INDY Committee Meeting

STANDING COMMITTEE ON INDUSTRY

COMITÉ PERMANENT DE L'INDUSTRIE

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, December 2, 1997

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[English]

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

We have a number of witnesses here to appear before us as a committee today, and we're going to have some time constraints because of a vote that's going to take place at approximately 4.15 p.m.

What I propose is that we begin with our first witnesses from the Canadian Wireless Telecommunications Association, who are scheduled between 3.30 p.m. and 4 o'clock. Once they are completed, we'll start with our next witnesses and continue until the bells begin. We're not sure if we're going to have a 15-minute bell or a half-hour bell. It depends what happens in the House, but we'll get word once the bells start. We'll determine how long we'll continue while they're going, but we'll break in time to go back for the vote. Is that's okay with everyone?

We're also going to have to limit our questions and time lines as much as possible. What I propose is to try to ensure that one person from each party has the opportunity to ask questions; however, we are going to be very limited. With that in mind, I will ask not only the committee members but the witnesses before us to make their presentation as brief as they can in order to allow for questions.

I'm not sure who's going to begin. Mr. Poirier, are you doing the presentation?

Mr. Roger Poirier (President and Chief Executive Officer, Canadian Wireless Telecommunications Association): Thank you, Madam Chair, members of the committee. My name is Roger Poirier, and I'm president and CEO of the Canadian Wireless Telecommunications Association, or CWTA. With me today is David Farnes. David is vice-president of regulatory affairs at CWTA. And Christopher Taylor is our legal outside counsel.

[Translation]

The Canadian Wireless Telecommunications Association (CWTA) represents the wireless telecommunications sector in Canada. Our members include cellular, personal communication services (PCS), paging, mobile radio and mobile satellite companies offering services from coast to coast as well as fixed wireless service providers such as local multipoint communications services (LMCS).

We're pleased to be given this opportunity to appear before the committee and to provide our views on Bill C-17.

The Canadian wireless telecommunications industry is today the fastest growing component of the telecommunications industry in Canada and one of the fastest growing components in the Canadian economy, creating thousands of high technology jobs. This year alone, this industry is investing over $2 billion in new telecommunications infrastructure in Canada.

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Today, over six million Canadians use wireless products including four million who have opted for the convenience, the added productivity and security of wireless phones. This is the fastest growing consumer product in history.

[English]

This is the fastest-growing consumer product in history.

In regard to Bill C-17, we are supportive of the government's intent to amend the Telecommunications Act and the Teleglobe Canada Reorganization and Divestiture Act to comply with Canada's commitments as a signatory to the General Agreement on Trade in Services of the World Trade Organization. The commitments that Canada undertook in February of this year represent yet another step along the road to a fully competitive telecommunications industry. This is good for Canada and good for all Canadians.

As the committee is aware, Bill C-17 covers a range of matters, many of which are highly technical in nature. In general, we believe the bill takes a satisfactory approach to the specific issues that it addresses. However, we do have serious concerns about two elements of the bill: firstly, the provisions that introduce a licensing regime for telecommunications service providers; and secondly, the open-ended powers set out in proposed paragraph 46.1(1)(b). In our view, these elements of the bill are overly broad and move in the wrong direction toward increased regulation, instead of towards increased reliance on market forces. Before we discuss these two issues in greater detail, it may be helpful to outline the regulatory regime that applies to wireless telecommunications carriers in Canada.

Members of the Canadian wireless industry are currently subject to regulation under two statutes, the Radiocommunication Act and the Telecommunications Act. Industry Canada licenses wireless carriers under the Radiocommunication Act in respect of the particular radio spectrum and radio communication facilities that they use. These licences generally impose specific terms and conditions on the wireless carrier. In addition, the carrier is subject to any general regulations enacted under the Radiocommunication Act, and which may relate to its particular activities or facilities.

The second form or regulation facing wireless carriers is based on the Telecommunications Act. Wireless carriers qualify as Canadian carriers for the purposes of that act, which means they are subject to all the provisions of the Telecommunications Act, unless the CRTC decides either to exempt them from the act or to exercise its powers of forbearance under the act. To date, the commission has not exempted any carriers from the act. The CRTC has exercised its forbearance powers a number of times, including in respect of wireless carriers. As a result, provided that certain conditions are satisfied, wireless carriers have been relieved of some of the regulatory obligations, such as the obligation to file tariffs. However, they remain subject to other obligations under the act. In addition, the CRTC may, if it so chooses, reverse its forbearance decision and subject wireless carriers to the full weight of regulations under the Telecommunications Act.

Since wireless carriers are already subject to two layers of regulation under two different statutes, they are particularly sensitive to any legislative proposals raising the possibility of even more regulation. Unfortunately, Bill C-17 proposes a licensing regime for telecommunication service providers that does exactly this.

Clause 1 of the bill would add a new definition to the Telecommunications Act: the “telecommunications service provider”. This term is defined in an extremely broad manner and is clearly intended to capture both facilities-based Canadian carriers, including wireless carriers, and persons who do not own facilities but provide basic telecommunications services by reselling the services or facilities of Canadian carriers.

The introduction of this term is not, in and of itself, a problem. However, clause 3 of the bill goes on to introduce a licensing regime for telecommunication service providers.

The possibility of a second licensing regime being applied to wireless carriers is of extreme concern to our members. If the CRTC were to exercise its proposed licensing powers in respect of wireless carriers, these carriers could find themselves subject to two separate licensing regimes, under two separate statutes, administered by two separate government bodies. At the same time, these same wireless carriers would remain subject to the CRTC regulations under the Telecommunications Act as well as being subject to any applicable regulations enacted under the Radiocommunication Act. In our view, it would be highly inappropriate to enact legislation which would permit such a proliferation of regulation.

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It is our understanding that the underlying motivation for the proposed licensing regime is to permit the CRTC to exercise greater control in the regulation of international service providers. If Parliament considers it necessary to give the CRTC further powers for this purpose, it can do so in a much more focused and appropriate manner than is currently set out in Bill C-17.

Specifically, clause 3 of the bill could be modified so that the new licensing regime would apply only to persons who provide international services and only with respect to those services. A general licensing regime is not necessary and should not be enacted.

The second provision we consider overly broad is the proposed new section 46.1, which is introduced by clause 6 of Bill C-17.

The primary purpose of clause 6 of the bill is to introduce provisions that would transfer responsibility for the administration of numbering resources to the CRTC. This is an important amendment to the Telecommunications Act, and we agree that it should be enacted. Unfortunately, however, clause 6 goes beyond numbering issues. Under paragraph 46.1(1)(b), as it's currently drafted, the governor in council would be empowered to enact regulations identifying “any other activities...related to the provision of telecommunications services by Canadian carriers”, which the CRTC would then be authorized to administer.

This is an extremely broadly worded provision which has the potential to significantly extend the scope of the CRTC's powers and introduce new areas of regulation. It is, we believe, an invitation to more regulation, not less. This is not a proper signal for Parliament to be sending at a time when the consensus in Canada, and indeed around the world, is that regulations should be giving way to reliance on market forces.

In our view, it is both unnecessary and inappropriate for Parliament to enact a provision as open-ended as paragraph 46.1(1)(b). There is no foreseeable need for the CRTC to have even greater regulatory powers. In the absence of such a need, we believe clause 6 of the bill should be modified to delete this provision.

[Translation]

In conclusion, we would like to thank the committee again for granting us this opportunity to provide our view on Bill C-17.

We believe the bill constitutes another step in Canada's evolution toward a fully competitive telecommunications market. Our comments today have focused on two aspects of the bill which we believe are out of synch with that overriding direction.

The changes we have proposed are intended to ensure that the gains introduced by Bill C-17 are not offset by the introduction of further, unnecessary regulation. We believe that if Bill C-17 is modified in the manner we have proposed, it will be a positive contribution to the overall goal of enhancing competition in telecommunications, to the benefit of all Canadians.

[English]

In closing, we believe that other amendments to the Telecommunications Act should be made if Canada is to comply with its commitments to the WTO. We would recommend that the committee consider a separate process dealing with section 133 of the Telecommunications Act, which currently exempts SaskTel from the provisions of that act.

Thank you for your time. We would be happy to answer your questions.

The Chair: Thank you, Mr. Poirier.

Mr. Lowther, would you like to begin?

Mr. Eric Lowther (Calgary Centre, Ref.): Madam Chair, I wonder if I could have my question later in the routine, if that would be okay. Maybe one of the others would like to start.

The Chair: Certainly.

Madame Lalonde, do you wish to begin?

[Translation]

Ms. Francine Lalonde (Mercier, BQ): Why exactly are you opposed to subclause 46.1(1) as currently drafted, particularly subparagraph (b)? Don't you think that things are moving so quickly in the world of telecommunications that today we can't foresee what services will be provided two years from now? Since the activities in question are related to the provision of telecommunications services by a Canadian business and are designated by regulation by the Governor in Council, it is important that we have this flexibility. I think there may be a lesson in this.

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Furthermore, don't you think the CRTC, despite the powers it has, has tended to take the market option rather than the consumer option and that giving it more room to manoeuvre in this highly changing field is prudent on Parliament's part, and not the contrary?

Mr. Roger Poirier: I could answer both questions at the same time. We think the bill as it stands gives the Commission very broad powers, as we said earlier.

We think there should be a more costly test for them when it comes to determining why these amendments are necessary. You don't amend the Telecommunications Act every day. So we think it's up to Parliament to decide what powers the Commission should have in this field. We don't think there is any reason why these powers should be flexible.

Ms. Francine Lalonde: For example, the resellers as far as I know are not currently subject to any regulations. Wasn't it necessary for them to be subject to regulations?

[English]

Mr. Christopher Taylor (Legal Counsel, Canadian Wireless Telecommunications Association): I'll have to answer in English, I'm afraid.

[Translation]

Ms. Francine Lalonde: That's all right.

[English]

Mr. Christopher Taylor: There was a very conscious decision made to exclude the resellers back when the Telecommunications Act was enacted, which was only four years ago. The CRTC has a number of regulatory tools to exercise control over resellers, and it has been doing so for a number of years—many years actually, over a decade.

It's not clear that there really is a requirement for broader control. Nonetheless, there has been some suggestion that in the international field it may be appropriate. Our submission is that if Parliament considers that appropriate, then it should restrict it to the international field but not establish very general powers that could be used in wide-ranging and as yet unknown ways.

