INDY Committee Meeting

STANDING COMMITTEE ON INDUSTRY

COMITÉ PERMANENT DE L'INDUSTRIE

EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, December 3, 1997

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[English]

The Chair (Ms. Susan Whelan (Essex, Lib.)): I'm going to call the meeting to order now. Pursuant to an order of reference of the House dated Tuesday, November 25, 1997, we will undertake consideration of Bill C-17, an act to amend the Telecommunications Act and the Teleglobe Canada Reorganization and Divestiture Act.

We have before us our first witness. Four witnesses will be appearing before us today, in half-hour time blocks. Mr. Hudson Janisch, would you like to begin?

Professor Hudson Janisch (Individual Presentation): Madam Chair, my name is Hudson Janisch. I'm here to speak, of course, to the legislation that is before you. I have circulated 30 copies of a submission, which I hope have reached members of the committee.

I suppose the first thing I need to do is to establish some credentials to appear before this committee. I have attached a CV to the submission, which outlines the extensive involvement I have had over more than a 30-year period in many aspects of telecommunications law, policy and regulation. As a result, I greatly appreciate the invitation to appear before you today to participate in your deliberations on this important piece of legislation.

My particular interest in this amendment to the Telecommunications Act stems from the fact that in 1992 I was substantially involved as counsel to the Senate Standing Committee on Transportation and Communications in its detailed pre-study of Bill C-62, which was to become the new Telecommunications Act.

It is widely acknowledged that the report of the standing committee under the chairmanship of Senator Donald Oliver had a major impact on Bill C-62, which was as a result substantially amended here in the House of Commons.

I have attached as appendix B to my submission an article in Telecommunications Policy that highlights the underlying principles adopted in that legislation. It is, as you I'm sure know, Madam Chair, a very complicated piece of legislation. The article I have attached attempts to identify the most important elements in it and the most important principles underlying the legislation.

I must say that my concern today is that I feel that some of the foundational principles that were deployed in the Telecommunications Act would be substantially and unnecessarily undermined by some of the amendments contained in Bill C-17. To use a homely metaphor, I would suggest there is considerable risk here that the international obligations and the need to implement them of the WTO and the GATS “tail” is going to end up wagging the domestic telecommunications policy dog. That is, I think we have it back to front. There's a danger that in responding to WTO in the manner that's proposed, we are in fact intruding far too far into the established principles governing our telecommunications legislation.

In the legislation that presently governs, the Telecommunications Act, there was considerable thought given to the question of licensing—I'm sure you have heard this from other witnesses—and a deliberate choice, and I do emphasize deliberate choice, was made not to have a licensing regime. I would suggest that was a wise choice, and that we have a much more dynamic telecommunications competitive marketplace in Canada as a result of that deliberate decision.

The second point is that in determining under the Telecommunications Act who should be regulated, again a deliberate decision was made to stay away from broadly regulating all telecommunication service providers. Instead the focus was on telecommunications common carriers—those that provide service using substantial and significant transmission facilities—and not to extend a regulation further than that.

My concern should be, then—and I believe the concern of this committee should be—whether the Canadian telecommunications industry now is faced with a crisis sufficient to necessitate a significant change in the basis on which regulation has operated so successfully up to this point.

One of the most important things we need to keep in mind, I believe, in implementing the GATS, is that a cardinal, central principle in the fourth protocol of the GATS is that of proportionality. That is, regulatory measures must not be overbroad, but must be directly proportionate to the harm being guarded against. That is a commitment we have entered into through our negotiations with respect to GATS and the fourth protocol.

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In light of this, I would recommend that the committee inquire carefully of the sponsors and supporters of this proposed legislation as to just what the nature of the harm is that is needed to be guarded against and why it cannot be dealt with by way of existing regulatory techniques—a range of CRTC decisions, orders and tariffs already contained in the Telecommunications Act.

I also think it's important to bear in mind that the major concern for any possible licensing regime, that of routing restrictions, would be very short-lived. We're talking about, at most, a two-year period where Canada can play a significant role with respect to routing rules. I ask whether it would be wise to put in place a licensing regime that might effectively last for such a short time.

I'm very concerned as well with the implications of applying a licensing regime to by far and away our largest international traffic stream. Seventy-six percent of Canadian international telecommunications takes place between Canada and the United States, and that has not been subject to a licensing regime up to this point. It has blossomed. This is remarkable. If you go around the world, you can tell people anywhere in the world that the most successful cross-border international telecommunications marketplace is to be found in the United States and in Canada.

Under the principle in the GATS, we must observe most favoured nation treatment. Therefore if we introduced a licensing regime, we would be immediately confronted with the question, do we impose the licensing regime on Canada-U.S. traffic and provoke, I think, a very nasty response from our American friends, or do we soften the type of licensing regime from the learning experience we've had of the extraordinary success of the U.S.-Canada marketplace? I would urge the committee to take that into consideration and not to lose sight of that important matter.

In discussions leading up to this legislation there was a good deal of reference, especially by officials from Industry Canada, to the light-handed nature of the proposed licensing regime. I think that it is perfectly possible to construct a genuinely light-handed licensing regime that would provide for registration and identification, require attestation of compliance with Canadian rules governing routing and contribution payments, and require traffic reports, by route, on an annual basis.

If it is felt necessary to proceed as proposed, with a much broader licensing regime, I would suggest that there are a number of possible amendments that might be of interest to the committee.

The first I would suggest is that to me there seems to be a good deal of sense in the proposals by Bell Canada and Stentor and others that a licensing regime be confined to international services so as not to have an overlay of a licensing regime in Canada where a deliberate choice was made not to have a licensing regime.

Secondly, I believe that we should take very seriously the proposal for a sunset clause; that is, there may well be a good argument for a licensing regime with respect to international telecommunications, but I think that Telus has very effectively pointed out that that regime should not be put in place on a permanent basis.

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Finally, I would suggest that if one looks closely at the proposed legislation one might wish to eliminate the unrestricted authority to set or amend individual conditions in licences. I have a specific reference to where it's to be found in Bill C-17. So that's the power both to set conditions and to amend individual conditions.

This seems to me to create inevitably a much more heavy-handed regulation than was envisaged in this matter. If the licensing authority was confined to creating classes of licensing but would not allow the CRTC then to put conditions on individual licensees it would, I would argue, signal the more limited nature of the licensing under this bill and be somewhat closer to the promised light-handed form of licensing.

In closing, let me mention something that to me is quite extraordinary. If you look at the legislation that provides the major source for licensing with respect to communications, it is of course the Broadcasting Act, yet the Broadcasting Act specifically places limits on what the CRTC can do by way of individual conditions on licences. That is, under the Broadcasting Act the CRTC cannot change the conditions placed on licensees for a period of five years after the issuance and renewal of a licence.

I must say, I find it incongruous, to say the least, that in an area where the justification for licensing seems to me to be less than on the broadcasting side, we are going to put in a power—or you are proposing that a power should be given to the regulator—to have an unrestricted authority to set or amend individual conditions of licences when we specifically limit that power in the Broadcasting Act. I would say that at the very least you might want to ask people to explain why that should be done.

Those are the principal comments I have on the legislation. Let me say again, I was delighted to come up here today. I am delighted to participate in this proceeding. If there is anything I can do by way of response to questions now or at any subsequent date, I would be delighted to do so.

Thank you very much, Madam Chair.

The Chair: Thank you very much, Mr. Janisch.

Mr. Lowther, do you have any questions, to begin?

Mr. Eric Lowther (Calgary Centre, Ref.): Yes, thanks, Madam Chair.

I'm looking through your credentials, Mr. Janisch, and they're very impressive. I guess you have predominantly a law background.

Prof. Hudson Janisch: Yes, but I had the good fortune to do my law at the University of Chicago, which gave me a somewhat broader view of things.

Mr. Eric Lowther: I see. You also have years of experience in communications, by the looks of it, primarily as a consultant. Is that the idea?

Prof. Hudson Janisch: No, not primarily as a consultant. I'm a full-time academic. Most of my work has been done in the academic environment, but I've done a good bit of consulting. My experience goes back to the Bell Canada rate case of 1968.

I always ask a roomful of experts like this as to whether anybody else was at the Bell Canada rate case in 1968. I'm getting depressed, because those who were there are becoming very few in number.

Some hon. members: Oh, oh.

Mr. Eric Lowther: I was interested in your presentation. It seemed you started on one plane, fairly lofty, and then you said if we couldn't wrap our minds around this we'd go down to another level, which is sort of where the Stentor group is at, and to which we've had some other people speak to—some type of licensing at an international level.

I'd like to go back to your first premise, your first position, where you said that if we're going to have licensing, we should be asking the question of what we're guarding against. You also asked, if we're going to have some sort of licensing, and it's going to be so short-lived, with a two-year window until we have open skies or open competition here, what would be the benefit of such a short-lived licensing program anyway.

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Do you have any sense of what we're trying to protect, at an international level, with this move to international licensing coming out of the WTO? What's the big risk here? Why do we need to even have licensing at the international level?

Prof. Hudson Janisch: I would start by saying I am not yet persuaded that we really do need licensing. I look to the Telecommunications Act, which has some provisions that are clearly designed to give the CRTC already authority more broadly over persons other than Canadian telecommunications carriers.

