:
I call this meeting to order. This is the 45th meeting of the Standing Committee on Industry, Science and Technology, and as per the orders of the day, we have with us the Minister of Industry, the Honourable Maxime Bernier. He is here to discuss, pursuant to Standing Order 108(2), our study with respect to the deregulation of the telecommunications sector.
Welcome again, Minister, to the committee.
We'd also like to welcome two officials from the Department of Industry. First of all, we have Mr. Richard Dicerni, the deputy minister. Welcome, Mr. Dicerni.
We also have with us Mr. Ron Parker, visiting senior assistant deputy minister from the Department of Industry.
Minister, as you know, we've been studying this issue for a couple of weeks, and we look forward to your comments. You have at least a 10-minute opening statement, if not a few minutes more. We look forward to your comments and then we'll go immediately to questions from members.
Welcome.
:
Thank you, Chair, and thank you, everybody. I'm very pleased to be here today.
[Translation]
I'm very happy to have this opportunity to speak with Committee members today.
[English]
This committee's work is very important, and I'm following your study closely. I have read with great interest the testimony of some of the witnesses who appeared before you last week and the week before. As always, it is a pleasure for me to be able to speak to you today.
As you know, the telecommunications sector plays a critical role in Canada's economy. Over the next two hours I want to take some time to describe the decisions I have made and the reforms we have proposed to date to modernize the dynamic telecommunications sector.
Upon being appointed Minister of Industry, I moved quickly to set priorities. I strongly believe that opening the telecom sector to decreased regulation will increase competition, increase our national competitiveness and productivity, and, most importantly, it will be a great benefit to Canadian consumers.
It was obvious that modernizing the policy and regulations that guide the telecommunications sector had to be a priority for our government. In April 2005, the government appointed the Telecommunications Policy Review Panel to study the policy and regulatory framework governing this industry. They were mandated to analyze the telecom sector and to make recommendations that will help transform the industry and turn Canada into a strong, internationally competitive player, all for the benefit of Canadian consumers.
A fundamental finding of the panel was that competition in telecom has evolved to the point where market forces can be relied upon, and they concluded that the need for regulation in certain markets should no longer be presumed. Giving due consideration to the panel's finding and 127 recommendations, the government is pursuing a course of policy and regulatory modernization in the area of telecommunications.
[Translation]
As you know, the concept of greater reliance on market forces is in keeping with the government's overall objectives of improving competitiveness and productivity in the Canadian economy; it is also consistent with the government's vision for a stronger, more prosperous country, as outlined by my colleague, the Minister of Finance, in the document entitled Advantage Canada.
Last June, I tabled a policy direction in Parliament instructing the CRTC to rely on market forces to the greatest extent possible and to regulate only when necessary. This was followed by our decision concerning Voice over Internet Protocol, commonly known as VoIP.
Stating the need for greater reliance on market forces, the CRTC was asked to forbear from the economic regulation of access independent Voice over Internet Protocol (VoIP) services offered by traditional telephone companies.
In the best interests of Canadian consumers, in December, the government proposed to amend the CRTC's decision to forbear from regulating local telephone services.
[English]
In its ruling, the CRTC laid out its criteria for determining when it will refrain from regulating retail local telephone service on the basis of a market share test. However, the CRTC is still inhibiting competition beyond what is necessary, as it may take up to two years under the CRTC plan before deregulation comes to major urban centres. In the meantime, consumers are deprived of the benefits of competition.
The government is proposing to replace the CRTC's market share test with one that emphasizes the presence of competitive infrastructure. In markets where consumers have access to telephone services from a traditional telephone service, a cable company, and at least one non-related wireless provider, deregulation can occur. Under this test, service providers will no longer need CRTC approval to set their prices for residential services in markets where there are at least three facilities-based telecommunications service providers owned by three non-affiliated companies.
In a competitive market, consumers, not a government agency, should determine the prices they pay for telephone services. In a competitive market, there is no reason to regulate some companies while allowing others to offer the services they want at the prices they want.
In addition to leaving in place existing safeguards that protect consumers, such as a price cap for stand-alone residential service and continued price regulation in regions where there's little competition, we are proposing to amend the Competition Act. In December, I tabled in Parliament . This bill will establish financial consequences for companies that engage in anti-competitive behaviour in deregulated telecom markets. This measure will aid in the reduction of unnecessary regulation and act as an effective deterrent to prevent anti-competitive behaviour and, where necessary, help to rectify such behaviour.
[Translation]
Let me just say, once again, how pleased I am with your work. I very much hope to take a closer look at the comments made as part of today's discussions. However, as you heard from Hank Intvent, the Telecommunications Policy Review Panel stressed the need for timely action by the government in terms of deregulating the telecommunications industry, where necessary. Why is that?
Well, the telecom industry is driven by innovation and high technology. As well, the landscape changes rapidly, and the government has to be responsive to the pace of this industry.
[English]
We should remember that the CRTC had already initiated a review of its frameworks surrounding mandated access to wholesale services, something addressed by the policy direction. As well, all statutory requirements under the Telecommunications Act were completed and extensive consultations have taken place.
