:
Members, we will call the 47th meeting of the Standing Committee on Industry, Science and Technology to order.
Pursuant to Standing Order 108(2), we are furthering our study on the deregulation of the telecommunications sector.
We have two sessions here today of one hour each. For the first session, the first hour, we have two witnesses. First of all, from the Atlantic Institute for Market Studies, we have Mr. Ian Munro. He's the director of research. Secondly, from the Public Interest Advocacy Centre, we have Mr. Michael Janigan, executive director and general counsel.
Welcome, gentlemen. You will each have up to five minutes of opening statements, and then we will go immediately to questions from members.
Mr. Munro, we will start with you for up to five minutes, please.
:
Thank you, sir. I had understood three minutes, so my remarks may be brief. Thank you for the invitation to appear before you today.
As you may know, in January my institute submitted comments to Industry Canada in response to the Order Varying Telecom Decision CRTC 2006-15. If I could, I'll briefly summarize our response here.
We are supportive of the proposal to replace the CRTC's market share test with the competitive facilities test or the alternative competition test, and to move to areas smaller than the local forbearance regions defined by the CRTC as the geographic basis for deregulation decisions. The framework established by the commission is too timid and unnecessarily delays the benefits of full competition to consumers.
The entire province of Prince Edward Island constitutes a single CRTC-defined local forbearance region, and it provides an interesting example on this point. The population of P.E.I. is approximately 140,000, and the population of my hometown of Charlottetown is approximately 65,000. Suppose a competitor entered the Charlottetown telephone service market and captured 51% of the customers, so that it now was the largest service provider in the city. By CRTC rules, the Charlottetown market would remain regulated and the incumbent telephone company, now the number two service provider in the city, would still have restrictions on its marketing and pricing decisions, unlike its now larger rival.
When the outcome of regulation is to hinder the number two player in its ability to compete with the market leader, then there is something wrong with the regulation. It also must be kept in mind that a large market share does not necessarily translate directly into market power. The real question is whether a large market share would survive an attempt to charge high prices and earn monopoly profits.
Given the degree of competition that we have already seen spring up in recent years, we do not believe this would occur in a market featuring three facilities-based competitors. There is more than ample evidence that consumers are willing to switch providers when they perceive better value from a competitor than what the incumbent can offer.
Getting back to the question of geography, smaller is better because it allows for a more precise and effective regulatory response. Deregulating a large region in which there are some areas with no competitors present could put some consumers at risk. Conversely, failing to deregulate a large region featuring areas in which competitors have made significant inroads denies the benefits of full competition to consumers in those areas. By drilling down to smaller areas, regulation can be kept in place where competitors are not present and the benefits of full competition can be provided where competitors are present.
We also support the removal of the win-back prohibitions. Competing offers from service providers is the very essence of competition. If competitor A knows that competitor B will be restricted in its ability to respond, it seems reasonable to think that competitor A may not sharpen its pencil quite as much as it could have.
In the Canadian communications sector, liberalization, deregulation, and the introduction of competition have too often been implemented as halting half measures. Regulatory inertia deprives consumers of the benefits of full competition. We support the proposal to accelerate the pace to a deregulated local telephony marketplace where competition has taken hold.
Thank you.
:
Thank you, Mr. Chairman and members of the committee, for extending this invitation to address you on matters of concern to residential consumers, particularly vulnerable consumers, associated with the deregulatory actions of the government in relation to the CRTC in particular and telecommunications in general.
The Public Interest Advocacy Centre is a non-profit organization that provides legal and research services on behalf of consumer interests, in particular vulnerable consumer interests, concerning the provision of important public services.
PIAC has made submissions to the minister in response to the notice in the Canada Gazette setting out his proposed order reversing CRTC decision 2006-15. We have appended a copy of those submissions on the technical points, which raise objections to both the test used by the minister and the precedent associated with the reversal of the CRTC decision, to the speaking notes that have been circulated to you.
