Proceedings of the Standing Senate Committee on
Transport and Communications
Issue 6 - Evidence, October 7, 2009
OTTAWA, Wednesday, October 7, 2009
The Standing Senate Committee on Transport and Communications met this day at 6:30 p.m. to study 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 Dennis Dawson (Chair) in the chair.
[English]
The Chair: This is the eighth meeting of the Standing Senate Committee on Transport and Communications for our study of the wireless sector.
Today we have with us, from the Public Interest Advocacy Centre, Michael Janigan, Executive Director and General Counsel; and his associate, Michael De Santis.
[Translation]
The Public Interest Advocacy Centre is a non-profit organization that is incorporated under federal law. It works to advance the interests of individuals and groups that are usually unrepresented or under-represented in matters of public concern.
[English]
Welcome, gentlemen. To explain for some of the members, the setup has been made for the second part of the conference when we will be doing a teleconference with Edmonton.
Please proceed, Mr. Janigan.
Michael Janigan, Executive Director and General Counsel, Public Interest Advocacy Centre: Thank you, Mr. Chair and members of the committee, for the opportunity to present a consumer-oriented view of the current state of the wireless market in Canada and the challenges that we see that must be met in the future by policy-makers and industry.
We believe our brief on these issues has been circulated. In my opening remarks, I want to highlight some key issues raised therein and some reforms that might be beneficial for most stakeholders in the marketplace.
In assessing the wireless market, I am reminded of what my friend Michael Shames of the California-based consumer organization UCAN once said: The frequent question for consumer advocates is not whether the glass is half full or half empty but whether there is any glass at all. In truth, the state of affairs in the marketplace for users of wireless services is not that dreadful, but, rather, the industry exhibits a kind of mediocrity of performance for customers that belies the very lucrative nature of the service, now accounting for some 40 per cent of all telecommunications revenue.
Our brief sets out some of the rather modest achievements of Canada's wireless industry in relation to issues of price, penetration and quality of service. The excuses for the ho-hum results of country-to-country surveys of wireless performance seem to run the gamut from "we have too much geography" to "we have too much high-quality wireline telephony." Consumers have become similar to parents of a child with consistently underachieving grades on his or her report card. At some point in time, they want to see results and not excuses.
In our view, the remedies include a more robust approach to competition and consumer protection issues in the wireless industry. The concentration of the industry in the business of three main providers has affected the service offerings in terms of price and customer service. The swallowing of the original digital wireless providers, Clearnet Communications Inc. and Microcell Telecommunications Inc., by TELUS Communications Company and Rogers Wireless Communications Inc. undoubtedly provoked the perceived need to encourage new entrants through the set- asides in last year's spectrum auction process.
The current problem is that the size of the revenue stream being generated by wireless services makes preservation of market homogeny a business imperative. The new entrants are being fought tooth and nail on issues such as tower sharing or other interconnection matters, and their Canadian ownership qualifications are contested by the incumbents before the Canadian Radio-television and Telecommunications Commission, CRTC, scant months after being given the go-ahead on exactly the same criteria by Industry Canada. A promising consumer wireless calculator that matched consumer needs with the various service plans was scrapped by Industry Canada after intense lobbying by the incumbents. The fact that the best prices for services generated by the calculator were generally not those of the major players, we were told, had nothing to do with the opposition to its implementation. Industry Canada capitulated and, despite the investiture of some $1.4 million in its design by the government, it will not be put in place.
Other evidence, some empirical and some anecdotal, seems to indicate that competition is not sufficient to deal with persistent consumer concerns about transparency of pricing, clarity of billing and conduct that is exploitive on the part of providers. However, it is unfair to submit that these problems are exclusive to Canada. The solution to many of these concerns, however, has been addressed in other jurisdictions, and those solutions have been to make rules across the board to provide for fairness in the marketplace, both for consumers and other providers.
It is particularly important to make the point that consumer protection is not simply something nice to do if the industry says that it can afford to do so. It is not simply requesting marketplace manners. It is protecting the viability of competition and the efficiency of the industry by eliminating conduct that is destructive of the objective of open markets with informed and empowered consumers.
When we allow misleading or sharp practices to flourish, we reward flabby and inefficient providers. In telecommunications, unfortunately, we are saddled with a Telecommunications Act that was designed to try to deal with deregulating monopoly telephone incumbents in a fashion that would allow them to compete with new entrants on an even footing. It was a blueprint for deregulation and not to make marketplace rules across the board to all service providers.
Industry Minister Bernier's policy direction of December 2006 has made the problem worse by making the withdrawal of the CRTC from many consumer protection requirements part and parcel of treating the incumbents and the competitors in the same fashion. We need a new act and new rules across the board to provide standards and deal swiftly with industry misconduct. In this interregnum, certain persistent abuses and problems flourish and our new telecom ombudsman body, the Commissioner for Complaints for Telecommunications Services Inc., CCTS, has yet to find its feet in a substantial fashion.
With the goal of achieving a more transparent and consumer-friendly marketplace in mind, we make the following essential recommendations. First is pricing: While we do not need price regulation of wireless services per se, certain pricing hot spots exist, such as roaming charges, that require action similar to that initiated in the European Union in placing a cap on certain rates that wireless carriers may charge for their services. Similarly, anti-bill shock mechanisms to present customer billing well above expectations can be copied from the European Union. This approach makes pricing simpler and more predictable for consumers, and, in our view, would encourage growth in the consumption of wireless services. As well, the game of extra charges with meaningless labels such as "system access fees" should be abolished. All-in prices for services should be required exclusive of taxes.
With respect to spam, current legislation before the House of Commons and the Senate prohibiting spam would provide needed protection for consumers from fraud, abusive marketing practices and violations of their privacy. In the area of mobile payments, the creation of a mobile payments system with common standards would facilitate and encourage the use of such payments. Partnerships between carriers and credit card users could provide the convenience and security necessary for consumers to create a viable, mobile payment system in Canada.
With respect to the issue of marketing to children, while mobile commerce is a fledgling industry in Canada, the experience worldwide appears to indicate that children may become an important target for such messages. Legislation banning most forms of advertising to children under 13 years of age, such as Quebec's Consumer Protection Act, would protect these at-risk consumers from abuse.
I turn now to security of financial information. Identity theft is a rapidly growing crime, and wireless networks provide a new avenue for identity thieves to ply their trade. Criminal Code amendments that prohibit the possession and trade of financial information and technology and mobile commerce facilitating identity theft should be enacted.
Turning to payment dispute rights, Canada should follow the South Korean model and make existing financial institutions the intermediaries in mobile commerce transactions. The dispute resolution mechanism for credit card issues is well-established and protects consumer rights.
Turning to privacy issues, wireless networks pose new risks for the protection of users' privacy. Carriers should ensure that they comply strictly with the provisions of the Personal Information Protection and Electronic Documents Act, PIPEDA, to ensure the privacy and security of their customers. We also believe that the entrance of more players will make a difference in the wireless market. We are disappointed that the direction shown in 2008 by Industry Canada to promote competition seems to be flagging in relation to the treatment of the new licensees and its decision to scrap a wireless calculator.
Wireless competition needs a policy champion to survive in the current tidal wave of incumbent revenue and resources.
We would now be pleased to answer any questions on our brief or our submissions today.
Senator Johnson: Welcome to our committee.
Recently you opposed the use of the CRTC deferral account to finance broadband access to underserved communities. Could you explain that to our committee, please?
Mr. Janigan: Certainly. In 2002, the CRTC established a second-generation price cap for local telephone users across the country. It decided at that time that the price discounts that were generated by that price cap, instead of being rebated to customers or coming off customers' bill, would be placed in a deferral account. The reason they did that was to avoid lowering telephone bills so that new entrant competitors would have a lower ceiling.
Approximately $1.6 billion was collected in this fashion. About $800 million of that went to provide discounts to the competitors for access to digital networks. In 2004, $650 million was left, and the commission then held a proceeding to discuss how this was to be spent.
In our view, when we were representing residential consumers of local telephone service, that money should be rebated to the customers who were originally entitled to the discounts. The commission elected at that time to make as a priority the operations of the incumbents in areas where it was uneconomic to serve.
We felt that while this was an appropriate national goal, it was inappropriate to have the only contributors to that being the local residential subscribers of telephone services across Canada. No one else was asked to make that contribution, and this contribution came directly from local telephone rates. I do not believe the expectation of a local telephone user in Toronto is that he or she will be subsidizing the broadband operations of their telephone provider in Muskoka, so we opposed it.
In the interim, the plans came forward from the individual telecommunication companies, or telcos, for the broadband development, and about 60 per cent of those plans were approved. The rest of the money was to be rebated to customers.