Moving forward with this direction provides an intended course of telecommunication policy in Canada to the market, to the CRTC, and to the world. The reforms we have introduced will benefit Canadian consumers, providing them with even more choice of better products and services.
Thank you, and I'm very pleased to be here with you. I am now ready, with my officials—Deputy Minister Richard Dicerni and Ron Parker—to answer your questions.
:
Thank you for that question.
To begin with, I would like to explain the government's general position on telecommunications.
As you know, the government issued a policy direction to the CRTC on December 14, pursuant to Section 8 of the Telecommunications Act.
These policy directions set out, for the benefit of the CRTC, the market and the general public, the overall orientation that the government intends to follow as regard Canada's telecommunications policy. It establishes a regulatory framework for the CRTC, more specifically, as a means of implementing our vision, which was the inspiration behind the policy direction issued last December. I should also say that last March, as you pointed out, we received the report of an expert panel containing 127 recommendations. These experts criss-crossed the country for a year and listened to what Canadians had to say. They also called on international experts. They released their report in March 2006. One of their recommendations was to issue a policy direction to the CRTC asking it to rely on regulations as little as possible where market forces are present and where there is competition. That is exactly what we did. Following that, there was a lot of discussion as the review panel went across Canada.
We are proud to have issued that policy direction. It is in keeping with the objectives of the Telecommunications Act. It asks the CRTC to consider market forces when drafting regulations, in addition to concerning itself with social regulation.
[English]
I wanted to point something out to you from page 2-14 of the TPRP panel report. Under “Consistent Application of Policy” there is a recommendation that Mr. Intven, whom you cited a little earlier, was party to:
Canada’s telecommunications policy objectives should be implemented in a coherent and consistent manner by all such departments and agencies. These policy objectives should therefore apply not only to the CRTC in the performance of its duties under the Telecommunications Act, but also to the Minister of Industry in the implementation of telecommunications policies and programs.
Minister, we're very concerned that you've cherry-picked half of the recommendations from what was an excellent report. We agree with you on the objectives. We believe it's the right direction to take. But we believe that the way you've gone about it is absolutely wrong. It's wrong because you've taken out some of the important safeguards that were recommended by this blue ribbon panel. I'll cite a few of them.
The removal of something that is extremely critical was the establishment of an understanding of significant market shares as they exist today. No OECD country has ever proceeded with deregulation before having that kind of an analysis. You, sir, have done that.
Second, there is a recommendation here for a telecom competition tribunal, a quasi-hybrid between the Competition Bureau and the expertise of the CRTC. That has been thrown away in favour of something you refer to as a competitor presence test, which isn't even understood by the Competition Bureau. It probably is, but that low threshold almost guarantees that if I open up an apple shack and decide to call it “Dan's Telecom”, chances are it's going to constitute, in your view, some kind of competition.
The other one that's missing is CRTC's expertise and of course the concern about no consumer ombudsman.
Minister, I'm looking at many of the recommendations here, and they make sense. They must be done as the commission, as the panellists, have suggested: in a holistic way, in a comprehensive way. You cannot possibly state, as you have done now, that what you have proposed is faithful to what has been suggested by this blue ribbon panel, which both sides of this table agree with.
:
I do not share your views with respect to the comprehensiveness of this reform.
We have taken concrete action. There is competition in certain markets, and it is now time to deregulate those markets. The CRTC itself, using its market share test, admitted last fall that it wanted to review that test because it has realized that based on new data, there is very strong competition in certain urban centres. By using a test based on competitive infrastructure, we will ensure that where there is competition, there will also be deregulation that benefits consumers.
It is important to say that we are currently studying all of the panel's other recommendations and that, following that review, we will act on the other recommendations at the appropriate time.
I agree with you: many of the panel's other recommendations are of interest. We are in the process of reviewing them. So far, we have issued one policy direction to the CRTC — it was one of the recommendations deemed by the panel to be a priority. We brought that forward. We also tabled Bill , which will provide for consumer protection.
Our vision is a comprehensive one, because if telecommunications carriers or former monopolies adopt behaviour that is not in keeping with the Competition Act, as you know, financial penalties can be imposed. The Competition Bureau and the Competition Tribunal will have the power to impose fines of up to $15 million. We believe this will act as a deterrent and result in competition which is as harmonious as possible in deregulated areas. That is a power that the Bureau already had when we deregulated the airline industry, and it is a power that the Competition Bureau was asking for.
So, we are acting on several different fronts. We are taking action through the policy direction given to the CRTC, on the forbearance decision, and we are also acting to protect consumers.
:
Thank you, Mr. Chairman.
Minister, there is just one problem: in working with the review panel, you have treated it as though it is the board of directors of a company, when you are in fact a minister of a government. Furthermore, announcing the policy direction and the consultations on December 14, during the holiday period, left the impression that the whole thing was a sham and not particularly serious.
Fortunately, comments by consumers and small Internet service suppliers led to Committee's current round of hearings. The Committee passed a motion, and is holding hearings; as a result, the consultations that did not occur are taking place now, and I am very pleased about that. In fact, the testimony we have heard thus far clearly shows that there was much to be said. And we still have many witnesses to hear from.
