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Welcome, members, to the eighth meeting of the Standing Committee on Industry, Science and Technology, on April 13, 2010. We are here today pursuant to Standing Order 108(2) for a study of Canada's foreign ownership rules and regulations in the telecommunications sector.
Today our meeting has been divided into two separate sections so that we can hear from two separate witnesses.
The first witness, whom we will hear from for the next hour, is Mr. Dimitri Ypsilanti, who is the head of the information, communications, and consumer policy division of the directorate on science, technology, and industry for the Organisation for Economic Co-operation and Development.
He is available to us today through video conference from Paris. He has asked for translation. I want to highlight for members that there will be a delay, not only in the translation, but also in the video feed.
Without further ado, we'll begin with an opening statement from Mr. Ypsilanti.
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I have sent a paper. I'm not sure if it was distributed. It was sent in English and could have arrived a bit late for you to have it in both languages.
Let me begin by benchmarking Canada's foreign investment restrictions in the context of the OECD. There are 30 OECD member countries, and only three countries have investment and ownership restrictions that apply to all public telecommunication operators. These countries are Canada, Mexico, and Korea. Of the three countries, Canada has the most severe restrictions.
Some of the other OECD countries have restrictions in the sense that the state has to be a majority owner of the incumbent telecom carrier. For example, in Switzerland, the Swiss confederation must have majority ownership of Swisscom. France is required to have partial ownership of France Télécom, but not necessarily majority ownership. In the case of France, the state shares are down to about 23%. Canada is the most restrictive in terms of foreign investment in the telecom sector.
For me, the most important questions to address regard the benefits of these restrictions and, if there are benefits, how you can ensure that these benefits do not require a heavy regulatory burden. In fact, if I try to find arguments in favour of maintaining these restrictions, I've only come across two main arguments that are fairly general.
The first states that telecommunications is very sensitive, that the communications sector is sensitive, and to me it's unclear what in fact this refers to.
The second argument is that if Canadian control is not maintained there will eventually be an impact and a threat to Canadian culture and the creation of Canadian content. This is, in practice, an idea that there's a sort of domino effect that goes from the telecom sector to the broadcasting sector and then has a negative impact on culture and content.
With respect to the sensitivity of the telecommunications sector, in all OECD countries the telecom network is considered to be critical information infrastructure, and all countries have regulations in place to protect that infrastructure. However, these regulations do not actually need to prevent foreign entities from investing in those countries. There are more direct regulations to ensure that there is a protection of the infrastructure. Obviously in cases of national emergency, all countries have laws that give governments significant powers to ensure adequate control of networks, so the argument about sensitivity is, to my mind, fairly spurious.
What about the link to cultural issues and values? Telecom networks are carriers of content. The regulations that govern network development and the offer of communications services to the public are quite different from those regulations that govern the provision of broadcast content. In my mind, there is no reason to believe that foreign telecom network operators will necessitate a change in regulations governing the diffusion of online content.
Canada is, in fact, one of many OECD countries that have regulations favouring local content and the diffusion of domestic broadcast content, yet these other countries do not seem to find the need to restrict investment in the telecommunication sector. If they want to protect the content sector, they do so directly with other laws and regulations.
What about the costs of foreign investment restrictions on the telecommunication sector? I believe these costs are quite high. First, there's a higher cost of capital and the potential difficulty for new entrants to get access to equity capital. Canada, relatively speaking, has a fairly small capital market, and in a capital-intensive sector such as telecommunications, it is important for companies, even if they're Canadian-based companies, to go outside to obtain equity capital.
Lower investment performance also has implications for the development of competition in the telecommunications sector. I believe that by limiting investment only to Canadian-owned/controlled companies, you're actually reducing the level of competition in the telecommunication sector in Canada. This has implications in terms of higher prices for businesses and the competitiveness of businesses, both in Canada and overseas, and of course there is a negative impact on consumers and a slower diffusion of new technologies.
The foreign investment restrictions, I believe, also go against government objectives such as improving connectedness, enhancing innovation, or improving productivity.
In conclusion, Chairman, I would in fact argue that there is a greater danger to national welfare in Canada and to Canadian cultural heritage by slowing down the process of investing in high-speed ubiquitous networks, which results from limiting foreign investment in Canada. There is a danger to Canada and Canadian welfare from higher access and usage costs in the telecommunication sector than would occur in a more competitive market. I believe that Canadian culture will thrive much more in a market where access and use of network resources is cheaper and where users have more choice among service providers.
