INDU Committee Report

Bloc Québécois Supplementary Opinion

Selling Its Sovereignty to the Highest Bidder

Background

The Bloc Québécois would like to begin by thanking the many individuals and groups from Quebec and Canada who testified before the Committee on the important issue of foreign ownership in the communications sector.

“Globalive is a Canadian company, and meets Canadian ownership and control requirements under the Telecommunications Act,”[1] said the Conservative Industry Minister in December 2009, overturning the decision by the Canadian Radio-television and Telecommunications Commission (CRTC) that Globalive, a telecommunications company seeking to operate in Canada, did not meet the factual requirements set out in the Act.

The CRTC reached its decision in October 2009, after Globalive spent $442 million on spectrum licences in an auction. In a news release explaining its decision, the CRTC stated that “the Commission found it particularly important that Orascom owns 65.1 per cent of the equity, has entered into a strategic technical arrangement with Globalive, controls and holds the ‘Wind’ brand under which Globalive will operate, and holds the overwhelming majority of the outstanding debt.”[2]

The Bloc Québécois believes the Conservative government has always been aware that Globalive contravenes Part II of the Telecommunications Act but, given its determination to eliminate foreign ownership restrictions, the government issued an order breaching the Act and quickly announced its intention to amend it.

The purpose of the Committee’s study was to determine whether or not the Act had been breached. Throughout study, the Bloc Québécois reflected on the issue of foreign ownership, focusing on the interests of consumers and citizens in general, and on the cultural sovereignty of Canada and, by the same token, of Quebec.

How do we best serve consumer interests?

On 21 September 2005, David Emerson, who was Industry Minister at the time and subsequently went over to the Conservatives in February 2006, said he was open to relaxing foreign ownership regulations in the telecommunications sector if it would make Canada more competitive.   

In its report of March 2006, the Telecommunications Policy Review Panel recommended “a phased liberalization of foreign ownership rules for telecommunications carriers that are not involved in broadcasting.”[3] Maxime Bernier, who was Industry Minister at the time, was very supportive of the idea and has reiterated his support more recently.

The Speech from the Throne delivered on 3 March 2010 went ever further: “Our Government will open Canada’s doors further to venture capital and to foreign investment in key sectors, including the satellite and telecommunications industries, giving Canadian firms access to the funds and expertise they need.”[4]

The Conservatives consistently invoke consumer interest to support their actions. As the Industry Minister stated in December 2009, “Our goal has always been greater competition in the telecommunications industry, which leads to lower prices, better service and more choice for consumers and business.”[5]

The evidence received during committee hearings did not convince the Bloc Québécois that foreign ownership serves consumer interest. Moreover, it would be very surprising if foreign telecommunications companies were interested in remote areas—indicating that the presence of new players would in no way guarantee greater regional broadband access.

According to the latest CRTC report on competition in the communications sector, about 94% of Canadian households can access broadband services using landline facilities. Canadians can also access broadband mobile services, and about 91% of them do so using handheld mobile devices.[6]

The Bloc Québécois believes that the entry of foreign companies would by no means guarantee greater access to the telecommunications system. Mirko Bibic, Senior Vice-president of Regulatory and Government Affairs at Bell Canada, stated that “if Verizon, AT&T, and T-Mobile owned Bell, Rogers, and TELUS, Canada today would not have the world’s best HSPA plus wireless networks, and certainly not in small and rural communities across the country.”[7]

Does the presence of these foreign companies clearly help to lower the cost of telecommunications services? The Bloc Québécois is not at all sure. As Richard Paradis told the Committee, “even if lots of companies were allowed to enter the market, they would not necessarily be able to offer products at a better price.”[8]

In its 2009 monitoring report, the CRTC stated that broadcasting revenues increased 7% to $14 billion in 2008, and telecommunications revenues increased 6% to $40 billion.[9] Conventional wisdom dictates that this sector would benefit greatly from an infusion of foreign capital, but we can see that things were not going too badly, even at the peak of the international financial crisis in 2008–2009.  A massive influx of capital will likely be good for shareholders, but there are no guarantees when it comes to consumers.

Kenneth Engelhart of Rogers Communication spoke clearly on the issue of telecommunications costs: “I really think that many of these studies, particularly many of the OECD studies, have a lot of malarkey in them […] You have to look at the right metrics […] In wireless, for example, you could ask what the average revenue is per minute. That's the simplest, easiest way to compare countries, and when you do that, Canada is one of the ten cheapest countries in the world. If you look at our broadband services and at the speeds you're actually getting, as opposed to the speeds that people are advertising, again we provide some of the best value in the world. So I think that if the studies are done properly.... There was a World Economic Forum report that came out showing Canada as seventh-best in the world. Professor Waverman […] showed that the OECD studies were wrong and that Canada was one of the cheapest countries. If you look at the right numbers and look at the question properly, I believe we're doing very well in Canada.”[10]

Lastly, the economic situation needs to be considered, as Ian Morrison so eloquently explained: “I'd just like to point out that in 2003, when this committee was studying this matter the last time, the Canadian dollar was down in the range of 70 cents and below. Today, the Canadian dollar is at 98 cents and is projected to pass above parity. It's a 50% change in exchange value with the U.S. dollar. The euro was at 1.6‑something and is now 1.35. It's a 15% change. These things tend to tilt statistics in a way that makes our infrastructure look more expensive but have nothing to do with the underlying fundamentals.”[11]

However, the Industry Minister maintains that opening up to foreign ownership would provide access to funds and expertise that the telecommunications industry needs. With revenues of $40 billion—a 6% increase in a period of financial crisis—should we conclude that the sector’s main problem lies in the area of technology? That’s not what the witnesses told us.

