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Proceedings of the Standing Senate Committee on
Transport and Communications

Issue 4 - Evidence


OTTAWA, Wednesday February 6, 2007

The Standing Senate Committee on Transport and communications is meeting today at 6:15 pm to examine and report on current and potential future containerized freight traffic handled at, and major inbound and outbound markets served by, Canada Pacific Gateway container ports, East Coast container ports and central containers ports and current and appropriate future policies relating thereto.

Senator Lise Bacon (Chair) in the chair.

[Translation]

The Chair: Honourables senators, I call the meeting to order. This evening, we are glad to welcome representatives of the Montreal Port Authority: Mr. Patrice Pelletier, Chief Executive Officer, Ms. Stéphanie Isaacs, Director, Government Relations, and Mr. Jean Mongeau, Vice-President, Legal Affairs and Secretary.

As you know, we are here to examine and report on current and potential future containerized freight traffic handled at, and major inbound and outbound markets served by, Canada's Pacific Gateway container ports, East Coast container ports and Central container ports and current and appropriate future policies relating thereto.

We are very glad to welcome you here, Mr. Pelletier, and we will hear your presentation first; subsequently, the senators will surely have several questions for you.

Patrice Pelletier, Chief Executive Officer, Montreal Port Authority: Madam Chair, I want to thank you for giving me the podium this evening to complete the presentation made on May 14 by my predecessor, M. Taddeo. I will take this opportunity to share my perspectives on the future of various types of containerized freight traffic at the Port of Montreal, and certain measures that need to be taken to ensure its sustainability.

First, as you indicated, I would like to mention that I am accompanied this evening by Mr. Mongeau and Ms. Isaacs. I would call on them if necessary, depending on the questions raised.

Allow me to begin by reminding you that the Port of Montreal is the first Container Port on the North Atlantic Route, and it contributes to the creation of 17,500 direct and indirect jobs, in addition to wielding an economic impact of almost 2 billion dollars.

In October 2007, when I assumed my duties as President and CEO, I immediately grasped the importance of the container traffic in the Port of Montreal. I especially understood the need to ensure sustainability by doing everything possible to meet its growth needs.

It was therefore of primary importance for me to implement a strategic plan, including a new mission, a new vision, targeted strategic directions, and concrete action plans.

This task has been ongoing since we began developing our strategic plan, in November 2007, to set these strategic directions that will enable to Port on Montreal to become the Gateway of choice to the North American Continent. We expect to release the general terms of the new strategy in April.

We must understand that occupying the first rank in containerized freight traffic in North Atlantic is already a massive achievement. But to rest on our laurels would mean that our competition would overtake us. So we must constantly find solutions and implement initiatives in order to respond to market growth and develop new markets.

The development of the Port of Montreal is a social project. One of our strategies will be to develop a significant presence in the society and population of greater Montreal. This will involve reforging links between the port and economic stakeholders, and between the port and the population, bringing people together, and developing a feeling of pride and belonging among Montrealers with respect to the port.

This process will also integrate an efficient and effective developmental approach to government and Para government relations. Our strategy is to raise the city's awareness of the port.

We also want to make the Port of Montreal a leader in sustainable development in the maritime sector. This means developing innovative projects while contributing to the sustainable development of greater Montreal and its community. This also means making sure that we stay at the leading edge of environmental management, influencing our partners to adopt our sustainable development goals and seeing that they contribute to them.

No doubt, during the past months, you have heard about the example of the green alliance, which clearly shows the cooperation and partnership that exist in maritime transport, as the people in the industry have associated for a common cause, which is the greening of maritime transport.

Over the years, especially since 1960, the Port of Montreal has seen a modest but steady growth in terms of volume, although the composition of the total volume has significantly changed with increasing amounts of containerized goods.

I refer you to table A1, which clearly shows the change in type of traffic overtime. On this graph, the grey curb shows that from 1968 to 2006, there was a very significant increase in container traffic in Montreal, and the city continued to grow at a good pace.

The Port of Montreal is a formidable gateway for trade, with its integrated intermodal system that brings together and develops privileged relationship with all its stakeholders. These stakeholders are the ship holders, the stevedores, and the rail and trucking companies. This synergy has enabled, and will continue to enable, the Port of Montreal to offer state-of-the-art integrated services that are still competitive.

Among the chief competitive advantages of the Port of Montreal are its geographic location, its rail network interface, its productivity and stability, its high performance integrated system, and finally, the quality of its customer relations and services.

It is important to remember that 60 per cent of the containerized traffic goes to Ontario and western Canada, while another 40 per cent shipped directly to the American Mid-West, to Chicago and Detroit.

With all this in mind, I felt it was imperative to implement a strategy to ensure that the Port of Montreal can maintain its current level of containerized traffic, but also increase its existing volumes.

We must do everything possible to strengthen our competitive position on the North Atlantic route, but we also have to analyze opportunities to develop new markets by seeking new routes that our current customers and new lines could use.

For example, the enlarging of the Panama Canal and the development of new hubs, such as the one developed by the Mediterranean Ship Company (MSC) at Freeport in the Bahamas, would create new opportunities for the Port of Montreal. We must move in this direction.

I now refer you to table A-2 which presents the 2006 container trade routes, and which shows that the Port of Montreal still has plenty of opportunities to develop new routes.

Most of Montreal's freight traffic is represented by this little black line which stands for the North Atlantic route, and you see all the other existing routes which point towards the northeast of the American continent, for instance the West Indies line which is the blue curb. You have the grey curb that goes through the Panama Canal. All this represents added potential in trade for Canada and, of course, for Montreal.

North American container traffic grew from 2000 to 2005 by 12.3 per cent with Southeast Asia, 10.3 per cent with Northeast Asia, 8.7 per cent with Latin America, and was practically flat with Europe.

Nonetheless, the Port of Montreal has had a growth rate of more than 5 per cent over the past five years, and in 2007, its growth rate went up to 9.4 per cent. Nevertheless, a European comeback is forecast for 2005-2015, with 5.7 per cent predicted growth, and 6 per cent with Southeast Asia and 8.5 per cent with Northeast Asia, as shown in table A-3.

Table A3 shows growth by region for the period from 2000 to 2015. We are specifically interested in the green part of the graph that shows that European growth in trade will have a comeback, which correlates very well with our future growth in Montreal.

Today the Montreal Port Authority is at a crossroads. It must pull out all the stops to acquire the infrastructures and capacity required to meet this traffic growth. Clearly, not to respond or to respond too much, would have the direct impact of losing our competitive edge and consequently our market share. This is an extremely competitive and volatile market.

