Industry Committee on Nov. 17th, 2020

[Daniel Goldberg]

It's vital. The $18 billion that I mentioned which the FCC allocated to our two largest competitors.... They're already spending that money. We have many operators in the sector that are worried about all that capital destabilizing our industry to some extent. Our two largest competitors are recipients of all that money from clearing the same spectrum that ISED is now looking to Telesat to clear.

We're happy to clear that spectrum. Canada needs it for 5G, but two things need to be kept in mind. One, we're using it today, and nobody wants the important services that we're providing to be disrupted. It's going to cost money to relocate those users and not disrupt their services. Two, we're spending multiple billions of dollars to fund LEO. It's the right thing to do for Canada, and it's the right thing to do for Telesat, but it takes capital. We are hoping, and are cautiously optimistic, that just like the satellite operators who cleared that spectrum in the U.S. received compensation, we'll be in that same position here in Canada.

If we don't get it, two bad things are going to happen. First, all of these existing services that we're providing are going to be at risk. I can't imagine the government's allowing that to happen. Second, Telesat will be at a severe competitive disadvantage to these already bigger competitors who have received $18 billion for clearing the same spectrum. That would be a travesty. I hope that doesn't happen.

If the government follows through on the recommendations that we made, its a big win-win-win. The wireless operators get more spectrum for 5G quickly; Telesat can look after and reposition all the existing users of the spectrum, and we'll receive some of the financing that we need to build our LEO constellation, make the 5G spectrum available and give us a fair shot in this very competitive space race.

We have a great plan. We have a great company. We have super-committed people—

[James Cumming, Conservative, Edmonton Centre, AB]

Madam Chair, do I have time for one more quick question?

[The Chair, Liberal, Sherry Romanado]

Yes, you have two minutes and 10 seconds.

[James Cumming, Conservative, Edmonton Centre, AB]

Great.

I have another important question that I want to put to you, Mr. Goldberg.

We're all excited about the LEO program, both your program and SpaceX's program, as a potential solution for rural broadband. However, in many communities there is already fibre into the communities, and in many cases the government has provided funding for that fibre. I don't think you necessarily say that you're the solution to those communities, but can you offer any comments? It strikes me that there should be the opportunity to use that backbone to provide broadband access to many of these communities, maybe not necessarily direct wire, but it could be fixed wireless. There could be a variety of different programs for those communities that already have fibre into their community.

Can you offer any advice on that?

[Daniel Goldberg]

Yes. There is fibre to many of these remote communities.

As I said earlier, fibre is a great technology when the economics make sense. The problem with fibre, though, particularly for these remote communities, as I mentioned, is that it tends to be single thread. When that fibre gets cut, and invariably fibre does get cut, these communities can be off the grid for days and days and days. It's not just the inconvenience of not being able to book a hotel reservation or watch a Netflix show; there are public safety concerns and there are health concerns. It's serious stuff.

Yes, our LEO capability, even in those communities, should be regarded as complementary. We can double up on the capacity. We can make it redundant and we can really protect those communities from the inevitable disruption.

[James Cumming, Conservative, Edmonton Centre, AB]

Thank you for that, but still to the main point, if it isn't single thread, if there is fibre installed, surely there should be an opportunity for us to expand that and get these communities some service outside of just the LEO system.

[Daniel Goldberg]

Yes, for sure. Listen. The great thing about LEO is that it covers the entire country. We can serve a community today and we can move that capacity the very next day. So yes, although I'm not sure I totally follow the question, 100% it's a horses for courses type of approach for bridging the digital divide in Canada.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

We'll now go to MP Amos.

You have the floor for five minutes.

[William Amos, Liberal, Pontiac, QC]

Thank you, Madam Chair.

Thank you to our witnesses today. This has been a fascinating discussion.

I think all of rural Canada right now is exceptionally excited by the prospect of LEO technology rendering a better digital experience for that region. I represent rural western Quebec, 30,000 square kilometres of under-covered terrain. There is a great deal of frustration. People are looking for all manner of solutions. There's also a broad lack of understanding of what exactly LEO will be offering and how. Obviously, as we've heard from our witnesses today, there are different business cases for the Telesat offering vis-à-vis SpaceX. I appreciate the outlining of that.

I wonder, Mr. Goldberg, if you could enlighten Canadians further on the nature of the global competition among LEO satellite operators. What are some of the big challenges faced by Telesat? How do they compare with challenges faced by other providers? I've heard that we can expect consolidation in the industry over the coming years, but I don't understand all of those dimensions. I think the public would like to better understand where the business for LEO is going in the longer term.

[Daniel Goldberg]

Certainly, LEO is the new frontier in at least global broadband connectivity. All of us who have been providing satellite services for years have realized that we just can't do it effectively enough way up in geostationary orbit. We need to get our satellites closer to the ground so we can provide lower latency, higher capacity services.

