Industry Committee on Feb. 14th, 2024

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

I'll wait till the end, Mr. Chair, because I have some committee business and I don't want to use up other members' time.

[The Chair, Liberal, Joël Lightbound]

Thank you very much.

So I will yield the floor to Mr. Perkins.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

Thank you, Mr. Chair.

Thank you, Mr. Masse.

Thank you very much, Mr. Péladeau, for your enthusiastic appearance before this committee. I wish the other three had been as enthusiastic. It's been a bit more of a challenge to get them here, but perhaps you have prompted new attention from them, so thank you.

Mr. Péladeau, you said that within your company you have frozen prices. At this stage, are you going to react by lowering prices at all? While our prices have come down in Canada, the prices of Rogers, Telus and Bell, anyway, have only come down by similar amounts globally and they still remain number one, two and three as the most expensive cellphone players in the world. You could drive their prices down even more by being more competitive. I know you have a business to run and a return to produce for your shareholders, but—

[Pierre Karl Péladeau]

I think the policy they've been proposing is bad, and it will be to their detriment. I am not going to be surprised if they change their minds and continue to compete. They have been trying all the time to increase their prices. This is the kind of mindset that the telecom business used to have in this oligopolistic environment.

This is why, again, a fourth operator is there to change things, to shake up the marketplace, to make sure that Canadians enjoy better prices, better proposals, better products and better service. It's not only about prices—it's also service. How many times have we been hearing about Bell and very poor service? We're servicing our customers the way they like to be serviced.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

I get that.

I'll come back to the pricing issue if I have time.

You mentioned that roaming is six times higher. It's also, I think, that the CRTC has kept the rates up and hasn't changed them in five or six years or something.

Are there any other government policies—besides the cost of spectrum—that are keeping your prices higher than they would be to stay more competitive globally?

[Pierre Karl Péladeau]

Peggy would like to give you the price that we've been facing in the roaming environment.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

In addition to roaming, is there anything else?

[Peggy Tabet]

Roaming is very high. It's a very important component for us to compete in this market.

Just to give you an idea, Bell's regulated tariff is $13.67, while in 2004, in the European Commission, it was $2.25 Canadian or 1.55 euros. When we say six times lower, it's huge. This is Bell. Telus is $14. Rogers is $14. It's really too high.

This is the biggest component.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

Thank you.

That's the biggest component in developing a fourth national carrier.

What about other issues, like taking advantage of MVNO, backhaul policy and rates, and what your competitors use to prevent you from getting access through other means to those choices?

[Pierre Karl Péladeau]

You're right to mention backhaul, but we negotiated this out of the transaction with Rogers.

Jean-François, maybe you have other things to mention there.

We look forward, as I mentioned earlier, to having a regulated price that will make sense for competing on the bundled aspect. Therefore, we will be able to introduce bundled offers that will be affordable and will be competitive with what's taking place right now.

[Jean-François Lescadres]

If I may add, it's not a one-time thing. The industry is evolving, construction is going up and this is going to evolve each and every year as we go. Construction is going up over 25% per year right now, so when we put the roaming rate, it has to follow very quickly.

You talk about what we can do. What can be done is prevent every attempt that we talked about to delay everything right now. We're always in waiting mode. We get a decision, then it's not applied and then it's in appeal.

How can we stop those things and have a clear view on what our costs would be, so we can basically use those costs to offer lower prices to Canadians?

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

I appreciate that.

Two years ago, you bought 294 licences of the 3,500 megahertz for over $800 million. In November, I think, you bought another 300 licences at almost $300 million. That's a lot of money and it's a lot of spectrum. I assume you have no intention of selling any of that and you're actually deploying it.

How far along are you on deploying the spectrum from two years ago?

[Pierre Karl Péladeau]

I remember that Mr. Masse, in a previous committee, asked if spectrum was a factor for speculation because we've been seeing some holders selling it. The funny thing is that we sold some spectrum to Shaw, which we've now bought back. At the end of the day, we're using the spectrum. One of the companies is using it.

