Industry Committee on May 7th, 2020

[Michelle Rempel, Conservative, Calgary Nose Hill, AB]

Do you think that the necessity of big companies having to pay large upfront costs to build their own Internet networks, or facilities-based competition, creates too high a barrier to new competitors to create enough competition for market forces to work? How can we correct this issue?

Some have suggested that the builders of the infrastructure and the providers of Internet service should be mandated to be separate corporate entities, as they are in the U.K., to prevent potential market distortions and improve access. Could you comment on that?

[Laura Tribe]

Facilities-based competition, I think, has caused a lot of the problems that we're seeing right now in our market. There are definitely costs upfront in investing in that infrastructure, but the current model has really forced incumbents, in particular, and those vertically integrated companies to mix their business interests.

Models like structural separation would be what you're referring to, allowing a company to be either a service provider or a wholesale provider. It's definitely one way of going about it, yes.

[Michelle Rempel, Conservative, Calgary Nose Hill, AB]

Briefly, at the end, would you say that the status quo, the current regulatory environment, will allow us to achieve universal affordable access in Canada in a very short period of time?

[Laura Tribe]

I don't think that's possible without significant government intervention and funding.

[Michelle Rempel, Conservative, Calgary Nose Hill, AB]

Thank you.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

Our next round of questions goes to MP Will Amos. You have six minutes.

[William Amos, Liberal, Pontiac, QC]

Thank you, Chair.

Thanks to our colleagues and, in particular, our witnesses for joining us today.

Representing a rural riding in western Quebec, I cannot think of a topic that is more germane and important to the entirety of my riding.

I had a call this morning with a mayor and council from a small town who remain frustrated with their Internet access. This is the number one infrastructure issue in my riding. It has been since the start of my service as an MP in 2015, and it will continue to be until we get to that 100% connectivity target.

I share the passion of those witnesses with us today whose articulate presentations I really appreciate.

I would highlight that we really have reached a point of consensus in Canada. Many of you will be aware that in the previous Parliament, I advanced a private member's motion, M-208, which called for heightened investments in our Internet infrastructure across rural Canada. Thankfully, we had united support across all parties, so I think we really are at a moment where there is violent agreement that it is absolutely necessary. I think the question is really more about how we get there.

I agree with the point made by Ms. Tribe. Waiting until 2030 won't satisfy my constituents. People want Internet yesterday, and they deserve that, but the challenge is a technical and financial one. I don't think, though, that at this point it's a question of political will. I believe that our government has demonstrated that we're willing to step up.

I would note, just as a point of history—and this was brought up by our representative from the Kootenay region—there were programs prior to 2015, but they didn't go to private residences. The federal government provided subsidies that enabled schools, municipal halls, fire halls and libraries to get hooked up, but individual households were left without that support. They were left to the vagaries of the free market.

We have changed that, and the connect to innovate program does bring fibre optics to homes. Up to now, our government has connected nearly 400,000 homes, and leveraged federal and provincial funds to enable $1.2 billion worth of projects. That's not insignificant, but more needs to be done. We all acknowledge that.

I'll go to Ms. Tribe and to my friend and constituent, Jay Thomson, on this issue. What in the design of the next program—in the universal broadband fund, when it is brought forward—needs to be altered to ensure that it is a successful program?

[Laura Tribe]

I'll go first, but I will try not to take up so much time. I'll make sure Mr. Thomson also gets to speak.

I think it needs to include a focus on ensuring that the high speed is actually available in homes, not just technically available. We really need to make sure it's getting into the homes. It also needs to involve a consultation on what the individual communities look like, particularly indigenous communities. There's a lot of interest in their having decision-making powers over the types of services available to them.

We think the technology really needs to be future-proof. This is not about hitting the 2016 targets. They're a minimum. We want to make sure the technology being deployed is essentially fibre everywhere. If we need stopgap solutions now, there should be a plan for long-term connectivity.

We also need to make sure the speeds are actually being met. The advertised speeds are a big problem we have now because people aren't necessary receiving them. That came up from multiple people in the technology tests done in advance of this.

I think the biggest challenge—again, not to harp on the money aspect of it—is it has felt very piecemeal. It needs to be nationalized in that every single community needs to know when they're going to get service, how that's going to happen and what they can expect from it, with enough money to back it. The biggest failing of the programs to date over the decades, although not any particular program, is even though they have been chipping away at problems, every time an announcement is made a different community feels left behind because it wasn't done.