There are several market trends concerning containerized goods. They could exert varying impacts on traffic in the Port of Montreal. That is why we must consider these five factors: first, consolidation, alliances and the emergence of mega transporters in the industry; second, use of large vessels for economy of scale and cost reductions. To give you an idea of the size of the mega containers, each one can transport from 8,000 to 14,000 containers.

There will also be changes arising from the level of risk involved in putting so much freight on a ship and using so much logistics in a port.

Third, there are changes in management and logistic chain strategies. Some companies have a very vertical chain strategy. Not only do they want to control the maritime line, but they also want to control the railway, the trucking, et cetera. Fourth, the availability of rapid, efficient and cost competitive intermodal transport systems and finally the new port and shipping technologies.

Today the Port of Montreal is in an enviable position, but it must cope with major challenges if it is to achieve its growth objectives. Keep in mind that, besides its privileged geographic location, it is served by two major railway systems, as I mentioned earlier, it still offers the best transit time of the eastern ports on its land portion, right up to Chicago and Detroit. The port will also have to cope with rapidly growing ports in the Unites States, and it absolutely must make major investments to address its capacity problem. To do so, it needs to be able to play with flexible and appropriate financing tools. Every delay in obtaining this flexibility means the Port of Montreal risks losing its competitive edge.

To achieve its goals, the port authority is developing new mission and vision statements and is working on its strategic directions, including the development of its customer base, active growth, infrastructures, funding, community, the environment and the organization itself.

There is no doubt that in the near future the Montreal Port Authority will have o invest in its infrastructures to respond to its growth needs and maintain its competitive edge. As a first step, this means updating its infrastructures in order to respond to the needs of its users. To this we must add the need to make major investments in new facilities in response to today's growing traffic and the arrival of new traffic from new routes. And all this must be done in a context of sustainable development.

This evening, it is important for me to make you understand our new approach and make you aware of our investing needs. Investment would enable us to respond to the future growth of containerized freight traffic. Admittedly, the Montreal Port Authority has a cashflow of almost $90 million and has always funded its projects with capital assets and surpluses. But this premise can no longer be applied due to financial issues in the upcoming investments. It is clear that this will not be sufficient to meet the future funding needs of the port, at many hundreds of billions of dollars, in order to maintain its competitive position. However, above all, we want to facilitate trade and make a substantial social and economical impact on our country.

As you have already heard, we are winding up a study on the capacity the Port of Montreal needs to respond to container growth. The study concludes that the Port of Montreal will see steady growth, and, based on a potential 4 per cent annual increase — I remember that it was 9 per cent in 2007, and above 4 per cent over the last five years — it will reach full capacity within five or seven years, which is a very short time!

Our strategic plan therefore provides for major investments, in the aim of adding new spaces through development that is harmonized with the needs of our partners, not only clients, but all the stakeholders, from the city and the various levels of government, stevedores, shipowners, et cetera.

We are also going to analyze alternate scenarios in terms of legal and financial structures. This could even involve a partnership development with risk sharing. This strategic plan will guide our approach over the coming years. To accomplish this, we need to modify our powers by obtaining an amendment to our letters patent such that we can set up operational concessions and partnership agreements.

Last week, I appeared before the Standing Committee on Transport, Infrastructure and Communities to support Bill C-23 modifying the Canada Marine Act. In effect, this bill would change section 25 of the act, granting us access to parliamentary appropriations for purposes of infrastructures, the environment and safety.

This bill also provides for the creation of a borrowing code which would enable the Montreal Port Authority to enjoy greater flexibility in its financial arrangements for development projects. In fact, this borrowing code would apply to all Canadian port authorities with gross revenues exceeding $25 million. Application of this code would allow us to borrow on a commercial basis, giving us more flexibility in terms of financial guarantees.

The proposed changes to the Canada Maritime Act would therefore give us the funding tools that have been unavailable up to now.

This brings me to the creation of the continental port and the Ontario-Quebec trade corridor. For me and my team, and for the board of governors, this element is of national importance, and there is a direct connection to our social project, which I discussed earlier when describing the development of the Port of Montreal. I am sure that the Port of Montreal is taking an active part in the functioning of this gateway port, which was created by the federal and provincial governments in the aim of promoting domestic and international trade in the gateway area. For the Port of Montreal, it means a key development tool, and we are going to make sure that we present development projects that will enable us to respond to our immense development needs. We need all the tools available to develop the port at a pace that would allow us to remain competitive with American ports. As you can see, we are adopting a pro-active approach, and our strategic plan will reflect that.

You may rest assured that we will do everything possible to meet the growing needs of our users and all future customers, not only to facilitate trade but also to create a very substantial socioeconomic impact on the city and the country.

I wanted to share our new vision and tell you that the Port of Montreal is playing and will continue to play an extremely important role as an integrated, intermodel system and the gateway to Canada.

Thank you for your attention. I am now ready to take questions. Madam Chair, members of the committee, thank you.

The Chair: Thank you, Mr. Pelletier. As you know, the committee met the former chief executive officer of the Montreal Port Authority, Mr. Taddeo, on two occasions, namely on February 7, 2007 and May 14, 2007. In his presentation, as you are doing in your presentation today, he dealt with the tremendous advantage that the Port of Montreal presents for exporters from Montreal, Quebec and all of Canada. In this context, he indicated that the Port of Montreal is perpetually under construction, as it constantly responds to growing needs, especially in the Montreal Island area. He also stated that in the future, the Montreal Port Authority would depend on the real estate reserves at Contrecœur. You did not mention Contrecœur in your presentation. Is the Montreal Port Authority still planning to develop the site at Contrecœur? Would developing this site contribute to the economic growth of Greater Montreal?

Mr. Pelletier: This is an excellent question. Many journalists have asked me that.

The Chair: I can imagine!

Mr. Pelletier: One of the first things that I did during the initial weeks was to evaluate everything that had been done over the past 20 years. I even went back to the time before the real estate at Contrecœur was purchased, which was in the 1980s, and I tried to understand how things subsequently developed.

For the next phase of the development of the Port of Montreal, which is in anticipation of a substantial increase in container traffic during the years 2013 to 2020, the venues have not yet been determined. We must study the socioeconomical, environmental and financial impacts of a new location and we must determine what kind of relations we want to have with our partners to help us choose the most advantageous location. The greatest difference between my vision of the Port of Montreal and the vision that my predecessors had of it consists in a more systematic approach to a new way of doing things whereby the meaning of the term "business world" has changed considerably. The stakeholders in the port are not bound by contract. There is a missing link. Our objective, in the current phase of strategic planning consists in bringing all the stakeholders to the table to discuss the advantages and disadvantages of the new locations.

