Industry Committee on Feb. 8th, 2022

[The Chair, Liberal, Joël Lightbound]

I call the meeting to order.

Welcome to meeting number seven of the House of Commons Standing Committee on Industry and Technology. Pursuant to Standing Order 108(2) and the motion adopted by the committee on January 26, 2022, the committee is meeting to study the ongoing work of the Canadian Radio-television and Telecommunications Commission.

Today's meeting is taking place in a hybrid format, pursuant to the House order of November 25, 2021. Members are attending in person in the room and remotely, using the Zoom application.

I encourage everyone present in Ottawa to be aware of the health measures in place and to follow them.

With us today is Ian Scott, chairperson and chief executive officer of the Canadian Radio‑television and Telecommunications Commission. He is accompanied by Anthony McIntyre, general counsel and deputy executive director, and Philippe Kent, director of Telecommunications Services Policy.

Without further ado, I'll turn things over to Mr. Scott for his opening remarks.

[Ian Scott, Chairperson and Chief Executive Officer, Canadian Radio-television and Telecommunications Commission]

Thank you, Mr. Chair.

I was going to start by introducing myself and my colleagues, but you just did that, so I will get right to it.

We appreciate the opportunity to provide an update about the CRTC's ongoing work to support competition and investment in the marketplace so that Canadians have access to the broadband and wireless services they need.

We certainly understand the committee's concerns about the affordability of these vital services for the Canadian population, and we share those concerns. We have been working to implement a policy that is intended to foster competition among Internet service providers in the marketplace.

Much has been said about the decision we issued in May 2021, which set the final wholesale rates for aggregated high-speed broadband access services. Before I speak about the substance of this decision, I want to make clear that this was a costing decision, not a policy decision, and it's important that we get the rates right.

Why did we reverse course? To put it simply, it was because we got the initial decision wrong. We couldn't move ahead with rates that we knew were erroneous. While we always strive to get things right, the CRTC is not infallible. Legislators, parliamentarians, anticipated this and included provisions in the Telecommunications Act that enable decisions to be reviewed by the commission, by cabinet and by the courts as a mechanism to ensure that the public interest is protected.

In accordance with those provisions, companies submitted applications asking us to review our 2019 decision, as is their right. We addressed those requests seriously, fairly and in an impartial manner, as we always do in our role as a quasi-judicial administrative tribunal. We built a public record and gathered evidence from interested parties, and when we analyzed that evidence, we found errors and could no longer justify the associated rates from the earlier decision. Ultimately, we chose to reaffirm and make final the interim rates that were set in 2016, with certain adjustments.

The commission's work to implement its wholesale access policy continues. There are numerous ongoing proceedings looking at the regime that are open and ongoing today, relating to our costing methodologies, barriers to the deployment of broadband and more.

While I fully acknowledge that the new rates are creating challenges for some competitors, I am confident that we have done the responsible thing. I would also stress that the 2019 rates were never in effect in the marketplace. It is true that some competitors lowered their retail rates on the basis of that decision, but that was a business decision and a risk that they assumed, given the appeals that were being filed at the time.

While greater competition among broadband providers will benefit Canadians, there are far too many areas of the country that still do not have access to adequate or affordable broadband.

That is why the CRTC is working to close Canada's digital divide. Through our broadband fund, the CRTC has committed more than $186 million to date to improve broadband services for about 30,000 households in 160 underserved and unserved communities. This includes a significant number of indigenous communities.

We continue to evaluate proposals, and we will announce new projects as they are approved.

Finally, let me conclude by giving you an update on our mobile wireless decision, which we issued last April.

Among other things, our decision created a mobile virtual network operator regime for Canada. It opens the door for service providers to access the wireless networks of the big three national carriers—Bell, Rogers and Telus—as well as SaskTel in Saskatchewan. We are currently in the process of establishing the associated terms and conditions of this access.

