Proceedings of the Standing Senate Committee on
Transport and Communications
Issue 2 - Evidence, April 22, 2009
OTTAWA, Wednesday, April 22, 2009
The Standing Senate Committee on Transport and Communications met this day at 6:31 p.m. to study on emerging issues related to its communications mandate and to report on the wireless sector, including issues such as access to high-speed Internet, the supply of bandwidth, the nation-building role of wireless, the pace of the adoption of innovations, the financial aspects associated with possible changes to the sector, and Canada's development of the sector in comparison to the performance in other countries.
Senator Lise Bacon (Chair) in the chair.
[English]
The Chair: Before we hear from our witnesses, I want to discuss next week's schedule. On Tuesday morning, we will be dealing with Bill S-220, an act regarding commercial electronic messages, the anti-spam law presented by Senator Goldstein. He should be appearing before the committee on Tuesday morning.
On Wednesday, I am told that many of the Liberal senators will be leaving to attend their convention; as a result, I do not think the committee will meet on Wednesday, if honourable senators agree with that. We will do the same thing for the other side.
We hope to have Bill C-9, on which Senator Mercer will make a speech. If there are no other people wanting to speak, it will be sent to us by the Senate. We will see if witnesses wish to appear before the committee on Bill C-9. We will then proceed with clause-by-clause study of the bill. We hope Minister Baird will appear before us on Bill C-9.
For our May and June meetings, we will continue our hearings on the wireless industry. I appeared before the budgets subcommittee this afternoon. We do not know yet whether we will be travelling to the U.K. and France. We will see what the answer is with respect to our budget. I do not think it will be long before we have an answer, so we will be getting ready for the trip. We should start with France, followed by the U.K.
We might continue with Bill S-220 after that, but we always have to deal with government bills. We may have to deal with Bill C-3, to amend the Arctic Waters Pollution Prevention Act. Bill C-7, an act to amend the Marine Liability Act and the Federal Courts Act and to make consequential amendments, is still in the other place. Those bills will be before us in the coming weeks. The report on Bill C-3 was presented in the House of Commons on April 3. It has not been sent to us yet. With respect to Bill C-7, a meeting was held with an official yesterday, and the bill was referred to the Standing Committee on Transport, Infrastructure and Communities. It might be a while before we get it, because it would still have to go back to the house.
On our agenda today, we are dealing with the study on emerging issues related to our communications mandate and to report on the wireless sector, including issues such as access to high-speed Internet, the supply of bandwidth, the nation-building role of wireless and the pace of adoption of innovations, the financial aspects associated with possible changes to the sector and Canada's development of the sector in comparison to the performance in other countries.
Our witnesses today are from the CRTC, the Canadian Radio-television and Telecommunications Commission. We have with us John Traversy, Executive Director, Telecommunications; Michel Murray, Acting Director, Decisions and Operations, Telecommunications; Bill Mason, Manager, Competition Implementation and Technology; and Steve Malowany, Manager, Financial and Technical Reports, Industry Analysis and Reporting Telecommunications. Welcome to our committee. I think there was a problem with pages 2 and 3 of your written presentation, but someone is looking after that for us now.
Please begin your presentation.
John Traversy, Executive Director, Telecommunications, Canadian Radio-television and telecommunications Commission: Thank you for that, and good evening. Thank you for your invitation for us to contribute to your study on the Canadian wireless industry.
As the chair mentioned, with me today from the CRTC are Bill Mason, Manager of Competition Implementation and Technology, Michel Murray, Acting Director of Telecommunications Decisions and Operations, and, on my right, Steve Malowany, Manager, Financial and Technical Reports, Industry Analysis and Reporting Telecommunications.
[Translation]
The CRTC is an independent public authority charged with regulating and supervising the Canadian broadcasting and telecommunications industries. This means that we oversee more than 1,000 telecommunications service providers operating in Canada, including wireline and wireless telephone companies.
Since 2006, our approach to regulating the telecommunications industry has been consistent with the government's policy direction. The direction requires us to rely on market forces to the maximum extent possible.
[English]
As a result, we regulate only when market forces are not sufficient to achieve the policy objectives of the Telecommunications Act.
