Industry Committee on Feb. 23rd, 2021

[The Chair, Liberal, Sherry Romanado]

Good morning everyone. I call this meeting to order.

Welcome to meeting 19 of the House of Commons Standing Committee on Industry, Science and Technology.

Today's meeting is taking place in a hybrid format pursuant to the House order of January 25, 2021. The proceedings will be made available via the House of Commons website. The webcast will always show the person speaking rather than the entirety of the committee.

To ensure an orderly meeting, I would like to outline a few of the following rules. Members and witnesses may speak in the official language of their choice. Interpretation services are available for this meeting. You have the choice at the bottom of your screen of either floor, English or French. Please select the language for which you would like to have interpretation.

For members participating in person, proceed as you usually would when the whole committee is in person in the committee room. Keep in mind directives from the Board of Internal Economy regarding masking and health protocols.

Before speaking, please wait until I recognize you by name. If you are on the video conference, please click on the microphone icon to unmute yourself. Those in the room, your microphone will be controlled by the proceedings and verification officer.

A reminder that all comments by members and witnesses should be addressed through the chair. When you are not speaking, your microphone should be on mute. With regard to the speakers list, the committee clerk and I will do our best to maintain the order of speaking for all members, whether you are participating virtually or in person.

Pursuant to Standing Order 108(2), the committee is meeting today to resume its study on the accessibility and affordability of telecommunication services in Canada.

As is my normal practice, and for our witnesses, I will wave the yellow card for when you have 30 seconds remaining in your intervention. I will wave the red card for when your time is up. Please respect the time limits, so that we can get as many questions from our members, and responses from our witnesses.

I'd like to now welcome our guests with us today.

From Southwestern Integrated Fibre Technology, we have Barry Field, executive director.

We also have with us Pierre Karl Péladeau, president and chief executive officer of Quebecor Media, and Jean-François Pruneau, president and chief executive officer of Vidéotron.

With that, we will have the witnesses present for seven minutes, and then we'll go to rounds of questions.

Mr. Field, you have the floor for seven minutes.

[Barry Field, Executive Director, Southwestern Integrated Fibre Technology]

Thank you.

Madam Chair and honourable committee members, my name is Barry Field. I am the executive director of Southwestern Integrated Fibre Technology, commonly referred to as SWIFT.

SWIFT is a non-profit regional broadband program governed by the Western Ontario Wardens Caucus, the town of Caledon, Niagara Region and Waterloo Region. SWIFT's mandate is to eliminate the digital divide within southwestern Ontario, an area with a population of over three and a half million, representing 10% of Canada's population.

Thank you for this opportunity to participate in your important deliberations regarding accessibility and affordability of telecommunications services. While accessibility and affordability are both important components of this discussion, my area of concentration is accessibility, and I'll focus my comments accordingly.

SWIFT has recently completed the procurement phase of our first project, called SWIFT 1.0. The project is funded by the Governments of Canada and Ontario, each contributing $64 million, and over $20 million in contributions from our municipal members. SWIFT is grateful for these contributions and works diligently to ensure that these public funds are spent in the most effective, efficient and equitable means possible.

The primary goal of the SWIFT 1.0 project is to provide broadband services meeting or exceeding the CRTC's universal service objective to 50,000 underserved premises within the SWIFT catchment area, on or before June 2023.

Secondary goals include ensuring 3,100 kilometres of new fibre construction, and $65.5 million in private sector investment in the form of contributions from the Internet service providers, or ISPs.

I'm excited to announce to you today that SWIFT has concluded the procurement phase of our project, has exceeded all these targets and is currently working with the ISPs to implement these important projects.

The SWIFT 1.0 project has exceeded the premise's target by 26%, the fibre construction target by 30% and the private sector investment target by 93%. By all measures, this regional project has been an overwhelming success. Yet a tremendous amount of work remains.

Through the development and execution of the SWIFT 1.0 program, we've learned several lessons. I'd like to pass them on to you today, in hopes of influencing the design of future broadband strategies.

First, one size does not fit all. There are geographic differences among regions in Canada, and they can't all be shoehorned into a single model. We need to consider differences in settlement patterns, availability of data and existing broadband market dynamics, to name a few.

In southwestern Ontario alone there are major cities, towns, villages, hamlets, clustered seasonal shoreline developments and mass expanses of low-density agrarian settlement. The variability of settlement patterns in combination with existing market dynamics has a substantial impact on who provides existing services and how they expand those services. The variability in these dynamics increases as you zoom out to the national level.

Second, all ISPs, regardless of their size, have a part to play in helping us solve this problem. In certain circumstances, the small ISPs are more willing and better suited to provide service to areas that larger ISPs are not. The proposed solution can't be designed to exclude the participation of small ISPs.