Two weeks ago, the Supreme Court of Canada decided that the determination of the CRTC in relation to both the issues of broadband and the rebate were appropriate. We were losers and so were the telephone companies, and we will get a sort of saw-off in that regard.
Senator Johnson: You are a centre, and you seek to ensure that the public interest is served. Do you think the CRTC serves the public interest in the work you are doing?
Mr. Janigan: It does, to the limits of the jurisdiction that it exercises. The problem, as I indicated, is that we are operating under the form of an act and a policy direction that makes deregulation a priority rather than the objectives of access, affordability and consistency of service across Canada.
We think that some of these problems could be remedied with legislative reform. We also think that there are necessary measures that have to be brought to bear to ensure that consumer protection rules are put in place across the board for all providers and the act is not focused on a monopoly incumbent; it is focused on everyone.
Senator Johnson: Let us talk about 3G wireless systems for a minute. I believe the CRTC recently said that the wireless system access rose to 75 per cent and the 2G is over 98 per cent. Is the United States not into 4G now or moving into that?
Mr. Janigan: I think that Europe has made substantial advances on that as well.
Senator Johnson: Where would we be in terms of the rest of the world in this respect?
Mr. Janigan: To repeat my opening comments, we are in the mediocrity. We are not in desperate straits, but we are not a leader in that area. We have to identify the reasons why we have not been a leader.
Senator Johnson: What government policies would you recommend in terms of the expansion of a 3G coverage to make the market more competitive?
Mr. Janigan: Notwithstanding my affinity with consumer protection, the first policy solution is always competition, to look for whether or not sufficient competition exists and whether or not the incumbents and the new service providers would be incented to provide this type of coverage and service in the event of a very robust, competitive market.
Second, this is Canada, so we have to understand that there will be circumstances where, if we want to ensure that all Canadians have access to service, we may have to have something similar to a remote service fund that is contributed to either through tax revenue or some type of levy that is fair across the board.
Senator Johnson: The remote service fund is a good suggestion.
Mr. Janigan: There is an analogy to telephony here. We do subsidized rates from rates throughout Canada, primarily in the northern regions of the country and Northwestel Inc. That is something that may be doable.
We have avoided doing that in broadband because we have been slightly uncertain about how broadband was to be developed. The plan was always that it would be developed in a private-sector mode. However, it was always recognized that public-sector interests were associated with this.
We are approaching the point where access to broadband has become almost on a scale that access to telephony was 20 years ago, that it is an important incident of being a citizen of Canada, that they have to be connected and that it affects a whole range of opportunities and interests from cultural, economic and whatever. I do not think we can be blasé about whether or not we are connected or think that the connection at the library will be sufficient.
Senator Mercer: You pose some interesting propositions here. It would seem, as we talk about providing service to rural and remote parts of this country, that we have problems that other places in the world do not have because of our vast size and small population.
Do you not think it would be easier if we made providing service to rural and remote parts of Canada part of the licensing or re-licensing process by the CRTC, that you do not get a licence or do not get re-licensed unless you commit to providing certain services in certain rural and remote areas?
Mr. Janigan: One way or another, the financial implications will come to the fore. If it is circumstances where it is a requirement of licensing, then effectively you will see that the costs associated with that will be spread out among the individual users of the franchise. That may not be sufficient in certain circumstances to guarantee that that access exists.
A better solution might be to have a nation-wide fund that is available under certain circumstances and in a competitive fashion. For example, if service to a remote community is required, then those who are able to provide it may have to bid to provide it, rather than simply allocating it, holus-bolus, to the franchisee in that area.
Senator Mercer: It would seem that leaving $650 million in a fund and then having the Supreme Court of Canada make a decision that blesses what the CRTC has done is a backwards way of doing things. Would you agree with my premise that the CRTC has become a lawmaker instead of a regulation enforcer?
Mr. Janigan: Our comments following that decision were that it is an unfortunate incident in that the drafting of the Telecommunications Act left the CRTC with such broad powers that have now been welded to the objectives of providing telecommunications networks across Canada. If you read the terms of the recent Supreme Court of Canada decision, it appears that, as long as the CRTC is pursuing its objectives, its ability to act in a government-like fashion is seemingly unlimited.
Senator Mercer: Perhaps our next study will address that problem directly because it will be on the CRTC.
You mentioned an interesting thing: Roaming charges. We all see roaming charges as being exorbitantly high. Most of us around the table travel extensively, nationally and internationally. When we get our bills every month, we see the cost.
You said the European Union, EU, has a positive policy. Could you perhaps give us your outline of the EU's policy?
Mr. Janigan: We have in our brief some of the actions of the EU with respect to that. It is on page 12 and 13 of our brief. They actually started off modestly with a fiat against roaming charges. They then tackled some other issues that deal with consumers in vulnerable situations. In this case, they have set a cap on mobile roaming calls of 0.43 euros for making a call and 0.19 euros for receiving one. As well, they have dealt with circumstances where text messages are being sent from one country to another, and they put caps on that. They also reduced the cost of surfing, particularly between countries.
When you look at the big picture, they are looking at consumers who are in positions where they are not really able to competitively bargain for a better price on this. They are stuck with their provider and the provider really has the ability to exploit them.
The EU effectively said, across the board for everyone,that you cannot charge more than this. After initial grumbling, it is been accepted.
Senator Banks: Thank you, witnesses, for being here. I always ask, of advocacy groups, who funds you.
Mr. Janigan: We are a group that has a rather entrepreneurial method of funding, in some respects. We obtain our money through cost awards and the tribunals that we represent other consumer groups in, such as the CRTC and the Yukon Energy board. We also do policy reports for government departments and, sometimes, for other institutions and organizations in the individual areas we deal with.
We have a membership that is really based on other groups and organizations across Canada. Our major focus is on important public services delivered primarily in the private sector.
Therefore, we are a bit of a boutique operation, funded through a variety of different sources. We have been around since 1976. We do not have individual consumer complaints. Actually, sometimes we do because it represents an endemic problem. We started off being similar to a nation-wide public interest law clinic and now we have morphed more into a service that deals with consumer issues in these important public services.
Senator Banks: You said that you have a variety of sources of income, and you described one of them as being the proceeds of your actions and fees for services.
Mr. Janigan: That is correct.
Senator Banks: Are there others?
Mr. Janigan: We receive money for research reports generated by the staff. We have some small donations from time to time, although we are not primarily a donation-based organization.
Senator Banks: Donations would be a smaller part of your revenues than your fees for services?
Mr. Janigan: That is correct.
Senator Banks: Both when you were here and in your brief to us, you mentioned the gouging nature of the system access fee, which I think all providers use. What actually is that fee? It is made up, is it not?
Mr. Janigan: I think it is a residue of a fee that existed back in the early days of mobile carriage where they were actually charged a certain amount. The reason for the fee has disappeared but the fee remains.
The problems in the past have been that the fee has been misrepresented to customers as something that has been a CRTC-approved charge. Additionally, it obscures the ultimate nature of the transaction itself; namely, that, in fact, it really is just another method for the provider to collect their operating expenses.
Senator Banks: Do other jurisdictions have protection that would constrain that type of practice?
Mr. Janigan: The European Union has some pricing rules. With respect to airline advertising, the Federal Aviation Administration, FAA, in the United States has rules that prevent the adding on of fuel surcharges and that type of thing. Different jurisdictions have some rules to that same effect, for example, Quebec's Consumer Protection Act.
Senator Banks: In your brief you say:
Canada fared poorly in this comparison, ranking 20th out of 30 states for lower usage, 28th out of 30 states for medium use and 18th out of 30 states for high usage. Even more alarming is how Canada ranked in last place for wireless penetration among the 30 states surveyed . . . .
It seems the criterion you use there as something desirable for this service is its market success. Is that the best way to measure the services provided to Canadians? Why is that a measure of success? What if Canadians just do not want them, do not have access to them or do not use them as much as a matter of habit?
Mr. Janigan: Certainly, it has to be read in the context of access to other forms of service, such as wireline service. It is a legitimate point that Canada has relatively high-quality wireline services in relation to the rest of the world.
Penetration and take-up, particularly in the services such as wireless, which I think, by and large, are looked upon as being on the cutting edge of the delivery of telecommunication services, is some indication of how fast we are progressing along the road to greater connectedness and integration of telecommunications in society as a whole.
However, it is not perfect. You are right on that point.
Senator Banks: It is not necessarily the criterion. Some of us wish there were less frequent cellphone use in some places.
Mr. Janigan: I understand that.
Senator Banks: It is a sort of traditional fact that big guys who once had monopolies in the provision of any type of utility always object, as a matter of course, when someone comes to them and says that they have to let someone else use their pipes or their wires or whatever. The telephone companies were the first. Their response was to say, "You mean we have to allow that guy to run calls along our wire on our poles?" The answer was, "Yes, you do." It has become a normal thing. I think I heard you say that the big guys in this case are actively trying to ensure that the little guys do not have access to the highway.