Today, I should like to focus on the two most dynamic segments of the telecommunications market — that is, wireless services and broadband Internet services. I understand that Len St-Aubin, Director General, Telecommunications Policy Branch, Industry Canada, appeared before you earlier this month and provided you with various statistics and figures. I will do my best to avoid repeating the same information. However, we will be happy to provide you with any figures that may be of interest to you after our presentation.
With respect to wireless services, in recent years the pace of technological change in the telecommunications industry has increased dramatically. One of the more interesting advancements has been the evolution of cell phones from the bulky and expensive devices of the 1980s to the sophisticated smartphones available today. Wireless is now one of the major drivers of the industry. The number of subscribers has increased substantially in recent years, from 11.3 million in 2003 to 20.3 million to the end of 2007, with an average annual growth rate of slightly over 11 per cent. We expect that this trend will continue in the future, although the growth rate will likely slow as the market begins to mature more and more.
Propelled by this growth in subscribers, as well as by the introduction of mobile devices with more features, wireless services generated some $14.4 billion in revenues for telecommunication service providers in 2007. When compared to other telecommunications services, wireless was easily the largest segment of the industry and accounted for 38 per cent of all revenues, up from 25 per cent in 2003.
According to the most recent figures we have, the three largest service providers serve approximately 92 per cent of the market place. However, the industry may be headed for a major change with the arrival of new players. Further to the government spectrum option, as many as seven new service providers could soon be entering the marketplace.
As we indicated in our 2008 Communications Monitoring Report, wireless penetration rates in Canada are behind many of the companies in the Organisation for Economic Co-operation and Development. We are optimistic that the new entrants will be able to further expand the market and to attract additional subscribers, hopefully to grow the pie.
Of course, the current state of the economy is one of the major obstacles new entrants will have to overcome. Just last week, Telus reported its results for the first quarter of 2009, showing a drop in new wireless subscribers and in revenues of existing customers as compared to the previous year, suggesting that customers and businesses are starting to cut back on their usage. At the same time, we are pleased to hear that Telus indicated that it still plans to go through its major upgrade to its wireless network as part of a joint project with Bell Canada. This was announced earlier in the year.
Some of the new entrants, such as Globalive and Videotron, have announced that they plan to launch services in late 2009 or early 2010. In order to do so, they will need to make significant investments to build their networks and to hire staff, actions that can only help to stimulate the economy.
We will be watching closely to see what impact the new entrants will have on the marketplace. Our hope is that consumers will be the clear winners, with greater access to next-generation technologies that can provide more options to Canadians.
As you may know, the CRTC does not regulate the rates of wireless services in Canada. In fact, we have not done so for over a decade. In 1996, the commission determined that market forces could reasonably be expected to serve and ensure that consumers would benefit from competitive prices and service plans.
It is worth noting that many service providers currently offer plans that feature a high volume of minutes. This is one of the reasons that the average revenue per minute for local and long-distance calls in Canada is currently among the lowest in all of the countries in the OECD. However, we have found that the rates for consumers that have used fewer minutes tend to be higher in Canada than other countries, with the exception of the United States. This is information primarily from our 2008 Communications Monitoring Report — which I referred to earlier and which I think you have copies. It is available on our website.
While service providers are free to set their rates as they see fit, the commission does regulate a few key aspects of the wireless sector. For example, we required service providers to implement wireless number portability to offer consumers greater convenience. Since March 2007, consumers have had the option of keeping the same telephone number when changing wireless service providers. Consumers can also transfer their numbers between wireline and wireless service providers, and vice versa. Many Canadians, particularly the younger demographic, are starting to rely only on their wireless devices for their telephone service.
Another area of concern for the commission is 911 services. Earlier this year, we directed wireless service providers to upgrade their 911 services by February 1, 2010. Emergency responders have had difficulty at times in the past locating a person calling 911 from a wireless device, especially in emergency situations where the caller is unable to speak or provide specific landmarks. This is because 911 service can only narrow down the location of the caller to a sector within the area served by the nearest cell phone tower.
