Proceedings of the Standing Senate Committee on
Transport and Communications
Issue 6 - Evidence, May 7, 2014
OTTAWA, Wednesday, May 7, 2014
The Standing Senate Committee on Transport and Communications met this day at
6:45 p.m. to continue its study on the subject matter of those elements
contained in Divisions 15, 16 and 28 of Part 6 of Bill C-31, An Act to implement
certain provisions of the budget tabled in Parliament on February 11, 2014 and
TOPIC: Part 6 — Division 16 — Telecommunications Act.
Senator Dennis Dawson (Chair) in the chair.
The Chair: Honourable senators, I call this meeting of the Standing
Committee on Transport and Communications to order.
This evening, we are continuing our study of Bill C-31, An Act to implement
certain provisions of the budget tabled in Parliament on February 11, 2014 and
Our committee has been asked to conduct a pre-study of Divisions 15, 16 and
28. We are now studying Division 16, which amends the Telecommunications Act to
set a maximum amount that a Canadian carrier can charge to another Canadian
carrier for certain roaming services, or roaming fees.
The witnesses for our first panel are from the Canadian Radio-television and
Telecommunications Commission: Chris Seidl, Executive Director,
Telecommunications; and Alastair Stewart, Senior Legal Counsel.
I invite the witnesses to make their presentation.
Chris Seidl, Executive Director, Telecommunications, Canadian
Radio-television and Telecommunications Commission (CRTC): We are pleased to
appear before you as you study Division 16 of Bill C-31. This legislation
contains proposed amendments to the Telecommunications Act, including a
provision to limit the roaming rates that Canadian wireless companies charge to
other Canadian wireless companies.
Let me begin with some facts about Canada's wireless sector. With 28 million
subscribers, the sector has grown quickly over the last few years and is of
vital importance to the Canadian economy. In 2012, wireless companies reported
total revenues of over $20 billion, which accounted for 46 per cent of the total
telecommunications revenues of $43.9 billion. According to the Canadian Wireless
Telecommunications Association, over 280,000 people are employed in Canada as a
result of the wireless industry.
In addition, smartphones are more particular than ever. An increasing number
of Canadians rely on these devices as their primary means to talk, text, surf
the Internet, download data and watch videos and television programs. From 2011
to 2012, the number of Canadians who owned a smartphone jumped from 38 per cent
to 51 per cent.
The wireless networks that support smartphones as well as tablets and other
devices that access data over the Internet are available to 99 per cent of the
population. Moreover, companies are making significant investments in
next-generation networks, known as Long-Term Evolution or LTE networks. The
percentage of Canadians who can access these faster networks increased from 45
per cent in 2011 to 72 per cent in 2012. This is an impressive reach, given the
challenges posed by Canada's size and geography.
We are currently gathering the data for 2013. The updated figures will be
included in our annual publication, the
Communications Monitoring Report.
When looking at the overall performance of the wireless sector, it is
important to keep in mind that there is a retail and wholesale market. The
retail market consists of the services companies offer to Canadian consumers.
Last year, the CRTC introduced a wireless code that is contributing to a more
dynamic retail market. It ensures that Canadians can make informed choices about
the services and companies that best meet their needs. A feature of the code is
that Canadians can cancel their contracts at no cost after two years, if not
sooner. The code offers wireless subscribers a number of additional protections,
including a limit on national and international data roaming charges.
The wholesale market on the other hand consists of agreements between
companies. The revenues generated from these agreements, including roaming, came
in at $800 million in 2012. In Canada, many wireless companies have their own
networks to serve their customers within specific geographic areas. However,
they must rely on other companies' networks when their customers travel outside
their coverage area. This is referred to as roaming. Under roaming arrangements,
wireless companies make their home networks available to each other. This
ensures that Canadians can continue using their cell phones and other mobile
devices when they travel.
The CRTC wants to ensure that there is a sustainable level of competition in
the wireless sector today and in the years ahead. We recently published an
ambitious three-year plan that will take us to 2017, in which we have identified
a number of activities to achieve this goal. I would like to give you an update
on the public consultations we recently launched with respect to the wireless
sector, as well as what we have planned in the months ahead.