Today, you talked about a competition test. But I have a test for you: are you prepared to change your policy direction based on the feedback we receive? I will give you a couple of examples, although I'm not asking for a definite answer today: for example, including a sunset clause that would limit the period of time during which the policy direction would apply; also, small cable companies and Internet service providers made it clear to us that they haven't had an opportunity to take advantage of what the CRTC had provided for, which was up to 25 per cent. Because of your policy direction, they automatically became subject to competition overnight and they may well disappear from the market entirely in very short order. The report also recommended that there be an ombudsman, to keep an eye on things.
So, are you in fact prepared to amend your policy direction, so that if we quickly submit comments on this, you will be able to make an enlightened government decision that reflects the Committee's views, and we will be able to carry out our future work on all deregulation, knowing that you may listen to what we have to say?
You referred to two issues. The first is the policy direction to the CRTC last December asking it to rely as little as possible on regulation and as much as possible on market forces. The history of that is quite simple: the Committee held consultations for a year and made that recommendation. We looked at it and brought it forward.
The other part of your question has to do with the forbearance decision with respect to local telephone service. All industry stakeholders and consumers had an opportunity to appear before the CRTC and present their views before it announced that decision a year ago. So, there was considerable consultation at that stage.
Also, as you well know, we issued a draft policy direction last December, which was followed by a 30-day consultation period. I can confirm that that consultation process was a success because, over a 30-day period, we received 175 briefs…
:
It's a very good question.
Concerning the win-back, I want to let you know that Canada and the U.S. are perhaps the only jurisdictions to have this kind of restriction on their telecommunications industry.
What win-back means is that you don't permit the former monopoly to communicate with the customer—they must wait 90 days—after losing a client.
The telecom panel, in one of their recommendations on win-back, said that making offers and counter-offers to the same customer is the very essence of competition, and that win-back campaigns should not be restricted by a regulator.
We want to follow this recommendation. I think it's a very good one.
[Translation]
Why is it a good recommendation? Because it allows consumers to receive information about the products and services available in the market and because information is what consumers base their decisions on. Well-informed consumers will know about all the products that are available in the market and will be able to make a better choice.
We believe that restrictions should be eliminated as quickly as possible to allow for more dynamic and intense competition here in Canada. It is also important to note that winback rules are in place in both Canada and the United States. In the U.S., only a couple of states have regulatory standards—specifically, Florida, Georgia, Louisiana, North Carolina and South Carolina. It should also be noted that they restrict the right to make counter-offers to a seven-day or fourteen-day period only, not 30 the way it is here in Canada.
We conducted a study that indicated that most of the larger states—31 out of 38—have no such restrictions in the telecommunications industry. In my opinion, the time has come for us to drop this kind of restriction here in Canada, because they do not benefit consumers. In that regard, I would like to quote the Federal Communications Commission.
[English]
It's the American CRTC.
They said, in a decision:
Winback restrictions may deprive customers of the benefits of a competitive market. Winback facilitates direct competition on price and other terms, for example, by encouraging carriers to “out bid” each other for a customer's business, enabling the customer to select the carrier that best suits the customer's needs.
It's very clear, for the regulator in the States, that the win-back restriction is a kind of restriction that is against competition. We don't need that kind of restriction to ensure that we have all the information and good competition here in Canada.
:
Thanks for the question.
[Translation]
I believe telecommunications services in remote areas are extremely important in Canada. That is why, as you know, new, very advanced applications are able to provide what the Internet provides: tele-health, tele-learning, delivery of government services, and e-business. All those services require access to broadband. The rural areas need to be well served.
So, it is important to improve Internet access for First Nations and rural communities in Canada. The idea is not to deploy broadband service in remote communities. The idea is to provide health and educational services and enhance economic opportunities because, as you know, broadband service makes all of that possible in these communities.
At the present time, our government has taken a number of initiatives to allow rural areas to benefit from broadband service. As you know, we have implemented a broadband service pilot project. The focus was rural development. This began a few years ago with the aim of helping communities that don't have access to broadband service and allowing the private sector to play a complementary role.
Although this is a pilot project that was only developed recently, the government has also set up additional programs. Government organizations launched the National Satellite Initiative so that satellite use in communities in the Mid- and Far North, as well as remote areas of Canada, would be affordable for broadband service providers.
Among the other initiatives we have taken, I would just like to mention the Canada Strategic Infrastructure Fund and the Municipal Rural Infrastructure Fund. Those funds provide funding to eligible broadband service project developers.
We want rural communities to have the benefit of quality broadband services and access to the Internet at an affordable price. That's why we are reviewing all possible options in order to ensure that the Government of Canada can continue to play its role, as part of the effort to bring these services to Canadian communities that currently do not have access to broadband services.
:
I can assure you that for us the role of the CRTC is important in the telecom sector. They still have a role. They're still doing social regulation in the telecom sector, and also economic regulation.
As I said, deregulation will occur only in places where the test of three is met, only when you have a competitive infrastructure, but for the remote and rural regions, it will be business as usual. The economic regulations will be there, and the CRTC will be there.
