Industry Committee on May 7th, 2020

[The Chair, Liberal, Sherry Romanado]

Good afternoon, everyone. I call this meeting to order.

Welcome to meeting number 13 of the House of Commons Standing Committee on Industry, Science and Technology. Pursuant to the order of reference of Saturday, April 11, the committee is meeting to receive evidence concerning matters related to the government's response to the COVID-19 pandemic. Today's meeting is taking place by video conference, and proceedings will be made available via the House of Commons website.

I would like to remind members and the witnesses that before you speak, please wait until I recognize you by name. When you are ready to speak, please unmute your microphone and then return them to mute when you are finished speaking. When speaking, please speak slowly and clearly so the translators can do their work. As is my normal practice, I will hold up a yellow card when you have 30 seconds left in your intervention, and a red card when your time for questions has expired.

I'd like to welcome our witnesses. From the Canadian Communication Systems Alliance we have Jay Thomson, chief executive officer, and Ian Stevens, board member and CEO of Execulink Telecom; from the City of St. Clair Township, Steve Arnold, mayor; from OpenMedia, Laura Tribe, executive director; from the Regional District of East Kootenay, Rob Gay, board chair and director of electoral area C; and from TekSavvy Solutions, Andy Kaplan-Myrth, vice president, regulatory and carrier affairs.

Each organization will present for five minutes, followed by rounds of questions. We will begin with the Canadian Communication Systems Alliance. I believe, Mr. Thomson, you are speaking on their behalf, and you have five minutes.

[Jay Thomson, Chief Executive Officer, Canadian Communication Systems Alliance]

Thank you very much, Madam Chair and members of the committee, with special greetings to my MP, Mr. Amos.

It's nice to see you here, Mr. Amos.

As said, my name is Jay Thomson, and I'm the CEO of the Canadian Communication Systems Alliance, or CCSA, as we call ourselves. Joining me today is a member of our board who is also the CEO of Execulink, based in southwestern Ontario in the town of Woodstock, and that's Mr. Ian Stevens.

Thank you for this opportunity to participate in your important deliberations regarding Canada's response to the COVID-19 pandemic.

Like Execulink, CCSA's members are small and mid-sized independent communications companies that provide broadband Internet, video and telephone services, mostly to smaller and rural communities across this country. Their services have become essential to Canadians during this pandemic, a fact that all governments have recognized and confirmed.

I want to assure you that our members take this essential designation seriously. They are committed to keeping Canadians connected during these challenging times and to meeting the increased demands for installation, higher speeds and more monthly band.

In that respect, our members' proactive initiatives include the voluntary suspension of Internet data caps and overage billing, continued service calls—with heightened safety precautions—and the waiver of late payment fees. In addition, as video providers, our members are currently working in co-operation with many broadcasters to provide free previews of a number of TV channels, including children-oriented stations, in order to make available additional activities for those who must still stay at home.

As you know, Madam Chair, last week the House of Commons held its first-ever and historic virtual parliamentary session. The session used video conferencing, just like thousands of Canadians have been doing over the past few weeks to connect with family and friends and access online education and emergency services, and to continue working, just like we're doing now.

Unfortunately, as we know, last week's virtual parliamentary session was not without issues. Several participants had trouble hearing the member who was speaking at the time, and others had difficulty accessing the simultaneous interpretation. The ability of a member to fully participate in the session was largely dependent on where they live, and that's because the quality of their Internet connection is dependent on where they live.

While the majority of Canadians live in urban centres with good broadband connections, millions of others outside those centres continue to have issues with connecting. The trouble that MPs had participating in the recent virtual parliamentary session serves as a perfect illustration of Canada's shortcomings when it comes to universal access to high-quality broadband Internet service.

It's because of those shortcomings that CCSA and other organizations representing smaller communications providers have come together to jointly ask the government to expedite its financial support for rural broadband to help connect more Canadians faster. As this committee looks at ways for Canada to recover both financially and socially from the COVID-19 pandemic, making expedited investments into rural broadband should be high on your list.