For example, under subsection 37(2) of the existing act, the CRTC is entitled to demand information from any person—that is, any carrier, not confined to Canadian carriers—and they may acquire that information.

For example, the CRTC, under section 51 of the existing legislation, is entitled to issue orders. The language is extremely broad:

The Commission may order a person, at or within any time and subject to any conditions that it determines, to do anything the person is required to do under this Act or any special Act, and may forbid a person to do anything that the person is prohibited from doing under this Act....

Then orders made by the commission are decisions that may be enforced through the Federal Court, with contempt powers and so on.

So my analysis of the problem is not that the CRTC lacks a power, but that it lacks the political gumption to go ahead and enforce the powers it already has.

Mr. Eric Lowther: Do you feel we could participate in the WTO agreement, in the WTO participatory process in telecom, without licensing?

Prof. Hudson Janisch: I believe it would be perfectly possible. I believe that one of the briefs, maybe Stentor's or Bell's, says there is no legal obligation. So we don't legally have to put in place a licensing regime. We have to ask ourselves, is a licensing regime really necessary? That's the starting point that we must keep coming back to.

Mr. Eric Lowther: Thank you.

The Chair: Thank you very much, Mr. Lowther.

Ms. Jennings, did you have any questions?

Ms. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.): Yes.

Concerning the resellers, we heard yesterday, I believe, from Telus and Stentor. Stentor said they're currently not regulated, but if the government wished to capture them in the net of CRTC's jurisdiction, an amendment to section 24 would in fact do that, but they hadn't made that recommendation in their brief. Subsequent to their appearance before us, I forget the name, but a reseller came before us and said they want to be regulated.

Prof. Hudson Janisch: I believe that would be ACC, would it not?

Ms. Marlene Jennings: Yes, thank you.

ACC came before us and said they want to be regulated and they want CRTC to be given the powers we see under Bill C-17.

I'd like to know what your opinion is, because we've subsequently received another communication from Stentor saying they had in fact intended on making that recommendation but did not do so, because they didn't feel comfortable suggesting that resellers be regulated. They were under the assumption that they wouldn't want to be regulated. But if they do, then the way to do it is through an amendment to section 24, rather than extending to the domestic market licensing powers now proposed in the international market. I'd like to know your view on that, as it pertains to resellers.

Prof. Hudson Janisch: I have looked at the proposal very briefly, and it does seem to me to make some sense. That is, if one wanted to, frankly, avoid the overlay of a broad-based licensing regime, there are ways that could be accommodated, and use of section 24 may well accomplish that goal.

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Maybe I'm just being a little bit obstinate in defending what the Senate committee and the legislative process did but a few years ago, but I'm still not persuaded that we're over that initial threshold.

This is an era in which the minister, department, CRTC, and everybody are saying that we want to lessen regulation, withdraw from being regulators, become umpires, and no longer be actively involved. To me, it's astonishing that in the name of implementing the WTO, we've suddenly come in with this great big new regulatory regime, one that we rejected only four years ago.

Ms. Marlene Jennings: A second question, if I may, Madam Chair.

Given your reluctance or reticence to see licensing powers given to the CRTC, would you be more comfortable if, for instance, the act says the CRTC “may” regulate, not “shall” regulate? That case would allow the CRTC to explore the possibilities you mentioned under subsection 37(2) and section 51 so as to see whether or not that was adequate. If it wasn't adequate, the act would then allow them to move to the creation of regulations, because the other suggestions you made are not effective. Would that make you feel more comfortable?

Prof. Hudson Janisch: I think that would be the better way of going, but I would still be very concerned that when you look at the statutory words put in the proposed legislation, they do suggest a very broad regulatory scheme under a licensing power.

The example I used was that Parliament would be giving the CRTC the authority not only to create classes of licences, but within classes of licences, to impose specific conditions on individual licensees, which is a power we do not even give them on the broadcasting side, where the argument is much stronger that this is where they should have that authority. I would like to see the legislative language cut back so as to be more limited, but your suggestion may be a good way of dealing with it.

Ms. Marlene Jennings: Thank you.

The Chair: Thanks very much, Ms. Jennings. Madam Lalonde.

[Translation]

Ms. Francine Lalonde (Mercier, BQ): Good afternoon, Professor Janisch. I imagine that having studied in Chicago, you don't really support state intervention in telecommunications. You have a great deal of experience and it is interesting to have you here today.

I will follow the same line of questioning as Ms. Jennings. Yesterday evening, ACC told us about a small part of their business, but I presume companies of that type can expand as soon as they have a huge capacity to do so, one that is not always used by the big businesses who compete, by joining forces in Canada.

But your determination to ensure telecommunications companies do not have to get licenses and abide by the Telecommunications Act raises some questions. If you read section 9 of the Act, for instance, which you no doubt know better than I do, it says:

9. (1) The Commission may, by order, exempt any class of Canadian carriers from the application of this Act [...] consistent with the Canadian telecommunications policy objectives.

This power that the government has given itself—because the Minister gives himself and the CRTC extra powers—seems to fit in the context of a rapidly changing industry, where it is impossible to predict what the conditions, technology and services will be in two, three or four years.

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In my view, the CRTC certainly does not abuse its power; quite the opposite. Consumers feel it has not used it enough and that the Minister has been too complacent with big businesses. Of course, consumers and businesses can sometimes have common interests, but they can also have contradictory ones.

So why do you think it is so bad to impose licensing requirements on telecommunications service providers?

[English]

Prof. Hudson Janisch: I think my answer probably does take me back to Chicago. I think this industry is moving so fast—as you yourself so well recognize—that to put in place licences and regulations and so on inhibits the possibilities of the transformation of the industry. It's an industry in transformation, which is why it has fascinated me. I have been actively interested in it from the days when it was an absolute monopoly, one of the great monopolies in the world. I've been involved in the whole process of it shifting over to being more and more competitive.

I believe the time has now arrived when we want to think about telecommunications much more as a competitive industry. I think the last thing we want to do now is impose new regulation on it, because this should be brought now under the Competition Act. This is an industry that now should be looked at. If one has fears of abusive dominance or of predatory pricing, it's to the competition law that we should be looking. The more regulation we continue with, and the more licensing we continue with, the more we in effect block the competition authorities from ever being able to play an effective role.

It's not that I want to give up on disciplining the marketplace. It's just that given the very dynamic change that you yourself have so rightly identified, I believe imposing traditional licensing and regulation at this date is the wrong thing to do.

[Translation]

Ms. Francine Lalonde: I have a subquestion, Madam Chair. The market alone cannot solve all the problems. Competition will drive businesses to improve the technology. If you take just that, and ignore the consumers and what is happening out in the pasture, it is very attractive.

But members of Parliament and the government that acts on behalf of society must think of the impact on individuals. In that respect, competition is effective when there is enough volume to make businesses think about consumer interests. But when that is not the case, regardless of market trends, consumers end up paying the price for these technological advances. From what I can gather, that is what happened with the transportation industry in the United States and we should avoid doing the same thing.

I do find it reassuring, though—I would like it to be from Quebec, but that is another matter altogether—that there are regulatory powers because things are progressing quickly. It takes two years to pass legislation. I would prefer it if the government had some powers, even if it doesn't use them and people complain that those powers are not being used.

[English]

Prof. Hudson Janisch: I appreciate that sentiment very much, but I do feel we are in a sense building a contradiction into our policies. On the one hand, we are acknowledging—as you did a moment ago—the extraordinary dynamic change that is taking place in telecommunications. We look to the remarkable benefits for businesses and individual consumers while knowing that in the telecommunications industry it's very difficult to argue that there hasn't been significant benefit. Nobody will want to go back to a monopoly regime. I think many people now appreciate that there is a great deal of benefit, but the danger is—

Ms. Francine Lalonde: What about the poor persons?

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Prof. Hudson Janisch: Even the poor person makes many long-distance telephone calls.

Ms. Francine Lalonde: No, no, no.

Prof. Hudson Janisch: When I was studying this issue it was pointed out to me that the highest per capita payments for long-distance calls ten years ago were in the province of Newfoundland, which had the lowest per capita income. So it's not true that poor people don't make long-distance telephone calls. Families are divided because they are poor and have to stay in contact using long-distance telecommunications.

Ms. Francine Lalonde: Consumer associations don't say that.

Prof. Hudson Janisch: If I could complete my thought, it's this. If you look at the trend in telecommunications over the last 10 years—and I could go back and look at it over 30 years, but I won't bore you by suggesting you go all the way back for 30 years—you see a steady progression towards greater reliance on competition. I think it would be wrong.... I think the argument could be made in favour of a very narrow specific licensing power for a transition under a sunset clause to get us through this period for the next few years. I think that case could be made, but the case cannot be made for a broad licensing power. It is a complete contradiction of everything this government has done, everything the predecessor governments have done. Indeed I would argue it's a contradiction of the existing Telecommunications Act. Why build a contradiction into the act at this stage?

The Chair: Thank you, Madam Lalonde. I have a feeling we could continue this discussion for a very long time, and we have three other witnesses.