I think what we're doing as a new government is using the power we have under section 8 of the Telecommunications Act to issue a policy directive to the CRTC. We use section 8, and it's in line with the Telecommunications Act and with our mandate as a government.
Also, varying a decision from the CRTC is a power we have under the act. Section 12 gives the government the power to vary or send back a decision to the CRTC. What we did in the last couple of months was just using the power we have. It's different; we're not a regulator. We're setting policy direction for the CRTC. They are the experts. They are the regulator that will apply the three tests, and they're going to be there to regulate when necessary.
I believe the CRTC still has a role in the telecommunications industry, and it's an important role.
Minister, I want to come back to the earlier questions that I didn't get an answer to. In the meantime, you've raised a number of very interesting points, particularly with respect to wireless win-back, , and airlines.
Minister, when you last appeared before this committee on June 6, 2006, you stated categorically to my question that you didn't see any need to change the Competition Act. I'm glad to see you now see that, although I suggest the reason you're doing it has a lot to do with piggybacking on the issue of creating separate laws for the airline industry. As you know, competition law is the law of general application and general rule. I'm sure there are a number of competition lawyers and consumers out there who would probably want to argue that, as they did with me over the years.
Minister, you've talked a bit about the issue of win-backs, and I understand win-backs to work only on the following circumstances: if you leave the service, you will then get rewarded. So I hardly see how it's possible for you to connect wide consumer benefits with only a few people, who decide to leave, being paid handsome amounts to come back.
There's the experience in the United States, Minister, which I raised with you in December after you made your policy announcement just before the House rose. I talked about the experience of decline in competition in the United States. In fact, not only were they concerned about the decline, but to the same mantra that wireless and VoIP would be effective substitutes, we know that those technologies are a long way off. In fact, if they are precluded under your plan, they may never be realized.
So let me ask you this, Minister. An area that my colleague talked about in Durham region with Oshawa was with respect to what consumers are concerned about. They're very concerned about wireless. I want to know where you are with respect to this review, especially given that you have now three players. I note that under your criteria for having competition there has to be one of the wireless players who is not affiliated with the others. It's going to be pretty hard to deal with only three companies, which usually constitute either a telephone or a cable company. But this, Minister, probably has a lot to do with the fact that you didn't go through all the recommendations and follow the expert panel review.
Where are you with wireless? And when are you going to respond to a true need of consumers, as opposed to one that you seem to be inventing here now?
:
Thank you, Mr. Minister, for coming today. It's good to have you back to our committee.
I'll just go back a little bit, if you'll allow me. I come from a riding in southwestern Ontario, basically rural and small towns. My largest town is 14,000 people, and I have about 55 other towns that make up my riding, along with many who are in rural areas.
Mr. Angus is gone, but I certainly don't have people as rural as Mr. Angus has up north. Yet I can tell you that in the Internet service part, which is not regulated, a few years ago we didn't have anything, and now, quite honestly, it's amazing what has happened in terms of access to the Internet, especially high-speed access.
It still raises some concerns that have come from some of the stakeholders and customers, and I'll raise them because I have the rural issue and the small communities. In our rural communities the concern is that under your policy directive these communities could be left vulnerable to only monopolies or duopolies. Could you help and explain whether this would be true or not?
:
Thank you for your question.
I want you to know that your riding is very much like my own. The Beauce region is partly rural and partly urban. That is why we decided to deregulate, based on the 3-3 test, only where competitive infrastructure is in place. As you know, remote or rural areas will continue to benefit from the CRTC's economic regulation.
You talked about remonopolization. We believe that all the players operating in a market where there is a traditional telephone network, a wireless network or cable telephone service, are subject to healthy competition. I do not believe there will be remonopolization because, as you know, Jim Shaw, of Shaw Communications Inc., issued a press release saying that he is prepared to compete with the former monopolies and that his business wanted to do that and was prepared to do that.
The President of Cogeco also made comments that were reported in La Presse when we announced our policy direction. It was reported that Cogeco has an advantageous cost structure and that it is capable of competing if there is a price war.
It's important to realize that these large cable companies have invested millions of dollars in their network and infrastructure. Having done that, they are prepared to meet the competition. I don't believe those major players will simply drop out of the market overnight. On the contrary, competition will benefit consumers.
In that regard, prior to price deregulation in the long distance market in 1998, the average cost of a long distance call was 30¢ per minute. After the CRTC deregulated that market, the average cost of a long distance call fell to 10¢ a minute. That allowed Canadians to reap the benefits and make long distance calls at very competitive prices.
My hope is that what happened in the long distance market will happen as well in the local telephone service market as a result of our deregulation. There will be competition where deregulation occurs; and where there is no competition, or where our test is not validated, it will be the status quo. Prices will continue to be regulated, and Canadians will benefit from competitive service offers.
:
The rural areas—and this is an important point—have not been deregulated. They still benefit from CRTC regulations and standards that are currently in effect. It's the
status quo.