Third, all three levels of government must co-operate and work together to solve this problem. Competing programs at the federal, provincial and municipal levels make it difficult for ISPs to access funding, and do little to take advantage of opportunities to leverage contributions from all three levels of government.

Within southwestern Ontario today there are no fewer than five active government programs, all trying to solve the same problem in the same geography. The CRTC's broadband fund, the connect to innovate program, the universal broadband fund, Ontario's ICON program and the SWIFT program are all active. Combining the substantial contributions of all three levels of government would make it easier for the ISPs to participate and would leverage all those funds into a single, larger funding bucket.

Fourth, technology choices should be a regional consideration. Referring to my first comment that one size does not fit all, differences across geographies must be taken into account when determining the best technologies to consider when funding projects. The variability of settlement patterns and market dynamics among regions will influence the feasibility of filling the gap with fibre versus wireless and low-earth orbit, or LEO, technologies.

Finally, further funding is required by all levels of government. The combined contribution of all of the programs available today will not solve the problem. In southwestern Ontario alone, we require approximately $1 billion worth of investment above and beyond the current programs in order to reach the target of 95% of the population served by 2026. The current commitment from the federal government, while substantial, is simply not enough to solve the problem.

Madam Chair, you've heard from other witnesses at this committee that Canada needs a coordinated broadband strategy. The current strategy, Canada's connectivity strategy, is well-intended and has solid elements; however, it's not being implemented in a coordinated manner to ensure effective, efficient and equitable outcomes across the country.

The existing federal approach of having multiple disjointed funding programs that are not aligned with provincial and municipal partners causes an overlap of responsibility, a duplication of effort on the part of the ISPs when applying for funding, and a duplication of administrative overhead. It risks having different programs funding the same projects, and it distracts the federal government from what should be its central role of providing equitable distribution of funds.

Like other infrastructure programs in Canada, funding for broadband programs should be transferred from the federal government to the provinces and territories, and they should be charged with coordinating contributions at the provincial and municipal levels in order to ensure that effective, efficient and equitable solutions are being implemented in their jurisdictions.

I thank you once again for the opportunity to speak here today, and I am happy to answer any questions you may have.

[The Chair, Liberal, Sherry Romanado]

Thank you very much, Mr. Field.

I now invite the representatives of Quebecor Media and Vidéotron to make their presentations. They'll have seven minutes each.

[Pierre Karl Péladeau, President and Chief Executive Officer, Quebecor Media Inc.]

Thank you, Madam Chair.

Good morning, hon. members.

My name is Pierre Karl Péladeau, and I'm the president and chief executive officer of Quebecor Media. Accompanying me today is Jean-François Pruneau, who is the president and chief executive officer of Vidéotron.

I'd like to thank you for inviting us to present our point of view.

Over the years, Quebecor and its 10,000 employees have demonstrated their firm and sustained commitment to Quebec's economic prosperity and the development of our regions. We have been doing so for decades and, obviously, we wish to continue along the same path. We have demonstrated this by the billions of dollars invested in our telecommunications networks. They have been able to meet the reliability and robustness required to power consumption, which, as you know, has been greatly strained by the increased needs related to teleworking, entertainment and the many online activities due to the COVID-19 pandemic. This is a sad time for Canada and all other countries.

At a time when we are in the midst of a debate over the use of networks by wired and wireless Internet resellers, who are contributing zero investment, we need to recognize the vital contribution of network builders to the Canadian economy. Our ongoing investments are proof that the current facilities-based competition approach to regulation is the right one. To cut it up, as some would have it, would be detrimental to Canada's investment and to Canada's continued economic development and productivity.

We will always be proponents of competition, as long as it is fair, as long as it is equitable, and as long as it is beneficial to all stakeholders in an industry. The same is true of Vidéotron's experience in wireless service. It was able to break the cartel of the three incumbent operators, and allowed Quebec consumers to benefit from the lowest prices in Canada.

In this regard, we would like to remind you that the Competition Bureau presented an unequivocal finding in November 2019: in regions where regional competitors with their own wireless networks and facilities, such as Vidéotron, have achieved a market share exceeding 5.5%, and prices are 35% to 40% lower than in the rest of Canada. This finding was recently corroborated in the report published on January 29 by Innovation, Science and Economic Development Canada on the evolution of wireless service prices, which shows that Quebec is the only province in the country to have reached, for almost all targeted packages, the 25% price reduction target set by the federal government for the end of 2019.

This tour de force was made possible by Vidéotron's customer experience and the performance of its network, both of which have won numerous industry awards.