Mr. Janisch, I appreciate your brief and I appreciate your coming before us, as all the committee members do, and we thank you. We now know where we can call on an expert. Thank you very much.

Prof. Hudson Janisch: Thank you very much indeed, Madam Chair. I appreciated being here.

The Chair: We now have before us, from Call-Net, Mr. Robert Boron, senior vice-president; Mr. Jean Brazeau, vice-president of regulatory affairs; and Mr. Jonathan Daniels, regulatory counsel. Mr. Boron.

Mr. Robert Boron (Senior Vice-President, Call-Net): Thank you, Madam Chair.

I should mention we have filed with the committee a number of copies of the prepared presentation I will be speaking from today, and attached to that written copy of the presentation are a number of appendices which set out some proposed amendments I will speak to in the presentation we are making this afternoon.

For those of you not familiar with Call-Net, Call-Net owns 100% of Sprint Canada, which is Canada's largest alternative long-distance company. We provide telecommunications services in every province in Canada. We employ about 2,000 Canadians across the country. Call-Net itself is a publicly traded company which is Canadian owned and controlled. Call-Net has a licensing arrangement with Sprint Corp., which allows us to use the “Sprint” brand in Canada.

Because we actively provide international telecommunication services to consumers and businesses across Canada, the issues addressed in Bill C-17 are of paramount importance to Call-Net. It is for this reason that I would like to thank you for permitting us to make representations to the committee this afternoon.

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At the outset, I would note that Call-Net supports Bill C-17. Bill C-17 was primarily designed to implement Canada's obligations in the World Trade Organization basic telecom agreement, an agreement which Call-Net also wholly endorses.

Through its participation in the agreement, Canada will ensure that foreign countries open their markets to international competition and in return that Canada opens its own market to competition, including the elimination of Teleglobe's monopoly. Both things are good for Canada.

Arguably the most important part of the proposed amendments to the Telecommunications Act is the creation of a licensing regime for telecommunications providers. Call-Net largely endorses the adoption of a licensing regime, but only for international service providers.

That being said, Call-Net has a number of concerns with the bill as currently drafted. Call-Net notes that the licensing regime in the current draft is designed to cover more than just international service providers. Canada does not have a licensing regime for domestic providers currently, and we believe competition in this sector operates with sufficient oversight.

However, there are sound market and pro-competition reasons for adopting a licensing regime for international telecommunications providers. As such, Call-Net supports Stentor's proposal to amend clause 3 of the bill by inserting the word “international” to precede any reference to the term “telecommunications service” each time it appears in that clause.

Furthermore, Call-Net believes that the CRTC could achieve the objectives of the bill with the adoption of only a class licensing regime. The CRTC does not need licensing powers that would extend to the creation of specific terms and conditions for individual carriers or providers.

Ample powers would be held by the CRTC through its ability to make licence conditions apply equally to all members of a class. However, remedial powers contained in these conditions could be exercised on an individual licensee basis if required.

Removing individual licensing powers from the bill will ensure that the CRTC's licensing regime will not form a significant barrier to entry. As such, Call-Net recommends that clause 3 be amended by removing proposed paragraph 16.3(2)(b).

Call-Net is also concerned with the breadth of powers to control licensees granted to the CRTC under the bill. Importantly, the bill is silent as to the specifics of these powers other than to state that the CRTC can establish licence conditions.

Call-Net believes that the bill's vagueness on this point presents two problems. First, the CRTC could attempt to use this provision to give itself powers over service providers, including Canadian carriers, that are above and beyond those enumerated and specifically described in the act. Second, in the absence of specific language a foreign-owned or controlled reseller could challenge the CRTC's authority to apply to it any powers that are essentially similar to those enumerated in the act but which apply only to Canadian carriers under the act.

In the first case, the ambiguity in the bill could lead to the CRTC having too much power; in the second case, not enough. For both reasons, Call-Net recommends that the bill be amended to specifically state that the CRTC has the power to impose licence conditions on international service providers that are analogous to those powers it has in relation to the regulation of Canadian carriers.

In this regard, clause 3 would be amended so that proposed subsection 16.3(2) of the act would read:

The Commission may establish licence conditions in respect of classes of international telecommunications service providers or classes of international telecommunications services, which are analogous mutatis mutandis to those powers the Commission may exercise over Canadian carriers under the act.

Since only class licences are necessary in Call-Net's view, we also recommend the removal of proposed subsections 16.3(4), 5 and 6, which establish the length, renewal, and transfer rules for individual licences. These provisions would be unnecessary.

Proposed subsection 16.4(1) allows the CRTC to revoke or suspend a license if “the Commission believes on reasonable grounds” that the licensee has contravened its licence conditions. Call-Net submits that the legal standard for such action must not be the CRTC's belief but rather a finding of such by the CRTC. Thus, proposed subsection 16.4(1) should read “if the Commission finds that the licensee has contravened” its licence conditions.

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Turning now to the delegation powers of the bill, Call-Net believes that the delegation powers as currently set out in clause 6 are too broad. These powers of delegation, which should be made only to third parties without alliances to any service provider, should be limited to a specific list of CRTC powers. Call-Net is of the view that proposed section 46.1 should be amended to provide for language that only permits the delegation of specified CRTC powers respecting the administration of numbering resources, local number portability and directory services, databases and operations, as well as the administration of other technical issues and the administration, control or usage of shared resources.

Call-Net is of the view that Parliament should not, on an upfront basis, allow for the very broad delegation of CRTC powers that is currently set out in the draft of the bill.

In addition, Call-Net is concerned with the regime established to regulate a delegate. Once a task has been delegated by the CRTC, the delegate has the power under proposed subsection 46.2(2) to review and vary its own decision, just like the CRTC. The delegate also has the power to register its decision with the court to make it an order of the court, just like the CRTC. However, unlike the CRTC, a person does not have the right to appeal to the court any decision of a delegate. Call-Net believes that if decisions of the delegate are to be treated like CRTC decisions, the courts must have the same ability to review them.

As such, Call-Net recommends that proposed subsection 46.2(2) be amended to include this right of appeal. Specifically, proposed subsection 46.2(2) would read: “For the purposes of sections 62, 63 and 64, a decision of the delegate is deemed to be a decision of the Commission”.

Finally, turning to the Teleglobe Canada Reorganization and Divestiture Act, Call-Net notes that clause 19 of the bill repeals the section of that act that exempts Teleglobe from having to obtain CRTC approval for its interconnection agreements with foreign carriers. Of course we support that change. However, section 33 of that act—that is, clause 22 of the bill—grandfathers Teleglobe's existing contracts as at the date the amendment comes into effect, by deeming CRTC approval for those contracts. Call-Net is concerned that this statutory provision could be used by Teleglobe to prevent the CRTC from revisiting or amending pre-existing contracts.

It is important that Teleglobe not be permitted, for example, to grandfather pre-existing long-term, exclusive contracts, which could have the impact of foreclosing the opening of international markets to other Canadian carriers. Grandfathering monopoly-era contracts in an era of increasing global competition is not good for Canada and it's not good for competition. For this reason, the CRTC must have the power to revisit any contracts that are contrary to the public interest.

Call-Net therefore recommends that the CRTC's power be made explicit in the legislation. Thus, we would add to section 33 a statement that reads:

Nothing in this section prevents the Commission from exercising its powers under sections 32 and 64 of the Telecommunications Act regarding any agreement or arrangement that is deemed to be approved.

Madam Chair, with these changes, we believe that Canada will be able to move forward and achieve the objectives of this draft legislation.

We thank you for your time. We of course will be happy to answer any questions from you or other members of the committee.

The Chair: Thank you very much.

Mr. Lowther.

Mr. Eric Lowther: There are some interesting points brought out here, gentlemen, that are somewhat consistent with what we've had before, but also some new things. It sounds as if you're onside with a number of the other presenters about not requiring licensing domestically, but you do sort of endorse it at the international level.

For clarification, you make quite a bit of comment here about the class of licences, calling for a class of licences. When I look at proposed section 16 of the bill, it does talk about classes:

...a class specified by the Commission shall provide telecommunications services except in accordance with a telecommunications service licence.

Then proposed subsection 16.1(2) says “within a class of...services”.

So it seems as if the legislation is already in sort of a class approach, but if I'm hearing you right, you're saying we should apply the class approach at an international level but not at a domestic level. Is that right?

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Mr. Robert Boron: We are saying the licensing regime should be brought in only for international telecommunications service providers, and the CRTC's power should be for a class licensing regime, as opposed to a class licensing regime and a specific carrier licensing regime.

Mr. Eric Lowther: You also say there are sound market and pro-competition reasons for adopting a licensing regime for international providers. We've had some debate on why we need licensing at all at an international level. You say there are some sound market reasons. I've asked this question before and I've yet to get an answer. Can you give us a few succinct examples why we need that, and not just that everybody else is doing it and it makes us feel good? What will happen if we don't have this?

Mr. Robert Boron: I'll take a stab at answering that, and if I stray from the straight and narrow maybe my colleagues can bring me back to it.

First of all, it's worth mentioning that Call-Net is not advocating a licensing regime for international telecommunication service providers that would create barriers to entry into the market. We feel it's important to make that statement upfront.