We asked the industry to work with provincial and municipal representatives to find a solution to this problem. The enhanced 911 features that we announced earlier this year will be implemented over the coming months and will use specialized technology, such as the Global Positioning System, GPS, to improve public safety. This will allow emergency responders to receive a caller's location, generally, within a radius of 10 to 300 metres, a major improvement in 911 service. Any new service provider that enters the market after February 1, 2010, will be required to support this enhanced functionality.
Aside from wireless number portability and 911, the CRTC has established regulations in the wireless sector that protect the privacy of consumers, govern the use of telephone numbers, require that bills are made available in alternative formats, and ensure that Canadian ownership requirements, which are set out in the Telecommunications Act, are met.
When we forbore the regulation of rates in the wireless sector, we maintained a couple of key provisions — specifically, sections 24 and 27(2) — within the Telecommunications Act, allowing us to implement some of these features I just described. Section 24 is a key provision that allows us to impose any conditions we feel are necessary on telecommunications service providers to further the objectives of the act. Section 27(2), which we also maintain, relates to ensuring that carriers do not unjustly discriminate or provide an unreasonable preference to any person.
It is normal that disagreements may arise from time to time between consumers and their wireless service providers. When the disagreement concerns an area not regulated by the CRTC, consumers can turn to an independent agency headed by the Commissioner for Complaints for Telecommunications Services, CCTS. The CRTC approved the agency structure and mandate in 2007 and, today, it helps resolve complaints in an impartial and timely manner.
In addition to wireless services, the CCTS also handles complaints related to long-distance telephone services, Internet access, Internet telephone services — VoIP — and local telephone service markets that have been deregulated by the commission.
Due to the variety of types of broadband Internet services, it would be useful to start with a clarification. The commission has defined ``broadband'' as a service that offers Internet at speeds of at least 1.5 megabits per second. This is the same definition used by our colleagues at Industry Canada. About 93 per cent of all Canadians already have access to broadband services, most of them having an option between at least two different companies, primarily through the facilities of a telephone or cable company.
Outside of the major urban centres, many consumers can access the Internet through satellite or fixed-wireless technologies. Our research indicates that Canada has the highest proportion of households that subscribe to broadband services among all of the G7 countries. Broadband Internet access is increasingly seen as a key element to maintain a competitive edge in the global economy. Many countries, including the U.S. and Australia, have announced plans to expand broadband Internet access to rural and unserved areas, or to upgrade their existing infrastructure to enable higher speeds.
In Canada, all 10 provinces and three territories have recognized the importance of broadband access for remote communities. Each one has been developing its own initiatives to improve the availability of these services. Might I add, today in the clippings, I noticed that New Brunswick has announced a partnership with Barrett Xplore Inc., a company that provides fixed wireless and satellite services throughout Canada. The partnership will invest in and expand high-speed access in rural areas throughout New Brunswick, virtually covering the whole province. They will do this primarily using a fixed wireless service; for those areas they cannot reach with fixed wireless, satellite services will be provided.
Moreover, in the last federal budget, the government set aside $225 million for broadband deployment as part of its package. When Mr. St-Aubin recently appeared before you, he explained that Industry Canada is in the initial stages of developing a program to allocate these fronts. As part of this process, the commission has been working with both Industry Canada and Indian and Northern Affairs Canada, as well as the various provinces and territories to identify exactly what where broadband services are available and where they are not. By sharing our resources, we can avoid duplicating work and costs and minimize the burden on the industry.
Broadband Internet can provide Canada's rural and remote communities with important educational and economic opportunities. We look forward to seeing the specifics of the government's broadband deployment program and we are ready to help in any way we can.
[Translation]
We would now be happy to answer your questions.
[English]
The Chair: Thank you for your presentation, Mr. Traversy. In urban centres, such as Montreal or Toronto, there are often at least three companies offering wireless services. In rural areas, there is less competition, and in some places it is nearly a monopoly. Is there a need for increased competition in rural sectors, especially to ensure lower prices to wireless users? Will the CRTC ask the new players in the wireless industry to provide services to rural areas?
Mr. Traversy: As you are aware, Industry Canada recently went through an auction. They ended up allocating licences to seven new entrants into the marketplace. The new entrants are primarily regionally based, some larger than others. Some go through all of Western Canada and some are throughout the province of Quebec. None is national; they are all regional.