The port in Contrecœur would have the advantage of being very large — it could handle up to 3 million more containers. Is it in our interest to handle 3 million containers rather than one? Would a capacity of 1 million containers be adequate for the next 10 or 12 years? In addition, choosing Contrecœur would mean that we would need more rail lines, and that would change the urban landscape of the city. However, the current site could meet the demand for about 10 years.

The main reason we are here today is to assess the advantages and disadvantages of two or three possible sites. We therefore began a dialogue with the main parties involved, including the mayor of Contrecœur and her team, with whom we will be meeting next week.

We have no preconceived ideas at this stage in the process. It is extremely important that we eliminate the psychological barriers that would prevent us from maintaining a rigorous, systemic approach. If we go to Contrecœur, obviously, there will be a negative impact on Montreal. What will the impact be? How can we attach figures to this impact? We retained the services of major firms such as SECOR to assess the social and economic impact involved in this new vision of expanding the Port of Montreal.

The Chair: Expanding the current site of the Port of Montreal is limited by the land available, and we should say as well that virtually any expansion plan has some limitations.

Mr. Pelletier: In my opinion, the current size of the Port of Montreal could meet the demand until 2020 or 2025. That is one of the options we are considering. However, if I could choose only one response, I would opt for the port in Contrecœur. However, we have to take into account the social, economic, political, environmental and commercial aspects of this decision. There is no point in building a terminal if it is used very little; there is no point in making a bad investment of this type. There are ports around the world that have not managed to attract business.

The Chair: In the last December issue of the magazine Forces, you had a conversation with Mr. Éric Desrosiers. You revealed the direction in which you were taking the Port of Montreal. You would like it to become larger and to be the preferred gateway for new ships arriving from all over Asia, but particularly for new European ports. In order to achieve this, you mentioned that you need a new understanding with the various levels of government. You also referred to some bills that could be of interest to you for financing purposes. Could you talk more about these points which appear on pages 14 and 15 in the French version of your statement? Have you set up a group for the purpose of developing these potential markets?

Mr. Pelletier: On one hand, there is the strategic planning exercise that I explained to you, whereby we try to determine independently what additional routes could be part of our future planning. I mentioned a few of them earlier. I will give you an example of a recent partnership that we did not have before. One of our new clients decided to move goods from South America and Asia via Freeport to Montreal. The client could have gone to Savannah, New York, Norfolk or any other port on the U.S. Atlantic seaboard, but he decided to use Montreal. We are also considering new partnerships because some new ports have been open on the Mediterranean. There is some in-house work being done on them at the moment. We also decided to put out a call for tenders from the best players in the industry.

I find it interesting that you would ask this question, because we held a meeting to decide who would get the contract, following the calls for tender, in order to do a very specific market study about the movement and quantity of goods from ports on the U.S. Atlantic seaboard. We wondered, for example, whether we could target the transportation of cargos of bricks or ceramic goods from Brazil, which are currently transhipped in Savannah, and then delivered to Chicago. We are able to target for our competitors the type of goods they move, their origin, their destination, and in some cases the carrier. A shipping line may be moved, or there may simply be a movement from one shipping line to another. That is the work we are doing, and which we will be completing in April as part of our strategic planning. Have I answered your questions?

The Chair: Not exactly, but you have provided me with other information. So that is fine. I did not get an answer about the group that was supposed to develop potential markets.

Mr. Pelletier: First of all, with our port partners, the three or four presidents, we said that we were going to move toward the American Midwest and Europe starting in March. However, we have postponed the dates by about two months, because we did not have adequate data. Let me give you an example. Let us say that the LCBO would move all its wine through New York. In that case, we would have to meet with the LCBO to convince it to move its wine through Montreal. That is the type of information we are after. That is our next step. Based on this information, we will work as a team, and in partnership. This is the first time we have worked in this way. The shipping line, together with the railway, cornerstone to the transportation of goods for Canadians and a key to our success, will enable us to go either to Italy, Spain, Chicago or Memphis.

The Chair: Environmental protection is an integral part of your authority's mission — I believe $3 million have been invested in environmental projects over the last two years. The low water level in the St. Lawrence River seems to be an increasingly serious concern. During your interview with the Forces magazine, you said that there was no problem in the short and medium term.

Has this phenomenon been observed elsewhere as well? I come back to Contrecœur once again. What impact might it have in the long term? Are any measures planned for the Port of Montreal?

Mr. Pelletier: I will speak to you as a hydrologist. I began my career as a civil engineer specializing in hydrology. When I got to the Port of Montreal, I tried to understand the issue. I was told that the levels were low. I asked them how low. I then consulted a chart for the last few years to see the lower and the higher levels. I did see that the water level was low, but that happened five years ago as well. At the same time, I noticed that 2007 was a great year — the water level rose by 9.4 per cent. So I do not understand.

There are many issues involved. Ships have adapted over the years. Montreal has so much potential for getting into the American Midwest and the Canadian market that companies have built ships for the St. Lawrence. That is quite remarkable. We are not talking only about shipping 365 days a year in the ice, there is also the issue of the width of ships which means that you need less draft. We must realize that this remains a limiting factor. The water level remains a risk. I dealt with it in two ways in the strategic planning process.

I asked my team and all the consultants who work with us whether climate change would affect us in 10, 15 or 20 years. We are talking about a $500 million or $700 million investment, so we have to take care to protect it. Protecting it means knowing how to manage the risks. Obviously, we will not come up with the answer to a question of this type tomorrow morning. However, the Port of Montreal will receive some assistance from the university to study this phenomenon.

The question in the shorter term involves working with our partners to improve electronic shipping. It is incredible what can be done today with technological advances compared to what we could do even two or three years ago. If we did not know the draft or the depth, that would be another problem. We would never have experienced the type of growth we had. So these are very important projects. We must maintain our relationship with the Coast Guard and with the Great Lakes regarding downstream water movements.

You will find a project that talks about this as part of our strategic planning. This project will talk about inches. You must understand that one additional foot of draft for Montreal would increase the cargo on ships by between 10 and 20 per cent generally speaking. This is organic growth. We did nothing. We did not have to go to Memphis, Chicago, Paris or Marseille, and yet we have additional growth. So we have a team working specifically on making optimum use of the water, that is to see what we can do to make improvements in this area. I am not talking about on- going dragging on the St. Lawrence; this is very specific. Your question was about what keeps me awake at night, but not in any alarmist way, but rather as a manager responsible for managing risks.

Senator Dawson: Congratulations on your appointment. I think you have very big shoes to fill. You predecessor was at the very least very colourful, very committed, very convincing and very passionate about his port. We are very pleased to have you here. We will certainly be inviting you back when we study Bill C-23 or on other issues.