Unlike resellers and their parasitic behaviour, which, I must insist once again, make a zero contribution to the investment, Vidéotron has invested more than $1.5 billion in the construction and evolution of a network, as well as $1.2 billion for the acquisition of mobile frequencies, thereby enriching the Canadian treasury. We wish to continue our investments so that even more Quebeckers, particularly in the regions, can have access to high-speed Internet service at a fair price.

Unfortunately, we are facing opposition from Bell Canada, which is deliberately blocking access to the support infrastructure—the famous poles—that it owns because of the monopolistic legacy of the past. We aren't the only ones to say so, since Rogers, Cogeco, the Fédération québécoise des municipalités, Maskicom as well as several other regional county municipalities, or RCMs, and so on, have also denounced Bell's actions.

The impact of its anti-competitive behaviour is particularly serious. If the federal government doesn't take the necessary steps to bring Bell back into line, the ambitious goals of the new universal broadband fund to connect 98% of Canadians to high-speed Internet by 2026 and the entire population by 2030, will remain unattainable, and the digital divide between our rural and urban citizens will persist.

It's important to emphasize that this anti-competitive behaviour, constantly and frequently denounced, isn't limited to access to the support infrastructure of this national company, far from it. Indeed, whether by turning a blind eye to satellite television piracy in the 2000s or by refusing TVA Sports equivalent treatment to RDS in its cable television packages or, even more recently, by blocking Vidéotron's entry into Abitibi-Témiscamingue by any means possible, Bell's all-out anti-competitive behaviour is rooted in its business practices and stems from a monopolistic attitude.

Madam Chair, I understand my time is up.

We are, of course, ready to answer questions from committee members.

Thank you for your attention.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

We will start with a round of questions.

Our first round goes to MP Dreeshen. You have the floor for six minutes.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Thank you very much to everyone for being here today.

You know, the committee has heard a lot of testimony over the last year about some of the challenges that rural municipalities face in accessing adequate rural broadband services. We've heard from many witnesses that the larger players are simply not interested in servicing communities since the profit margins are not high enough.

There is just one comment I want to make. Today is Canada's Agriculture Day.

When you mentioned the low-density agrarian settlements, Mr. Field, I guess that's us farmers, because we certainly feel we're missing out in so many different ways. Adrienne Ivey has spoken to the status of women committee on issues of connectivity in rural areas of Canada. Cherilyn Nagle, who has worked very hard on ag issues, has commented that her career has been heavily affected by poor Internet connectivity, and the idea that her kids would ever have to do school online gives her the shivers.

I think that's what we're looking at right now and that's why we are concerned about the plans. I believe, Mr. Field, you outlined some of those issues and the fact that the red tape associated with this certainly needs to be dealt with. We've heard from some of the regional ISPs interested in providing service to rural areas that they face challenges in getting reasonably priced access ratios on to the backbone networks. We've heard from municipalities that we really need to have some type of comprehensive plan.

I'm just wondering if you can flesh out some of those five points that you had before and talk about how we can make sure governments are working together, that they are working with companies, and that we really do get something out to the rural and remote parts of this country.

[Barry Field]

Thank you, sir. Absolutely, I'd love to talk about that.

First and foremost, one of the main points I made is that we have these different buckets of funding all trying to solve the same problem. I think if we stepped back and designed a program from scratch as to how to fund broadband mainly in rural regions of Canada, we would not develop the current system we have. It doesn't make sense in a lot of cases, and it's not the most efficient system.

I think what we need to do is for the federal, the provincial and the municipal governments to collaborate. I really believe that the funding, like other infrastructure projects in Canada, is no different. The funding should be transferred from the federal government, getting it as close to the communities as possible through the provinces and letting them decide how to execute the programs in their provinces.

Having said that, it is vitally important that we have participation from all sizes of ISPs. In the SWIFT program alone, it's interesting to note that we have awarded about 20% of our funding to the national carriers. That's a small amount of our funding. Then 25% went to what we call the medium regional types of carriers such as Cogeco, for example, and the remaining 55% went to small ISPs. I'm sure you've never heard of some of these ISPs.

The third largest recipient of SWIFT funding is a small company out of Holstein, Ontario called EH!tel Networks. I suspect most people on this committee have never heard of them. I hadn't heard about them before I started this role either. They're a very small ISP, but like many of the other small ISPs, they're willing to stand up and provide service in areas where there is no business case necessarily for the larger incumbents to do that.

I think it's a mistake to look down upon the larger ISPs. They're businesses. They're profit-driven businesses, and that's okay. What we need to do is develop programs that allow them to continue to do what they do, but do it in lower density areas.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Thank you.

