Industry Committee on Dec. 8th, 2020

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

Mr. Lemire, it is your turn. You have two and a half minutes.

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

Thank you, Madam Chair.

I'm going to turn to Mr. Brown. Thank you for your recommendations. You and I have a very similar take on the situation.

When companies want to provide connectivity in the regions, one of the big problems they encounter is access to infrastructure, the poles and networks of the big providers.

It looks a lot like abuse of dominance to prevent competitors big and small from entering the market. It seems to fit the description of an anti-competitive practice under the act.

Do you see it as an anti-competitive practice?

[David Brown]

I certainly think that what I would call “business by default”, at least here in northwestern Ontario, is essentially a monopoly. We just don't have choices or options.

I think the use of satellite Starlink's SpaceX technology allows, and is the only path forward, for at least indigenous communities and perhaps rural municipalities. Delivering this in a timely manner, scalable, without terrestrial-based solutions is probably the only way that's an effective use of taxpayer dollars to invest in something that's going to help these communities.

I think there is an advantage there. When I look at the universal broadband fund, from my understanding of it—and I'm by no means an expert—the only application that would make sense for indigenous communities to apply for is the rapid response stream. That rapid response stream allows them to apply because of the on-premise component of the Starlink kit, but we have to do that in a quick turnaround. These communities need to understand what they're applying for. The deadline is January 15.

I really think that a lot of this wasn't necessarily intended, but it's written for telecommunication companies; it's not written for SpaceX Starlink. If the goal is to bring Internet and broadband access to these indigenous communities, they're typically closed over the holiday season for two weeks, like many of us taking holidays. They have to navigate COVID and community shutdowns, and we're asking them to do something online, which there is irony to because they don't have that access right now.

Hopefully, we can get some funding through the rapid response stream for these communities. It is not necessarily first-come, first-served, but it is first in, first out, and I think they're at a disadvantage when it comes to that.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

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

Thank you.

[The Chair, Liberal, Sherry Romanado]

Our next round of questions goes to MP Masse.

You have the floor for two and a half minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you.

I'm going to go back to Mr. Lawford with regard to his suggestion for a broadband czar.

Would that position be time limited? Would it be something where you would have some type of a structure of consultation?

I'm interested about that as a coordination piece. We have so many moving parts with programs that are sunsetting and with some that are continuing and so forth. Can you give us a little more detail on that, please?

[John Lawford]

Our frustration at the moment is that some pieces are run out of the CRTC and some out of ISED. I'm making it up a bit on the fly, Mr. Masse, to be honest, because we don't have a national broadband plan that has tapped a particular agency to do this. Whoever it is, or whichever ad hoc department it is, I hope they would be able to coordinate separately from the CRTC and industry because of the parochialism in those two areas, and I hope they would be able to contact and work with the provinces.

[Brian Masse, NDP, Windsor West, ON]

Thanks for that.

I come from the auto sector, where we've had an auto czar off and on at different times to help coordinate the moving parts of multi-jurisdictional trade and cross-border issues and so forth. It's a worthy idea to explore, even if it were to be a transitional piece to create a working plan.

I know my time is up, Madam Chair.

Thank you very much for that.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

We will now go to MP Sloan.

You have the floor for five minutes.

[Derek Sloan, Conservative, Hastings—Lennox and Addington, ON]

Thank you; I appreciate it.

I'm going to ask Mr. Kaplan-Myrth a few questions.

In regard to the CRTC's 2019 decision, as far as I understand it, the rates have not, obviously, been implemented yet, and there was a court decision that upheld the rates. Now we're seeing the CRTC review their initial decision that was upheld by a court.

Is there any good reason for the delay in implementing the rates right now? If you could comment on that, that would be great.

[Andy Kaplan-Myrth]

No, we don't think that there is.

When the decision came out in August 2019, the incumbents appealed it three different ways. The government petition has been shut down. They lost in the federal court of appeal process. Now they're appealing that to the Supreme Court, but we'll have to see if the Supreme Court will even hear it. Of course, they also asked the CRTC to review the decision.

Where it stands right now is that they asked the CRTC to put a stay on those rates while the CRTC is reviewing it, and the CRTC granted them that.

TekSavvy is actually challenging that decision in court now. We've asked for a judicial review of that decision to stay the rates because we think it is unreasonable. This isn't the basis of our complaint, but at a high level, essentially competitors have carried the burden of these higher rates all of this time and the CRTC already found that those rates are going to come down. Decision after decision is finding against the incumbents.

We think it's certainly time to implement those rates or at least part of those rates on a going-forward basis, if nothing else, so that we can start to see the benefits of those rates in competition.