However, as you have mentioned, any country in the world to our knowledge that has opened up international telecommunications services to competition has created a licensing regime to prevent certain anti-competitive practices from happening. What those other jurisdictions are concerned about, and what we believe Canada should be concerned about as well, is the situation where services are being provided from Canada, where there will be an open international telecommunications services regime, into countries that have a much more closed regime, whether it's a monopoly regime or a regime that's dominated by a dominant carrier in that regime.

Certain games can be played with respect to pricing, by either affiliates or carriers that are collaborating with the dominant carrier or the monopoly carrier in the distant regime, that would not be beneficial for the industry in Canada, for carriers that operate in the industry in Canada or for consumers or businesses using those services in Canada.

Mr. Eric Lowther: But under the Competition Act wouldn't we have the ability to restrict that already? If it could be shown they were prejudicially pricing that kind of thing, couldn't you restrict their access?

Mr. Robert Boron: I'll say something and let Mr. Daniels complete the thought.

I think a more efficient way of dealing with the situation would be by setting terms and conditions for a class of carriers that is either affiliated with or owned by a dominant or monopoly provider in a distant regime, as opposed to having to worry about whether competition law in Canada could be applied vis-à-vis a provider in a distant jurisdiction.

Mr. Eric Lowther: So we're saying these players could provide service in Canada cheaper than Canadian entities could provide it to Canadians because of their low costs through monopoly entities somewhere else.

Mr. Jonathan Daniels (Regulatory Counsel, Call-Net Enterprises Inc.): We should clarify that this can be a WTO country because some WTO countries, as part of the deal, have committed to opening up their markets to international competition. India, for example, said it will look at it in 2004 and Hong Kong will look at it in 2006.

I know yesterday there was a lot of discussion about WTO and non-WTO, but we're talking about WTO countries as well, even those that signed the deal. But the types of games that can be played are not necessarily the traditional anti-competitive activities you're looking at within Canada, within a domestic market the Competition Act can look at. Right now, for example, because we have a monopoly generally—and there are exceptions—Teleglobe is able to go to that four-in-one carrier in India and make a deal: “We have 200 minutes going to you. You'll send us back 100 minutes and this is what we'll charge you per minute.” They charge each other the same rate, but really you're only paying for the difference between those minutes.

So Teleglobe charges India $1 for every minute it sends to Canada and India charges Teleglobe $1 for every minute it sends to India, when in reality, because we're sending India 200 minutes and they're sending back 100 minutes, the only payment is for that 100 minutes, the difference, at $1.

• 1625

Because we open our market to competition, and that's the change, if India opens its market to competition, for example—and I'm only giving one example—then Canada opens its market and India doesn't, then India can take their 100 minutes that they're sending to Canada, bring it in and pay someone in Canada 5¢, because they don't have to pay that $1 any more. But they can still say that everybody has to pay them $1 per minute for what you send there. That in fact would be $1 for 200 minutes. The fact is, that could cause prices to increase in Canada for Canadian consumers.

What's anti-competitive here is that India is abusing its monopoly position in India. It doesn't even necessarily have to have a Canadian affiliate to do it, and that is why the CRTC needs powers to be able to control to prevent these types of anti-competitive activities.

But from a competition act, this isn't predatory pricing. They're not doing the traditional types of gains. It's because they have the monopoly in their foreign country that they're able to play games in Canada. That is why Canada, the United States, and virtually every other country that is opening its market to competition has introduced a licensing regime. It's for exactly these types of reasons. I think that is behind the purpose of the bill, and that is why we support it.

To disagree with the person who spoke before, licensing is not for routing. We don't believe in routing restrictions. Licensing is to protect competition, and the only way to do that is to be able to have the powers to exercise the arm the Competition Act plays in Canada. You want similar types of issues to be able to be done against foreign carriers that are not regulated by the Competition Act. That's why we need licensing, and that's why in the filing last week with the CRTC, virtually every player.... In fact there were ten submissions on this issue, and all supported licensing for international, but only international was the issue there.

The Chair: Thank you. Mr. Peric.

Mr. Janko Peric (Cambridge, Lib.): Thank you, Madam Chair.

For clarification here, you mentioned in your statement that Call-Net owns 100% of Sprint Canada.

Mr. Robert Boron: That's right.

Mr. Janko Peric: Who owns Sprint Canada?

Mr. Robert Boron: Call-Net owns Sprint Canada.

Mr. Janko Peric: Who owns Call-Net?

Mr. Robert Boron: Call-Net is a publicly traded company. It's listed on the Toronto Stock Exchange and the Montreal Exchange, and in NASDAQ in the U.S.

Sprint Corporation in the U.S. is our largest single shareholder. It holds 25% of the non-voting shares of Call-Net.

Mr. Janko Peric: Sprint?

Mr. Robert Boron: That's Sprint Corporation, which is the third-largest long-distance provider in the United States.

Mr. Janko Peric: But it's Canadian-owned?

Mr. Robert Boron: Call-Net, yes.

Mr. Janko Peric: But not Sprint?

Mr. Robert Boron: Sprint Corporation is a publicly traded U.S. company. Sprint Canada is owned by Call-Net Enterprises, which is a Canadian publicly traded company.

Mr. Janko Peric: In my opinion, that's why we need the CRTC to control and to issue the licences. I'm not aware of the exact number of multinationals that are entering our market and trying to compete and push down our own providers.

Could you tell me, is Call-Net or Sprint entering the Chinese market?

Mr. Robert Boron: Is Call-Net entering the Chinese market? No, it is not, currently. Is Sprint? I'm not sure. Sprint happens to be one of our shareholders, but I'm not sure what they're doing vis-à-vis the Chinese market.

Mr. Janko Peric: What about Unisource?

Mr. Robert Boron: I can't comment. Sorry.

[Editor's Note: Technical difficulty]

Mr. Jean Brazeau (Vice-President, Regulatory Affairs, Call-Net Enterprises Inc.): The gist of the question is what are companies like Call-Net, Sprint Canada, and other carriers doing for Canada. I think if you've opened your phone bill recently you've see what these companies are doing for Canada. Consumers have benefited significantly from the presence of new entrants in the market, and they will continue to benefit as the market is further liberalized. I don't know of any telephone company in Canada that exports to anywhere in the world, and that includes Bell Canada. Bell Canada does not export any services anywhere around the world. Northern Telecom does, but certainly not the carriers themselves. So I think we're no different from any other carrier.

• 1630

The Chair: Mr. Shepherd, you had a question?

Mr. Alex Shepherd (Durham, Lib.): You mentioned the grandfathering of contracts with Teleglobe. By the essence of what you're requesting, you're saying there could well be existing contracts that Teleglobe has by virtue of their monopoly, that these might not be in the public interest, and that we should be allowed to revisit them. By definition, those contracts must be in place today. Are you knowledgeable about contracts that are not in the public interest and that Teleglobe has entered into?

Mr. Robert Boron: No, and I think you speak to the very point of our issue in that those contracts that Teleglobe has in place have not needed to be filed with the CRTC and not placed on the public record. We therefore do not know what is in those contracts today. We don't have a problem with the grandfathering of the coming into effect of those contracts. All we are saying is that the CRTC needs the explicit power to revisit or to ask Teleglobe to modify or amend certain provisions of those contracts if they, the CRTC, look at those contracts and find they are not in the public interest. That's all we're asking for.

The Chair: Thank you, Mr. Shepherd.

[Translation]

Ms. Lalonde.

Ms. Francine Lalonde: I would first like to ask you whether there are any translators at Call-Net, whether anyone speaks French and whether you have any francophone clients.

Mr. Jean Brazeau: We have francophone clients, translators, as well as people who speak French.

Ms. Francine Lalonde: And yet I received a document that was only in English. We just got it, and frankly, I am appalled. If it were an individual or a witness who spoke only English, I wouldn't have a problem with that. But since we're talking about a company with 25 per cent of its shares owned by Sprint Corporation, you no doubt have the means to give us a French version of the text. I will try to not let that affect my impression of you and I will try to control my anger.

The United States issues licences to its domestic carriers. It seems to me that it is a country that is open to competition. If Canada had a similar practice, why would it be considered as a hindrance to competition?

Mr. Jean Brazeau: We are in favour of a similar regime. I don't think you can have a licensing regime that allows competition both in Canada and the United States, but that could also protect us against the practices mentioned earlier and against international carriers that have a closed system or a monopoly.

Ms. Francine Lalonde: In light of your study on international carriers, given all the mergers, the shareholders game, the creation of businesses that are held by others and everything you know better than I do, what would happen if a business were an international carrier, but had originally been given the means to be a national telecommunications carrier? Would it be considered international or national? Would it be subject to the licensing regime as per your definition?

Mr. Jean Brazeau: Only for international services.

Ms. Francine Lalonde: I am sure you agree that it is complicated.

A third question. In two, three or four years, given all the technical progress and the mergers between big firms, among other things, if we ended up with a de facto monopoly because of the market effects... We know that is what the future market is all about, That is what they teach at the HEC. In the first business course, students are taught how to control their competitor. Successful companies know how to do that. Why would licensing powers not to be required?