Increased and expedited government investments in Canada's broadband infrastructure will advance the ability of all Canadians to participate in our digital economy and will be crucial for stimulating economic recovery by generating employment opportunities and promoting business growth.

Hundreds of locally based independent Internet providers in this country are keeping Canadians connected during this crisis. They also seek to expand their network so they can connect even more, but the reality is that low population densities in the areas they serve means it will be uneconomic to do so without government help.

With the right amount of funding, properly allocated, and with partnerships with government, locally based service providers will be able to reach many more Canadians and do it soon.

Over the years, we have worked constructively with all levels of government to ensure that Canadians, wherever they live, can actively participate in our digital society and economy. We recognize now more than ever that we all need to work together to keep Canadians connected to these critical communications services so that they may access necessary, accurate and up-to-date information and stay in touch with family, friends and colleagues.

For Canada, the return from investing in rural broadband is clear. With universal access to quality broadband services, more Canadians will be able to fully participate in and contribute to our modern economy and to help us quickly get back on our feet.

No parliamentarian, regardless of the riding you represent across this vast and great country, will again be deprived of the ability to fulfill your democratic duties because of a problem connecting.

Thank you again for this opportunity. We look forward to responding to your questions.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

Our next witness is Laura Tribe from OpenMedia.

You have five minutes.

[Laura Tribe, Executive Director, OpenMedia]

Good evening, and thank you for having me today.

I'd like to begin by acknowledging that I am joining you today from Ottawa, the traditional unceded territories of the Algonquin nation.

My name is Laura Tribe. I'm the executive director of OpenMedia, a community-based organization working to keep the Internet open, affordable and surveillance-free.

Eight weeks ago today, the World Health Organization declared a pandemic. Today I'm here to focus on the one thing that's getting us through it all: the Internet. In a matter of just days, we saw the entire country shift online in a way we never thought possible. Workplaces instantly went remote, stores adopted e-commerce solutions, restaurants switched to delivery apps and schools pivoted to e-learning.

The Internet is holding our country together, it's keeping people employed, it's keeping families connected and it's allowing our democracy to continue to function, bringing me to you today from safe within my home.

Imagine the stress you would feel if your Internet connection went out right now. What if it were out for a week? What if it were out for a month? What if the government told you it would take another decade to fix? That is a reality for rural Canadians across this country. Unless you change course urgently, hundreds of thousands of Canadians could be left behind for the next decade. That's what I'm asking you to fix.

Here are some quick statistics on Canada's home Internet landscape. One in ten Canadians households does not have a home Internet connection. Only 41% of households in rural Canada have access to the CRTC's basic broadband speed targets of 50 megabytes per second download and 10 megabytes per second upload. On first nations reserves that's even lower, at 31%. That is not acceptable, and COVID-19 hasn't helped. Before the pandemic, those who didn't have home Internet access could use public libraries, schools or Tim Hortons Wi-Fi to help bridge the gap. That's no longer an option, and even for those who do have Internet, things aren't great. Over a third of Canadians are reporting slower speeds since COVID-19, according to a recent survey. This isn't good enough.

There is some good news, however. We've heard from your parties across the political spectrum that we need to address the digital divide. Minister Monsef has promised to speed up rural broadband rollout. Ms. Rempel Garner released a new plan to connect Canadians by 2021 instead of 2030. Mr. Masse has been calling for a national broadband strategy. Your parties represent the overwhelming majority of Canadians across this country, and they're saying that more needs to be done to get everyone online during COVID-19. The debate about whether or not to act is over. Clearly more needs to be done.

So now the question is this: What are you going to do about it? We need immediate short-term solutions and we need long-term systemic fixes. We have a long list of suggestions, but to start, here are the top three things that you, as parliamentarians, can do right now.

One is to mandate a basic Internet package to ensure that every single person in Canada has access to affordable high-speed Internet. Over 3.5 million people applied for CERB in the past two months, and Canadians already pay some of the highest prices in the world for Internet access. People should not have to choose between food, rent or connectivity.

