Industry Committee on Feb. 6th, 2018

[Christine J. Prudham]

Xplornet is in many respects lucky to be here today. We started out as a very entrepreneurial little company in Woodstock, New Brunswick. We were completely privately funded, and off we went. The CRTC issued what was known as the “deferral account decision”. That decision, which essentially put over $300 million in the hands of Bell Canada to compete with little Xplornet, almost crushed us. We could not raise private capital for 18 months after that event. Essentially, we thought that was the end of us.

We were very fortunate that Bell didn't build out on the proposed schedule. It's well known in the public record that there were significant delays, and that incredible delay was pretty much what saved our company at the beginning. Otherwise, handing over $300 million to compete with what was then a very tiny company would have definitely driven us out. Undoubtedly, if we put too much money into areas where people are already willing to privately invest, we can drive out private money. I'm sure that's not your intention.

[Jim Eglinski, Conservative, Yellowhead, AB]

Thank you.

Mr. Proctor, when you're in your individual community, how are you feeding it to the residences? Are you doing it by fibre optics, or are you doing everything remotely?

[Dean Proctor]

We use fibre. In the case of Nunavut, it's actually government fibre. The Government of Nunavut is one of our clients, and they have built out their own fibre ring. We're delivering it across their own fibre to their buildings. With consumers, small offices, home offices, it's all wireless. That began back in 2004-05. We built our broadband wireless—it's called WiMAX. We've evolved that to 4G LTE and 2G GSN. It's all wireless. The speeds that come across it are phenomenal, certainly well in excess of the CRTC's 50 down and 10 up objectives. We can deliver much more than that in the last mile; our problem is the backbone.

[Jim Eglinski, Conservative, Yellowhead, AB]

I'm going to go back to you, sir, since I think you're about as rural, as remote, as we can get.

[Dean Proctor]

My Saskatchewan accent is coming out.

[Jim Eglinski, Conservative, Yellowhead, AB]

Referring to the last mile, broadband technologies, what is the best thing we can do for rural Canada? What are the best systems to use?

[Dean Proctor]

It depends on your use. It depends on what you want to be doing. We're obviously advocates of wireless technologies, mobile wireless, 4G LTE, soon to be 5G. If you're talking about an individual connection to a home, to a business, fibre is obviously the cream of the cream, but the question is whether it's practical for all areas.

One of the things we're finding in a lot of the small communities is that with 4G LTE we can deliver well beyond what any individual needs. It's an incredible technology. The answer is that it all depends. That's the classic engineering answer, but it's true. If you're able to deliver fibre, that's great. I would suggest to you, though, that for the vast majority of rural and remote areas, wireless solutions, fixed or mobile—and our preference is mobile—are the best way to go.

[Jim Eglinski, Conservative, Yellowhead, AB]

What is the cost comparison for, say, fibre versus what you're doing? Is it a lot more expensive?

[Dean Proctor]

Fibre is much, much more expensive, yes.

[Jim Eglinski, Conservative, Yellowhead, AB]

Thank you.

I think I've just about used up my time.

[The Chair, Liberal, Dan Ruimy]

Mr. Masse, you have seven minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, witnesses, for being here.

I'll start with Mr. Mitchell, but I would ask for this to go around.

Obviously the decision in the United States to abandon net neutrality has a significant impact on, I think, even government policy to spend resources to connect and how to connect. There is obviously going to be a change of behaviour and marketing access to people's information now that won't be based on just the net neutrality model. It can, quite frankly, be vulnerable now to a specific type of relationship that is different from what it's had in the past.

I don't expect you have an answer for it, but what does that do for public policy people like me, who believe in net neutrality but who are now faced with—especially here in Canada, because the pipelines and the effect also come from the United States—the defeat of some of the principles? This service has been characterized as being like highways, but the reality is we're now building toll roads to certain destinations.

If you have any comments about that, I'd be interested in hearing them, starting with the U.S. side and Mr. Mitchell, and then the Canadian after that.

[Christopher Mitchell]

I'll sum mine up with just two quick thoughts, because it's very deep. The first is that about 100 million Americans can only get broadband Internet access from a large provider that is expected to begin violating network neutrality. So it's of deep concern and we're seeing local governments taking more initiative to think about building their own networks or conditioning the use of certain assets such as conduit upon maintaining a neutral network. States are increasingly making procurement decisions to require neutral networks. If Montana is purchasing a link, it will have to get it from a company that is offering a neutral network.

