Industry Committee on Nov. 26th, 2020

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

What he released at that time essentially has no bearing on the decision-making process that you're undergoing right now.

[Ian Scott]

We rely on the record of proceedings, so we have received applications for review and vary. We have received comments or submissions from other parties. That is the basis upon which we will make our decision.

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

Okay. I appreciate that. Thank you.

I'm done, Madam Chair.

[The Chair, Liberal, Sherry Romanado]

Thank you very much, MP Sloan.

Our last round will go to MP Ehsassi.

You have the floor for five minutes.

[Ali Ehsassi, Liberal, Willowdale, ON]

Thank you, Madam Chair.

Thank you, Mr. Scott. This has been very helpful.

The first question I have, Mr. Scott, is on the last little while—the last decade, at least—when we've seen many low-cost operators enter the market. After some time, they've been gobbled up by the big telcos. Would you care to comment on that phenomenon and advise us as to whether there is a solution to that?

[Ian Scott]

I'm not sure which market segment you're referring to. I guess in the largest sense it's a pretty normal process, in that businesses may launch but they may not have either the financial wherewithal or the economic stamina, if you will, to make it in the longer run.

I think, for example, of someone who's engaging simply in arbitrage. It may be that when prices come down, they no longer have a sufficient margin within which to operate, and the business becomes more difficult. We don't have responsibility for reviewing market concentration in the sense of, for example, the Competition Bureau, which looks at mergers and acquisitions. We don't review mergers and acquisitions unless they had a fundamental impact or they related to Canadian ownership.

[Ali Ehsassi, Liberal, Willowdale, ON]

Thank you for that.

There's another question that I had. Insofar as connectivity is concerned, there appears to be a lot of potential in using satellites. What would you say about the use of satellites to ensure that more Canadians are connected?

[Ian Scott]

Satellites play a very large role today, perhaps unnoticed or unappreciated, I guess, and they are all what are called geostationary satellites. They do provide service. Today, they provide television, telecommunications, GPS and so on.

A lot of the discussion today is about the low-earth orbit proposals or the systems that are being built. Indeed, they hold a great deal of promise, as they are a substitute for fibre and can provide low latency and high throughput services to individuals who aren't close to the traditional points of presence of telecommunications providers.

[Ali Ehsassi, Liberal, Willowdale, ON]

Thank you for that.

Late last year, the CRTC launched a survey asking Canadians about mobile wireless services. Could you share with this committee what were some of the principal findings of that survey?

[Ian Scott]

I think the survey you're referring to is probably the one we conducted in the context of the current wireless proceeding, and the survey results are part of the record of that, along with the public hearing that we held in February and, I would say, thousands of pages of submissions. All of that is part of our current review, that file that is in front of us, as I mentioned earlier.

[Ali Ehsassi, Liberal, Willowdale, ON]

Is there anything in particular you would like to say about the exercise that maybe came to light?

[Ian Scott]

If you're asking me to characterize, if you will, what Canadians think about wireless service generally speaking, they'd like it cheaper. They'd like more gigabytes of capacity for less money, as would I, as I'm sure all of you would.

[Ali Ehsassi, Liberal, Willowdale, ON]

Absolutely. That's a great segue to the next question I had, which was in regard to the affordability tracker.

How would you assess the affordability tracker?

[Ian Scott]

I'm not sure what you mean by “tracker” in that context. Could you explain please?

[Ali Ehsassi, Liberal, Willowdale, ON]

It's my understanding that there is this new instrument to try to quantify affordability for Canadians.

[Ian Scott]

The commission regularly receives filings and tracks all manner of telecommunications statistics. We do so in co-operation with Statistics Canada. And the industry department, ISED, also has developed a system for tracking the prices of wireless in relation to their policy framework that asks the carriers to reduce their rates by 25%. That's not part of the CRTC's role.

[Ali Ehsassi, Liberal, Willowdale, ON]

Last question. One of my constituents actually put this to me a few weeks ago. Why does it appear that the CRTC actually does a more robust job of regulating cable companies than it does mobile services?

[The Chair, Liberal, Sherry Romanado]

A quick response please, you're out of time.

[Ian Scott]

I would simply say it's not the case. We regulate everyone as required, not one group or group of companies more robustly than others. We always try to regulate in the public interest and we deal with problems as they arise.

[Ali Ehsassi, Liberal, Willowdale, ON]

Thank you, Mr. Scott.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

That ends our first panel. I would like to thank you, Mr. Scott, and your two directors for being with us this morning. What we'll do is we'll suspend momentarily so that we can get the next panel on board. With that I will just suspend momentarily.