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

Mr. Walt Lastewka (St. Catharines, Lib.): My questioning is along the same lines as that of Ms. Lalonde. I wanted to know what concerns you had in both those two elements you specify. What was your concern the way it's written today? Could you expand on that? I think we're both asking the same thing.

We'd like to know what concerns you have as a result of the inclusion in proposed paragraph 46.1(1)(b). My understanding is that this section was put there to keep up with technology as things change, rather than to come back to Parliament and go through sittings and so forth. It's that we trust the CRTC to make decisions on that.

I really want to get down to your concerns about the way it's written. What are you fearing?

Mr. Roger Poirier: Our fear—maybe I can ask my colleagues to expand on that—is simply that the provision is too broad both in this section and in the licensing requirements proposed in clause 1 of the bill. This is clearly a move toward more regulation, not less.

We represent an industry that's extremely competitive in the marketplace, and we foresee a day when the regulation of our industry will for all purposes disappear. That has been generally the trend. As we mentioned, even today, we have seen forbearance in regulation for the most part.

We believe that any bill that confers additional powers to regulate and license our industry moves in the wrong direction. If the government wants to confer on the commission powers that it feels the commission needs to deal with specific matters, such as international carriers, then it can do so through a proper definition and by making sure that those provisions of the bill apply to those aspects. But these are sweeping regulatory powers that are being conferred to the commission. We could find ourselves very simply in dual regulation, with dual licensing requirements. This industry clearly wants to move in a different direction.

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Those, in a nutshell, are our concerns, but maybe my colleagues have some more specific points.

The Chair: Thank you.

Mr. Lastewka.

Mr. Walt Lastewka: If we could go beyond those two items that you mentioned, I take it you agree with the rest of the legislation in the way it's written.

Mr. Roger Poirier: We have no major concerns with the rest of the bill, as we've mentioned.

Mr. Walt Lastewka: I understand now the two items that were brought forward, so I have no further questions, Madam Chair.

The Chair: Thank you, Mr. Lastewka.

Mr. Lowther.

Mr. Eric Lowther: Thank you, Madam Chair.

There are a number of questions here, really. First of all, can you see any rationale at all for the licensing component at your level? Is there any legitimate rationale that you could see for why they might want to have that?

Mr. Roger Poirier: When you say “at your level”, is that in relation to the wireless industry?

Mr. Eric Lowther: Yes.

Mr. Roger Poirier: No, absolutely none. Our understanding of that provision is to take into consideration certain concerns in relation to foreign carriers. As we've said, if that is the reason for those provisions, we believe the bill and the changes to the act can be much more focused in dealing with those matters.

The problem with the bill as it now stands is that it's all-encompassing. It would extend powers to the commission, which could see a licensing provision on wireless carriers. As we've mentioned, we are already licensed under the Radiocommunication Act, and we are already subject to the provisions of the Telecommunications Act.

Mr. Eric Lowther: So to clarify, the two parts of the bill that you have the most problem with are the expanded licensing component in proposed sections 16.1 to 16.4, I believe, and the broad administrative powers given in proposed section 46.1(1)(b). Those two components are primarily the focus of your concerns, right?

Mr. Roger Poirier: That's correct.

Mr. Eric Lowther: Now, the fact that Mr. Lastewka mentioned that you did have any other problems with the bill is not so much because the rest of the bill is so solid as opposed to the fact it really doesn't impact on your industry. Would that be accurate?

Mr. Roger Poirier: That's accurate. There are certain provisions even in the changes to the Teleglobe act, for example, which has no bearing particularly on this industry. But for the most part, that is correct.

Mr. Eric Lowther: Thank you.

Mr. Roger Poirier: I should mention that there are certain parts—numbering, for example—in which we agree with the provisions. These are areas that we have been in discussion on for a number of—

Mr. Eric Lowther: Could I just follow up on that comment, Madam Chair?

On the numbering situation and the way in which this legislation is proposing that it be handled, is that the only way this has ever been addressed—through a CRTC, third-party, established body that's going to manage that? Is that an industry-birthed idea as far as you know, or is it a CRTC and regulatory proposal?

Mr. David Farnes (Vice-President, Regulatory Affairs, Canadian Wireless Telecommunications Association): Certainly that's a new proposal. I would think all of the telecommunications carriers in Canada would agree with that approach. The CRTC has fundamentally moved towards a more industry-driven process whereby they establish working committees comprised of carriers and other stakeholders in the telecommunications industry.

Mr. Eric Lowther: Who will fund the cost of the administrative work of keeping track of this number scheme? Is that a government-borne cost or is it an industry-borne cost?

Mr. David Farnes: I think it's fair to say that, to a certain extent, that remains to be determined by the commission. I would suspect that to a great extent, though, those costs will be borne by those carriers participating in that forum. That seems to be the direction in which the commission is headed.

Mr. Eric Lowther: The more questions I ask, the most question I have.

The Chair: Last question, please, Mr. Lowther.

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Mr. Eric Lowther: Okay. There are parts of this legislation that deal with the standards around equipment, with certifying that equipment meets standards in order to be connected to Canadian facilities. The Department of Industry told us that section of the bill was actually taken almost verbatim from the Radiocommunication Act, and that parts of that legislation included in Bill C-17 allow for a new classification of inspector to be created. The legislation also gives that inspector the right to enter into a place of business, basically unannounced, to check records and investigate equipment. Is that consistent with what you live with in the Radiocommunication Act? Do you know?

Mr. Roger Poirier: As you said, there are really no major changes from what is contained in the Radiocommunication Act today. There is a transfer of responsibility to some degree to the CRTC for what we call terminal attachment, and it's not an area that we have major problems with.

Mr. Eric Lowther: So to date, terminal attachment or hardware that does not meet the requirements for your network has not been a problem.

Mr. Roger Poirier: We operate slightly differently, because we're of course wireless.

Mr. Eric Lowther: Right.

Mr. Roger Poirier: We do not have customer equipment attached to the public network as you do with the wire-line type of system. In Canada the terminal attachment program deals with all that equipment, telephones, fax machines, etc., that needs approval before it can be attached to the public network. In our case, phones are looked at under a different set of requirements.

Mr. Eric Lowther: Do you think it's a good idea to have this legislation in there for this standard-setting criteria that's not really there today? That material connected to your networks has to meet some—

Mr. Roger Poirier: I have no comment on that particular area.

Mr. Eric Lowther: Okay.

The Chair: Thank you, Mr. Lowther.

Mr. Eric Lowther: I think it's covered in the other act anyway.

[Translation]

The Chair: Ms. Lalonde, do you have another question?

Ms. Francine Lalonde: You say you are strong companies and that you can defend yourselves in the market. Isn't it true though that Bill C-17 will considerably alter the general conditions? It already appears that there will be quite a fierce business war. Consequently, isn't it necessary for the CRTC and the government to retain powers, particularly in clause 16.1?

Competition or the market can solve problems when there is volume, but when there's no volume, it doesn't solve problems.

Mr. Roger Poirier: Our problem is that the bill, in particular the clauses we spoke of, is simply too broad. Concerns can be addressed with a much more specific bill that defines the problem as it stands. It isn't necessary to have a licensing system for all telecommunications companies in Canada.

Ms. Francine Lalonde: Why not?

Mr. Roger Poirier: It isn't necessary.

Ms. Francine Lalonde: But everything is shifting.

Mr. Roger Poirier: Yes, but we already have a licence under the Radiocommunication Act. We don't want two licensing systems in Canada and two regulatory levels. That's the case for most telecommunications business members.

Ms. Francine Lalonde: For most of them.

[English]

The Chair: Thank you, Madame Lalonde.

I want to thank the witnesses from the Canadian Wireless Telecommunications Association. I understand that we have a few other witnesses who will be raising points similar to yours.

Thank you for appearing first. Now I'll ask you to trade places with our next witnesses from Stentor.

Mr. Roger Poirier: Thank you.

The Chair: We're going to have the presentation from Stentor. I understand that the clerk has handed out copies of their presentation. Does everyone have a copy?

• 1600

I'm not sure who's going to begin. Mr. Mulder, you are? That would be great. We are ready whenever you are comfortable.

Mr. Nick Mulder (President and Chief Executive Officer, Stentor Telecom Policy Inc.): Thank you, Madam Chair, for giving us the opportunity to appear before you. I know that because of the shortage in time, you want to keep us short, so we have an eight-page brief and I'll summarize the first three pages.

Before I do so, I'd like to introduce two of my colleagues. I have with me Greg van Koughnett, who's the vice-president of legal and corporate affairs, and Robert Tritt, who's the national director of international affairs.

For those who don't know the Stentor Alliance, we're owned by the nine full-service domestic telephone companies plus a number of affiliates and associates. We do all their major policy work and so on through Stentor Telecom Policy and government relations and communications.

We very much welcome this legislation and we want to congratulate the government for the steps it's taken to date in pursuing a new model for competition in the international telecommunications area. It's very much a progressive step forward, what they've done over the last year and a half, and we've had a lot of input in the process.

Secondly, we believe very much that the overriding policy objectives should be.... May I continue?

The Chair: We're just going to check on the time to find out if it's 15 minutes. I have a feeling it's two bells. We're just going to confirm that. If you want to continue, Mr. Mulder....

Mr. Nick Mulder: Yes, definitely.

The Chair: I'll cut you off if I have to.

Mr. Nick Mulder: Oh, I'm sure you will. Whenever necessary, votes in the House are more important than a witness. I know that.

We certainly support the thrust behind this legislation, that we have competition.

Third, we very much welcome the passage of this bill. We hope the committee will see fit to pass it as soon as possible. As we were saying to some of the members beforehand, we like the overall design of the house, but we'd like to move some of the furniture and probably create a back door.

The Chair: Mr. Mulder, I do apologize. It's only a 15-minute bell, which means we'll recess now and come back right after the vote. But everyone has your presentation to take with them to read.

Some hon. members: Oh, oh!

Mr. Nick Mulder: I'm sure they will all do that on the way to the House.

The Chair: I apologize, but we will adjourn until after the vote.

If committee members could return as quickly as possible, that would be greatly appreciated.

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The Chair: I'll call the meeting back to order, please.

I apologize to our witnesses. We're going to have to do some fancy time work here. We have to still be finished by 6.15 p.m. or we're going to get interrupted by another vote. So I would ask that our witnesses be as brief as possible.

I know I read the report with fascination. It was very interesting. So, Mr. Mulder, would you continue where we left off.