Mr. Janigan: From my sources, the negotiations have been very difficult between the incumbents and the new entrants. Of particular concern is this latest round of Canadian ownership disputes in the CRTC, which, in and of itself, may not be disturbing, but it comes three months after the Canadian government cleared every one of these individuals on the same criteria. It just seems to me to be obstructive to the maximum.
Senator Banks: Pardon my ignorance. In the case of electricity, gas and landline telephone services, the access given to create competition to the existing, previously monopolistic highways were all mandated by government fiat, in effect. Am I right? If I am, is there such a thing with respect to cellphones?
Mr. Janigan: In large part, you are correct. However, it still remains contentious. We are engaged in about the third go-around on the definition of whether or not access to digital subscriber line, or DSL, facilities is an essential facility and how it should be provided. It remains contentious.
In relation to the wireless networks, my understanding is it was a condition of the licensing franchise for each of the wireless carriers, but I may stand corrected on that.
Senator Merchant: I want to go to your comment about Quebec having enacted the ban on forms of advertising directed to children. Is that the only province that has such legislation?
Mr. Janigan: As far as we know, that is the only legislation, yes.
Senator Merchant: Most of the advertising that may be directed toward children probably has no boundaries, so I think this applies only to advertising that emanates from Quebec. I believe that is what I read in your brief.
Mr. Janigan: Certainly there would be jurisdictional problems associated with the mode of transmission or using that act as a bulwark in Quebec and certainly elsewhere.
Senator Merchant: You would like to see this made into a national ban?
Mr. Janigan: I think it should be required. Effectively kids are getting on their mobile devices and seeing that they can get photos of their favourite stars by pressing this, this and that, which leads to another solicitation, and then they are tracked. Their buying practices are tracked, and they are solicited with more offers. Some of it may be invidious per se and some of it may lead to expense and problems for the family. Therefore, in our view, it is a matter of common sense to try to nip that in the bud.
Senator Merchant: What can you do, then, to encourage this with government? What avenues are you pursuing?
Mr. Janigan: First and foremost is to present it to the minister concerned, which of course would be Industry Canada. I believe other concerns would be expressed by the Privacy Commissioner of Canada. As well, I would think the new CCTS ombudsman would be someone who may wish to add his voice to the process.
Senator Banks: Even if you did that, would the bad guys not set up in Montana or Vermont?
Mr. Janigan: We will not get a 100-per-cent, fool-proof system. We can only enforce it where we can. Our agencies now are increasingly cooperative between Canada and the United States, for example. However, we can only enforce it to the extent that the provider has the ability to be enforced by Canadian or American laws.
Senator Merchant: With respect to the matter of misleading advertising, if a complaint arises, who deals with it? Where does a person go if they have a complaint?
Mr. Janigan: There are two sources where someone can pursue a misleading advertising complaint. I suppose it is the classic answer that, in Canada, provincial and federal legislation governs that. In Canada, under the Competition Act, there are both civil and criminal remedies for misleading advertising, depending on the type of advertising that is involved. The Competition Bureau, from the federal standpoint, would be the primary agency to pursue it.
Senator Zimmer: Can you please explain your view on the use of the CRTC deferral account to finance broadband access in underserved communities? What is your opinion on how to accommodate rural and remote areas with broadband?
Mr. Janigan: To recapitulate, in part, my answer to Senator Johnson earlier, we see the idea of a national fund for broadband — and I know we made a submission to the government that might look at the excess amounts that were garnered in the auction process as a potential source of that fund — as representing an appropriate mechanism to deal with this. We think that the fund would be administered on an open and competitive basis, not something that is necessarily specific to the local telephone company in the area.
A position we advanced in relation to what the CRTC did in the deferral account was that, effectively, those were monies collected from discounts that were not given to customers in the price-cap process and properly belonged to customers. It was a local telephone service, and the price-cap mechanism said that they should be getting the discount. We felt that using that money to take it into Bell's or TELUS' broadband operations, which are not regulated — effectively providing Internet in rural and remote regions — really was not a proper use of that money.
Senator Zimmer: The CRTC monitoring report mentions that mobile revenues remain the single largest revenue component for Canadian telecommunication providers. If that is the case, why are the costs, such as incoming text message fees, being passed on to consumers? For example, when you go into a hotel these days, they actually charge you a marketing fee to sell you your room. That is unbelievable.
In this case, why are costs, such as the incoming text message fee, being passed onto the consumer?
Mr. Janigan: As a recent article in The New York Times showed, the cost of text messaging is small relative to the charge. I think the answer is because they can. The state of competition or rules that exist are such that it enables them to do that.
The problem, as I indicated, with the whole mobile industry is that this area is so incredibly lucrative that the money is overwhelming almost every other consideration. In fact, the players are taking steps to frustrate competitors and do other things and charging simply because large profits are to be gained from it. It is up to policy-makers to set the rules appropriately and allow them to compete as vigorously as possible. That type of exploitive conduct should be reigned in.
Senator Zimmer: This summer the European Union enacted new rules to regulate wireless fee. One of the rules restricts any charge for incoming text messages, even when in another EU country. Do you believe such regulation would be applicable to Canada?
Mr. Janigan: Yes. In our brief, we have highlighted some of those EU provisions as ones that make sense from the standpoint of protecting customers who are particularly in circumstances where they are vulnerable to exploitation because they have really no other choice of provider, particularly with respect to roaming fees, text messaging fees or data transfers between jurisdictions.
That is something where a universal policy across the board with rules that cap that type of thing would be useful in the market and would set the ground rules for everyone to play in without having these hot spots of pricing where suddenly consumers are surprised with a huge bill.
Senator Zimmer: Therefore, it would create an equal playing field.
Mr. Janigan: It would create an equal playing field across the board with all rules followed by all providers.
Senator Housakos: I apologize if the questions I ask might cause some repetitiveness, but I walked in a few minutes late, and you might have touched upon these questions already.
You have been critical of the current use of auctions to allocate spectrum. What alternatives does your association propose in order to replace the current system?
Mr. Janigan: We have had a philosophical difference with the whole idea of auctions, believing that it is probably better to set the conditions of what you want in relation to the mobile service across the country. We have some difficulty with the whole process, that simply generating large amounts of money in an auction process is perfectly attuned to the public interest in receiving the mobile service.
Be that as it may, we have to accept the fact that governments now are in love with the idea of auctioning because, first, it is a simple process, and, second, it generates a large amount of money for the Consolidated Revenue Fund. In that case, we supported the process that was ultimately adopted last year with set-asides to meet certain problems in the perceived problems of the mobile service, when they set aside a certain amount of spectrum for new entrants and allowed them to bid on that in a separate fashion from the big guys.
Senator Housakos: Do you not agree, though, in addition to generating revenue, which it undoubtedly does for the government, that it also prevents it from becoming a bit of a Wild West industry? I agree with you; I have fundamental problems with certain things because they go against my belief in the free market economy. However, can you propose an alternative to this that will prevent the Wild West in this industry taking form and simultaneously providing cost- effective benefits to the market place?
Mr. Janigan: There is no doubt that they have to have some certainty about their rights to that frequency. Property rights must be set that people cannot intrude upon. The question is whether or not the process of bidding up the price leads to the best result.
Also, I have a difficult time accepting that all the monies garnered for the auction simply go to the Consolidated Revenue Fund and do not go to the purposes that are associated with telecommunications or mobile service in a general sense. If I had to make one recommendation, I would say that the proceeds from the auction itself should not be so wholly the province of the Consolidated Revenue Fund; that money should be available for other purposes that are in furtherance of mobile needs and telecommunications needs in general.
Senator Housakos: That is fair enough. Given the large investment required to become a player in the wireless industry, are you in favour of allowing more for an investment? In your opinion, would the addition of more competition bring more effective cost pricing to the consumer?
Mr. Janigan: Because we represent consumer groups that are interested in more competition, and we have perceived that there is likely little gain from the current ownership rules, yes, we are in favour of more liberal ownership rules in relation to allowing more foreign competition in to deal with the wireless market. We think that is something that should be pursued. We do not see a big downside for consumers, rather a potentially big upside by allowing in more foreign competition.
Senator Housakos: In your opinion, is the CRTC's raison d'être, their mandate, sufficient enough to be able to monitor all the growing needs in the wireless industry over the next few years?
Mr. Janigan: No, I do not think so. The CRTC was set up as a tariff agency that controlled the monopolist incumbent. Effectively, in most areas no monopolist exists anymore. We have market-dominant players, but a whole proliferation of issues deal with the telecommunications network as a whole. They may well have the information and some of the expertise, but they do not really have the resources to try to deal with them.