You talk about the continental gateway toward the end of your brief in English. Senator Zimmer and I are just back from Prince Rupert. The port managers start by talking about the continental gateway and then they talk about the local port. This is already a step forward by you, because you talked about it toward the end of your presentation — perhaps your predecessor would have added some more pages to discuss it. We will be going to Halifax to meet with the port officials. We will be having discussions with port officials throughout the country, and as a result of the conversation, we should have an approach to the Atlantic region similar to the one we have for the Pacific region, where people worked cooperatively to develop their port. This week, we will have an opportunity to see whether the same spirit is developing in Halifax. I know that the Atlantic gateway and the Central Canada gateway will come later. It seems clear that we have to turn things around and say that the representatives of the ports of Halifax and Montreal are going to India to say that together, we can do this.

You talked about the depth of the river, but I am going to talk about its height. The Quebec City bridge will prevent large container ships — the new generation of vessel — from coming into the port of Quebec City. Even if you were to dredge, they will not be able to get under the bridge. We think it is clear that Halifax could be the solution for Eastern Canada. Prince Rupert is not starting from scratch; they are in a process of building something there. They have the depth, the cooperation of the community and they have no constraint on growth. There is no objection from any quarter, except perhaps land claims — which we may have in Contrecœur, who knows.

Some day, I would like the ports in Eastern Canada to be like the ports in Vancouver, that is, I would like them to work together. Does the continental gateway mean that you do not always see Halifax and Quebec city as competitors, but possibly as opportunities for growth? In other words, if Contrecœur is not justified, could Quebec City be seen as offsetting that? Could Sept-Îles be seen in that way? Parliament must look at the overall interests, not those of your board or that of Halifax, but rather at the interests of all Canadians. Does it make any sense for us to invest in Montreal if Halifax has a 50 per cent capacity?

Mr. Pelletier: I will try to answer the question by making two or three points. First of all, I talked about the continental gateway at the end of my remarks, precisely because it is important. I talked about trade for a few minutes. I talk about it all the time. I am from a business background; I spent my life involved in trade around the world. I lived abroad for 11 years and I have lived in four provinces. As far as I am concerned, the continental gateway is just a word. The objective of this government is to increase trade. In my opinion, that is the most important point.

We are not the people who control trade. We facilitate it. I tried to define what we do. What does the Montreal Port Authority do? Some people say that we managed the facilities. That is not so, we facilitate trade. They are the ones who have the port facilities. We provide the infrastructure. They are the ones who have the ships. In two minutes, a shipping line can leave from one port and go to another.

We decided we had to be robust, that is resilient; we must have a stable market, and that is what we have in Montreal. We go to the very heart of North America. You talked about large ships. It is true that there are some large ships. This year, we have a 5,000 TEU ship in our port. That was unimaginable a few years ago. Boats used to be five times smaller. We will not be getting the 8,000 or 10,000 TEUs in any case, they will not come to Canada. They will come to Vancouver to drop their cargo. The advent of these very large ships is extremely good for Canada and for Montreal, because the larger ships will free up the smaller ones. If we have a fleet of ships between 4,000 and 5,000 TEUs, there will be a 15 to 20 per cent growth in Montreal. That might be unmanageable.

All of this is connected. What I am trying to explain is that it is true that for me, there are only two gateways in Canada: the Western gateway and the Eastern gateway. Last week, some members from Eastern Canada asked me why I was not assuming responsibility for the entire eastern part of the country. I am not responsible for this type of decision, but it is true that there is an optimization relationship within the country.

What is even more interesting is that we are not in competition with either Halifax or Quebec City. I do not want to be arrogant, but that is simply the fact of the matter. The fact is that my number one competitor is New York, Savannah or Norfolk. Those are the ports that are growing, with these huge investments by the government in port infrastructure, railway and highways to counterbalance the entire American West; 50 per cent of what comes in at Long Beach and Los Angeles goes to exactly the same place as we do. That is quite extraordinary! Halifax is a very deep port that will provide fierce competition for New York once the dredging to 53 feet is completed. I cannot give you the equivalent in metres, in the marine sector, we are still functioning largely in the imperial system.

Our advantage is the proximity of the markets. Ships, a very economical mode of transportation, go as far as possible, and then, the key is being able to tranship efficiently onto a reliable railroad. That is the key to Montreal's success; that is the model. For me, it is all about complementarity.

So if you asked me whether I am in favour of an Eastern gateway, I would say yes, I have no objection. Bill C-23 makes amalgamation possible. These are concepts that must be discussed and debated for the good of the country — that is increasing trade, making Canada more competitive, providing more employment opportunities and processing the goods.

One of our objectives in Montreal is to add value to this containerized freight, namely to develop the capacity of taking these containers — instead of letting someone else do this — and process the material, and then forward it, thereby increasing revenue and jobs

[English]

Senator Merchant: Welcome, Mr. Pelletier. Please give us a history of the labour disputes at the Port of Montreal.

Mr. Pelletier: I will let Mr. Mongeau give you the background. I was pleased to have "social peace" when I embarked on my mandate. I also mentioned that peace is essential to the smooth running of a port. We can dream about the best terminal but, at the end of the day, it is about people.

To illustrate this, our annual general report this year is not about pretty ships, although we will have a few, but it will be about people. Whatever we can do technologically, we need this.

Perhaps Mr. Mongeau can comment on two issues: First, we have five unions to deal within the port and then there are the other thousands of people working in the port, who also have a collective agreement. That collective agreement is not with us but it has an impact on us.

Jean Mongeau, Vice President, Legal Affairs and Secretary, Montreal Port Authority: If we are talking about the internal employees, we have five different unions and actually all the collective agreements have been signed up until 2011. Except what happened in 1990 with the white-collar workers, we had no problem with the unions. We have had peace on a steady basis.

On the other hand, there is one collective agreement signed between the MEA, which is the Maritime Employers Association and the longshoremen. They entered negotiations and now they have signed a deal. We can also experience labour peace now without any problems.

Mr. Pelletier: When was the last conflict?

Mr. Mongeau: The conflict was in 1994 or 1995.

Mr. Pelletier: I am not very close but I entertain relations with the union. I receive them in my office and I talk to them. I talk to them about my strategic plan and I visit their offices. They have on their board the article from Forces and La Presse and the Montreal Gazette because they see growth and they think that is great. Therefore, I would qualify the relationship as a good one.

Maybe it is because it is smaller. I thought the Montreal model's success is about size, but after my visits to Vancouver, Long Beach, LA, Hamburg, and I am going next week to Amsterdam, it is not that. The success is in the partnering.

We go to the table. Today, at my round table, I had the president of all the maritime lines for Canada and all the terminal operators. They are our competitors but we talk about how we will improve the port. What will we do? I think the model is a bit about this. When I speak with the president of the longshoreman's union, he is talking in a similar way. I am not saying it is risk free, but I think the quality of the relationship is the element that distinguishes this port from others.