In the studies I have read on pricing — and the various studies are always interesting — in other jurisdictions it has been found that regional players do add a lot of pricing innovation to the marketplace. There is an opportunity with the new entrants to obviously add new competition. If it comes through as to what happened in the U.S., with regional employers, there might be an opportunity for some pricing innovation to come through those areas.
As to the CRTC getting involved vis-à-vis asking the new wireless players to provide more service, those conditions of licence were established by Industry Canada, so that is not something within our area of jurisdiction.
The Chair: Third generation — called 3G — wireless networks are available in urban centres while rural sectors are relying mainly on first- and second-generation networks. When will 3G networks be available to rural sectors, and do you find it acceptable that most of the applications of smartphones designed for a 3G network are not yet available to Canadians living in rural areas?
Mr. Traversy: Again, I would come back to the new entrants coming in, that of course they will provision their services over 3G-enabled networks. It is hoped that that will expand service a little bit further in Canada.
When it comes to providing service in rural areas, if you are dealing with private companies, we hope the costs of expansion, the capital costs of new equipment, will come down, that they will be able to make an economic business case to roll it out. It is a private, for-profit enterprise rolling out these services; if there is not something in the bottom line for the enterprise, it is unlikely that they will push out that far.
Senator Johnson: Welcome to our committee. Following up on the chair's 3G question, I am interested about the recent spectrum auction. How will this affect the rollout of 3G services to Canadians?
Mr. Traversy: Currently, we have the rollouts going quite well. The monitoring report indicates that 78 per cent of Canadians now have access to 3G networks. I would think with the addition of additional players that it could spur development there. They will be looking to innovate, add functionality and differentiate themselves in the marketplace. There could be an opportunity for them to do that through expanding their networks.
Senator Johnson: How expensive would this be?
Mr. Traversy: Expensive to roll out?
Senator Johnson: To provide 3G to all Canadians.
Mr. Traversy: To rural Canadians?
Senator Johnson: To all Canadians.
Mr. Traversy: Does anyone have an estimate of what that would cost? I do not have that with me. We could provide further data at another time. We will undertake to send that information as best we can to the clerk.
Senator Johnson: Do you see a role for other government policies to bring 3G access to all Canadians? Are there further things government can do?
Mr. Traversy: The government undertook an initiative when it went through the spectrum auction, to see if new entrants could spur innovation.
As to a policy development role for government, that role would fall more closely with that of Industry Canada's responsibilities than the CRTC.
Senator Johnson: According to the Communications Monitoring Report 2008, while 98 per cent of Canadians have access to wireless only 61 per cent subscribe, which I found interesting. It is below the penetration level of many OECD countries. Do you have any comments on this? Can you explain the low penetration level?
Mr. Traversy: One of the rationales or factors to consider is that Canada has a very well-developed and defined wireline network. We spent a lot of time trying to develop the network. It was a regulated marketplace for quite some time; it still is. As a matter of fact, the wireline that has been developed is available to most Canadians at reasonable rates. This is one of the factors to consider when Canadians are thinking about signing up for wireless services. If you compare the rates we currently charge for wireline services with other jurisdictions, Canada is one of the lowest, if not the lowest, in the world. It is a well-developed, affordable wireline service that has impacted the wireless penetration. In some European countries, the price of the wireline service is more expensive than the wireless service.
Senator Johnson: How does it compare to the United States?
Mr. Traversy: The United States has similar numbers to us. They have a well developed wireline system also.
Senator Johnson: What about countries with high as opposed to low penetration rates? Is there anything that distinguishes them from each other?
Mr. Traversy: I went through one of the factors, and I think a developed and affordable wireline system is one of the contributing factors.
Senator Mercer: I should like to thank the witnesses for attending here. Unfortunately, Senator Johnson and Senator Bacon asked some of the questions I had in mind. However, it seems to me that this issue of the availability of broadband and 3G services in rural Canada is a major concern. Not only are our rural areas spread out but we have a lot of remote areas across the country. The availability of 3G and high-speed can shrink the globe significantly. I have witnessed that in Northern Canada, where young people in the North are experiencing things they could never experience otherwise.