We have a do-not-call list right now where even in its rather minimal state, the CRTC is having a difficult time attempting to get the resources to deal with the players in an appropriate fashion. That one little aspect of an entire telecommunications framework is challenging for them. We probably need a new model; we certainly need a new act and probably a new approach as well.
Senator Housakos: Thank you very much for your answers.
Senator Mercer: I am interested in your comment about the do-not-call list and the relationship between the CRTC and the administration of that. I would like your opinion on it, but the way I look at it is that the CRTC has gone exactly contrary to what Parliament said. In the debates before the House of Commons committee — I sat in on that committee — all four parties had the same opinion on how they were to deal with charities. Now the CRTC is trying to find a back-door way of charging a fee to charities for the do-not-call list.
Mr. Janigan: The problem with charities is that the theory behind exemption collides with the reality of the customer perception of what they do not want to have access to. We have found, in some respects, that some of the most pernicious complaints about telemarketing have their source in charity calls. We are faced with the difficulty that the general population seems to have an aversion to the calls.
Senator Mercer: Parliament knew that, or at least those points were made, but they still went ahead for good reasons I think, and exempted charities, political parties and other organizations from the do-not-call process.
Mr. Janigan: What Parliament says rules.
Senator Mercer: That is what one would think.
Senator Merchant: Consumers — you represent consumers — are always worried about security, such as security of information; and we hear about identity theft. What steps do you foresee that can be taken in the wireless area to protect the consumer?
Mr. Janigan: One of the recommendations that we have set out in our brief deals with identity theft from the standpoint of wireless. Our particular recommendation has cited Bill S-4, which is before the Senate at the moment and seeks to make amendments to the Criminal Code to criminalize certain behaviour related to identity theft and possessing or trafficking in credit card account information. We have suggested that it might include some specific clauses to protect wireless consumers from abuse. That is one of the steps we see as appropriate.
Also, a clause prohibiting the possession and distribution of tools to circumvent safeguards and encryption on mobile commerce networks similar to the postal key prohibition might also be also a useful protection.
Senator Banks: I apologize for asking this question again, but I did not understand your answer to the second part of Senator Housakos's question. He asked you, first, to confirm that you did not like the idea of auctions, and you explained why. He also asked what the alternative means were, what a set of criteria would be and what the adjudication process by which you would otherwise determine a successful operator would be.
Mr. Janigan: It was the process used prior to the auction process, where you set the conditions upon which you want the operator to operate in that area and you look at the bids in relation to that set of conditions. If you think that in a particular area this remote region must be served as an incident to getting the franchise, then the person has to bid on that in relation to providing that service.
Senator Banks: It is similar to an application for a broadcast licence, a promise of undertaking.
Mr. Janigan: That is correct. There is an art term that is associated with this. I have been wracking my brain for it. I think it is something similar to a "Chadwick" auction. It is the opposite of that, where you set the public interest requirements first and then get the provider.
The Chair: Your organization made a comment concerning the code of conduct of the Canadian Wireless Telecommunications Association about cooperation between that and abandoning the rate calculators. Can you give us more precision on that incident?
Mr. Janigan: Some of the principles and much of what is contained in the wireless conduct code is good. The question is how it will be implemented, how it will be enforced, and how we can do it in a transparent and accountable fashion. We do not quite have all the answers on that.
With respect to the wireless calculator, that was a project of the Office of Consumer Affairs of Industry Canada. They spent some $1.4 million on it. They did some testing, and we were fortunate to be able to test it out with different consumer needs. It seemed to generate some incredibly useful information for consumers, particularly given the proliferation of plans, et cetera.
After this calculator was ventilated with the industry, it was subject to a fairly intense lobbying campaign by the industry to prevent it from being implemented. The official reason given was that it was beyond the technical capacity of Industry Canada to operate. I find it difficult to contemplate that a government department that is in charge of the telecommunications and cyber future of Canada cannot operate a wireless calculator from its Internet site. We felt that was something that would have encouraged more and better competition for the interests of consumers.
The Chair: A bill on anti-spam is going forward in the House of Commons and this is normally the committee that would study it. Would you give us a few comments that could be helpful to this committee on how the process is proceeding?
Mr. Janigan: I am not the counsel in the Public Interest Advocacy Centre, PIAC, who has been primarily involved with that, although I am familiar with some of its provisions. In general terms, we believe that the bill represents a substantial effort at consumer protection by the government, and, if implemented, it would be a useful tool in curbing abuses. It will not be a silver bullet, but it will be of substantial use to consumers in attempting to control spam, which ranks fairly high on the scale of complaints by consumers associated with Internet and telecommunications use in general.
The Chair: That was my way of giving a heads-up to the committee that we will probably be studying that bill before Christmas.
Senator Plett: Maybe I am not understanding something. In my previous life, I travelled for my business across much of our country, primarily Alberta, Saskatchewan, Manitoba and Northwestern Ontario, and I found a wide range of service in those provinces.
A few nights ago, we had witnesses from SaskTel. The wireless in Saskatchewan seems to be considerably better than anywhere else in the country. We heard the regional minister from my province of Manitoba tell us at our caucus meeting today that he is having discussions with Manitoba Telecom Services Inc., or MTS. At my cottage just two hours south of Winnipeg, I have no cellphone or wireless service.
Why is there such a vast difference in services across our country? One would think that we would have equal service.
Mr. Janigan: I think it is because wireless service was initially provided by the incumbent telephone operators. It grew up as an adjunct or a service that was ancillary to their operations of providing local telephony. It was not considered by many of the incumbent telephone providers ab initio. They did not start out with a plan of how to deliver wireless networks in Canada. It was considered part and parcel of the business operations of telephony.
As a consequence, it was modelled on business models that were appropriate to telephony and not necessarily appropriate to wireless in general, and the problems associated with rural and remote were kicked down the road to be solved by new or better technology or by the fashion of public subsidy. That is as good a theory as I can evolve on why we have such a patchwork quality to some of the service provision. It must follow to some extent a business model that has some resonance in the individual services that are being provided.
Senator Plett: I appreciate your answer, and I understand that you may not be able to give us a better answer than that. If this was 1902 and we had telegraph systems and horse and buggy, that would make some sense. However, I would think that Manitoba, being right next door to Saskatchewan, should be able to figure out a system to provide equal service.
The Chair: Thank you, gentlemen, for your presentations.
Senators, because of the limits of technology, we will not be able to have a bilingual presentation. We cannot ask questions in French because they cannot be translated through the system.
Second, the written presentation is in English only. An informal poll was done among the people who have a concern about this. We have agreed that we will make an exception. We rarely accept documents in one language. However, since, due to technology, we cannot ask questions in French anyway, if you do not mind, I will accept the document.
Senator Mercer: Might I ask, Mr. Chair, that the document be translated?
The Chair: It is in translation and will be sent to our offices.
With us from Edmonton is Erwin Loewen, Director of SuperNet, Technology Services, Service Alberta. Perhaps, later on, you can introduce the person accompanying you.
The Alberta SuperNet was built to connect public institutions across the province to a broadband Internet for a high-speed Internet access, videoconferencing and other services. It is a network of fibre cables and towers currently reaching 429 communities across Alberta.
Welcome, Mr. Loewen.
Erwin Loewen, Director, SuperNet, Technology Services, Service Alberta, Alberta SuperNet: Thank you very much. I would like to introduce Ms. Michelle Chapeski, who is from the Alberta SuperNet business team. She will help if there are any questions with respect to the contract, if I have any trouble with them.
The Chair: We need someone like that.
Mr. Loewen: Again, I apologize. We would have had this presentation in French as well, but we had a short opportunity to prepare at this point in time. We had to do what we could in the short turnaround.
Actually, your introduction has done a great service to explaining what Alberta SuperNet is. I almost do not have to continue at this point.
I would like to simply go through a short series of slides to take a look at exactly what Alberta SuperNet is at this point in time and how we are using SuperNet to enable services, both for Alberta's public sector and also its business and residents in regard to services; and particularly the focus we have been asked to talk about, which is Internet service providers.
If we move on to our agenda, on slide 3, we will go over the vision and opportunity, talk about the solution and the current use and benefits that SuperNet has been providing to Alberta, after which we will be happy to entertain questions and have a discussion.
First, the vision of SuperNet, on slide 4, is probably similar to many parts of Canada and a number of parts of the world. It is a fairly large area with a relatively distributed population, over 661,000 square kilometres and almost 3.5 million citizens. It encompasses two major cities, but Alberta's population, according to Statistics Canada, is one of the most distributed populations in the country. We have two thirds of our population in major urban centres, but a clear third or more is in many smaller centres throughout the province.
We have had competition, as in other parts of Canada, in the urban centres. The rural areas were pretty much without service of any kind. Our direction was to bridge the divide between urban services and rural and remote services in Alberta. We did have issues with terrain. We have mountains, hills and prairie all in one area. The simplest was the prairie, but we have definitely had some challenges in meeting the capability to connect all parts of the province.