Mr. Nick Mulder: Thank you, Madam Chair, and thank you for coming back.

I'm on the middle of page 4 of our brief. There are just 3 short pages that I would like to highlight. In the first full paragraph, we want to turn now to the issue of amendments that the Stentor companies wish to propose for your consideration. As I said before the break, we overall like the legislation and we hope it gets enacted reasonably soon.

These amendments have in common that they seek a single purpose to ensure that the bill is true to its original purposes but does not create an unnecessary regulatory burden and risk in achieving the desired goals.

Our proposed amendments address three topics that I want to touch on them briefly: licensing, new powers accorded to the commission, and partnerships.

First, Madam Chair, I wish to address the concept of licensing carriers. Although common across the globe, licensing has not, to date, been the Canadian way. Indeed, the original draft of the Telecommunications Act, when it was tabled in the House in 1992, envisaged the licensing regime, and wisely in our view, the House of Commons committee and the Senate removed those provisions from the bill in favour of substitution of direct authority over Canadian carriers. The direct power of the commission to make orders against telecommunications service providers is quick, cheap and efficient.

Madam Chair, the concept of licensing for international services has, since the successful WTO negotiations early this year in Geneva, been considered desirable, though not in law essential, to bring the former Canadian regulatory regime into harmony with the majority of our major trading partners. In the U.S., for example, licensing is carried out for international services, although not for domestic services.

However, it is in our view not essential to provide in the Telecommunications Act a complete overlay of licensing. Licensing should be restricted, in our judgment, therefore, to international considerations only. Thus in clause 3 of the bill, we propose that the word “international” precede the term “telecommunications” services each time it appears in that clause.

I would like to bring, Madam Chair, to your attention one final matter concerning licensing. The committee may wish to consider a form of sunset clause to ensure that this new form of oversight by the CRTC does not extend beyond its useful life. Our colleagues from TELUS will be addressing this matter in detail later on this afternoon when they appear before you.

Secondly, Madam Chair, as this bill took shape, several matters in addition to licensing emerged that we understand as desirable. One of these is the administration of numbering resources by the CRTC, addressed in clause 6 of the bill through the addition to the Telecommunications Act of proposed paragraph 46.1(1)(a).

With this provision, we and other parties, we think, heartily agree. We do not object to that at all. At the same time, however, Madam Chair, paragraph (b) is added to this subsection to permit the commission to administer “any other activities that the Governor in Council may prescribe”.

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Madam Chair, at the present time, there are no activities contemplated that we understand will require in law the use of this new and arguably very broad statutory power. We are uneasy about the proposal that Parliament will delegate the ability to extend the bill into totally new areas concerning activities of Canadian carriers. In our view, Parliament should limit the new statutory powers accorded the commission to those considered necessary to address specific problems currently before the commission, or reasonably forecast to soon be before the commission.

Indeed, Madam Chair, it is of significance that the Telecommunications Act specifies that one of the objectives of telecommunications policy, to quote paragraph 7(f) of the act, is:

(f) to foster increased reliance on market forces for the provision of telecommunications services and to ensure that regulation, where required

—and I underline the words “where required”—

is efficient and effective;

In our submission, Madam Chair, it would be appropriate, as a reflection of the current and future reliance on competitive forces in the telecommunications field in Canada, to delete proposed paragraph (b) from proposed subsection 46.1(1), with the requisite consequential deletion and renumbering in a few other parts of this bill.

We believe the deletion of this paragraph is consistent with the CRTC's own thinking, and we note here that the chairperson, Françoise Bertrand, noted earlier this fall the need for new approaches. As she put it while discussing her vision for the commission before the Canadian Business Telecommunications Alliance in Toronto on September 16, the old commission used to say “we shall regulate it”; the new commission will say “regulate it if it is necessary”. She also noted in that speech that while the presence of the commission will still be required “in carrying out our regulatory responsibility, we will not hesitate to get out of the way whenever we can”. So we think our suggested amendments are consistent with that direction of the CRTC. This therefore helps to reinforce our view that the CRTC should seek to diminish its current regulatory role and should not be accorded any additional powers that are not demonstrably necessary. If they are necessary, well, perhaps we should consider them. But we haven't heard of any.

Third and finally, Madam Chair, we wish to address one provision that relates to clauses 4 and 5 of the bill, and that deals with expanding the ambit of committed service providers from corporations to include partnerships of corporations. This is desirable for financial planning purposes. In our view, this concept is so desirable that it should be expanded beyond the scope of international submarine licences. Therefore, in our view, there would be a significant benefit to the Canadian telecommunications industry to permit partnerships of eligible corporations explicitly in subsection 16(1) of the Telecommunications Act.

Madam Chair, for ease of reference for the committee, we have attached an appendix that outlines the specific amendments that you could take a look at. I want to thank you and the members for listening to our brief and our suggested improvements to the bill. I want to stress again that we like the overall thrust; however, we just think there are some areas where it can be improved and refined.

Thank you.

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

Mr. Lowther.

Mr. Eric Lowther: Thank you, Madam Chair.

I thought that was an excellent submission. The quotes from Madame Bertrand and the thrust that the CRTC seems to be going in certainly seem to be in conflict with some parts of this bill, as you've pointed out, Mr. Mulder.

From Stentor's position here, I'm wondering about something apart from even the licensing at a national level or that of the basic telecommunications service providers within Canada. I'm wondering about this whole idea of licensing at all, even at an international level. We had the industry in here saying that we're licensing because, as I recall, all the other people are doing it. Because that's the case, we're going to do it too.

I assume we're licensing to protect against something. Do you have any insights into what we're trying to protect against with these international licences?

Mr. Nick Mulder: Madam Chair, perhaps Greg van Koughnett will want to elaborate in more detail, but I don't think it has anything to do with protection. It has more to do with making sure all the players in a new regime—and this is an entirely new regime, in which there will be open competition in telecommunications for international services for the first time—will understand what the requirements are.

We think it's a good idea to have a licensing regime in the initial phase, so that everyone is clearly aware of what the obligations are. But that also means that down the road, whether it's two years or five years from now, there ought to be a sunset provision. By then, the players will know what the regimes are, and there will therefore no longer be any necessity for licensing.

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Mr. Eric Lowther: So what's the worst case, though, if we didn't have international licensing? There's some cost to this licensing and somebody's bearing it. And I'm assuming it's going to be the taxpayer, so I'm trying to figure out what the benefit of this international licensing is. Where's the payback? What are we protecting with this international licensing?

Mr. Nick Mulder: Again, I don't think it's protecting things. It just makes sure that everybody knows what their roles and obligations are.

Greg, do you want to comment on the cost?

Mr. Greg van Koughnett (Vice-president, Legal and Corporate Affairs, Stentor Telecom Policy Inc.): Thank you, Madam Chair.

Mr. Lowther, there is an advantage to the Stentor companies in an international licensing regime from the point of view of the complexity of policing an errant, non-WTO country. There are only 69 signatories. There are a lot more than 69 countries. Some countries may decide to try to take advantage of international arbitrage opportunities, even though, strictly speaking, they're not legal.

Although it is possible to address those bad actors using the current regime, Stentor ends up being the ham in the sandwich. The Stentor company tariff is the mechanism by which such bad actors are currently policed. With an international licensing regime, there would be a license accorded to the actor that would be pulled by the commission, so Stentor would be left out of the equation.

Mr. Eric Lowther: Are you saying these bad actors are not part of the WTO agreements?

Mr. Greg van Koughnett: That's right.

Mr. Eric Lowther: So you're saying that we can't, through the Competition Act or some other vehicles within Canada today, deny these bad players access to the Canadian market and say, hey, you can't play here because you haven't signed on to the WTO agreement. We can use the WTO agreement as our vehicle for who plays and who doesn't play. We don't need this regulatory regime at an international level.

Over and above that, I've heard this concern about the Canada-Canada bypass, but I believe that the greatest concern we have there is in the American market. And due to the competition in long distance that we have, the scenario of the Canada-Canada bypass being more cost-effective in the United States is not as attractive as it was and the likelihood of it happening has dropped a lot.

To me, there's no real value in this whole international regime in trying to protect this Canadian market, unless I'm missing something.

Mr. Nick Mulder: I hope we haven't left the impression that we want to do this to protect anything. It's just that with this opening up of a telecommunications business that had been a monopoly, as you start unrolling it you have to make sure that everybody knows what the obligations are and what the conditions are and so on. So to have a period of time to have a licensing regime in place seems to make sense to us, because everybody would be in the same boat.

But then after a while you can get out of it whether or not you're a WTO signatory, and particularly, as Mr. van Koughnett points out, if you aren't part of the overall deal.

Mr. Eric Lowther: I appreciate your comments, but I still have not heard why we need it, except that you kind of feel it would give us all a comfort zone.

Let me ask you a closing question and give somebody else a chance here. Let's say we cannot change this bill, so it's going to allow the licensing right down to the basic telecommunications service provider, as it does today, to resellers and the whole works, all the way up to international players. Would Stentor choose to see this bill pass as it is or would you rather not have it at all?

Mr. Nick Mulder: That's a very good question, but I have some difficulties with the premise that the committee cannot make amendments. I assume that if the majority of the members feel that amendments should be made, then amendments will be made. If we had to choose between the two—without talking to my colleagues here—I would say that overall we think this is important legislation. It is substantial progress in the whole field of telecommunications and the degree of competition. Therefore, on balance, if you force me to choose between one or the other, I'd say you should pass the legislation and we'll deal with those other issues later.

But as I said, I'm hoping that if the majority of members here think our suggestions are positive, you will take them in that vein.

• 1655

The Chair: Thank you, Mr. Mulder and Mr. Lowther. Mr. Murray.

Mr. Ian Murray (Lanark—Carleton, Lib.): Thank you, Madam Chair.

I want to continue on the same line, essentially, about the need for this regulation. For example, as you mentioned in your presentation, at the present time there are no activities contemplated that would in law require the use of this new, and arguably very broad, statutory power. You quoted Madame Bertrand from the CRTC.

When this bill was being contemplated and drafted over some period of time, I assume the Stentor company had some discussions with government as this was being prepared. I'm just trying to understand what's really behind having these regulatory powers included in the bill. It sounds like it may not be from the CRTC. Did you come across any compelling reasons given by any government official as to why those should be in the bill if the CRTC itself is suggesting that the world is moving toward a deregulated environment?

