THE STANDING SENATE COMMITTEE ON TRANSPORT AND COMMUNICATIONS
EVIDENCE
OTTAWA, Wednesday, March 8, 2023
The Standing Senate Committee on Transport and Communications met with videoconference this day at 6:47 p.m. [ET] to study Bill S-242, An Act to amend the Radiocommunication Act.
Senator Leo Housakos (Chair) in the chair.
[English]
The Chair: Good evening. I am Leo Housakos, senator from Quebec and chair of the committee. I would like to invite my colleagues, starting on my left, to introduce themselves.
Senator Richards: David Richards from New Brunswick.
Senator D. Patterson: Dennis Patterson, Nunavut.
[Translation]
Senator Cormier: I am René Cormier from New Brunswick.
[English]
Senator Klyne: Good evening and welcome. Marty Klyne, senator from Saskatchewan, Treaty 4 territory.
[Translation]
Senator Clement: I am Bernadette Clement from Ontario.
[English]
Senator Manning: Fabian Manning, Newfoundland and Labrador.
Senator Cardozo: Andrew Cardozo from Ontario.
[Translation]
The Chair: Honourable senators, we are meeting to continue our examination of Bill S-242, An Act to amend the Radiocommunication Act.
For our first panel, we are pleased to welcome before the committee —
[English]
— from the Nisga’a Lisims Government, we have with us Eva Clayton, President, who has joined us by video conference.
Ms. Clayton, welcome. Tonight, we were supposed to have a second panellist with us, but unfortunately, they were not able to attend. You have the whole panel to yourself, and we have you to ourselves. You have plenty of time for your opening statement, and then we will turn it over for questions and answers. You have the floor, Ms. Clayton.
Eva Clayton, President, Nisga’a Lisims Government: Thank you for having me at the Senate committee. On behalf of the Nisga’a Lisims Government, I’m very pleased to be presenting and appearing before the Senate committee on radio communications, which is very important for the Nisga’a, and especially for, generally speaking, the spectrum from the radio communications. It would mean a lot to the government, because we can make money to further fund our initiatives.
In this case, the theory is that the spectrum revenues would be used to further the technological status of the country as expressed in the very first reading. Nine billion dollars in revenues would go a long way to improving connectivity for all Canadians. It would also mean higher speed access to enable crucial services to be accessible. That is incredibly important for remote and Indigenous communities. It will help to address the lack of connectivity.
The lack of connectivity exasperates the socio-economic inequities, including, to name a few, business opportunities, employment, education, physical health and mental health. There are new technologies that can help improve social and physical well-being that can be utilized and new technology to produce a lot more food, access and higher education; to improve business processes and to provide community outreach; and support for the elderly, the mental and physically challenged individuals, and LGBTQ communities.
What does this mean to the Nisga’a? We understand that we are not only a remote community but an Indigenous one. The connectivity is so vitally important to our nation. Our limited resources in health and education need that connectivity to ensure the health and safety of our citizens. It will provide opportunities for our new health facility to help heal some of the mental and physical trauma that face our members today. It will provide a higher education component that is not available in the North, bringing our members back to the communities as doctors, skilled tradesmen or educators, for example. And areas of economic opportunities, like Liquefied Natural Gas, or LNG, and tourism, will rely heavily on the accessibility of connectivity for our communities and companies, and for the various businesses that will benefit from our many projects here in the valley.
Even smaller companies like those providing healthy foods or gathering places like coffee shops can use these services for marketing business tools, like interactive online booking and ordering, et cetera.
Language and culture are other areas that can benefit from this connectivity. It is to share what we’re doing on our homelands to our members who live outside of our homelands in the urban areas. We can provide Nisga’a traditions, Nisga’a languages and Nisga’a cultures through that connectivity.
Further, it would be inclusive to those members to be interacting via connectivity. That will certainly help to revitalize the Nisga’a language and the Nisga’a culture and teachings that we have.
To conclude, the Nisga’a Nation has invested millions of our own funds and have seen first-hand the improvements to quality of life and the economic opportunities that its own investments into communities can bring to our communities. Having a legal recourse and some assurance that the service providers will be held to account and will be held accountable to remote communities through this bill will not only help communities access important and critical services but will also help alleviate some of the financial burdens in order to stay connected because of a lack of oversight.
Thank you, honourable senators.
The Chair: Thank you, Ms. Clayton. We will move to questions.
Senator Manning: Thank you to our witness for taking time to join us here this evening.
Canada has set a goal of providing all Canadian households with a broadband connection of 50 megabytes per second download and 10 megabytes upload by 2030. Can you describe the quality of telecommunication service in the Indigenous communities you represent? Can you tell us some of the major challenges that your community is facing with regard to accessibility and affordability? You have touched upon the amount of dollars that it takes to invest. Thank you.
Ms. Clayton: Thank you, senator. Right at this point, the connectivity is not all that great, and it’s due mainly to the remoteness of the communities and the geographic areas — the challenges that we face to get that connectivity in the remote areas.
The third is the cost. Right now, we’re looking at building our economy. We don’t have economic stability just yet, after recovering from COVID and making sure that we carry out the responsibilities we have in that area through our treaty.
Does that answer the questions?
Senator Manning: Yes.
How would you see the federal government and their role in improving internet access to the communities you represent? Do Indigenous communities, wherever they’re located in Canada — I’m just wondering what you see as the federal government’s role in providing that service or reaching out to provide that service.
Ms. Clayton: It’s important for the federal government to continue to reach out but do so more so to the very remote areas where connectivity has many challenges in the Indigenous communities because of the remoteness.
But when you think about the role of the federal government and reconciliation, it would be great to have that kind of support from the federal government in that regard for connectivity.
Senator Manning: Thank you.
You touched upon a couple of the possible businesses that could be brought into your area and communities. If memory serves me correctly, you mentioned LNG and tourism. Can you tell us if some of these businesses have approached your community, and what is their concern in relation to setting up operations within your community? Is connectivity a major issue for them? Have they offered to play a role in facilitating that connectivity to your community?
Ms. Clayton: Thank you for the question. The connectivity for small businesses is not there just yet. This particular appearance before the Senate is to prepare and plan for future businesses because we’ve learned from the small businesses that are currently in business on Nisga’a lands that the connectivity is poor. In their words, the connectivity is not up to speed.
It’s important to note that the small businesses in the Nass as it exists today really have no means to be contributing to the connectivity costs because of the need to further build the economy and to really build the economy in the Nass.
Senator Manning: Thank you.
Senator Cormier: Thank you for being with us tonight. I’m very interested to know more about your reality.
[Translation]
Yesterday, representatives of the Canadian Wireless Telecommunications Association told the committee that 99% of Canadians had access to mobile wireless technology. At that same meeting, they also told us that, according to what they had learned, the figure was actually 90% for Indigenous communities.
In light of the information they provided in response to Senator Patterson’s questions, I’d like to know what percentage of your communities is connected. The association says it should be 90%. Is that the case for you?
[English]
Ms. Clayton: Thank you for the question, senator. In terms of percentage, we have about 90% connectivity, but it’s not the connectivity that our people want and our government requires at this point. There needs to be — in the words of our small businessmen — improved connectivity. I don’t know what they mean by that, but we’re still working on it. We do what we can to make sure that the connectivity is there for our people.