I believe government does have a role here. It seems logical to me that in licensing operators, or in issuing licence renewals, conditions should be placed on providers — such that if one were to receive a licence or a renewal of an existing licence the provider should submit a plan to address the areas of Canada that do not have high-speed and 3G access. How does that fit in with CRTC's view of the world?
Mr. Traversy: We agree with the objectives. Of course, extending broadband throughout Canada into rural areas is an objective we should try to achieve. We should look at different measures to get there, both with wireless and wireline broadband connectivity.
Over the years, we have tried to ensure that our regulations encouraged and provided a framework that pushed providers — particularly on the cable and wireline side of the telecommunications world — to push out their networks as far as possible.
I think we have the numbers to prove it has been a success. When you look at the cable side, most Canadian have access to a cable provider; it is somewhere in the neighbourhood of 92 per cent. On the wireline side for telephony, it is higher than that — most Canadians have access — so those encouragements or rules have worked. On the wireless side, we are now at 98 per cent coverage in Canada, so there is quite broad-based coverage.
There is some work to do, and we should be trying to push forward. The licensing conditions, of course, on the wireless side are something that is set by Industry Canada and not the CRTC.
Senator Mercer: I was surprised to learn from a recent study by the Standing Senate Committee on Agriculture and Forestry on rural poverty that of the top four issues that came up in every area — every part of the country, in all 10 provinces and three territories — this issue was in the top four in every community. I was quite surprised, so it is an issue that while the numbers may not be great, it is extremely important to the people affected.
In 1999, the CRTC issued an exemption order for new media broadcasting undertakings and, in 2007, an exemption order for mobile television broadcasting undertakings. The CRTC is currently re-examining new media. What have been the significant changes since 1999 that will affect policy with respect to new media broadcasting? What role will 3G wireless play in the future of broadcasting in Canada, and how are other countries managing new media in broadcasting?
Mr. Traversy: As you know, there was a major new media proceeding undertaken by the CRTC recently. Some of the questions you have raised are under deliberation now at the commission.
Of course, there have been major changes in the marketplace. Canadians now have access to video and other broadcasting services through different devices, networks and platforms than in the past, and that has caused a lot of fragmentation in the marketplace. It is something that the commission is currently studying and has under review.
Senator Mercer: In a slightly different vein — and I may not have the right people before me — in a Telecom decision, CRTC 2008-6, the CRTC ``ignored'' — which is the proper word — testimony by parliamentarians before the House of Commons Industry, Science and Technology Committee when they were passing the do-not-call legislation. The CRTC has ignored the specific direction of parliamentarians for the exemption of charities from the do-not-call list and has now imposed fees on charities for managing the do-not-call list that they were already managing, which is funny.
How do you explain that the CRTC, who I see as an implementer of policy, now becomes a maker of policy?
Mr. Traversy: You are referring to the exemptions for the do-not-call list that currently apply to registered charities. I can assure you that those exemptions are in place and we take them into account. When we are taking a look at complaints on the do-not-call list side, charities are particularly exempt.
I think what you are referring to is when we were thinking of trying to find a delegate for our investigation activities. The legislation gave us the right to be able to try to do that. One of the funding formulas that we brought forward was that perhaps everyone registered on the do-not-call list, which would include charities, would contribute to this investigations delegate.
I can tell you that when we issued an RFP to find someone to do that work, we had no compliant bidders. There are currently no charges being brought upon charities by us in any way or form to do with the do-not-call list.
Senator Mercer: I would caution the CRTC, as one parliamentarian who will be here for another 14 years, that ignoring the specific comments of parliamentarians of all political stripes before both committees on this issue is very disturbing and I will continue to monitor it as we go.
Senator Zimmer: There is a debate regarding affordability of telecommunications services in Canada compared to other countries. The issues of comparing apples and oranges seem to be at hand. Earlier this month, you lightened the requirements by eliminating the need to report on affordability of telecommunications services. To my knowledge, ensuring reliable telecommunications services at affordable prices is part of your mandate.
Can you tell me what sources, other than Statistics Canada surveys, you intend to use to monitor affordability, and how will they be more effective in monitoring affordability within our nation, in comparison to that in other countries?
