Industry Committee on Jan. 25th, 2023

[Andy Fillmore, Liberal, Halifax, NS]

Thank you, Chair.

Thanks to the witnesses for joining us today. Hello from Halifax. I apologize for not being able to be with you in person.

Monsieur Dagenais, thank you for being here today. I understand you are the ADM responsible for spectrum policy at ISED. Let's start out with a basic, fundamental question.

What is a licence spectrum?

[Éric Dagenais]

Spectrum refers to the radio frequencies that are used to transmit wireless signals. It's the air around us. That sounds a bit magical, but that's what it is. Essentially, whether it's satellites, your smart phone or your Wi-Fi at home, if it's wireless, it uses spectrum. At ISED, we try to manage the traffic. There's a lot of data being transmitted over these wireless airwaves, and sometimes the best way to manage that traffic to avoid interference is to have a licence and to give a licence to someone.

We have a licence that gives exclusive use over a specific spectrum band in a specific market. That person can then use that spectrum band to transmit over a number of years. That's what we call licensed spectrum. The telecommunications industry—the wireless industry—makes use of a lot of that licensed spectrum.

[Andy Fillmore, Liberal, Halifax, NS]

Thank you.

We're hearing in this discussion about the transfer of licensed spectrum. How does licensed spectrum relate to the discussion before us today with regard to Rogers and Shaw?

[Éric Dagenais]

For the Minister of Innovation, Science and Industry, his role is just that. It is to look at the part of the transaction that relates to the transfer of the spectrum licences.

Shaw has a number of spectrum licences that it initially wanted to transfer to Rogers. The minister refused the transfer of those licences. Again, the explanation and the reasons have been published. Now we have a revised transaction that's before the minister, whereby Shaw wants to transfer its licensed spectrum to Videotron.

Those are the four corners of what the minister of ISI is reviewing at the moment.

[Andy Fillmore, Liberal, Halifax, NS]

His decision is around the licensed spectrum transfer. I want to be clear for folks who are paying attention that his decision is not around the approval of the merger. That's not his bailiwick.

Is that correct?

[Éric Dagenais]

That's correct. Competition matters fall to our colleagues at the Competition Bureau and the commissioner of competition.

[Andy Fillmore, Liberal, Halifax, NS]

Thank you.

If the Competition Bureau wants to add anything there, I welcome it.

[Jeanne Pratt]

I would say that we brought this case. We conducted an exhaustive investigation. We found that the proposed merger between Rogers and Shaw was likely to substantially lessen competition in Alberta and British Columbia.

We subsequently looked at the divestiture of the Freedom assets. We evaluated that under our usual procedures and guidelines with respect to evaluating remedies under the Competition Act. Our findings were that the divestiture of assets of Freedom fell short of addressing the breadth and the scope of the substantial lessening of competition that would result from the merger. That's why we brought the case to the tribunal.

We lost at the tribunal and we lost at the Federal Court of Appeal, so our process now is done with respect to this merger.

[Andy Fillmore, Liberal, Halifax, NS]

Thank you for that.

If I could come back to Mr. Dagenais and the licensed spectrum question, we have to assume there are very specific criteria. In fact, I think you have alluded to them in how you judge your evaluations on spectrum transfers.

What exactly is the basis for the decision? What are the criteria that the minister will be looking at?

[Éric Dagenais]

We have a spectrum transfer framework. It's a document that was put out in either 2013 or 2014, pursuant to public consultations. It lists what the objectives of the transfer framework are, and it lists the criteria.

Essentially, you have eight specific factors that may be relevant in ISED's assessment. First is the current licence holdings of the applicant and their affiliates in the licensed area.

Second is the overall distribution of licence holdings and the licence spectrum band and commercial mobile spectrum band in that area.

Third is the current and/or prospective services to be provided and the technologies available.

Fourth is the availability of alternative spectrum that has similar properties, because not all spectra have the same properties.

Fifth is the relative utility and substitute ability of the licensed spectrum.

Sixth is the degree to which applicants and their affiliates have deployed networks and the capacity of those networks. This is whether the people to whom the spectrum is being transferred have the ability to use it and to serve Canadians.