Of the key players in this area, you have two of them on this committee today: Telesat and SpaceX. Amazon has its own plans to do this. The Chinese and the Russians have their own plans. There's a company called OneWeb that was backed by SoftBank and is now backed by the U.K. government. There's a mobile network operator called SparkVue, which is one of the largest mobile network operators in India. They are providing services in other parts of the developing world.

We all face somewhat different challenges. Our biggest challenge at Telesat right now is raising the rest of the capital we need to build our system. We have over $1 billion on our balance sheet. We're investing every nickel we have into this, but we need to raise some more funding. I hope this ISED spectrum proceeding will be one source of that.

Amazon's problem isn't capital. They have plenty of that. Their problem, frankly, is they are brand new at this. They are behind the ball. They are not moving as quickly as SpaceX. They are not moving as quickly as Telesat. They don't have good spectrum rights.

Ms. Cooper and I both talked about the need for these satellites. You have to make sure they don't bump into each other, but you also need to make sure you have rights to use the spectrum you need to deliver the service. Amazon is in bad shape from that perspective.

OneWeb got out early. They launched their service. They had two problems. One was raising enough capital. Two was they clearly didn't have the depth of technical expertise they needed to have to design and implement a really capable system. Telesat has that in spades. SpaceX is a leading space technology innovator. OneWeb had two strikes there.

I'm concerned about China and Russia. Capital is not going to be the problem. They are strong on space technology. They are going to be formidable competitors in this area. It really underscores why one needs to move quickly to carve out their niche in this market and start delivering services to the customers out there.

I hope that was helpful.

[William Amos, Liberal, Pontiac, QC]

Thank you for that.

I take it from your comment that the Government of Canada's investment of $600 million in Telesat's operations so that rural communities can be better serviced not only provides a significant boost to this leading Canadian contributor to low-earth orbit satellites, but also serves as a bulwark in a way in a broader set of geopolitical considerations around the deployment of LEO by other countries, including China and Russia.

Could you comment on that both from a domestic standpoint and—

[The Chair, Liberal, Sherry Romanado]

Unfortunately, Mr. Amos, that is your time.

Because we have a bit of time remaining, I will start a fourth round. I will give each of the parties their time slot so you will do the first four. Perhaps at the next Liberal round, Mr. Goldberg, you can answer that question.

With that, I will go to MP Dreeshen.

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

Thank you once again, Madam Chair.

Ms. Cooper, you talked about some of the costs for consumers and so on, the Starlink Internet at $129 per month, with a dish cost of $649. You also said that at this particular point it's unlimited with no data caps.

When you're looking at the new price points, do you have an idea of what one might be able to expect once you have gained some economies of scale? When you say no data caps at this point, which way do you think you're going with that? Are you going to be looking at data caps once you have more customers? What are your basic thoughts on that?

[Patricia Cooper]

The first point I want to make is in terms of the equipment for which a customer needs to pay the one-time, upfront cost. We think we have a really clear path to driving that equipment price down. It's one of the hardest problems in these LEO systems, specifically those that go directly to consumers. You want to have tens of thousands of them at a low per-unit cost. We definitely have a path for that, again, both because of economies of scale and some future design developments.

I don't want to say much about where we think the price is going to go or how the service is going to evolve, because we are really genuinely taking feedback from these beta tests. I think we're going to really need to understand that better in terms of how actual customers use this and how we need to understand the management of the system and the flow of traffic that an increasing number of users have.

I do want to mention two quick things on cost. Obviously the expense of deploying the network is one important element. We are a privately held company. We aren't publicly traded. I want to clarify from Dan's comments about the $18-billion spectrum clearance in the U.S. That doesn't affect us. We aren't a previous operator of satellites. We don't operate and don't have any services in the frequency bands that have been cleared. I wanted to make sure that was evident.

One of the other big advantages we have is that it costs a certain amount of money to deploy a satellite, and because we have not only our own launch services available, we also have the advantage of the innovation of launch reusability. We're flying our satellites on rockets that have been used two, three, four, five times, which is unheard of in the deployment of commercial satellites. Coupled with the innovations in the satellite design, this all brings a more affordable deployment of the space architecture at the same time that we're driving down very hard on the equipment price past this early adopter first beta test.

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

Thank you very much.

One of the comments earlier is you won't get really great service past the 50th parallel. Well, most of Alberta and Saskatchewan are north of the 49th parallel. When we think about that, we have to wait until you get to that stage where the coverage is something that is going to be significant.

Ms. Beck, you talked about antenna capabilities, the costs that would be associated with that, with the LEO constellation, again with the receiving and transmitting aspect of it.

Is there a differential with the type of broadband spectrum that you would be using as far as the cost goes, either for the antennas or for distribution out to the public? Does using one wavelength versus another wavelength change the cost for the consumer or for the ISP?

[Michele Beck]

Thank you for that question.

I would say that with the LEO constellation, the frequency bands that we are employing for our own constellation are in the Ka-band. The one advantage that we have using those frequency bands is the amount of spectrum that is available to us to deliver services. That's the first thing. You need a lot of spectrum to be able to deliver broadband services.