Mr. Traversy: You are referring to a decision that was released within the last couple of weeks. We tried to streamline some of the reporting requirements that certain of the telecommunications service providers currently have to provide to the commission.
As part of our ongoing exercise, we are reviewing some of our existing regulatory regimes or measures in light of the policy direction. The policy direction was something that was provided to us through Parliament. That was an amendment to the Telecommunications Act to try to rely on market forces as much as possible, and in a competitive environment, to try to streamline the regulatory burden that is currently placed on some telecommunications service providers.
In the decision, we went through five or six different reports and we examined each of them in turn, including the affordability report, to see if we still needed the information provided by that report to undertake our day-to-day activities — or whether that information is available from other sources. Do we have access to the same numbers through analyzing websites, or through other publications or reports that are available through Statistics Canada, in this particular case?
We found that the information they are currently providing to us is being provided to Statistics Canada also. Therefore, we thought we could lighten the burden and eliminate one reporting requirement to the commission because we were confident we could get the information from another source. We did add in that decision, in fact, if we did need to have specific information from any provider, that we reserved the right, as we have under the Telecommunications Act, to go back and ask for the information we would need to examine a particular question at one point in time.
Senator Zimmer: In many countries, there is growing evidence that the popularity of landline phones is decreasing. Technology is erasing many landline advantages. Many people like the practicality of having a single number, which makes the cell phone a better option. As cellular reliability continues to improve, the argument for landline will likely continue to erode. In fact, individuals are already increasingly reliant on their cell or smartphones for their communication needs.
Has the CRTC noticed this phenomenon in Canada? If so, to what extent; if not, what are some of the factors hindering this transition?
Mr. Traversy: That is an interesting phenomenon that is happening in all jurisdictions, including in Canada, particularly with the younger demographic. It is a statistic that we monitor. Currently, in Canada, somewhere between 6 and 7 per cent of households are wireless only. They have decided that based on a number of factors. Some people find their cell phone more convenient, so why go through the extra cost of having both a wireline and a wireless device?
The numbers range differently throughout the country. It was as high as 10 per cent or slightly higher in Vancouver. For the younger demographic, as they are moving out of their parents' homes, many of them are deciding not to subscribe to a wireline phone but to use a wireless device only.
That is a factor of the maturity of the industry. People are seeing that it is a reliable device; it can be relied on almost to the extent of a wireline service now. It is a matter of economics or functionality for individual Canadians to decide what their package of communications services will be.
Senator Zimmer: How will 3G wireless, iPhones and smartphones affect the representation, monitoring and preservation of Canada's official languages?
Michel Murray, Acting Director, Decisions and Operations, Telecommunications, Canadian Radio-television and Telecommunications Commission: I cannot answer this question now. Can we think about it and get back to you?
Senator Zimmer: That is fine. Thank you.
Senator Dawson: I have a question on the same subject. As you know, the new telephones are not telephones but television sets. On the new telephones people are listening to television, music and videos. As a francophone, I am a little worried that, because of the transfer to this new technology, all the rules and regulations that the CRTC and the Canadian government put in place over the last 30 to 40 years to protect a sizeable place for francophone services in Canada are going down the drain.
You have said a few times, Mr. Traversy, that you do not have that power anymore. The CRTC decided that they were not getting involved in the Internet, and I can understand that; it is very fast.
I would like you to comment on G4. We have a digital divide of from 98 per cent penetration to 72 per cent utilization, and according to the OECD we are one of the lowest users of wireless communication. That digital divide scares me on the linguistic side and on the technological side because, although 2 per cent and 22 per cent are not big numbers, it is always rural communities. They are not able to set up small businesses or communications services because they are not serviced.
Historically, the CRTC would say that it was the responsibility of the CRTC to encourage cross-financing, where the profitable markets of Montreal, Quebec and Toronto would help subsidize setting up phone lines in rural Canada.
This is clearly not your fault, and I am not blaming you for it, but we have abandoned that cross-subsidization responsibility and are telling people to take the beautiful markets. The seven new companies will not be setting up their systems in rural Canada. They will be looking at the lucrative markets downtown, and they will try to penetrate them with, I agree with you, original products and innovate pricing. However, the reality is that that will only increase the digital divide between urban and rural Canada, and it will inevitably create job problems for rural communities.