Mr. Nick Mulder: Mr. Murray, those are good points and I'll deal with them.

The first thing is that we had general discussions with officials in Industry Canada and the CRTC. We're certainly aware that they were going to repeal the Teleglobe Canada Act and implement a licensing regime. We did not have the benefit of seeing a draft of this bill. At one stage some lawyers were shown briefs with details, but they were sworn to secrecy, so we had no chance to comment on the details of this.

As I indicated, we like the overall legislation. We just think certain provisions in there could be improved upon, and those are the ones.

It includes the issues in terms of the point you refer to, Mr. Murray, where you talk of the powers of the governor in council. We have not been able to determine so far what those functions might be that would be transferred over. Certainly we agree with numbering and anything associated with numbering. We think there's merit in having it to go over to CRTC, but we aren't aware of any immediate issues that are currently being handled elsewhere that anybody is thinking of transferring over.

As we said, if we knew of them, we would say do them, but then put some constraints around it and say that it has to be within an existing telecom act and it should be consistent with the evolving role of the CRTC. It should, in some cases, be put at arm's length from the CRTC so it could be transferred to the private sector.

We think the current wording is very broad. I don't want to sound cynical, but depending on who the minister or the governor in council of the day is, you could say all of a sudden that some whole new functions are been considered for the CRTC.

Since we don't know of any rationale, we thought perhaps either there should be restrictions placed on it or that it should just be deleted. If in future there were functions, then Parliament should be asked to bless those functions.

Mr. Ian Murray: It seems reasonable. That's all I had, Madam Chair.

The Chair: Okay, Mr. Lastewka, you wanted to ask a follow-up question on that.

Mr. Walt Lastewka: I was just going along the same line, and I wanted to

[Editor's Note: Technical difficulty] Mr. Lowther. I think that's one of the reasons we have these hearings. We want to hear all the stakeholders as we get the bill down further with the different readings.

I'd like to commend you on your presentation and being right to the point on how you think it should be changed. I have no questions on it. I understand your position very clearly in terms of how you would like to have the changes made. I'm sure the department and we committee people have the opportunity to understand it better. Thank you very much.

The Chair: Thank you. Madame Lalonde.

[Translation]

Ms. Francine Lalonde: I'm trying to understand. Define international telecommunications service providers. What would that be? You have proposed clauses, but there should be another one that defines international telecommunications service providers. What would they be?

Mr. Nick Mulder: Ms. Lalonde, I'm not an expert on the subject. Mr. van Koughnett could answer you.

Ms. Francine Lalonde: Yes, I want an answer.

Mr. Greg van Koughnett: They are simply resellers and public suppliers who have facilities, like Bell Canada and the other members of the Stentor Alliance. There are currently two types of companies in Canada: resellers and other companies that have facilities. As we said 30 minutes ago, the original attention of the Telecommunications Act was never to submit resellers to regulation by the CRTC.

• 1700

Now, with the regime under this bill before us today, the resellers will be captured by the licensing system, but not by the other provisions of the Telecommunications Act itself.

Ms. Francine Lalonde: I don't understand. Excuse me.

Mr. Greg van Koughnett: I remember this was also a problem for Mr. Michael Binder last week. I'll try to answer once again.

Ms. Francine Lalonde: I'm in good company.

Mr. Greg van Koughnett: Let's start with this new definition of "telecommunications service provider". The idea is to capture resellers for the first time.

Ms. Francine Lalonde: Yes, that's clear.

Mr. Greg van Koughnett: That's what Parliament is trying to do by providing in lines 11 and 12: "including by exempt transmission apparatus". The word "exempt" indicates that resellers were excluded when the Telecommunications Act was drafted. Now resellers will no longer be excluded.

As to the international question, resellers may be companies that have their own facilities and that enter the field of international telecommunications. The fact that the facilities belong or don't belong to the company that provides the service has no bearing on the question whether the company is entering the field of international telecommunications.

Ms. Francine Lalonde: The bill's intention is broader. According to the Department, the intention was really that it be broader.

Mr. Greg van Koughnett: Ah, yes.

Ms. Francine Lalonde: So limiting that to resellers will have consequences.

Mr. Greg van Koughnett: No, the intention...

Ms. Francine Lalonde: Your own intention.

Mr. Greg van Koughnett: Our intention is to capture the resellers and the companies that have their own facilities, but simply... Do you have our brief?

Ms. Francine Lalonde: Yes.

Mr. Greg van Koughnett: The idea is simply to include the word "international" in clauses 16.1 and 16.3 so that licences are simply given to companies that go into the field of international telecommunications.

Ms. Francine Lalonde: You said it. Why do you object to this definition in the bill?

Mr. Greg van Koughnett: We have no problem with the definition.

Ms. Francine Lalonde: Perfect. You can live with the definition, as you said earlier, even if it isn't reduced...

Mr. Greg van Koughnett: Yes, you only have to add the word "international".

Ms. Francine Lalonde: All right. If we didn't add the word "international", would that be a problem for you?

Mr. Greg van Koughnett: No.

[English]

The Chair: Thank you.

Mr. Lowther assures me he has one brief question.

Mr. Eric Lowther: Madam Chair, you are too kind to me.

It sounds as though your position is almost identical to what we had from the previous presenters. Is that true? It's the same licensing concern, the same proposed section 46—

Mr. Nick Mulder: Yes. We suggested that you might consider—and the TELUS people will talk about this—sunsetting the licensing provision. As well, we have a technical amendment on the partnership, to allow a broader set of incorporations.

Mr. Eric Lowther: I wonder, Mr. Mulder, for the benefit of the committee, if you could give us your drivers behind this sunset component. Why would you endorse the sunset component to the licensing provision?

Mr. Nick Mulder: Well, at least in principle; I don't want to steal the thunder from your fellow Albertans from TELUS, because Mr. Addy will deal with that.

Mr. Eric Lowther: Okay.

Mr. Nick Mulder: Ultimately, though, we think it could be done the same way as the current regime is, without licensing. It ought to be at least considered. It's consistent with where Madame Bertrand is at, that they should get out of the business because it's no longer necessary.

• 1705

Mr. Eric Lowther: If you were to choose—and I phrased this question incorrectly last time—between passing the bill with a licensing regime as it is or go without a licensing regime, which would you choose? I apologize for not saying it right last time.

Mr. Nick Mulder: It reminds me of going to a wedding: you're asked which side of the aisle you want to sit on, whether you want to be on the bride's or the groom's, and I'm the friend of both. Can't I have both?

I go back to the principle that if the majority of the members.... I've been involved in enough legislation to know that on balance, when the House, or sometimes even the Senate, but certainly the House of Commons, makes improvements, changes, the bill coming out is better than it was coming in. So I'm going to go on this basis.

The Chair: Madame Lalonde, one brief question.

[Translation]

Ms. Francine Lalonde: I just read an article in Business Week entitled "What the Free Market Can't Fix". Even Ms. Bertrand has a Canadian telecommunications policy to enforce. As it says here, "markets do not regulate themselves."

Mr. Nick Mulder: No, that's true. In general, there are a number of cases where regulations are necessary, but not here.

Ms. Francine Lalonde: We're going to continue looking at that.

Mr. Nick Mulder: All right.

Ms. Francine Lalonde: Thank you.

[English]

The Chair: I want to thank the witnesses from Stentor. This was a very good brief and it was an interesting discussion. I have the feeling the people who follow will build on what you've had to say. We appreciate your enduring with us through the vote and I apologize if it has caused any inconvenience.

Mr. Nick Mulder: Thank you. It's understood.

The Chair: I now ask TELUS to join us, Mr. George Addy. Everyone should have before them the TELUS package.

Mr. Addy, I would hope your plan is not to read it in full.

Mr. George Addy (Executive Vice-President and Chief General Counsel, TELUS Corporation): No. I'm very appreciative of the committee's time, Madam Chairman. I just wanted to introduce myself. I'm an executive vice-president and chief general counsel for the TELUS group of companies. We're an Alberta-based group of companies. I've given you some material which I won't review.

With me is Mr. Phil Rogers, who is counsel to our company. He will be joining me and I'll be deferring technical questions to him, since he is much more conversant with them than I am.

Madam Chairman, you have our submission. I don't plan to read it. I'm going to jump right into the concerns, which you have heard twice already today and which we will be building on, the concerns relating to the licensing regime.

The bill proposes to introduce for the first time in Canada a new system of regulation of telecommunication service providers. Although Canada has had a licensing regime for radio and wireless transmitters, this is the first time we're seeing it expanded beyond that. A broad-based licensing approach was originally proposed when the telecom act was reviewed and amended in 1993 and it was rejected at that time. We think the same considerations as were brought to bear on that occasion should be brought to bear at this time.

The practice of regulating by licensing, particularly in a dynamic, competitive sector such as telecoms, is a practice which in our view should be applied, if at all, with great restraint. Once introduced, licensing systems have generally proven very difficult to abolish. I give you an interesting little anecdote in the document about printing presses. I won't refer to it now.

We appreciate that during the transition period from now until March 1, 2000, when the last of Canada's telecom monopolies will end, a temporary licensing system may assist the CRTC to monitor, and where necessary regulate, the conduct of new international service providers operating in Canada. It may be particularly useful in dealing with those which are affiliated with foreign monopolies or non-WTO countries or non-signatory countries.

With that limited objective for licensing in mind, we would support what you've heard today already on the narrowing of licensing by introducing the word “international”—those parameters—into clause 3 of the bill. It's our view that when you do that, only international services, which are primarily the intent and the focus of the legislation, will be addressed by the bill, and it will more accurately reflect its objectives.

• 1710

As Mr. Mulder suggested, we also believe consideration should be given to a sunsetting provision. Mr. Lowther referred to the issue of the costs of licensing regimes and who bears those, etc. Because of those associated costs, we suggest the licensing regime should not extend beyond its useful life, which we are proposing is until March 1, 2000. We can respond and amplify on why that date when the questions arise.

[Translation]

In view of the rapid transformation of the telecommunications universe, a two-year time period is already provided. Competition at that time will undoubtedly be stronger than it is now and, after March 1, 2000, if Parliament considers that the licensing system should remain in effect, despite the high degree of market competitiveness, it can pass an appropriate amendment to the Telecommunications Act to extend it if that's the case.

I would also like to draw your attention to the proposed new paragraph 46.1(1)(b), which you've been hearing about today. We agree on the other comments made on this subject today.

