can you please explain that?

[Christopher Seidl]

Absolutely. We defined the first call for applications for the territories plus satellite-dependent communities—in other words, the north, where we felt the need was the greatest. That's the start of the commission's approach.

We did announce that we will be having a call in the fall for the rest of Canada, including all regions of Canada and all project types—be it transport, access or mobile—following the first call. We wanted to really address the areas where we felt the need was the greatest, which was the north, including those satellite-dependent communities. In 2016 we set aside a maximum of 10% of the fund for those satellite-dependent communities. We wanted to start there as a first step to get some decisions out quickly, and then look at the larger problem in the rest of Canada—again, including the north.

[William Amos, Liberal, Pontiac, QC]

I appreciate that. I have questions in the back of my mind. Perhaps this could be responded to in writing. On what basis was that determination of greatest need made? It can't have been made on a population basis. I'm just trying to channel the frustrations of so many constituents and mayors. I don't mean to direct it toward the CRTC as an institution, but to the situation.

The CRTC's “Let's Talk Broadband” report was finalized in December of 2016. At that time, it was announced that there would be a fund established—all good ideas. It's taken a very long time to get to this point right now, where my constituents and my mayors look at me and say that they still can't even apply for funding through the CRTC.

[Christopher Seidl]

We do run all our proceedings through an open public process where everybody has a voice—it's very transparent—to get that decision out and get the best solution out there from everybody involved. That obviously does take some time. We had a few processes to get to where we are now. I think we've probably gone as fast as we could have on any of those activities.

We do share the desire to get broadband everywhere, but it is a shared responsibility. We are only one piece of the solution for the $750 million. In 2016, and many times, we said that it's a shared leadership from private and public sectors; all levels of government have to step up to the table to solve the digital divide.

[William Amos, Liberal, Pontiac, QC]

To go specifically to the issue of cellular coverage, which has become a major discussion point, particularly around public safety.... This national capital region and my riding of Pontiac have gone through two tornadoes and two floods in the last three years. Your remarks this morning do not address the issue of cellular.

I wonder to what extent you think that gaps in wireless coverage...so people can use mobile telephones for any reason, including public safety.... To what extent do you feel like we're on the right path now toward addressing that, with the $750-million fund and the investments that have been made available by our government?

[Christopher Seidl]

In my opening remarks I did mention a few times that our basic service includes mobile. I think we're one of the first countries that includes mobile as part of our basic service where everybody should have that—not just in households, but on all major roads in Canada. We have that included in our eligible projects in both calls for applications that we have identified.

I think it's very important to get that in place. We do have fairly extensive coverage right now. There are still people without it, but we're at 99.4% coverage of mobile right now—98.5% for the latest technology—for households. About 10% of our major roads are not covered right now, so that is certainly a public safety issue that needs to be addressed. Obviously, that's where the business case is the hardest for anybody—to build out those long stretches of highway. As I mentioned, only 25% in the north carries.... That would be one of our first calls, in an area where there are long stretches where people don't have any connectivity and no other services around. It really is an issue that is exacerbated in that area.

[William Amos, Liberal, Pontiac, QC]

I have two minutes. I don't want to completely run out the clock, so I'll pass it over to member Graham.

[David Graham, Liberal, Laurentides—Labelle, QC]

Thank you. I appreciate it.

To Mr. Ghiz, it's very rare that I'll say this, but I think I agree with everything you've said. With the [Inaudible—Editor], that doesn't happen too often. I appreciate having this opportunity.

When the CRTC mandate Minister Bains announced recently talked about competition, my concern was: what is the point of competition, if you don't have service to begin with? The biggest issue I have is this. Mr. Amos' riding and my riding are neighbouring. Together, they are much larger than Belgium. It's a very big territory. I have entire communities that have neither Internet nor cellphones. How do we get those communities connected on cellphones, so that emergency services, as Mr. Amos was talking about, don't have to meet at city hall every hour, and then go back out onto the ground? What's the fastest path to getting proper coverage of all our small towns?

[Robert Ghiz]

Great question.

You heard from the CRTC, and us. It's not easy, and doesn't always make economical sense. I think government now, and in the past, has been on the right path, in terms of supporting facilities-based carriers, because they're the ones that build the networks. Has coverage increased fast enough for everyone? I like to say that when we use the number 99%, with 35 million Canadians, that means there are still 350,000 Canadians who don't have access. You don't hear from the 34 million or 32 million who have it. You hear from the ones who don't have it.

