I call the meeting to order.
Welcome to meeting number seven of the House of Commons Standing Committee on Industry and Technology. Pursuant to Standing Order 108(2) and the motion adopted by the committee on January 26, 2022, the committee is meeting to study the ongoing work of the Canadian Radio-television and Telecommunications Commission.
Today's meeting is taking place in a hybrid format, pursuant to the House order of November 25, 2021. Members are attending in person in the room and remotely, using the Zoom application.
I encourage everyone present in Ottawa to be aware of the health measures in place and to follow them.
With us today is Ian Scott, chairperson and chief executive officer of the Canadian Radio‑television and Telecommunications Commission. He is accompanied by Anthony McIntyre, general counsel and deputy executive director, and Philippe Kent, director of Telecommunications Services Policy.
Without further ado, I'll turn things over to Mr. Scott for his opening remarks.
I was going to start by introducing myself and my colleagues, but you just did that, so I will get right to it.
We appreciate the opportunity to provide an update about the CRTC's ongoing work to support competition and investment in the marketplace so that Canadians have access to the broadband and wireless services they need.
We certainly understand the committee's concerns about the affordability of these vital services for the Canadian population, and we share those concerns. We have been working to implement a policy that is intended to foster competition among Internet service providers in the marketplace.
Much has been said about the decision we issued in May 2021, which set the final wholesale rates for aggregated high-speed broadband access services. Before I speak about the substance of this decision, I want to make clear that this was a costing decision, not a policy decision, and it's important that we get the rates right.
Why did we reverse course? To put it simply, it was because we got the initial decision wrong. We couldn't move ahead with rates that we knew were erroneous. While we always strive to get things right, the CRTC is not infallible. Legislators, parliamentarians, anticipated this and included provisions in the Telecommunications Act that enable decisions to be reviewed by the commission, by cabinet and by the courts as a mechanism to ensure that the public interest is protected.
In accordance with those provisions, companies submitted applications asking us to review our 2019 decision, as is their right. We addressed those requests seriously, fairly and in an impartial manner, as we always do in our role as a quasi-judicial administrative tribunal. We built a public record and gathered evidence from interested parties, and when we analyzed that evidence, we found errors and could no longer justify the associated rates from the earlier decision. Ultimately, we chose to reaffirm and make final the interim rates that were set in 2016, with certain adjustments.
The commission's work to implement its wholesale access policy continues. There are numerous ongoing proceedings looking at the regime that are open and ongoing today, relating to our costing methodologies, barriers to the deployment of broadband and more.
While I fully acknowledge that the new rates are creating challenges for some competitors, I am confident that we have done the responsible thing. I would also stress that the 2019 rates were never in effect in the marketplace. It is true that some competitors lowered their retail rates on the basis of that decision, but that was a business decision and a risk that they assumed, given the appeals that were being filed at the time.
While greater competition among broadband providers will benefit Canadians, there are far too many areas of the country that still do not have access to adequate or affordable broadband.
That is why the CRTC is working to close Canada's digital divide. Through our broadband fund, the CRTC has committed more than $186 million to date to improve broadband services for about 30,000 households in 160 underserved and unserved communities. This includes a significant number of indigenous communities.
We continue to evaluate proposals, and we will announce new projects as they are approved.
Finally, let me conclude by giving you an update on our mobile wireless decision, which we issued last April.
Among other things, our decision created a mobile virtual network operator regime for Canada. It opens the door for service providers to access the wireless networks of the big three national carriers—Bell, Rogers and Telus—as well as SaskTel in Saskatchewan. We are currently in the process of establishing the associated terms and conditions of this access.
All of this is good news for Canadians. Consumers will benefit from a market for mobile wireless services that features more providers, more choice, more affordable options and more investment. In addition, we took action to ensure Canadians can sign up for low-cost and occasional-use plans.
I hope my remarks have helped to clarify the work the CRTC is currently doing to support more competition and investment in the marketplace, ensure Canadians have access to high-quality broadband and wireless services, and as we always do, regulate in the public interest.
We would be pleased to answer your questions. Before we do, however, I must qualify my remarks by saying that we are unable to delve into specifics about any files that are currently before the commission.
Thank you very much. We're available for your questions.
Thanks very much, Joël, and happy birthday.
Mr. Scott, just so I have the timeline right, in May 2015 there's a notice of consultation for wholesale rates. In March 2016, there's an interim decision that determined that wholesale rates were likely not just or reasonable. A comprehensive review was undertaken for over three years. “Comprehensive review”, by the way, is not my language. That's the language from the August 15, 2019, decision, and that comprehensive review, despite its comprehensiveness, was incredibly incorrect, I guess, because less than two years later you reversed course almost entirely.
