Industry Committee on July 25th, 2022

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

Going back to the CRTC, it's clear they're already having trouble meeting their current mandate. This, of course, has to do with the 911 services and the alerting system services that went down. With that, do you feel that adding further responsibilities will further dilute their ability to do their work? One good example might be Bill C-11.

[Dr. Michael Geist]

Yes, I think it would be.

I think the CRTC has really struggled to meet its mandate and do what I think Canadians would expect. Frankly, the way in which it de-emphasizes competition.... It's just something, well, it might happen, and it would be nice if it did, as opposed to one of its top priorities leading to the kind of affordability and resiliency that we've heard talked about over the course of the day. That really ought to be job one.

It's an organization that has little experience dealing with some of these Internet-related issues, and the notion of taking Bill C-11 and Bill C-18, potentially some of the online harms issues, and vesting in the commission all of those additional responsibilities I think leaves us all pretty concerned.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

My next couple of questions will be for Mr. Klass.

One of the statements you made previously was that the outage occurred on such a wide scale and that it would have been worse had Rogers already taken Shaw over. Can you explain that for us?

[Ben Klass]

Yes, absolutely. Dismissing competition is something that's implicated in this issue. I've heard many people say that if you have more competitors in the market, some of them are going to be relying on the big telecoms, and they would have gone down as well.

We heard that some of the resellers or the wholesale-based providers who are on Rogers, their customers were all still out, and maybe people who live in rural areas—I'm one of them right now—wouldn't have a choice anyway, but that misses the issue that we've put a lot of eggs in one basket. As I said, Rogers has over 10 million mobile customers. They have two and half million people on their home Internet service. I don't know how many commercial customers they have, but there are obviously some important ones, most notably Interac.

I think the core concern there is that if we had more competition here, if we had a more decentralized environment, the impacts of these types of things would be contained. You wouldn't be seeing 10 million people all of a sudden dropping off the network across the country.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

Thank you.

I have one more question. You mentioned in your testimony that the regulator bears some responsibility, and you also used the word “permissive”. Can you quickly explain what you meant by that?

[Ben Klass]

The CRTC has forborne from a lot of their responsibilities. They have the legislative power to forebear from regulation when they find that markets are sufficiently competitive to protect the interests of users. What this has looked like in practice is that the CRTC has refrained from regulating on the assumption that things are going to work just fine based on the behaviour of market players. This has been the overarching trend that the regulator has pursued for the last 30 years. We see examples, numerous ones having been listed today, where on its face it's clearly not the case that users' interests are being protected. The high prices are one of the main ones we're used to hearing about, but this network outage is another one.

We heard Chairperson Scott tell us about the ESWG. The CRTC sets policies and then hands off the implementation of those policies to these working groups that are made up of CRTC representatives and people from industry, who then periodically report back. I don't mean to downplay the hard work the people in those groups do, but if the CRTC is just putting this on autopilot, letting the industry sort things out and assuming it's going to work, we have a pretty good example here in front of us where we might need them to start looking behind the curtain and making sure these types of groups are actually doing their job.

[The Vice-Chair, Conservative, Michael Kram]

Thank you, Mr. Klass and Ms. Gray.

Next we have Ms. Lapointe for six minutes.

[Viviane LaPointe, Liberal, Sudbury, ON]

Thank you, Chair. I will be sharing my time with MP Erskine-Smith today.

My first question is for Mr. Winseck.

We've heard a lot of people today tell us that this outage was unprecedented. In your opinion, could this system failure have been anticipated by Rogers, especially given that they have experienced widespread network issues in the past?

[Dr. Dwayne Winseck]

I think MP Gray has stressed the importance of a risk assessment officer with senior responsibilities. That's somebody who can keep their eyes open for these kinds of things, and it means having a proper contingency plan in place so we don't see the kind of response that was put into motion by Rogers when this problem started to erupt.

These problems, in a very complicated system like the telecommunications system that exists across this country, are going to emerge from time to time. The idea that they are inevitable is true. The question, though, is how to minimize and quarantine the risk when they do occur and how to properly put in measures that are going to prevent them from happening in the beginning.

[Viviane LaPointe, Liberal, Sudbury, ON]

Thank you.

My next question is for Dr. Geist.

Earlier, Mr. Scott from the CRTC indicated that one cannot guarantee that a system failure will never happen again. He said that the CRTC is focused more on contingency planning, or what must be in place should an outage occur again.

Do you agree with this position?

[Dr. Dwayne Winseck]

No, I don't. We have a set-up in this country where the premise—and it's a faulty premise—is that we have sufficient competition and that the marketplace will deliver the goods. In the past, when we've had even less competition before the transition to competition, there was a greater premium put on network reliability. Now we have this illusion that we have enough competition in place that the regulator and policy-makers can basically take their hands off the wheel and leave industry alone.

I think we've fallen between the legs of the stool and have neither a monopoly, as we had in the past, nor competition today. That's why I referred to a tight oligopoly. The problem, however, is that we don't have a policy or regulatory framework set-up in place to ensure regulators are going to deal honestly and candidly with the reality that this market will never be fully competitive. Companies' feet need to be held to the fire to ensure that essential public services are reliable, affordable and universally accessible so we can try to push competition as far as possible. However, right now we have regulators expressing undue deference to the industry, an extraordinary reluctance to actually regulate the industry, which has the kind of gatekeeper and market power that these companies have in this country, and a minister who is leaning on this mother-may-I approach versus reaching into the legislative tool kit he has, applying it and asking sharp questions about what more is needed.