[Jay Thomson]

I'll jump in.

As others have already said, it's important to look to the smaller, locally based providers that are actually in the communities and fully understand the needs of their local customers. Money can be made available to them, perhaps in smaller amounts than have been the case in the past. We don't necessarily need huge multi-million dollar projects in smaller communities, but we need a way to get access to money quickly and through a simple application process, with the ability to use the smaller amount of funds for local projects.

There is another aspect to it. There's more to this than just the capital expenditure to build the network. Once it's built, it has to be maintained. The economics of rural Canada and smaller populations are such that the cost impact is the same for builds as it is for maintenance. Operational support is also important so that once built, a network can be maintained and even improved over time.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

Mr. Lemire, you have the floor for six minutes.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Thank you, Madam Chair.

I'm very pleased that we're finally addressing this topic. I'm happy to see a consensus. I still want to emphasize one point that I had in mind and that Ms. Tribe just raised, namely, the idea of nationalizing the service delivery. I think that this idea is worth considering.

My question is for Mr. Kaplan-Myrth. It's good to see you again, Mr. Kaplan-Myrth.

The crisis obviously affected your business model, including the monthly price, the ability to generate traffic and perhaps the ability to provide unlimited data to your customers. Is that the case?

[Andy Kaplan-Myrth]

Effectively, yes. We're not charging overage fees for the small number of customers we have who are still on capped plans. Effectively, everybody is unlimited for as long as we can do that.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Could the Canadian Radio-television and Telecommunications Commission, or CRTC, help you by introducing more suitable regulations? If so, when would you want these regulations implemented?

[Andy Kaplan-Myrth]

Our main concern is the wholesale rates and the August 2019 decision. It really all goes back to that, because that's fundamentally what makes this sustainable for us or not. The old rates are dramatically inflated and we're stuck paying those for as long as the new rates are suspended and under appeal.

What can the CRTC do about that? It's complicated because the rates are before the courts; the Governor in Council, with a petition; and the CRTC. Those are the three appeals. The CRTC could issue a decision on the review and vary quickly, and I think it could actually step in and take some action to set emergency rates for the purpose of helping competitors manage this period of the pandemic.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

In a recent discussion, we spoke about the influence of providers and the role of distributors. In this case, I'm talking about Bell. The provider sells a service to itself or to one of its subsidiaries. It doesn't offer the same price to all its resellers. It also doesn't offer them the same speed, the same quality or the same access to technology.

Do you think that this situation is fair to the consumer?

[Andy Kaplan-Myrth]

To be clear about this, Bell, for example—or any of the incumbents, really—builds the broadband networks and then uses those broadband networks to provide services to its own customers on a retail basis. It also sells wholesale access to those networks to providers like TekSavvy and other wholesale-based competitors, and we take those wholesale services that we buy, put them together with other services that we took to make our Internet service and sell them to our customers. The requirement is that everyone who is buying those wholesale services from Bell is buying essentially the same services. There's some variability because of off-tariff agreements, but the tariff services that we all buy, I assume are essentially the same. We have a level playing field among the competitors, but that is very different from the service that Bell provides to its own retail customers.

This is really not just about Bell, it's about all the incumbents that are mandated to sell wholesale services. They typically have many advantages that they can leverage when they're selling services to their own retail customers, operational advantages and efficiency advantages, and they obviously have a lot of information about what services, capacity, backhaul and other sorts of things are available and can manage that in ways on their retail side that we can't on the wholesale side.

This goes back to some of the ideas of structural or functional separation that Laura Tribe was talking about earlier, where if Bell, for example, were required to buy its own broadband services on the same terms that we buy its broadband services to serve their retail customers, I think that would create a level playing field and would probably improve the services that we all got from their broadband network.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

I gather that the consumer may benefit from the prohibition of the practice whereby a builder could be a reseller in the same company.

At that point, should the provider be a crown corporation, or at least a third party company that would offer a fixed price to everyone?

Would it be feasible for each distributor to have a customer ratio in urban and rural areas?

[Andy Kaplan-Myrth]

I'm not sure I would want to limit what different businesses could do. I think the goal here is to try to connect more people and get more good services to those people. Starting from that focus, I'm not sure that businesses that provide the broadband services shouldn't be allowed to also provide the retail services, but certainly, they're—

[The Chair, Liberal, Sherry Romanado]

Unfortunately, Mr. Kaplan-Myrth, that's all the time we have for that round.