Senator Merchant: The Marine Transportation Security Clearance Program, MTSCP, requires certain port employees to submit to background checks. Has there been some reaction to this measure?

Mr. Pelletier: Montreal was the first place to enter into and complete the program. On December 15, we had cleared over 2,000 people. It was a success. People thought it would not happen, especially with the checkers and the longshoremen but it was done, and it was done within the time frame. That is a great example of how things can be done. Again, is it the model of partnering that makes a difference? My guess is that it is a bit about this.

The media was very surprised. I have resisted an interview with the CBC for a while because I wanted to master it. It is a complicated element, not just the security check but the interrelations among Canada Customs, the RCMP, the Sûreté du Québec, and the terminal operator. I felt I needed to become more immersed in the issues. However, I finally spoke with the CBC after Christmas and the interviewer had heard the same thing, and basically was there to report the success story, which is pretty good on a subject that is not such an easy one.

Senator Adams: Some of my questions have been answered, in particular, about the unions.

What about trucking? We have complaints about trucking because sometimes CN does not cooperate with the truckers. Do you have the same problem with that in Montreal?

Mr. Pelletier: Do you mean in terms of the trucking industry and the rail?

Senator Adams: Yes, or in the Port of Montreal.

Mr. Pelletier: No, I do not think so. I have walked around the port, so it is not just like the CEO was telling you there is no problem. However, there are improvements to be made in terms of the flow, which is more of a structural problem. Montreal and the Province of Quebec are handling this through a project that involves Notre-Dame Street. We expect that the project will improve the flow. However, there is no issue relative to either the rail or the trucking business. We have two railways, so there are no issues.

Are you talking about the wait time for the trucks?

Senator Adams: No. Sometimes when they have cargo, they also have to pick up other things somewhere else along the rail line but CN will say that they can only go so far along that particular line.

Mr. Pelletier: No, but in Long Beach I saw kilometres of trucks waiting and I was surprised. I asked why and they said that it was closed between 5 o'clock and 6 o'clock. The system does not respond to the need at that time. Can you imagine the environmental issues? When I was there, it was quite cold and a number of the drivers left their trucks on to keep them warm. We do not face that issue here.

One of the main projects we will introduce in the next two years is a main trucking gate. It will be much more computerized and will accelerate the flow.

Senator Adams: You talked about the traffic at the port increasing every year and the protection needed for the containers. Are you able to control the unloading of containers? You are talking about between 8,000 and 14,000 containers. How long does it take you to unload them? We heard from someone that it takes about 10 days but the companies want it to take only two to three days to unload a larger ship.

Mr. Pelletier: It is all about equipment. For example, I was at a port where there were 8,750 containers to be unloaded. There were seven cranes working nonstop. Not everyone can afford to have seven cranes on the same ship, but the ability to do so will either limit or not limit your ability to discharge the containers.

For the size of ships that we have at the Port of Montreal, a ship is unloaded and leaves the port in three days. Remember another unique aspect about the models for the Port of Montreal: A ship comes to the port, is unloaded and then fully loaded again. Naturally, when you have large ships they will usually call to three or four ports before they have all their merchandise unloaded and reloaded. Montreal is a one-shot deal.

Senator Adams: Does your union have anything in its agreement about a slowdown as they have in B.C., where they have so many days as a slowdown? Wal-Mart and Canadian Tire do not like it when the union does that type of slowdown.

Mr. Pelletier: The productivity of the Montreal team is double what you saw on the West Coast. It is not what you would find in China, but there are some reasons in terms of the logistics and the type of work that is done. The productivity is what makes us. The port is still growing.

To answer your question, these are the elements that make us resilient and more robust in terms of the model. If there is a change, it is not as though we are under threat — not even when you look at long-term investment.

Senator Tkachuk: Are most of the goods that you receive heading for Canada or for the United States?

Mr. Pelletier: About 60 per cent of it stays in Canada and 40 per cent goes to the U.S. Out of this 40 per cent, 75 per cent goes to the Mid-West.

Senator Tkachuk: That 40 per cent goes straight to Chicago?

Mr. Pelletier: Correct.

Senator Tkachuk: And what about the Canadian product?

Mr. Pelletier: The majority goes to Quebec and Ontario.

Senator Tkachuk: It goes to Toronto, is that right?

Mr. Pelletier: That is correct. Toronto is a main destination.

Senator Tkachuk: Is the United States product shipped by rail?

Mr. Pelletier: Yes. Our railway is extremely competitive and has a majority of the market share. Maybe 54 per cent goes by rail and 46 per cent by truck, but that is unique. For most of the ports, it is always half-and-half. The principle is about the same: Local products go by truck and what goes long distance, for example, to the Mid-West or to Toronto, goes by train. That principle applies pretty well everywhere. I am not an expert, but I have visited a few ports now and that is pretty well the system.

Senator Tkachuk: Will your new business be U.S. business or Canadian business?

Mr. Pelletier: It is U.S. business. Canada will continue to have its growth but it is a modest single-digit growth. It is great if the country can grow to seven; maybe we will get to eight or nine. We will always be higher than the growth of the country.

Senator Tkachuk: When you mentioned your rather dramatic increase in business, is that be because of the Suez Canal or because of European product coming in?

Mr. Pelletier: The reasons are twofold. We will concentrate on Europe. I have mentioned the transformation of the Panama Canal. This is a reality. In 2014, let us say there is a problem in LA/Long Beach. The ship will not call at that port. The canal will permit ships larger than it is. They will come back and go along to the Northeast American coast. The cargo wants to go there.

If you look at the flow of cargo, our rail partners from CN and CP were in our office the last week and they show the rail network and the flow of merchandise. It is like an artery. You can see the heart of the nation. When you look at the United States, you know the line that travels south from Chicago represents it. Everything merges there. That is where the merchandise wants to go.

If the flow is easier and if it is potentially cheaper to continue and go to the Panama Canal and then go up, that is what will happen. If there is a problem such as a strike or issues about the environment that block the development on the West Coast, the merchandise will be redirected. Why do you think all these ports on the east shore have massive investment? People want alternatives. Who wants to have only one solution?

Senator Tkachuk: And you have competitive rail lines.

Mr. Pelletier: Yes. We are better today on the price.

Senator Tkachuk: On the West Coast, we had many complaints about the cost. I was not in Prince Rupert but some of the senators here were there.

Senator Dawson: There is only one in Prince Rupert.

Senator Tkachuk: I know that, but whether they were complaining as much as Vancouver about the fact there is only one railroad is the issue. It is difficult there. You are very fortunate to have two railroads. That bodes well for Montreal.