I'm interested in another aspect of how the government process works, because I understand that, at the end of 2019, your organization filed an application to appeal what you refer to as the restrictive eligibility criteria currently used to determine access to federal broadband funding. I believe you requested that changes be made to the exclusive use of the system used by Innovation, Science and Economic Development Canada to map served and underserved areas as the base for CRTC funding eligibility. Can you explain what the issue was there and how you've been trying to resolve that?

[Barry Field]

I would first comment that understanding the map, understanding where service exists today and where it doesn't exist today, is probably half of the challenge. It's extremely difficult work. There are many players providing services across the country, and to understand exactly who provides what and where is a challenge for any organization.

The situation that you refer to I think for the most part has been resolved. At the time the CRTC and ISED were using the hexagons in their mapping system to determine which areas would be funded and which would not. Effectively what that meant was, if there was a single household within a 25-square kilometre hexagon that received 50/10 services, that entire hexagon was not eligible. They've since—

[The Chair, Liberal, Sherry Romanado]

Unfortunately, Mr. Field, we're out of time. Perhaps you can pick it up on another round.

Our next round of questions goes to MP Jaczek.

You have the floor for six minutes.

[Helena Jaczek, Liberal, Markham—Stouffville, ON]

Thank you very much, Madam Chair.

Thank you to our witnesses today.

Certainly what you've said definitely echoes what we've heard from other witnesses in terms of jurisdictional areas' funding from three levels of government. As a local MP, I have found it extremely challenging to know where various ratepayers groups should apply for funding.

Mr. Field, could you just elaborate a little bit more? You're talking about a transfer of funds from the federal level to the provincial level, which would then work with municipalities. I think, as we all know with COVID-19, the issue of broadband access really does have a national imperative or responsibility to a certain extent.

There has been a recommendation of a broadband czar at the federal level, as an example, to try to coordinate at least at the federal level what exactly is required in terms of access and affordability for Internet services across the country. How do you see your model in operational terms? How exactly would it work when you say the three levels need to collaborate, knowing full well that often it doesn't happen?

[Barry Field]

First and foremost, I think that transferring funds from the federal government to the provincial and municipal governments doesn't necessarily take away the role of the federal government. I think coordination is absolutely key to making sure that there is a coordinated plan across the country.

The existing SWIFT project right now is an example of that funding regime that I talked about. We're funded effectively in equal parts by the federal and the provincial government. The federal government, through Infrastructure Canada, provides funds to the provincial government. The provincial government has a contribution agreement with SWIFT, and they disburse the federal and the provincial funds to us.

In addition to that, the member municipalities of SWIFT have made a contribution in excess of $20 million to the program, and that continues to grow. Effectively, they're all working together in that regime to provide funding, down to the regional level.

I'm sure it doesn't make sense to do regional projects in every case. In southwestern Ontario it absolutely does. We've shown that it can be effective. We have EORN in eastern Ontario. They have a regional project as well that's equally effective. In certain circumstances, there are benefits to pushing that money down to the regional programs.

[Helena Jaczek, Liberal, Markham—Stouffville, ON]

The federal government recently introduced a pathfinder program that was designed to assist applicants. Have you had any experience with that, and can you tell us what you think of it?

[Barry Field]

Pathfinder services is a program that's attached to the universal broadband fund. I think they call it a concierge service. It allows the ISPs, when they're applying for funding through the UBF, to call up and have somebody to talk to, to walk them through various issues they may be having.

That certainly works well within the UBF fund. I am currently working with Pelee Island here in southwestern Ontario to put an application in to the UBF fund, and we'd use that service, which is effective. I think we're talking at a higher level as to how we coordinate all of the various funds and monies that are out there into something that's more efficient.

[Helena Jaczek, Liberal, Markham—Stouffville, ON]

In other words, it would cover each of the various funds. In other words, the rapid response stream and these other buckets of funding.... It should be coordinated across all of those.

[Barry Field]

Absolutely.

[Helena Jaczek, Liberal, Markham—Stouffville, ON]

Mr. Field, you did emphasize that you were talking about accessibility. As you know, the study is to explore affordability as well. It strikes me that you are somewhat objective on the affordability issue.

Do you have any comments in terms of what the federal government might do to improve affordability? We've heard about the connecting families program.

Do you have any insights from the work you've been doing in southwestern Ontario?

[Barry Field]

Again, my forte is more on the accessibility side, but I do have some opinions.

First and foremost, by giving people access to networks, you are effectively handling part of the affordability issue. Right now, we hear from families in southwestern Ontario all the time who have two or three different cellphone plans because they have to tether their computer to a cellphone to get their broadband.