[Translation]
Senator Cormier: Thank you for that. Senator Patterson’s bill would require the main service providers to make connectivity services available to 50% of the population in the area that they cover within three years. The committee has heard from witnesses about the challenges associated with a one-size-fits-all approach. Others highlighted the obvious differences between urban areas and rural and remote areas.
As we consider the bill, should we explore the possibility of setting different targets for service deployment depending on the area? In other words, should the requirements be adjusted to reflect different deployment schedules depending on whether the area is urban, rural or remote? The idea would be to take into account the challenges associated with the geographic area, the population and the actual connectivity. I would like to hear your thoughts on how to address those two realities.
[English]
Ms. Clayton: Thank you. Yes, the deadlines should be weighed in terms of both the urban and the remote areas because they are two different geographic locations. It will be somewhat smoother for connectivity in the urban areas compared to the remote connectivity, due to geographic areas and licensing. I would suggest different timelines. Thank you.
[Translation]
Senator Cormier: You mentioned your small- and medium-sized businesses. Is there a need in your communities for education so that internet use —
[English]
Ms. Clayton: Yes, there are educational needs, especially in the area of connectivity. We are looking at providing those kinds of educational tools to have IT resource people on board within each of our communities so that they will be on site to look at connectivity issues as they arise due to the weather and global climate change across the world. We have had our difficulties with connectivity and hydro, but education is good.
Senator Cormier: Thank you so much.
Senator Klyne: Thank you Ms. Clayton for your opening remarks and for your participation. I have a few questions and I’ll ask what I can within the allotted time. Maybe in the second round I will have a few more questions for you.
As you’ve outlined in your opening remarks, there are many benefits to having access to the internet with a reliable and fast broadband service in underserved markets like yours. This bill aims to do that by putting spectrum and broadband fund dollars to work.
Do you foresee any challenges or do you have any recommendations to make this a better bill?
Ms. Clayton: Thank you for the questions. At this point, when we think about whole area of the spectrum, all the issues and how they can be handled in Canada, the major points are related to should they be purchased by any registered service provider and whether or not it would be up to the licensee to utilize the spectrum.
As well, it will build upon the very first issue where spectrum can be resold. As such, smaller corporations and providers can buy cheaper spectrum because they are not a major telco. That’s just an example of some of the issues that you’ve asked about.
Senator Klyne: Thank you. Let’s assume that there’s connectivity. You have a functioning, well-operating, fast, reliable broadband service and cellular service. In Nisga’a Nation, where do you see the digital literacy level of youth in your communities?
Ms. Clayton: Thank you, senator. The use and connectivity today are not at the speed that they want. We have programs set up for our youth, but when we have, as you’ve described, 100% connectivity, in good order, the digital footprint that our youth will be utilizing will be for educational purposes because we have to look at the needs of our younger people in terms of education. Right now, we are teaching our children about the dos and don’ts of the internet. We are teaching our youth about the use of the internet for our language and culture. We’re using the internet as it is now today for teaching tools, but with connectivity going 100%, it will certainly add to that and improve that for the youth and for the elders. Our elders are currently getting so excited from learning on the internet. They’re so excited, and they want to see everything online as it is for language and culture. They’re amazed by it.
Senator Klyne: So your communities are getting ready and mobilizing. Their digital skills and literacy are being improved. I take it you’re ready to meet this head on and take full advantage of it?
Ms. Clayton: Yes, they are.
Senator Klyne: From that, can I infer or assume that the Nisga’a nation has some programs available to users so they can have or acquire a desktop, laptop, notebook, smartphone or devices when you have the connectivity fully 100% operational? Will they be able to plug into it and make use of it, or will it be a situation where many households won’t be able to afford that?
Ms. Clayton: Yes. Right now, the only place they have that is within our schools. Because of the affordability problems, it’s not in every home just yet. But they certainly go out of their way to ensure that they’re up to speed with technology, and they go out of their way to learn about it wherever they can. Their children, grandchildren, the elders and the parents, they bring it home. There are devices in the homes like cellphones, and not everybody has desktop computers or iPads. They do have that in the schools when they can use them. It’s just that when they got them, the connectivity was too poor.
Senator Klyne: Maybe you’ll find a corporate donation from some of the developing businesses around your communities that might want to donate some devices to the families. Good luck. Thank you.
Ms. Clayton: Thank you. That’s the plan.
Senator Clement: Hello, Ms. Clayton. Thank you for being here. The Nisga’a Lisims Government participated in the ISED consultation on a policy and licensing framework in December 2021. I’m going to refer to the comments that you made in that consultation.
You wrote that the Nisga’a Lisims Government supports caps on the amount of spectrum a single entity can buy, as well as rural deployment requirements. Notably, you wrote, failure to leverage spectrum should result in the reallocation of that spectrum to other carriers, with a commitment to its rapid deployment in our rural communities.
Can you tell us more about what you would like to see implemented as requirements?
Ms. Clayton: Thank you. Yes, I did make that submission in 2021. What we would like to see is the rollout of a plan based on the amendments to the act that will set out all the areas that you’ve mentioned. All of them are equally important to what we are doing with connectivity, which is why I had made that submission. We would like to see that.
We’d also like to see how it would be rolled out based on the submissions that have been made with regard to amendments to the act. Thank you.
Senator Clement: Why are you concerned about rollout? Can you explain?
Ms. Clayton: It’s not a concern. It’s just that I’m looking forward to the rollout and how it’s going to come out.
Senator Clement: So you just want to see that happen?
Ms. Clayton: Through the amendments, yes.
Senator Clement: Do you have specific requirements that you suggested there?
Ms. Clayton: No, I don’t have anything other than what I’ve stated today and what I stated in 2021.
Senator Clement: You have an expertise on modern treaties. You co-developed Canada’s collaborative modern treaty implementation policy. I’m interested in what’s happening in New Zealand, for example. They have a treaty claim there that resulted in allocating spectrum at no cost to the Maori nations.
Can you comment on that? Is spectrum subject to treaty claims in Canada? Can it be? Should it be?
Ms. Clayton: Spectrum at this point isn’t subject to the Canada claims. And for the Maori, I’ve met them. They have the ability to do that. They have the financial resources and the wherewithal to be able to do that. We met with the Maori in 2018, I think, and they spoke about how their economy has gone from the bottom to the top. They’re doing so well that they can do stuff like that. But certainly not for the Indigenous people of Canada.
Senator Clement: What would be the barriers here?
Ms. Clayton: No economy. The lack of economy to build the financial resources needed to contribute to the connectivity. That’s the biggest barrier.
Senator Clement: Thank you.
Senator Richards: Thank you for being here, Ms. Clayton. Actually, I think Senator Klyne asked this question. I’ll try to ask it in a different way.
How does the lack of connectivity impact the health and education of your young people? I’m thinking of the lack of resources and maybe even access to health with nurses and doctors that might be mitigated by better and greater access to a wider broadband internet. I’m thinking of the health and education of the children specifically.
Ms. Clayton: That’s a great question and one that I can answer. With the lack of connectivity in the area of health, especially with the lack of doctors and the lack of doctors for remote areas, recruitment has become a problem for our nation, so we rely on connectivity to provide our health services through telehealth. It’s so very important that we have that connectivity due to the shortage of doctors in Canada, not just remote areas.