Today, the way the spectrum rules have been moving forward with industry, you're forced to build. You need to be a telecom operator. You cannot be a private bank or an agricultural business. You need to be a telecom operator. Once you've bought spectrum, you have seven years to build and you cannot sell it. Rules are tighter and, at the end of the day, industry listened to some of the unfavourable comments that took place regarding the spectrum acquisition or auction rules.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

What percentage of the capital cost and the ongoing licensing operating costs do spectrum fees represent in your overall operating cost?

[Pierre Karl Péladeau]

I'm not going to be able to give you a number for that.

What I will tell you, first of all, is that there were many spectrum auctions. Some of the spectrum licences are more used than others. A spectrum auction took place in 2008 and 2012, so you have many of those. Some would be more amortized than others, so—

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

I'm told that it's more than 20% from other providers, smaller providers.

[Pierre Karl Péladeau]

Well, it also depends on the scale and size of your market and the number of customers you will serve.

[Jean-François Lescadres]

As well, it depends on how many years you amortize it. That's basically the biggest point to determine the effect. You talked about 3,500 megahertz. If you take that $800 million, it depends on how many years. You take it as a factor to consider, because I think that makes a big difference.

Of course, that's a major cost to operating a network. I think that's obvious. I think there was an effort, as we saw, with 3,800 megahertz as the least expensive spectrum auction, which I think was a good formula, at the end of the day, to provide a lower price to Canadians.

[Pierre Karl Péladeau]

The shorter the amortization schedule you use, the bigger the proportion will be. Today there is some spectrum that was given, not even paid and not even auctioned by the incumbents, in 1985. Is this fully amortized? Certainly. Is it still used? Absolutely.

So what is the proportion? Again, it depends on what spectrum you're referring to.

[The Chair, Liberal, Joël Lightbound]

Thank you very much.

Mr. Turnbull, go ahead on our last round of questioning.

[Ryan Turnbull, Liberal, Whitby, ON]

Okay. Great.

It's really great to have you and your team here, Mr. Péladeau. I'm very excited by your story and the energy and passion you're bringing to this conversation today. I think you are shaking it up and disrupting the market in the best interest of Canadians, because it seems to me you're lowering prices and increasing competition.

I want to ask you what I think is just a simple question. The Minister of Industry is the one who put conditions on the Rogers-Shaw merger that resulted in Quebecor getting Freedom Mobile, and this is directly and causally connected with the increased competition. Would you not agree?

[Pierre Karl Péladeau]

Rogers-Shaw is more about the Internet than the cable business. They spin off the wireless business and we acquire it. The cable and Internet access will be more competitive in the future. As you know, Telus is the telecom operator on the western side. Will they force more competition? I don't know. We'll find out.

Will this factor also be a deterrent to combining wireless and wireline? It's not impossible. Certainly, what we have right now in B.C. and Alberta is a single wireless network. There is also a new technology that will come in the future, and in fact, referring to the spectrum, we will continue to need more. It's what we call fixed wireless access. Instead of having wireline Internet access, you will have towers able to deliver Internet into your home, on your computer, or for watching television. This is certainly something that technology will bring. Again, it will help Canadians to get better proposals and better innovation, and we look forward to it.

A matter that we think also needs to be fixed is what we referred to earlier, and that's to be able to have decent, regulated prices for access to the Internet or the wireline network of the incumbents Telus, Rogers and Bell, especially the fibre one, which has been under under review, for which Bell is in front of the government, to be able to say, you know, the CRTC does not have the competence to do this. Well, again, it's a matter of what we've been seeing forever, so many times.

[Ryan Turnbull, Liberal, Whitby, ON]

Thank you for that answer.

In terms of your testimony, I have just a very general question: Is competition increasing as a result of your entrance into the market?

[Pierre Karl Péladeau]

There is no doubt about this.

I'll show you something that I think is interesting. Obviously, as you can imagine, we're looking at prices every day and at competitors' prices. These are promotions...well, not promotions but proposals by Bell. It started at $85 for 25 gigabytes.

[Jean-François Lescadres]

That was last year, basically.