Thank you very much for this opportunity, Chairman.
Thank you, Mr. Ypsilanti, for joining us this morning. It was most interesting.
My riding is in a rural area of Canada. That often concerns me. You mentioned in your presentation that because of Canada's small population and large geographical size, there's a small capital base and equity is limited. As I mentioned, population is not just limited, but spread across a large part of the country.
The argument I've been hearing most often is that if we open up competition and open up to foreign ownership, we'll have more competitors coming into the market and offering more service. Now, I've dug around a bit, and what I've seen on the OECD website is that most OECD countries, if I'm not mistaken--and maybe you can comment on this--have three or fewer networks by the time all is said and done and the dust has settled.
Maybe you can comment on that and on how it would help Canadians to have better service. It seems to me that if we have two or three now and we open it up, all that will happen is that rather than having new competition coming in, we will end up with buyouts.
Is that something you've looked into?
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That's an excellent question. Of course, as I said, the construction of networks is expensive. We are moving away, in many countries, from the copper network to a fibre network, and it is even more expensive to put in fibre networks.
Nevertheless, I believe that what competition does is that, first, it forces the incumbent to improve service, and obviously it reduces prices, but then it clearly puts pressure on them to reach out. Because they do have coverage in the urban areas, but they want to extend coverage. They want to get a bigger part of the pie, if you wish, and they do tend to extend coverage.
The same goes for any new entrants that have networks. If they want to compete, they need the capital to compete. Therefore, they need capital from overseas, in many cases,to compete. They may need know-how from other national telecom operators if they're moving, for example, to a fibre network. I think the key point here is how investment creates better competitive conditions in the country.
Let's look at the mobile sector in many European countries. Granted, a country such as France is about 500,000 square metres in size, so there are at least 10 Frances in Canada; for example, I believe two Frances could fit into Ontario. Obviously the size of Canada is a factor, but there is virtually 100% coverage in the mobile sector in France. You have very few of what I would call “white spots” where you get no signal. That comes from having three operators and a number of virtual network operators, so competition is a key factor.
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Thank you for those words.
I look at France, and I can tell you that my riding alone is 16,000 square kilometres, with a population of about 100,000 people, so you can understand the challenges of getting service to people. Some would say that the business case—and I would argue the same way—says to just ignore that, to leave it alone and go to larger centres like Toronto and Montreal, the centres where it's lucrative.
You've made the argument that with competition the same level of service would come, regardless of where you are in Canada. I'm not sure if you're saying that competition would take care of this or that we would have to mandate it as a government in non-lucrative areas.
What we've found in the past is understandable, but just not acceptable: that cities would get prime technology and prime service. Yet when we look at rural areas, not only is the response slower, but the quality of what comes out there is lower, and the service offering just isn't there.
So when we look at establishing mobile networks, I don't understand why a company or a corporation.... I know you mentioned that they want to reach out, but the real money is in the big centres, and we understand that. I'm not sure that deregulation and opening up to a foreign owner who is trying to maximize his profit could guarantee service to rural areas and coverage in areas that are not densely populated.
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I assume when you say “broadcasting”, you mean terrestrial free-to-air broadcasting, such as the CBC.
Let me break down the question. Most telecom operators that are offering broadband Internet access have been offering bundled packages for a number of years, which include Internet TV. They're offering 100 channels on their IP networks, on their Internet network. France Télécom has 100 channels, for example, but these are online.
Obviously some operators in Europe own cable companies, and that has caused problems in terms of competition. The cable companies offer Internet access, cable modem access, and the telecom companies offer broadband access, and they tend not to compete with each other because they have joint ownership. A limited number of countries have that.
To my knowledge, there are no countries where the telecom operator actually owns broadcast facilities in the sense of terrestrial broadcast facilities. But as I said in my earlier remarks, there is no evidence at all that there's been dilution of local content or local content regulations because of entry by telcos in the market for content.
Thank you, Mr. Ypsilanti, for being with us here this morning.
I know that in your document you have some good numbers on evaluating other countries and their pricing, but I'd like to ask you for your comments on reliability. What I mean by reliability is the success of the service in regularly providing the level of service that someone has purchased.