How did you get it so wrong? How can we have confidence in your continued work if after three years of a comprehensive review you get it so completely wrong?
I'm not sure what the question is.
First, perhaps I should take a step back, if I may, and just explain that costing processes—this is the use of long-run incremental costs by regulators to help establish rates, for example, in this case wholesale rates for competitors—are measures that are used around the world by regulators to try to establish rates of this type. It's a very complex process.
To give you a sense of the size and scope of that material, we were dealing with something like 150 costing models, 20,000 pages of evidence and over 100 rate elements to be calculated. All of those are, if you will, contested. On the one side you have parties submitting rates and defending their representation of the appropriate costing and others contesting it and asking for changes. To make a long story short, staff and the commissioners rendered a decision they believed to be correct, as I said earlier, following an application for review.
We conducted a thorough analysis. We sought additional information from all parties. Based on that record, we identified errors. Having identified them, we're duty bound to correct them.
A comprehensive review determined that great errors were made.
The challenge though, of course, is you have companies that are assuming risks. You're right: they're assuming risks and making business decisions with the confidence that you're getting a comprehensive review right over three years. I think to flippantly say that they assumed risk.... Fundamentally, the decision undercuts competition, and your mandate, I would hope, is to encourage competition.
Let me get to another element of competition around MVNOs. I can't figure this out one, either. In fairness, this is before your time. In March 2017, the CRTC made a decision—incorrectly, in my view—to say “no” to MVNOs. It was referred back by the Governor in Council. On April 15, 2021 there was a very modest step forward.
Other jurisdictions have a business model. I met with a company that operates internationally with this business model. They want to build towers. They want to build the infrastructure and they'll let other companies operate on their infrastructure. There are two business models: One, the company that builds the tower and two, other companies that want to operate on the tower. Everyone can make money and have their own piece of the pie.
We don't want to take that step forward, despite other jurisdictions operating in this fashion. Why not?
First of all, allow me to address you and salute your audacity following your speech this morning, which I listened to with great interest. I commend you for that.
Mr. Scott, thank you for being here today. Obviously, your recent decisions have led us to have a number of questions during the year. The context of an election, which we all could have done without, has brought us here today. That being said, your decision is a very courageous one, and I want to stress that.
I would like to ask you a question. Has the COVID‑19 pandemic allowed you to think about a telecommunications strategy in Canada and to realize that, ultimately, solutions must be found to the problems of Internet accessibility, which affect people in the regions more? These solutions will help more people, wherever they are, and not just people in large urban centres.
Your question contains several questions. I'll answer you in English, Mr. Lemire.
I'm trying to think. Does the pandemic have a profound impact on our processes or our direction in terms of bridging the digital divide? The answer is absolutely, yes. It has never been more obvious and important in Canada and throughout the world to ensure that all Canadians have access to reliable broadband service.
As I mentioned in my opening remarks, we have a fund, but also all levels of government—municipal, provincial and territorial—have been doubling their efforts and, frankly, doubling the amount of funds available to extend the service.
However, this issue is still very complex, but it is very important. Right now in Canada, I think about 70% of the population has access to high‑speed Internet at 50 and 10 megabits per second, but there is about 50% of the population in rural areas—
I don't think it's that complicated. We have an industry here that is entirely regulated. I'm a former city councillor. You don't get access to the infrastructure without conditions and terms. Federally we have a spectrum auction and we own the airwaves—we own the air rights. We're at a point right now where it's failed in a huge way. Even before the pandemic there were a lot of problems for access.
Mr. Scott, where would you find some type of option for us to enhance programs—which I don't like because I disagree with this government and the previous one with regard to how they actually auction off the spectrum—or how do we actually use the tools that we have right now to connect Canadians in a way that's actually affordable?
It's not fair right now. We have kids trying to do school. Some are doing it remotely. Some are actually in urban centres. Then we have all kinds of businesses and a whole series of different things.
Where can we actually improve in the short term some of the structures that are working really well, versus actually remoulding the CRTC? You may disagree with that and that's fine, but I think it needs to be done.
I won't comment on the latter point. It's not my place.
Where to begin? The first thing I would say is—and I know you are well aware of this—we don't regulate retail rates. The Telecommunications Act says that we ought not to unless there is no other choice. That kind of detailed rate regulation left most advanced economies in the late 1990s or even the early 1990s and moved more to various forms of incentive regulation and so on.