Mr. Pelletier: Yes, we are very fortunate. We are even more fortunate because we can talk with our two partners, which might not have been the case in the past. Today, there is an openness to work together in collaboration, which is unusual. My vice-president of operations, who is also the harbour master, told me this week that he did not think he would ever see this happen in his lifetime. This is about the importance of mutual success. They are still competitors and will have their market share, but they also understand that the constraint of one becomes the constraint of the other one.

Senator Tkachuk: I was very impressed with Montreal; I am sure the other senators were, too.

When we were in Vancouver, we had testimony from the Mayor of Delta. She was concerned about the expansion of the ports and the impact that expansion would have on what I call the "environmental look" — not necessarily the environment itself — for example, everyone wants to have condominiums and Starbucks, but they need wealth to have all that. That was a serious problem. We were all shocked at how negative this was. We did not hear that in Montreal. You are right in the heart of the city. You have trucks and trains coming and going. You are on the riverbank where people might want to walk and have biking trails. Do you have that same conflict between the residents and some of the local politicians and the port, as it was made clear to us exists on the West Coast?

Mr. Pelletier: It does exist and it was certainly a lesson for me in Long Beach. It is unbelievable. If you want to see real problems, go there. You will see how environmental and societal concerns can put the brakes on everything. However, a strategy can be: if I grow I can be better and I can address environmental issues, which is logical and realistic.

In terms of Vancouver, I visited terminal one. It is very different from Montreal but not so different from what other places are doing around the world, which is to backfill and create lands. I lived in Alberta for three years. We could talk about the bituminous oil sands and so on. I do not say it is not my problem, but I can talk to you about Montreal.

I recognize that this is an issue. All I can do is deal with it face to face. I cannot hide behind growth or whatever; I need to have a plan. This is why I said the development of these options must be rigorous and they must be discussed. My people have tried to say, "This is my project. I will build a $1 million TEU terminal there; thank you very much. Where is the money?" I cannot do that. I have built things around the planet. It might work initially, but it will fail eventually.

Our approach is to look at all the options and to talk to people. Let them first understand what we are all about. In Montreal, we will open the gates to the community this summer — Labour Day — for people to see what we do. There is a certain perception — I would not say there is ignorance in a bad sense — but we are a closed entity. We have not told people our story. We have told business people, but there is perception and being afraid of something. By definition, people will see there is an expansion and a project that they do not want to see. I feel responsible to the democratic process and I want to let the public become familiar with the port.

Some people in Montreal would prefer to have access to water, but there is a price to pay for progress and that price is economic and social. I look at our support in the eastern part of Montreal; it is fabulous. They know there are jobs, it means work for people, and that is good. When I talk about added value, as I have, I talk about logistics and distribution.

I will use the example of Canadian Tire. All these containers coming to our small Wal-Mart, if you want, have the same principle. There is transformation of goods. There are many stores in Quebec and Ontario; I think there are 500 stores. We can open this container and transform the goods and reroute them. That is additional work. They are good jobs. It is not high tech-jobs, but they are good jobs for ordinary people.

My goal in 2008 and 2009 is to bring the pluses and minuses, the pros and cons, in a transparent way. There is no other way, because we are in a city. My message, as you saw, is to create a port in a city and not the opposite — not a city in a port.

[Translation]

Senator Fox: I am by no means an expert in container freight, but I heard your presentation, I found it extremely interesting and it explained several factors. It is essential that we promote the port, the city. In the past we criticized the port because we did not understand what it represented for Montreal in economic terms.

Everything being equal, with no shutdowns on the Western Coast, what is the real advantage that Montreal has over New York? I do understand that both CN and CP are in Montreal. I am assuming that there are also trains in the New York region. When you go abroad seeking new contracts for the Port of Montreal, what are the advantages that we can provide and what are the disadvantages that we hear about?

Some time ago we also talk about developing an international logistic centre in Montreal and the Port of Montreal was also involved. Does this concept interest you? Would this concept entail some added value for the Port of Montreal?

Mr. Pelletier: First of all, I will answer your second question. If Montreal did not have 60 per cent of the Canadian market, that would be a horse of another colour. Having a portion of this Canadian revenue will give us a base which would enable us to facilitate, either indirectly or directly, this trade with the United States.

It is a matter of productivity; it is faster and less expensive. It's as simple as that. We have maybe obtained a 10 or 15 per cent advantage. The most recent studies were done in 2005 and they are being done again. I think that we were somewhat had. They got infrastructure without having to tight it to the price of the container. That means that if the State of New York makes a contribution to the facility, which the client does not have to pay for, it becomes more competitive. That has eaten into our competitive edge by a few percentage points.

For the shipping lines, even the element of time is not a factor. What counts is how much it will cost. We are just a small factor in all of that, 2.5 per cent in the price of a container in the total supply chain. Rail is what essentially makes the difference.

With respect to your second question, that is one of the first things that I looked at. We are a port all right, but what else can we do? I took a close at the Port of Havre, in France. I wondered why we did not do that. Why have the containers go up somewhere and do it on a scattered basis? That is one of the approaches. Will it be adopted? I cannot tell you. We will probably get the answer in the Spring. After reviewing the file, I thing I have discovered why that did not work. It is because there was no partnership. As strange as that may appear, there was no leader, no one in charge. And I am not referring only to physical people, but to companies that have shown an interest in having this work. It was like a marketing idea; it is not the artisans that are going to get it working. If we were to reintroduce this aspect, the business model must change as well as the location. My idea will be to take a look at the eastern part of the city rather than the western, as we did before, on the highway leading to Pierre Elliot Trudeau Airport.

Senator Fox: The logistic centre? It was supposed to be on Notre-Dame Street. It was in the east.

Mr. Pelletier: There may have been two options. I am talking about 1999.

Senator Fox: A little bit later than that.

Mr. Pelletier: There may have been another phase.

Senator Fox: CP Ships was involved and Phil O'Brien had done some studies.

Mr. Mongeau: They wanted to change the Y curb.

Senator Fox: Pardon me?

Mr. Mongeau: They wanted to change the Y curb because they wanted to go towards the east.

Senator Fox: But to do that, do you need an expert from CP Ships?

Mr. Pelletier: What you need are specialized people. You also need an authority such as the Port of Montreal to lay the ground work. You need the same level of infrastructure as you have in our terminals.

As an example, Savannah, which has been an incredible success, has seen its curb increase over the past six years. What makes it so successful is the fact that it does business with Wal-Mart and Target. The box arrives, it goes to Wal- Mart or Target and then from there it is distributed further. Of course, we cannot do things on the same scale as the United States, but we do have big corporations that could participate in that.