Two is to release new funding to support shovel-ready infrastructure development projects, connecting underserved rural areas with high-speed 50-by-10 access during COVID-19. Where upgrade projects are ready, give them the money and get them off the ground. Ensure this money helps promote more choice for customers by prioritizing smaller independent service providers and network operators. An economic crisis is a scary time especially for small companies to tackle large infrastructure investments, but you can provide the financial backing to help make them happen and promote greater competition in the process.

Three is to provide a detailed plan with new funding to ensure universal connectivity much sooner than 2030. OpenMedia has been calling for a national broadband strategy since well before the CRTC declared the Internet a basic service in 2016. If I were an MP from a rural riding, I would be genuinely afraid to tell my constituents that they would have to wait until 2030. You have the power to speed this up. Please do it.

Fixing Canada's digital divide only takes two key ingredients, political will and money. You can make both of those happen. There's no going back to normal when this pandemic is over. Our world has been changed forever. Remote work is the new normal. E-learning is here stay. We wouldn't tell rural, remote and indigenous communities that they deserve second-class doctors, teachers or medicine, so why are we telling them to settle for second-class Internet?

When you leave this meeting today, I want you to imagine going back to a town hall in your community. What are you going to say to them? That you're doing every single thing you can to bring them the lifeline they need or that they'll just have to wait and see?

If there is one thing I want you to take away from today's meeting, it's this: The Internet is an essential service. It is your job to ensure that every single person in Canada has access. The country needs Internet heroes, and I hope you'll be one of them.

Thank you.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

Our next witness is Mr. Rob Gay, from the District of East Kootenay. You have five minutes.

[Rob Gay, Board Chair and Director Electoral Area C, Regional District of East Kootenay]

Thank you.

Good evening.

Welcome. It's my honour to present to you this evening. I certainly appreciate all the work you're doing. I really have to build a little bit on what Mr. Thomson and Ms. Tribe have said. I'm going to make exactly the same points, but more in a regional forum.

I'm from East Kootenay in British Columbia, in the extreme southeast corner of British Columbia. I've been involved in local politics for about 15 years now. I chair something called a regional broadband committee, which is a regional approach. There are three or four regional districts. We represent about 160,000 people scattered throughout the mountains, so it's a very expensive area to serve.

Our present state, and why we have a problem, is that what happens in our area—and I'm sure in much of Canada—is that big telecoms come in and look at a business case. Their business case is predicated on where the density of population is, and they take that. That's fine. That's how business works, but the people on the fringes—they could be 50 metres out of the fringe, they could be 10 minutes out of that fringe—will not get service. As was mentioned by others, this is an essential service for all of us. That really leaves us with a tough problem.

Who came along to help us solve the problem? It was the small Internet service providers that were talked about by previous speakers. These businesses are small, localized, and are faced with a difficult problem. The cost of infrastructure in most of Canada is such that it generates low revenue, especially where you have mountains, where you have to build lots of very expensive towers.

This is not a formula for sustainability in business; hence, all orders of government, be it our local government, municipal governments, or the federal government, need to provide these small carriers with access to funds so they can provide the service to rural people. Much of rural Canada is not profitable. We understand that, and that's our role.

I think, from your point of view, how might you help? We, in local governments, provide essential services. That's what we do, providing things like water and sewer, and we fund them by a formula where the taxpayer, the person receiving the service, will pay for that. For the infrastructure, it's usually a funding formula among the local government, the provincial and the federal governments. Once the service is established, it's not that difficult to pay for the ongoing operations.

To our experience, again I must agree with the previous speakers. We lack, in this country, any sort of strategic plan for this. We have programs. This is the way this has been managed for many years: We have programs. One I was first involved with was called connecting Canadians. I recall it was a good program because it focused on rural programs. Then we had a program called connect to innovate. We applied for it. We weren't successful.