The opportunity is covered on the next slide. Essentially, the following key areas are what we were looking for: eliminate the digital divide in Alberta by connecting urban and rural communities; meet evolving needs for higher bandwidth to serve new technology solutions for video, image, data and voice applications; ensure that the network promotes competition and rural development in the province; and ensure that the network was open and accessible to all.
The government got involved at this point to create a business case for bringing broadband to the rural communities. As in many other parts of the country, we had a scenario where the corporate communications providers were unable to make business cases to bring high-speed services into small communities because the cost to build would have far exceeded the business capabilities in those communities alone. The government felt that if we could come in and help provide funding to get to those small communities for the capital cost to build the infrastructure, it could become self-sustaining thereafter.
If we move on to slide 7, I can explain the principles for the proposal that we put out for tender. They were to have a sustainable and scalable network — we were looking for a 21st-century solution — and to purchase or lease existing infrastructure where feasible. In other words, we did not want to overbuild over existing solutions. We wanted to extend from those solutions.
We wanted open and equal participation opportunities, which essentially meant universal pricing, no distance costs. We also wanted to ensure there were no penalties from a remote area as compared to an urban area. To promote competition and rural development was a key principle, as was ensuring that affordable and timely services were available for the public sector programs and the province.
We looked at the various models and opportunities that were available to build a broadband network throughout the province. In doing that, we decided that a public-private partnership was the best approach. We wanted to be able to get to all parts of the province with broadband solutions. However, we wanted to ensure that the government did not have to run the services to meet the needs of the residents and businesses.
As a result, the Government of Alberta put in, based on the tender results, $193 million to build a network for what we refer to in our slide as the EAN. This is the extended area network. I will explain that in a couple of slides from now.
Bell Canada was the proponent that won the bid, along with Axia SuperNet Ltd. Bell won the right to build the base area network for the largest communities in the province because they wanted to expand into Western Canada, and they saw this as an opportunity to bring in their own infrastructure. I will explain exactly how it works in a couple of slides from here as well.
We also wanted a network operator and an independent access manager. That means that we wanted to have the ability to have a neutral, independent party — not a major telecommunications provider, necessarily — to allow for equitable access to SuperNet by all providers, whether it was a large telecommunications company that wished to use that infrastructure or a small independent ISP, Internet service provider, operator, with no differentiation in costs for the services.
On the next slide, we can talk about our partners. Again, the winners of the contract, teamed up, are Bell Canada and Axia SuperNet Ltd. Bell Canada built the entire infrastructure throughout the province. They are the prime for the construction, and they actually own and operate the infrastructure within the 27 largest communities in the province, the base area network or BAN.
This is where Bell found a business case for themselves to go after businesses and services in Alberta, where it made sense to invest their own money. In the base area network, they provide bandwidth services to us through those communities, and it forms the backbone of SuperNet throughout the province.
Axia SuperNet Ltd. won the operation portion of the contract. They work directly with the customers and service providers to ensure that there is an open access model to SuperNet. The services and quality control are maintained for those services — the service level agreements, if you will, for the network.
I will switch to slide 11. We will come back to slide 10 in a minute.
We will take a look at how SuperNet is laid out in a generic format here. As I mentioned, we have a base area network; Bell Canada runs and operates this part of the network. It forms a backbone throughout the province between the largest communities.
Approximately two thirds of the population lives within those communities. We allowed Bell Canada to build that portion of the network for SuperNet and operate as a carrier, a provider in that area, because there was competition in those communities already. The government did not provide funding or build into those areas. Bell did that themselves and competes directly with other services already available.
However, for public sector sites, they all connect into the Bell network as part of the public sector connections for SuperNet. In the extended area network, or EAN, the government financed this portion of the build. Our $193 million went to up to 402 additional communities in the province.
Currently, approximately one third of Alberta's population is in that area. They have limited access to new technologies and limited or no broadband service capabilities at all in that area. Given that it was difficult to find a business case for carriers to go into those areas with broadband services, we created the business case by essentially building that infrastructure.
Internet service providers are allowed to connect in the extended area network directly to SuperNet. We will talk a little more about that when we talk about the solution.
The next slide, slide 12, addresses the technology. It is using Internet protocol or IP-based solution throughout. It is mostly a fibre network. We have over 12,000 kilometres of glass under our province at this point. Some wireless is being used either in places where it was not feasible or impractical to complete with fibre optics in those locations.
The key difference to SuperNet's solution versus other Internet service providers' solutions is the use of a different type of network technology. We use something called MPLS, multi-protocol label switching, which is a multi-packet label system. It is a technical term. MPLS and QoS, quality of service, technologies allow SuperNet to be much more than simply Internet bandwidth. It allows us to have private network capability within SuperNet itself so that independent organizations — school boards, hospital authorities, library regions, government ministries and the Government of Alberta itself — can each create independent virtual networks within the environment of SuperNet. The QoS capability allows us to have priority packets to allow us to deliver real-time services — such as videoconferencing, et cetera.— at a better throughput to ensure that it does not get compromised by other data.
Public-sector customers are able to use SuperNet end to end. If you are a school, you can connect in downtown Edmonton or in our most remote locations in the province, with universal pricing wherever you connect. You pay the same price for the same bandwidth connection whether you are in downtown Edmonton or in one of our remote communities.
Commercial customers provide an interesting twist or angle to our contract. We had to meet a couple of requirements. Bell was our partner in building this network. They built the network in the 27 largest communities. The commercial sector does not directly connect to what we refer to as SuperNet in the base area network. They can use any commercial provider to connect services between Edmonton and Calgary, Edmonton and Red Deer or various other large communities in the province. When you get out into those extended areas where the government provided funding for SuperNet, commercial customers can connect directly to SuperNet at that point. They can then back-haul their services to larger communities or between small communities. It is a little complicated in that respect, but we are finding a way to make it work.
If we could flip backwards for a second to slide 10, we can talk about who can access SuperNet.
This network was tendered for the public-sector needs in the province. Government ministries, learning facilities, kindergarten to grade 12, post-secondary institutions, health organizations, libraries and municipal governments can all connect to SuperNet directly in all of the communities. Businesses and residences have the opportunity to connect directly to SuperNet in those extended communities — the 402 communities that were government-funded.
Essentially, they do not connect directly. They find a carrier solution or service provider, whether it is an ISP that provides services to those residents with the SuperNet connection or another provider that creates direct business connections for rural businesses connecting onto SuperNet.
Service providers can extend SuperNet beyond the borders of our SuperNet communities primarily through wireless connections as well. When we look at business customers, for example, we have oil and gas or other remote customers who want to create a direct connection from remote communities back to their main headquarters in the larger centres. They are allowed to create direct point-to-point wide area network, WAN, connections over SuperNet as well.
I hope it is not getting too confusing. We are here as long as you need for questions as well.
We can talk about how SuperNet is deployed in a typical community in the province. We definitely have some small centres in the province. Slide 13 shows something called a PoP, point of presence. It is the centre where the intercity fibre comes into the town and leaves to go to the next destination. At the PoP, we have local access fibre that connects to all public sector sites in the town.
It is one of the more unique solutions for services to the public sector in Alberta. In almost all cases — with some exceptions — we have fibre optic connections directly to buildings. We are looking for longevity and sustainability of this network. We knew that bandwidth increases for services happen all the time. By having fibre to the schools, hospitals, libraries and government offices, we have sustainability for 30-plus years with this type of infrastructure and possibly as long as triple that, up to 80 or 90 years. It is hard to tell with technology these days.
From that point of presence, or even from other ones, an Internet service provider can connect to the SuperNet PoP site. They can back-haul services from a major centre. For example, a small Internet service provider in a little town in Alberta can set up a connection to the SuperNet point of presence. They can get their services from a larger ISP in Edmonton, Calgary or wherever. That can be run over the SuperNet backbone so that they can get as much bandwidth as they require in the community. From there, they can use standard services to go to the homes and businesses. Those services could be DSL, cable or wireless solutions — whatever makes the most sense for them to deliver their solutions in that community.
Again, their back-haul is SuperNet, and then they distribute using standard services to the homes and businesses. This gives a sustainable business model for the Internet service providers in those communities compared to having to bring in the bandwidth themselves from a larger community at a significantly higher cost.
At the same time, service providers from the local community or from any other SuperNet-connected community in the province can deliver Internet services directly to the public sector as well. Therefore, the schools in those small communities have quality bandwidth from the Internet for their needs. It is equitable in those small communities as much as it is in Edmonton, Calgary or other places.
One key point to talk about is the slight differences in Alberta with respect to our desire to find last-mile solutions to meet the needs of homes and residences throughout the province and perhaps some other provinces. We have our public sector already connected to a broadband network largely throughout the province at this point in time.