Earlier you asked me how far we were going to go with our market studies. I think that the answer lies in the Canadian companies.

[English]

Senator Zimmer: Thank you for your presentation. First, I would like to congratulate you on your new position and the adventure ahead of you. Good luck and best wishes.

What do you consider to be your greatest impediment to increasing the efficiency and competitiveness of your port?

Mr. Pelletier: An issue that concerns me is intra-Canadian competitiveness towards an objective that is not necessary. That may sound narrative or qualitative. However, for the first time in my generation, I left this country to work overseas and build things because I felt we were not doing that. I wanted to build powerhouses, metros and so on. For the first time in my 40 years, I see the potential of major infrastructure being promoted to serve this country in terms of having better and more competitive trade. I see a unique opportunity which may not arise again. If we are not aligned, this is a threat to everyone. It is a threat in terms of diverting the focus. This is what has bothered me the most since I arrived.

It is true that health, education and our Armed Forces are important, but we have taken action in those areas. What have we done in regard to leaving infrastructure for the next generation so that it does not collapse and so that it is efficient and competitive? Trade is opening up this country, and trade is as important as culture. I am not saying that trade is more important than culture, but it is as important. It is not just about the port; it is about trade issues.

The second issue regards situations that we cannot control, like the water level. The water level is a concern, but I think we can mitigate some of the risk.

I am not concerned about financing in the sense that if we have support from our government, we will be more competitive and we will be able to offer infrastructure at a lower cost. Will we be able to expand as much if we do not have support? No. A different mix of financing is a must for expansion. How will we be able to build a $500 million expansion without financial flexibility? This is probably the number one threat if we cannot get flexibility. The issue is not just the amount but also the flexibility.

Will the port be able to issue bonds to build infrastructure? Will the port be able to receive subsidies, whether for security or for the environment, things that we do not get a return on?

We do not get a return for being avant-garde in terms of security, but if tomorrow we are not ahead of our American friends and competitors, the merchandise will not transit through Canada, and that will block trade. Can we charge the user for security? No. These are impediments to the additional growth.

Senator Zimmer: Your answer touches on my next two questions, one of which deals with infrastructure. They are widening the Suez Canal now, but Asia is now building ships that are bigger than what the canal can accommodate. You talked about dredging and going deeper in the Port of Montreal. Will you be able to stay ahead of the game in the competitive world as far as dealing with these larger ships and being able to handle them?

Mr. Pelletier: I partially answered that question a few minutes ago. I was in New York in mid-January for an investment conference on the transport of containers. The CEO of APL was there, which is seventh or eighth in the world, from Singapore. He is an American managing a Singaporean company. He said that he does not believe that ships will continue to get larger and larger and that he does not think that companies should buy ships larger than 10,000 TEU.

Even within the industry, there is a fair amount of dialogue about where this situation will stop. It is like the aerospace industry. Will everyone get the Airbus A380? The answer is no. Secondly, the infrastructure will not able to take it, and so on.

We have a market today that can receive ships up to about 4,000 or 5,000 TEU. The majority of ships in the world are smaller than that, so there will always be enough ships to call on the Port of Montreal. That is not the issue. The issue is whether we will be competitive, and how we will be competitive.

I have talked about security. We cannot have roadblocks from a security point of view. We have to ensure that we have a sustainable development approach so the population does not try to impede our growth, and then we need performance in terms of people and infrastructure. We can train people better, but in terms of infrastructure, that is the Catch-22. If we do not have enough space or enough equipment, then we will not be able to meet the growth element.

Senator Zimmer: You touched on the last area I want to ask you about. Marine security in recent years has included the Marine Transportation Security Regulations. Has the increase in these regulations negatively affected your competitiveness and efficiency in the container operation?

Mr. Pelletier: Today we are ahead of the game. We scan 100 per cent of the import containers. We have performed all the required security checks. In terms of the customer and RCMP relationship, we have good efficiency. Our next step is to automate entry to the port efficiently and with less human intervention.

We are at the beginning this type of technology, so we are not behind. I have visited ports that are just introducing these elements. My intention is to continue that type of investment. We have invested $7 million or $8 million over the last three years. Our plan is to invest more. I said if we cannot get subsidies, we will have to take it from our bottom line; I have no choice. If I do not do this, it will be imprudent.

I spent the last three years with SPAR Aerospace where I was president. SPAR belongs to L-3 Communications, which is one of the premier defence and military companies in the United States. I know what we can do. There is the technological element to be introduced to make our port more secure. If our port is more secure, then the flow with the United States will not be stopped. In fact, in our view, it will be increased because we will be more efficient.

We are a bit more agile than New York. We have 325 employees; the New York Port Authority has 300,000. It is another scale. We are extremely focused. We do one thing; we facilitate trade through our installation, infrastructure and people.

Senator Zimmer: Do you think the federal government has taken the right approach in meeting these international standards, and have you applied and received any funding under the Marine Security Contribution Program?

Mr. Pelletier: Yes, we did. For example, at the Port of Montreal we have somewhere around 250 surveillance cameras, which is great stuff. We always think the Americans are better at this, but I went to Long Beach the security is out of a trailer; our building is a $21 million security building. We have an excellent control centre. In my view, we need to continue with that.

My goal for this year and next is to transform the image and use artificial intelligence. This is not science fiction; the technology can do this. It will analyze the information and set up alarms. I will translate the process, so that we can be more vigilant and rapid. There is no human that can watch 250 cameras at the same time. The problem with the technology today is that it starts alarms with pigeons. This is improving very quickly, though.

The question is whether we can afford it. Can the Port of Montreal afford it? Should we get into a debt situation to do this, or should it be our government that supports this? If you ask me, the answer is simple: The government should support it because it is a question of national security and trade.

[Translation]

The Chair: Mr. Pelletier, Mr. Mongeau, Ms. Isaacs, thank you for appearing before the committee. The questions were numerous and diverse and I think that this is but the beginning of your relationship with the Standing Senate Committee on Transport and Communications.

The committee will soon be meeting to study other bills. Once again, I would like to thank you and wish you the best of luck in your new duties.

[English]

Thank you for giving us the opportunity to share our views and our vision.

The Chair: We have another item on our agenda, namely, the Department of Industry User Fees Proposal for a spectrum licence fee for broadband public safety communications in bands 4940-4990 MHz.

As you remember, we did the study of user fees last June, and tabled our report on June 13. Today, we have the officials from Department of Industry who last appeared before this committee on this topic in June of 2007. We would like to know if there have been any developments since that time that would change what you presented to this committee at that time.