[The Chair, Liberal, Sherry Romanado]

We will come back to order.

We'll start with the other two witnesses' presentations and then we'll go to Mr. Rafferty for the third presentation so that we don't delay. With us today we have from the CNIB, Mr. John M. Rafferty; from the Competitive Network Operators of Canada, Mr. Matt Stein, and Mr. Geoff White; and from OpenMedia, Ms. Laura Tribe and Ms. Erin Knight.

We will start with the Competitive Network Operators of Canada.

You will be able to present for five minutes and the floor is yours.

[Matt Stein, President and Chief Executive Officer, Competitive Network Operators of Canada (CNOC)]

My apologies in advance. I was told that I had seven minutes, so I will go as quickly as I can.

I'm Matt Stein, president and chair of the Competitive Network Operators of Canada, or CNOC, the industry association for the competitive side of the telecommunications industry. It's the side of the industry that brings Internet to the homes of over 5 million Canadians.

CNOC's mission is to increase the level of competitive choice, add value and boost innovation in the delivery of communication services to Canadians. Additionally, I am the CEO of Distributel, one of the largest independent ISPs in the country, although my comments today are for CNOC.

Also appearing with me is Geoff White, director of legal and regulatory affairs for CNOC.

The Internet is an essential service. That's never been more evident. At the same time, large Canadian telecom companies have never been more powerful or less accountable. When it comes to pricing, it's no secret: Canadians pay some of the highest prices in the world. Perhaps then it should really be no surprise that Canada is also home to three of the most profitable telecom companies in the world.

Are Canadians getting what they need in terms of speed, packages, pricing, services, customer service and otherwise? The simple answer is no. The CNOC member companies, which are investors and job creators, use the mandated wholesale access to large carrier networks to compete with the big former monopolies on price, quality and customer service. We do this by paying rates set by the CRTC and which the CRTC determines based on the underlying costs, plus a fair and reasonable markup, which ensures that big carriers continue to earn a profit even when it is our members that load customers on to the network rather than their own retail operations. Our customers love us and more Canadians would, if they could turn to us, because of the way that we do business.

Smaller competitors have been a key part of the Canadian telecommunications landscape since the government started allowing competition against the former provincial monopolies. The current government and previous ones, as well as the CRTC, have recognized that without smaller competitors, the large carriers would have too much market power, resulting in higher prices, lower innovation and poor customer service. In fact, the current government, in its 2019 policy direction as well as during the last campaign, committed to make competition a key pillar of its commitment to affordability and innovation in Canadian telecom, helping the middle class move forward.

While the CRTC has, over the years, put in place several measures to facilitate competition, the incumbent carriers have put so much pressure on the system through lawyering and lobbying that today competition hangs on by a thread. Whenever the CRTC delivers a decision they don't like, the incumbents protest and wait for the last minute to appeal—not because of doing what's right, but to create a delay, because a delay is a win. Every day of a delay is another day of acting without being kept in check by competition.

I want to briefly outline a very timely example of that was discussed at this very committee earlier in the week.

As you're aware, the CRTC's decision of August 2019 set final rates for high-speed services. When they did so, it said that the rates that we, the independents, had been paying the incumbents for years were, in many instances, 73% too high. It corrected the rates accordingly. It also ordered the incumbents to repay years of the overcharging—just as the CRTC warned them they would do in 2016—to the tune of $325 million. To underscore that, it was $325 million that the big phone and cable companies had overcharged small and medium businesses across the country for years.

As a result, competitors took swift action and lowered prices, raised speeds and improved their packages. Not surprisingly, the incumbents took that to the Federal Court of Appeal, as was just discussed earlier today. Why not? The risk of delay is nil to them. Today, small competitors are still paying the old, inflated rates and cannot access the millions of dollars of refunds that they're entitled to.

If the CRTC's final rates—or corrected rates—were in place, overcharges would have been repaid. I guarantee that competitive service providers would already be hard at work innovating, lowering prices and investing in affordable access for Canadians.

We were confident that the CRTC was going to stand by that decision, but something the Governor in Council did in August really concerns us. Although it didn't send the decision back, it did take the unprecedented step of adding some strange language to the preamble, which seemed to question whether an investment balance had been struck despite the fact that the CRTC's process, by definition, takes that in account not only by considering investment, but also by requiring a fair and reasonable return. Because of that, we're now very concerned that the government might be backing away from its commitment to Canadians. The actions of the CRTC are not enough if the government does not stand behind its work with the support it needs.

Finally, the best investment that could be made in Canadian telecom affordability right now does not originate from government coffers. It originates from a reaffirmation from the current government of the role competitive service providers play in delivering on the goals of competition, affordability and innovation, and letting the CRTC do its work. Canadians deserve better.