The second piece is simply that there is push-back, and I don't think we'll see this abandonment of net neutrality last for very long. Whether under this administration or the next one, I suspect we'll see a much larger coalition forming to defend the Internet more broadly. I think that's a welcome change, so that gives me hope for all range of areas.

[Dean Proctor]

Net neutrality is a tough subject. Our company members are Internet pioneers. It would be fun if you actually came and met some of the originals from the company. We're strong believers in the openness of the Net.

There's another way to look at this one as well, though, which is with regard to the control of the content. It's one thing to block certain content or to privilege certain content, but in the case of Canada, where you have one company in particular that is a controller and owner of a large part of the content that could be delivered across the networks, we have to be worried about the other side, which is to make certain that all carriers—we're a carrier—have access to content that may be controlled by other carriers. So I'd flip this one back a bit to the extent that there are restrictions on open access, and we have to make certain that the content itself is available to all providers as well. I'll just throw it in a little different direction.

[Christine J. Prudham]

I think Xplornet's view has been that we don't own content. We are not overly concerned about that because we respect subsection 27(2) of the Telecommunications Act and believe all carriers should respect subsection 27(2), which deals with this issue, obviously, in Canada.

Consequently, our primary focus continues to be providing the service that allows people their choice of content, if that helps.

[Jay Thomson]

We come at this question from an interesting perspective, because our members are Internet providers, but they're also cable television companies and IPTV companies, so they distribute TV programming services. It's a big part of their business.

Most of those programming services are owned by Bell, Rogers, and Quebecor, which are also the biggest ISPs in the country. Our fear is that, absent net neutrality, they would be in a position to favour their own networks over ours for distribution of those services.

[Brian Masse, NDP, Windsor West, ON]

There's no doubt, and that's part of the reason for the defence of net neutrality. It really becomes the eye of the beholder as to what's really important content or not.

At any rate, with regard to the next spectrum auction, maybe I'll go in reverse order for responses, if I have time.

How do you feel about the terms and conditions on the spectrum auction that might be more involving the final mile that is asked? It's nice to talk about, and I know the catchphrases in terms of governments staying out of the way and then knowing when to help. It's always told to stay out of the way when the lucrative aspects of business are there in front and the low-hanging fruit. It's asked to get out of the way for that, but then it's always requested to partner for the more difficult aspects. How do you feel about having terms and conditions that might be more specific on the spectrum auction that's coming up?

Maybe I'll go in reverse order, if I have time. Let's start with Mr. Thomson.

[Jay Thomson]

Our members don't have spectrum, generally. They'd like it, but they can't afford it. The licence areas typically are way too large and encompass too many potential customers for our members to be in a position to bid for any of those licensed areas. The auction process is very complex. It's not really designed for the smaller player at all.

[Brian Masse, NDP, Windsor West, ON]

That could be written in the terms and conditions, who actually gets—

[Jay Thomson]

We'd certainly like to see that.

[Christine J. Prudham]

Likewise, Xplornet is certainly concerned about the upcoming auctions. As we stated in our presentation, we're concerned that there hasn't been a recognition of the fact that it's needed for rural broadband. On the economics of serving downtown Toronto, Jay is quite right when he speaks to the fact that, the way the map of downtown Toronto is drawn, some of the worst broadband servicing in Canada is actually right around Toronto. It's because the spectrum is trapped in the Toronto licence. If it's worth seven million people in that area, you're buying it to serve the downtown Toronto folks. You're not serving Uxbridge, Stouffville, Milton, or some of those areas.

Yes, we think there needs to be something specific, something addressed to it.

[The Chair, Liberal, Dan Ruimy]

We're out of time, but both of you could give a very quick answer.

[Dean Proctor]

We intervened in favour of the spectrum set-asides for the smaller players, the new entrants. We intervened in favour of a much lower opening price, because that has been a real hurdle for us in past auctions. In outlying areas where it's very difficult to build out a network, the last thing you want to be doing is spending a fortune buying into the spectrum, so we supported that.

The one area where we're probably in agreement with Xplornet and would like to see some adjustments is where one can bid, but also the size of the tiering. Maybe the tiering needs to be adjusted to favour more rural and remote area auctions.

[Christopher Mitchell]

I cannot add anything, so please move on.

[The Chair, Liberal, Dan Ruimy]

We're going to move to Mr. Bossio for seven minutes.