I'll use an example. In Windsor, I've used Cogeco Cable for many years, and it has been very, very good and reliable. I've had relatives who have gone to Bell, which has sent them the wrong equipment. As well, that service has operated at full capability not on a regular basis, but only intermittently.
You were looking at costing and so forth in these countries. Has there been an evaluation of the reliability of the provision of that data management service and the broadband used to deliver it, which users are paying for? Has it been evaluated at all?
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For speeds, and I'm just referring to the speed you as a customer get, in the U.K., the regulator is Ofcom. When you sign up to a package, once the operators know in which suburb and city you live, they can tell you that normally customers who live in your particular area get a speed of
x or
y. So some information will be given.
You have to remember that quality for Internet access is of course to a large part dependent on the operator and the service that it provides, but it's also dependent on you, the customer, on your inside wiring, your computer, your modem, etc., so it's quite hard to measure speeds. There are attempts to measure speeds, but they are often measurements of speeds outside the home because that's much more pure, if I can say it that way; it's not tainted by domestic equipment.
If I can add to that, in the early days of telecommunication, regulators did collect a lot of data on different qualities of service parameters, for the offer of telecommunication voice services basically, and because quality did increase significantly as we went to digital networks, many of these measures have disappeared. Because on the voice side, using normal copper networks, normally quality is good. It's only in the ISP area where quality can be shaky.
I would like to get back to the threat to culture. I have a few statements to make and I will be pausing so that you may get consecutive translation.
Canada was the first country in the world to sign the Convention on the Protection and Promotion of the Diversity of Cultural Expressions. That was done for fundamental reasons. You did not seem to comprehend its outcome. Canada and Quebec live next door to a cultural giant, I will even refer to it as an empire, the United States.
The vice-president of CBC/Radio Canada was even quoted as saying that Canadians were the only people in the world to prefer watching their neighbour's television. In Quebec, we have a fully functioning star system, with a significant audience, thanks to our system receiving government support, and because there are regulations and legislation. This support is sustained and lasting.
In the area of telecommunications, if you control access you can control content. Telecommunications companies such as wireless telecommunications companies are now making cultural choices by offering free applications, films and access to a host of cultural activities through their technology. Wireless telecommunications are currently governed by the Telecommunications Act. That amounts to a real problem.
The system has been working well to date. The system needs to be updated and modernized. However, it is clear that foreign ownership complicates matters. From a cultural standpoint, and even from an economic standpoint, we do not see the need to change these rules. To date we have seen no evidence here in Canada that it would work as it has in the European Union. In Europe there are ten people for every foot of fibre optic cable whereas here there is one per every thousand feet. Obviously, that is an exaggeration; those are not exact figures.
Why change this when the cultural threat to Canada and Quebec is real? What is your interest in imposing new foreign ownership rules on Canada and Quebec?
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Yes, my remarks covered all of Canada, obviously including Quebec. You seem to be arguing that Bell Canada, for example—I don't want to pick on Bell, and it could be another Canadian-owned carrier—will enhance Canadian content for some reason, more than any other carrier would.
All carriers will behave the same way. They invest, they look at prices, and they want to make a profit. One carrier, because it's Canadian owned, will not necessarily purchase more Canadian content than will a carrier that is not Canadian owned. My point is that for Canadian citizens, for users, it's important to have good quality networks that are cheap and offer a range of services, and you can have that only through competition.
Let's turn now to the cultural choices. The cultural choices that you're talking about.... And yet cultural diversity is important; I don't think people doubt that. But they may within a framework. All I'm saying is that this framework, which you can adapt quite easily to a new Internet environment, a new environment where a telco offers programming online, doesn't have anything to do with restricting investment.
It's a direct regulation on what a telco can--I'll use the term--“broadcast”, on what it can offer in its program choice to its customers. That regulation is quite light relative to the restrictions on foreign investment and that type of regulation is easy to put into place and administer.
I don't see any danger in opening investment on the network or in that link, which I think is very tenuous, to eroding cultural diversity in a country. If you want to maintain that diversity, all I'm saying is to put those regulations in place that you already have anyway.
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Thank you, Mr. Chairman.
I will make a brief opening statement. We will then be happy to answer your questions.
The committee is examining issues related to foreign ownership in the telecommunications sector. These issues have taken on greater importance with the arrival of convergence. The convergence of telecom and broadcasting has now been widely recognized as a fact of life. What is still being debated, however, is its impact on Canada's legislative and regulatory structure.