We have before us from Industry Canada, Kevin Lindsey, Acting Assistant Deputy Minister, Spectrum, Information Technologies and Telecommunications; Glenn Sheskay, Counsel, Legal Services; and, Heather Hall, Manager, Emerging Networks. Welcome again to our committee.

Kevin Lindsey, Acting Assistant Deputy Minister, Spectrum, Information Technologies and Telecommunications, Industry Canada: There have been modest developments in the sense that some municipalities have come forward since my predecessor appeared before the committee last June to express an interest in accessing the spectrum by way of applying for developmental licences. This is a step to test equipment to make use of this spectrum. Apart from that, there have not been any significant developments.

The Chair: Would that change the report?

Mr. Lindsey: In the sense that there have been no further representations from proponents pursuant to our consultations, I would say no.

The Chair: In June of 2007, this committee approved the proposed new user fees but raised several concerns in its observations. As you will recall, we expressed our concern about the appropriateness of having public safety entities pay for spectrum use. We also have the subjective elements in the calculation of the proposed user fees and the choice of a user fee based on economic value rather than on cost recovery. Can you comment on these concerns?

Mr. Lindsey: First, with respect to public service agencies having to pay for spectrum, this is a principle that has been in place now for many years having been embedded in legislation since the late 1980s or early 1990s.

I have been in this present position for all of eight days. To the extent that I mislead you with a fact, I ask my colleagues to please intervene. This is a principle that has been embedded in our spectrum management policy and legislation for many years. Public agencies, police, fire, ambulance, and so on have been paying for access to spectrum for these years.

This fee is with respect to a new band of spectrum that we are making available to agencies that would serve different purposes and let them take advantage of new equipment on the market. Therefore, consistent with this policy and approach to legislation that has been in place for many years, we think it is reasonable to charge the fee in that case.

With respect to the basis for establishing the fee, I think it was acknowledged in June, when officials last appeared, that it is very difficult to establish a fee for this in the sense that there is no market. As this a fee for the use of public services such as fire, emergency and ambulance, it is not traded. It is very difficult to establish a market price.

Officials have taken a couple of approaches to this. First, we have looked abroad to what other countries do with this spectrum. We have looked to England, Australia and the United States. In the case of the U.K., although one-to- one comparisons are difficult in this world, our best estimate is that the equivalent U.K. fee is about 60 per cent higher than what we are proposing. Based on our analysis, Australia and Canada are about equal. Until recently, the United States did not charge for access to this spectrum; however, developments in a recent Federal Communications Commission proposal suggest it is moving down this path.

Economic value really goes to the first question, senator. It is really the policy basis of our approach to charging for spectrum. It is embedded in the legislation.

Senator Mercer: Who pays the fees? Who actually writes the cheque?

Mr. Lindsey: There are various users of the spectrum, including the RCMP, municipal police forces, and so on.

It is the agency, in the case of the RCMP, that pays the fee; in the case of municipal entities I would have to defer to Ms. Hall or to Mr. Sheskay, which is to say I am not sure whether it is the municipalities or the service itself.

Heather Hall, Manager, Emerging Networks: The licence is issued to the entity that owns and operates the network and that is who pays the licence and invoice.

Senator Mercer: It would seem to be a matter of security, whether local, national or regional. If I understand what you said, Mr. Lindsey, as the technology has progressed, the fee process has kept up with it and we have found new ways to charge fees. Is that correct?

Mr. Lindsey: If I could, the basis for charging the fee in this case predates the technology necessary to use this spectrum by many years. The issue of timing has to do with the fact that we can now put this spectrum on offer, because there is equipment out there that can let services exploit it.

Senator Mercer: You say "on offer." That sounds to me like they can take that service that is on offer or they can take another service. Is there a competitive service that the RCMP or the municipal police forces can purchase?

Mr. Lindsey: These municipal services can use a variety of devices to communicate, and they would use different parts of the spectrum to do it. In this case, we are talking about a particular part of the regular spectrum that is useful for transmitting data and images wirelessly.

To give you a sense of what we are talking about, a large municipality might equip its fire department with technology that allows a firefighter in a burning building to view the floor plans of the building as they are in it and transmit that floor plan and data necessary wirelessly across this particular spectrum. It is not the same spectrum they would use, for example, to communicate from one police car to another.

Senator Mercer: I come from a part of the world where the municipalities are not very wealthy. Am I correct that if the municipality does not pay the fee, the firefighters will go into the burning building without the advantage of this technology?

Mr. Lindsey: The fee for this licence for a city of the approximate size of Halifax would be in the order of $1,450 per licence.

Senator Mercer: Per licence per year?

Mr. Lindsey: That is correct. To give you a sense of the order of magnitude of the equipment that is necessary, we looked at an example in a relatively small city in Oregon. Between the hardware costs for the fixed sites, the cost to set up the networks and the communication devices themselves, the cost approached $1 million. Relative to the cost to establish the service and to acquire the necessary equipment, the licence fee itself is really quite small.

Senator Mercer: The cost of hardware might be prohibitive for a municipality with infrastructure problems and that is struggling to make ends meet. If you want to talk about Halifax, I could give you a list of 10 roads they should be fixing.

I am concerned about putting in a tax on good security. The product you describe is worthwhile having, but I am concerned that some municipal police forces might find themselves on the outside. Can we really afford up to $1 million for the hardware, et cetera? The $1,400 per licence per annum is insignificant, but the other costs may be prohibitive. I am not sure I know the solution to the problem, I just know there may be a problem.

Mr. Lindsey: Sorry, senator, I misunderstood your question. The cost can be quite high. I would emphasize, though, that Industry Canada really has nothing to do with the acquisition of the equipment, and we are not creating an imperative for the municipal services to use this service. We have simply identified an element or a part of the regular spectrum that they could use, should other conditions allow them to exploit it.

Senator Mercer: Any modern city would want to make sure that not only are their properties protected, but also their police forces and fire services are protected by a service like this. It is really becoming a cost of doing business. If they want to provide quality fire and police protection, they need to have this service. While we talk about it being optional, it really is not optional if you want to provide quality service to your citizens.

Mr. Lindsey: I cannot disagree.

The Chair: I need a motion from you, senators, to adopt the eleventh report that we adopted on June 13, 2007, so we can report it with the observations made at the time. I think they are still very important. Then we can report again to the Senate.

Senator Tkachuk: I so move.

The Chair: Do you all agree?

Hon. Senators: Agreed.

The Chair: We will adopt it. Thank you very much.

Thank you for your presence here tonight.

Senators, we might not sit next Tuesday morning. We are waiting again to hear from Wal-Mart. We will sit on Wednesday.

I have not yet adjourned the meeting.

Senator Mercer: Perhaps we could go in camera for a moment and have a brief discussion.

The committee continued in camera.