Evidence of meeting #15 for Industry, Science and Technology in the 43rd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was spectrum.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Marie-Hélène Labrie  Senior Vice-President and Chief Public Affairs and Communications Officer, Cogeco Inc.
Leonard Eichel  Senior Director, Regulatory Affairs, Cogeco Inc.
Dean Prevost  President, Rogers for Business, Rogers Communications Inc.
Tony Geheran  Executive Vice-President and Chief Customer Officer, Telus Communications Inc.
C.J. Prudham  Chief Legal and Regulatory Officer, Xplornet Communications Inc.
Charles Beaudet  Vice-President, Eastern Canada, Xplornet Communications Inc.
David Watt  Senior Vice-President, Regulatory, Rogers Communications Inc.
Stephen Schmidt  Vice-President, Telecom Policy and Chief Regulatory Legal Counsel, Telus Communications Inc.

6 p.m.

Liberal

The Chair Liberal Sherry Romanado

Thank you very much.

The next round of questions goes to MP Dreeshen.

You have five minutes.

6 p.m.

Conservative

Earl Dreeshen Conservative Red Deer—Mountain View, AB

Thank you very much, Madam Chair.

I'm in a bit of a unique situation. I have Rogers for my business cellphone, I've got Xplornet for my home and I have Telus for my home and personal service as well. Unfortunately, all of them have been causing me issues and concerns, but that's what we're used to when we live in a rural part of Canada, especially when so many people are using the system at this particular point in time.

As Mr. Longfield indicated earlier, we did have a study on broadband, and I was part of that group. We were also at the U.S. Senate hearings on broadband services for rural and remote communities.

The first question I would like to ask is to Cogeco, because it has a presence in both the U.S. and Canada. When we're talking about regulatory issues, do you find there are some things that occur in the U.S. that make it easier there than in Canada?

6 p.m.

Senior Director, Regulatory Affairs, Cogeco Inc.

Leonard Eichel

From the U.S. perspective, there is no mandated wholesale requirement in the U.S., which means that we can roll out infrastructure in a lot of our rural markets without having to concern ourselves with that obligation. That makes the business cases better, and it makes us able to roll out the network farther and faster.

Also, the U.S. market is a bit different in that we are sort of privileged to have that rural market opportunity. In Canada, I guess the key difference is the mandated wholesale requirement, which makes it a bit of a struggle in some instances to be able to provide infrastructure in certain areas.

6 p.m.

Conservative

Earl Dreeshen Conservative Red Deer—Mountain View, AB

To the Telus representative, you spoke about policies that undermine an investment strategy and how that's going to cause problems in the future. You also spoke about the regulatory environment and how it has to become easier to work with. After listening to the Cogeco people, I think you probably would have some ideas there.

Of course, you also mentioned that you're not making any threats, but we have to make sure that the regulatory environment is stable. I don't know whether you've made those same kind of statements to urban Canadian networks. There's this promise to reduce the rates by 25% for consumers. The issue there is that, as you are perhaps saving for those particular customers, you're just making it harder and harder for rural people.

Again, when we look at the service we have, it has been unreliable. Urban and rural areas don't have what you advertise. They don't have very good broadband Internet access. Is it a technology issue or a regulatory issue? What role do you see the government playing to help eliminate this digital divide we see between rural and urban areas?

6 p.m.

Executive Vice-President and Chief Customer Officer, Telus Communications Inc.

Tony Geheran

Let me try to unpack that. That was quite a lot.

First of all, it's a complex issue, so the regulatory framework needs to be very clear if you're going to make long-term investments for your interests. For us to fibre Red Deer, which is one of the cities where we would like to build in Alberta, it's a $150-million project for us. If we're going to invest $150 million, with an average cost per home or premises of around $2,500 to $4,000—in Alberta there is a lot of buried costs, so it's very expensive—we want to know we can generate a return on that. For that magnitude of investment, you're talking about a 15- to 20-year investment return period on a project, assuming it goes well. You need to know that the regulatory policy isn't going to change when you've made a commitment of that magnitude.

When you're looking at rural investment, we've already invested a very large amount of our own money at no cost to the taxpayer in rural builds. Hinton, Edson, Bonnyville, Wetaskiwin and Drumheller are all fibre towns in Alberta that we've built out. They were much less attractive than building out of Calgary, Edmonton or Vancouver, but we wanted to balance our investment and make sure that we have broad coverage.

There are communities that still don't meet those economic return criteria, and we need policies that will help us bridge that gap so we can make the commitment. We will provide the infrastructure and the skills and resources—and we have them—but we need the federal and provincial funding to align to help smaller communities that don't qualify on those economic terms.

6:05 p.m.

Conservative

Earl Dreeshen Conservative Red Deer—Mountain View, AB

Red Deer has 100,000 people. It's a great community and it has service in lots of different ways, but when you get 20 miles away there is no service that you can rely on. I think that's really part of it. We're concerned right now with the risk, with the COVID-19 pandemic, of a more expensive and less competitive environment for Internet services. I think one of the critical things is we see—

6:05 p.m.