[English]

Paragraph 46.1(1)(b) as currently drafted is a sweeping and undefined provision that would, by cabinet order, permit regulation and administration of any telecommunications activity. There is no indication of what types of activities this provision is aimed at. There is no limitation on the scope of that power.

In our view, in an industry as dynamic and competitive as telecom, the government should clearly define the areas or matters it believes cannot be left to the market to resolve. A broad, unrestricted discretionary power to prescribe activities to be administered by the CRTC will introduce a significant and unnecessary element of uncertainty into this sector. That uncertainty adversely affects service providers, their customers, and the telecommunications investors.

Undefined discretionary powers to regulate or administer telecoms are inconsistent with the Government of Canada's policy to rely primarily on competition. They are also inconsistent with the trend—clear and evident trend, in my view, Madam Chairman—toward less regulation, which is evident in all our major trading partners. They are also inconsistent with Canada's commitment to an open, transparent framework, embodied in the new WTO agreement.

Both the lack of a sunset provision and the broad, unrestricted discretionary power are also inconsistent with the principles of regulatory simplification and reform enunciated by the OECD report on regulatory reform, released in May of this year and endorsed by the government in May of this year at the ministerial summit.

I recall from past experience that generally the Minister of Industry attends those summits, and if that was the case this year, the minister sponsoring this bill was also endorsing that report. I don't have copies available. I have one, which I can leave with the clerk, if that's of interest to you, Madam Chairman.

I would point out that the second policy recommendation on regulatory reform from the OECD is that there should be a system to review regulations systematically to ensure that they continue to meet their intended objectives efficiently and effectively. They are proposing review proposals for new regulations as well as existing regulations; that regulations and their proposals should integrate a regulatory impact analysis into the development, review, and reform of regulations; and that there should be update to regulations through automatic review methods such as sunsetting.

The document from the OECD says that in May of this year, ministers welcomed the report and agreed to implement its recommendations in their countries. It's on that basis, Madam Chairman, that I'm suggesting this committee should give consideration to the issue of a sunsetting provision in the legislation.

I've had the opportunity to listen to the comments of the speakers before me, and in the interest of time, I will stop here. You have our full submission and I'm prepared to address questions on matters I haven't spoken to.

• 1715

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

Mr. Lowther.

Mr. Eric Lowther: Thank you, Madam Chair.

I think it's interesting that three presenters we've had here are lining up on these same areas. I think we can applaud that these industry groups are so much in sync with some of the concepts in the CRTC's vision document I have here, which calls for a move from a more constrained and regulatory environment to broader competition and less regulation. So it seems we're all pretty much on track, and it's comforting to know that this committee process actually adds some value here.

I have a couple of questions, though, for clarification. In regard to the sunset provision, Mr. Addy, that you're talking about, and that the Stentor group also talked about, does having it there help competition or does it hinder the growth of competition and strengthen this industry? Which way does having it there move us?

Mr. George Addy: The thrust of the studies that have been done on it, and in particular the OECD report of this May, was to try to make governments aware of the costs associated with regulatory regimes and that sometimes the appropriateness of a regulatory regime is overtaken perhaps by technological development or other developments within a particular country, but there's a lag in freeing and therefore a burden to the marketplace of that regulatory regime. The thrust of the report is that those costs are lost, that it's wasted economic value, if I can use that term. We've done it in Canada in other legislation. I think the Bank Act has that type of a provision, the bankruptcy legislation has that type of provision, where there's a mandatory review after a period of years to ask whether we still need this.

The alternative is to say it ends on a date certain, whatever that date is. Or you can say there shall be a review on a date certain to ensure that there's the constant check that the economy isn't suffering from inappropriate or no longer appropriate legislation or regulation.

Mr. Eric Lowther: So is it fair to say, then, based on what you're saying there, that having the sunset provision in the legislation sends a signal to the industry that at some point in time there will not be the protection that licensing through the CRTC offers you; so, guys, you'd better get your act together, because some day this protection's going to be gone. This way we're just sending a warning shot over the bow, whereas if you don't have it there and you give them the sense that they will always live in a protected environment, the urgency to network on a global basis maybe wouldn't be there to the same extent. Is that a fair statement, do you think?

Mr. George Addy: That's very fair.

You're addressing two notions. One is the issue that uncertainty may shelter inefficient economic activity, whereas the certainty of a particular date will provide certainty to the industry and they can plan their investments, they can plan their strategies and so on, with the knowledge that the environment or the scheme will be dissipated at a certain point in time.

One of the costs I think people frequently forget about is the cost of resources that don't get into a regulated sector because of the uncertainty. Businesses have to invest funds, and if you can invest in an environment where you have more certainty as to what the laws, parameters and the rules are, as opposed to an environment where you're subject to a discretionary power and you're not sure what activities might or might not be captured, the tendency would be to invest on the side where you have a better idea of what the environment's like so you can make the proper business decision on what the return will be, etc., and make the appropriate business choices.

So there's both the cost of people within the regime who just don't get their act together and don't innovate, and they don't develop and they don't improve, they don't continue to earn their customers' loyalty or business, and then there's the other cost of investments that are lost because of that uncertainty.

• 1720

Mr. Eric Lowther: So I suggest to the committee that, based on Mr. Addy's comments and what we've heard here today, having the sunset clause in the legislation actually moves us in the direction in which the CRTC has already stated they want to go, providing an environment where there is increased competition.

Thank you.

The Chair: Thank you, Mr. Lowther. Mr. Shepherd, please.

Mr. Alex Shepherd (Durham, Lib.): You touched on the aspect of international trade negotiations. Is there merit—you're probably going to say no—in having a regulatory regime to use as a lever for possibly our own international telecommunications industry that wants access to foreign markets?

In other words, we're aware that countries will use a regulatory regime as an artificial restraint of trade. Is that part of the philosophy behind some of this regulatory regime—not so much to discipline the national network but rather to ensure that artificial barriers to trade do not limit access to other countries?

Mr. George Addy: I think there are two components to that. I will ask Mr. Rogers to address the second one, where I think what you're getting at is whether we need it. I think that's implicit in your question.

The first part, dealing with whether it is useful to have this card in our pocket to trade on the international trade table, is an interesting notion, but frankly, I would rather not even be at the table. It's difficult for me to take the position that I would enjoy being traded off on the world trade table for cedar shakes or something else. I'd rather stay out of that arena entirely, thank you very much.

As to the legal merits of whether you need that to protect yourself from foreign-based competitors in the international service business, I'd like to defer to Mr. Rogers, if you will.

Mr. Philip G. Rogers (Legal Counsel, Gowling, Strathy and Henderson): There are some situations you can envisage in which there may be countries, not part of the WTO telecom agreement we're speaking about, who could be in a position to exercise some abuse of their position since they're not committed to an opening of the market, as are all the other countries that have signed the deal. In that respect, a licensing regime for an interim period might make some sense, although it should be revisited, as Mr. Addy was suggesting.

With respect to whether or not it's strictly necessary to accomplish that, and only licensing will achieve that, there are good legal arguments to say that you don't actually need licensing. There are other mechanisms in the legislation today the commission could use to protect against the kind of foreign entry into Canada that prejudices the Canadian market.

So it is a tool, but not necessarily the only tool.

Mr. Alex Shepherd: But I was driven somewhat by some of our trade partners having a regulatory environment themselves.

Mr. Philip Rogers: If you're speaking about our trading partners who've signed on to the WTO agreement, as Canada has, the 69 countries, they are all committed to an opening of their markets, according to the schedule of commitments of each country. The United States, for example, did have a regime, described in their parlance as the “eco test”, that they have now abandoned as a result of this WTO agreement. They are operating on the basis of a policy announced by the FCC about ten days ago, that there is, in effect, a presumption of valid entry by other countries, such as Canada, into their market, because they're accepting that other countries will go forward with the commitments embodied in the WTO regime.

So vis-à-vis those countries, we have the regime of the WTO to protect Canadians here and Canadians who go overseas to enter into other markets.

Mr. Alex Shepherd: Having said that, though, because it's not perfectly clear that other countries are going to totally abandon the regulatory regimes, is it appropriate for our country today to at least have one in place that we could then “take off the table”, to use Mr. Addy's thought process?

Mr. Philip Rogers: First of all, we have not in any sense abolished our regulatory regime in Canada. The CRTC and the government are moving forward—correctly, in our view—to reduce the level of regulation. We encourage that, and wish it to continue, but there is a regulatory regime still in place in Canada. The commission still has the power that exists under the present act, the Telecommunications Act, to address abuses, to issue powers of orders of connection or disconnection against parties that are abusing the rules or taking advantage of bypass that may be against the commission's rules.

• 1725

So those are mechanisms that are in place today, and vis-à-vis where things go forward in the future under the new WTO regime, we also have the protections that are afforded each of the member states, which is a generalized regime of disciplining those states that do not comply with their obligations under the agreement.

The Chair: Thank you, Mr. Shepherd.

Madame Lalonde.

[Translation]

Ms. Francine Lalonde: I'm going to refer to a provision that the other presenters did not address. On page 4, you say that if the proposed clause 46.6 had to apply and if a fund were created to support access to affordable service—which we support—the fund administrator should be appointed by private industry. It seems to me this is little much because this is precisely to ensure that the responsibility assigned to the CRTC to enforce Canada's telecommunications policy—and I would like it to be Quebec's policy, but it is Canada's—is implemented. So making access to basic service affordable should not be up to a president selected by the private sector.

Mr. George Addy: I believe there has been a misunderstanding, Ms. Lalonde. We are not saying there should not be a fund and that there should be no regulations respecting fund raising, etc. We are saying that since we are putting money on the table and we have been assigned responsibility for administering the fund, we would like to be able to choose who will manage the fund. This does not in any way remove the CRTC's power to establish regulations as to the fund's applicability.

Ms. Francine Lalonde: Do you want to talk about the financial issue?

Mr. George Addy: That's it, the administration.

Ms. Francine Lalonde: "Administrator" could be a broader term.

Mr. George Addy: All right, but it's subject to standards established by the CRTC.

Ms. Francine Lalonde: The other arguments are sound. I'm not convinced of the need to limit international providers, but I'm going to continue searching, thinking and talking with the committee. Thank you.

[English]

The Chair: Thank you.

Thank you very much, Mr. Addy. We appreciate your presentation. It's getting more interesting as we go on today, and I'm sure it will over the next few days. We definitely appreciate your bearing with us due to the time constraints and the short notice for the committee and being with us today.

