Industry Committee on Dec. 8th, 2020

[Andy Kaplan-Myrth]

No. I think the premise of your question is right. These are essentially the same economics at play and the same policy goals. We're trying to introduce competition on networks that do require investment. Wholesale-based service-level competition is a proven way to do that on broadband networks, and essentially the same thing will also work on mobile.

[Nathaniel Erskine-Smith, Liberal, Beaches—East York, ON]

If anything, it seems to me that we're squeezing the resellers. To your point, TekSavvy, and the wholesale rate conversation, walk me through why as a consumer—I used to be a consumer of TekSavvy—I haven't seen increased quality, but I've seen significantly increased costs over the last five years. Why would that be?

[Andy Kaplan-Myrth]

Can I clarify something? Do you mean increased cost from competitors or overall in the Internet services?

[Nathaniel Erskine-Smith, Liberal, Beaches—East York, ON]

Overall, in home Internet services. I can't find, in my home Internet service, at least, in the east end of Toronto, a package that I paid for five years ago for less than, say, $60.

[Andy Kaplan-Myrth]

Right now, home Internet services are really dictated for competitors and for retail by the wholesale rates that incumbents have set. By inflating those wholesale rates—which really goes back all the way to 2011 probably, or earlier, when those rates were first set—they have really prevented competitors from being able to introduce pricing that would discipline Internet pricing across the board.

You can just look at what the CRTC's current wholesale rates are for specific services that you buy. You can look at what the CRTC found would be a just and reasonable rate for that service in August 2019, and those are the rates that incumbents are fighting. If you do look that up, you'll see specific prices that are lower than the pricing that's in the market. Of course, it's more complicated than just the individual speeds, but it will give you an idea of the disparity between the inflated rates and the just and reasonable price that it ought to be.

[Nathaniel Erskine-Smith, Liberal, Beaches—East York, ON]

Very simply, you would say that the CRTC should stick with what they initially proposed?

[Andy Kaplan-Myrth]

I think the CRTC has all the evidence in front of them to make a decision. They spent three years deliberating about it and arrived at a decision in August 2019. I think that when they do the same thing in a review—which is not about policy goals of how much Bell or other companies should be able to invest—they'll arrive at the same pricing.

[Nathaniel Erskine-Smith, Liberal, Beaches—East York, ON]

Mr. Ghiz, I don't want to put you entirely on the spot, but I did read recently in the Financial Post that Rogers and Telus received, I think it was $63 million, from the wage subsidy but then Telus paid out dividends. That makes me uncomfortable.

Does it make you uncomfortable?

[Robert Ghiz]

I can't answer questions about individual member of our association.

Nonetheless, I believe you were at the committee hearing the other day when the chair of the CRTC, Ian Scott, was there. He talked about how our industry has stepped up to put out programs to help individuals and customers, as well as companies, in health care and governments, during COVID-19. So our industry did respond to some of the issues out there.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

Mr. Lemire, you may go ahead. You have six minutes.

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

Thank you, Madam Chair.

I want to start by thanking you, Madam Chair, as well as Mr. MacPherson, the clerk, for trying to fit a square peg in a round hole, so to speak. Your efforts in that regard are very appreciated.

I would kindly ask the witnesses to keep their answers brief, because there will be a lot of back and forth. You all raised so many interesting points, particularly regarding competition.

I am going to start with you, Mr. Stevens.

My team and I have met with members of your alliance in Quebec. You mentioned the importance of government funding to ensure rural prices are in line with urban prices. Affordability is not the only consideration. Geography comes into play as well. To offset those extra costs, you need top-up funding from the government, unless it is willing to subsidize rural operating costs, which would mean higher prices for customers at the end of the day.

Is the situation equal on both sides? Obviously, the answer is no. Is the situation fair and equitable? There again, the answer is no. You also said government investments must address the needs of the future. Basically, that means investing in fibre optics, which differs from SpaceX's strategy. I would like you to elaborate on that.

You said fibre technology would serve Canadians for generations to come. The problem we are discussing today is the accessibility and affordability of high-speed Internet. Do the programs provided by the federal government and its various organizations cover that problem as far as mobile networks are concerned?

[Ian Stevens]

I'll dive into the use of fibre optics as the technology of choice that I talked about.

The programs that Execulink has taken advantage of are fibre first. It's been a long-standing position of the CCSA that threshold facilities are the best way to get sustainable, long-term, broadband services delivered to Canadians.