In the area of education, the same would apply. Many of our children are taking online courses when they go to school because we have a shortage of teachers. It’s not only a shortage of doctors but there’s also a shortage of teachers, so that connectivity will play a huge role in those two areas. Thank you.
Senator Richards: Do you have in your community nurses or doctors who speak your language and know your culture? Do you have any nurses who have that expertise?
Ms. Clayton: Not at this point, but we do have some who are in the system. It’s a matter of getting them out of the educational system. We do have people who are in the field of nursing, but they haven’t come home just yet.
Senator Richards: Thank you very much.
Senator Cardozo: Thank you, Ms. Clayton, for joining us. My question is fairly general. First, I should know this, but could you give us a sense of the geographic area that your nation covers?
Ms. Clayton: Thank you for the question. We have 2,000 square miles.
We are four communities: Gitlaxt’aamiks, or New Aiyansh, Gitwinksihlkw, Laxgats’ap and Gingolx, which is at the mouth of the Nass River and has the most issues with connectivity due to where it’s located. And we’re in a very mountainous region. We’re surrounded by water down below.
So there are four communities, and we have a volcano that’s in the back of the community in which I reside. We have lava beds that we drive through to get to my community. So we need that connectivity if it blows up.
Senator Cardozo: Thank you for some advance notice.
So the four communities are quite separate from each other?
Ms. Clayton: Yes.
Senator Cardozo: And you’ve got pipelines in that area, too, right?
Ms. Clayton: No pipelines.
Senator Cardozo: I want to ask you about the schools. What grades are taught in the schools in your nation? Do you have high schools, or do the kids have to go off reserve for high school?
Ms. Clayton: Thank you for the question. We have K to 12 in New Aiyansh. Each of the communities has early childhood learning to Grade 3 or 4. Then they go to the other community.
Senator Cardozo: So the kids don’t have to leave home to finish high school.
Ms. Clayton: No, they don’t have to leave home to go to high school.
Senator Cardozo: But to go to college or university, they have to go some distance?
Ms. Clayton: Yes. Post-secondary courses are taken elsewhere.
Senator Cardozo: How about training such as skills training or apprenticeships?
Ms. Clayton: That’s the other area I should have mentioned. We’re looking at skills training. That’s another area — trades — where connectivity would be very helpful. We’re looking at trades training for our nation through the Nisga’a Employment, Skills and Training program that is funded by Service Canada.
Senator Cardozo: Yes. There is certainly a lot of trades training across a lot of sectors too — everything from construction to automotive. All these courses are available online, which would be very helpful. It also means young people don’t have to leave home to get that kind of training.
I just want to ask a little more about telehealth. What kinds of facilities do you have within the nation? How far do you have to go when people are dealing with more serious health issues?
Ms. Clayton: We have the Nisga’a Valley Health Authority in New Aiyansh. It can hold up to two beds. We used to have two doctors. One would be in New Aiyansh upriver and the other downriver. Now that we don’t have doctors due to the shortage, we have telehealth for major health issues, because the nurses at the health centre can certainly help with the minor health issues, but everything requires connectivity from here to there and from the health centre to the other communities.
Senator Cardozo: Thank you very much for that. We’re talking about frequencies and all sorts of technical issues, but I think you’ve really helped us understand a bit more about the real-life issue that we’re dealing with and how technology and better coverage can help people in their day-to-day lives. Thank you so much for that.
Senator D. Patterson: Thank you, President Clayton. It’s great to see you again. The Energy Committee was up in your area some years ago, where you made a presentation. I know you’ve made other presentations to Senate committees, so it’s great to see you.
We were told by the association that represents the wireless providers in Canada — we asked about connectivity — and we were told it’s down to 90% in First Nations. You mentioned connectivity is not that great in your region.
Looking at the individual homes, I know you said there are services available in the schools. Looking at your average home and whether they have internet connection, not to mention iPads and desktops, would you be able to give us an idea of roughly how many homes would have internet connections in your region? Would it be anywhere as close as 9 out of 10 homes, or 90%?
Ms. Clayton: I would say it would be about 9 out of 10. I’ll give you an example. We have about 220 homes in New Aiyansh. I’m just guessing now. This is a few years back. But each of the homes are connected.
Senator D. Patterson: I believe you said connectivity is not that great. Would you describe what those limits are or what the frustrations are for people in homes?
Ms. Clayton: Yes. When I say that, we find that our connectivity is down frequently. A lot of it is due to weather. A lot of is due to hydro being down — wires being on the lines with the hydro. For example, just the other day, Terrace was out. Terrace is the closest community to New Aiyansh. When their connectivity goes down, the connectivity in Aiyansh and some of the communities in the Nass are affected.
We have a number of reasons, such as weather, BC Hydro, power outages and severe flooding that often happens around spring breakup.
Senator D. Patterson: Thank you.
This is my bill that we’re examining in the committee tonight. I’m from a rural area in Northern Canada, in Nunavut, as you probably know. I’m concerned that a lot of spectrum is not being used. It’s being purchased, usually by large providers, and sometimes held for up to seven or eight years without being used.
You said that you’d like to see service providers more accountable to remote communities. If I understood you correctly, you also said that unused spectrum should be available to rural communities. I think you also said that you’d like to see that available spectrum being resold or made available to smaller providers who might be able to buy it.
Would you be in favour of measures that would not allow big companies to sit on spectrum and not use it when your community is suffering from connectivity? Did I understand you correctly?
Ms. Clayton: Yes, you did, senator. That’s exactly how we feel — everything you have said.
Senator D. Patterson: Thank you.
The Chair: We’ll go to second round now.
Senator Cormier: Ms. Clayton, I have a lot of questions to ask you about your culture because there’s a lot we need to know about your culture, but I’ll try to stick to the bill we have before us. I would like to come back to the service providers. In the bill, they have to deploy to 50% of the territory in three years. That’s their responsibility.
Considering there’s a difference between the remote and the urban regions, what amount of time would they need to deploy connectivity in your region? Currently, this bill says three years. Is that the right timing for remote regions considering the issues that you raised in terms of geography, knowledge and so on? Do you have a percentage to suggest?
I’m trying to do this in English now, so I don’t know if I’m clear.
Ms. Clayton: No, you’re clear. Concerning deploying connectivity in three years, when you think about the work that has to be done it’s good, but I would like to see two years. Three years is good for the remote communities, though.
Senator Cormier: Thank you for that. Considering the importance of connectivity for our communities, and for your communities in terms of importance for health, for education, for everything, should the right to connectivity be part of human rights?
Ms. Clayton: I think so. When you think about how we’ve progressed in terms of technology, it’s become a right. I’m speaking about it with respect to the lack of doctors and teachers. We lose all of that when we don’t have the technology. With technology, it has turned into a right.
Senator Cormier: Thank you so much, Ms. Clayton.
Senator Richards: Thank you very much. I come from a rural community too. The rural Miramichi has had problems with connectivity and access for years. Would the big player, Elon Musk and Starlink, be available and help out with the most important linkage to health centres and schools in your area? Have you approached anyone about that?
Ms. Clayton: I will have to check with our health provider to see what system they use, but I experienced telehealth through the internet. I did not know who or what the provider was. That kind of information is important for us to know.