All of this is good news for Canadians. Consumers will benefit from a market for mobile wireless services that features more providers, more choice, more affordable options and more investment. In addition, we took action to ensure Canadians can sign up for low-cost and occasional-use plans.

I hope my remarks have helped to clarify the work the CRTC is currently doing to support more competition and investment in the marketplace, ensure Canadians have access to high-quality broadband and wireless services, and as we always do, regulate in the public interest.

We would be pleased to answer your questions. Before we do, however, I must qualify my remarks by saying that we are unable to delve into specifics about any files that are currently before the commission.

Thank you very much. We're available for your questions.

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Mr. Scott.

We're ready to start our first round. As a reminder for MPs and to inform our witnesses, when I present a yellow card it means there is one minute left, and the red card means the time is up.

We'll start right now with Madame Gray, for six minutes.

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

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

Mr. Scott, you had referenced the scrapping of the plan to mandate lower wholesale Internet rates. I wonder if you can tell the committee today who made this recommendation back in May 2021. Was it the CRTC's recommendation to the government, or was it the government recommending it to the CRTC?

[Ian Scott]

We didn't scrap the decision. As I was just explaining in my opening remarks, in the original decision, the rates that were contained in the 2019 decision were subject to appeals and they were put on hold.

If the question is, who made the decision, it was the CRTC. We're an arm's-length administrative agency from government. Based on the public record of the proceeding, the decision was made by the members.

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

Thank you very much.

Mr. Scott, how many Internet service providers did the CRTC consult with specifically on reversing or putting this on hold, as you were saying, to drop the wholesale Internet rates?

[Ian Scott]

We don't consult with individual companies. We issue a public notice, a notice about proceedings, and then parties—any party, any Canadian—are free to intervene in the process.

There is both an association that represents many Internet service providers and numerous individual providers that have been involved throughout all of the proceedings relating to the establishment of terms and conditions for wholesale access, as well as the establishment of the rates through separate proceedings.

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

Thank you. I have limited time so I think you've answered that. Thank you kindly.

Next question, Mr. Scott: Were there any telecommunications companies or individuals that were notified in the sector prior to this decision becoming public that this would be putting on hold...?

[Ian Scott]

Again, when I say “put on hold”, they were subject to appeals. The court stayed the decision because of appeals made by numerous parties to the Federal Court of Appeal. They issued a stay, which meant the decision did not take effect. Meanwhile, parties also appealed to us and appealed to the federal cabinet, but to the specific question, no one gets advice or advised, or communicated commission decisions, in advance of their publication. We're a quasi-judicial tribunal.

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

Has the CRTC done any analysis on how the record-breaking inflation we have seen may affect the affordability of Internet for Canadians?

[Ian Scott]

We track and monitor prices and general economic conditions regularly. We report on that. There is a place on our website where you'll see communications reports, including detailed information about rates and plans and offerings, so in that sense.... Then, otherwise, arguments or submissions are made in the context of various proceedings, and that evidence is taken into account as we deliberate on any given matter.

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

What metrics are you using? We know inflation is a huge issue right now. Are there any specific metrics you're using when you take this into consideration?

[Ian Scott]

As I said, we have a number of proceedings going on, and evidence will be led in those proceedings. That's the information, and only that information is used to base any decisions.

What I was describing was our regular monitoring of the industry available to Canadians and available to companies and so on, but specific to the decision-making process, parties are free to submit evidence and information, and that is what we rely on.

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

Great. Thank you, Mr. Scott.

Are you able to table any analysis the CRTC may have on this that you use in your considerations?

[Ian Scott]

I have no separate information. As I said, there is extensive general information about telecommunications pricing services and so on available on our website. Otherwise, our decisions speak for themselves. They are published and readily available, as are any reports that we commission, but there is no other separate analysis.

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

Right, but my understanding is that you came to the decision to, using your words, put this “on hold”.