As you have been told, both the reversal and the kind of issue that is sought to be reversed are very unusual. The determination of the conditions that show whether a workably competitive market exists that is sufficient to protect the interests of consumers without regulation is not one that lends itself to resolution by fiat. It is very much an issue where the practical experience of the regulator must be used in conjunction with the various theoretical constructs associated with the presence or absence of market power. CRTC decision 2006-15 was informed by substantial volumes of expert evidence, such evidence being fully tested in an oral hearing before an independent tribunal. No such process has informed the proposed order of the minister.
We are concerned the government may be unwittingly playing the role of a sorcerer’s apprentice, setting loose inappropriate market forces and problems in the industry that the previous framework of consumer protection was able to deal with, with appropriate controls. The principal question is whether the appropriate mechanisms will be in place to identify problems, much less solutions.
However, it is important to note what the government actions to date did not do. They didn’t introduce competition in any markets where competition didn’t already exist. In fact, most major telecom services have already been forborne from regulation by the CRTC.
Secondly, they didn’t free the incumbent local exchange telephone companies from the obligation to maintain local rates at tariff levels. These companies were always able to lower rates across their rate bands. That's a very important point, which seems to have been lost in a lot of the public commentary associated with this issue.
Thirdly, they did set an unfortunate precedent in allowing telecommunications regulation by politics to trump long-standing administrative procedure. It is a precedent that may prove costly for the winners in the long run. The ILECs are now frequently openly dismissive of regulatory scrutiny in current proceedings before the CRTC, citing the actions of their new champion, the industry minister, as their justification.
Fourthly, they do not accord with the wishes of Canadians. A Pollara survey of September 2006 found that 80% of Canadians were opposed to the ILECs setting their local rates. Strong majorities were against this prospect even in dense urban areas of cable telephony offerings. In fact, most Canadians, perhaps given the problems associated with the wireless and broadband industries, don’t feel that cable provides enough competition for the ILECs.
Fifthly, together with the proposed amendments to the Competition Act, they provide no comfort for customers who complain of overcharging or oppressive conditions from a dominant provider. In theory, the Competition Act protects the potential competitor from anti-competitive conduct; it does nothing for the customer.
It would be, in our submission, far better to create conditions where problems with the proposed new regime may be swiftly identified and remedied rather than endlessly debate the consequences at this time.
These conditions would include, at a minimum: thorough, ongoing, and independent research with stakeholder consultation as to the state of competition in the telecommunications industry, including issues of choice, price, penetration, affordability, and access identified with appropriate customer demographics; establishment of the independent ombudsman consumer agency as recommended by recommendation 6-2 of the Telecommunications Review Panel report to provide remedies for consumers in a deregulated environment and to provide a window on consumer protection problems as well as potential solutions; and the establishment of a process that will swiftly and effectively institute consumer protections where the deregulated market has failed to provide competition sufficient to protect the interests of users.
Thank you for your indulgence. I'd be happy to deal with any questions.
:
Thank you, and I apologize for the difficulty with the language.
Yes, we support the smallest possible area that you could look at as the basis for these deregulation decisions because it allows you the most precision. It also allows you to avoid the potential problems that could occur in either making or not making a regulatory decision in a larger area.
If you imagine a hypothetical large area, in which half is served by a number of competitors and the other half is not, and if you were to deregulate that area, then you would have a certain portion of the area not being served by competitors and deregulated, which is problematic. Conversely, if you choose to retain regulation, then the half of that area in which competitors are present is denied the benefits of complete competition because the regulatory framework stays in place.
If instead you can focus your regulatory decision on each half independently, in my hypothetical example, you can deregulate the area where competitors are present and allow consumers the full benefits of competition, while maintaining protection for consumers in the other area where competitors are not present.
So we always believe in going to the smallest area that can be practically administered.
:
This matter of an attempt to define LFRs was a matter that occupied a considerable amount of time and head-scratching in the original proceeding. It's frankly not so much a matter of science, but belief, in terms of how this thing should be crafted. There are opinions on both sides of the map.