In 2013, the CRTC conducted a fact-finding exercise on the rates, terms and
conditions associated with roaming arrangements in Canada. Based on the
information we gathered, we learned that some national wireless companies are
charging or were planning to charge smaller competitors higher wholesale roaming
rates than those charged to U.S.- based companies. In December 2013, we launched
a public consultation to investigate whether these arrangements may be putting
certain companies at an unfair disadvantage. We are currently studying the
comments we received from the wireless sector, the public and other interested
parties and expect to issue a decision in the next few months.
Earlier this year, the CRTC launched a second public consultation on the
wireless sector in Canada. The scope of this consultation is much broader than
the one I just explained, as it aims to review whether the mobile wireless
market as a whole is sufficiently competitive. Notably, we are examining the
wholesale services, including roaming, that wireless companies obtain from other
The CRTC sought comments on three questions. First, what is the state of
competition in the market for wholesale wireless services? Second, what impact
does the wholesale wireless market have on the prices and services that Canadian
consumers pay for and receive? And third, do we need more regulatory oversight
for the wholesale wireless market?
The deadline to submit the first round of comments is on May 15. We will
examine the submissions in preparation for a public hearing that will be held in
the National Capital Region in late September.
In carrying out these activities, the CRTC wants to make certain that the
competitive environment in the wireless sector is sustainable and provides
benefits to Canadians. These include having access to high-quality networks and
innovative services at reasonable prices.
Bill C-31 proposes to limit wholesale wireless roaming rates in Canada
pending the outcome of the CRTC consultations I have just explained. Bill C-31
sets out the formula that would be used to calculate the maximum wholesale rate
for domestic voice, data and text services that one wireless company can charge
another in Canada. The CRTC will be responsible for implementing the proposed
amendments should Parliament decide to adopt the legislation.
We would now be pleased to answer your questions. That being said, there are
a number of ongoing proceedings before the CRTC, Mr. Chair, and I hope the
committee members will understand that, depending on the question, our answers
will necessarily be limited in order to maintain the integrity of those
The Chair: I understand you, sir.
Senator Mercer: Thank you, gentlemen, for being here. I find it
disturbing that, in your fact finding exercise in 2013, you learned that some
national wireless companies are charging or were planning to charge smaller
companies higher wholesale roaming rates than those charged to the U.S.-based
This predatory pricing is not unusual in the airline industry, for the big
guys to put the small guys out of business. This government and other
governments have spent a lot of time trying to ensure that the spectrum has
spread around and there has been competition. Are there no rules in place
currently to help solve this problem?
Mr. Seidl: The CRTC forbore or stopped regulating rates for the
wireless industry back in the mid-1990s. We did retain some powers with respect
to that forbearance. In particular, we maintained a power to investigate any
issue of unjust discrimination or undue preference. We launched that proceeding
in December 2013 to look at those particular cases. There is currently no rate
regulation on the wholesale rates that wireless companies can charge each other.
Senator Mercer: You can do the study and release your findings, and
the hope is that public pressure will make some changes?
Mr. Seidl: As I mentioned, we have two proceedings ongoing. The first
one is looking at the narrow issue of unjust discrimination. From that, we could
come with a finding and, if there is an issue, introduce some form of rule to
control the rates, if that is necessary. The second proceeding is much broader,
and we're looking at the wholesale wireless market as a whole, including roaming
and other services. In that proceeding, if deemed appropriate, we could
reintroduce certain powers we have and go as far as going back to rate
regulation on the wholesale market if we wanted to.
Senator Mercer: Under the heading of other services, are you looking
at the accessibility of smaller companies to access the established tower
systems that other companies may have across the country?
Mr. Seidl: Our proceeding is open to all wholesale services in the
wireless market, including towers. That's in scope in the second proceeding. We
also asked for any input in what other services they may want us to look at.
Senator Mercer: CBC abandoned a number of towers a number of years ago
when they switched from analog to digital. I do not know whether those towers
are being used for telephone distribution or not. Do you have any idea?
Mr. Seidl: The comments on that particular file are not in yet. They
are coming in in May of this year, later this month. We are collecting
information on which towers individuals are using at this point. I don't have
the details in front of me.
The Chair: Maybe you can forward them to the clerk, when made public?