[English]
In 2006 the Telecommunications Policy Review Panel recognized that:
This convergence of telecommunications and broadcasting markets brings into question the continued viability of maintaining two separate policy and regulatory frameworks, one for telecommunications common carriers like the incumbent telephone companies and one for their competitors in most of the same markets, the cable telecommunications companies.
This scene was repeated by the Competition Policy Review Panel, commonly known as the Wilson panel, which stated the following in its 2008 report:
The Internet and other information and communications technologies have changed the business landscape for these industries. In essence, with convergence, it is increasingly difficult to define distinct “telecommunications” and “broadcasting” industries or sectors, particularly when it comes to delivery or distribution networks.
[Translation]
Despite these observations, both the TPRP and the Wilson panel proceeded to recommend only the liberalization of the foreign ownership restrictions governing telecommunications. In addition, both panels recommended that the liberalization should initially be applied only to new entrants.
Where the commission stands on this issue is quite clear: we want vigorous competition. Canada would benefit from having additional facilities-based carriers. Foreign investment, properly regulated, can play a key role in supporting such carriers. The present rules are too restrictive and complicated. A liberalized and simplified policy to govern foreign investment is essential to improving competitiveness.
[English]
However, some considerations have to be kept in mind in any attempt to liberalize the rules.
First of all, requiring a regulator to apply two sets of rules for broadcasting and telecom introduces artificialities into a converged company's corporate conduct and produces artificial corporate structures. This obviously runs counter to the natural benefits of convergence.
Second, in view of the convergence of telecom and broadcasting, any liberalized foreign ownership rules for telecom should give due consideration to the social and cultural objectives of the Broadcasting Act.
Third, while market liberalization should be pursued vigorously, it should not discriminate between potential new entrants and incumbent firms.
Finally, we believe that it is widely agreed that, given its economic importance, control of the communications sector should remain in Canadian hands.
In short, the challenge for you as legislators and for us as regulators is to strike the right balance to achieve liberalized foreign investment while maintaining Canadian control.
[Translation]
The present rules and regulations make up a complicated web of boundaries, categories and constraints. They are in urgent need of an overhaul. They do not at all address the reality of convergence. Broadcasting distributors now deliver telephone service. Phone companies deliver television service. The Internet delivers everything and mobile devices bring it all into your hand, wherever you are. Technological convergence has led to corporate convergence: mergers and acquisitions bring all of these services together under large ownership groups.
At the CRTC, we have been doing what we can internally to implement regulatory convergence. We have created the policy development and research branch, which brings together activities common to broadcasting and telecom. We also conduct joint telecommunications and broadcasting hearings whenever possible. For instance, we examine the accessibility of both types of services in a single hearing.
But the legislative and regulatory structure we administer still preserves the old distinctions of broadcasting and telecommunications, or in other words the distinctions between content and carriage. For Canada to remain a leader in a converged world, we need to abandon these artificial and outdated concepts.
[English]
Canada clearly needs unified legislation to cover telecom, broadcasting, and radio communications. Other countries have already done this. It is time for us to do the same.
We also need more institutional simplification so that foreign investors don't face the prospect of being subject not only to different legislative regimes, but also to different regulators that make conflicting decisions. In short, we need a unified approach to clear the way for convergence, competition, and creativity.
But that is really for another day. Today you are considering foreign ownership rules. We need to simplify these rules. We should not be juggling complicated percentage requirements for operating and holding companies or dealing with percentages of board members and other such things.
Here is a simple approach consisting of two rules that we propose. First, no foreign entities should be allowed to own, directly or indirectly, more than 49% of the issued voting shares of a Canadian communications company. Second, no foreign entity should have “control in fact” of a Canadian communications company. This would apply to all communications companies, whether they're engaged in telecommunications or broadcasting. It would also apply both to incumbents and to new entrants.
I would like to stress the importance of keeping that “control in fact” in Canadian hands. The CRTC is mandated to promote and protect Canadian cultural and social values. This mandate is even more challenging in a world where digital information doesn't recognize any national borders. I'm confident that Canada can simplify and clarify the rules for foreign investment in communications, while still ensuring that culturally or socially sensitive areas remain firmly Canadian in character. I'm equally sure that you cannot instill Canadian values by regulation.
Before giving you my closing remarks, I would like to propose to the committee a change that should be part of any regulatory reform.