Kenneth Engelhart of Rogers Communications was very clear on this issue: “Canada leads the G-8 in broadband deployment. We have much higher broadband deployment than most OECD countries, and the latest concern of governments has been with ultra-fast broadband. In France, you can really get ultra-fast broadband mostly in Paris. In Canada, Shaw, Rogers, Videotron, Cogeco, EastLink, we all offer ultra-fast broadband. That is 90% of Canada's population right there. In wireless, the latest and greatest thing is ultra-fast wireless broadband, a network called HSPA plus. There are 17 networks like that in the world, and Canada has three of them: Bell, Rogers, and TELUS. So I disagree very strongly with people who say that Canada lags in investment and innovation. Now I understand the OECD's point. They're saying free markets are a good thing and open entry of foreign entities is more free. I understand that. But I disagree with their notion that we lag the world. In fact, we're leading the world.”[12]

The Chairman of the CRTC supported this view, saying that “we are one of the only countries that has a coast-to-coast high-speed wireless access network right now. So we're not doing badly. Especially given our land mass, this is quite something.”[13]

To sum up, the Bloc Québécois is not convinced that opening up to foreign ownership would be an advantage in terms of accessibility, increased competition, innovation or consumer cost. That is why we believe that the quotas provided for in the Act must be maintained.  

Could regulation be the best approach?

In order to stimulate competition, the CRTC, in its April 2006 decision Forbearance from the regulation of retail local exchange services, advocated refraining from regulation in a defined geographic area once an incumbent local exchange carrier had suffered a 25% market share loss.

On 13 June 2006, the Minister directed the CRTC to do an about-face and give market forces greater leeway. A news release issued by Industry Canada stated as follows: “‘Tabling this document signals the government's intention to direct the CRTC to rely on market forces to the maximum extent feasible under the Telecommunications Act and regulate—where there is still a need to do so—in a manner that interferes with market forces to the minimum extent necessary,’ said Minister Bernier. ‘All Canadian consumers will benefit from a stronger competitive environment that will bring greater choice and even lower prices and better services.’”[14]

Despite the power of incumbent companies, Maxime Bernier was already seeking deregulation in June, perhaps due in part to the influence of the Montreal Economic Institute: “While one could argue that the telephone industry was a natural monopoly before the development of new technologies, such is no longer the case; it therefore appears that the CRTC no longer has a reason to intervene in this field. There are solid economic reasons to justify true and full deregulation of Canadian telecommunications.”[15] [TRANSLATION]

The Industry Committee requested a moratorium on the policy direction from 13 June to 31 March 2007. However, on 11 December 2006, Maxime Bernier, the Industry Minister at the time, announced that telephone companies could set their own rates as they liked in any geographic area provided that there were at least three competing telephone companies in that area.

The Bloc Québécois notes that competition has not increased in Quebec since the order was issued in December 2006 and that the deregulation ordered by the Conservatives has not had the anticipated effect. Clearly, the almighty free market has not lived up to expectations, and there are no indications that foreign ownership will succeed where deregulation has failed.

As Richard Paradis told the Committee, “We should maybe find ways to pressure companies to bring the rates down, but it's not a solution to bring in new people.”[16]

Prior to the Conservatives’ free-market directives and orders, the CRTC had the power to establish floor prices and ceiling prices, the former to encourage competition and the latter to prevent companies with a near-monopoly from abusing their position.  

Before the Conservatives came to power, Canada’s approach to regulating telecommunications focused more on changing the often monopolistic telephone market through greater competition. Regulation decreased as competition grew.

Only regulation can guarantee compliance with the Canadian Telecommunications Policy. The objectives of this policy are to:

• facilitate the orderly development throughout Canada of a telecommunications system that serves to safeguard, enrich and strengthen the social and economic fabric of Canada and its regions; and

• render reliable and affordable telecommunications services of high quality accessible to Canadians in both urban and rural areas in all regions of Canada.[17]

Regulation does even more. In its report submitted to the Telecommunications Policy Review Panel, the CRTC stated that “on 16 December 1992, prior to coming into force of the Telecommunications Act, the Commission initiated a public proceeding to examine whether the existing regulatory framework should be modified in light of developments in the industry. In that proceeding, the Commission noted that, in an information-based economy, a modern and efficient telecommunications infrastructure is a fundamental component of, and vehicle for, the production and consumption of goods and services. The Commission noted further that, in recent years, technological change and increasing competition had significantly altered the nature of the telecommunications industry, so that, in addition to fulfilling the basic communications requirements of all subscribers, telecommunications had evolved into a tool for information management and a productivity enhancer for business. These changes had allowed the telephone companies to develop a wide range of new audio, video and high-speed data services to satisfy the demands of both business and residence consumers in the local and long distance markets.”