Our next speaker is MP Masse. You have six minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Madam Chair.

Mr. Kaplan-Myrth, go ahead and finish your thoughts.

[Andy Kaplan-Myrth]

Thank you.

I think that depending on the different model that you use to build those networks, if you funded somebody to build the broadband network and provide even terms for everyone providing retail services on that network, including perhaps the company that built the network, that might be a way to use the funding mechanisms to ensure that level, competitive playing field.

[Brian Masse, NDP, Windsor West, ON]

Thank you.

One of the things we haven't touched too much on just yet and that I think is important is that this country actually had spectrum auctions and gained $20 billion of revenue for essentially no real product for which they had a cost to roll out. The spectrum has taken in around $20 billion—the last numbers are going to be even more important for our future—and we haven't put that back into the system.

In fact, what we've done is that we've created a very low competition market. We have areas that are poorly serviced, by design, in what we have now. We've had experiments in the past, through Maxime Bernier, in regard to opening up for foreign competition, but then at the same time not even having mandates to protect that competition or allowing it to do anything other than just having a precursor introduction into our market.

Still, what we don't have yet is a basic package commitment from the government, and 2030 is absurd. That's just not acceptable.

My first question is for you, Ms. Tribe, with regard to the universality suggestion you made. I think there is an example that was handled poorly in the past, when we actually forced a skinny package for cable and Internet providers for news and basic services. There should be a political decision or a drive to mandate a basic set of services at a lower price at the minimum threshold you should expect for a Canadian who needs to use the Internet now more than ever before.

Even before COVID, we saw government services moving online. We've reduced public offices where you can actually get service and help and we've streamed people to online services. We've made it even more important to be connected, let alone that it is important for your education, the economy and so forth.

With regard to your suggestion of a basic package, can you highlight a bit of what you would see as features for that?

[Laura Tribe]

One of the challenges we've seen with ideas like a skinny basic package around cable is that in the past they were buried on websites. They were impossible to find and impossible to navigate. I think what we're talking about with a universal package that's available to everyone is to make it as inclusive and as widely available as possible.

We can look at any of the affordability packages that have been put forward in the past. They tend to be incumbent led, particularly around cellphones or for home Internet for subsidized housing in plans that are restricted in the amounts that people can use and restricted in the speed. Even though they may be affordable—for something like $10 a month—if they don't actually give people the services they need, it's a problem.

I think what we're looking at right now is something like a plan for $20 to $25 a month. It gives people those high-speed access services. If you want something faster than the minimum basic from the CRTC, you can do that, but I think we need to recognize, those who are making that call, that for companies like TekSavvy that are providing wholesale, that's a real challenge, because of where the wholesale rates are at right now, to make that actually feasible.

That's really where this isn't just regulating at the retail rate. It has to get at a lot of those systemic, underlying issues of everyone being overcharged at the base level off the bat.

[Brian Masse, NDP, Windsor West, ON]

Yes.

You raised an important point. I was there when Mr. Amos' motion 208 went through. The problem we have is that it was a motion, so it's not legislation. We need it enshrined in law. It was good, and we had some really good discussion on it. It highlighted and moved some things. I don't have any criticism whatsoever, other than how we need this to be more mandated by law.

If you want to actually play in the market, I see this spectrum auction as an opportunity to do that. On this spectrum auction, I'll again follow up with you, Ms. Tribe. I've been advocating—you can disagree with this, so feel free—that instead of getting the money from the spectrum auction, we need to focus on access to service and having specific claw dates to actually have accountability for that spectrum.

What we have right now is $20 billion in revenue from our current system. As for where it's gone, we have no idea. I've asked the government many times about that. They've put very little of that money back into rolling out Frankenstein packages all across the country to try to fill in the gaps. When we do this spectrum, I would rather see it focused less on money and more on actually getting access.

[Laura Tribe]

I think it's definitely incredibly expensive for the amount that's going into purchasing spectrum. I think in the last round for spectrum, it will be a little while before it's actually deployed. It's all preventative and trying to hedge around 5G.

I think if the spectrum is to be given away for free, as it has been in the past, historically, which I think is really where the charges started to come from, realizing that such a commodity was being given away for free, then we really do need to make sure that the fund is going directly back into the services themselves.