The difficulty is, of course, if you make the region too small, it would mean that effectively deregulation will only occur in a small core of perhaps an urban area, and the rest of the regions may effectively be subject to regulation for endless amounts of time because the deregulated core is not included with that larger amount. If you make the size too large, then, effectively, some of the rural areas may be included by the fact that their population is less than the urban areas and be automatically deregulated in circumstances where that may not be something that is in keeping with their interests.
There are ways in which the local forbearance region can be constructed either smaller or larger that may in fact either benefit or hurt the interests of the incumbent telephone companies or benefit or hurt the interests of the customers it's attempting to serve. The CRTC took the position of effectively trying to look at a community of interest, in particular the economic community of interest, to come to some resolution on that scale.
And it's not perfect. Let's face it. I's not. You can find exceptions in this country and how it's applied where it's not perfect, but I think, by and large, it would have been preferable to leave that in place and try to individually fix the exceptional regions where their particular plan didn't work.
:
Mr. Carrie, if I may, I'll interject here. I think we have to be clear about what in fact we're talking about in relation to the forbearance order. The telephone companies have always been able to compete with their new-entrant competitors. They have the ability, for example, with respect to local exchange services to lower prices, if they want, across their rate band.
What has been done in this circumstance is to say effectively that we don't need to worry about any of the ordinary protections that are afforded to consumers in a particular region, because there is enough competition here; we'll let the market decide the ultimate price.
In general terms, what that will mean for high-volume consumers is potentially more product offerings, more bundles, and whatever. For example, I'm a fairly intense consumer of telecommunications. Our house probably spends over $300 a month in various forms of communications--Internet, wireless. I expect there may be some better offers available that might be made to me. On the other hand, we would anticipate that those customers who are low-volume or in rural areas will not likely be taking part in those discounts or have those discounts available to them, simply because of the fact of deregulation.
In the case of regulation, what happens with the incumbent telephone company is that their rates have to be lowered across a rate band. In deregulated circumstances, they can be done one on one with customers, and that's effectively what this is all about. It's not necessarily about competition, although competition is part and parcel of it. It's about effectively being able to target your message to the customers you want to attract.
Thank you, witnesses, for coming.
May I have just a clarification on the TPR suggestions? There were two phases to the implementation. In the first phase, the government would issue statements endorsing the development. In the second phase, the recommendations and required changes to existing legislation would be implemented.
I think we need some clarification on that. It was stated that there were some areas of concern about those TPR suggestions, but again, the implementation was in two stages.
I want to speak about cherry-picking too. We hear an awful lot about the cherry-picking in the recommendations by the TPR, and that the minister is cherry-picking these recommendations.
Mr. Munro, I understand that the Atlantic region is the most competitive region and market in Canada. That, of course, speaks volumes because there is obviously a desire for those who are in the industry to commit themselves to the process of investment and to going after the market. And you've proved that.
I want to ask you, when we talk about the minister's recommendations, can you comment on the consultation of the process? Can you just quickly comment on that?
:
Good afternoon, and thank you very much for the invitation.
I am a law professor at the University of Ottawa, where I hold the Canada research chair in Internet and e-commerce law. I am also a syndicated weekly columnist on law and technology issues for the Toronto Star and the Ottawa Citizen. I served on the national task force on spam in 2004-05 and sat on the board of the Canadian Internet Registration Authority, CIRA, which manages the dot-ca domain in Canada, for six years, from 2000 to 2006.
I'd like to briefly discuss three Internet issues that I think have a direct link to telecommunications regulation: network neutrality, broadband access, and spam.
Let me start with net neutrality, an issue that has been generating an increasing amount of attention in recent months and was the subject of a brief question and answer when the minister appeared before your committee last week.
While the definition of net neutrality is open to some debate, at the core is a commitment to ensure that Internet service providers treat all content and applications equally, with no privileges, degrading of service, or prioritization based on the content’s source, ownership, or destination. Several concerns are often raised in the context of net neutrality. The first is the fear of a two-tier Internet.
We know that as providers build faster and faster networks, there is reason to believe they will seek additional compensation to place content on a fast lane and leave those unwilling to pay consigned to a slow lane. While consumers, of course, already pay for different speeds, we're talking about something different here. We're talking potentially about a world in which, let's say, Chapters can't compete in the online book space because its content is on the slow lane while Amazon is paying and is on the fast lane.
