Industry Committee on Nov. 26th, 2020

[Geoff White]

Thank you for your question, sir—

[Matt Stein]

Well, yes. If we can't rely on regulation—and I've spoken about this recently—and the regulatory regimes that exist today to preserve competition, the next step is not to give up and say, “I guess regulation doesn't work to preserve competition.” The next step is to move towards what you're referring to, I believe, which is structural separation, where there is a separation of the operations divisions and the retail arms of the large incumbent carriers. We've seen this in other parts of the world as well.

I think that Geoff White, my associate, has something to say on the matter as well.

[Geoff White]

Right. Structural separation is certainly a remedy worth exploring, given some of the real-time examples we're facing.

Sir, you mentioned Abitibi. One of the CNOC members, Ebox, has been having great difficulty trying to access the wholesale service of Cablevision du Nord, which is a Bell subsidiary. There is a wholesale regime in place. Ebox signed up its first two customers on October 27, promising to offer prices at a 50% discount to what the incumbent is offering, but Cablevision, the Bell subsidiary, is dragging its feet and causing delay after delay.

That's the impact right there with the system and the delaying that went on, but the CNOC members, the smaller competitors, use that access, which is very well recognized by the government, as a legitimate means to bring down prices. It's just a question, though, of making sure that the regulator is responsive to what's happening and that the government stands behind it, saying that smaller competitors are a tool for serving Canadians and giving them what they deserve.

[Geoff White]

If the question is about funding and whether, if I understand it correctly, it favours the larger enterprises, I think the answer is yes, simply by virtue of the scale they have. The scale they have is by virtue of the historical monopolies they were given by the government and head starts on access to spectrum at a considerable scale. The broadband fund doesn't require wholesalers, the big players, to share their networks, which is unfortunate, because if you could provide wholesale access, you could deliver competition and choice even for Canadians who live in rural or remote areas. We suggest to you that they don't deserve second-class treatment. They deserve the same level of customer service and competition that Canadians in denser areas deserve.

[Geoff White]

It's a tool that the government and its regulator, the CRTC, have at their disposal to help Canadians who routinely complain about the affordability and price of customer service. It's standing behind the role of competition and allowing mandated wholesale access to cost-based rates plus a reasonable markup. That's the solution for our universal affordable connectivity.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

Our next round of questions goes to MP Masse for six minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Madam Chair.

Obviously with COVID-19, public awareness about inclusion and so forth has heightened, but as the NDP critic for industry for a long period of time, I've held to three major principles that I think are important. I think they're also important for moving the general public this way.

First of all, accessibility and affordability need to be the same. There's no point in having one or the other. That is supported by the structure of using public airways or public land, which is a privilege not a right. That's the public entity we have at our disposal to keep Canadians connected.

I also believe that being connected in an affordable and accessible way is an essential service for Canadians.

Lastly I believe in a digital bill of rights; it's part of your human rights and it's part of your connectivity to society in a wholesome way. I spoke about this with the recent tabling of the changes to our Privacy Act.

I would like our guests to comment on that. You can disagree. That's great. But if you don't, what do you think of that? I think there needs to be a paradigm shift in how we approach this, because we control the regulator. We have the assets, being the public space, being the spectrum or having grand access to the use of materials and goods and services to put fibre optics in towers and so forth. But at the end of the day, we're building a dog's breakfast of a system; it has winners and losers.

Maybe we start with the CNIB and then ask each witness for a comment, please.

[John M. Rafferty]

While I'm very interested in the answers being given by the other witnesses here, I think it's important to recognize that more than six million Canadians are living with a disability and more than one and a half million Canadians are blind or partially sighted.

This isn't just about connectivity in rural and remote areas, which is highly critical. There are as many people living with disabilities proportionately in rural communities as in urban communities. It is about right to access. We are solving issues of inclusion using technology today and then taking it away from people, as opposed to allowing them to have proper access to it.

I think we need to address all of the issues for students from grade 7 to 12 in Alberta who have been sent home who have a disability and who live with high levels of poverty and whose parents are trying to support their education at home. It's not just connecting people in rural and remote areas. It is a complex issue. I want to make sure that the voice of those with disabilities stays loud and prominent when you are having the debate about access, because they are not a subset of the community; they are a large portion of our communities.

[Brian Masse, NDP, Windsor West, ON]

Full disclosure: I am a former member of the CNIB board of directors.

At any rate, to our next witness, please.

[Matt Stein]

Sure. While bridging Canada's digital divide is extremely important, we realize that connecting rural and remote communities will not be cheap. Funding made available through things like the universal broadband fund is so important and is still the best investment the government can make to ensure that all Canadians get connected.

While I appreciate the linkage, connectivity or accessibility and affordability are distinct issues. There is no reason that accessibility should ever come at the expense of competitors who offer the only real alternative to the big incumbents and provide fantastic customer service and lower prices coast to coast.

[Brian Masse, NDP, Windsor West, ON]

Thank you.

OpenMedia, please.

[Laura Tribe]

I think you are right that we need a paradigm shift around this, but I think it's also well under way. This is the second time we've been invited to speak before this committee this year about the need for connectivity and bridging the digital divide in Canada. I think the conversation has shifted. We understand that the Internet is essential. I don't think there's anyone here who disagrees. I think, really, we just need to figure out how to move forward and make it happen.

When we look at issues like spectrum, the spectrum in Canada has largely been licensed. People have paid for those licences, but that doesn't mean everyone has access to cellphone services in their areas. There are large areas where it's not being deployed. I think looking at things like “use it or lose it” policies, to make sure those areas have access to that spectrum, if they're not being served, is put forward.... I think looking at a number of other solutions, including supporting choice and supporting affordability, will help us step beyond trying to have the conversation around “if” we need the Internet and really getting concrete around “how” to make it happen, as quickly and effectively as possible, in those areas that don't have it.