Senator Richards: A doctor who lives close to us in a rural area got Starlink because he absolutely needed it. I’m was wondering if that’s a function on your territory and if it could be implemented, that’s all.
Ms. Clayton: It more than likely can, but I will check.
Senator Richards: Thank you very much.
The Chair: Colleagues, on behalf of the committee, I’d like to thank Ms. Eva Clayton, who is here with us on behalf of the Nisga’a Lisims Government. We thank you for your testimony. It was helpful to the committee.
For our second panel, we’re pleased to welcome via video conference Mr. Jeff Church, Professor in the Department of Economics at the University of Calgary; and Len Waverman, Professor at McMaster University. Welcome to you both. We’ll turn it over to each of you for a five-minute opening statement, and then we’ll turn it over to my colleagues for questions. We’ll begin with Mr. Church. You have the floor, sir.
Jeff Church, Professor, Department of Economics, University of Calgary, as an individual: Good evening and thank you, Mr. Chair. Please let me begin by thanking the Standing Senate Committee on Transport and Communications for the opportunity to share my views on Canada’s spectrum policy.
I’d like to begin by expressing my delight with Bill S-242. I think Senator Patterson has identified an outcome associated with spectrum management policy in Canada, which clearly suggests an obvious problem: Substantial amounts of spectrum have been set aside for new entrants, and because of our lax deployment obligations, too much of that spectrum appears not to have been deployed. TELUS suggests in their analysis that only 20% of some set-aside spectrum in rural area has been deployed.
Given the large amount of spectrum set-asides, ranging from 40% to 60% of the total in some auctions, this suggests a considerable misallocation of spectrum, one that becomes notable when spectrum has been assigned but there’s either poor or no service in rural and remote areas.
It’s important to recognize that the spectrum misallocation is not only that some is not being utilized in rural and remote areas, but that much more is substantially underutilized, even in urban areas.
Senator Patterson’s solution to the misallocation associated with spectrum not being utilized is to strengthen deployment obligations in future licences. I think Canadians should thank the honourable senator for raising the issue of spectrum lying fallow, but I think it would be a wasted opportunity to limit changes to putting pressure on the minister and ISED to toughen up deployment obligations on future licensers of spectrum. I would suggest that rather than only addressing the symptoms of questionable spectrum policy, like spectrum lying fallow and being underutilized, it’s appropriate to ask how this situation arose.
Within that context and for the remainder of my brief remarks, I’d like to highlight the following: The benefits from set-aside spectrum are low and the costs are high. Also, in terms of achieving universal service obligations, which I think is what the first panel was talking about in terms of remote and rural areas — how do we do that effectively and efficiently?
A key policy lever under the control of the federal government is spectrum allocation, through which it’s attempted to engineer more competition by subsidizing competitors. It started this in 2008 with the AWS-1 auction and has used set-aside spectrum to reserve or allocate considerable bandwidth to new entrants ever since.
In 2013 and 2014, Andrew Wilkins and I published two University of Calgary School of Public Policy research papers that provided an assessment of wireless competition in Canada. In those two papers, we were quite critical of the government and regulatory policy initiatives to try to create more competition. In our view, the costs exceeded the benefits, and one of the costs we identified was a misallocation of spectrum.
It seems to me that nothing has really changed in the intervening years, that the competitive benefits of creating competition are going to be limited if there’s not extensive market power and the three informative tests that we have all suggest that competition is not an issue to be addressed in wireless services.
Because of my time, I’ll skip over those tests, but I’m happy to answer questions on them.
One of the costs of the set-asides is misallocation of spectrum. The set-asides would result, we predicted, in higher costs and lower quality of the incumbent providers and artificially aggravate the scarcity of spectrum required for data. Subsequently, Kent Fellows, a colleague of mine at the University of Calgary, and I are in the last stages of completing a research project that tries to measure the costs and benefits of the set-asides of the 2008 AWS-1 auction. We demonstrate, we think, quite conclusively that the factor limiting the benefits to Canadians of wireless services was not and is not sufficient competition and prices are too high but the quality of the service is too low. If that set-aside spectrum had been made available to the three incumbents, then our estimates indicated that an increase in the number of subscribers relative to the set-asides would have been up by a factor of at least two more, an increase to the benefits to Canadian wireless consumers would be an increase in benefits of at least a factor of seven — so 700 times — and there would have been a reduction in quality-adjusted prices of at least 4% to 5% relative to the decrease in prices we saw from the set-asides of between 1% and 2%.
It seems to me that the circumstances now with the requirements of spectrum to realize the promise of 5G appears similar in some respects to what we had in 2008 when the iPhone revolutionized the demand for and usage of spectrum. The priority should be to make as much spectrum available to carriers that will use it. That suggests that spectrum policy should figure out mechanisms that would enable spectrum assigned to wireless to be allocated to its most efficient use or user — that’s existing spectrum — and a concerted effort to make sure that if wireless is the most efficient use of spectrum, it is made available to support wireless services on a timely basis.
Those are two things that ISED has been criticized for by the carriers and associated industry groups.
In my last four seconds, I would just say that if we’re talking about the deployment to try and convince people to provide service and make sure that the spectrum is being used appropriately, that’s a question of profitability. The way we deal with that is we should go back and look at our history. How have we done things with local service pricing options? How did we make sure telephony was available years ago to every community? We had built in subsidies. When we introduced competition, we got rid of the subsidies. We investigated local service pricing options. We did all kinds of interesting regulatory things to try to make sure that these universal service obligations were met.
I applaud the deployment requirements being increased.
I think there are many more things we know we can do, and many different approaches we can take, which would solve this question of meeting universal service obligations in a timely manner. Thank you, Mr. Chair.
The Chair: Thank you Professor Church, and now we turn it over to Professor Waverman. You have the floor, sir.
Len Waverman, Professor, McMaster University, as an individual: Thank you, I’m equally honoured to be appearing at the Senate today via modern technology. The problem with having two neoclassical economists at the same time is that as I listened to Professor Church, I agree with much of what he said.
But let me take a somewhat different tack, and I won’t take the five minutes because this is a very small change to the act, and it’s a welcome change.
Most of my research has been on the impact of telecommunications, specifically, mobile communications, on economic growth and productivity. But when we look at the rural areas our previous witness and other witnesses have talked about, we’ve been very slow — far too slow. This has also been far too slow in the U.S. because the mechanisms that were used were never effective. Subsidies alone were never enough. Spectrum auctions alone are never enough. We have to really turn the page and ensure we get rollout, and this is what Ms. Clayton was talking about.
I don’t know where the three years in this act came from. Another way of doing this would be to have the bidders in spectrum auctions bid the minimum number of years in which they will roll out services and make that a binding constraint. At the moment, we’re asking them simply to bid money, but we can ask them to bid other things as well. Spectrum is a public resource. The licence is a lease for a number of years, usually 20, and with no further obligations. Well, there are other obligations, such as not disturbing other signals, et cetera, but I think we can do better than that.
I’ve read what some of the intervenors have said that they think three years is too little time to roll out the spectrum on advanced services. So one recommendation would be that it could be three to five years, but it would be three years, except that one could appeal to the CRTC to change that to five years or four years.