So, we are applying our test to the market, as it currently exists. Cities like Toronto and Vancouver could benefit from deregulation when this test is applied by the CRTC and put into effect. So, we are giving the CRTC a tool with which to expedite deregulation in the urban centres, where there is already healthy competition.
As regards areas where there is no competition—in other words, where there are only one or two players—we will not be applying that test. I hope that we will one day be in a position to create competition and deregulate those markets. It's in the interest of consumers, so much so that according to one study, a 1 percent drop in rates in the local telephone service market, following deregulation, would affect approximately 60 per cent of markets in Canada and result in annual savings of $29 million a year for Canadians. That's a lot of money. That's the reason why we want consumers to benefit from this competition as quickly as possible.
We have to decide whether we are going to allow that deregulation to occur immediately or later. Should we apply the 3-3 test or the market share test?
We have decided to apply the 3-3 test, which is simple and non-arbitrary, to allow the CRTC and markets to apply it where there is competition, so that consumers can benefit and save money.
Thank you, Minister, for coming. I want to congratulate you on work that was done on an important issue that was brought forward a year ago. You've moved forward on that, and we thank you for your attentiveness and for coming here to answer some of these questions.
My riding, Chatham--Kent--Essex, is probably one of those ridings that represents all areas, much the same as the riding you talked about. We have an urban centre, Chatham, with a population of 40,000. It has good representation from all parts of telecommunication. Then we have rural areas with very little representation, and in some cases they need high-speed Internet. I'm concerned about them.
I'm wondering, sir, if you can tell us how this new policy direction would benefit them. Or would it hinder them? Would it cause a slowdown in having the services they so desperately need and want?
Following 60 days of consultation and the tabling before Parliament, for a period of 40 days, of the policy direction we issued, and which has been in effect since December, we were able to make certain changes to the CRTC policy direction in order to ensure that suppliers of wholesale broadband access are still able to access the networks of former monopoly undertakings.
Following consultations, the policy direction issued to the CRTC was amended somewhat. I will read you part of what we amended in order to ensure that suppliers of wholesale broadband access will always have access to former monopolies' core networks.
We amended the policy as follows:
[English]
...to determine the extent to which mandated access to wholesale services that are not essential services should be phased out and to determine the appropriate pricing of mandated services...
So we want to be sure there is an industry offering wholesale access services to Canadians. We asked the CRTC to have a look at this in their usual, very conscientious and professional way. I know right now they have some hearings concerning this, and I'm looking forward to the decision of the CRTC, to make sure the companies will be able to offer these wholesale services—again, in the new context. In the end, it will be good for customers because we're going to have more competition.
:
Thank you for your question.
I'm not saying that some telephone companies are charging too much. I'm simply saying that we want to enhance competition. Normally, in any deregulated industry, competition leads to better prices and better service for Canadians.
Based on the test that is proposed here, approximately 60 per cent of the major markets here in Canada will be deregulated once it has been applied by the CRTC. For consumers, that means stiffer competition in the telecommunications industry, where the players are very healthy, financially. There are major players in both the cable and traditional telephone market segments and these people are prepared to compete.
When we apply our test to the major urban centres, the result is that there is less economic regulation affecting the major players. Experience has shown that less price regulation leads to much lower prices; in any case, that is what has happened in the past.
Earlier, I used the example of long distance pricing, which went from 30¢ a minute in Canada, before deregulation, to 10¢ a minute. Do I have any assurance that this will occur in a deregulated industry? Well, I don't have a crystal ball, but I can tell you that competition always benefits consumers, and we are undertaking this reform in the interests of consumers.
:
Thank you very much, Mr. Chair.
Minister, first of all, I'd like to express to you my sincerest gratitude for your presentation today. You occupy a very important role as it relates to the Canadian economy.
As far as I'm concerned, the number one challenge this economy faces is the productivity gap between us and the United States and other countries. That has, of course, an impact on our standard of living. I was happy to note in your presentation that competitiveness, as well as productivity, is in fact part and parcel of your beliefs as they relate to the Canadian economy as we try to compete in the world market.
I want to take a broader approach and get a sense from you, as the minister, what we can in fact expect from you. You obviously are a believer in deregulation. This is the philosophy that you seem to be promoting. How far are you going to go with that? Does it go beyond the telecom issue?
As well, I would like for you to address the issue of foreign ownership, which has not been mentioned. I refer to the OECD study that essentially urges Canada to change its rules. If I may quote from a couple of individuals, one was Don Drummond, the chief economist of the Toronto-Dominion Bank, who said, “It reduces competition, and so it keeps prices up artificially high.” The C.D. Howe Institute stated, “Without change, capital-starved Canadian companies will fail to commercialize much of the nation’s R&D investment.” So how big of an issue is this for you, and will you be acting on this particular issue in the near future?
[Translation]
As you know, on March 22, the Telecommunications Policy Review Panel submitted a report containing more than 120 recommendations, as well as a number of interesting suggestions. One of those was to adopt a progressive method of liberalizing foreign investment restrictions. It also suggested, as you know, that Cabinet be given the power to override the restrictions during phase I, if it believes the foreign investment is in the public interest. It also recommended broader liberalization that would ensure fair treatment for all telecommunications undertakings, including distribution and broadcasting undertakings. This second phase would be implemented following a review of broadcasting policy.