Mr. George Addy: Thank you, Madam Chair. Is there an interest that I leave with the clerk a copy of the report that I was referring to?

The Chair: Yes, that would be satisfactory. I would ask you now to trade places with Bell Canada.

So that Bell Canada and ACC TelEnterprises know, I'm going to divide the remaining 45 minutes between you. You each have approximately twenty-two and a half minutes. Bearing that in mind, if you could try to keep your presentation between five and seven minutes, that will allow fifteen minutes for questions.

That being said, we have Mr. Courtois and Ms. Gervais. I'm not sure who is beginning.

Mr. Bernard A. Courtois (Group Vice-President, Regulatory, Bell Canada): I will be speaking.

[Translation]

Thank you, Ms. Whelan. Good afternoon, ladies and gentlemen. On behalf of Bell Canada I want to thank you for this opportunity to present our views on this very important legislative initiative. I am accompanied today by Linda Gervais who is our Vice-President responsible for Federal Government Relations.

Bell Canada is here today to comment on Bill C—17 from the perspective of years of experience with the Canadian regulatory regime as the largest domestic telecommunications carrier in Canada.

Bell Canada is also a member of the BCE group of companies, some of which have had considerable experience with regulatory regimes in foreign markets, which I could describe to the committee if necessary.

• 1730

[English]

I will begin by saying that Bell Canada supports the WTO agreement and supports quick passage of Bill C-17 to implement it. Both are important in the general trend to make all sectors of the telecom industry competitive. In particular, Bell believes effective competitive alternatives to Teleglobe will help our industry grow and provide benefits to our customers, whether residential, business, or government.

We also support the amendments proposed by Stentor and discussed earlier today. We wish to bring our own perspective primarily to the issue of the licensing regime.

We supporting licensing for international traffic, because much of that activity goes on beyond our borders and licensing is the accepted way of dealing with this around the globe. In light of an earlier discussion, we have considerable powers today to regulate what goes on in Canada, even for international traffic, and experience has shown that does not work in standing up for Canada's interests and implementing Canada's rules. A licensing regime appears to be the way to resolve that.

However, when it comes to regulating the domestic market, Canada has rejected the licensing approach in the past and the Canadian approach has proven to be more efficient, more effective, and beneficial for customers. Furthermore, experience in other countries that have used the licensing approach for their domestic market has demonstrated that it can be quite problematic compared with the Canadian method.

[Translation]

The domestic telecom market in Canada is one of the most open in the world. We have achieved enviable results in terms of both prices and effective introduction of competition. Let me give you some examples:

-Canada's long distance prices are among the lowest in the world and are comparable in U.S. prices.

-Our local business prices are about the same as those in the U.S., but ours feature larger local calling areas and no additional charges for usage.

-Canada's local residence prices are lower than U.S. prices, even with the proposed third step of rebalancing to take place in January 1998. And they offer larger local calling areas, flat rate calling, and a more modern basic network.

-Canadian Internet access prices are the lowest of all OECD countries.

-In Canada, the prices we charge long distance carriers who use our local network to connect to customers are much lower than in the U.S.

Equal access, a key enabler of long distance competition, was ordered by the CRTC in 1992. We began to implement equal access in Canada in the summer of 1994 and we completed it within six months. In comparison, the US ordered equal access in 1982, began to implement it in 1984, and it took about eight years to achieve what Canada had in a few months. In the UK, equal access is still not available even though competition was introduced in 1985.

[English]

These are just some of the illustrations—I can give you others—of how the Canadian approach has been successful. I will point out that this success depended on the co-operation of the Stentor members in getting a lot of these things done, as well as on having a single regulator with the full power to resolve disputes and prescribe solutions as challenges presented themselves. That's the main difference between the Canadian approach and the licensing approach.

In contrast, in the U.K. the licensing approach has created much delay and resulted in inaction because the licence conditions didn't permit much flexibility. The regulator there found great difficulty in resolving disputes as they came up because they were not prescribed in the licence conditions.

In New Zealand's case, the licensing regime caused basic interconnection disputes to be dealt within the courts. They went all the way up to the judicial committee of the Privy Council. It took 10 years, and the judgment was that they had to go back to the negotiating table and start all over again. It's no wonder we were able to accomplish a lot more with the direct intervention method we have in Canada, compared with licensing.

So although we support licensing for international traffic, we strongly believe we should not embark on the provision of licensing for any domestic activities.

There's another concern about licensing for domestic activities which is significant for a company such as Bell Canada. It's the uncertainty it would generate for investors. The telecom industry requires massive investments, and we in Bell Canada in particular must compete for very substantial sums of capital in global markets, and these markets, as we all know, are particularly edgy at present.

• 1735

Investors tend to shy away from risk and uncertainty. We believe it would be detrimental to our Canadian industry to contemplate superimposing a licensing regime that would overlap, duplicate, or confuse the traditional Canadian regulatory regime which is already in place for domestic activity and which has served Canadians so well.

Lastly, I would like to mention one other part of the bill. It's one you've heard something about this afternoon, the part that deals with administration of numbering and subsidies.

It has been known for some time now, as we worked with long distance competition and as we anticipated coming on with local competition, that assigning jurisdiction and providing for administration as prescribed in the bill would be useful in these two specific areas. However, proposed paragraph 46.1(1)(b) would create jurisdiction and allow for administration of any other activities the governor in council may prescribe and that are related to the provision of telecommunication services by Canadian carriers. This concerns us because we do not know what new jurisdiction, unspecified, is either needed or intended.

In our view, if we do not know the extra jurisdiction or the new jurisdiction we're envisaging, let someone be clear about it and state what it should be. Then we can all appreciate, and the committee can appreciate, whether it should be added to the law. If we don't know, let's have the government come to Parliament for jurisdiction if, as, and when that jurisdiction is needed. Let's not write a blank cheque in the legislation.

[Translation]

In conclusion, in the race among industrialized countries to have the best telecommunications infrastructure and an environment conducive to global competition, Canada has the opportunity, equipped with the right regulatory policy and objectives, to remain in the forefront of the race. Let's not stop that momentum by imposing a domestic licensing regime.

Thank you for your time. I will be pleased to answer any questions you may have.

[English]

The Chair: Thank you. Mr. Lowther is next.

Mr. Eric Lowther: Thank you, Madam Chair. One question.

The Chair: One question?

Mr. Eric Lowther: And maybe a few sub-questions.

The Chair: I'm getting excited.

Mr. Eric Lowther: I want to deal with one issue, and that relates to your comments around the international licensing requirement, that we need that, yet you clearly point out, very succinctly and very well, that within a domestic environment it breaks down. People try to sort out who is at fault, there are long legal cases, etc.

It seems to me from what we've heard here today that if we as a committee buy into the concept of a sunset clause in this legislation, so at some point there will not be a licensing regime—we have had suggested to us March 2000, two years or so away—it's going to be short-lived at best if we buy into that. This whole licensing thing is going to be short-lived at best at an international level.

Again, if we're moving towards increased competition and all that good stuff, why do you think the international licensing scenario will work well in an international environment? It doesn't work well in a domestic environment, yet we're putting all this infrastructure in for a two-year window. Can we not do without it, particularly considering that this bill doesn't even kick in for Teleglobe until October 1998 and then 2000 for the Telesat portion?

Do we really need it, is what I'm thinking. I don't see the up side here. I see a lot of cost and work to protect against something such that none of us are really sure what it is. Where is the payback for the effort applied? Give me a perspective on that.

Mr. Bernard Courtois: There's a very narrow purpose to an international licensing regime. Domestically, all these complicated issues that are needed to implement competition and protect the public interest as you would go through this transition period are about things that happen domestically—the terms of interconnection. You put the various parties and issues together, and complex issues arise and the regulator can arbitrate. That's what our Canadian regime is very good at handling.

• 1740

The need for international licensing is essentially a matter of routing the traffic. For example, you can have a company that has a monopoly at the other end, that takes Canadian traffic, and that charges 50¢ for every minute you send across. But they can come to Canada, take traffic through private lines, take their own traffic that they sell to Canadians, and pay only 5¢ on a private line when it's their traffic but charge 50¢ when it's a Canadian carrier trying to enter traffic in their country.

In order to try to enforce comparability of rules and comparability of treatment and of preventing abuses, we have to try to follow the traffic. With modern equipment, you put in modems and machines that transform the signal into digital form, so it's going to be really difficult to really track where that call goes. Internationally, what the various countries do.... With a licensing regime, you have jurisdiction over the service provider and you can force the service provider to report on the routing of its traffic on a regular basis. When you look at the routing of traffic, you find an imbalance, you find some anomalies in where the traffic is going. You can then smoke into that and say someone is not following the rules.

That's why licensing, which gives.... For example, in Canada we don't regulate resellers. You have resellers that can operate here, and there's no direct jurisdiction for the CRTC to force them to tell the CRTC where their traffic is going. You then try to rely on the Canadian carriers to tag that traffic and follow it. As I explained, that gets very difficult.

So for the international sphere, there's a very narrow purpose for the licensing. Whether the need for that will disappear in the year 2000 or 2002, or whether it will need to go on after that because all countries will not have signed the WTO and there's still room for abuses, are separate issues. But in terms of the domestic regime, as I said, you have a much broader scope of things you are trying to regulate, and you need much finer tools and much more direct intervention.

So on the international scale, it has a very narrow purpose. It's very special.

Mr. Eric Lowther: It still seems to me that we could handle that perhaps at a WTO level. That's a comment, not a question, because I want to respect my earlier promise to the chair to ask only one question.

Mr. Bernard Courtois: Not all countries signed the WTO. Not all countries will ever sign the WTO. There will always be some on the outside.

Mr. Eric Lowther: But we can exclude them from access to Canada if they don't sign.

Mr. Bernard Courtois: No, there's no way to exclude anyone. At the moment, the Canadian market is wide open. You set up a business and you start selling before you have to get any permission from anyone. You just set up shop. There's no permission required to start a business in Canada, whether you're from Timbuktu or from Hull, Quebec.

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

Mr. Murray.

Mr. Ian Murray: Thank you, Madam Chair.

Mr. Courtois, we haven't heard many fans of domestic licensing this afternoon, but it's probably fair to say that we could anticipate hearing from some in the future as witnesses continue to appear. I'm just trying to understand whether or not you're aware of how licensing could benefit some of your competitors, or if there's a case to be made for licensing. If there's no business case for it—and as I say, I don't want to anticipate what we might hear, but obviously this has been put in here by somebody for a reason—can you suggest someone who might benefit from our licensing regime?