I think this is a welcome change. As Professor Church said, there are many other changes that are needed, but I would simply add that it’s not just the entrants that have been sitting on spectrum. I think a lot of incumbents are sitting on it, and they’re utilizing it as well. Especially in the rural areas, we have to do more.
The U.S. infrastructure build does a lot to advance quickly, and still we see from the federal government the desire to have full connectivity and modern services that are needed for business, communications, economic growth and productivity in rural and Indigenous areas. But the timetable is still too slow. There’s no reason why it can’t be faster, and it can be faster by pushing the firms that have the spectrum to do it.
Thank you.
The Chair: Thank you, professor. I turn it over to Senator Klyne to launch our Q and A.
Senator Klyne: Thank you, chair, and welcome to both our guests. Your opening remarks resonated with me.
My interest in the changes to the act is to get to those underserved markets, the rural and remote areas, particularly those populated by Indigenous peoples. My concern is that north of the 55th parallel the economic gap and void are ever-widening until we can provide them with access to the new economy, which would, I would say, come through reliable broadband and cellular service, swapping out some of the old legacies for new applications. So it requires a digital transformation.
I’m enlightened and inspired by some of the comments and recommendations you were making.
In order to ensure that spectrum is used to close the digital literacy gaps and the transformation of being able to participate in the mainstream new economy, do you see some clear recommendations, other than what you’ve already provided, to try to accelerate that process? Every year that’s going by, there’s a new divide going on up north of the 55th parallel. With broadband connectivity, a reliable service and the right speeds, I think we’ll probably need to eclipse the CRTC standard of 50-10 upload and download in the next short while as 5G and other advancements come on line. Can you make some clear recommendations or observations on how to make this a better bill in terms of changing the act?
Mr. Waverman: One could add other obligations on the people who get the spectrum, for example, what services they’re going to roll out and how they’re going to ensure that the potential customers can use those services. What educational programs will they use? A modern smartphone is a very sophisticated device and getting more sophisticated.
One can see the use of 5G in the North, because the internet of things could be very useful for tracking animals or watching ice melt. There are a number of activities that can be enhanced with modern telecommunications. I would suggest a package of what the lessees would do with the spectrum to advance Indigenous culture, the culture in the North and business opportunities, not just what you pay for the spectrum.
Mr. Church: I think it’s a very good question, Senator Klyne. I would try to distinguish a little bit about what we know about providing service for other kinds of things in the North versus the South. We distinguish between situations where we think the market and the private sector will work well, and we distinguish between situations and products in places where we think that the market is just not going to work very well because it’s not profitable.
If we have a policy objective to provide universal service at fair prices to citizens, no matter where they’re located in Canada, and if that’s a policy objective, then I think instead of having bids for spectrum we should have auctions for service providers. We will provide those service providers with the spectrum or money or whatever. And, as Professor Waverman has talked about, you could have a broad request for services to whether it be a nation like our previous witness talked about, where we have four communities that we want to have served, or we’re going to decide these geographic regions, but they should be regions where we encourage some sort of competition to decide who is going to provide service. It’s a bid for connectivity, for providing the service that is being submitted, and they might be negative bids. They might say that they will compete over how much subsidy has to be provided by the federal government or the provincial government or how it’s going to be financed by the rest of us to make sure that this level of connectivity is available to everyone.
I think that there are lots of things that we should be thinking about, which involve moving outside of the box of just auctioning off spectrum and hoping that it turns out to be profitable for somebody to provide service. I think we should be moving more to a model where we say that we’re going to have a monopoly service provider in certain geographic areas. The question is how we get the quality of service that we want at the least cost to taxpayers.
The Chair: Professors, what do you say to the critics who will argue that overcoming the urban-rural communications divide in this country is just impossible, that there are just certain parts of the country that don’t make economic sense? Either the federal government will dig deep into taxpayers’ pockets and overcome that challenge or it won’t be economically feasible.
Mr. Waverman: I’ll begin again. We have faced this challenge many times in this country with railroads, highways, the CBC and telecoms. We always have this hurdle that we are a large geographic area with a population thinly spread along the U.S. border, and other populations, but they’re Canadians. They have to be included in the opportunities that modern telecommunications provide.
As Professor Church said, it may be necessary to have a negative auction. What’s the minimum that you would take to serve this area with a package of connectivity? We have been failing for a number of years in the North. We can’t keep trying the same thing over and over again. We have to try new things. It’s certainly feasible to do that.
What expense it is? We won’t know until we try.
Mr. Church: To follow up on that, I think we have not been using markets to identify low-cost solutions, so we don’t really know whether or not it makes economic sense. When we’re thinking about trying to provide service to some remote region, we should try to be technologically neutral. It may well be the case that, in a negative bid to provide high-speed broadband connectivity to some remote region in Canada, the government enters into a contract with Elon Musk and Starlink. That’s what we do because that’s the least expensive and most reliable way to get high-speed connectivity to that region. The objective should be to provide it at a reasonable price to citizens, wherever they are. If that’s the objective, then it behooves the rest of us to figure out the least-cost way to deliver that service. We should be technologically neutral. We should not think that it has to be high-speed cellular service. Maybe there are other ways that we can do that. Hopefully, that minimizes the number of situations where we are left with saying that it’s going to cost us an awful lot of money to provide this service to a small handful of people. Maybe then we can negotiate some other deal with them which compensates them for not having service.
The Chair: Earlier, we heard Professor Waverman point out we need to do a better job or actually start doing the job of attaching benchmarks and conditions of timelines on the spectrum auctions, which is a common sense idea. I’m shocked that no one has thought of that before this evening and why the government hasn’t been implementing it.
The other question I have — and maybe I’m just trying to figure all this out — is should we be doing a better job bundling the spectrum we sell in urban centres by attaching them to the spectrum in rural parts of Canada? Again, as Professor Waverman has said, the history of Canada has been protecting our airline industry and giving them certain privileges in certain areas and attaching conditions and making sure they provide services in less economically viable areas. Up until a few months ago, it was working well. We’ve now been looking at why we’re having difficulties again. The railway industry is in the same type of condition. VIA Rail gets subsidies. They get a mandate and we compel them to operate out of the Toronto, Montréal, Quebec City, Ottawa corridor.
Why haven’t we found that sweet spot with spectrum? Maybe I’m out in left field — and you can tell me so — but shouldn’t we be doing a better job bundling the more lucrative urban centres with the more rural regions of the country?
Mr. Church: That’s just another way of financing the subsidy. To the extent that you’re saying in a particular bundling or geographic area that, “I’m going to make it wide,” then how much am I going to pay for that licence area for that spectrum? In some regions I’m going to make money; in other parts of that region, I’m going to lose money. If you put these deployment objectives on me to roll out in regions where it’s not profitable, then it’s going to lower the overall amount that I am willing to pay for the licence. That money comes out of taxpayers’ pockets indirectly. It means we get less when we auction off the spectrum licence. That is a form of subsidization. The question is, however, is that necessarily the best way we should go about encouraging the delivery of service?
When I think about the auctions for service as opposed to the auctions for spectrum, if we go back and look at, for example, cable in the 1970s, municipalities and governments would sign contracts with the provider that would say here is the specific price that’s being negotiated and here are the specific rollout objectives. By such and such a date, you should have wired in so many households, whatever that percentage is. That was the nature of the contracts. I think that’s the direction we should be going. Instead of auctioning off spectrum, we should be auctioning off the rights and terms to provide a particular service to particular geographic regions. Thank you.