[Derek Sloan, Conservative, Hastings—Lennox and Addington, ON]

Can I ask you to expand on something? You had stated earlier that the minister's statement that came out in August on balancing investment with affordability is incorrect or a false dichotomy. Could you quickly summarize why that's the case?

[Andy Kaplan-Myrth]

The Governor in Council's decision did not overturn the rates. I want to acknowledge that. They said that this is already before the CRTC and they should take care of it. In that sense, that's a good thing, but it also made a comment that the rates may not in all cases have achieved the right balance between investment and affordability.

That was a real concern to us and to the competitive industry as a whole because it signalled that the government doesn't seem to have recognized or acknowledged that competitors—when we get those lower rates and when we get the refunds for the money that we've overpaid all of these years—will invest that money in the economy, including in facilities and in our networks.

To arrive at a conclusion that low rates necessarily mean low investment basically requires that you also believe that only the incumbents are going to invest. Yes, the incumbents get lower revenues from wholesale rates than they do from a captured retail market where they can charge whatever they want. Of course, that's the idea of competition. When competitors are healthy and participating in that economy and their revenue is not tied up in incumbents, then competitors can also take that money and invest it in facilities and in their communities in different ways.

That was our concern about that statement from the government. It reflected this idea that there's this balance or trade-off between investment and competition.

[Derek Sloan, Conservative, Hastings—Lennox and Addington, ON]

You've described a very troubling scenario whereby the larger providers are undercutting their own wholesale rates which they've argued to maintain.

Can you quickly explain how we know that the wholesale rates are inflated? It seems the CRTC is taking over a year to decide this, finally. How do we know? It seems like it should be fairly obvious. Can you, as an expert, explain that?

I believe we're out of time. I apologize.

[The Chair, Liberal, Sherry Romanado]

Just answer very quickly.

[Andy Kaplan-Myrth]

I would say it's a technical issue. Read the CRTC's decision on costing. They're the experts. Just look at the public version of TekSavvy's complaint to the Competition Bureau, which details how we arrive at our pricing and how it is then impossible for us to compete, really, with the flank of brands and with Bell and Rogers in particular.

[Derek Sloan, Conservative, Hastings—Lennox and Addington, ON]

Thank you very much.

[The Chair, Liberal, Sherry Romanado]

Thank you.

We'll now go to MP Jowhari. You have the floor for five minutes.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you, Madam Chair; and to the witnesses, thank you for your testimony. It was quite informative.

I'll start with Mr. Lawford.

You categorized the funding that the government has provided as “fragmented”. Can you explain why you feel that it's fragmented and explain what drivers you use to call it fragmented?

[John Lawford]

Sure.

The reason it's fragmented is that it doesn't all come out at once. We've had a number of programs, such as connect to innovate, connecting Canadians, the universal broadband fund and the Canada Infrastructure Bank funding, bump up at different times. The other main part of the process that makes it uncoordinated is that it is application driven. I shouldn't use the word “beauty contest”, but that's what it is. You put in an application, and if your application is good, you get the money.

There are other ways to do this. There are reverse options. There are fewer categories of criteria that you need to satisfy, and you could probably have a more efficient system. It's for that reason.

It's also that the funding comes from at least two locations from the federal government: from the ISED division, and from the CRTC's ongoing broadband fund. Finally, there are provincial funds, often matching or not matching and different deadlines. Therefore, the coordination challenges with that, especially for a smaller community-based provider, are very difficult.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you.

From your point of view, who would be able to bring alignment to this funding?

[John Lawford]

It's tempting to want to leave it with the CRTC, because they are the natural regulator in this area. I don't believe they have the statutory authority at the moment. Perhaps the committee could consider that. However, the difficulty is that most of the funding comes through the federal government, where it should rightly be from, because when you're building things you want that to be taxpayer money and be accountable to the voters.

Without a national broadband plan, it's hard to know where to cut that off. That's why we suggested a neutral third party to at least temporarily be a broadband czar and get the whole house in order, and then perhaps we should think about legislation to formally give it to the CRTC.

[Majid Jowhari, Liberal, Richmond Hill, ON]

You talked about the legislation. What would be one of the key characteristics of that legislation?

[John Lawford]

If you were to take a look at the U.S. legislation, you'd see that it requires that funding be up to a certain standard. All Canadians would have roughly the same access to advanced telecommunications.

That's the way the U.S. law is structured. It has a joint federal-state board to work out problems between the two levels of government in the United States. I think that would be smart in Canada as well. It has special pillars for, as I say, education, health care and indigenous access so that those issues are dealt with properly and not sidelined. Those are pillars of that system.