[Viviane LaPointe, Liberal, Sudbury, ON]

Thank you.

MP Erskine-Smith, the floor is yours.

[Nathaniel Erskine-Smith, Liberal, Beaches—East York, ON]

Thanks, Viviane.

Mr. Geist, I want to pick up on where you commented around the CRTC chair being mission critical employment. Do you share the view that the overriding consideration for that appointment has to be the best interest of consumers, with some knowledge of the communications marketplace?

[Dr. Michael Geist]

I would say that the number one priority needs to be a regulator that acts in the public interest, and I don't think that's something we've seen out of the commission.

I think the way you achieve that policy objective of acting in the best interest of the public is with someone who puts consumers and competition at the very centre of its regulatory process, not one that comes across as apologizing for the inadequacies that might exist amongst the dominant players and simply suggesting that, well, that's just the way it is.

[Nathaniel Erskine-Smith, Liberal, Beaches—East York, ON]

“That's just the way it is, and oh, by the way, I just happen to be the CRTC chair.”

You list off seven points. Some seem straightforward and obvious to me, for example, that you would have consumer compensation in the way we do with airlines. I indicated earlier that you have communication standards with respect to outages. Undoubtedly there are some lessons to be learned in collaboration with the FCC around resiliency.

When you speak to competition concerns, though, and the need for real policy reforms, it is felt that CRTC has played around the edges. I mean, they have major powers here. They can order companies to provide services. They can order connections to be made. They can set rates to be charged and impose just and reasonable rates. They tend to do none of these things, from what I've seen.

When you look at additional substantive reform, we've looked at structural separation at this committee. There are any number of commentators who have called for opening up the sector to trusted but foreign competition.

Should we be embracing these ideas, and what else should we be embracing?

[Dr. Michael Geist]

The committee in particular has a pretty good track record when it comes to conducting hearings in this sector and coming forward with recommendations. The frustration has been that they haven't always been adopted by the government of the day or the CRTC.

The MVNO issue, on the wireless side, is a classic example of where there was an opportunity for, and there still is an opportunity, to try to ensure that we get more service-based competition into the wireless sector. We saw both the CRTC and the government deeply reluctant, I think, to move in that direction. The minister came out with what he promoted as a new policy direction. While it was a good thing to sort of wipe the slate clean and come up with something new, I think many took a look at some of those recommendations and felt it was by and large business as usual.

There's been a real reluctance to shake things up in the way that's needed.

[Nathaniel Erskine-Smith, Liberal, Beaches—East York, ON]

We tend to forget that countries like Australia exist. I want to take a look at it.

Thanks very much.

[The Vice-Chair, Conservative, Michael Kram]

Thank you, Mr. Erskine-Smith and Ms. Lapointe.

Next we have Monsieur Lemire for six minutes.

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

Thank you, Mr. Chair.

I'm curious to know what the experts here today think of Quebecor's takeover of Freedom Mobile. Rogers provided that information to us earlier.

Do you think Quebecor can act as a credible fourth player in the telecommunications network?

Mr. Lawford, you seem to want to answer quickly. I'll give you the floor.

[John Lawford]

I don't have any comment on the impact of competition, because I'd rather talk about what the CRTC can do.

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

Mr. Winseck, can you comment on Quebecor's acquisition of Freedom Mobile?

[Dr. Dwayne Winseck]

I'm sorry; I didn't have the translation on, so I didn't hear the question.

The quick question is, with Freedom Mobile being acquired by Quebecor, is that an adequate solution? Is that helpful in this situation? I think the answer is no. I don't believe that Freedom Mobile is the linchpin in this deal. I believe that this is a lowball kind of offer. We see that basically Rogers and Shaw are not even agreeing to divest all of the wireless assets here. They're just trying to take three-quarters of a loaf and spin that off—Freedom Mobile to Quebecor—as if that's good enough. I think this is the way in which the companies have hubristically approached this transaction from day one, as if it was a slam dunk and they could lowball their offers to appease regulators.

That, I think, speaks to some of the things that Ben, John and Michael have also pointed to here all along, this idea that the regulators have struck a very weak stance in the face of intransigent market power, concentrated markets, and they're used to getting what they want. The divestiture of Freedom to Quebecor, I think, should not be given serious consideration.

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

Mr. Klass, do you have any comment on the matter?

[Ben Klass]

Yes, I largely share Dr. Winseck's views. My take on the situation is that on the basis of the arguments the Competition Bureau has made, to allow Quebecor to take over Freedom Mobile would be very risky. I think we need to be valuing the bird in the hand over the one that might appear in the bush, in this particular case.

We've seen Xplore Mobile offered as a remedy in the past. This is a company that was supposed to make up for the loss of competition in Manitoba. With it having failed despite the fact that it had the potential to access the tremendous capitalization through the American hedge fund that owns its parent company, Manitoba is now left with less competition than anywhere else.

I believe Ottawa, in fact, has the most competitive wireless market in the country, with five carriers. You can choose between Videotron, Shaw, Bell, Telus or Rogers. You'd be seeing a decrease in competition in the national capital region that wouldn't be addressed by this merger.

I think by and large historically these types of mergers in Canada have not worked out in favour of competition despite the promises that have been made and the assurances that have been given. I see very little in this present arrangement to change my mind on that.

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

Mr. Geist, do you have any comments to give?