Those are the recommendations made by the expert panel, and we are currently reviewing all of their recommendations, including that specific one.
As you already stated, the OECD also recently expressed the view that there should be further deregulation in the Canadian telecommunications industry.
There is also our Advantage Canada plan, presented by the Minister of Finance, which is intended to increase foreign investment in Canada. In that regard, we are being asked to review foreign investment policy, and particularly the Investment Canada Act. Through the Advantage Canada plan, the new government will try to maximize foreign investment spinoffs for Canadians, while maintaining our ability to protect the national interest or national security.
As you know, we are determined to lift restrictions on foreign property as much as possible under the General Agreement on Trade in Services between the provinces. That is an important agreement, and we want to be sure we limit restrictions between jurisdictions even here in Canada.
Finally, the World Trade Organization has to adopt policies that are consistent with Canadian policies and its own.
Having said that, the telecommunication sector is important for industry. We want to ensure that it has the necessary resources to be competitive internationally.
We are currently reviewing foreign investment. You asked me whether I am prepared to take action with respect to foreign investment. I note that, under the previous government, your Committee tabled a unanimous report, I believe—my memory fails me—in which you said that there should be liberalization of foreign investment in the telecommunications sector.
As Minister of Industry, I am responsible for the Telecommunications Act, but not the Broadcasting Act. So, I am analyzing the recommendations of the Policy Review Panel, as well as the report of the Standing Committee on Industry, which recommended that we liberalize foreign investment. I will report on that analysis to my Cabinet colleagues at the appropriate time, with a view to determining future action.
Industry Canada is currently responsible for spectrum management. As you know, in their report, the experts recommended that responsibility for spectrum management in Canada be transferred to another organization.
I am currently reviewing this whole issue from a broader perspective, as I am all the other recommendations. My Department issued a press release last Friday informing Canadians and industry participants that we would like to proceed with a spectrum auction. Various band frequencies are currently available, and we want them to be available to players here in Canada.
As you just said, we asked a specific question as part of the consultation, which was the first phase of a lengthy process. We will be consulting industry stakeholders with respect to the criteria for the auction. Following that, we will carefully consider their input. Finally, in early 2008, we will proceed with a call for bids on available spectrum.
The question is whether part of the spectrum should be reserved for new players. The debate is on. I have no preconceived notions as far as that goes. I await the recommendations and suggestions of people in the industry and various players with respect to whether or not the government should reserve part of the spectrum for new entrants.
There are also all the other technical details related to the auction. We are asking people in the industry to forward their comments and suggestions to us. This is a consultation process that will last 30 to 60 days. At the end of that process, in early 2007, we will call for tenders in order to make certain spectrum bands available on the market.
:
Well, Minister. Thank you for being here.
[English]
I know you'd like the deregulation to reduce costs for everyone—for consumers, I'm sure--but sometimes the road to hell is paved with good intentions, and in some cases it's just not working for low-income people. I'll give you two examples.
One is when long distance was deregulated. You sort of did half the job, but not basic access rates that low-income people need. In remote areas, it's almost a matter of life and death, and certainly for economic survival or to get off social assistance. So when long distance rates went down—which you, I, or governments, and wealthy people could afford—the telcos needed to get some revenue from somewhere, so they reduced basic access rates, which were not regulated. Of course the people who could least afford it, those with low incomes, had to pay the bill.
The second example is when a telephone company owns the wires in an area. There may be a number of Internet providers, but when you say, well, we'll deregulate and then we'll get the cheapest, the problem is that the company owning the wires charges the only other providers a rate to use those wires. When that was regulated, at least they had to provide access at a reasonable rate. But deregulated, they think they can do what they want and charge exorbitant rates, which puts Internet access up.
Of course, no one in a remote area can afford to put in those cables or wires again, so it's not working.
I don't know if the minister has a solution to those two problems and how they might be made to work with regulation, because deregulation obviously didn't work.
:
For your question, I want to let you know why we're doing that. I think it's important to put it in context.
Recently the OECD issued a very interesting paper, based on a study about why we want to have more market forces in the telecom sector, why we want to have more deregulation in Canada's telecom sector.
The study estimated that the growth in Canada's business sector productivity could have been much higher. It would have been 1% higher every year between 1995 and 2003. I'm saying this because—and it's not me, it's the OECD—if we didn't have the overregulation that we have in this country, we could have better productivity for our economy as a whole. If we had aligned our regulation with that of the least restrictive country in each sector, we would have had that 1% increase between 1995 and 2003. This 1% more per year makes a huge difference after a few years, and I think you're going to agree with me.
But there was another important observation in the OECD study. Excessive regulation has a worse effect in sectors that produce and use information and communications technology intensively. So telecom is an example. It's even more important to have less and better regulation in this sector.
This is why we decided to deregulate the telecom sector, so that the economy as a whole would benefit.
In the end, this will have an impact on productivity growth in this country, because as you know, excessive regulation has always been a huge cost. This cost is more important in the telecom sector, because it's so important for the country's innovation and productivity.