[Translation]
The CRTC should have the ability to assess administrative monetary penalties, or AMPs, under both the Telecommunications Act and the Broadcasting Act. In telecom, we are now applying smarter and lighter regulation. We are moving away from the old approach that prescribed in advance to the players what they were permitted to do. We now prefer to prohibit certain conduct and only step in if somebody breaks the rules.
But in order for us to make an effective intervention, we need the right tools to ensure compliance. Let's say a radio station violates the terms of its licence, or a telecom carrier is not complying with the ownership rules. Currently, the punitive actions we can take are either too light or too harsh. But with AMPs authority, we could impose a penalty that is appropriate for the violation.
[English]
We currently have such a tool in enforcing the national do-not-call list and the regulations made thereunder. The spam bill that was debated during the previous parliamentary session proposed to give us similar powers. But rather than following this piecemeal approach, I hope the committee, while considering liberalization of ownership rules, will also recommend the adoption of comprehensive AMPs with respect to all CRTC responsibilities.
Thank you very much. We will be pleased to answer any questions.
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As I tried to make clear in our opening statement, we feel that convergence is here. To make a distinction between telecommunications and broadcasting is artificial. It doesn't make sense. As you know, you can watch any television program on the Internet or on cable. When you watch programs, some are interactive, and you can phone in or type and send e-mail messages that appear on the screen. You interact. Is this telecom? Is this broadcasting? Or both?
I mean, it is all one. The technology is one. The industry is one. Legislatively, if you deal with them separately, you're going to force them into artificial distinctions in order to take advantage of the legislation. That's not going to create efficient companies or competitive companies. That's why we say you have to deal with both of them.
But given the very cultural concerns that you've expressed and that we have, etc., we feel that the best way to do it is to simplify the rules, not to have a different rule for holding companies and operating companies. We have special board rules, etc. We don't need all of that.
Make it very simple in regard to any foreign company. As long as the Canadians own 51% of the voting shares and the control in fact is there, that's fine, and they can invest as much as they can in Canada. They can be very successful. I mean, a lot of companies in the past.... Rogers is a perfect example. It had huge financing from abroad, but there was no question that Ted Rogers was in control.
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Well, you see, when people apply to be licensees, etc., they don't necessarily know whether they will succeed and what the final structure will be, so to pre-clear them is very difficult. That's why the government adopts the perfectly sensible approach of saying, “Here are the conditions, and if you're successful, you have to be Canadian controlled”.
I don't think there was anything wrong with the way they approached it. The problem was that the initial decision.... I don't know when it was made or on what basis it was made. They would have had the same facts before them; I can't tell.... The process, as you know, is not transparent, and as for the materials they filed with Industry Canada to get the initial permission to bid, I have not seen them, so I don't know. I can only speak of what they put in front of us.
They came before us and said, “We are now set up and we want to operate”. They said, “This is how we're going to run ourselves and this is where our money comes from, and this is our technology and where it comes from, and this is where our the trademark comes from”. It's all the same process, they said, and they said that they thought they were in Canadian control. On the basis of the facts they presented to us, on which there was heavy cross-examination, we came to the conclusion that no, they were not, but several times during the hearing we asked them to make changes.
They did make quite a few changes and considerably restructured the thing. They came before us with two companies, and by the end of it, there was only one company. The two were merged, the voting structure was changed, and so on. They made considerable changes, but they did not make the essential ones that we felt were necessary.
As I mentioned, I wish I had had the power to give them conditional approval. Since we didn't have it, we said no, but we made it quite clear what they would have to do in order to come onside.
Gentlemen, good afternoon and welcome to the committee.
On March 25, we heard from representatives of Industry Canada, who told us, “Before issuing spectrum licences, Industry Canada must confirm compliance with these ownership and control requirements.” The licences were sold in 2008. In October, the CRTC decided that Globalive did not respect Canadian ownership requirements. This decision was then modified by the government, which decided that the company did meet the criteria.
You explained earlier that when a company wants to purchase spectrum licences or submit a bid, it must disclose what the company is and who controls it. I imagine that it was based on this information, at the outset, that Industry Canada allowed Globalive to bid and that the licences were sold.
When were you notified that Industry Canada continued, even after the modifications, to state that the company complied with Canadian ownership requirements?
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The Broadcasting Act has a whole shopping list of objectives, but they basically boil down to two. It should be an overwhelmingly Canadian system offering Canadian content, and Canadians should have access to it both as viewers and as participants, i.e. as producers. Those are the overriding key objectives.