Some other provinces are trying to meet their public-sector requirements for broadband solutions at the same time as they are looking for Internet solutions for homes and residences. Therefore, it is a slightly different model, but, in essence, the end result will be the same. Alberta still has a desire to ensure that 100 per cent of its population has equitable access to broadband Internet services. We can talk about that after, as well as how successful we have been with it.
Slide 14 shows how SuperNet looks today in the province. I am not sure if you received colour or black and white copies of the document, but I can provide you with online copies if you wish. The red lines on this particular map would be the base area network — that is, the parts that were built using Bell funding; the yellow lines are all the extended area communities that were connected by government money; and the green lines, also funded by government money, are where we did have to use wireless connectivity.
Of interest to me as a technology person is that the connection to Fort Chipewyan, way up in the northeast part of the province, was the longest wireless connection in the world back when it was put together in 2005, over 121 kilometres point-to-point connectivity. It was a proud engineering achievement for those that were doing the build at the time.
Looking at the statistics again, you can see 12,000 kilometres of fibre. Over 1,800 kilometres of wireless was used connecting up to various small communities where it was not feasible for fibre connectivity. The total number of sites is approximately 4,200 public-sector sites that are connected. We are increasing the connections with commercial-sector sites as well now being added on. Presently, over 60 Internet service providers have registered connections to Alberta's SuperNet. A number of them would be small, as I would refer to it, mom-and-pop-type Internet service shops, as well as larger providers right up to the largest ISPs in the province, including TELUS, Shaw Communications Inc. and others.
In the public sector, over 85 per cent of the sites that were allowed to connect to SuperNet have taken up SuperNet services. It was not mandatory for those sectors to have to use SuperNet. Certain sectors, primarily education and libraries, have some of their funding subsidized to connect to SuperNet by the government, so it became easier for them to accept services right away. Overall, over 85 per cent of the sites built are already using active SuperNet services today.
The last bullet on this slide, "Promoting Innovation," refers essentially to some of the things that we were looking to see happen with SuperNet. From the public sector point of view, we have had significant success. We have seen a number of innovative ideas take off. The most interesting occurrence was when we had a common network that all the public sector in the province was sharing. That cross-sector collaboration increased at a rapid rate. After the SuperNet build was completed in 2005, it was noticeable how quickly we found the health authorities, school boards and libraries all starting to collaborate on shared services.
Videoconferencing is one of the big victories on what we have been able to achieve in the public sector in Alberta. Shortly after SuperNet was finished, we went from a handful of videoconferencing suites in school boards to over 700. We have 1,700 kindergarten-to-grade-12 schools in the province in total, so the proliferation was significant and rapid. Some of the cross-sector collaborations that occurred were, for example, physiotherapy and speech and language pathology capabilities from the urban centres to the more remote areas where students were previously only able to get services on a quarterly basis; that is only four times a year. They were now able to get weekly sessions remotely over videoconferencing. In some cases, the physiotherapist found that the use of videoconferencing allowed her to zoom in on her subjects in a way that she could not when they were across the table from her. She was able to get some good use out of the technology.
We have been pleased with the success of SuperNet within the public sector. If we go to slide 15, we can look at the benefits of SuperNet itself. We go over a number of different areas. Again, the key achievement for the public-sector component of SuperNet was the ability to have a network that was more robust than an Internet service. Essentially, it was creating a private network within the province that allowed us to have shared services and what we call quality of service, QoS, where we can ensure that we put priority on the data information that was most critical, such as videoconferencing and Voice over Internet Protocol — VoIP — solutions, and so on. It has proven to be successful in that manner.
The other part that was a success within the province was putting in universal flat-rate service fees for all parts of the province. It was the first time that the rural health authorities and school divisions in particular could create a wide area network connection between all of their locations and were not penalized — versus urban school boards and urban health authorities — because of the significant distances between their locations. That has also provided success.
On the flexibility of services, we have service options that vary to give different opportunities for the different types of users of SuperNet, from a 256-kilobit-per-second service offering to over 100 megabit services. Presently, we have what we refer to as GigE or gigabit Ethernet services available on SuperNet already. The direct benefits for the public sector are definitely there.
I will gloss over the next few slides at this point in time. There are e-government solutions and connections for Albertans. I will come back to talk about last-mile connectivity and ISPs at the end of the presentation here.
The ability to have voice and video collaboration is important. Alberta Justice is using videoconferencing and connectivity to prisons and remand centres to the point that they can do arraignments and hearings, and lawyers can actually contact their clients directly over video circuits without the need to travel as far all the time. Again, given Alberta's distributed population base, it makes it more costly and challenging for some of those types of services to be offered otherwise.
This next slide shows health, libraries and e-learning. There are definite different opportunities within each sector, and, as I said, some interesting cross-sector initiatives are under way at this point in time.
Important to us was the evolution of business and community services, e-commerce, e-banking, and the ability for, again, multi-site corporate environments and businesses to be able to create a wide area network at an affordable cost from remote areas where there would not otherwise have been, as I said, a viable commercial fibre offering before, and now there is.
We now go to slide 19. This is sort of where it all comes together, namely, with the Internet service providers. The primary focus of the tender, the RFP or request for proposal, for SuperNet, was for the use of a broadband network for the public sector of Alberta. That has been achieved with great success. The secondary purpose was to stimulate the provision of broadband Internet services to the rural population. That has been met with mixed success. We can talk about that certainly and see where that has gone.
One of the key things that we thought was a business requirement for providing Internet services to rural areas was the back-haul capability. That is, the ability to provide large bandwidth from the community back to a higher-tiered Internet service provider so that smaller providers in those rural areas could actually get affordable bandwidth to get back to larger centres. That was definitely a required business driver to allow Internet services to flourish in smaller parts of Alberta. We definitely have met with some success in there.
We have seen that approximately half of the SuperNet communities have achieved some level of broadband Internet services being offered to their residents and businesses. That is a success story. We had probably 40 to 50 communities prior to SuperNet's completion that had broadband services. We have well over 200 today, four years after the fact.
That could be considered a success. However, we still have approximately 200 communities that do not have that type of service. The Government of Alberta is very interested in understanding the business models, what is happening with Internet services, what it takes to bring that service to the rest of the province and where the business case is.
We have begun to understand what happened with our Internet service providers. It is more than back-haul when you get to the more distributed populations with fewer households per square kilometre. At that point, the cost of putting up towers and distributing those services begins to exceed the business case. Along with the rest of Canada, we are trying to figure out the best ways to put those services in place.
Some interesting projects are happening with innovative uses of SuperNet, some being very dynamic. With broadband Internet or broadband services for SuperNet throughout the province, the libraries are reinventing themselves as information centres in their communities. They provide more than just books. They have the capability to provide Internet services, videoconferencing services and smart-community services, et cetera. We are taking some interesting directions. The committee is free to contact me to ask for more information should there be an interest in learning more about them.
We believe that we are meeting most of the requirements of Alberta's public sector for broadband services by having deployed Alberta SuperNet. We are partially successful in bringing Internet services to our rural and remote communities because we have this broadband network throughout the province. We are looking at ways to complete that capability for our entire population base.
The Chair: Thank you. I ask colleagues to be disciplined with their questions. Supplementaries will have to be kept to a minimum.
Senator Johnson: Thank you for an exceptional presentation, which was very dense. You have answered many of my questions.
Where was Alberta in this business before the development of SuperNet? How did this all happen and become such a brilliant operation?
Mr. Loewen: It is a long story. In the 1990s, many organizations in the public sector started to realize how important the Internet would be to their operations. Certainly, health authorities, school boards and so forth were finding an increased desire to have better connections than the dial-up services of the day. As a result, they put pressure on the government to find solutions to meet this need.
The government has a research arm known as the Alberta Science and Research Authority that was looking at ways to take Alberta into the 21st century and make it a successful province. In late 1998, they put forward a recommendation to the government that the government should build a broadband network throughout the province to meet the needs of the public and private sectors. From that time, it was a matter of looking at various solutions. We looked at what some of the innovative solutions for networks were in the rest of the country. The RSQ Network in Quebec was finding some success, as were the Orion Research Networks in Ontario and British Columbia. We looked at what they were achieving in trying to create networks for the needs of specific sectors, primarily education, post- secondary and business research. We tried to extrapolate from that ways that we could meet our needs.
The need to extend broadband from the campus environments of the research networks to the general population brought us to the public-private partnership. That meant we could not offer pure dark fibre services to the public sector, which would have been an interesting capability. However, it limited the ability to walk away from that kindergarten-to-grade-12 school or that post-secondary institution and still be able to get access to the broadband services needed to complete homework, for example.