Returning to the question, how is the CRTC looking at the aspect of the telephone being used as a television, and how will it be affecting our responsibilities vis-à-vis bilingualism in Canada?
We are admitting that we are always a little behind every time there is a new technology, and now we say that G3 is getting up to 60-plus per cent penetration. Is there a way to encourage, through licensing, whoever will be doing G4 first? You did an inquiry for the new lines, and they did not have that many constraints. Thirty years ago, when Bell or anyone else was getting a licence, it was giving them a licence to make money, but with conditions. Now you are selling them a licence and not giving any conditions.
With G4, if we are again going to have an increase in the digital divide, we, legislators, and you, regulators, should perhaps look ahead. If we want to decrease the increasing gap between those who have first-class services in technology and wireless technology and those who have not, maybe we should be putting in constraints as early as possible. That is probably what we will have to look at over the next few months in order to have an opportunity to jump start this time around. We can put conditions either on cross-financing or on regulations to ensure that we do not again increase the digital divide.
Mr. Traversy: Thank you for the question. You wanted to talk about the emerging 4G services and whether that will expand the digital divide and provide an opportunity for more broadcasting services or Canadians using those devices to access broadcasting services, and you are concerned about official languages.
Senator Dawson: I include Canadian content, not only the bilingual side.
Mr. Traversy: You also had a question about cross-subsidization, something that has historically been done.
There is no doubt that with the demand for 4G services it comes down to the ever-increasing demand from Canadians for wireless broadband, particularly from the younger demographic. In my view, we will see a migration from fixed to mobile Internet applications. This will be video streaming, music downloading, mobile TV and VoIP. We will need the capacity to support an ever-increasing demand for connectivity for new wireless devices for a new generation of consumers. You are right when you say that the trend will move toward viewing video services off different platforms.
The commission recently did a wide study on the impact of that on the broadcasting situation. As I said, it is under deliberation now, so I cannot go too far on that. We will be issuing a decision in the coming months. The commission looked at it seriously. It has been studying it for the last year and a half to try to understand what are the implications, including on official languages.
It is a broadcasting question. I will leave that part of it to the study that the commission is undertaking. We were here to talk more specifically about telecommunications, and I understand the convergence factor there with broadcasting.
On the cross-subsidization issue, it is true that when we were developing the wireline service at the time that it was a monopoly environment there was cross-subsidization, and that still takes place. All subscribers to telecommunications services contribute to serving the high-cost areas in Canada to ensure that Canadians have access to wireline services at reasonable rates throughout the country.
In the development stage, there were monopolies in each territory and we were trying to expand the first kind of communications services, the telephone service, to all parts of Canada. When wireless arrived, that was already in place. There was a sophisticated system of wireline service available, and it was an emerging competitive environment from the start. The decision that was taken at that time was to let the competitive market forces roll it out.
Senator Dawson: Before we get into an environment of either licensing or auctioning G4 access, or whatever it will be called, can we think ahead about developing a system under which we will at least not increase the digital difference between urban and rural Canada?
Mr. Traversy: Another auction will take place. That is the concern of Industry Canada, and I am sure they are already developing policies on it. There will be a digital dividend when the transition from analogue spectrum to digital takes place. Decisions will have to be made as part of that auction.
Senator Housakos: I want to follow up on the divide between rural and urban Canada and broadband service and the reach or lack thereof in rural Canada. It seems that the plan of action to deal with the problem is to have more auctions and more competition, if I understand you correctly. What will happen in a few years when we realize that that does not work because the new competitors coming into the marketplace will want to go to lucrative markets and, unfortunately, due to sheer numbers, rural Canada is not very lucrative?
In a few years, we will be back where we started. What is the contingency plan? It would seem from your answers given this evening that there is no plan B.
