Industry Committee on Jan. 26th, 2021

[Robert Malcolmson]

Certainly, the amounts that the telcos—that is, Bell and Telus—charge in Quebec are regulated and public. That's the $12.48 rate that I quoted you. The rates that the hydro companies charge are different because they are provincially regulated. Traditionally, they've been a whole lot higher than the rates we've been able to charge. There is a discrepancy in rates in terms of whether you're connecting to a hydro-controlled pole or a telco-controlled pole.

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

Why do you charge for pole updates—we've seen this firsthand in Abitibi-Témiscamingue—when the service providers say that you fail to maintain the poles?

[Robert Malcolmson]

We do maintain them. Many of them are quite old and suffer the wear and tear that poles exposed to the elements traditionally suffer.

In terms of what we charge, again, the rate is regulated. It's not as simple as climbing a pole and attaching your equipment. When a pole is in poor condition or in a unique place or when there are unique demands placed on a pole, the person seeking access and the provider have to make sure that the pole can accommodate the demand and that they're not going to create safety issues or performance issues.

Of necessity, many poles have to be updated in order to accommodate the new capacity that's being attached to them. That's just a fact of life.

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

I want to take this opportunity to congratulate you on your initiative to increase access to poles in my area, Abitibi-Témiscamingue. Inadequate access to poles is one of the main reasons why our area is lagging far behind in terms of connectivity.

According to some service providers, the prices that you charge to your competitors for broadband are the result of questionable tactics. The prices are constantly changing, depending on the seller's wishes, and the parameters are never verifiable. In my constituency, one of the most common excuses for keeping prices high is that Télébec, one of your companies, must update equipment. However, your competitors say that you don't maintain your equipment.

What is a reasonable average price for broadband that Télébec charges to its providers? Is it true that this price is higher than the rate charged by Bell in other parts of Quebec?

[The Chair, Liberal, Sherry Romanado]

Sorry, but your time is up.

Mr. Malcolmson, do you have a quick response to that?

[Robert Malcolmson]

I think you're referring, perhaps, to Vidéotron's recent entry into the Abitibi–Témiscamingue area, where, rather than building networks, it's decided to seek access to our networks and resell our networks. Again, the costs of that access are regulated, pursuant to a CRTC tariff. It's not a question of increasing costs; it's a question of providing access to resale at regulated rates.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

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.

Thank you to our guests for being here.

Thanks, Bell, for your Let's Talk campaign.

Let's talk about a decision that Bell made in August 2019: the cancellation of 200,000 rural or remote connections.

Why did the company make that decision, Mr. Malcolmson?

[Robert Malcolmson]

It's quite simple, Mr. Masse. I referred to it in our opening remarks. There's a direct correlation between regulatory policy and our ability to invest. The decision that you just referred to—which we did make—was born out of a response to a CRTC decision to reduce the rates that we're able to charge third parties that seek to access our networks and resell those networks. The CRTC reduced those rates in the range of 82%. Quite frankly, those rates made the provision of service well below our costs.

[Brian Masse, NDP, Windsor West, ON]

The reason to add those was because of Bell's taking advantage of significant public revenues to expand 800,000 just prior to that. Then you dumped the 200,000 from the actual connection. It seems like it was more of a public temper tantrum by Bell to punish consumers in rural areas like Manitoba, Ontario, Quebec and the Atlantic provinces that got particularly hit.

Do you not think that was a poor decision, given the fact that you're even here asking for more public money? You've also taken advantage of the wage subsidy program.

[Robert Malcolmson]

As I said, we built out without any public money at the beginning of the pandemic. Out of recognition of the need for connectivity, an additional 137,000 households—

[Brian Masse, NDP, Windsor West, ON]

But your own documents show that you actually created 100,000 positions. Your own documents show that you actually took advantage of government revenue support systems then, and then added the 200,000 because you actually had public money and support. Then, when the CRTC issued that decision, your immediate response, within hours, was to cut 200,000—20%—in rural and remote communities. Then you come to the committee here asking for more government money and public money. You've also taken advantage of the wage subsidy program. Do you not think that was a knee-jerk reaction at the expense of Canadians?

[Robert Malcolmson]

I think we need government and regulatory policies, particularly now in the midst of a pandemic when a lot of Canadians need connectivity. We need policies to support private sector investment. When those policies are changed or don't materialize, there is simply no ability to continue investing.

We do the best with what we have. We invest private capital. We participate in subsidy programs. We're committed to extending service to Canadians. However, the regulatory climate has to be there to provide that foundational underpinning to investment.

[Brian Masse, NDP, Windsor West, ON]

Would it be fair to say that Bell has taken advantage over the last 10 years of tens of millions of dollars of public revenue in one form or another with regard to expanding, or is it millions? What is the amount of public money and programs that Bell has taken advantage of?

[Robert Malcolmson]

I think it's unfair to say that Bell has “taken advantage of” public programs.

[Brian Masse, NDP, Windsor West, ON]

Well, everyone takes advantage of it. I mean, it's a public-private partnership. Whether it's Rogers, Telus, Bell or any other thing, it's taking advantage of an opportunity.