• 1635

Mr. Jean Brazeau: That is another reason why we are in favour of a licensing regime. In our brief, we clearly recommend that the CRTC should have the power to establish a licensing regime for international services.

Ms. Francine Lalonde: You say it would be only for international services, but I think it should also apply to national services.

Mr. Jean Brazeau: Domestic as well.

Ms. Francine Lalonde: The industry has not been without a monopoly for very long, but things have already changed a great deal.

Mr. Jean Brazeau: Yes. I agree with Professor Janisch; I also have a great deal of faith in the market.

Ms. Francine Lalonde: I don't.

Mr. Jean Brazeau: That's your opinion.

Ms. Francine Lalonde: I would like to quote from an article that appeared in last week's Business Week. The market is not self- regulating.

Mr. Jean Brazeau: That is true in some conditions, but if the marketplace is competitive, I think the market can be self- regulating. That can be very beneficial for consumers.

Ms. Francine Lalonde: It might be true when there is competition, but it is not true when there isn't.

Mr. Jean Brazeau: If there is no longer any competition, I agree with you.

Ms. Francine Lalonde: That can happen quickly when it is no longer a viable business. I can quote a few well-known CEOs that I have met and to whom I said: Yes, but what happens when there isn't a big volume? They said that yes, in that case, regulation was required. If you need regulations, you also need powers.

Mr. Jean Brazeau: According to the provisions of the telecommunications bill, the CRTC has a power to regulate us, to regulate Bell Canada, to regulate all Canadian carriers. So the power does already exist.

Ms. Francine Lalonde: They are subject to the regulations.

Mr. Jean Brazeau: Yes, yes. The CRTC can order us to act in a way it believes is beneficial for the public. The domestic regulatory power already exists.

Ms. Francine Lalonde: But why did they opt for the license?

Mr. Jean Brazeau: The purpose of the license is really to protect us against unfair competition in foreign countries that have not opened their market to competition rather than to regulate the carriers that provide international services.

[English]

The Chair: Thank you.

[Translation]

Ms. Francine Lalonde: I will continue later. Thank you.

[English]

The Chair: Madam Lalonde, I see that we could continue this.

[Translation]

Ms. Francine Lalonde: There is a French version, with apologies?

Mr. Jean Brazeau: We only gave you the English version because changes were made at 11 o'clock this morning. We apologize for that and will ensure you get the French version.

Ms. Francine Lalonde: Thank you.

[English]

The Chair: Thank you for your presentation and for coming before us on such short notice.

• 1640

I'd like to welcome our witnesses from AT&T Canada Enterprises. We have before us Mr. Peter Barnes, vice-president, public affairs; Ms. Kirsten Embree, associate lawyer from Osler, Hoskin & Harcourt; and Janet Yale, AT&T Canada's senior vice-president, external affairs.

Mr. Barnes, I believe you're going to give the presentation. Let me remind our witnesses that you don't have to read your presentation word for word. Our time is limited and we'd like to ask as many questions as possible.

Mr. Peter Barnes (Vice-President, Public Affairs, AT&T Canada Enterprises Inc.): Thank you, Madam Chair, mesdames et messieurs.

Madam Chair, I've prepared a short text, which is a summary of the salient points of our presentation. I'd like to take you through that for seven or so minutes, and then, with my colleagues, I would be most pleased to entertain questions.

As you know, AT&T Canada has been operating in Canada for more than ten years and currently has an ownership interest in AT&T Canada long-distance services and a marketing arrangement with Rogers Cantel, now known as Cantel AT&T. We also operate a telemarketing centre in Winnipeg, employing over 1,300 people, and have announced our intention to open another such centre in Halifax. We estimate that the Halifax centre will employ an additional 1,000 Canadians. Through our various business interests, we currently employ more than 7,000 people across the country.

I'm here today on behalf of both AT&T Canada Enterprises and AT&T Canada long-distance services because we wish to raise a number of items concerning Bill C-17.

[Translation]

I first wanted to take this opportunity to commend the government for introducing this legislation and committing to its passage. It will surprise no one that AT&T Canada believes that real and sustained competition in all aspects of the telecommunications industry is important to ensuring the provision of high quality telecom services to all citizens at the lowest possible cost. This is the direction this government has been moving in since it took office and we support that vision.

The contents of this legislation will accomplish a number of important things within the telecommunications industry. For example, the proposed delegation power will provide the opportunity to expedite many of the processes which currently must be followed, an important consideration for businesses as they become even more competitive and time-conscious. It will allow for more industry involvement on important issues, and will help to free up scarce Commission resources to deal with pressing regulatory matters. And not to be forgotten, it also allows Canada to move into line with important industry changes worldwide.

[English]

We commend these moves to promote global competition and allow new opportunities for Canada's telecommunications sector. However, there are a number of aspects of the bill that concern us and which I wish to spend a few minutes discussing.

First, there is the scope of the licensing regime. Under the bill, the CRTC would be given significant new licensing powers and a framework for a new licensing regime. The bill also broadens the definition of who will actually be covered under the legislation. In our view, when this definition is combined with existing definitions in the Telecommunications Act, the result is that switch-based resellers will be subject to regulation, and they have not been to this point.

Of greater consequence, however, is the broad scope of the proposed definition of “telecommunications service provider”. As presently drafted, it could permit the commission to extend its new licensing regime to every telecom service offered by every service provider operating in Canada today, even those that are entirely unrelated to international services.

Canada's existing local and domestic long-distance industries are already subject to growing pro-competitive regulatory rules established by the CRTC. It is unclear to us why they should now be subject to additional regulatory control and the burden of licensing.

Some important questions need to be answered on this matter. First, why is it necessary for the CRTC's licensing regime to extend beyond international service providers to capture potentially all local and domestic long-distance telecommunications companies? Second, is this new licensing regime and broadening of the commission's regulatory powers justified as the industry moves towards a fully competitive model, both in Canada and abroad?

[Translation]

AT&T Canada believes that, with the exception of dominant carriers, maximum flexibility should be available so competitors in all segments of the telecommunications market are able to compete to the best of their abilities.

• 1645

These new licensing powers being given to the CRTC seem to impair this ability. Changes should be made to the legislation which will significantly limit the scope of these licensing powers, so they deal only with dominant service providers and not every telecom service provider.

[English]

So our focus is on dominant international service providers.

The second point I would like to cover is the application of foreign ownership and control rules.

Currently, facilities-based telecommunications common carriers eligible to operate in the Canadian domestic telecommunications market must comply with foreign ownership and control restrictions contained in the Telecommunications Act and in associated regulations. If Bill C-17 is enacted, foreign ownership and control limits on the ownership and operation of international submarine cables and satellite Earth stations which provide telecom services would be eliminated. As a result, a non-Canadian-owned or -controlled company could fully own or operate an international submarine cable and receive a licence from Industry Canada for the operation or ownership of the cable. Similarly, it is conceivable that the non-Canadian owner or operator of the overseas cable could be the subject of further licensing by the CRTC as a telecommunications service provider. As a result, it is quite conceivable that non-Canadian-owned or -controlled facilities-based carriers will find themselves effectively barred by foreign ownership rules from providing attractive services to the Canadian market through an inability to obtain CRTC service licences for their domestic Canadian operations in spite of the licensing by Industry Canada.

[Translation]

AT&T Canada believes that these inconsistencies require clarification prior to the passage of this bill.

[English]

We suggest that any entity that is a dominant carrier and is eligible to obtain a international submarine cable licence from Industry Canada should be entitled to hold an international service provider licence from the commission. As well, the CRTC licensing regime should be such that it reflects the fact that holders of international submarine cable licences can use their submarine cable facilities, as well as domestic facilities, to provide telecommunications services to Canadians.

[Translation]

Now let's talk about CRTC administration and delegation powers. Bill C-17 confers on both the Cabinet and the CRTC new jurisdiction and powers over certain aspects of telecommunications regulation such as the administration of telephone numbering resources and local subsidy arrangements. The Commission can delegate any of its new powers of administration to any person, including any body created by the Commission itself for that purpose.

AT&T Canada is entirely supportive of the government's underlying objectives to expedite the regulatory process, promote co-operation between the regulator and the regulated, and permit the Commission the flexibility to exercise itself or delegate certain of its powers.

[English]

However, we respectfully submit that it would be imprudent of this committee to overlook the fact that this part of the proposed amendments, as currently drafted, confers very open-ended authority on both the cabinet and the CRTC. In Bill C-17 there are no stated limits on the types of activities cabinet can prescribe for the CRTC to administer so long as the activities are somehow related to telecommunications services furnished by Canadian carriers. Possible new areas of commission regulation or administrative oversight are potentially limitless. At a minimum, in our view, the bill requires greater specifics in the types of matters the cabinet can assign to the CRTC.

Once the CRTC is empowered by cabinet, it is completely at liberty simply to delegate by written authority the new power to anyone of its choice, and even to create a new body to which its powers may be delegated. Decisions of the delegatee will be deemed to be decisions of the CRTC.