The driver for lower rates and better service is competition. Again, you know that we don't regulate spectrum. That is a matter for the industry department, so I won't try and answer for them. The CRTC's approach is to focus on competitive models. There is competition and competition has produced some desirable results.
When we talk about wireless, we have excellent coverage in Canada. We have the latest technology. We have not done as well on rates, so the commission's work has been focused on trying to enhance competition. Through various means, a number of entrants have entered the market. In our recent examination of the marketplace and our recent framework [Technical difficulty—Editor] accelerate that competition to drive down those rates.
With respect to the specific measures in relation to affordability, we have targeted some measures to low-income Canadians. The government has introduced some programs. As you alluded to generally, they recently enhanced, if you will, a program for Internet access that is $20 for a 50/10 service for qualifying Canadians. They expanded those criteria beyond the original child benefit, but also to other lower-income Canadians.
If you don't have detailed rate regulation, then we can't direct specific rates for specific target markets. I think, in fairness, the ultimate answer is that we need to continue to enhance competition. That's what's going to drive down rates and meet the needs of consumers.
It's a fair question. I could argue with the premise of this taking a long time, but certain things do take a long time. We've talked quickly about the wholesale access, and that is a very long period of time. It is because of the nature of the costing exercise, the number of parties and the fact that it's a large process being contested. When you have large policy proceedings like the wireless [Technical difficulty—Editor
], then you need to gather evidence from all parties, have public hearings and then examine the record.
You could add resources, and it would incrementally change and improve the timing, but fundamentally, we do remain a transparent quasi-judicial agency that follows administrative law principles, so that means we can only rely on the information filed with us. We encourage all Canadians to participate, and then we have to examine that large record.
We're not slower than other regulators dealing with similar issues. Some of these issues are complex and take a long time. I do understand it's frustrating, but it also reflects the significant economic and business aspects of the matters that are being decided.
In May 2021, the CRTC decided to overturn the 2019 decision.
What had changed in the competitive landscape for that decision to be overturned? It seems to me that the time frame was rather short.
We talked about the time frame for CRTC decision‑making, so in this case it's a relatively short time.
Earlier, you talked about errors, but you didn't list them. It would be interesting to know the errors that led you to overturn the decision.
Mr. Scott, the public perception of people in a position like yours, or like mine and my colleagues', is often more important than reality.
Your meeting with the president of Bell in an Ottawa bar may seem harmless. You said that the meetings follow CRTC rules and are recorded when you meet with the parties concerned. Presumably your meeting in that bar wasn't recorded.
What impression did that meeting leave on the independence of the CRTC? The meeting was made public, and we can talk about it publicly.
As I mentioned in my opening remarks.... Let me just take a step back and say that I completely agree with the committee's recommendation and statement. I quickly tried to point out where we are right now, which is a little more than half, if you will.... About 90% of those in urban areas have 50/10 service available to them, but it's around 50% in the case of those in rural areas. Sadly, it's less in indigenous communities.
What are we doing about it?
We initiated our broadband fund and we have been assessing applications and awarding project funding as rapidly as we can. We work together to the extent we can as an arm's-length agency with federal and provincial governments to make sure that taxpayer dollars are being deployed efficiently. Obviously, the federal, provincial and territorial governments have now committed a much larger amount of funding to try to build those things out.
Progress is being made. I think it was about 44% 18 months ago in rural areas. We don't have the most recent numbers, but it looks like it's greater than 50%. That's not a great result, but it is happening and it does take time.
The reason those rural communities are less well served is that fibre typically doesn't reach them. Fibre is being deployed in a lot of cases, as well as new technologies such as low-orbit satellites. All of these things are happening, and they're not happening fast enough, I acknowledge, for those who live in those areas with an insufficient level of service. Directionally, it's going to the right place, and we're doing what we can with our fund.
I can tell you. If you look at the government records, it's at least $11 billion.
Most of that funding goes to help our large telcos make those investments across Canada, yet here we are. You made a decision to reverse your initial decision, which lowered those wholesale rates, and you returned them to the 2016 rates, which were higher. It is these large telcos that, for the most part, received the largest benefit of the public investments that are being made in our broadband systems across the country. Of course, those subsidies end up going to the bottom line of the big telcos.
If you look at Rogers', Telus's, Bell's or Shaw's bottom lines, there are significant profits being made, yet your organization made a decision to effectively make it more expensive for the small telcos to compete and provide Canadians with better pricing and better service.