It's an Internet where U.S. television shows and movies zip quickly to consumers' computers because the U.S. studios have paid to be on the fast lane, but Canadian content and user-generated content creep along in the slow lane. Or, potentially, it's even an environment where two-tier health care is replicated online, where some health care providers have their content zip along on the fast lane, with those unwilling to pay consigned to the slow lane.
That's a vision of the Internet that may well become a reality. In the U.S., major telecommunications companies such as Verizon and BellSouth have talked about just that sort of activity, while in Canada, Vidéotron has publicly mused about the potential for a tariff for the carriage of content.
The second concern is that ISPs will block or degrade access to content and applications they don’t like, often for competitive reasons. In the U.S., one ISP, Madison River, blocked access to competing Internet telephony services.
Here in Canada, we have had Telus block access to a union-supporting website during a labour dispute, and in the process blocked more than 600 other websites. We've had Shaw advertise a $10 premium surcharge for customers using Internet telephony services, opening the door to creating a competitive advantage over some of those third-party services. And we have Rogers currently degrading the performance of certain applications such as BitTorrent, which is widely used by software developers and independent filmmakers to distribute their work.
In response to this, there has been growing momentum for net neutrality legislation, provisions that would require ISPs to treat Internet content and applications in a neutral fashion so that the opportunities afforded to today’s Internet success stories such as Google, Amazon, and eBay will be granted to the next generation of Internet companies, along with the millions who contribute content online. The U.S. Congress debated such legislation last year, and just in December, AT&T agreed to net neutrality conditions as part of its merger with BellSouth, under pressure from the Federal Communications Commission.
Note that the net neutrality legislation concerns have grown due to at least two problems in the Canadian market. The first is a lack of competition. Canadian consumers have limited choice for broadband, which is typically limited to cable or DSL, or frankly neither in many communities. A viable third provider running their own market rarely exists. A second concern is a lack of transparency. When Rogers degrades the performance of some applications, they rarely disclose the practice. In contrast, some ISPs in other countries identify precisely how they treat all forms of content and applications.
Finally, on the net neutrality issue, last week the minister indicated that he was still studying the issue. I think it is critically important to note that Canada is already active on the net neutrality policy issue on the international front. The OECD is currently working on a report titled “Internet Traffic Prioritization”. Given our active participation at the OECD, I must assume that Canadian officials are participating in the drafting process. According to a recent draft that I have seen, the OECD has acknowledged concerns associated with anti-competitive conduct, the prospect of hindering access to information, and the privacy implications of monitoring content that travels through ISP networks.
Moreover, it notes that robust competition can help mitigate these concerns, but Canada is not cited as a country with the competition to counterbalance any competitive concerns.
If I may, I'd like to comment quickly on two other issues in addition to net neutrality. The first is the issue of broadband. We increasingly recognize the critical importance of broadband or high-speed access. Whether for communication, commerce, creativity, culture, education, health, or access to knowledge, broadband access represents the basic price of admission. Canada was once a leader in this area. In the late 1990s, we became the first country in the world to ensure that every school from coast to coast to coast had access to the Internet. Soon after, we launched a broadband task force to develop a strategy to ensure that all Canadians had access to high-speed networks. In the years since that task force, our global standing has steadily declined. Many European countries have eclipsed Canada in broadband rankings, and the TPR panel undertook a detailed analysis of the Canadian marketplace with the goal of identifying whether the market could be relied upon to ensure that all Canadians have broadband access. Their conclusion is that it would not. The panel concluded that without public involvement, at least 5% of Canadians, hundreds of thousands of our fellow citizens, will be without broadband access. We need a broadband implementation strategy.