Seventh is the characteristics of the region, including urban and rural status, population levels, etc., because you don't need as much spectrum if you're not serving as many people. The population density matters.

Eighth is any other factors relevant to the policy objective that may arise from the licence transfer or the prospective transfer.

The factors are set out in a regulatory framework that takes its cues from the Radiocommunication Act and the Telecommunications Act.

[Andy Fillmore, Liberal, Halifax, NS]

Thank you very much, Mr. Dagenais.

Mr. Chair, is there any time left?

[The Chair, Liberal, Joël Lightbound]

There are 15 seconds left, not enough for another question. Thank you, Mr. Fillmore. We'll leave it at that.

I'll now give the floor to Mr. Lemire for six minutes.

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

Mr. Chair, I would like to start by correcting one thing. According to what was reported in the media on January 13 by The Canadian Press, all parties in the Standing Committee on Industry and Technology agreed to convene this meeting to review the transaction. That's not true.

I think you'll agree that I was opposed to this. Indeed, I was deeply uncomfortable with the idea of holding this meeting today, particularly because of elements that were highlighted by the Competition Tribunal, in this case the Fox project. Furthermore, I get the impression that our committee is being used to serve the interests of lobbyists rather than the public, especially when I read this:

“Trial competition board review at the new committee, upcoming, shapes narrative.”

We are being used strategically by the Telus lobby, obviously in concert with Bell and other partners, and I feel very uncomfortable with that. I named these things in the subcommittee, and I wanted to put that on the record today.

Having said that, I think we still need to move forward and make a constructive contribution today. This is a transaction that we on the committee had studied in its first form and jointly rejected the first agreement. Furthermore, the Competition Tribunal issued a decision yesterday confirming our position. This suggests that our work is relevant.

In that context, the wireless part was a concern. The buyout by Quebecor made it possible to bring that other player, in this case a fourth player, into the Canadian market. I see that public policy on competition has allowed this acquisition to come to an acceptable outcome for Shaw, Rogers and Quebecor Media. I think that our recommendations have been heard and that the focus has been on accessibility and affordability from the outset. This has set the tone for the thinking and discussions that have taken place between different companies over the past few months.

We looked at the agreement between Shaw and Rogers, and I think the current agreement between Shaw, Rogers and Quebecor is much better for consumers.

For those who have been following this closely and have read yesterday's decision by the Competition Tribunal, paragraph 1 is very telling. There is a well-known saying in the competition law community that when competitors complain about a merger, it is often a good indication that the merger will promote competition. The documents that were produced revealed Telus' strategies through its Fox project.

The following question is for Ms. Pratt, deputy commissioner of the Competition Bureau.

Parliamentarians generally learned about the Fox project through the media on November 14. All the headlines were about an attempt by Telus to undermine the sale of Freedom Mobile to Videotron.

You, from the Competition Bureau, who were present at the hearings, what do you think about the Fox project, the players involved and their strategy? Is this the kind of competition you're willing to support?

[Jeanne Pratt]

I'll answer you in English, if I may, because I need to use technical terms.

Whenever competitors come to us in investigations, we are skeptical. We look at the evidence. We look at the underlying documents. We look at the incentives and the ability to compete. We have a degree of skepticism when we are dealing with incumbent competitors in the marketplace. What drives our decision-making is the totality of the evidence that we look at in our investigation.

In this particular case, we thought that led to a substantial lessening of competition emanating from the Rogers-Shaw transaction, as mentioned in my opening statement. Our concern was not with Videotron. Our concern was with the assets that Videotron will have to compete as opposed to what Shaw had to compete previously. Under our remedies bulletin, we just did not think those assets were sufficient to address the substantial lessening of competition caused by Shaw's exit.

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

Why do you insist on sticking with the original agreement between Shaw and Rogers rather than embracing the idea of transferring spectrum licences from Shaw to Rogers in connection with Videotron's proposed acquisition of Freedom Mobile?

I think your role is as an arbitrator, and it is essential. However, it gives us the impression that you decided to get the puck on the ice and take it to the other end and pass it to the members of the Fox project collective.