If you bring in a Canadian communications act and you combine the two acts, you want to make sure you maintain that as much as possible. Obviously, in the age of convergence, in the age of digitization where all content can be offered, this becomes more and more difficult.
In the past under the Broadcasting Act, we would control what you could run on a radio station or what you could broadcast, so we would control what the cable companies could offer you. Therefore, it was a defined universe. We could impose rules.
Now that you have an open universe, you have alternatives. Right now, you can watch most programs on the Internet or on your hand-held devices, so this becomes much more difficult. Therefore, rather than dealing with trying to use regulatory arbitrage, really, you're driven very much more to an age of subvention, of finding ways to support and aid in enabling Canadian programmers.
Why do we say 49%, etc.? Why does there need to be control? In a combined company, you want to make sure that the controlling minds, the controlling people, are Canadians, and they understand Canada, and they understand our bicultural, our bilingual situation.
Let's face it, if we don't do this, by and large it will be bought up, and you will have a “transplant” communications industry that will be the training ground for young executives from foreign countries. No matter what regulations you put together, you can't instill in them what Canada is all about so that they can reflect that in the programming. You can do that only if the Canadians are in charge.
That's really what the bottom line is here. If you do take away the ownership, I'm afraid.... If you try to do it by regulating, you may not succeed, and there's no way you can go back.
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Well, the OECD always makes these wonderful studies. I've spent a lot of time at the OECD in Paris, etc. It's very hard to compare France and Canada or Korea and Canada. For one thing, they're not right next door to the largest communications and broadcasting market in the world. Second, they don't share, to a large part, the same language, etc. Plus, our geography and demography are quite different. So I take those comparisons with a good grain of salt.
I think you have to look at the actual situation. We are aware of where we are located geographically and what our challenges are. I think we're overprotective and we're too complicated right now. Make it clear. Make it simple. So that if somebody wants to put something in Canada, he knows that he can't be in control and that he can own only 49%, and that he can basically bet on a Canadian to make a lot of money for him. That's how it works and that's how it should work.
Let whoever runs the Canadian communications companies go to the States, Europe, Japan, Asia, or China and get some money, etc. and say that the rules are clear: “I'm in charge, but here, you have 49%”. Let them say that they are obviously going to listen to those people very carefully, etc., but that they have to make this enterprise work and become profitable within the confines of the laws of Canada, which say that a Canadian has to be in control and the communications system has to reflect Canada.
Thank you for appearing today.
I think everybody wants increased competition. It's the obvious thing. But just like the oil and gas industry, where you have vertical integration, you don't necessarily have to have collusion. You just have the fact that Petro-Canada, for example, ships in Esso gasoline and sells it to other stations. There just isn't the competitive approach anymore.
One of the things I have a concern about is how, for example, Globalive--which is, some allege, and I think there's some truth to this, really just a front for an Egyptian billionaire--has been very much on the front of the New York Times and other papers, saying that the next generation of development is actually acquiring medium and other types of telco sector providers right now, as the next wave. They could actually come into our market, and, right now, when we have an issue of competition--I think that's fair, and very clear out there--we could have another model brought on us where we have one or two operators after a couple of years and no real competition.
I'd like your comments on that, because that's one of the fears being expressed out there. When we look at some of our domestic players, they're not the big fish in the sea. They're the ones who right now provide us services, but they could be very vulnerable, or they could be very interested in being purchased or in selling significant parts of their operations to foreign investors, with not necessarily a new competitive model coming into place.
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Thank you, Mr. Chair. I'll be sharing my time with Mr. McTeague.
I have a very brief question.
The OECD report that was referred to earlier--and this will be in the same vein as Mr. Masse's questions--reported that in the countries that have liberalized their rules, there seems to be an initial push, where you have multiple people or corporations competing, but they all end up with three or fewer. That seems to be where we are now.
My concern is that we seem to have more companies coming in, which, as you mentioned, will have better pricing, and that better pricing, I honestly believe, will happen in Toronto, Montreal, and Vancouver. I'm in northern Ontario, Mr. von Finckenstein. Where does that leave me in northern Ontario where the population is sparse and the service is not great right now?
We've seen historically that the service we've had has lagged behind that of major centres and that we have technology that may not be the finest. It's usually second-rate technology and it puts us behind the eight ball. How do you see further competition helping us?