Mr. Seidl: It depends on whether the information will be made public.
A lot of the information is confidential.
The Chair: If it is. Thank you.
Senator Batters: Thank you for coming to our committee tonight. I have
a couple of brief questions. I am wondering if you could tell us what the
expected annual cost savings to consumers might be as a result of this proposed
change. I think it's a welcome change and a lot of consumers will notice a
difference. Do you have any estimate as to the annual cost savings that could be
Mr. Seidl: We don't have any specific numbers in terms of potential
cost savings. As I mentioned, the wholesale market in Canada in 2012 was $800
million, including all wholesale services, including international companies,
and international roamers coming into Canada as well. Really, if there is a
reduction in charges from one wireless company to another wireless company, it's
up to that wireless company to determine what it does with those savings, if
there are some savings. It could pass it on to consumers. It could offer
innovative offerings to consumers. It could reduce costs and use those funds for
expanding its networks. There are multiple choices a provider can provide.
Senator Batters: I was recently in the U.S. for my sister's wedding.
When the flight landed in the U.S., I would get this text that strikes the fear
of God into me. ``Welcome to the United States. You are now roaming outside of
SaskTel's network.'' I am from Saskatchewan. ``Roaming rates are up to $1.50 a
minute, $10 per megabyte and 20 cents per text. Rates are lower with travel
add-ons, et cetera. In June, SaskTel will have caps on data charges to help
manage your usage. Until then, all data charges apply''. I'm wondering about the
caps on data starting in June. Is that as the result of a CRTC initiative, or is
that SaskTel doing that on their own?
Mr. Seidl: As part of the wireless code, which I mentioned earlier, we
did introduce a cap on roaming charges, both international and national roaming.
The cap is $100. The carrier is not allowed to charge you more than that in any
particular month, at that point in time, and they're also supposed to notify you
when you've reached that limit.
Senator Batters: So that would avoid some of those news stories where
you hear about these crazy $8,000 roaming charges on a phone bill.
Senator Mercer: When you reach the limit and they notify you, can you
still use the service or do you have to pay extra?
Mr. Seidl: At that point you're given a choice. If you want to
continue and go beyond the $100 you can contact your cellphone provider or go to
a site and accept it going forward. There needs to be an expressed consent that
you want to continue beyond that amount.
Senator Mercer: There is no benefit; you're just being advised when
you reach that level.
Mr. Seidl: They won't be able to charge you more unless you expressly
Senator Eggleton: What mechanisms would ensure that the cost savings
as a result of this change would be passed on to consumers?
Mr. Seidl: The commission really looks at trying to develop
competition sufficient to ensure there is a dynamic retail market. We look at
potential supply and demand conditions and the barriers to entry in these
markets. Where competition issues are in play, we will try to remove those items
and let market forces determine the appropriate price for consumers.
If this is a barrier for certain providers in terms of offering better
solutions to consumers, then you would expect that they would be able to compete
and offer better solutions. There is no guarantee.
Senator Eggleton: No guarantee, except the fact that the government is
putting it in this bill. It wants to see quick results. It's postponing the
long-term thing while you're doing your study, but I think they're looking for
some short- term, quick results here for consumers. My understanding is that
that's the purpose behind it. It doesn't sound like you can do that.
Mr. Seidl: If the amendments in the legislation bring the price down
for these wireless companies, then they would have a cost savings.
Senator Eggleton: How do you know they'll pass it on?
Mr. Seidl: That's up to the wireless companies to do that, but if it's
a competitive market they will need to compete.
Senator Eggleton: Is it competitive enough, I wonder? Thank you.
Senator Merchant: Thank you, and welcome. My question is similar to my
colleague's. Are there any penalties imposed on the companies? If a consumer has
a complaint is there going to be sort of an ombudsman that the consumer can call
and register his complaint with? How are you proposing to ensure that the
consumers have some outlet to voice their complaints?
Mr. Seidl: There is the Commissioner for Complaints for
Telecommunications Services, so consumers can call the CCTS and raise their
issues. They deal with quite a few wireless complaints. It's probably the
largest growing area for that organization. They try to rectify the issue with
the provider and the consumer.