Mr. Bernard Courtois: Yes. One party, ACC, is coming up just after us, and the question has arisen with respect to them. They would like to be considered a competitive local exchange carrier, but they're not a carrier, they're a reseller. Because resellers are not covered by the act, it's a question of whether or not they can take on all the obligations of a competitive local exchange carrier and then get the rights and privileges that come with those obligations. I guess it's one of the uses that's been mooted about having a domestic licensing regime. But in our view, if you want—

Mr. Ian Murray: Sorry, but are you suggesting it's a sort of back-door entry into the market?

Mr. Bernard Courtois: Yes. Someone has said that because you can't control resellers, they may not be on the same plane as carriers and should not necessarily have the same rights. It's come up with the question of competitive local exchange carriers, and it's not clear that the CRTC has identified a need for this. It's just that some parties have said that if the legislation perhaps allowed you to licence resellers, you could capture them there and impose the conditions of protection of the public that you want to impose. Our view about it is that is you would not cause violence...you shouldn't overlay a whole licensing regime on the Canadian domestic scene to achieve that.

• 1745

There's a already a section in the act, section 24, that allows the CRTC to set broad conditions for privacy or for any other thing it wants in a market. You just need to change the expression there from “Canadian carriers” to “service providers” and you would be able to impose conditions on resellers. You wouldn't be regulating their tariffs—that's in section 25—but you would be achieving it in the same way as the whole structure of the Canadian regime is set up.

If instead you go and create something completely new, like a licensing regime for the domestic providers, then, as I say, you create this concern, this uncertainty, because you take two regimes that are essentially not the same and superimpose one on the other, and then you have all the problems.

You might ask ACC whether they think they should come in under the bill or come in under the Telecommunications Act in some way. And if so, as I'm saying, use section 24. Don't create a whole new licensing regime for the domestic scene.

Mr. Ian Murray: Thanks.

The Chair: Thank you, Mr. Murray.

Madame Lalonde.

[Translation]

Ms. Francine Lalonde: Do international telecommunications service providers include Americans?

Mr. Bernard Courtois: Yes. We are satisfied with any dictionary definition. It's international from the moment traffic crosses borders, whether into the United States or oversees. So the definition of international is not a problem.

Ms. Francine Lalonde: Can this liberalization of international telecommunications bring other competitors into the Canadian domestic market?

Mr. Bernard Courtois: The Canadian domestic market was open prior to the agreement. So perhaps...

Ms. Francine Lalonde: In concrete terms, this could bring in others.

Mr. Bernard Courtois: That could be the case.

Ms. Francine Lalonde: It would be the result of natural laws.

Mr. Bernard Courtois: When countries, France, Germany or Japan, see their own markets attacked by foreign companies, their businesses may try to participate to a greater extent in foreign markets. But it must be said that Germany and France are already allied with Sprint in the United States.

As for Japan, it's uncertain. The Japanese have just won the power to go outside their country. This is the biggest business in the world. But I have to say that the biggest names in telecommunications in the world are already here in the Canadian market. We were open before the agreement. So we won't make any appreciable changes here.

Ms. Francine Lalonde: It's hard to see you without thinking of what is happening with the end of your own monopoly. The end of the monopoly is causing problems for consumers in particular. We can read and read again about prices in Quebec and Canada being the lowest in the world, but consumers have still seen increases that they consider very big for basic telephone service.

I say that to emphasize that the market can't solve the problems on its own and that, consequently, even if everyone wishes the CRTC's role were no longer necessary, it seems to me that, since we have a telecommunications policy and I would like to be a Quebecker, we will still have to have a regulatory body. My first occupation was the study of the history of capitalism, and history teaches us that there is always competition, and it may be fierce, until there are two or three major players that come to terms with each other, even unofficially. So consumers will always need protection. History shows us that the market is not paradise.

Mr. Bernard Courtois: Yes, it's true that the big players in the world are bigger than we are here in Canada. However, we should bear in mind, as was said earlier today, that the law isn't disappearing and that the CRTC's powers do not disappear under this bill. The CRTC will always be able to intervene when it considers it necessary to do so.

However, once the CRTC and government have opted for competition in order to go more quickly and foster innovation, diversity and adjustment to customer needs, regulating prices, rates and so on goes against the grain. We have opted for the market as a way of regulating prices and rates.

When you've opted for the market, you may or may not trust the market, but it's the market that now sets prices.

• 1750

It should also be said that consumers as a whole have not had an increase because of what has happened, because the consumer price index does not include, for example, discount services and competitors' long distance services.

Since competition has arisen, the price of telecommunications in Canada has not increased. The basic price has dropped, if you consider long distance rates, because it is hard to say today that long distance is not a basic service. Long distance is essential to people.

Ms. Francine Lalonde: It was established that you had to pay $40 a month to have... We'll have to discuss that. Thank you very much.

Mr. Bernard Courtois: It will be a pleasure for us to discuss it.

[English]

The Chair: Thank you.

Mr. Bellemare, one question.

[Translation]

Mr. Eugène Bellemare (Carleton—Gloucester, Lib.): Perhaps it's Canadian distributors, that is to say resellers, that aren't subject to regulation?

Mr. Bernard Courtois: That's correct. When the Telecommunications Act was passed in 1992, Parliament chose not to regulate all resellers. So businesses that have transmission facilities are not regulated.

[English]

The Chair: Thank you, Mr. Bellemare.

I'd like to thank you, Mr. Courtois, for appearing before us. We are getting into a very complicated area today, and it's going to be quite the discussion.

Thank you, Ms. Gervais, though we didn't hear too much from you.

We'll hear from ACC TelEnterprises now. We have before us Ms. Barrett and Mr. Horhota.

I'm not sure who's beginning your presentation, but I would just remind you we do have a time line. We do have to leave at 6.15 p.m. There will be no bells to stop us. I will just stop us. As I left, I was told there would be no bells.

Mr. George Horhota (Vice-President, Corporate Development, ACC North America, ACC TelEnterprises): We'll respect the time constraints.

The Chair: Thank you, Mr. Horhota.

[Translation]

Mr. George Horhota: Ladies and gentlemen, we are pleased to be here today to present our position on Bill C-17.

[English]

We're very pleased to appear before your committee.

I'd like to introduce Maggs Barrett, who's our executive vice-president responsible for the local business in Canada, and I'm responsible for corporate development on the North American basis.

ACC is a reseller and is very supportive of the licensing regime that Bill C-17 has introduced. We are supportive of the government's initiative in this respect, and further in our presentation we will outline the specific reasons a reseller would be supportive of licensing criteria.

We do believe CRTC should have the flexibility to apply licensing requirements in circumstances where the CRTC believes it to be in the public interest. We're not suggesting licensing across the board for all players at all times. We're suggesting that the CRTC have that power and authority to us it when it sees fit, when it believes it to be in the public interest.

Consequently, we do not share the views of some of the presenters who appeared here before us. These parties are concerned that the commission will use licensing to expand its regulatory mandate, in fact to possibly become obstructive or even draconian. They advocate that licensing be restricted only to the international regime. A much greater concern, however, is that the commission might exclude unregulated resellers from certain activities if the commission believes it can't exercise appropriate regulatory supervision over them.

The powers of Bill C-17 address this concern by ensuring that the commission will have the tools it needs to supervise resellers, so the resellers will be able to provide a full portfolio of telecommunications services. I will note to the three previous presenters, who are opposing domestic licensing, that interestingly enough, the net result of that position in fact will be a lessening of competition in local telecommunications in Canada, so one has to take the result of their submission in that context.

I will also point out Mr. Mulder's citation of the CRTC chairman's view of regulation; he quite correctly characterized it as “regulate if necessary”. Well, indeed, if necessary, but without the licensing power that this bill introduces, the commission will not have the ability to make that decision. It will not have the tools with which to regulate or not regulate.

• 1755

I won't go into detail about who ACC is—you can read it in our submission—except to say that we have been in Canada since 1984. We have been competing here longer, in fact, than Fonorola and Sprint. We introduced our own switches in 1990, and in 1992 we became a full-service competitor.

Today we have 500 employees in Canada, and we count among our most special achievements a significant service provision to the university and college market. We provide service to 65 colleges and universities, to their alumni, to their students, to their faculty, and return a portion of our revenue to the education institutions, about $5 million in the last three years. So, in fact, there is a very vital role for a reseller in the Canadian market, as ACC has demonstrated through its excellence in the educational sector.

We are, in fact, the first competitive provider to offer—and competitive being to the Stentor members—a full bundle of telecommunication services: long distance; Internet; paging; and for the business community, Centrex, which is a local business service and it resells the phone company's own service.

For a reseller, the key contribution to our customers is in fact being very customer focused, and innovative, and flexible. So we are in fact a reseller that adds value to the services we buy. I will underscore that we do in fact support Canadian carriers to a very high degree. We spend about $100 million a year purchasing infrastructure—that is, transmission facilities—from the Stentor members, Rogers Network Services, Videotron, Fundy Cable, Shaw, and so forth. We also invest in Canada by operating and owning our own switches and support services.

It's important to understand that a reseller offers a very unique contribution to the Canadian telecom environment, and we want to ensure that resellers can continue to provide a full portfolio of services in this environment. That in fact does require the licensing powers that this act contemplates, and Maggs will discuss those.

Ms. Maggs Barrett (Executive Vice-President, Local Market, ACC TelEnterprises): I wish to spend a moment to describe the sections of the bill that we support, why we support the bill as it is written, and underline the requirements for flexibility in a licensing regime.

You're very aware of clause 3 of Bill C-17. It contains a proposed licensing regime for telecommunications services. The commission is granted the power to specify classes of telecommunications services for which a licence is needed. No telecommunications provider can offer a service within a specified class unless a service provider first receives a licence from the CRTC. The licence conditions can either be for an individual carrier or they can establish a class for many carriers.

One of the government's reasons for establishing a licensing regime was to allow the CRTC to regulate the competitive provision of international services, whether by a Canadian carrier or a reseller. The proposed licensing regime covers more than the international services, however, as you've just heard, and grants the CRTC wide regulatory powers over whatever providers the CRTC decides should be licensed.