If telecommunications has become a “tool for information management,” then regulation of the industry is essential.

Moreover, we cannot approach telecommunications from a strictly commercial perspective since the very nature of the industry involves the transmission of information throughout Quebec.

Quebec has no way of harnessing the telephone industry or establishing a policy to control it properly or encourage competition. Only a regulatory body can do this.

Unfortunately, it is now refraining from regulation. As Peter Murdoch pointed out, “The real problem has been that Canada's regulated telecommunications service providers have not had to innovate to reduce prices because the Telecommunications Act does not require the CRTC to regulate in the public interest.”[18]

Is cultural sovereignty up for sale?

The pace of technological change in telecommunications and broadcasting is particularly fast, and the two fields are getting increasingly harder to separate. As stated by the CRTC Chairman, “The convergence of telecom and broadcasting has now been widely recognized as a fact of life. What is still being debated, however, is its impact on Canada's legislative and regulatory structure.” [19]

More than 50 years ago, the Massey Commission reported that “in the early days of broadcasting, Canada was in real danger of cultural annexation to the United States. Action taken on radio broadcasting by governments representing all parties made it possible for her to maintain her cultural identity.”[20] 

This opinion was reiterated in the 1986 Caplan-Sauvageau report: “As Sir John Aird’s commission reported to the government in 1929, when radio alone was at issue, Canada was fast becoming a mere satellite of American broadcasting.”[21]

When it comes to culture, Canadian consumers—as apart from Quebec consumers—have always been heavily influenced by the United States.[22] The federal government developed such mechanisms as the Canadian Broadcasting Policy to safeguard cultural diversity.

Mobile telephones have no content regulations and are becoming de facto broadcasting tools.[23] Consequently, the Bloc Québécois would see any loss of control over these companies by Canadian interests as the first sign that the federal government was relinquishing cultural sovereignty. Broadcasters would be justified in thinking it unfair for Canadian content quotas to apply to them if potential telecommunications companies could broadcast whatever content they liked on mobile phones.

André Bureau of Astral Media highlighted the issue, stating that “the problem of foreign ownership in the telecommunications sector is one to which broadcasters like ourselves can relate, since we now operate in an environment marked by the convergence of broadcasting and telecommunications. More and more, cable, telephone and wireless communications companies are offering every day a similar range of telephone, data transmission and video-broadcasting services.”[24]

The Bloc Québécois believes that not only should current foreign ownership restrictions be maintained but broadcasting and telecommunications legislation should be merged so that convergence and the new communications environment can be properly regulated.

Quebec’s struggle over telecommunications and broadcasting

Quebec has long called for broadcasting to be under provincial jurisdiction. Back in 1929, Quebec Premier Alexandre Taschereau held a vote on a Quebec broadcasting act. The federal government responded by passing the Canadian Radio Broadcasting Act on 26 May 1932. This legislation provided for the establishment of the Canadian Radio and Television Commission, which was instituted that same year and was the forerunner of the CRTC. 

On 25 February 1968, Daniel Johnson explained very clearly why Quebec should have a say in communications: “The assignment of broadcasting frequencies cannot and must not be the prerogative of the federal government. Quebec can no longer tolerate being excluded from a field where its vital interest is so obvious.”

Quebec governments of all political stripes have defended this critical component of Quebec’s development.

When Lawrence Cannon was Minister of Communications from 1990 to 1992, his department prepared a more detailed proposal on the issue: “Quebec must be able to determine the operating rules for radio and television broadcasting systems, and to control the development plans of telecommunications networks, service fee structures and the regulation of new telecommunications services […] Quebec cannot let others control programming for electronic media within its borders […] To that end, Quebec must have full jurisdiction and be able to deal with a single regulatory body.”

The determination shown by Quebec governments to have jurisdiction over telecommunications stems from their desire to establish parameters for the relationship between citizens (including corporate citizens) in Quebec.

Since the time of Premier Taschereau, Quebec has claimed the right to control its broadcasting because the message being transmitted was essentially a cultural matter. The Supreme Court quickly ruled that the federal government had jurisdiction since airwaves exceed provincial boundaries.

Conclusion

Given the various challenges Quebec faces in comparison with the rest of Canada, particularly in the areas of language and culture, the Bloc Québécois recommends as follows:

• maintain current foreign ownership quotas;

• undertake a study of new communications legislation that integrates telecommunications and broadcasting;

• pass legislation as soon as possible to establish a Quebec broadcasting and telecommunications board that would regulate pursuant to the Broadcasting Act and the Telecommunications Act.