Through this use, I think that you went beyond your framework and that you adopted a strategy that consisted in extending the deadlines.

Why did you ignore Videotron's acquisition of Freedom Mobile in the lawsuits you filed?

[Jeanne Pratt]

It's our framework. The way we look at it is in accordance with the framework under the Competition Act.

We evaluated the Rogers-Shaw transaction. Our investigation determined that the transaction itself was going to substantially lessen competition. We brought an application to the tribunal in May 2022. There was no proposed acquisition by Videotron at the time we launched the application. That divestiture and all the agreements came to light in August, three months after we had filed their application. We evaluated it as a remedy. That is how the parties proposed it to us. We evaluated it as a remedy to address the anti-competitive effects of the Rogers-Shaw transaction. That is what we did.

Ultimately, the tribunal disagreed with us. The tribunal thought that we should not be evaluating it as a remedy, that it was a new transaction as of August 2022, so ultimately the tribunal disagreed with us.

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

So some time was lost because of tribunals.

My time is up, Mr. Chair.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Lemire.

Mr. Masse, you have six minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair, and thank you to the witnesses for being here.

First of all, I'd like to apologize to Mr. Lemire. It was my Canadian Press comment, and I forgot to separate the Bloc from that. I apologize to him. We've had conversations on that. I want it to be clear, because he is very capable of speaking for himself, as we've seen.

Going quickly to the matter at hand, Canada since 1993 has basically decided to deregulate our telco sector in many respects. We've had subsequent prime ministers and ministers of industry do a number of different ventures that have led us here today. The cast of characters is long and very bipartisan.

My first comment is for Mr. Dagenais.

I'd like to find out from you how you think this minister is going to get it right, given the fact that we have the situation we have right now. What makes it different at this moment? Going back to Mulroney, Chrétien, Martin, Trudeau, Harper, and then a whole series of industry ministers who I've met with and worked with over the years, ranging from Maxime Bernier to David Emerson, being a Conservative and a Liberal, we still have these policies that we have right now.

How do we fix it? What makes it different now from the path that got us here to this moment?

[Mark Schaan, Senior Assistant Deputy Minister, Strategy and Innovation Policy Sector, Science and Economic Development Canada, Department of Industry]

The government's telecommunications policy is guided by three core policy objectives, with competition as the underlying principle. Those are quality, coverage and price. In particular, the belief is that Canadians should benefit from services that are fast enough to support modern emerging applications, that are broadly available where they live and where they work, and that are available at reasonable and affordable prices.

While overall there's definitely more work to do on the pricing side, it is worth noting that in terms of high-quality networks, Canada's performance remains extraordinarily strong, including above that of the OECD. On coverage, 4G coverage is about the same as the European average, and 5G coverage is ahead of the EU. On prices, these are higher than in our peer countries. As we've noted, the government has been clear that there is more work to be done.

[Brian Masse, NDP, Windsor West, ON]

There's more work to be done, but what's different this time? Let's go to spectrum right now. How much of the spectrum has been resold in our industry for profit from those who bought original spectrum? I think we're up to $30 billion that we've actually charged for spectrum, or close to that. How much of that has been resold?

We could even use Videotron as an example. How much have they resold of their spectrum? What type of profit have they made from reselling spectrum, which is a public asset?

[Éric Dagenais]

I don't have those figures. I could get them. It's a relatively low amount compared with the amount of spectrum that has been auctioned.

[Brian Masse, NDP, Windsor West, ON]

Is it fair to say, though, that we're letting people and companies buy our spectrum at an auction and then resell that spectrum for a profit?

[Éric Dagenais]

When spectrum is sold as a set-aside spectrum, it comes with conditions whereby the purchaser is encumbered from reselling that spectrum for a number of years. We do that to avoid arbitrage. We do that for a number of reasons.

In those cases, the sale of spectrum would take place after the provisions had expired.

[Brian Masse, NDP, Windsor West, ON]

Would you agree, though, that not using spectrum or keeping it on the shelf for a long period of time affects competition?