Mr. Traversy: It has not been part of the role of the commission to develop those policies as to how we will expand the network. In my opening comments on broadband, I said that there are a number of programs in place. Each province and territory has a program, and I talked about the one that was announced previously and that was spoken to in a press article today. New Brunswick has developed a partnership arrangement with government and private industry to ensure that rural Canadians have access to high-speed Internet networks throughout the province. I indicated that the government, as part of the stimulus package, has earmarked $225 million, I believe, to develop a broadband strategy to deliver it further out to rural Canada. Some programs are in place to try to improve the situation.
Senator Housakos: Is there a specific program that this money funds?
Mr. Traversy: Our role to help in that regard is to monitor the situation as to where it is available. Our organization does not have funds available to initiate programs to push out either wireless broadband opportunities or wireline broadband opportunities. We have a reporting requirement of the industry to ensure that we understand exactly what the circumstances are.
Senator Housakos: In respect of rates, Canada has some of the most expensive data rates in the world as compared to some European countries and even to the U.S. When it comes to wireless phone service, there is a wide range of discrepancies in pricing between the three main players in the marketplace. I should like to know your opinion on that in terms of the pricing discrepancies and why it is so much more expensive in Canada?
Mr. Traversy: As I indicated, we have undertaken studies to compare Canadian prices for wireless with other jurisdictions. Our numbers indicate that, for heavier users of wireless, Canadians are not doing that badly vis-à-vis other countries. It is interesting to compare pricing plans of the various providers within a country. It is difficult, and you have to develop a number of assumptions that you then reduce to a common denominator. They are not unique and it can be frustrating at times to compare prices between providers within the same jurisdiction. When you add on a comparison of prices for international jurisdictions, it becomes an extremely difficult exercise. I have read many of the studies and critiques, and sorting it through is like comparing apples and oranges.
Senator Housakos: Do you think we should establish specific rules on pricing or should we leave it at is?
Mr. Traversy: We currently have five incumbent providers, two of whom are regional and three of whom are national. There will be seven new entrants coming on board, so it will be interesting to see how that affects the marketplace. It will be worth monitoring to understand the impact on the marketplace.
Senator Merchant: What are some of the more striking differences that you notice between Canada and other countries?
Mr. Traversy: Canada has an interesting marketplace that differentiates substantially from most European countries. Most homes in Canada have the benefit of running two wires. We have a highly developed cable system. Canadians have an option between providers for most communication services. It is a North American phenomenon to have telephone companies and cable companies. Most other jurisdictions do not have the cable wire. For competition, they rely more on leasing the network elements of the incumbent. That is one of the big differences you see when you compare jurisdictions. Having the second wire provider of telephony that reaches most Canadians is truly unique.
We have noticed the differences and mentioned them this evening. The uptake of wireless service in Canada is lagging in many OECD countries, which is an interesting phenomenon. I described one of the factors for consideration to account for that, and there could be others.
Attempting to compare rates, in particular for wireless services, can be a difficult exercise at times. We have tried to do it internally at the CRTC and it can be a source of tremendous frustration.
Senator Merchant: Are there any international best practices in terms of government policy or the operation of companies that could provide a model for Canada?
Mr. Traversy: We will add that to the list of things we will get back to you on. As well, we will provide a comment to the clerk of the committee.
Senator Johnson: Do you have any idea of the nature and number of complaints the commission receives regarding wireless?
Mr. Traversy: They have an annual report that I read recently. I know the CRTC is responsible for treating complaints in respect of all deregulated services, of which wireless is a big part. If Canadians have a concern or a disagreement with their wireless service provider, there is recourse through the CCTS. I do not have the figures on complaints with me but I can provide them to the committee.
Senator Johnson: I wanted to know about the level of satisfaction with the service.
[Translation]
Mr. Murray: Senator Dawson talked about minority communities. I have a little story to tell you in this regard. I come from a small village in the Gaspé Peninsula. My village, which is close to Matane, has had high-speed Internet for many years thanks to an Industry Canada initiative. Two years ago, I spent a couple of days on vacation in my village. While I was there, we received a postcard from a competitor, Barrett Xplore, who was offering services. It is interesting, for isolated francophone communities, to have ready access to this amount of content. This can also bring communities closer together.
[English]
The Chair: Thank you for attending here today. The additional information that you send to the clerk will be distributed to the members.
(The committee adjourned.)