You know that you get submissions and you look through them and look at inflation as one of them. I guess what I'm getting at is, what specific analysis are you using to come to that decision? What specific metrics are you using to come to that decision? What can you table for the committee today to make us better understand how you're coming to that decision?

[Ian Scott]

That decision.... To be clear now, the rates were not put on hold. They were stayed by the courts. The decision is the establishment of final rates, and everything there that has any bearing on that process is contained in the decision itself.

We'd be happy to provide the full decision to the members. That is the only statement, and that is what we relied on—all the information—and it is properly accounted for and published in the decision. We would be pleased to provide that to the committee if they don't have it.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Scott and Madam Gray.

I will now turn to Mr. Erskine-Smith for six minutes.

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

Thanks very much, Joël, and happy birthday.

Mr. Scott, just so I have the timeline right, in May 2015 there's a notice of consultation for wholesale rates. In March 2016, there's an interim decision that determined that wholesale rates were likely not just or reasonable. A comprehensive review was undertaken for over three years. “Comprehensive review”, by the way, is not my language. That's the language from the August 15, 2019, decision, and that comprehensive review, despite its comprehensiveness, was incredibly incorrect, I guess, because less than two years later you reversed course almost entirely.

How did you get it so wrong? How can we have confidence in your continued work if after three years of a comprehensive review you get it so completely wrong?

[Ian Scott]

I'm not sure what the question is.

First, perhaps I should take a step back, if I may, and just explain that costing processes—this is the use of long-run incremental costs by regulators to help establish rates, for example, in this case wholesale rates for competitors—are measures that are used around the world by regulators to try to establish rates of this type. It's a very complex process.

To give you a sense of the size and scope of that material, we were dealing with something like 150 costing models, 20,000 pages of evidence and over 100 rate elements to be calculated. All of those are, if you will, contested. On the one side you have parties submitting rates and defending their representation of the appropriate costing and others contesting it and asking for changes. To make a long story short, staff and the commissioners rendered a decision they believed to be correct, as I said earlier, following an application for review.

We conducted a thorough analysis. We sought additional information from all parties. Based on that record, we identified errors. Having identified them, we're duty bound to correct them.

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

A comprehensive review determined that great errors were made.

The challenge though, of course, is you have companies that are assuming risks. You're right: they're assuming risks and making business decisions with the confidence that you're getting a comprehensive review right over three years. I think to flippantly say that they assumed risk.... Fundamentally, the decision undercuts competition, and your mandate, I would hope, is to encourage competition.

Let me get to another element of competition around MVNOs. I can't figure this out one, either. In fairness, this is before your time. In March 2017, the CRTC made a decision—incorrectly, in my view—to say “no” to MVNOs. It was referred back by the Governor in Council. On April 15, 2021 there was a very modest step forward.

Other jurisdictions have a business model. I met with a company that operates internationally with this business model. They want to build towers. They want to build the infrastructure and they'll let other companies operate on their infrastructure. There are two business models: One, the company that builds the tower and two, other companies that want to operate on the tower. Everyone can make money and have their own piece of the pie.

We don't want to take that step forward, despite other jurisdictions operating in this fashion. Why not?

[Ian Scott]

The answer to that question can be found in the commission's decision of April of last year, following a fulsome review of the wireless sector. I would like—

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

You think you got that fulsome review right?

[Ian Scott]

I do.

To be entirely accurate, a result of that framework is that we have indeed introduced MVNOs. We introduced MVNOs that are available to any company that has spectrum that can be used for mobile services. We fully expect that process to not only continue competition but also enhance competition by the very players that have entered the market and are having a meaningful impact on rates.

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

My last question is specific to your position and relates to a meeting you had, which is public now. You had a recent interview with the Toronto Star in relation to the meeting. You indicated that the CEO of Bell is a friend.

I wonder, does it not give you pause to have meetings like that, knowing that the decisions you make are so consequential for companies in this space and for Canadians who care about affordability of an essential service in this space—which depends in some ways on increased competition—and not necessarily to be friendly to Bell and the big three?