Again, I have to take issue with the premise. No, our decision was about costing. It is important that we get the cost right. It doesn't matter whether it's a large company or a small company. Our task in that case is to apply a costing methodology and to come up with a just and reasonable rate that reflects the actual costs involved in providing the service.
That is what we did. As we've already mentioned, we made an error and then it was corrected as it needed to be.
With respect to the awarding of programs, I can't speak to other government programs. I can speak to the CRTC's awarding of [Technical difficulty—Editor]. We do not favour one group or another. We have objective criteria that were developed as a result of a fulsome process. We apply it fairly and impartially. We award projects where no one has access to 50/10 service. We are doing our best to extend service in those remote areas. We do not care via which technology or who it is, as long as they meet the criteria and improve service for Canadians.
Thank you very much, Chair.
I hope you give me an extra 30 seconds, as well. I'm just joking.
It's very good to meet you, Mr. Scott.
I have two lines of questions. Let's start with scam calls.
Scam calls are becoming a daily routine for many Canadians. [Technical difficulty—Editor] we've seen reports of increased use of this and using more advanced technology, as well. Just this morning, I got three calls from “Service Canada”. We know that these are particularly harmful to newcomers and to also our senior population. At the same time, it actually reduces the credibility of our public institutions.
I understand that there is a law enforcement part of the solution, but what is CRTC doing about this problem?
Thank you for the question. I'll try not to use up all of your time.
We're doing as much as we can. It is truly a terrible problem. We have agreements with the FCC and the Australian regulator and others, such as memoranda of understanding, to work together to try to address it.
Some of the measures that we've taken include blocking calls at source. For what are called malformed numbers—things that are obviously not real numbers—we've authorized the carriers to block those at source. We've introduced a system called Stir/Shaken, which, as it's applied, will allow companies to indicate to consumers whether or not the call has been verified. We've also recently approved what was a trial to use artificial intelligence to identify and screen out some of these calls.
I do have to quickly add that a couple of years ago when I looked at the numbers, we were talking about numbers that were something like 200,000 calls per second in the United States.
Okay. I want to get to my next question.
The CRTC is new to me, and I'm a new member of INDU. I'm learning that the CRTC has different functions. On one hand, you administer government funding to partner up with carriers and to expand broadband coverage infrastructure. On the other hand, you approve wholesale rates, and then you act as a supervisor and regulator for the industry. On top of that, you oversee the thousands of broadcasters.
Do you find it challenging to balance all these different hats? I'm asking this question in the context of Canadian customers, who are paying some of the highest rates in the world.
The fact is that there's a lot of responsibility on your shoulders, and, at times, there might be conflicts when you have to make important decisions. I compare it to the electricity system, which is equally complex. They have multiple regulators, each taking a part of the whole system.
In short, do you feel that it may be time for change? Do you think there's too much responsibility for one agency?
Perhaps some thought should be given to this to ensure continued investment in the network, particularly in remote areas.
I'd like to come back to the urgency of getting regulations and establishing negotiation terms. We are in a key period for ensuring investments in the network, and summer is coming. Obviously, it is more complicated to build networks, plant poles and build towers during the winter.
In your new framework, on what basis do companies negotiate settlements? What do you suggest to them?
I'd just like to clear up some confusion, Mr Scott, because you said a few times that the 2021 wholesale rates decision was a correction, but in my reading, the commission is concerned that completing a fulsome revision would prolong the time period and would require significant resources.
Isn't it the case that you identified errors, but you didn't necessarily correct those errors, because it would take too much time and cost too many resources? We still don't have a really good answer despite two fulsome reviews.
I understand you spent three years to determine one answer and two years to determine another answer, and we still don't have an answer.
Just so I have it right, there's no active ecosystem of MVNOs because they can't get access to the infrastructure. You say you want more competition, but we're not going to get new competitors coming in to build the infrastructure because we don't have an active ecosystem of MVNOs.
Isn't the answer, in a short-term way, to mandate MVNOs to create that active ecosystem, such that there are going to be investors who come forward to build the infrastructure? Then we don't rely upon the big three, the capture of the big three, and the excessive profit-gouging by the big three.
Probably not. It's interesting; I believe the mandated U.S. service level is still 25 megabits per second. But all of us are going to have to review this.
I would note that it was the CRTC five or six years ago that set 50/10 as an aspirational target. It wasn't our place to dictate what speeds would be required, but the commission set it as an objective that looked forward and seemed to be a reasonable amount.