Senator Johnson: Given that, you are likely aware that through Industry Canada, the Government of Canada has a $225-million program, Broadband Canada: Connecting Rural Canadians. Do you think it is possible to compare this program with the program that created Alberta SuperNet and to estimate what it would cost to cover all of Canada with a SuperNet program?
Mr. Loewen: That would be a bit difficult. Certainly, I have been in discussions with Ms. De Francesco, who has been trying to set it up with Industry Canada. Their complete goal is to provide solutions to the rural parts of remote Canada. Essentially, the common connection between the Broadband Canada program and the Alberta SuperNet program was trying to use government funds to stimulate business cases to bring this to smaller parts of the country.
Alberta SuperNet had a slightly different focus, in which we set up a business case for government monies specifically to connect the public-sector sites. In doing that, we hoped to provide the infrastructure and access to that infrastructure, which allowed the private sector to piggy back and find that last-mile solution on their own. Broadband Canada realizes that the private sector still cannot do that on their own. Distribution costs and other costs are required to reach the very small communities.
Trying to extrapolate a cost for SuperNet to the rest of Canada would be difficult because Alberta SuperNet provides a fibre broadband solution. I am not sure, but perhaps Broadband Canada's focus is more on last-mile customer connections using primarily wireless solutions than it is on back-haul fibre solutions.
The answer to meet Canada's requirement for data services will require investment in both types of infrastructure. You cannot create the last-mile connections in the smaller communities without that significant back-haul capability, which would have to be fibre-based to be effective for long-term infrastructure for the country.
Similar programs to SuperNet on a national level can be found in Singapore or Australia with the broadband programs they are trying to initiate. Australia has estimated the cost of their program at over $40 billion. However, the key difference is that they are talking about fibre to the home. Alberta SuperNet does not provide fibre-to-the-home solutions; it is only the back-haul at this time. Perhaps it would be a significant subset of that amount of money for Canada for back-haul requirements.
The telecommunications industry is doing a fine job at meeting broadband requirements for a large portion of the country. The question is where the places are that they cannot go right now with a viable business case that government funding could probably find a place to complete that capability for back-haul, which is what SuperNet does.
Senator Zimmer: Witnesses from SaskTel recently appeared before this committee and emphasized that the cost of a broadband network includes not just the initial construction cost but also the maintenance costs and the future costs of providing even faster Internet speeds when these speeds become the new standard. Could you comment on that, please?
Mr. Loewen: Just let me recap the question. You are looking at the costs, not just the construction costs but the maintenance costs of the faster speeds, particularly when, once those speeds are provided to the customers, they start to use them on an ongoing basis and demand those speeds and beyond?
Senator Zimmer: Those speeds become the new standard. Of course, everyone wants the latest model.
Mr. Loewen: Right. With Alberta SuperNet, by using the fibre infrastructure, we have that scalability and affordability to go forward as more bandwidth is required. There is still a requirement to have electronic swaps every few years to be able to transmit higher speeds over that fibre infrastructure. The costs for that are borne by our private- sector partners presently.
They are meeting the expanding need. As more services are demanded by the customers, as long as the price points stay competitive, we are finding that the business model appears to work right now with the private sector expanding that capacity themselves.
Government does not need to put in more money. It does not appear to be necessary once the original build is completed. From that perspective, ongoing maintenance should be manageable by the private sector if a P3 model, a public-private partnership, is used for the build.
Senator Zimmer: What percentage of Alberta's population is still not served by high-speed Internet? Are there plans to extend SuperNet to reach them? Can the satellite technology be used to provide broadband to those without access to SuperNet? What other countries or provinces in Canada are using SuperNet as a model?
Mr. Loewen: We have estimated that about 25 per cent of our population is still not reached by SuperNet-enabled high-speed services. Again, that indicates the high percentage of the population living in rural areas in the province.
Senator Zimmer: Are there plans to extend SuperNet to reach them?
Mr. Loewen: We are trying right now to work on solutions, looking at the successes of projects such as Broadband Canada and the Building Canada Fund, as well as provincial initiatives with our agriculture and rural development community to stimulate growth in the remote areas to bring broadband Internet services beyond the initial SuperNet communities.
We may not need to extend SuperNet to many more communities. We can use them as a base of operations for wireless Internet service providers to extend, using radio towers out from those communities to the remaining parts of the province.
You asked about satellite access. It would be difficult to say that we could use terrestrial services, such as terrestrial wireless or wired services, to reach 100 per cent of the population in any part of the country. In a few situations, satellite services will always be a required component of providing broadband services to the entire country. As a result, we see some need for satellite services in all cases.
Our preferred approach now would be to try to use terrestrial-based services as much as possible to ensure the best- quality service — no deference to the great services being offered by our satellite providers at this point in time. They are definitely providing a good-quality service, but it does not quite compete in some cases with terrestrial-based wireless or landline services.
Senator Zimmer: Lastly, what other countries or provinces in Canada are using SuperNet as a model?
Mr. Loewen: I know that SuperNet was looked at as a model by Singapore and Australia as they were evolving their own fibre solutions. Both countries opted to go to a fibre-to-the-home solution as opposed to just back-haul services, as we have done. That has extended the cost and scope of their particular service provisions.
I am also aware that the province of Newfoundland and Labrador is in discussions presently with Axia SuperNet Ltd. and its partners to provide a solution in that province for broadband services as well. I know that Axia SuperNet Ltd. is providing similar services to SuperNet in portions of France right now, partnering with various French telecommunications companies.
Senator Merchant: I am from Saskatchewan, but Senator Zimmer asked all the Saskatchewan questions. We know they are envious of our services, as we heard from Senator Plett.
I have a question about the security aspect. Does an extensive cable network such as Alberta SuperNet raise any new security concerns, both with respect to the security of the network and the user information transmitted along the network? If so, how is the Government of Alberta addressing these concerns?
Mr. Loewen: With respect to the security of the information transmitted over SuperNet, the Government of Alberta is quite satisfied with the security services provided on the network. The network uses, as I said, a technology provided by or put forward as a standard by Cisco Systems Inc., multi-protocol label switching, the Cisco version of MPLS that we are using on SuperNet. This allows us to create virtual private networks throughout the network for each organization that uses it. Individual school divisions, library authorities, health authorities and government offices and municipalities are each able to create their own networks with complete security from the data being picked up or sniffed out — the technical term used — on those networks.
We have done security technology assessments. Axia SuperNet Ltd. has a security team that provides their security solutions to the government. From a networking and data-security point of view, we feel confident that the data transmissions are secured within each organization. Some of the organizations that use SuperNet do in fact encrypt their traffic across the network in any case. However, it is based on their own security protocols and not necessarily because of a requirement over SuperNet.
In the case of physical security and security on the network itself, there are indeed security protocols. Axia would probably shoot me if I tried to talk about them too much now. In fact, security is set up, with video cameras and so on, at the points of presence in each community, inside and outside, and they do monitor those.
The actual physical fibre itself is, for the most part, buried cable, and it does have a great deal of resiliency and capability.
We occasionally get what my boss refers to as "backhoe fades" on occasion. This does happen. We have outages, but we have a prompt service to bring them back.
I have mentioned to Industry Canada, CRTC and others in the past, when we have had discussions about what we are doing in Alberta, that we are working on enhancing the SuperNet itself with what we call ring topology. We are extending SuperNet out so that, in all cases, it is not just a linear network going out to a series of communities and that is it, and if you cut the fibre somewhere, those communities are all dark beyond there. We are setting it up as a ring so that any individual cut would not reduce services to any but a very few locations.
It is important that, as Canada evolves solutions for the last mile out to all communities, they also consider that the resiliency of the back-haul, the resiliency of the fibre solutions they create for those communities is also inherent and capable of resisting breakages and so forth. While today we are beyond some of the basic capabilities of providing Internet to rural and remote communities, the Internet, for many people, is simply to do web browsing and some email, and later on, YouTube. We are now getting to the point where Internet service providers are offering VoIP solutions, the actual phone for your homes now coming over their solutions. We need to ensure that as we evolve our networks across the nation, we consider the resiliency of those networks so that our customers and citizens do not end up with a lack of services including critical services over these IP solutions that we are providing to them.
Alberta is definitely trying to ensure that we enhance SuperNet as much as possible to have that resiliency.
Senator Mercer: We have heard much about your program in Alberta: it is very impressive. My colleagues would not be surprised that I really like the universal-pricing aspect, that the price is the same all across Alberta. It is interesting that it is not the same next door in Saskatchewan, which also seems to have a pretty good network.
Even when you have universal pricing, I am curious as to whether you have figures that break down the actual costs of providing services to Edmonton and Calgary compared to the actual costs of providing services to the most rural parts of Alberta.