What that program did—and I won't criticize it—is that it gave people who a decent level of service a great level of service. Those who had no service—and you heard the statistics earlier—still had no service. That program didn't go very well. It took almost two years for us to rewrite our applications about four times, and ultimately we were told no. Programs that are very goal-oriented support one part of the country, but again, they're not based on a strategy, from our perspective. What we need to do is to make some programs that reduce the administrative burden on these small Internet service providers. We need to get away from these goal-oriented programs.

Can we create a new granting model that focuses on the strategic needs of the community and the region? This might include consideration of the very real business challenges faced by the local ISPs. Can the grant process be modified toward more localized measures of success? These small carriers are our private sector solutions for offering affordable high-speed Internet.

Another option—and you'll probably hear it, and maybe some of your communities do it—is where the municipality takes a role. That has not been our choice, but it's not something that we won't do.

Again, as the other witnesses have said, we very much lack high-speed Internet for all the reasons you're well aware of. COVID-19 is just making it that much more difficult for our residents, our students at home, for telehealth, to get the job done.

I have included in my report an appendix to a report issued April 23, 2020, by the B.C. Broadband Association. They talk about varied success—access to spectrum is a big one, and the lack of infrastructure.

Thank you very much. I appreciate your time.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

Our next speaker is Mr. Kaplan-Myrth from TekSavvy Solutions.

You have five minutes.

[Andy Kaplan-Myrth, Vice-President, Regulatory and Carrier Affairs, TekSavvy Solutions Inc.]

Thank you.

Good evening, Madam Chair, vice-chairs and committee members.

Thanks for the opportunity to speak with you.

My name is Andy Kaplan-Myrth. I am VP, Regulatory and Carrier Affairs at TekSavvy.

TekSavvy is an independent Canadian Internet and phone service provider based in southwestern Ontario and Gatineau. We've been serving customers for 20 years and now provide service to over 300,000 customers in every province. We have consistently defended some very simple values concerning the Internet. We believe in affordable, competitive access to the Internet, and we have consistently defended network neutrality and our customers' privacy rights.

TekSavvy invests in building broadband networks in southwestern Ontario, as well as delivering services across Canada, using wholesale services that we buy from incumbent carriers. Wholesale-based competitors like TekSavvy serve more than one million Canadian households and businesses, and we act as a competitive alternative for countless more.

For more than 20 years, with mixed results, successive governments have worked to nurture telecom competition, but the entire framework is at a breaking point, and competitors are at risk of disappearing. If we don't act to protect broadband competition now, then we risk coming through this pandemic with a more expensive and a less competitive market for Internet services.

As you know, the CRTC sets the rates we pay for the last mile of broadband services. Those rates are required to be just and reasonable, fully compensating incumbents for the cost of their investments. In an important decision last year, based on years of study, the CRTC dramatically lowered wholesale broadband rates. The commission also ordered that incumbents pay back the difference between the inflated rates and the final rates going back to early 2016, an amount that's estimated to be around $350 million that competitors collectively overpaid to incumbents.

We knew the incumbents might appeal that decision, but we decided that Canadians deserved the benefit of those lower rates, and we immediately reduced our prices. Other competitors did as well. Of course, phone and cable companies have launched multiple appeals of those final rates and, meanwhile, they're charging us the old inflated rates. As a result, going into 2020, we were already losing money, but rather than raising prices on our subscribers, we decided that we were in a strong enough position that we could stay the course and lose money for the next year while we defend the appeals.

With COVID-19 and the move to work from home, a reliable residential Internet connection is more important than ever. To support our subscribers, we immediately suspended any charges associated with exceeding bandwidth limits, but the main impact of COVID-19 has been to exacerbate those pre-existing rate problems. In particular, to address the increased traffic generated by people working from home, we have significantly increased the capacity we buy from incumbents, all at the old inflated rates. Revenues are essentially flat while our costs continue to mushroom.