Also, do you see regulation coming from the CRTC? Or should we have, in this new combined regulation, something enticing or regulating the people who are providing service to major centres to provide that service to northern Ontario or to rural Canada?
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Part of it is price, of course, as you say. The other thing is technological innovation, which will come. And it has come. Actually, I think that we are one of the only countries that has a coast-to-coast high-speed wireless access network right now. So we're not doing badly. Especially given our land mass, this is quite something.
You're quite right when you say that it's spotty in certain areas. In your part of northern Ontario, I believe you have one only provider. But is it different in wireless than in any other industry? Unfortunately, it's part of the economic.... But digitalization has actually meant a lot of advancement on that front, by taking away regional disparities and allowing people even in remote locations to have access to communications, to markets, etc., which they otherwise didn't have.
There will be some innovations to satellite. There's no question about it. As these markets are hauled out, you also have this innovation called fixed wireless. As you know, you bring it to a certain point by satellite and then you distribute it by land line, or vice versa--you can bring it by land line to one point and then go wireless. All of this will happen. The more players you have, the more the market becomes saturated in some area, and people will push out into the hinterland. That's a normal economic evolution.
We do our best in terms of wireline, in terms of cross-subsidization of lines. We have not done that in wireless because there has been no need. As I said before, unless there's real market failure, we're very reluctant to do that. There is a huge price to be paid every time you intervene in a regulatory way into the natural rollout of an industry.
My colleague, Mr. Katz, spent years developing the wireless industry for Rogers. Maybe he can add something.
Mr. von Finckenstein, Mr. Katz, and Mr. Keogh, it's good to see you here today.
I understand that you've worn a couple of different hats in the past. I'm glad that one isn't me appearing before the Federal Court in front of you, but I've worked with you in other files in the past.
I'll say this very quickly. You've sawed off the possibility of Canadian ownership at 49%. That assumes that you believe correctly that there is enough finance, that there is a capital pool available within Canada to continue the mission of ensuring that consumers are protected with a variety of competition as well as decent pricing and innovation.
Can you guarantee this committee....? In your understanding of the industry right now, apart from bringing together all the pieces of legislation on telecom--the Radiocommunication Act and of course the Broadcasting Act--are you convinced that the 49% threshold will continue to satisfy the ability to bring services to Canadians at competitive prices?
Thank you, Mr. von Finckenstein.
In taking a look at page 3 of your opening statement, I was interested in the second paragraph, where you say “the legislative and regulatory structure we administer still preserves the old distinctions of broadcasting and telecommunications, or in other words”--and this is the part that I thought was interesting--“the distinctions between content and carriage”. As you go forward, you refer to those as “artificial and outdated concepts”.
When you're talking about the distinctions between content and carriage, I find it interesting that you would call those “artificial and outdated concepts”. It seems to me that the differentiation between content and carriage is the critical question as we move forward in this world of convergence. It seems to be the whole question of Canadian content and culture versus what we're talking about in terms of carriage, in terms of liberalizing the rules regarding carriage without actually impacting the rules regarding content.
Maybe you could clarify what you meant by that.
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Traditionally we have said that telecommunications companies are carriage companies. They don't have anything to do with the content; they just carry it from here to there, etc. They are impartial providers. Broadcasting is something different. You create content and influence content, and we want to make sure it reflects Canada.
Along comes digitization. Everything gets converted to bits, so it's convergence, and the technology bits essentially become one. The companies have formed themselves and have consolidated to do both. Let's take the example of Rogers. Rogers owns a wireless network, a wireline company, and a cable company--all three distributing. It also owns a specialty television channel and a television network--clearly broadcasting. All of that is together.
If you are going to liberalize one side and not another, you will be saying to Rogers that in their empire there, in that part, they can have foreign control, etc., and you don't care because they're just carrying. But you'll be saying that in this other case they have content and you care very much what they do. Then we come to the application that Madam Lavallée is referring to and where do they fall in? Also, where do you fall in when you have programs that have interactivity, which is the craze right now and is something that young people very much want? Do you treat them as content or carriage? Because there are aspects of both.
It just doesn't make sense anymore. It was perfectly level.... You had a different world when you didn't digitize everything. Now, with digitization and convergence, everybody has seen the light. The way to do it is to put it all together and find the most efficient way of producing and distributing it.