Finally, over a 12-month period in 2004-05, I served on a national task force on spam, alongside representatives from every major stakeholder group, including telecommunications companies, cable companies, the marketing association, ISPs, and consumer groups. The unanimous conclusion was that Canada needs anti-spam legislation. Our current legislative framework, which includes telco laws, privacy laws, and the Criminal Code, is simply ineffective. With virtually all of our major partners having enacted specific anti-spam legislation, we risk becoming a haven for spammers. Moreover, the costs of a growing deluge of spam are being borne by small businesses, network providers, our educational institutions, and individual Canadians. Legislation alone will not solve the problem, but neither will the issue be solved without it.
Thank you.
:
Good afternoon. I'd like to thank the honourable members for the opportunity to appear before you today.
I'm a professor at the University of Calgary in the Department of Economics, and also a fellow of the Institute for Advanced Policy Research at the University of Calgary, where I coordinate the markets institution and regulation working group. I have some expertise, having been involved in the telecom wars for at least 12 years, typically as part of the Competition Bureau's telecom team. I was there in 1995-96 as the T.D. MacDonald Chair in Industrial Economics—I happen to have theoretical expertise in network economics—and that was when we were figuring out decision 97-8.
I'm here to talk to you about a couple of things in my opening statement. The first is that when we think of the order by cabinet on overturning the local forbearance decision, there are two issues we have to be aware of.
The first is the institutional context of this decision. In general, for a minister to overrule the regulator has very undesirable implications. On the other hand, if the regulator has made a decision that is sufficiently out of touch, or inefficient, or harmful to consumers, then we have to ask, “How did we end up with a regulator who would make such a decision?” In that case, there are just fundamental problems at the CRTC and with the Telecommunications Act.
The second issue, of course, is assessment of the CRTC's forbearance decision framework and those four key elements.
To understand some of the dissatisfaction I would have with the CRTC's decision framework, you have to recognize two interesting things about this decision. The first is that the nature of the proceeding is all about downward price flexibility. It's about the incumbent local exchange carriers, the ILECs, being allowed to reduce their prices. The existing regulatory regime makes it either impossible or unprofitable for the ILECs to lower their prices to meet competition.
The second issue that dominated the proceedings was the incentive for anti-competitive conduct. That's related to this issue of the lowering of the prices by the ILECs. The worry was that there would be anti-competitive conduct by the ILECs. That worry is whether the dangers are sufficiently legitimate that we should have ex ante prohibition on the behaviour of the ILECs or whether we should have an ex post approach.
The second issue, which I think is probably more important to Canadians, but which was certainly second in the list of things that went on at the hearing, is the question of when competition is sufficient to replace regulatory constraints on the ILECs' market power. What we mean by that is, when is competition sufficiently developed that we can reduce the caps on the prices, so that instead of a regulator holding prices down, competition is sufficient to hold the prices down?
The point of the proceeding was to come up with an expedited process that was administratively simple. When you think about administratively simple processes, what you have to take into account is errors.
There are two things you have to worry about in terms of errors. You have to worry about the probability that you're going to make an error, which is that you forebear when you shouldn't have forborne or you don't forebear when you should have forborne, and you should worry about the costs of those errors. You should take into account the probabilities that your decision framework is going to result in error, and you should also think about what the cost of those errors might be.
The second thing to think about in terms of that proceeding is that we've had this IP revolution; we've had convergence. The old, hybrid model that the CRTC has tried to create, coming out of decision 97-8, simply doesn't work. It's irrelevant; it was an experiment that has failed. We now have competition between networks, and the CRTC needs to institute a regulatory framework that recognizes the competition between networks and the importance of the launch of digital telephony by the cable companies.
Concerning competition between unregulated broadband networks, the old model simply did not work. It was a nice experiment to try, but it was very hard to get it right. We tried very hard to get it right. The CRTC bent over backwards to try to support the CLECs under the old model. It doesn't work.
The CRTC in this decision was very much worried about anti-competitive behaviour. They thought about the conditions for forbearance and in doing so made the conditions for forbearance, in my opinion, far too difficult. What they did is adopt the CTCA's argument to have very large geographic regions. If you have those very large geographic regions based on a high market share threshold, you're going to delay or potentially eliminate the possibility for forbearance.