We had expected to carry financial losses for up to a year while the incumbent appeals played out, but the impact of COVID-19 effectively put us where we had expected to be at the end of this year. To manage those costs, TekSavvy has taken drastic and painful steps, laying off almost 30% of our workforce and increasing service prices by $5 a month. We have also had to delay planned investments in rural networks. This is a perverse outcome. Those underserved areas ought to get service more quickly because of COVID-19, but instead their service will be delayed unless the government steps in to fill in the funding gaps.

TekSavvy strongly encourages the government to take a long-term view even while addressing the immediate pressures of the COVID-19 public health crisis. This must be a competitive market that serves the needs of all Canadians and should not be replaced with monopoly markets.

From TekSavvy's perspective, the COVID-19 pandemic has not, on its own, created problems for competitors; rather, the foundations of the regulatory regime that support wholesale-based competition were already crumbling, and COVID-19 is adding stress and exposing just how dire the situation is.

Thank you for your time.

I look forward to your questions.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

Our last witness is Mayor Steve Arnold.

You have five minutes. I'll ask that you speak very slowly and close to your mike for the interpreters.

[Steve Arnold, Mayor, City of St. Clair Township]

Thank you, Madam Chair.

This is all a new experience for me over the last month with Zoom meetings and things like that, and I appreciate the opportunity to be able to discuss St. Clair Township's Internet coverage before, during and after the COVID-19 pandemic.

As you said, my name is Mayor Steve Arnold. I represent a community that has a population of approximately 15,000 people within 640 square kilometres, and our western border is the United States. They're less than half a kilometre away from us.

The balance of the property that we have is approximately 90% rural and 10% urban. Half of our assessment, and also half of our water usage, is based on heavy industry, which is well serviced by fibre optic cable. Because they're big customers, everybody wanted to make sure they were serviced.

In 2011, I was part of the western wardens who established the SWIFT initiative in southwestern Ontario. We also started trying to entice high-speed Internet providers in 2004 in our municipality to expand service to commercial and light industrial companies, and to our residences in areas outside of where our industrial complexes were. During that time, from 2004 to 2019, we have worked with eight different providers with limited success. Usually what happens is that they get all excited, and they come and charge you $60 to see whether or not you have a strong enough through-the-air signal, and 90% of the time you don't. You pay your $60, and they say sorry and go back to wherever they came from.

The residents who currently have Internet, even in our more built-up area, which is Corunna, they get it through the cable providers at 45 megabits per second transfer speeds, and anybody else who can get anything through the airwaves gets between five and seven megabits per second transfer speeds, but if you do your checks, on the lower end, it's usually around 0.5 to one, which makes it pretty well impossible to do anything.

I'm told that downloads of larger files can take from two hours to two days for movies and homework. I've had teachers call me to complain because now they have to do online learning, due to the COVID stuff, and it's just impossible to get it out to the rural communities. Even on the Internet that I have—I use a satellite connection—I'm getting slow speed detections that are shutting me down and taking me offline for sometimes a couple of days at a time. It's very frustrating for us.

There are a number of households that I've been contacted by that are now using two providers in order to get enough service to complete even simple tasks. With our proximity to the United States, signal piracy is common. Canadian providers install a new through-the-air tower, and then the reception and transfer becomes as poor as prior to the installation. They're very entrepreneurial when you cross the international boundary close to us.

However, the good news is that we are very pleased to have been successful in working with Cogeco to receive a SWIFT fibre optic cable project and grant, which will service our most under-serviced and largest population outside of our village of Corunna. It is their hope that we will see this project completed within 18 to 30 months. It's a $5.8-million project and it will provide service to approximately 30% of our total land mass and approximately 5,000 more residents than we currently have serviced. However, we will still be limited....

Am I done? Okay. Thank you very much.

[The Chair, Liberal, Sherry Romanado]

No, no, you have 30 seconds.

[Steve Arnold]

Okay. One of the things we want to make sure of is that the Internet be viewed as an essential service. You may think this is strange, but Detroit, which is 60 miles from us, did a 10-gigabyte transfer speed through fibre optic. Why would we feel that five to 50 Mbps per second is acceptable for rural Ontario and the majority of my municipality?