In terms of the legislation it is, as I mentioned, on wholesale, so it's to
the retail mechanism. Again, it's between wireless companies and their
agreements. There is not a direct retail aspect to that.
Senator Merchant: How do you notify consumers? If you have somewhere
we can take a complaint, how do you let us know? Is there a number?
Mr. Seidl: We require providers themselves to advertise the presence
of the CCTS to their consumers. It's on our website as well. The CCTS does
outreach to ensure consumers are aware they can reach out to the CCTS if they're
not getting a proper response from the service provider.
The Chair: If there are no other questions, I would like to thank the
I will tell the committee we have a dilemma because the following witnesses
are spectators in the other committee room. I will ask the clerk to see if they
can come here. If not, we will have to wait for the other committee to finish.
We can do the report.
We will free the witnesses. Mr. Stewart and Mr. Seidl, thank you.
We have another issue that we have to deal with.
We will go in camera. Is it agreed?
Hon. Senators: Agreed.
(The committee continued in camera.)
(The committee resumed in public.)
The Chair: Honourable senators, we now resume the meeting and continue
our study on division 16 of Bill C-31, which amends the Telecommunications
Act to set a maximum amount that a Canadian carrier can charge to another
Canadian carrier for certain roaming services.
Our witnesses for our second panel are from Industry Canada. I want to thank
them. They are support staff in the other room normally, and they have
accommodated us, so we will try to accommodate them, not keeping them here if
things are urgent on the other side.
We have Pamela Miller, Director General, Telecommunications Policy Branch
from Industry Canada; and Christopher Johnstone, Senior Director, Industry
Framework Policy, from the same department.
I invite the witnesses to make their presentations.
Pamela Miller, Director General, Telecommunications Policy Branch,
Industry Canada: Good evening. It is our pleasure to be here today to
explain section 16 concerning wireless roaming rates and to answer your
I would first like to explain what is meant by roaming rates in this
amendment. This amendment addresses wholesale roaming rates; that is, the rates
that are charged between companies to use each other's networks. So that their
customers have access to services outside of their network footprint, wireless
companies must enter into roaming agreements with other wireless service
providers. This is particularly important for new competitors entering the
This clause would amend the Telecommunications Act to prohibit Canadian
carriers from charging their Canadian competitors wireless roaming rates that
are higher than they charge their own customers.
Industry Canada mandates that carriers offer roaming service to other
carriers, but does not regulate the price of that access.
We understand that the roaming rates that Canada's largest wireless companies
are charging other domestic providers are significantly above the rates they
charge their own customers — that is, they have wholesale prices that are higher
than retail prices.
These high wireless roaming costs negatively impact competition as new
entrants must either pay these costs themselves or pass them on to the consumer.
In its submission to the current CRTC proceedings, the Competition Bureau
indicated that incumbents have retail market power and therefore have an
incentive to ensure that new entrants are not fully effective competitors.
The amendments set out the wholesale mobile roaming services that would be
capped: wireless, voice, text and data services, and include a formula for the
cap based on a carrier's average retail rate for a service.
Regarding how this measure relates to CRTC regulatory processes, the CRTC
will be responsible for enforcing the roaming cap. The CRTC has launched two
proceedings to examine wholesale wireless roaming, and the government has
indicated that this measure will be in place until the CRTC makes a decision on
The amendments provide that a wholesale roaming rate established by the CRTC
would take priority over the legislated rate.
To summarize, these amendments provide a cap on the rates charged between
companies to roam on each other's networks. Capping domestic roaming rates will
help Canadian consumers benefit from more competition in the wireless market.
That briefly summarizes the proposal. We welcome any questions. Thank you.
Senator Eggleton: What helps to ensure that the cost savings are going
to be passed on to consumers? That, I would understand, is the objective of this
exercise. While the CRTC is looking at things long-term, the government wants to
see some quick impact here. How is that going to be assured? Sometimes these
companies don't always pass on cost savings to consumers.
Christopher Johnstone, Senior Director, Industry Framework Policy,
Industry Canada: The amendment does relate to the wholesale cost. It does
not relate to the retail cost. That being said, companies such as new entrants
into the market are obviously trying to be as competitive as possible in the
Currently, because the wholesale rates are at this level, they either need to
absorb the cost, which is obviously difficult for smaller companies, or pass
those costs on to their customers, so those are the choices that smaller, newer
entrants to the market have right now.