Mr. Waverman: I agree with Professor Church, but it’s a different kind of market and a different kind of service. It may not be that Bell and Rogers are the best in the world for operating in these kinds of areas, where they don’t know the customers and they don’t know how to provide service in those very remote communities. I would prefer to have an open mind and see who would bid for those kinds of services.
Senator D. Patterson: I’d like to thank both witnesses. Professor Church, maybe I’ll start off with you, please.
You talked about set-asides being wasteful. Unfortunately, my bill — and this is my bill we’re discussing tonight; I’m honoured to have it considered by the committee — is looking at a narrow issue of what I would call fallow spectrum. We may be able to make an observation about set-asides, but an amendment that would deal with set-asides would probably be out of the scope of my bill.
You said that you’ve done a policy paper critical of the government regulatory initiatives in this area. Did you look at the issue of what I call fallow spectrum in your policy paper or in other writings that you and/or colleagues have done?
Mr. Church: Thank you, Senator Patterson. The paper that I referred to, which we did in 2013-14, contained early discussions about the set-asides we had in 2008. We could start to see the impact of those set-asides, and it seemed to us that you could see that restricting access to the spectrum to the three incumbents was causing them difficulties. I think in one of our papers we talked about the fact that we might have ended up with a joint venture between Bell and TELUS anyhow, but with the set-asides in those auctions they had very little choice but to enter into a joint venture. Instead of having potentially two networks, we ended up with one network. We might have just had one network anyhow, jointly operated between Bell and TELUS so it’s hard to know, but it made that outcome more likely.
You can see this ever since, Senator Patterson. If you look at the spectrum-to-market-share ratio in this country, the new entrants have a substantially higher number of that spectrum-to-market-share ratio than the incumbents do.
Implicitly in all of that, at least associated with the set-asides, that spectrum is not being utilized either at all or it’s being underutilized. My recent research takes that 2008 spectrum and says instead of being allocated to the new entrants, where it’s not being utilized effectively, it was used to increase the quality of the incumbent’s networks, especially when we had the data explosion associated with the introduction of the iPhone. We get these huge welfare effects for Canadians.
It is indirectly telling you something about the cost of having this spectrum not being utilized. If we take the ramifications for what 5G means and the spectrum requirements that are going to be necessary for our networks to be able to deliver 5G services, we need to get onto this.
I appreciate that your bill is going forward, so it would apply to the next spectrum auction — the 3800 — which might happen at the end of this year, and then you have your three-year deployment after that, but we need to do something with the set-aside auction, set-aside spectrum and spectrum not being utilized now so we can get in line to deliver networks that are capable of supporting 5G.
Some people in the industry would say this is a very pressing problem and that we’ve had a successful time with our 4G and LTE networks, but now we’ve kind of fallen asleep at the wheel.
Mr. Waverman: Could I leap in, Senator Patterson?
Senator D. Patterson: Yes, please.
Mr. Waverman: Thank you for your bill.
I won’t get into the issues of who has the excess spectrum and what it’s not being used for. I won’t talk about Shaw and Rogers either.
This bill is a very welcome addition to spectrum policy in the future. Also, I think that when leases are up and being renegotiated, I don’t see us taking away spectrum from somebody who has used it for 15 or 20 years — that we add this kind of other circumstances into those kinds of leases. I think it’s very welcome.
I just wonder why it’s three years. Maybe it can be tuned a little bit. That’s it.
Senator D. Patterson: Thank you very much.
Professor Church, you spoke about ensuring that spectrum is made available in a timely manner. Do you believe that what’s called the “use it or lose it” policy that I think is the basis of this bill could be an effective way of meeting telecommunications needs in rural and remote Canada?
Mr. Church: Senator Patterson, I certainly think it’s an improvement over what we have; therefore, I think it’s a good start. We need to be fairly aggressive on the “use it or lose it” approach. Perhaps it should be “if you don’t use it, you should share it.” It needs to be made available.
But again, I wonder about the spectrum that’s lying fallow or not being used. I understand the argument when it comes to the set-aside spectrum. Professor Waverman seems to be disagreeing with me a little bit on this. We have MVNO policy, roaming policy and all kinds of things — and the population requirements that we have for deployment, which means that the new entrants deploy in the cities and then it becomes very unprofitable for them to deploy their spectrum in rural areas.
But fundamentally, if there is a problem with the lack of deployment, it must be a problem related to profitability; the firms don’t think it’s profitable. So how do we solve that problem? That is the issue here.
The deployment thing, as I talked about earlier, suggests an internal cross-subsidization that goes across the regions of the licence. Is that necessarily the best way we can go to utilize the spectrum, or could we create a secondary market somehow which would then allow anyone to have access to that spectrum that’s not being used? If so, we should get onto that. If you’re going to use it, you should be justifying to ISED that you’re going to use it. If you’re not going to use it, there should be a market process put into place so that anyone — the little providers we talked about or the big three — can get a hold of that spectrum and use it.
Senator D. Patterson: Would you be able to share any writing you’ve done related to this issue? If so, please do so through the clerk.
Mr. Church: Yes, Senator Patterson. I would be happy to send the papers that we’ve done on this.
Senator D. Patterson: Professor Waverman, you also spoke about us being far too slow in rolling out spectrum in northern and remote Canada, which is where I’m from.
With respect to recommendations, would you accept that this bill sets aside a baseline deployment condition? This is a legislative change that would be put in place, but it would still allow the department to make a change to the structure of the auction itself through the bidding process. In other words, I’m trying to establish a baseline. It would be up to the department to structure the auction that would deal with some of the shortcomings that you’ve addressed.
Does that analysis make sense to you, Professor Waverman?
Mr. Waverman: Yes, Senator Patterson. It makes eminent sense to me.
In the past, we have had obligations on certain issues and in telecoms as well. What happens is when that magic date of three years rolls around, the person who has a licence says that it’s been very difficult. “Look at what happened to interest rates. Just let me have a few more years.”
We have to make an “obligation” an obligation, so that it is really believable. Do we take it away? Do they have to resell it to someone? What happens at that point of the three years or, as I suggest, three to five years? It has to be spelled out what happens at that point. They can’t just whimper, wail and hope for a better day.
Senator D. Patterson: My bill does provide that there’s some possibility of other arrangements short of revocation of the licence that the minister may consent to. Is that the kind of flexibility that you’re describing?
Mr. Waverman: Yes. There has to be some flexibility, but there can’t be unlimited flexibility so that it ends up not really being a binding constraint.
Senator D. Patterson: Thank you.
[Translation]
Senator Cormier: Thank you to the witnesses for their presentations and their insights. I’m trying to figure out the best question to ask.
Mr. Church, what you are suggesting is really a paradigm shift in terms of how we should look at the bill. In light of the bill we have before us, I’m trying to understand some things. You may have already answered these questions, but if I understand correctly, you view the bill as a first step, because a lot of things could be done to improve access to high-quality connectivity in rural and remote areas.
With that in mind, how do you suggest we amend the piece of legislation before us, Bill S-242, to move in the direction you’re proposing — if, indeed, you think amendments are needed?