[The Chair, Liberal, Sherry Romanado]

Thank you very much, Mayor Arnold.

Now we will move to our rounds of questioning. First is a six-minute round. I will give the floor to Madam Rempel Garner.

You have six minutes.

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

Thank you.

Thank you to all the witnesses.

I would just like to start by saying that Internet access is not a luxury. It is a requirement for equality of opportunity and I think it's becoming a barrier to equality of opportunity to economic growth and productivity. So this isn't an issue that we can just ignore and hope that the status quo will fix.

What I hope to hear tonight is some consensus on a few issues. First of all, 2030 is not an aspirational or appropriate target for universal, reliable access to the Internet.

I'm going to start my questions with one directed to Ms. Tribe. Investment is important as we work toward access across this country, but would you say that spending is the metric that we should be driving to? Perhaps it should be to connect every Canadian with the 50-down/10-up requirement that you set forward within an aspirational timeline? I want to shoot for the end of next year.

[Laura Tribe]

I don't think the amount in dollars spent is really the metric, although we do know that connecting the majority of rural Canada is going to cost a fair bit. Really, adoption needs to be the number one metric, not just in terms of who technically has access to services but also in terms of who is using them.

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

Okay. Many companies will say that they have unlimited data plans right now. Is that really the case, or is it in fact that they actually choke access or access speeds or reduce speeds after a certain level of usage?

[Laura Tribe]

I think where we see unlimited data plans is often in those urban areas if you have fibre or cable connections. For those on satellite or those who rely on any sort of wireless services, they are not unlimited at all, and even if they are unlimited and not subject to a financial penalty, once those services are throttled they are rendered effectively useless.

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

Would it be accurate to say that virtually no part of rural Canada has consistent, reliable, 50-down/10-up access?

[Laura Tribe]

I would have to look at the map to see if I could find an area that would identify as somewhere that has access, but I think that it's really hard to point to a large swath of rural Canada that would consider itself sufficiently connected.

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

CRTC has asked some companies to revise the rates that they charge small Internet companies to use their service networks, and some say that the August 2019 CRTC revised mandated wholesale rates are below cost, while others say that they are too high. What's the truth?

[Laura Tribe]

The rates that the CRTC put out in August were so dramatically reduced from its previous rates that there is no way the CRTC could be off by that much. The rates customers are paying right now are way too high. I think the best example of whom to believe might be what we heard from the incumbents themselves in the wireless proceedings in February at the CRTC, where they really made it clear that ultimately their loyalties lie with their profits for their shareholders, not with their customers.

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

Do you think that the current spectrum auction process, which is how radio frequencies are assigned to telcos to transmit service, makes sense? Or, should we be looking at use-it-or-lose-it type licences so that there are no possibilities for companies to unnecessarily hoard frequencies needed to connect Canadians?

[Laura Tribe]

We've heard a lot of concern around the way that the regions are divided with regard to spectrum and how that often lets companies own the spectrum but only develop the services in the most-developed areas. So ultimately, we would put forward that if companies are not using that spectrum, they need to either make it available to other companies or communities to access, even if they maintain the rights, or they should lose the right to it entirely.

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

The CRTC is evaluating allowing smaller companies to access wireless service providers' network infrastructure to create more competition and service provision for cellphones. Some bigger companies say that mandated MVNO access—that's what we're talking about here—is harmful, is socialist and will prevent the development of rural Internet services. Is this true?

[Laura Tribe]

No. It's not a political slant; it's actually an argument regarding efficiency. When we look at the approach to date of trying to get any new companies to come in and start a network from scratch and build across the country, that is dramatically less effective; it is a waste of finances and resources, and ultimately it fails to serve customers. So introducing MVNOs will meet the needs of different segments of the market; it will increase affordability for customers, and it will provide a wide variety of services that are not currently available, more efficiently.