AT&T Canada urges this committee to investigate this issue and consider expanding the specifics related to how third parties might be used. Items that should be addressed include what types of issues should be delegated, the types of bodies that would be eligible to play the role of third party, limitations on the powers of these third parties, and possible safeguards that might be put in place. We believe these clarifications are essential if the use of third parties is to be accomplished with credibility.

• 1650

We have one fourth and final point. We understand the chair of this committee has ruled that the discussions of possible modification to this bill regarding the regulation of SaskTel by the CRTC are beyond the scope of these hearings. We certainly respect that ruling, but we would nonetheless encourage the committee to undertake a study of this matter in the near future, in another venue, and to recommend to the government the date when CRTC regulation can be uniformly applied across Canada.

I thank you again for your attention.

[Translation]

Again, I thank you for your time.

[English]

Your questions will be welcome. Thank you.

The Chair: Thank you very much, Mr. Barnes.

Mr. Lowther.

Mr. Eric Lowther: Thank you, Madam Chair.

Can you, Mr. Barnes, or the folks with you ever envisage the day when the need for international long-distance telecommunication licences will not be required?

Mr. Peter Barnes: It's always difficult to predict what's going to happen in the future. The marketplace has been evolving rapidly, and I expect it will continue to do so. That's why we have proposed what I would call a “normative” approach, one based on dominance in the marketplace. If you have players who either through their domestic marketplace share or foreign operators who have a dominant or monopoly share in their market are able to dominate a marketplace or a route, then licensing is an approach to moderate the possible excesses of that dominance.

Rather than trying to fix a date certain, then, we've proposed a normative approach.

Mr. Eric Lowther: But aren't there approaches over and above licensing that you could speak to?

Secondly, where are you at in so far as a sunset clause on the licensing aspect of this particular legislation—putting a mark in there to say, look, at this point in time, we're no longer going to need licensing, or at least we're going to review the requirement for licensing so that we can send a signal to those players who are in the market to say, “You may not always live in this protected environment and you'd better get your act together”, and actually motivate a more aggressive development?

Mr. Peter Barnes: There are two points I'd like to make on that. The first is that given at least the question as to whether the commission could exercise power as a domestic regulator on certain international carriers, licensing may well be a good transitional step for those carriers who will retain dominant carrier status. That's an approach that seems to have some merit for those types of carriers.

Vis-à-vis the sunset clause, I think the approach of including in the legislation a revisit of the need for licensing three to five years from now is quite appropriate. That's probably an approach that makes a lot of sense in many cases where new regulations are being imposed.

Frankly, I favour that over a date-certain approach, which is effectively trying to predict that five years from now, for instance, the market will have reached a certain level of competitive maturity. But I think a review after, say, five years would be a reasonable approach.

Mr. Eric Lowther: I certainly concur with your ideas on the regulatory or the administrative aspect, clause 46, and having a clear idea of what exactly this is going to be for before we write the blank cheque.

Thank you. I thought those were good comments.

The Chair: Ms. Jennings, no questions right now?

Madame Lalonde.

[Translation]

Ms. Francine Lalonde: Thank you, Mr. Barnes. I would also like to thank you for your French text.

In your brief, you mentioned a few new ideas that we had not heard before, including maximum flexibility for competitors in all segments of the telecommunications market, with the exception of dominant carriers. This is the first time we have heard that. Would you say the same thing if you were a dominant carrier?

• 1655

Mr. Peter Barnes: That is a good question. I must say that up to about three years ago, AT&T's parent company was considered a dominant carrier. Of course, it is difficult to move from a monopoly or a situation where you have the lion's share of the market to a competitive one. But from a policy perspective, I think you have to find a balance between incentives to deregulate and the objectives of public policy, which are to exercise a certain control over companies that have a power to influence competition because of their market share and financial resources.

I am not quite comfortable with an approach that is completely based on the market. I think regulation still has a role to play, and that role is changing. When markets expand and become increasingly competitive, some regulatory guidelines could be dropped. But in the meantime, it is good to have some regulatory control.

Ms. Francine Lalonde: I will ask the same question I already asked a number of times. The market can become increasingly competitive where there is an interest in doing so, but there are often other places or other markets that are of no interest to the firm. In that case, there is a need for regulations.

You raised an issue that is both interesting and somewhat troubling. You say there is some inconsistency in the exemptions from regulations pertaining to foreign property and control of international submarine cables. You have already read your brief and it is well written, but I would like to hear you summarize your viewpoint.

Mr. Peter Barnes: Here is how I would summarize the inconsistency. Canada made a commitment to make it easier to get submarine cable licenses as of October 1998. The problem is making this feasible. If someone has a cable that is hooked up to the Atlantic coast or the Pacific coast, he can use the cable to move the traffic. The problem, of course, is in knowing how to get the traffic that comes from Montreal, Toronto or Vancouver to that cable. Since what goes on within Canada is subject to the Foreign Property Act, but is not subject to the Act from the point where the cable is in the Atlantic or Pacific Ocean, you end up with two conflicting systems.

What we suggest is that with the easing of restrictions on cable licenses there be some consistency so that every market opportunity that already exists within the market, namely for re- sellers who have their switching equipment, can be linked to liberalization of the cable network so that we move forward rather than backward on service delivery.

Ms. Francine Lalonde: So they would be subject to licenses.

Mr. Peter Barnes: First of all, that is not the issue. A cable requires a license.

Ms. Francine Lalonde: No, a cable is a cable.

Mr. Peter Barnes: A service provider should have a license if it is a dominant carrier. That is the standard approach among operators: if they are dominant, they must have a licence, and on a technical level, if there is a cable, there must be a license.

Ms. Francine Lalonde: We will do the clause-by-clause study of the bill tomorrow. That is something to bear in mind; it is new and interesting. That is all for now, even though I have other questions. Time is marching on.

[English]

The Chair: Thank you, Madame Lalonde. Mr. Shepherd.

Mr. Alex Shepherd: I guess I just wanted to address the same issue, because it's a little unclear to me. It seems to me that what you're intimating here is that the CRTC may arbitrarily deny a licence based on the foreign ownership of the applicant. Is that what you're stating?

• 1700

Mr. Peter Barnes: I'm hoping the CRTC wouldn't act arbitrarily. I don't think they would do that. I think the danger is that unless there is clarity in the text of law, there might be an interpretation by the CRTC that could put in conflict the operation of an international submarine cable licensee's works, and the combination of that with the carriage of traffic from a city in Canada to that very cable. Today, the carriage of that traffic for categories of providers who are called resellers, even if they own switches, is quite appropriate and permitted.

What you have are effectively two regimes coming in potential clash with each other. What we're suggesting is that there should be clarity in the legislation so that it's patently obvious to everybody who reads the legislation that there was no intention to somehow use the existing foreign ownership controls that apply domestically in order to somehow limit the ability of the new liberalization on the submarine cable to effectively get to market and offer services to customers.

Mr. Alex Shepherd: So, for instance, because part of the CRTC's mandate is to deal with Canadian culture within Canada, to set up a regime of Canadian culture, you feel that regime within the CRTC may well extend to the licensing and telecommunication providers?

Mr. Peter Barnes: Actually, the cultural imperatives the CRTC responds to are on the Broadcasting Act side of its responsibilities. In the Telecommunications Act, they do have economic ownership issues they have to look at from a Canadian ownership and control perspective—which they do.

It's more of an economic issue within a cultural one. Because they have liberalized certain parts of the domestic market, where you have, for example, switch-based resellers who are not subject to those foreign ownership rules by the commission's own motion, what we're asking for is clarity to ensure that such a liberal regime can continue and can be combined with the new liberal regime that would be set in place as of October 1998, so that they can both co-exist.

Mr. Alex Shepherd: It would be a contravention of our WTO agreement if we in fact denied you a licence because of your foreign content, would it not?

Mr. Peter Barnes: That's quite possible.

The Chair: Thank you.

I'd like to thank the witnesses for appearing before us this afternoon. This issue is becoming very complex. We appreciate your brief, and we appreciate your presentation and answers to our questions.

Mr. Peter Barnes: Thank you very much.

The Chair: I would ask the witnesses from AT&T to please exchange places with our next witnesses, from the Canadian Bar Association.

Everyone should have a letter before them from the Canadian Bar Association. We have with us Mairi MacDonald, the chair of the national media and communications law section; and Tamra Thomson, the director of legislation and law reform.

I believe Ms. MacDonald is going to begin. Or is it Ms. Thomson?

Ms. Tamra L. Thomson (Director, Legislation and Law Reform, Canadian Bar Association): I'm going to begin.

The Chair: Okay, whenever you're ready.

[Translation]

Ms. Tamra Thomson: Thank you, Madam Chair. The Canadian Bar Association is a national association representing over 34,000 lawyers, notaries, law professors and students from across Canada.

The association's main objectives include improving law and the administration of justice. It is in this context that we are presenting our comments on bill C-17.

• 1705

[English]

You have received the letter that we have given to the clerk today. I would just like to note that our submission today is made on behalf of the CBA's national media and communications law section, which comprises more than 1,000 lawyers across the country, practising in all aspects of communications law.

I will ask Ms. MacDonald to address the substantive portion of our presentation, and then we will welcome questions from the members of the committee.