The market definition principle that the CRTC used is fundamentally at odds with good competition policy and good economics. The 25% threshold is also irrelevant, if you think about competition between competing networks. The role market share plays in assessing the nature of competition is to ask, if one firm tried to raise their prices, what would happen to their customers? If you have two competing networks and one firm tries to raise their prices, the question to ask is, how easily can those consumers switch to that second network? Is there capacity available on that second network? Does the second network have low prices?
In that respect, when you have competition between two networks that are offering very similar services, the market share measure that is relevant is market share in capacities--in terms of how many broadband pipes or access to the telephone network there are into that house or that location.
In general, I would say that the minister's order is a welcome and refreshing change to what the CRTC had proposed. I note that the price ceiling remains, so what the decision or the order allows is for the incumbents to have some downward price flexibility. That downward price flexibility will benefit consumers, it benefits the ILECs, and it stops protecting the cable companies.
There are three things about the minister and the bureau's test that are interesting. One is that it's a step away from what the ILECs have traditionally argued for. I've spent 10 years fighting the ILECs. They have always argued that it was enough for potential competition if we lowered the barriers to entry. That was enough to deregulate. Finally, now, we have a test that is based on actual competition. Not until the cable network is available and supplying digital telephony, which has been shown to be equivalent to the ILECs, is there going to be deregulation.
There are three things about the minister's test, which is essentially, as far as I can see, the bureau's test, that are very controversial, and I'd be happy to answer questions about. The first is, in general, we would think that two is not enough for competition. We've heard this duopoly problem--two is not enough. Well, sometimes two might be enough, especially when the trade-off is between imperfect competition and imperfect regulation. You might want to look at the characteristics of that industry to see that this is a case of when two might be enough.
The second thing I'd be happy to answer questions on is the potential for tacit collusion or coordinated conscious parallelism. When we get this nice cozy duopoly, why do we think they won't act like a monopolist?
The third thing, of course, is the ex ante. Why do we think there may not be such strong incentives for anti-competitive behaviour? The ex ante costs of prohibiting this anti-competitive behaviour are very high, and an ex post approach, after we actually realize it and do a fact-based incentive to see if it actually happened, may be a preferable approach.
Thank you, Mr. Chairman.
:
I want to thank both of you for being here.
Mr. Geist, I take your last comment with respect to spam. I had a bill that didn't quite make it as far as I wanted it to, but that's probably because there are just so many good issues out there, and this one, as a whole, is one that intrigues.
Mr. Church, I have had a little bit of experience with the Competition Act. I've had a little bit of experience as well with the CRTC, in an earlier period, but I've also noted in your comments that nowhere have you made reference to the TRP report. You talked about the limitations of the CRTC in its existing way of looking at these new emerging technologies. If I heard you correctly, you said it is possible to have two competitors at the end of the day.
In that kind of scenario, sir, when we're trying to increase competition, why would you take the position that simply having two competitors is good enough? The scenario that we've seen, and we've seen this in other industries, is that often, depending on rationalization and efficiencies or if something should happen down the road, it is conceivable that one of the two may in fact quit. We also know that when it comes to wireless, which is the third option, Canadians aren't very well served by that right now.
With your experience, in your estimation, why didn't the government proceed first with the issue of wireless before proceeding headlong into ignoring the TRP report or choosing selectively only parts of it? Why has this not factored into your comments here in this presentation before this committee today?
:
Thanks. I think that's a good question.
I think the experience we're seeing is that, as time goes by, there are more and more examples. When people were talking about net neutrality a year or two ago, we didn't have the Vidéotron example, we didn't have the Shaw example. We were uncertain about Rogers' activity in terms of some of its package shaping. What we are seeing occur on a pretty consistent basis is that the providers themselves are experimenting with a range of different activities.
This is in an area that is moving incredibly fast, without question. YouTube was an unknown a year ago and yet has developed quite rapidly. With the kind of consolidation we're seeing, the growth of user-generated content and the need for Canadian content online, I think we do run the risk, if we don't act soon, of finding ourselves stuck in an environment where we do have this two-tier Internet.