[English]
Mr. Church: Thank you, honourable senator. I think that’s a very difficult question, and I don’t want perfection to be the enemy of the good.
I do agree with you that what I’m talking about is a bit of a paradigm shift. The bill that Senator Patterson is proposing is trying to work in the confines of spectrum auctions and how we do things.
When I think about what Professor Waverman just talked about, you can think of this as a question of being, “I signed a contract with someone, I give them three years to roll something out, and they renegotiate with me because stuff happens that nobody foresees.” Many of us will have done renovations to our houses. We all know how this works. It’s no different when it comes to rolling out a network.
To me, that suggests that we need to stand back and say that this is a problem; either we think it’s an urgent problem or we don’t. If we think it’s an urgent problem, then maybe we should consider the paradigm shift. That shift may well involve us getting funding from the federal government, but that money and the monitoring and oversight of these projects are done at the local government level; it’s done by the municipalities. They are observing what’s going on. They are monitoring; they are seeing the rollout and making sure it’s happening appropriately. I know I didn’t quite answer the question.
[Translation]
Senator Cormier: As I examine the bill, I get the feeling that we are missing data, clear figures to help us understand the different situations. Given how things are currently, do you feel there is a lack of data?
Do we have a clear sense of the challenges on the ground, the figures and the data needed in order to consistently deliver quality service? Are there things we could do on that front so that we are better equipped to deal with Bill S-242 and then perhaps shift the paradigm, as you’re suggesting?
[English]
Mr. Church: That is a very good question. When I was asked to participate in this, I did some looking around and realized that it was very hard for me to figure out how much spectrum was lying fallow. I don’t know if it was the 3,800-megahertz consultation or the white paper that TELUS issued at the end of last year for which they provided the study, which is the 20% number that Senator Patterson and I use.
You would hope that the government — ISED or perhaps an independent regulator, such as the CRTC — would have the ability to acquire information, do the analysis and provide the government with some guidance on what the appropriate steps were.
I do think that is a problem. It’s been pointed out in other contexts that spectrum policy is a bit unusual in that it’s part of the federal government, which means that it is more susceptible to political influence than other kinds of decisions that we make in telecom, where we’ve delegated them to an independent regulator, given them marching orders and then the politics stay out of it. We’re not in a situation where we’re wondering if a decision has been made because it’s politically good or it’s good for Canadians.
Senator Clement: My mind is going in a million different directions, and I have two talented staff in the room who are also on their laptops. I’ll try to figure out what to ask you. I’ll ask my questions and then get out of the way.
Professor Church, in your opening statement you referenced your 2013 article, Wireless Competition in Canada: An Assessment, in which you said there’s no evidence that there’s a competition problem with wireless services in Canada. You said in your opening statement that nothing has changed since 2013. That’s a bit discouraging. Could you comment on how that is possible?
We all agree that universality of coverage is essential. There’s no argument around that. How did we not get anywhere in the last 10 years since you wrote the article?
More specifically, you mentioned municipalities and local government, which I always find interesting. Would facilitating and/or requiring sublicensing of spectrum licences be a way to address the use it or lose it or share it? What role do you see municipalities playing in that process? Or lean into the municipalities in partnership with the federal government. Any comments you can make on that would be great.
Professor Waverman, you have devised a connectivity scoreboard. You’ve done some international work comparing Canada to other places. I wonder how Canada ranks.
I also found it interesting when you said that you would add years to the bidding process. What would that look like? Has that happened in other jurisdictions?
Mr. Church: Thank you, Senator Clement. What I had meant to say — and I hope this is what I said — is the issue about market power. Has the market power assessment changed between 2013-14 and now? I would say no. They didn’t have market power then and they don’t have it now. Yet we still trot out policy and federal government initiatives that are designed to try to increase competition, even though there’s not a competition problem.
If I look at the test we did in 2013-14 and the ones for which I have the data that I can replicate today — and we see these in the wireless review — and I look at the evidence that’s being put forth, it’s still not convincing to me that we have a market power problem in wireless that needs additional policy measures. For instance, that implies that we can get rid of set-asides quite easily and not have a competition problem.
In terms of the other question you asked me, I think that what we are talking about in many rural and remote communities is rolling out local services. We have to figure out a mechanism whereby we can roll out those local services, which will inevitably involve people with boots on the ground in those local communities. It may be municipalities or non-profits. It has to be something whereby they’re involved, and maybe it’s being funded by the federal government. We have to have the capacity that we’re going to deliver this service.
You see this in some communities. Olds, a small town north of where I am, has instituted a broadband local network that’s owned by the city. You see communities figuring out different ways in which they can try to do this.
I think that if we are going to implicitly subsidize big spectrum players when they buy their licences by saying you can bid less for a wider geographic area because part of that area is going to have places that are not profitable to roll out, so we’re going to implicitly subsidize by accepting less in the auction, then maybe we should make sure that however we’re doing that funding, it is accessible to other people besides the people participating in these auctions.
Mr. Waverman: Madam senator, I appreciate you bringing up the Connectivity Scorecard, which I have not continued. I was going to try to do it at a provincial level.
For example, when you look at 4G deployment, Canada is one of the leaders of the world. They were quick and they were very broad. It really was a world leader in 4G.
In 5G, we’re lagging. Some of that could be the price of spectrum. The spectrum auctions have been realizing prices per megahertz in Canada that are above what you see in comparable countries, either our size or bigger, like the United States. That’s an issue because it limits the pocketbook of the people who win those licences to roll out services.
We’re talking about Senator Patterson’s bill, which is looking at the North. There’s been a lot of work at both the federal and provincial levels, in Quebec and Ontario. A number of experiments are going on, very well-done experiments, trying out different methodologies with government funding. There are pots of money available at both the federal and provincial levels. They’re not that well integrated and they’re behind what the U.S. is doing with their infrastructure bill, especially with the speed. The U.S. is ahead of us in wiring up or “spectruming up” those areas of the country. We’re still somewhat late. I think we still have another eight years to go before we say there’s equivalence.
We have to do it faster, and we can do it faster. We have to make it a priority. I think Senator Patterson’s bill helps in that respect because it says use it or lose it. If you don’t do it in three years, somebody else will.
Senator Clement: Putting bidding years in the auction process?
Mr. Waverman: Yes. I know in the U.S. they’ve had reverse auctions where — what’s the minimum? They have had these negative auction for example, universal service obligations which are costly to the government. How little do you need? But it turns out they always bid too little, and they come back and say the pot is empty.
But I think that could be done. I’m not sure where it has been done. I’m sure it has been done. There’s no reason not to add other conditions besides money to the auctions.
Senator Clement: Thank you.
Senator Richards: Thank you for being here.
I live in a place where at a certain point in time of the day, my summer place, when I’m doing work I can’t get on because there are too many people on. I walk down the road to my friend, whom I mentioned earlier, who has what I think is called Starlink, and he’s on all the time. I’m just wondering, if the government gets involved in this, will the providers be able to manufacture a service as good as Starlink? Because at the moment, my provider seems to be doing just as little as possible to facilitate access.
I’m wondering if the government gets involved in this and has bids on it, would they be able to provide the service a Starlink would provide? Professor Church, perhaps?