ACC understands that a number of parties wish to limit these licensing powers to just international services. They see no need for the broad licensing powers with regard to domestic telecommunication services. Unlike the international arena, they do not believe there's any pressing need to limit the domestic telecommunication services. Moreover, they worry that granting the CRTC power to license domestic telecommunications could be potentially intrusive.

ACC, on the contrary, supports Bill C-17's approach to licensing. We believe the CRTC should have the flexibility to impose licensing in appropriate circumstances, whether in the domestic or international arena. Consequently, ACC disagrees with those parties who seek to restrict the CRTC's licensing power to deal only with international services.

It may see odd or counter-intuitive to have an unregulated party coming before your committee and asking for regulation. Why would we, in fact, speak in favour of possibly imposing regulation on unregulated carriers?

The answer is very straightforward. A licensing regime will ensure that the CRTC can always impose regulation on resellers in the appropriate circumstances, and I want to underline “the appropriate circumstances”. I want to underline “the appropriate circumstances”. This means that the CRTC will not feel it must prohibit resellers from engaging in certain activities simply because they cannot regulate them.

• 1800

If ACC is faced with the choice of being able to offer certain circumstances or only offering them on a regulated basis, we will always, understandably, choose the latter. ACC does not wish to be prohibited from offering certain services because we are unregulated.

This problem is practical, as you probably understood from the previous presenter. Recently, a situation arose where the inability to regulate resellers led the CRTC to decline to open a new area of activity to resellers, namely the local telecommunications market.

The CRTC's May 1 decision, which was described as 97-8, was structured in such a manner that in order to impose consumer safeguards and other obligations on local service providers, only regulated Canadian carriers could enter this important new telecommunications market.

There was no problem with resellers, as raised by the CRTC. There was nothing wrong with resellers participating in the market, but the end result was that, without regulation, resellers were in fact excluded.

ACC has asked the CRTC to reconsider this aspect of their decision. We have proposed a mechanism that we believe satisfies the CRTC's concern in this specific case. We are confident the CRTC will respond positively to our request, given the commission's stated desire to encourage entry into the local marketplace.

However, the lesson we learned from this particular experience is that this situation might arise in other reseller activity and that reseller activity should be regulated in certain circumstances. This is the belief of the CRTC. Therefore, we need to have a mechanism to address this specific belief.

Although licensing may not be necessary in all cases, and in fact we would suggest in a lot of cases that it absolutely is unnecessary, there may be instances where licensing is indeed the best approach. ACC believes the CRTC should be given the flexibility to apply the most suitable approach to deal with issues before it, including, in appropriate circumstances, the imposition of licensing.

I want to draw to your attention the possibility of this coming up in the very near future. The payphone industry is shortly to become unregulated. There's the question of how you participate in that particular industry. For example, issues such as the maximum price that can be charged, access to services such as 911, and operator services will be on the table. If it's deemed that regulation is the only appropriate way to allow people to enter that particular marketplace, then a whole class of service providers will be excluded.

Therefore, ACC supports the licensing provisions of Bill C-17. We believe there are good public policy reasons for granting the CRTC the power to implement licensing for telecommunication service providers, including resellers whether an international or in the domestic arena.

I would be happy to answer your questions.

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

Mr. Eric Lowther: Thank you for the presentation. That's an interesting perspective. I'm trying to make sure I heard it correctly. Sometimes it's best to try to paraphrase it and see if I got it right.

I think what I heard was that if you're able to be licensed, then you feel you would be able to play more actively and be involved more. You wouldn't be excluded. It's almost like we would like to go under this regulatory umbrella so we won't be excluded from participation. Is that kind of what you are saying?

Ms. Maggs Barrett: Exactly so. The present situation is such that regulation is presumed and deemed necessary to impose certain conditions on the participants in the marketplace. So terms and conditions for entry are asked to be filed in tariffs. Tariffs are regulated through the CRTC. As a reseller, we could file tariffs, but the CRTC has no jurisdiction to regulate those particular tariffs. So when the conditions are such that it is deemed these conditions must be met in order to enter a market, we cannot enter that market and meet those conditions under the present form of the bill, because we are not regulated. We are by design not regulated.

• 1805

Mr. Eric Lowther: I wonder, though, if that's not a bit simplistic. Put us under regulation so we can participate. And to take your case in point, the one with the access to local telecommunications market, just to now issue you a license or put you under some licensing regime may not have actually automatically made you fit the thrust of what was intended for local competition players. I think there were other factors in that particular example to do with ownership, etc., that were criteria for those who participated in the local market. Just buying into “regulate me so I can play”, you may find that along with regulation there's a whole list of other parameters that would exclude many of the resellers from being able to play because they wouldn't qualify for the license or whatever.

I think there are other factors here potentially that I wonder if you've given some thought to.

Mr. George Horhota: Yes, but it would be the commission's purview to make those decisions. The commission decided to open the local market to competition in the public interest, in fact in consumers' interest. It's very enthusiastic about ensuring that the maximum number of players provide service, but it's very conscious of ensuring that the public interest is protected, so vital services like 911 have to be regulated.

There are quite a few issues regarding the public, particularly the consumer interest, that require oversight. The only way the commission can provide that oversight is if the provider of a service is a carrier. The only one that can be a carrier is a Canadian-controlled company.

The commission's issue on local competition wasn't to exclude foreigners from providing resold services, because resellers are not excluded from providing any services today. The commission simply wanted the lever, the ability, to regulate anyone who provides local service, and to do that it requires effectively licensing authority to bring a reseller who happens to be foreign-controlled under its jurisdiction.

The Chair: Thank you, Mr. Lowther. Mr. Bellemare.

Mr. Eugène Bellemare: Thank you, Madam Chairman.

How much revenue does your company make a year?

Ms. Maggs Barrett: The Canadian company will come in this year at around $170 million and the corporation will be about $380 million U.S.

Mr. Eugène Bellemare: You say you spend about $100 million a year, so you are making a profit of about $70 million.

Ms. Maggs Barrett: It's not a profit of $70 million. What we're saying is that we're spending $100 million with Canadian carriers on leasing of facilities from them or using their equipment, buying minutes from them and things like that.

Mr. Eugène Bellemare: For all the equipment and the material you use that belongs to another company, do you have to pay for this or are you getting any free rides anywhere?

Ms. Maggs Barrett: There are no free rides.

Mr. Eugène Bellemare: There was this question by one of the witnesses that the terminology “Canadian carriers” should be changed to the true meaning of “resellers” in the law.

Ms. Maggs Barrett: He actually was saying “service providers”, so he was changing the definition in a section of the act from saying “Canadian carriers”, which it says today, to “service providers”, which it doesn't say today.

Mr. Eugène Bellemare: What's your comment on that?

Ms. Maggs Barrett: Basically I would suggest that what we're dealing with here is the need for a reseller to enter all markets available. Today we don't have that particular ability. I couldn't tell you if he's right that by changing those particular two words in that section of the act it would in fact do what we need. We know this will do what we need.

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

[Translation]

Ms. Francine Lalonde: Is there currently a grey market among resellers?

• 1810

[English]

Ms. Maggs Barrett: I apologize for the fact that I cannot answer you in French.

Today resellers do one of two things. We put in switches and lease our transmission facility from another carrier, as do, in fact, AT&T, Sprint and Fonorola. The only difference is that they also have some in-ground facility . We have no facility, so 100% of our facility is leased from a Canadian carrier. So in that case, we provide service. There is no grey market.

There is a second class. You can purchase in bulk from one carrier, and because you have a huge buying power you can resell that to a smaller class of customer, let's say a residential customer. I'll give you a very simple example. I will buy minutes at 7¢ and I will sell them at 15¢, so that is where my profit lies. Again, that's not a grey market.

Am I being clear? I hope so.

[Translation]

Ms. Francine Lalonde: Yes. However, you would like a licensing system that would make it easier for you to do what you do now. Is that correct?

[English]

Ms. Maggs Barrett: The commission has deemed that certain consumer safeguards must be met, which we absolutely agree with, and the way those conditions are met is through a Canadian carriers' tariff. Today we can't file that tariff and therefore we can't demonstrate that we are willing to meet those consumer safeguards. Therefore we can't participate in certain markets.

We wish to have a licensing regime that will allow us, through the terms of that licence...and it's very clear that the licence would have specific terms associated with it that would include access to emergency services or whatever. The consumer safeguards would be built in. In order to meet the terms of the licence, we would have to agree to those specific conditions. At that point, we would be able to enter a marketplace and do what we need to do.

[Translation]

Ms. Francine Lalonde: Madam Chair, I would have liked to receive their brief before hearing the other witnesses because I would have had other questions to ask them. So if it is possible in future to obtain the briefs before the sitting, if they are available, that would be a good idea.

Why in your view are those who spoke before you opposed to your having a licensing system? Is that one way of keeping you out of the market?

[English]

Ms. Maggs Barrett: Absolutely. Very clearly. We did indicate earlier that by not allowing this and by allowing all parties to benefit from a specific marketplace, and by setting the terms and conditions in that marketplace—which, by the way, does not mean that a Canadian carrier would necessarily have to apply for a license, because the terms of the licence go by class of carrier, so it could apply to us without applying to them—by eliminating that opportunity, it eliminates us from participating in the market.

In the present positioning on the local that we have gone before the commission with, we believe our position does allow us to put forward a mechanism that will allow us to enter the local marketplace, and it's interesting to note that Stentor group was the only group that opposed that particular way of us entering the marketplace. So yes, I would say that it is absolutely a way of restricting competition.

Mr. George Horhota: Madame Lalonde, Mr. Courtois kindly suggested an amendment when he said that we could come in under section 24. If this would help, we would be very happy if he would support us in front of the commission with our application for a review of variance. I don't think that support is forthcoming, so one can read the motivations in that. The fact of the matter is that we don't fear the commission. We will subject ourselves to the commission's decisions and will happily do so, unlike those who appeared before us. In some ways, they would probably like the commission to disappear. We don't fear the commission at all.

The Chair: Thank you very much, Madame Lalonde. I understand that you prefer to receive the briefs in advance. There will be other witnesses coming before us who will discuss this issue and you can raise these questions with them at that time.

• 1815

Thank you very much, Ms. Barrett and Mr. Horhota. Thanks to all the witnesses for bearing with us in regard to time constraints.

I was informed there would be no bells. It now being 6.15 p.m., I will call this meeting to an end and we'll adjourn until tomorrow. If there are bells, I apologize, but that was the message I was given. Thank you.