My point here is that you're talking about a cut of a program from a CRTC decision, a regulatory body, that affected the lives of rural and remote Canadians. You're finally catching up on it, and then at the same time you're asking for more public resources and revenue and we have no guarantee that you won't have another public tantrum when it comes to the CRTC's decisions in the future.

What guarantees do we have that Bell will not do what it did back then? That actually delayed right now the connectivity of many Canadians. That's the reality. You took that decision right away, and you're making up for it now. What guarantee is there that we won't have a similar situation when the CRTC comes down with a decision and you cut back promised expansions?

[Robert Malcolmson]

When the CRTC comes out with a decision that you're referring to, we will do what we always do, which is to evaluate what it means for our business, what it means in terms of our ability to invest in areas that I think you would admit are difficult to reach, or they would already be served by private sector investment. We'll make a rational business decision based on what the rates are and what it does to our ability to invest.

As we've said repeatedly, we want to be network builders. That's the business we're in. We're not resellers. We don't seek access to networks and then play a game of rate arbitrage in terms of the cost of access versus retail pricing. We actually commit private capital, funded by our shareholders, and build networks. We want to do more of that.

[Brian Masse, NDP, Windsor West, ON]

You also take advantage—which is fine, because taking advantage is a good thing—of public interest to actually fund these projects, but what you're telling me today, which is really disappointing, is that there's no remorse over cutting back the 200,000 homes that could have been serviced in the past that would have had an advantage to this day. You took advantage of the different programs, and you're still here telling us that if the CRTC or something else does something, Bell will just cut the public loose whenever they want just because it's in their bottom line interest at that moment, versus a real mature partnership with public money and funds to roll out broadband in our country.

[The Chair, Liberal, Sherry Romanado]

Mr. Masse, unfortunately that's all your time. You're even a little over.

That ends our first round of questions. We'll now go to the second round.

With that, I turn the mike over to MP Nater.

You have the floor for five minutes.

[John Nater, Conservative, Perth—Wellington, ON]

Wonderful. Thank you, Madam Chair; and thank you, Mr. Malcolmson and Mr. Daniels, for joining us this morning at our committee.

I guess I would just make the observation that according to your recent shareholder report, your profit was $5.5 billion over the last two years, yet Ma Bell was still able to take advantage of the wage subsidy, so I do find that interesting.

You mentioned a fair bit about wireless home Internet. I think in many rural communities there's a feeling that Bell is the incumbent and that Bell has let go much of the infrastructure in favour of perhaps a push to wireless. I want to get your opinion on that and why, in so many rural communities, there isn't a push to put fibre in the ground where there might be a business case. I think of a lot of places in rural southern Ontario where smaller telecoms have invested in fibre, yet Bell, where it's the incumbent, has failed to do so.

[Robert Malcolmson]

I'll address your comment on the wage subsidy first, and then I'll answer your question about wireless home Internet.

In terms of the wage subsidy, yes, we did receive it, and we received it in large part because the businesses we own—and I'm thinking here of Bell Media, the largest media company in the country, and our retail footprint of retail stores—were some of the hardest hit by the pandemic. It was a choice between laying off thousands of employees in an era where advertising revenue disappeared and retail stores were shut down or keeping Canadians working, and we chose the latter. We think the program itself worked, and it served industry well in order to keep people working.

In terms of your wireless home Internet question, our preference when we build networks is always to build fibre where there's a business case to do so. In smaller rural areas, there are challenges with building fibre connectivity, so we've come up with an innovative product, which we call “wireless home Internet”. It reduces the cost of the build, reduces costs for consumers and extends the network footprint in an innovative and seamless fashion. As more spectrum becomes available, we'll be able to do even more of that for rural Canadians.

[John Nater, Conservative, Perth—Wellington, ON]

I would note that some of the smaller telecoms are lapping Bell when it comes to investment in fibre in rural communities. I think it's just furthering that digital divide, where Bell is the incumbent and users are being forced to move to wireless Internet.

I want to briefly comment on the Internet service availability map that ISED has developed. Much of that is from the telecoms providing that information. How comfortable are you that that mapping is accurate from areas where Bell is the incumbent?

[Robert Malcolmson]

I'll ask my colleague, Jonathan, to answer that.

[Jonathan Daniels]

We do rely on that data to make all sorts of business decisions, both for what we apply for and what we see, even when we're not applying for a broadband fund to look at what's available.

In terms of accuracy, I can't say that it's perfectly accurate—we've seen some examples—but generally we found it to be pretty reliable data. We're in the process right now of updating our portion of the data as we build our network out. We regularly send updates to ISED and the CRTC so they can have the latest information available.

[John Nater, Conservative, Perth—Wellington, ON]

Through the Connect to Innovate program, I would note that Bell undertook zero projects in rural southern Ontario, but I just say that in passing. In Nova Scotia, for example, you received $926 million, nearly a billion dollars, for 36 projects. I'd be curious if you could note how those 36 projects in Nova Scotia are going and when they will be completed.