Liberal

The Chair Liberal Sherry Romanado

Unfortunately, MP Dreeshen, that's your time.

6:05 p.m.

Conservative

Earl Dreeshen Conservative Red Deer—Mountain View, AB

Okay. Thank you.

6:05 p.m.

Liberal

The Chair Liberal Sherry Romanado

The next round of questions goes to MP Jowhari.

You have five minutes.

6:05 p.m.

Liberal

Majid Jowhari Liberal Richmond Hill, ON

Thank you, Madam Chair.

I'd like to welcome all the witnesses to our virtual committee.

I'd like to start by getting a sense of the way all of you have defined your pricing model.

I understand that the amount and timing of usage play a role in developing a price, and also determine your cost. You all talked about a shift, with the increase during the daytime and increase on the weekend, and the use of different platforms, whether for data, or streaming, etc. How has that played a role in your pricing and your cost?

Let's start with Cogeco.

May 14th, 2020 / 6:05 p.m.

Senior Director, Regulatory Affairs, Cogeco Inc.

Leonard Eichel

Certainly increased usage is a key factor in being able to moderate and manage our cost structure. Internet use has been going up 40%, from a CAGR perspective, every year for the last nine years, so we have to constantly upgrade and invest in our networks. This latest round of usage as a result of COVID is certainly spurring us on to invest even more during this particular thing.

The costs from what we do invest play a huge role in the price that we charge our customers. The pricing has to reflect that. It has to be able to recover those investments as well. You have to remember that for companies like us and others in this particular meeting, a lot of the equipment we buy is coming from the U.S., so we have to pay for it in U.S. dollars. That's a cost. Labour increases every year and inflation increases every year. We have those costs to take into consideration when we're pricing our services.

6:05 p.m.

Liberal

Majid Jowhari Liberal Richmond Hill, ON

So you feel that you have to increase your pricing because the cost has increased.

Rogers.

6:05 p.m.

President, Rogers for Business, Rogers Communications Inc.

Dean Prevost

Interestingly, we never talk about the cost per unit. The cost per unit is actually falling rapidly. What's happening in Canada, as the other witness just said, is that costs are rising and the unit usage is rising, yet our price per unit has been falling rapidly. This is typically not unpacked when people look at a headline price for a set of services, but when you look at what's happening underneath that, it's like you're able to buy more and more of each unit at a far, far lower price. So the costs are actually falling dramatically, particularly in the wireless space and the wireline space, but that's not typically reflected in these bundled services that aggregate costs as part of the platform that has now moved from 3 gigabits to 5 gigabits to 10 gigabits, all at smaller increments than you would expect given the capacity given.

6:05 p.m.

Liberal

Majid Jowhari Liberal Richmond Hill, ON

Thank you.

Let me quickly go to Telus and Xplornet because I have a follow-up question for all of you.

Telus first, please.

6:10 p.m.

Executive Vice-President and Chief Customer Officer, Telus Communications Inc.

Tony Geheran

It depends on the service and the network. If you are talking about costs for wireless services, remember that we have the highest cost spectrum in the world. The way our government charges and sets up auctions, raises the cost of the spectrum, which adds to the cost of the service the customer has to pay for. With the spectrum at lower costs, we would see lower rate plans for Canadian users on the wireless networks. If you are video streaming and using very high bandwidth to download movies, you have got to look at the capacity that needs to be in place to cover that, and the nature of that capacity has to support the usage patterns. So there are a lot of dynamics that really challenge the way you can look at the services, whether it's voice, video or data and a fixed or a wireless network to determine the right, affordable, economic price plan. If it's not affordable, customers won't use it.

6:10 p.m.

Liberal

Majid Jowhari Liberal Richmond Hill, ON

I'm sorry for interrupting. Let's go to Xplornet.

6:10 p.m.

Chief Legal and Regulatory Officer, Xplornet Communications Inc.

C.J. Prudham

I think ours would be somewhat similar. There is the primary challenge of being able to reach rural areas. We adopt a national pricing structure. We're trying hard not to charge more if you are in a remote area versus close to urban areas. We try to make sure that people are priced in a fair way, but the next issue we have that everybody has just alluded to is that you have to intensify that network after you—

6:10 p.m.

Liberal

Majid Jowhari Liberal Richmond Hill, ON

I have 30 seconds. Did any of you four increase your prices to smaller ISPs on March 1?

Let's start with Cogeco. Just a quick yes or no.

6:10 p.m.

Senior Director, Regulatory Affairs, Cogeco Inc.

6:10 p.m.

Liberal

Majid Jowhari Liberal Richmond Hill, ON

Rogers?

6:10 p.m.

Senior Vice-President, Regulatory, Rogers Communications Inc.

6:10 p.m.

Liberal

Majid Jowhari Liberal Richmond Hill, ON

Telus?

6:10 p.m.

Executive Vice-President and Chief Customer Officer, Telus Communications Inc.

6:10 p.m.

Liberal

Majid Jowhari Liberal Richmond Hill, ON

Xplornet?

6:10 p.m.

Chief Legal and Regulatory Officer, Xplornet Communications Inc.