Mr. Lemire, there are some other questions buried in your ask and I didn't quite catch them all. Is there a particular area you want to dig into, and I'll focus on that?

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

Yes, please. I am especially interested in the programs.

Would you say the programs are the biggest barrier to accessible and affordable services for all Canadians in rural areas?

[Ian Stevens]

I think where we and our members are investing is in our communities. We stop investing when the business case dies or the retail rate and the cost to build and serve our networks don't connect. That's where the programs that we and other CCSA members have been accessing have been bridging the gap. They've been helping us with one-time capital injections to build beyond the traditional geographic boundaries in areas where the costs per kilometre to service every home otherwise don't make the business case come true. That's where we've been focusing.

Within those programs, as I mentioned in my remarks, as part of the funding application there is generally an ask on what your retail rates are going to look like for the next few years. They do test that. Whether it's municipal, federal or provincial, so far what we've seen is a test for affordability to make sure that when they do fund it, the funding group has a sense of whether or not it will make sense for the people who get connected at the end of the wire.

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

Do you and your members feel that wholesalers are hindering small distributors? Do you sense that is ultimately the problem, here in particular, when it comes to connecting all Quebeckers and Canadians?

[Ian Stevens]

I missed the first part in the translation. I apologize. Are you talking about wholesalers for small operators?

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

Yes.

[Ian Stevens]

Thank you.

The wholesale regime that TekSavvy has been addressing today is focused on the large incumbents. There has been a need and a desire for many of the networks that have been funded from the public sector to have an open access policy. I don't know examples of operators who have tried to access that, so I can't really comment on wholesale access to small network provider networks.

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

Thank you, Mr. Stevens.

I have one last question for you. How many of your members have filed complaints against wholesalers? Are there many who would like to file a complaint, but can't for lack of time or money? What problems do they run into?

[Ian Stevens]

Today I'm focused as a representative of CCSA. I can't really speak to wholesalers' ability to complain. Perhaps a different witness could address that.

[The Chair, Liberal, Sherry Romanado]

Thank you.

Our next round of questions goes to MP Masse.

You have the floor for six minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Madam Chair, and for the updated schedule as well.

Mr. Lawford, successive governments have collected around $22 billion in revenues from selling the spectrum, which is public space and an asset. Not all of that has gone back into providing services. There have been a series of programs rolled out over the years.

I'm wondering what your thoughts are on the upcoming spectrum auction. I believe that the process we have is broken. It's incurred additional costs for consumers. I think other countries have used more of an RFP process that guarantees the use of the spectrum you purchase within the time frames and reaches citizens in areas as an obligation. It also has some obligations on the cost structure, and it would be a better approach. I'm just curious to know your thoughts on that.

[John Lawford]

I believe there should be more conditions in the spectrum auction regarding rural build-out.

There should also be a process for “use it or lose it” spectrum. Often it is sat upon, with big plans to put into practice that are not followed up on by the industry department.

The question of whether you should change the process from an auction to something more like a beauty contest, which is what I think you're referring to, is a really fraught one. Years ago, PIAC opposed moving to an auction model for the reasons you give, which is that you lose control to some extent and it becomes an economic exercise. The economic incentive of making money from this thing outweighs all of the other concerns.

This committee can certainly recommend putting very stringent coverage requirements for those getting spectrum, and also for “use it or lose it”. That has not always been adhered to in the past, so I would definitely encourage this committee to consider that recommendation.

Changing the auction is probably a little too far down the track by this point.

[Brian Masse, NDP, Windsor West, ON]

Thank you for that.

Mr. Ghiz, maybe I can get your opinion on “use it or lose it” and also on the spectrum auction.

As far as I'm concerned, we've created toll booths in the sky. It's really important to recognize that even before the pandemic, broadband and access at an affordable rate had become an essential service for Canadians, especially as we had moved to more online services before COVID-19, closing bricks and mortar government services and then more schooling and so forth. Then with COVID, it has gone on.

Mr. Ghiz, what is your opinion with regard to “use it or lose it” in your association?

[Robert Ghiz]

I take your point and agree with it concerning the costs associated with spectrum in Canada. You and I have had this discussion many times. You've had some interesting ideas on how to use those dollars.

You're right, though; it has been more than $20 billion. We're probably the most expensive country in the world when it comes to our spectrum costs. Obviously those costs are passed along to the customers, and we think that making spectrum cheaper and more available is something that would help reduce costs and increase build-outs.

As you know, some of my members have some differing opinions on spectrum, so I have to be a little careful about going into details. Those, however, are my general comments with regard to spectrum.