It's not uncommon for me to hear from people who are spending $700, $800, $900, or up to $1,000 a month just on their cellular bill because of this issue. By solving the accessibility issue, I think you are in fact helping to solve some of the affordability.

I do think competition is a good thing in driving down prices. Most of the funding that's out there today requires open access. I think that open access to networks that are funded by the various levels of government is important, and it needs to be done in a fair and transparent way.

[The Chair, Liberal, Sherry Romanado]

Thank you, Mr. Field.

Mr. Lemire, you have six minutes.

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

Thank you very much, Madam Chair.

I'd like to thank the clerk for adding this meeting. The evidence that has been presented today is enormously relevant, and I think it will be very well reflected in our report. I thank Mr. Field and Mr. Péladeau.

Mr. Péladeau, what are the main obstacles to free competition faced by Vidéotron in terms of accessibility and affordability of telecommunications services in Quebec? You mentioned a few, but I'd like to take you a step further in this regard.

[Pierre Karl Péladeau]

Thank you for the question, Mr. Lemire.

I did mention this problem earlier. It's been around for decades, ever since Quebecor acquired Vidéotron in 2000. From the very beginning, the long-time operator has shown a real desire, to maintain its monopoly or, at the very least, its dominant position. Unfortunately, anything goes for it doing so.

In terms of the specific problem we've been facing for the past few years, Vidéotron is still doing what we call in our lingo network extensions. This involves extending our networks to ensure that we offer a high-quality product, particularly with respect to Internet service. The speaker from Southwestern Integrated Fibre Technology talked about this earlier.

Vidéotron's business and operating sector is significant in the Montreal, Québec City, Chicoutimi and Sherbrooke areas, where there is significant density and major investments. Outside of these centres, we're talking about service in the regions. However, this doesn't necessarily mean that it's a remote region, such as Chibougamau. The region can also refer to the south shore or the north shore. You can live 30 or 45 minutes away from an urban centre and not have access to high-speed Internet service, because the poles that make up the infrastructure don't belong to you. In Quebec, the two major pole owners are Hydro-Québec and Bell Canada.

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

Mr. Péladeau, an article that appeared in the Journal de Québec, a media outlet belonging to the QMI Agency, states, “the war on poles is over,” according to Quebec City and Bell Canada.

What do you think about that statement?

[Pierre Karl Péladeau]

Allow me to use a popular expression used by another politician and say, “we'll see.” Our words aren't necessarily as peremptory. The processes are extremely complicated, lengthy and tedious, and anything goes in blocking access to the poles, unfortunately.

The good news is that the Premier of Quebec rose in the National Assembly—in the blue room—to question the president of Bell Canada a few months ago. I can honestly tell you that it isn't often that a business leader is questioned in this way by parliamentarians. That was tantamount to admitting the existence of such a practice. Did this challenge ultimately change the thinking of Bell Canada's management? We hope so. However, at this time, it's too early to conclude that it has.

As I mentioned, we want to invest, and we will continue to do so, to provide high-speed Internet service—a service that has become essential—for all Canadians, and particularly to Quebeckers. We are committed to that goal. We have been, and we will continue to be.

There are currently no sanctions. Bell Canada reigns supreme because this company owns its infrastructures. In this regard, the regulator is only able to tell it that the company should do what's necessary for competition to provide services, but that doesn't work.

Bell Canada has always done so and, sad to say, the mentality of a kind of monopolistic culture is deeply rooted at Bell. Until proven otherwise, we can't conclude today that things will change to take a diametrically opposite direction.

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

Mr. Péladeau, I'm the member for the riding of Abitibi—Témiscamingue, which makes up 75% of the region.

Can you provide the people of Abitibi-Témiscamingue some examples of blatant obstruction attempts by Bell Canada and the conduct of the Canadian giant that are hindering the deployment and modernization of networks, to the detriment of businesses in my region?

How could the Government of Canada improve competition between the telecommunications networks in Canada?

[Pierre Karl Péladeau]

It is with great pleasure that I will answer your question. I'll then ask my colleague Jean-François Pruneau to give you more details.

As you probably know, Bell Canada had a monopoly for several years: it owned Télébec and had acquired Cablevision. It provided cable service, Internet access and wired telephone service, not to mention wireless service.

For over a year now, we've been looking to offer other services to Abitibians and all residents of the region. Once again, we have systematically encountered opposition. It was as if there was a desire to hinder us at all costs and to slow down our activities. Once authorization was obtained, the installation of the infrastructure was even more complicated.

The devil is sometimes in the details, and Mr. Pruneau will be able to provide you with some of them.