What we need to do, moving into the future, is look at regulations—and this is why this motion is important—on how that connectivity is going to happen that much faster. I've listed a couple of things, but the announcement of the capital cost allowance was extremely beneficial, and encouraged investment to happen. We have the connect fund at ISED, which is very good. We have the CRTC fund, which our members are funding. Provinces have their own funds. Some municipalities have their own funds, such as EORN.

I think the key to all of that is coordination amongst them all, and also flexibility in the funds. SaskTel is one of our members. I was talking to them the other day. They have a large province. They want to see flexibility in these funds, so that broadband includes fixed wireless as well.

[David Graham, Liberal, Laurentides—Labelle, QC]

Thank you.

[The Chair, Liberal, Dan Ruimy]

We're going to move on to Mr. Albas.

You have seven minutes.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Thank you, Mr. Chair.

Thank you to all our witnesses for coming and sharing your expertise with our committee today.

I'd like to start by addressing something I heard today and something that has come up recently. First of all, to the CRTC, Mr. Amos has expressed frustration with the choice of starting with many of those rural and remote northern communities. Considering that many of them have very little, if no, coverage, because of market failure or cost, I can see why you'd want to start there. People who live that far away are Canadians too, and deserve to have the benefit of those kinds of programs. We should always be mindful of putting those who have the least first.

The government has announced a clawback of 3,500 MHz spectrum currently owned by, among others, Xplornet, which we heard from on Tuesday. When I asked about the impacts, they said they would be significant. I know the government has made some slight alterations to their plan, but it's still a major clawback.

I think it's somewhat absurd to study rural connectivity and not address the fact that a government decision may have cut off the Internet connections of thousands of rural customers. I'm prepared to move a motion to study this, but I'm also aware of the lack of time to do so, with the end of session fast approaching.

I think we must engage with the fact that we're talking about ways to increase rural connectivity, but the government is reducing it. In my opinion, we should at least make reference to the decision, and its impacts, in the report, or find out from the affected companies how many people will be affected by this policy choice.

I want to ensure the witnesses who made time for the committee have a chance to answer questions, so I'm going to end there. I hope the Liberal members who are clearly concerned about rural connectivity are willing to address the fact that the government may have just put a hatchet to it.

To the CRTC, I'm hoping you'll further indulge me for a quick second. A colleague has a constituent paying an extra $2.95 administration fee on their bill. They were told by their local provider that it's a mandated CRTC charge that only applies to a specific geographic area. If you can't answer this, could you please get me in touch with someone in your organization, so we can talk about the issue?

[Christopher Seidl]

Do you know what the bill item is for?

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

It just says “admin fee” on the line item, and when the constituent phoned and asked, they said that the CRTC mandated that to their local area to collect that fee and gave no further explanation.

[Christopher Seidl]

Where we have tariffed services—this is going back in time now a little bit—local calling regions were extended. There were additional costs associated with that, where we regulated the rates that the incumbent had to provide, and they were allowed to charge extra to extend that local calling to a wider region. That might be what it is.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

It may be something that the CRTC may want to revisit in terms of transparency so that people can know, because it just says “admin fee” and all people are told is a government body told the local provider to put it on there. I think there should be sufficient transparency on this.

To the CWTA, Mr. Ghiz, thank you for being here.

The minister of ISED said yesterday he did not know where the tipping point is for prices and investment. At what point would the revenue from customers be too low to discourage facility investment? What is the tipping point of your members?

[Robert Ghiz]

I'm not going to get into direct costs with our members, but I will say this: the tipping point is looking at the overall public policy. The overall public policy that we've had in Canada now for the last 10 or 15 years, since a policy directive came down in 2006 by the previous government that has been followed through by this government, is that investment by facilities-based carriers is extremely important. If you've looked at what's happened through this program, you have the three national providers, and now you have all these regional providers across the country. What the regional providers are doing is providing more competition, which is allowing prices to go down while also encouraging all members to expand their network so that they can gain new customers.

Just to demonstrate how well it is working right now, in the last quarter, out of all new net subscribers, Freedom and Vidéotron received 84% of those new subscribers, so it's showing that it is working.

I used this in my speech the other day at the telecom conference. It's like your doctor giving you a prescription, an antibiotic, for a cold you had. We had a cold; we had a problem with our wireless coverage and prices across the country. You're given that antibiotic, you take it for four days, and then you think the problem's gone away, even though the prescription said seven days, so you get sicker.

What I'm saying is that we're still in that process of taking our antibiotics to ensure that we can have great networks with reasonable prices in our country. It is working, and we just need more time to allow that to continue.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

We're studying rural wireless access here, and that is crucial. However, as my colleague has said, access does not mean much if it's too expensive. What kind of guarantees can we get from you and your organization, particularly your members, that expansion of service will not be met with hugely increased fees?