[Brian Masse, NDP, Windsor West, ON]

Mr. White, I think you have your hand up.

[Geoff White]

If I may, Mr. Masse, the current state of affairs is a dog's breakfast, lunch, dinner and bedtime snack in terms of the current mess we're in with the overarching regulatory framework. That's largely the result of lawyering, lobbying and delaying.

If we go back to basics, though, the Telecommunications Act contains two provisions that have stood the test of time: just and reasonable rates and no unjust discrimination. Those are your bedrock principles on which we can go forward without a paradigm shift. Telecommunications has always been regulated because it's utility-like, and to this day it's an essential utility-like service. On that basis, with some political will to back that fundamental foundation, with the recognized role of wholesale providers as a regulatory trade-off in respect of the large size of the incumbents, I think you can get to where you need to go for Canadians.

[Brian Masse, NDP, Windsor West, ON]

Thank you.

I see the red card, Madam Chair.

Thank you to the witnesses.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

Seeing as we're a little tight on time, I'll start the second round and give each party an opportunity to have a slot.

We will start with MP Sloan.

You have the floor for five minutes.

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

Thank you so much.

I'm going to pose what I hope will be a catch-all summary question to anyone who wants to answer. Some concerns that have been raised to me by local ISPs in my riding are along the lines that we have an overinflation of wholesale costs. Then apparently the big telcos have been providing Internet services at rates that undercut their own wholesale rates. Local ISPs feel that basically what they're trying to do is destroy competition. One independent ISP, TekSavvy, actually filed a formal complaint with the Competition Bureau detailing how large carriers have deviated from CRTC costing rules to grossly inflate wholesale rates for competitors, while at the same time offering retail prices below the wholesale costs. If someone could comment on that, that would be great.

I guess the question I have is this: Would the implementation of the August 2019 wholesale rates in a quick and effective manner solve this, and how do we get to the bottom of this? Could you comment on whether you believe the large telcos are trying to literally destroy competition? Furthermore, is implementing the August 2019 decision the answer to this?

That's for whoever wants to take it.

[Matt Stein]

I'll take that one.

The large telcos have said they would like to destroy the small competitors. That's not really a surprise. They're not too fond of us, as you're well aware. In fact, it's also true that when the interim rates are set, the way that works is that there is a recommended rate by the big telco. That's accepted by the CRTC. As the chair just said to you, ultimately when it's determined, the small, the independent, will be made whole. The corrected rate will be deployed, such as it was to be in CRTC order 2019-288, the decision that came out in August of last year.

It's important to understand that all the while, those large incumbents were, through their direct retail brands or their flanker brands, selling below the interim rates, very often, both on promos and on standard packages. Implementing those rates would be a massive leap forward for the industry and for Canadians. A rush to implement those rates as fast as possible is key. It's not the only thing; keep in mind that this is for only the slow speeds. The CRTC is still working on the fastest speeds.

So ushering forward and helping the CRTC by giving them the support they need to get those things out the door, without any further intervention, is important too.

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

Okay.

I'm just going to jump in again. I notice my time is ticking down.

Part of the response by the minister to this—where he suggested that the decision was not potentially made correctly in terms of its balancing—had to do with the threat the big telcos made of not making any further investment. Is that threat realistic? If so, how do we address it?

[Matt Stein]

No. It's not realistic.

They say that every time. They said that back a decade ago. They said that if they have to offer higher speeds, they're never going to build fibre. It's on the public record. The CEO of Bell Canada announced this to the CRTC. He said they would never build fibre. They're still doing it. They were required to give those speeds.

They made the same claim in August 2019. They said that if these are the rates, then they're not going to build wireless for Canadians. They're going to hold back $100 million of investment. Some of the most efficient investments they have in their entire network.... It's not reasonable to think that they would cede their market to their competitors. If you believe they're competitive at all, you've got to believe they're going to continue to build. They always make those claims and they never hold water. We shouldn't change it now either.

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

Essentially you're saying call the big telcos' bluff.

Let me ask my final question. I'm sorry, we're running out of time.

In regard to this particular decision, it seems as if the telcos initiated a legitimate right of appeal in court. It may have been for frivolous reasons, but they were able to. The court initiated a stay of the implementation of these rates. How do we get faster implementation of decisions like this? We'll never be able to eliminate rights of appeal to court. How do we get this done?

[Matt Stein]

Again, there may be a more fulsome answer that Geoff would think of, but I would say that there's nothing that stops the CRTC from setting interim rates. They set the interim rates based on the recommendation of the big carriers which, of course, are always astronomically high.

Another approach they might take is to say that those rates don't make sense. Bell Canada, for example, recommended $122 for fibre access, but they're selling it for 60 bucks. Let's just take a retail-minus approach like we have out east.

I appreciate the red card. I apologize.

[The Chair, Liberal, Sherry Romanado]

My apologies.

Our next round of questions goes to MP Jowhari. You have the floor for five minutes.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you, Madam Chair. Thanks to all our witnesses, especially those who are coming back for the second time.

Let me start with Mr. Stein.

Mr. Stein, you talked about the large telcos hating the small players and wanting them out of the market. In your opening remarks, you also talked about how they're growing more powerful and less accountable. Can you expand on how we can bring a balance to that power and how we can make them more accountable?

I'm interested a response that's aside from introducing more competition. I want to see how we can bring a balance to their power and increase accountability.

[Matt Stein]

I would say the first step is to stand behind the CRTC. It works on this every single day.

I'm going to hand it over to Geoff for a more complete response.