Senator Eggleton: So it's really only the small, newer entrants that
are going to have cost savings to pass on, is that it? Not the big guys.
Mr. Johnstone: It's not limited to any size or type of company. The
measure relates to all companies, but in terms of the companies that stand to
benefit a great deal, obviously they are new entrants to the market.
In December, when the government announced this measure, we noted that the
roaming rates that Canada's largest wireless companies are charging other
domestic providers can be more than 10 times what they charge their own
Senator Eggleton: So if you're a customer of one of the big companies,
you may not see any savings at all.
Mr. Johnstone: There are areas of the country where larger companies
rely on roaming between companies.
In terms of domestic roaming, however, larger companies don't typically
charge their customers for domestic roaming. Usually their plans are
Senator Eggleton: So all of this expectation about consumer savings is
put out there, but it may not be realized for a lot of people.
Mr. Johnstone: The focus of the legislation is on addressing those
domestic wholesale rates, the rates that can be 10 times what these companies
are charging their own customers. Again, this has been an issue that has been
raised a number of times, especially by new entrants into the marketplace. It's
a factor that's limiting their ability to compete effectively in the
Senator Mercer: Thank you for being here. In 2013, the CRTC conducted
a fact-finding exercise. One of the things they found was that national wireless
companies were charging or were planning to charge smaller competitors higher
wholesale roaming rates than they charged the U.S.-based companies.
It seems to me that this is predatory pricing designed with one thing in
mind, to drive the little guy out of the marketplace, because nobody can survive
this type of pricing.
I'm actually surprised that the Competition Bureau has no power to deal with
this issue and predatory pricing, especially when it involves a spectrum that
the government has put out there. The government spent a lot of time, to their
credit, and tried to encourage new people into the business but provided no
protection to them against predatory pricing and these outlandish, outrageous
wholesale roaming fees that are being charged.
Ms. Miller: The Competition Bureau did make a submission to the CRTC
proceedings. They actually did find that Canada's largest wireless companies
have incentive to use high mobile roaming rates to ensure new entrants are not
and do not become fully effective competitors. As a result, new entrants are
likely limited in their ability to bring attractive product offerings to market.
They made a number of other observations. They made quite an extensive
submission on January 29, 2014, and that is part of the CRTC proceedings that
are ongoing. I know you just heard from our colleagues from the CRTC in the
previous session and I would again draw your attention to this quite extensive
submission the CRTC has presented as part of that.
Senator Mercer: You also talked about roaming fees that the big
companies charge each other. As we know, if you have a phone from one company
and you happen to be in another part of the country, you may not be able to get
direct service from them so you're roaming and you end up roaming on the other
guy's network or you don't get service at all.
Do the big three charge each other these outlandish fees, or is this just
what they do to the little guy?
Mr. Johnstone: The rates between carriers are negotiated between
carriers and are company agreements that are confidential. Again, I would point
to the statement that was made in December that the rates the largest wireless
companies are charging other domestic providers can be more than 10 times
Senator Mercer: You just said these deals are confidential among the
big three, but we know that they're charging the little guy 10 times more. We
must know what the rates are or you wouldn't know it was 10 times higher. You
can't do the math if you don't have the numbers.
Mr. Johnstone: The CRTC has requested all the information and they've
requested all that information as part of the proceedings they're undertaking
The Chair: That's a question I asked before. If they can make them
public they will make them public to us as soon as they get them.
Senator Mercer: The Canadian public and people watching tonight are
going to be shocked and angry that companies are being allowed to charge 10
times the rate they charge each other with the sole purpose of trying to put the
little guy out of business.
The Chair: I'd like to thank the two witnesses for having accommodated
the committee. I know you've been asked to move back to the other meeting.
If senators agree, we will adjourn at this point. We will meet next week, on
Tuesday morning with The Public Interest Advocacy Centre and on Wednesday with
the Automotive Parts Manufacturers' Association.
Thank you, Mr. Johnstone and Ms. Miller, for your presentation and your
presence and I hope you have just as pleasant a time at the next meeting.
(The committee adjourned.)