Further, I think if one takes a look at what happened in the United States, AT&T was willing to voluntarily agree to these terms because as part of a merger it made a lot of sense to give on a net neutrality issue. If we're going to deregulate in the marketplace, now is the time to ensure a net neutrality provision is included.
:
But they know they've lost a customer. They're not sending a bill to 136 Hawkdale Circle any more, and they used to. That's a theory that's told by the cable companies. But in actual fact, for the win-back to work the way they think it's going to work, it's not clear to me that it's necessarily a concern.
What would happen if this happens? It assumes that the ILEC can win back the customer cost. There's no customer retention cost. The cable company goes and spends all this money to acquire the customer, and then the ILEC comes along and cherry-picks the customer back, and then the cable company goes bankrupt because it doesn't recover its customer-specific costs.
One of the things that the CRTC and the cable companies I don't think are very clear on is how much of those customer acquisition costs are common costs across all customers, in the sense that they're an advertising thing, and how many in fact are specific and sunk to a given customer, which is what they would actually lose. It might just well be that cable modem, which cost $100, and the cable truck, which cost $50. Maybe that's all we're talking about that they would lose on their customer picking.
The other thing we would expect to happen is that if you knew I went to the cable company and got win-back very quickly by the ILEC, everybody on the block would do the same thing. They'd say this is a great deal to get a low price. Switch, and then wait for the win-back to come. So in fact they're not going customer by customer; everyone would get the benefits of the lower price.
:
I'm interested in that because I think it's crucial. You said:
Moving away from before-the-fact (ex ante) regulatory prescriptions to approaches that place greater reliance on after-the-fact (ex post) regulatory intervention, based on verified complaints of significant market problems
is the way we ought to go. That's, in fact, in the TPR.
But the interesting part is that the recommendation immediately before that, sir, is:
...applying economic regulation symmetrically to all service providers, based on whether they have significant market power, regardless of the technology they use.
It's acceptable, I suppose, to say we can proceed with all these wonderful new technologies that come down the pipe. If an entrant or one of the two vigorous competitors who are left decides not to compete or decides to leave, and in the absence of any other alternative, you're suggesting perhaps voice-over-IP might be one of the ways to go.
What guarantee does the consumer have that these programs will be made available to them, that new technologies will become available to them, when you have one dominant player left in the market?
Professor Church, maybe now I'll prove to you that I'm a bad student, but I want to come back to the question that was raised by Mr. Brison and by Mr. Van Kesteren. I'm trying to understand if there's a solution there.
We're talking about mom and pop operations that are cable networks and that are already in place and do not at this point offer telephone services. They are a little bit everywhere in Canada. Their neighbours and competitors-to-be are big telcos and wireless. The minute those people come in with the new rules, it's “There are three of us; the war is on now.” They are not able to raise the millions of dollars they think they need to get the right equipment to be able to offer telephony because of the uncertainty of the situation, but if they could get those billions and put them into their networks to be able to offer telephony, they would cause the start of deregulation in their area and be the first victims.
You tell me you're not sure they will die, and if they were to die, then they could be sold. This is a little bit brutal, and I'm not too sure that this committee will be able to recommend that.
Is there a solution somewhere between the 25% that the CRTC dreamed about and the “three” infrastructure that the minister is talking about? Is there some common ground somewhere that would allow this committee to do something unanimous for a change?
For a change.
Mr. Church, if my memory is correct, you may have been the first witness to draw attention to the large geographic regions that are evident under the 25% market test with the CRTC and the change in the region size in terms of what the minister is proposing. I believe there are 84 regions under the CRTC and something like 5,400 relevant geographic regions.
Seeing as you are from Calgary, I want to point to some examples. You mentioned Wood Buffalo, where Telus is stating that Shaw has 30% of the market. But if you're looking at their region, they actually group in Wood Buffalo and Cold Lake, they group Lethbridge and Medicine Hat, and they group Camrose and Drumheller.
It was interesting. When Mr. Shaw was here and talked about going after markets, he never grouped those. He said I'm going after Medicine Hat, I'm going after Lethbridge, and I'm going after Camrose.
I just want a brief comment on the geographic region difference.