You're quite right. With the evolution of HD and ultra HD, and the amount of video programming, the requirement in the future may be much higher. Indeed, the service offerings that are out there today are up to, and in some cases exceeding, a gigabit, and many Canadians, particularly during the pandemic, have been increasing the speeds they subscribe to. I don't know what the average is now, but it's more than 50/10.
First of all, thank you to the witnesses for your time and for joining us today.
I want to take us to the land of broadband. We have arrived at a system in Canada now where the large carriers are building the infrastructure, what's on the poles and so forth, and then there's an ecosystem of smaller, newer carriers that are piggybacking on that infrastructure and charging lower rates. This is fine; this is a part of the element of competition that we're trying to reach.
An element of this, though, is that the competition is either more or less fair whether you're in an urban or a rural setting. In dense urban settings, it's not so much of a bite off of the large carrier's investment in the hard infrastructure, but in the rural areas where the infrastructure user per kilometre is much lower, it gets to be a little bit more painful.
There's the famous example that's been relayed to me a few times in a Canadian rural community where the large company provided the hard-wired infrastructure, including into an apartment building, but the enterprising university student living in the apartment building, after having the right business class, created his own carrier and was selling the Internet service to his neighbours more cheaply than the larger carrier could provide.
I invite you to muse with me about whether there is anything in the CRTC's domain or plans that would help to mitigate some of those variances in the degree of competition that emerges and that would make it a little fairer regarding urban or rural.
I think you accurately described the challenge. In urban areas there's a bigger market and it attracts more competition.
We have in Canada, if you will, sort of a head start. Many countries only had a wire-line telephone system, never wired cabled. We, like the U.S., have two wires in most homes, cable and telephone wires. Then we have wireless on top, and then we have, as you've described, resale—people obtaining access on a wholesale basis to that and reselling it.
The challenge in rural areas is that there's much less business interest in competing there. The challenge for the CRTC is to figure out what kind of wholesale arrangements are suitable in rural areas that will accomplish both objectives, continuing to see facilities extended to the underserved or unserved while also supporting competition, and that's a very challenging proposition.
We'll be looking at Northwestel, the company that provides service to most of northern Canada, in the coming months and year, and that will be one of the big challenges in that case.
I'm not sure if that fully answers your question, but you're absolutely right that rural areas are more challenging and often need a different approach from urban areas.
I hope that answers your question.
Let me ask you another question.
Consumers—Canadians who are watching these proceedings—will probably be scratching their heads and saying, okay, in 2016, wholesale rates were established, and in 2019 the CRTC lowered those wholesale rates, presumably to increase competition, which would come from second tier telecoms and not the big guys necessarily, and within two years, that decision is reversed, and the wholesale rates are increased.
I think it's fair for Canadians to ask how in the world increasing wholesale rates will improve competition and lower the rates that consumers pay.
In the first instance, we're talking about identifying the costs. There are many elements to the HSA, the wholesale access agreement, such as technical arrangements, how many points of interconnection, how it works and which facilities are included. It's a very complex matter and there are multiple elements. The costing of wholesale service is but one.
With respect to overall rates, between 2010 and 2015, rates were going up at a very rapid rate—between 30% and 40%, as I recall. The commission has taken numerous steps to intensify competition, including the establishment of the current HSA arrangement. That had the effect of stopping those increases, and rates flattened out. They increased slightly sometimes or decreased slightly, and you saw competitors' market share grow, and it has continued. Then we had to make determinations on wholesale costs.
You've said several times “increasing the cost”. No—determining the final rates based on costs, and that was what we did, as I've said several times now and corrected again.
I will be splitting my time with my Liberal colleague, Mr. Erskine-Smith.
Mr. Scott, in its policy direction to the CRTC in 2019, the government directed the commission to place high consideration on competition, affordability, consumer interest and innovation in all of its telecommunication decisions.
Can you highlight for us today how the CRTC is making progress in achieving these policy directives?
I honestly don't view my job that way. When I started, I was asked what my vision was. I suppose I'll be asked what my “legacy” was, if that's the term.
I'm sorry, but I don't know the word in French.
That's not how I look at it. We deal with matters as they come before us, whether it's application by parties or whether it's initiated by government or self-initiated.
It sounds sort of trite, but it isn't to me. We do the best job we can in the public interest. We develop a record. We ask the important questions. We get submissions from all Canadians and then we render decisions that we believe are truly in the public interest.
That's what a good regulator does and I hope that's what we have done under my leadership.