Answering your question concerning
[Translation]
Access to services provided by wholesale Internet access or telephone access resellers is very important. That is why we asked the CRTC, in the policy direction which is currently in effect, to strike the right balance between market forces and regulation in this segment of the telecommunications industry.
We also recognize that mandatory access to wholesale services is needed to promote competition, and the CRTC is currently reviewing that. The CRTC is the most appropriate agency to regulate that segment of the industry, if need be, and ensure that Internet service is accessible, particularly broadband, all across the country.
We want to ensure that deregulation does occur, and that it occurs in an orderly manner, and that service providers…
:
You are more than the Minister of Industry for Canada; you are the member for Beauce.
And I am the member for Portneuf—Jacques-Cartier.
People in Quebec know about the similarities between Portneuf and Beauce. Both are ridings where small industry is extremely dynamic and is based to a large extent, in both cases, on exports, allowing both employees and investors to make a good living. Entrepreneurs in both of our ridings are fiercely independent people. A member of Parliament who served before you was an independent by the name of Gilbert Bernier. Our two ridings have this in common: they're the victims of programs put in place by the Government of Quebec that discriminate against resource regions, resulting in significant job losses. Our two ridings also have in common the fact that, for a very long time, they were ruled by Québec-Téléphone, which became Telus Québec, something that probably significantly hindered economic development in both of our regions.
Our two ridings probably also have in common their lack of access to deregulation, which is kind of a shame, based on the standards you have just put in place or are preparing to make official. When that happens and as competition becomes more and more widespread, you will need to find competent and dynamic adjudicators, so that the competition is fierce and ruthless.
In recent weeks, I have noted that Liberal members of Parliament who sit on this Committee do not have a great deal of confidence in the Competition Bureau. They have the impression that everything always takes too long when you're dealing with the Bureau. As for our Montreal colleagues representing the Bloc, they feel that if the Competition Bureau were truly effective, every oil company executive would already be in prison. So, they can't possibly have any confidence in the Competition Bureau.
Ms. Scott showed courage in coming here to deliver her message, which was to reclaim a mandate and to declare herself capable of fulfilling that mandate expeditiously if real problems emerge.
What do you intend to do to restore people's confidence in the Competition Bureau and its ability to take quick, draconian action if there are abuses?
:
Thank you for your question. As regards a comparison between the ridings of Beauce and Portneuf, you are right that we represent people who are entrepreneurs, people who believe in their success and in themselves. I am very proud to represent the Beauce region, and I am certain that you are just as proud to represent your riding. People from the Beauce may not benefit from the deregulation of telephone services quite as quickly as we would have liked, but I do hope that one day, they will derive the same benefits as people living in the major urban centres across the country.
I have confidence in the Competition Bureau; I believe the Commissioner is doing a fantastic job. She told the Committee that when there are serious problems, they address them and allocate the necessary resources to carry out studies as quickly as possible and issue injunctions, when necessary.
The Competition Bureau has all the resources it needs to be in a position to take action and sanction anti-competitive behaviour or an industry player that abuses its dominant position. It has all the necessary resources to do that. But we would like to provide it with an additional tool to counter this kind of behaviour. That's why I'm asking the Committee to look at Bill , a bill that is in the interests of consumers, since it will ultimately give the Competition Bureau more teeth, by enabling it to impose administrative monetary penalties of as much as $15 million and issue injunctions after conducting a comprehensive, but expeditious, study of a given situation.
The Competition Bureau has a role to play. It is an independent government organization, as you know. I believe the new power related to administrative monetary penalties that would be given to the Competition Bureau once Bill C-41 has been passed into law, is in the interests of consumers and Canadians as a whole. I am confident that the Bureau will act expeditiously if this bill is passed and if a situation arises in the market place which shows that a company is not abiding by the rules laid out in the Competition Act.
Thank you for your interest in Bill and I hope that this bill can receive appropriate consideration at second and third readings as soon as possible.
As I said, the data I referred to with respect to lower pricing for long distance service in Canada beginning in 1998 are from the CRTC's 2001 Annual Report. I'm referring to chart 4.7. It's a diagram showing average long distance rates in Canada, and it clearly shows how prices dropped when deregulation occurred. The CRTC says that resale of long distance services began in the late 1980s, and facilities-based competition in 1992, but it was in 1998 that rate regulation diminished.
It is very important to make a distinction between rate regulation and the arrival of new market players. New players began to enter the long distance market in 1992. Despite the fact that there were new players operating in the market, rates remained relatively high at about 25¢ to 30¢ a minute. Now that there has been price deregulation—that is what we have now; we can make the comparison—we have new players in the market place which are the cable operators. Cable companies are able to offer local telephone service and secure market share previously held by former monopolies. So, we have new players who have been operating in the market for quite some time now.
We have now reached the point where it is time to deregulate prices, just as the CRTC did back in 1998 with long distance service. That was when we saw the impact on consumer pricing, and I hope we will see the same kind of impact on the pricing of local telephone service, so that consumers have better choices and benefit from more competitive prices. Based on the example we have with long distance service here in Canada, I am optimistic and I do believe we will see more competitive pricing in the coming months.