I'm happy to answer any questions you may have. Thank you. I apologize for going over time.

[The Chair, Liberal, Sherry Romanado]

Thank you very much, Mr. Stein.

I have a reminder to the witnesses, as I'm not sure that you were here at the beginning. The yellow card means that you have 30 seconds remaining and the red card means that you're out of time.

With that, we will turn to OpenMedia. You have the floor for five minutes.

[Erin Knight, Digital Campaigner, OpenMedia]

Thank you.

I also was under the impression that we had seven minutes, so I'll try to do my best to fit it in five.

Good afternoon, my name is Erin Knight. I lead OpenMedia's work on Internet affordability and accessibility, and I'm joined here today by our executive director Laura Tribe.

First, I am speaking to you today from Calgary as a guest on the traditional territories of the Blackfoot Confederacy—the Siksika, Piikani and Kainai Nations—the Stoney Nakoda, and the Tsuut'ina Nation. This area is also situated on the homeland of the Métis Nation.

OpenMedia last testified before this committee in May, and on closing the digital divide, we said, in effect, “Do it now. Do it right and don't leave anyone out.” Almost half a year later, Canada's digital divide has actually gotten worse. While the universal broadband fund shows great promise in getting a substantial number of rural households connected to higher speeds by the end of 2021, the government's inaction during the first seven months of the pandemic made certain that, on average, rural and remote Canadians are no better connected today than they were in March.

According to recent data from the Canadian Internet Registration Authority, rural Internet speeds have remained stagnant throughout the pandemic while urban speeds have significantly increased. On average, urban Internet users now see speeds 10 times faster than rural users. The digital divide has deepened simply by a failure to act. In the spring, emergency COVID-19 policies from Canada's ISPs were a positive measure that truly helped people. These policies granted customers freedom from overage charges and the fear of disconnection for missed payments. The majority of these reprieves, however, have now been gone for months. The government took no action to share the burden of these supports or ensure that they would last until the pandemic crisis was over.

We're now seeing second-wave lockdowns all around us. Just this week, Alberta sent every student from grades seven to 12 home for remote learning until the end of the year. We know that not every student can afford an adequate home Internet connection that supports this, but the government still has not stepped up to help people struggling to pay their telecom bills.

In our May testimony we shared that one in 10 people in Canada does not have Internet at home, many of them due to the high cost of plans. Since then, Internet prices in Canada have actually gotten worse. Cabinet's decision in the wholesale Internet rates' appeal this August directly led to higher retail prices from smaller Internet providers who are struggling to stay alive. All this to say, five months since we last testified, the government's actions have been a far cry from, “Do it now. Do it right and don't leave anyone out.” It's clear that real action to improve the affordability and accessibility of telecommunication services in Canada could not come at a more crucial time. But if this attempt to close the digital divide is going to be any different from the countless others that we've tried before, we need to set a few things straight.

First, let's dispel the myth that access to an Internet connection is more important than how affordable that connection is. In reality, there are three main components to bridging the digital divide and they're all equal in importance: one, availability, a.k.a. infrastructure; two, quality of connection; and three, affordability. Is what exists accessible to those who live there? You can build it, even state-of-the-art, but until everyone in Canada, at any income level, can afford it, the digital divide will persist.

Second, let's dispel the myth that it's a good strategy to only focus on one of these three components at a time in a silo. We can't connect the country to quality Internet and then try to tackle the cost. They need to be addressed in tandem. Without affordability, there is no accessibility. For those who have access but can't afford it, when can they expect to start using the Internet? 2031? For rural residents, we can't afford to let their desire for access be used to support a one-option, one-provider, one high-price solution. We can't replicate the structural market competition problems we already have in new areas and just be happy that they're technically served. This is especially true for households that are served only by satellite plans.

Finally, let's dispel the myth that affordable Internet in Canada is out of reach. There are clear, simple things that could be done to improve the cost of Internet in this country. First, you need to support more competition. For both home Internet and cellphones, Canadians do not have enough choice. More competition is the ticket to lower prices. Every time a policy, funding announcement or regulatory decision supports the incumbents, you're helping to keep the Internet unaffordable. Second, do your part. Make sure your constituents know that they're eligible to apply for programs like the universal broadband fund, and support them in their applications. Hold big telecom to account in policies, platforms and testimony here regarding their price-gauging tactics and ever-increasing retail rates.

It's somewhat discouraging to be here talking about the digital divide when it's gotten worse since we were last here, but I remain optimistic that if we can work with urgency, the next time we meet we can be celebrating success.

Thank you. We look forward to your questions.