Ms. Mairi S. MacDonald (Chair, National Media and Communications Law Section, Canadian Bar Association): On behalf of the media and communications law section of the Canadian Bar Association, I thank you for providing us with the opportunity to appear before you this afternoon and to provide you with some preliminary views concerning Bill C-17.

I understand that your clerk has gone to some trouble to arrange appearances to accommodate certain travel restrictions I'm now under. I wanted to make a special point of thanking her for doing that, and of course to apologize to any witnesses who may have been inconvenienced as a result of this.

I'd like to provide you first with a little bit of context concerning the comments of the media and communications law section on Bill C-17.

The members of our section who are engaged in a telecommunications law practice represent a wide variety of clients. Some members are in-house counsel with incumbent phone companies like the Stentor companies or with competitors to those companies. Others represent a variety of clients, including service providers and consumers of telecom services, from their day-to-day law practices, either as part of firms or as sole practitioners.

Because it's still a fairly small field of legal practice, however, when we're making CBA representations and activities we do focus as a section on seeking consensus on legal issues specifically; that is to say, not in advancing the causes of our clients, whoever they may be.

In summary, our section's position on this bill is the following.

While we recognize that a number of the provisions are required to give effect to Canada's specific commitments as part of the World Trade Organization's general agreement on trade and services, we are concerned that a number of the provisions in the bill go beyond what is required. These provisions are open ended and establish potentially onerous regulatory barriers and conditions.

Accordingly, we are asking you to recommend that the bill be severed, with the non-controversial provisions and those that are clearly tied to the implementation of Canada's commitments to the WTO being dealt with rapidly and in time to meet our obligations for having certain things implemented by October 1, 1998.

Certain of the provisions that are more far reaching should, in our view, be debated and studied in greater depth before they are passed.

The clauses of the bill that we believe can be fast-tracked are listed at schedule one to the letter that your clerk has distributed to you this afternoon. These include provisions concerning satellite earth stations, international submarine cables, and the constitution and regulation of Teleglobe Canada.

Schedule two to my letter, on the other hand, lists the clauses that we urge you to recommend be severed from Bill C-17 and debated at greater length before they be given passage.

Let me take a very few minutes to go over schedule two with you.

The first group of provisions that we're concerned with—and it sounds as if you've probably heard this from a lot of other witnesses this week—are those that enable the CRTC to issue telecommunications service licences. The section believes that this licensing regime is not required by the WTO agreement.

We understand that the minister undertook to the CRTC that the commission would be granted additional powers to license international service providers and to impose conditions on their offer of services. As a preliminary view, we agree that the principle of national treatment requires that if the commission is going to apply conditions on the provision of international services, then some form of legislative hook is required to provide those equally to Canadian-based international service providers as to foreign-based international service providers operating in Canada. In other words, the principle of national treatment justifies going that far.

If the commission concludes, as a result of the process that it's currently undergoing pursuant to telecom public notice CRTC 97-34, that it must apply some conditions to international service providers that compete with Teleglobe following the end of Teleglobe's monopoly on October 1, 1998, then we agree that similar conditions must be applied to all such providers to meet the requirements of national treatment. However, we question whether a licensing regime is truly required to give effect to this principle, even with respect to international carriers. We believe this point should be debated at greater length.

• 1710

The real difficulty with clause 3 as drafted, in our view, is that the commission is provided sweeping new powers to license domestic telecommunications service providers as well, and to subject their offer of services to specified conditions.

As you know, the proposed licensing provisions originally introduced with the Telecommunications Act were removed at the urging of the Senate committee that studied Bill C-62 in the spring of 1992. At that time, the media and communications law section recommended that the licensing regime be removed, because we did not consider it to be necessary. We were concerned that it would impose an additional burden on everybody trying to do business in telecommunications in Canada. We were pleased and gratified when the Senate adopted our recommendation and in turn recommended to the minister that that licensing regime be removed, and that the act that was finally passed did not contain such licensing provisions.

I'm afraid we have the same concerns about the licensing provisions in Bill C-17 that is before you now. Licensing can be onerous, and the introduction of this regime after the act has been in place for four years creates, in our view, a certain amount of uncertainty in the industry. Taking the minister at his word that his objective in introducing these changes in Bill C-17 is primarily to contribute to greater competition in the telecommunications industry in Canada, we must express the concern that uncertainty about the applicable regulatory regime is more likely to inhibit competitive entry than to encourage it.

We are not sure what objective the CRTC and the government has for these licensing provisions, although I gather there has been a fair bit of discussion of that, too. I would certainly be willing to undertake to answer any questions you may have.

We believe there should be more disclosure and more debate about what the actual objectives are of applying this licensing regime on the domestic side of the equation as well. If the objective, as has been suggested, is for the CRTC to be able to apply conditions to the provision of service to everyone in Canada that offers a particular type of service—for example, local access service—then we believe there are probably more direct means of accomplishing that goal, which will in turn create less uncertainty and apprehension in the industry and give people a much firmer ground on which to go ahead and become part of the telecommunications industry in Canada.

Our second broad concern, listed in schedule 2, relates to the delegation provision, which is the proposed new section 46.6 of the Telecommunications Act, in clause 6 of the bill. Again, in our view, this is not obviously related to either Canada's specific commitments to the WTO process or to the reference paper to which we're also committed.

In general, the delegation of powers to the CRTC, which can then sub-delegate with respect to specific areas such as the administration of the numbering system, and possibly also the administration of the support fund for access to service, is fine. What we are concerned with is the open-ended nature of the prescription power that is awarded to the Governor in Council, so that the Governor in Council may prescribe—as your last witness, and I suspect the one before that, has pointed out—a very wide range of powers to the CRTC.

That wide range of powers seems in our view to include everything that the CRTC now has to do with respect to the offer of telecom services by Canadian carriers, and it may go beyond that, to any powers that the Governor in Council or the minister may have with respect to the offer of telecommunications services by Canadian carriers.

Again, this degree of uncertainty and this degree of open-endedness is something we think is going to inhibit further participation in the industry rather than contribute to the government's stated goals for this legislation.

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Our third broad concern is with the telecommunications apparatus certification process introduced by clause 8 of this bill. These are the provisions that would follow section 69 of the Telecommunications Act.

Again, we don't see how this is required by either our specific commitments to the WTO or the reference paper. Once again, we're not entirely sure why these provisions are being introduced with this bill and we believe they should be debated and discussed at greater length. Again, the general concern is that these provisions will potentially be onerous to importers and those who are offering for sale any type of telecommunications apparatus and may inhibit activity in that field as well.

Generally, ladies and gentlemen, those are the comments of the media and communications law section about this bill.

The Chair: Thank you very much, Ms. MacDonald.

Mr. Lowther.

Mr. Eric Lowther: For the benefit of myself and maybe the rest of the committee I would like to try to paraphrase what you're saying here, or what you're doing. It seems to me you've taken all the clauses that previous presenters have had issue with here, pretty well the clauses of the bill we've had discussion on and previous presenters have had issue with, as I've said, and you're recommending we just strip these out of this bill and go ahead with everything else but this and then work away on this until October of 1998, when the Teleglobe divestiture is supposed to kick in, and between now and then have these problems solved and go through another legislative process to address these issues. Is that where you're coming from?

Ms. Mairi MacDonald: Roughly speaking, that's where we're coming from. We're suggesting you recommend that the contentious provisions be stripped out.

The timing for international service providers I understand is a bit faster than leaving everything to be discussed until October and making the changes then, but we're concerned that this bill doesn't just address the WTO commitments but a number of other things. Based on what we've been able to see of the record of the reasons for these things and also the discussion of them, there doesn't seem to be the urgency attached to these sorts of provisions which there is to the provisions that bring forth the WTO agreement.

Mr. Eric Lowther: It's interesting that in your point three on schedule 2 you say the licensing regime is not required by WTO agreement. What you're telling us there is that we're stepping into this licensing approach because.... Why? It's the global norm, but not required?

Ms. Mairi MacDonald: I'm not even sure I would necessarily say it's the normal norm. It seems to me the WTO agreement requires certain standards of openness and objectivity in regulation, and a lot of other regulatory agencies and new regulatory agencies being set up are dealing with that through licensing regimes, but it's not the only way to accomplish those objectives.

Mr. Eric Lowther: That's my next question, then. Can you give us an example, because you say here it could be addressed better through a more direct approach, of what might be one of those more direct approaches other than licensing?

Ms. Mairi MacDonald: I understand Stentor has proposed to you an amendment to section 24 of the existing act that would give the commission powers to establish conditions for the provision of service by “telecom service providers”, which is the new term defined in this bill. Off the top of my head, which is about as much time as I've had to think about it, that seems to be an approach that has some merit. Whether it fits structurally with the existing Telecommunications Act and with the jurisdiction of the government over telecom service providers is something I would probably like to give more thought to, but to be going ahead with, that would be a good avenue to explore.

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The Chair: Just before we proceed on that line, Ms. MacDonald, you should be aware that this committee cannot entertain an amendment to section 24 of the act because it would be out of order. I've allowed discussion on section 24 because it has a broader power, but any amendment to section 24 by this committee would be out of order.

Ms. Mairi MacDonald: Thank you.