:
Minister, I think you'll agree that suggesting that consumers are somehow supporting this particular initiative, as Bell Canada tried to the other day.... I'd be quick to point out that on the first question of the Ipsos-Reid poll they commissioned, 84% of Canadians weren't even aware of the policy to begin with. So this is in fact a very complicated area of public policy.
Notwithstanding the declarations you've made, and obviously the references you had to make to the documents in front of you, I too find it very complicated. I am aware of one thing, as are several members of this committee, with respect to the Competition Act, and I'm also painfully aware why legislation specific to the airline industry was put into question, which is that the cease and desist provision was struck down by the Quebec courts. Your department—your legal advisors—and Madam Scott should certainly have been able to tell you that only in the most egregious and obvious of examples, which is a very hard test to prove, will you be able to in fact arrest a situation where an anti-competitive act is taking place.
This leads me to the real question about the competitor presence test. What you've done is thrown out the standard rule of reason test by which all matters of competition or anti-competitive activity are judged. You've thrown out the opportunity to have a review of the market in which a decision is to be made. And of course consumers know very little about this project.
Given all the recommendations you've set out and given the Quebec court's decision, how can you now be confident that consumers will be protected and that anti-competitive activities won't be prevented under Bill , which, by the way—and I point this out for you, Chair—was the grandson, if you will, of Bill , which remanded it to make it a law of general application?
You are referring to the now defunct Bill tabled by the former government. That bill gave the CRTC the power to impose administrative monetary penalties on stakeholders in all the different industry sectors. You're absolutely right. That is why I am confident that Bill , which is specific to the telecommunications industry, will be approved by the House at the appropriate time.
With respect to the Competition Bureau and the Competition Tribunal, Ms. Scott said a number of times, when she appeared before you, that she has the necessary resources to take action and would like to be authorized to impose administrative monetary penalties of up to $15 million. She said she would like this bill to be passed by the House and expressed her confidence that this would discourage abusive behaviour. At the same time, she said that if such behaviour were to appear, the Competition Bureau would have the tools it needs to issue injunctions with a view to ensuring that the Act is adhered to and that all industry players, particularly large players, comply with it to the same extent as new entrants.
The test that we are applying for the purposes of deregulation was used by the CRTC itself. It is different from the market share test. If we want consumers to benefit from deregulation and competitive pricing as soon as possible, we can use that test. It is based on facts, is easy for the CRTC to administer, and allows the rule to be applied where there is competition. That is our belief. We want this to happen as quickly as possible.
:
Minister, the problem is that the Competition Bureau does not have the right, even under Bill C-41, to go beyond the position taken by the judiciary, particularly in Quebec. That is why Bill C-41 contains amendments that take into consideration the legislation in force in the given area.
[English]
The concern I have is that in the time it takes to get to the tribunal, the business could be dead and gone and buried and the flowers wilted, and you've lost competition, as you've seen in the United States, Minister. You've seen this happen time and time again.
There was a perfect document prepared for you by the panel, by the report. You've chosen, even in some of the chapters, such as chapters 3 and 4, only to have certain recommendations. I'll give you an example: interconnection. There are a lot of companies that haven't interconnected; yet if you proceed with this, the advances you've made in long distance and in other places will be lost, and also what you've done here in terms of local connection.
Are you not concerned that your decision to rush or to go in haste may in fact have the reverse and opposite effect to what you're trying to achieve and result in less competition and very little in the way of new entrants to this market, which will hurt consumers?
:
You are talking about the possibility of remonopolization or duopolization subsequent to our using our test and deregulating an urban market.
At the present time, there are a number of players operating in urban markets. They are the former monopolies, the cable operators providing telephone services, and all the businesses offering cell phone service. All across Canada, there is a significant number of players in markets considered to be very limited. I do not believe we will lose the benefits of deregulation or that we are moving towards a duopoly or monopoly. In that regard, I would just like to read a comment made by the President of Cogeco, Mr. Audet, as quoted in the Globe and Mail on December 13, 2006. This is what he said:
[English]
“Our costs are very low. If someone decides to lower prices, they are welcome. We'll be in a position to defend ourselves.”
[Translation]
The President of the company is saying here that there is a competitive price structure and that he is prepared to take on the competition in any price war that results from deregulation. That is why we believe we must move to deregulate. There are significant players, and in addition to that, this is in the interests of consumers.
Thank you, Mr. Minister.
One of the concerns in my riding, where we have Esso, Petro-Canada, and Shell for gasoline, is that nobody believes there actually has be collusion; there's just no competition because of vertical integration in the industry.
With regard to your model, you have telephone, cable, and wireless, which allow for the deregulation component to take place. What happens or what thresholds are in place if, for example, one of those three different pillars exits the market or is not really there in a strengthened position and is going through the motions, so to speak? There are many places where cable or telephone service has really been at the lower end of provision. So what happens if one of those exits the actual area? Does regulation then automatically get imposed back on that area, since they've lost one of the three pillars of the reasons for deregulation?