Mr. Loewen: That is an interesting question. I do not have that information at my fingertips. Originally, to create the original pricing model for SuperNet, a form of averaging was done on bandwidth costs for the network itself. A decision was made holistically across the province on what the cost of bandwidth was, and then that was applied to the pricing model of services for all sites, essentially.
I do not have at my fingertips the actual costs for an Edmonton site or a major urban site versus the remote sites. I am presuming we might be able to get that information, but it would take work on our part to do that.
One thing we do have in the contract provisions with SuperNet is the ability to look at the average urban costs for comparable services and to try to ensure that our costs do not exceed that cost for all parts of the province. To date, we have found that our pricing structure has not needed to be modified from its original configuration in 2005.
The answer is no, essentially.
Senator Mercer: Your clients in Edmonton and Calgary might be interested in knowing what they are actually providing as subsidy to the rest.
Saskatchewan talked about running fibre optics to one single customer in the very northern part of Saskatchewan at a cost to the customer. You indicated that you had some clients who were in very remote locations but needed to connect to headquarters — you did not use that word, but I will — in Calgary or Edmonton. When you run that, can the communities along the line feed off that?
My final question is not directly related to this. It was in answer to a question by Senator Zimmer where you mentioned agriculture, which I was surprised by. In the Agriculture Committee's study on rural poverty, the lack of access to high-speed Internet was included in the three most important things that people in rural Canada, including rural Alberta, and mainly farmers, told us were a problem for them. Obviously, we did not get as big a complaint in Alberta because of your program. When you talked about enterprises in rural areas, one of the major enterprises happening in rural Alberta is agriculture.
Mr. Loewen: That is absolutely true. We have a ministry in Alberta that is referred to as Agriculture and Rural Development. They encompass both aspects of rural development in the province. Meeting the needs of farmers, ranchers and other rural businesses is definitely a key objective of what we want to achieve in the government for Internet services. Agriculture and Rural Development has used some funding, some of it federally distributed as well, to create grant programs to actually get communities — in this particular case, it goes to municipalities — to create broadband solutions with private partners in those communities. The use of wireless Internet service providers in conjunction with communities putting up wireless towers, for example, is one way they are using grant funding to pilot solutions that would work. That one concept is a municipal utility model for the provision of infrastructure and then getting service providers to go over that infrastructure to deliver services.
Senator Mercer: Are services off the single line going to a major customer in the North? That was my original question.
Mr. Loewen: Yes. When we built SuperNet out, we used public-sector locations to set the footprint for where SuperNet would go. As a result, we had our fibre covering much of the province, as the maps can show you. In all cases, we have what I refer to as access points along those fibre connections. Where possible, we are allowing connections into the access points, which get back into SuperNet services eventually.
Having a long connection to a commercial customer is not specifically the way SuperNet itself is built right now. An example might be, though, where we have a business — I will suggest an oil and gas company, for example — that would want to use SuperNet to get from Fort MacKay in Northern Alberta down to Calgary. SuperNet can get from the main townsite of Fort MacKay all the way down to Calgary because it is one integrated network. To get to the oil and gas site, which might be 20 kilometres from there, they would have to pay for the infrastructure to get back from their exact office back into the Fort MacKay SuperNet point of presence. If there is an access point and route between their office and the SuperNet point of presence, then they may have the opportunity to connect their fibre in at that point as opposed to having to bring it all the way back to the townsite.
Yes, when we do long builds of SuperNet itself, sometimes locations between the designated areas might have access provided. I am not sure on the build itself, how much of that was planned for those types of accesses and how much of it was simply a requirement; when you pull fibre optic cable long distances, you have to have a stopping point every so many kilometres.
Senator Plett: I am continually intrigued by the superior services that other provinces have versus my province of Manitoba, and I think Senator Johnson would agree. Senator Zimmer, I am not sure yet whether he is from Saskatchewan or Manitoba, but he would agree that Manitoba is not as good as Saskatchewan or Alberta.
The Chair: It depends what team is playing.
Senator Plett: Senator Mercer already asked part of the question. I may just ask it in a bit of a different way. If you do not have the answer, I would appreciate you getting it for us because it is relevant in my province. Your flat rates and same fees for services whether it be La Crete, Alberta, or Calgary, Alberta, are commendable. I would like to know how much or what percentage of that would be subsidized. I am not sure that I care about the actual cost, but I would like to know what percentage of your services up in La Crete or Beaverlodge or any of these places would be subsidized versus Edmonton or Calgary. I am not sure whether you have that answer for us here tonight.
Mr. Loewen: It is based on trying to calculate what the actual costs are to remote parts versus urban parts. I do not have that answer today. Definitely, we will do our best to get an answer to you. The subsidization is between the customers themselves as far as the prices they are paying for the service are concerned. Therefore, no government funding is subsidizing more remote sites than the urban sites with respect to operating costs.
Senator Plett: Thank you. I am not sure whether you answered this earlier — if you did, I apologize — but you did talk about Bell Canada owning the infrastructure. Does this mean that the system of open access does not apply in urban areas if Bell Canada owns the infrastructure there? Does this give Bell Canada a monopoly or a competitive advantage in the provision of Internet services?
Mr. Loewen: That is a good question, and I think I can clarify that for you. In what we refer to as the base area network, which is essentially Bell services, what Bell actually provides — they have provided and built their own infrastructure there — is all of the bandwidth requirements for the public sector that uses SuperNet. Therefore, between the extended area network, the portion that the government funded and the base area network that Bell funds and operates, we have, from a public-sector point of view, a seamless network. All of us use that Bell infrastructure to make our connections for the public sector.
In the commercial sector now, to provide Internet services between those base communities, the government felt obligated to have Bell fund that portion of the network because there was competition there already. Bell has now spent their own money and is on their own infrastructure in those communities, and they go head-to-head with other telecommunication providers for services in those communities. Therefore, given that the government did not actually fund that component of the network, we have not provided any advantage to Bell over any other carrier that already had services in those particular communities. Does that make sense?
Senator Plett: Yes, it does. Thank you and congratulations on your great work.
Senator Housakos: How long did it take in order to implement the infrastructure, the laying of the cable, the total infrastructure of the SuperNet program from beginning to end in order to make it operational where you can apply it across Alberta?
Mr. Loewen: At the time, I would have said forever. The reality is that it was a five-year program. We launched the request for proposal in February of 2000. We had a letter of agreement signed in November of 2000, and an actual contract was not completed until July of 2001. Engineering construction commenced at that point in earnest, and the actual operation of the network, the full production operation, started up in October of 2005.
Senator Housakos: I think you might have mentioned this in your presentation, but what was the total investment between Bell and the government?
Mr. Loewen: The government had a one-time investment of $193 million for the actual construction and build of the original SuperNet rollout, and that was it. Bell covered all additional costs. In the contract, Bell had their initial investment, and all cost overruns were to be borne by the contractor.
Senator Housakos: Did the government do a return-on-investment evaluation at the time when the money was invested, and have you hit those targets?
Mr. Loewen: I might have to come back to you on that one. It has been interesting. I have been lectured on the use of the term "return on investment" for a government. Cost savings and benefits are available, and the actual return on investment is difficult to assess, per se. From the success of the network itself and the uptake — 85-per-cent utilization — and the program success within the public sector, I would suggest that we have achieved our targets as to the initial requirements for the service. However, on actual business case targets that were identified, I will have to get you those answers because I am not privy to them at the moment.
Senator Housakos: My last question relates to your pricing structure. What do you take into consideration? You seem to have very competitive rates, and it sounds as though you are offering services to clients at more than fair market value. How do you come to that price structure?
Mr. Loewen: One of the key considerations when you look at standard telecommunications models for pricing, is that typically there is a premium price for lower-end services because they have had to put in infrastructure costs and so forth. They want to try to recoup their investment as best they can. As you get to higher bandwidths, you find that they can lean out those costs quite a bit and make it more on a per-megabit basis or whatever, more competitive for customers. With SuperNet, we did not want to look at that model. We wanted to have it at a competitive price point from the beginning for all costs. Therefore, they basically worked out, based on costs and operational requirements, a price per bandwidth period, holistically across the province. If it were, say, $7 a megabit or something similar for pricing, then there was no premium at the low end and no significant cost cutting at the high end. We achieved optimum pricing right from the lowest bandwidth on up. From that point of view, the cost modelling for SuperNet was different than standard telecommunications delivery.
The Chair: I would like to thank you on behalf of the group, Mr. Loewen. I have two comments before we end this session. We did have the presentation in black and white, to answer your earlier question. We will provide colour-copy access through the Internet.
We met with the people from Axia SuperNet Ltd., and they were quite proud of you. After having heard the presentation, we have to agree with them. Thank you very much.
Mr. Loewen: Mr. Chair, senators, thank you very much. It has been a privilege.
The Chair: We are adjourned until Tuesday in 10 days. Thank you very much.
(The committee adjourned.)