The other thing is we reuse that spectrum, not unlike cellular service. We reuse it over and over again to cover the earth, and that amount of spectrum gets multiplied. That's how we deliver a lot of capacity.

[The Chair, Liberal, Sherry Romanado]

Thank you. I'm sorry about that Ms. Beck. Unfortunately, that's the end of that slot.

I'll now offer the time to Mr. Amos.

You were not finished your round of questions, so you have the floor for five minutes.

[William Amos, Liberal, Pontiac, QC]

Thank you, Madam Chair.

I'll give the floor immediately to Mr. Goldberg to comment on that geopolitical aspect that I raised.

[Daniel Goldberg]

Thank you for that. It's a hugely important question.

The reality is that on the one hand, we operate these satellite constellations; they provide service to consumers and you think that's kind of the end of the picture. On the other hand, space is strategic and governments are very actively participating in the development of space and of technologies that fly in space, to space and that access space.

If you look at these LEO constellations, they're a great example of the important strategic dimensions and the role that government has to play here. It's certainly the case and it's obvious that when the Russians or the Chinese—even when the Government of India—are participating in the space sector, they're doing it with their state-owned companies. They've taken a strategic decision. Space is important. Space has implications in terms of their ability to look after their citizens and also for national security implications. They're making heavy investments.

The same is true of the U.S. I take my hat off to what SpaceX has developed. Listen to what Ms. Cooper has said. Ms. Cooper accurately said that because of their ability to launch satellites, they're vertically integrated. It gives them some advantages in terms of deploying a LEO constellation and going the next level. It didn't happen by accident. The Obama administration made a very conscious, strategic decision to move the U.S. away from launching the space shuttle all by itself and relying upon U.S. commercial industry to develop a capability. SpaceX rose to that challenge and answered the mail. In doing so they've received billions of dollars to help them develop those rockets, develop the Dragon capsule that we all witnessed last night, and now to develop low-earth orbit satellites and the like. That's an enormous advantage to them.

Yes, on a smaller scale, the $600-million capacity agreement that we did with the Government of Canada was vital to try to help Telesat compete against these behemoths—not just the companies, but the governments—and try to be competitive in this sector.

I think we're going to get there. It is a space race. It's an extremely strategic area. It's not only Russia, China and India. It's the United States. It's the Europeans. It's the U.K. backing OneWeb. If space is important to Canada, then Canada is going to need to open its eyes wide, look at what's going on in the world and participate in this area.

Canada has been doing that, but to beat the drum one more time, this proceeding that is taking place at ISED right now is crucial. It's existential to Telesat and to our plans to invest in LEO and to compete globally.

[William Amos, Liberal, Pontiac, QC]

Thank you for those comments, Mr. Goldberg.

I did have the privilege of joining Minister Bains at the earlier announcement at the aviation museum in Ottawa. I do believe these are important and strategic investments, both for domestic rural broadband deployment and for our capacity to build crucial and strategic innovation sector business opportunities.

I'd like to turn to Ms. Cooper.

I know I have limited time left. I wonder if you could speak to some of the geopolitical considerations and perhaps some of the risks that North America faces as we enter into an era of significant LEO service provision.

[Patricia Cooper]

Thank you for the question. I do think it's an important area.

I want to clarify something. I think the U.S. government has really shifted its focus from being an owner-operator of satellites and launch vehicles to being a customer. The great privilege that we have enjoyed as a supplier to the U.S. government is to provide services. The contract we have with NASA to deliver those astronauts is a service. We own the capsule and the rocket. That's a very different thing from having state-owned development money put in.

I do think that's one of the things we'll want to watch going forward. These projects are very difficult, but the drive is to fuel a connectivity demand that is very large. That's one of the drivers for a lot of the more commercial ventures. I think the early indicators are that other state-driven economies are starting to look at the kind of platform like these LEO constellations which only a few years ago folks thought were improbable. We're glad to be breaking those expectations and fielding some copycats.

[William Amos, Liberal, Pontiac, QC]

Thank you.

[The Chair, Liberal, Sherry Romanado]

It is now Mr. Lemire's turn.

You have two and a half minutes.

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

Should Canada build licensing requirements around the needs of urban and rural areas to reduce the size of licences and accommodate smaller Internet service providers in the marketplace? The goal would be to promote greater competition among Internet service providers.

Where do you stand on the size of licences in Canada?

Mr. Goldberg, from Telesat, can go first.

[Daniel Goldberg]

Thank you for the question.

I think the way that ISED licenses the geographic tiers is absolutely important.

There's a mid-band auction that ISED plans to hold mid-next year. They are using tier four licences, which allows smaller regional operators to build capacity blocks without having to make massive investments for spectrum in areas that they have less interest in serving.

Yes, I believe that's an important approach to allow there to be more regional competition in the market. I think that's an important tool.