Mr. Church: That’s what we’re kind of trying to talk about. We’re trying to talk about a situation where we think that the economics are such that in some remote community that we should have a single provider, a single network.
We don’t want to subsidize two competing networks, but we’d be really happy to have one good network. And the competition we’re going to envision is your provider versus Elon Musk and Starlink. We will say to them, “Here is a community. We want you to provide broadband service to it. We want to know what is the price we have to pay you, or what is the price you’re willing to pay us? How much time is it going to take? What are the qualities of the service that you’re going to provide? ”
We’re going to let the competition for the market try and discipline your local provider who doesn’t seem to be interested in solving his congestion problem. So look at him to compete against the Elon Musks and Starlinks of the world in this kind of competition for providing service to these remote communities.
Senator Richards: Thank you very much. I know that’s what we’re hoping for. I’m just wondering whether, with government involvement, will we be able to do it?
Mr. Church: The way I think about this is it’s the local government maybe with some financial help and advising from the federal government, but it’s the local government that is going to be running the auction. We are hopeful that the local government has the interests of its people, its citizens closer to the heart than maybe the federal government might.
It’s not the government who will be providing the service. It’s just the government involved in selecting who is going to provide the service and monitoring them.
Senator Richards: I’m playing a bit of a devil’s advocate here. When we had to get our internet fixed two years ago, the tech gentleman who came had to drive almost 200 miles to get to our house. It took him two hours to find it, and then he said, “You need your receiver up on the roof, and I’m not going to climb up there.” And I don’t blame him.
I’m hoping the service gets better down there over the next few years, because I’m sure it’s not half as bad as it is north of the 55. Thank you very much.
[Translation]
Senator Cormier: I have a follow-up question about what you said in response to Senator Richards’ question.
Economics isn’t my strong suit, but if I were a businessman and I was asked to bid on a contract to provide service in an area where it wasn’t cost-effective or profitable, I’d like to know what supports and assistance I would be entitled to so that I could deliver quality service.
My fear is that no one will bid on providing service in those areas if they aren’t profitable. You may have already proposed some options, but I’d like to hear them.
[English]
Mr. Church: Yes, thank you. That’s exactly what we’re talking about here. We’re trying to say how it is I can make service to the community in the interests of the firm to provide it, which as you point out it has to be profitable. The kind of auction we’re talking about here is an auction over the extent of the subsidy. I can imagine one firm says, “I’ll provide you with services, but you have to subsidize every subscriber $5 a month, and you have to pay me,” and some other competitor says, “I can do it for $3.50.” Some other competitor says, “I can do it for $2.”
It’s an interesting auction in the sense that the bids are how much we pay you to provide service to make sure that it’s profitable. So what you’re doing, in the auction process, you’re revealing how much the subsidy has to be for you to break even. That’s the kind of mechanism that I’m thinking about.
[Translation]
Senator Cormier: I see. Thank you very much.
[English]
The Chair: Senator Patterson, the sponsor of the bill and appropriately, you’re the last up tonight.
Senator D. Patterson: I’d like to direct this to both of you. We’ve spent some time talking tonight about three years, and whether there should be some flexibility there, which I think is allowed to some degree in the bill.
I’d like to ask you about the 50% threshold that is in the bill. We’ve heard that 50% deployment requirement may not be appropriate from different parts of the country. There’s been some criticism that a one-size fits all formula is too crude. This is possibly a way the bill could be improved or fine-tuned. I’m wondering if you believe that we should — perhaps in light of those criticisms — be establishing different deployment conditions, which could include percentages, based on factors like remoteness, population, geography or some other similar metric. I’d like to ask each of you if you would have any comments on that, please.
Mr. Waverman: Sure, I’ll take it on first. I think that’s wise, but I think the easier way of doing it is giving some latitude to CRTC or to the department, because to write that into the bill would require a lot of work as to what the right factors and percentages are.
Allowing flexibility both in the number of years and the 50% or 35% roll out in those three years would be advisable, but subject to negotiation with someone, because before the fact, if I’m going to write all this down, it would make the bill very cumbersome, and maybe wrong I would think. We’ve got to find a mechanism of whom would be that trusted body, whether it’s the minister, the CRTC or someone to modify it.
Mr. Church: Senator Patterson, I would echo those comments by Professor Waverman. One of the things we’re missing here — and this was brought up in an earlier question by one of your colleagues — is what is the institutional mechanism that we have? It seems like the institutional mechanism we have through ISED is not capable of delivering what we need, which is the lowest cost, highest quality and timely service that we can get. This simple metric of a population coverage, the ISED witness came in and told you, they moved to 90%, 97% and the 3800 consultation process resulted in much more detailed population coverage mechanisms.
But maybe that’s the problem. Maybe the population coverage mechanism isn’t the right mechanism that we should be looking at and we need to delegate the determination of what the right requirements are for rollout to someone who has more information and is closer to the ground.
Part of the answer to this is if we had an auction for not the spectrum but for the service, then the firms could tell us what it is they think they are capable of doing without us specifying in advance, without any knowledge of how profitable it is or what it’s going to cost us.
So I would echo that rather than specifying it in the legislation, we instead say that this spectrum stuff should be dealt with through the CRTC or whoever our industry regulator is going to be.
Senator D. Patterson: Thank you. If I may, I have one final question, Mr. Chair.
Professor Waverman, thanks to Senator Clement, we understand you’ve completed kind of a report card on success with deployment. Both professors have observed that the North and remote Indigenous areas are underserved.
We were quoted a figure by the national association representing wireless subscribers yesterday, the Canadian Wireless Telecommunications Association. They were asked about penetration in rural and remote communities. Mr. Robert Ghiz, the executive director, said that according to the CRTC numbers, 99% of Canadians, where they live and work, have penetration. He admitted that in urban areas it is higher compared to rural and remote centres. He said that in rural areas, it is around 98%, and in First Nations, it’s down to 90%.
Now, you both said that these are areas that are being underserved and where we have to do more work. Do those figures of 98% connectivity in rural areas and 90% in First Nations ring true to you?
Mr. Waverman: To me they don’t. We’ve heard from one senator that he has to go to his neighbour to get service in a rural area. I can’t imagine that it’s 90% in the North. We heard from witnesses in this hearing that they don’t have this connectivity. What do they mean by connectivity? Is there one phone in the town? What is the definition? And what speed is it? Is it the old 100 kilobits speed? Which is not speed.
The definition of connectivity has got to be wherever you live, you have modern connectivity so you can live, work and prosper as a Canadian.
Mr. Church: Just to follow up, Senator Patterson, I think this is one of the problems that we end up with when we are using a metric for penetration based on population. As Professor Waverman pointed out, most of the population is within 200 miles of the United States border, so when you say it’s 90%, it sounds like it’s — 10% sounds like a very small problem, but 10% can be quite a number of people in quite large geographic regions. I think that the statistic is deceptive because it’s based on population, and the distribution of our population is not uniform.
Senator D. Patterson: Thank you.
The Chair: Thank you, Professor Church and Professor Waverman. On behalf of my colleagues on the Standing Senate Committee on Transportation and Communication, I’d like to thank you both for your invaluable contribution to our study. We hope to see you some time soon again as witnesses. You’ve really enriched the discussion.
(The committee adjourned.)