Mr. Eric Lowther: I guess the point of my question is you're saying there may be more direct means. I'm not suggesting we would necessarily make the amendment, but it might be one way to solve this on a go-forward, not through this committee but through other legislation.

Finally, I would like further clarification on why the Canadian Bar Association has come to this committee. Are you advocates of the Stentor group or are you independents? Do we view you as just a bunch of concerned lawyers who want to help us out, or what?

Ms. Mairi MacDonald: If we're seen as advocates of the Stentor group then I have real problems with my client base. As Tamra pointed out, a very important part of the Canadian Bar Association's mandate is the improvement of law and the administration of justice. At the national level it's divided into sections dealing with specific areas of interest. The media and communications law section deals with a broad range of communications law types of issues, including broadcasting, entertainment, advertising, and media freedom of expression, in addition to telecommunications.

As I tried to explain at the outset, in dealing with any of these sorts of issues, particularly Telecom's, because the bar is so small we take great pains to focus on legal issues particularly, as opposed to the issues that would advance the interest of any of the clients we represent. One of the reasons for that is a lot of our members are in-house with some of the Telecom service providers. So we go to some pains to be fairly neutral on the policy issues.

Mr. Eric Lowther: Thank you very much.

The Chair: Madam Jennings.

[Translation]

Ms. Marlene Jennings: To continue in the same vein as Mr. Lowther, are some of your members legal advisors who work for the government or the CRTC?

To give you some background to my question, I would like to point out that the Quebec bar Association , of which I am a member, set up committees for legislation, justice and criminal law. Often, the members who sit on those committees are representatives of the entire association; for example, there would be Crown prosecutors as well as defence lawyers on the criminal law committee. The viewpoint or consensus that is reached by the committee is a real consensus in the public interest, which is one of the mandates, if not an obligation of the Quebec Bar Association according to law. It must be concerned about public interest. I was wondering whether you also had that type of representation.

[English]

Ms. Tamra Thompson: Perhaps it would be best to explain how the Canadian Bar Association policy is adopted, particularly within a given section.

First of all, the members of a section, such as the media and communications law section, are the experts in their field. CBA policy requires members who participate in the development of any policy to indicate if there are particular client interests on a particular bill that may influence what they bring to that policy-making. We then strive to balance that within the membership of the section.

Secondly, any statement on behalf of a section must be approved by the national legislation and law reform committee, which is a committee that looks at prior bar association policies and balanced public interest and then recommends to our national executive committee whether that policy should be approved. It then goes for approval to the national executive before we can make it a public statement.

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That process has been followed for the particular letter you have received and is consistent with the policies and statements the section has made before this committee on previous bills.

[Translation]

Ms. Marlene Jennings: So am I to conclude that the answer is no or yes? The question was very simple: Are any members of your section lawyers who work for the federal public service, in telecommunications, or for the CRTC, for instance? That's all I am asking; the answer should be "yes", "no", or "I don't know".

[English]

Ms. Tamra Thomson: Members of the section are members of the private bar and in-house counsel for various companies, and work for the federal public service. There is that balance within the section.

[Translation]

Ms. Marlene Jennings: Thank you. In your brief, you recognized that the current Act gives the CRTC powers to govern the activities of Canadian firms that operate domestically, "the domestic market" to use the expression we have heard incessantly over the past few days. Under Bill C-17, the power to issue licenses or to create a licensing regime would be increased to apply to both the international and domestic markets. Do you think the proposed regime in sections 1, 3 and 7 of Bill 17 would give the CRTC more power than it has under the current legislation on the domestic market?

[English]

Ms. Mairi MacDonald: Yes.

[Translation]

Ms. Marlene Jennings: To what extent? Could you give us some very specific, basic examples?

[English]

Ms. Mairi MacDonald: The most obvious example is it appears to try to allow the CRTC to issue class licences that would apply to resellers, which are not Canadian carriers under the existing definitions in the act. So it extends powers, which are not awarded to the CRTC under the existing legislation, to strain in who's allowed to operate in Canada as a reseller. Secondly, it establishes conditions for its provision of service.

[Translation]

Ms. Marlene Jennings: Did you know that a reseller appeared before this committee and asked to be regulated and said it was very pleased to be under the auspices of the CRTC and the powers that it has? Perhaps that might change you opinion of the extent or increase of CRTC powers over domestic resellers?

[English]

Ms. Mairi MacDonald: It doesn't change my view that this bill is proposing to extend the CRTC's powers. I've heard that at least one reseller has come in approving of that measure. My concern is really with the open-ended nature of those licensing powers. Obviously the reseller that spoke to you has a particular objective and agenda with respect to the domestic market, which may be entirely appropriate.

It may also be that the CRTC generally does require more powers to be able to deal with the public interest end of either resellers' or Canadian carriers' operation in local markets, long-distance markets or any other markets. But our simple point is that an open-ended licensing power has the potential to do a great deal more than address particular concerns and issues.

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We're recommending that the specific goal be identified and addressed in legislation rather than simply giving the commission broad-ended powers like this, which we believe will make it more difficult for people to decide whether or not they want to get into this market, or, once having gotten into this market, whether they're still appropriately operating or need to go through more regulatory hurdles that haven't been presented to this point.

Ms. Marlene Jennings: Merci.

The Chair: Thank you, Madame Jennings. Madame Lalonde.

[Translation]

Ms. Francine Lalonde: I was also surprised at some of the comments. There were some useful legal ones, although a lot of your comments seemed to be political and economic in nature. Of course, members of the Bar can make such comments, but they cannot do so in their capacity as lawyers.

If I stick to your precise area of expertise, you drew our attention to the fact that the CRTC would be given the power to delegate. There seems to be an error in the French version of the brief, where you referred to the old rule of delegatus non potest delegare. It said delegator non potest delegare. Surely that is an error; I once taught latin and I am sure it is not delegator. That expression means that the person to whom a power is delegated cannot delegate that power. Is that correct? I would like you to clarify that.

[English]

Ms. Mairi MacDonald: Essentially our concern is that the delegation permitted to the CRTC is really open-ended; that areas that can be delegated to the CRTC, that can be proscribed by the Governor in Council, are not limited in any way; and that we don't know what it is other than the number in resources and administration that is in the mind of the government as it proposes this.

Obviously the government can give the CRTC the power to delegate any powers that are delegated to it. That's fine. That doesn't violate the old maxim.... But to come to a view as to whether or not it's appropriate that this delegation take place, we would recommend that it be more specific and that the scope of what is being delegated be more specific, more clearly specifying that there be more debate and understanding as to exactly what it is that's being intended. Because the power, as written in the bill, is very open-ended.

[Translation]

Ms. Francine Lalonde: Yes, I understand. In fact, if we follow your reasoning, since the CRTC is a public organization, a citizen who felt cheated by a position taken by the CRTC could object to the CRTC. But if the CRTC delegates its power to a private organization, citizens lose their say in any decision or decisions that might be made. I think that is a very valid comment.

Madam Chair, as you said, the more we look into this, the more complicated it gets.

The Chair: Yes, yes.

Ms. Francine Lalonde: But I still don't think it would be very practical to pass just a few of these clauses. In fact, despite what you say, the purpose of this bill is not just to change Teleglobe's mandate. Given the major changes that have occurred in the market, as well as technological advances, I think that we are using this opportunity to revamp the Telecommunications Act. So I think this bill goes beyond merely adapting to the new GATT agreement on services. Thank you.

[English]

Ms. Mairi MacDonald: In response to that last comment, I think that's absolutely correct. I mean, obviously in this bill there are a lot more changes, and far-reaching changes, than are those simply required to deal with our new commitments. But the bill has had a very quick run so far, in our view, and some of those changes may themselves create very far-reaching changes in the industry.

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Our recommendation is that you recommend, in your turn, as a committee that the industry and lawyers and members of Parliament have an opportunity to debate these issues at greater length before they go through, just because they're very broad-reaching powers, and arguably overreaching.

The Chair: Thank you, Ms. MacDonald and Ms. Thompson, for your presentation.

The clerk and I have discussed what you've proposed here, and it does not appear that we can actually sever clauses. We could recommend to the Speaker that it be severed, but in discussions we don't recall the last time that has happened, even with omnibus bills. And this is not an omnibus bill we're talking about, it's just telecommunications. We could delete clauses, and that's something the committee may want to consider, but to recommend to sever clauses and to sever the bill is not really within our power. In the past the Speaker has never accepted it—going back to the 1930s, I understand, without having had the ability to do research. Correct me if I'm wrong, if you have another precedent, but we aren't aware of a precedent that would allow us to do anything like that. But we do take note of your concerns and your presentation.

Ms. Mairi MacDonald: I have no precedent to offer in counter to that. I just wanted to point out that one of the reasons why we've gone this way is that we're not in a position to make strong recommendations that particular clauses be deleted. But we did want to raise these concerns with you from the point of view of the Canadian Bar Association, particularly of my section. We of course leave it in your capable hands as to how you choose to respond to that.

The Chair: We appreciate it, and you definitely have got our attention.

Ms. Mairi MacDonald: Thank you.

The Chair: Thank you very much for your presentation.

I will ask the members to stay behind for a few moments.

The meeting is adjourned.