Proceedings of the Subcommittee on
Communications
Standing
Senate Committee on
Transport and Communications
Issue 2 - Evidence - November 27, 1996
OTTAWA, Wednesday, November 27, 1996
The Subcommittee on Communications of the Standing Senate Committee on Transport and Communications met this day at 3:32 p.m. to study Canada's international position in communications.
Senator Marie-P. Poulin (Chair) in the Chair.
[English]
The Chair: As you know, our focus is the international competitive position of the communications sector in Canada. What we are asking ourselves is: What measures can be taken to ensure that Canada remains on the leading edge in communications in the 21st Century? Although we know that it is a complex area -- fONOROLA and one which is quickly evolving area -- we would like to focus on four issues: the technological issues; the commercial issues; the human capital issues; and the cultural issues.
Bearing this in mind, then, we would ask you to proceed with your presentation.
Mr. Michael Murphy, Acting CEO, Stentor: If you have had a chance to go through our presentation, what I would suggest we do is look at some of the slides that we have brought, which will assist us in covering some of the essential points that I hope will relate specifically to the issues that you are interested in. I can assure you that from the standpoint of the telephone companies in Canada, our ability to remain competitive and to have an industry that is competitive on a global basis is of critical importance. It is not only critical for ourselves, but also for the country, because of the important enabling effect that our sector has on the Canadian economy.
So, we will walk through these slides. As you can see from the first slide, we are talking about our competitiveness in telecommunications.
The next slide will give you some sense, I think, of some of the important basics here. We have some terrific advantages in this country, not the least of which is a world-class infrastructure -- the foundation for competitiveness in any nation, particularly in an information-age economy. Our telephone companies have had a long history of making significant investments in this sector. The challenge for us is being able to sustain that, as our environment changes significantly. Hence, a lot of expense and effort will be directed at building tomorrow's infrastructure. So, from the standpoint of building tomorrow's infrastructure, a lot of expense and effort is being put into doing that.
As a technology company, we acknowledge that this is not just about technology. In effect, technology is a means to an end. What we are talking about here is the opportunity to create advantage for many sectors of the economy, including health care and education -- and I think the potential benefits there are very great -- government services, in terms of the delivery of services and the desire by governments at all levels today to improve the quality of service that is being provided, as well as cultural expression.
Hence, opportunities are available if we maintain the standard that we have developed in this country, in terms of building first-class infrastructure.
The next slide includes what we believe to be the keys to Canadian success in this area. Clearly, the essence, from our standpoint, is an opportunity to build capital and spend money on R&D, because those investments are very much tied to what will keep us at the leading edge in this sector. This is an extraordinarily complex business, one that has the attention, I think, of all countries. It is increasingly evident to a number of world governments that an effective telecommunications infrastructure directly contributes to the ability to maintain a high standard of living in a country.
Therefore, as noted here, it clearly has a major impact in terms of job creation and job retention. From our standpoint, tying it specifically to productivity and exports, investment leads to innovation and productivity improvements, which has an impact on jobs. That is our perspective in terms of building the infrastructure in the future.
When you talk about international competitiveness in this sector, what you are ideally looking at is an opportunity to ensure that you are going to have success in comparison to other countries. From our standpoint, that opportunity starts with the right kind of public policy and regulatory environment. Presently, we are at the edge of some major decisions which are about to be made in a number of areas that will affect the ability of our companies to remain competitive. So we have a chance to continue to get things right in this country.
The first one that I have highlighted here is the whole question of long-distance competition. This is an area, of course, that has provided much interest over the last number of years. We are now in a fully competitive environment in Canada -- have been for a number of years. Our major competitors are large global players -- AT&T and Sprint from the United States, and other players. Over 200 companies are now vying for this business.
The telephone companies are in a very serious situation in terms of fighting for market share. Our competitors are very vigorous and experienced, and have brought that kind of experience and technology into the Canadian marketplace. So, we are fully engaged on that front.
We are also in an environment where the only players who are regulated continue to be the Stentor companies. All of our competitors are unregulated as long-distance providers. We continue to be regulated.
The future of regulation for the Stentor companies is currently before the CRTC. A proceeding was launched late this summer, and evidence was submitted just last week. We will be directly involved in that process through to next year. We will see what kind of decision the regulator comes up with -- a decision that will impact our ability to compete in this market.
The next slide looks at the local service marketplace -- to us, a critically important segment of the market in Canada -- which is going to be the next competitive frontier. In 1993, the Stentor companies made a proposal to the CRTC to open up the local market. To this end, we have participated in a number of CRTC proceedings to define the rules of the competition in the local market, much like we have gone through in the long-distance market.
I will come back to my original statement about the importance of making investments in this sector to ensure that we remain competitive as a country. In the case of local market competition, one of the critical decisions will be what form competition will take: Will competition take the form of the competitors leasing
Stentor's facilities and reselling them in the marketplace, or will the competitors have to make their own capital investments in this marketplace? We anticipate these critical CRTC decisions in 1997.
Slide number 6 looks at a third sector, competition in video distribution -- the cable television market -- an area of interest to the Stentor companies. This sector has not been faced with competition directly. That is now starting to happen, and the rules of that particular engagement are also in front of the CRTC today. The Stentor companies have been involved in that through a process with the CRTC. Rules will be put in place by the end of 1997 to create a competitive cable television market.
The examples that are included on this slide include some of the critical issues face us in terms of how viable the competition will be. And if these questions are not answered in a way that provides an opportunity for the telephone companies and others to get access to programming on the same basis as the incumbent cable companies, we are not going to see effective competition. So, again, critically important, because these decisions will inevitably lead to increased expenditures on behalf of all competitors, including the telephone companies.
The next slide, No. 7, talks about another critically important issue, which is the discussions that are taking place today within the confines of the World Trade Organization with respect to liberalizing the rules for trade in telecommunication services. Many discussions have been taking place within this sector, and I think in terms of importance to Canada, given the importance of this sector to our country, the importance of getting the rules right to facilitate competition and to liberalize markets on a worldwide basis is very important.
The next side talks a little bit about some of the critical issues that are before us within those negotiations. When you talk about Canada`s ability to compete on a global basis -- we already have a very liberalized telecommunications environment. Foreign players can come into our market, play in the markets they choose to play in, in an unregulated way. That is not so in a lot of countries.
So, there is much to discuss under the headings that we have identified here -- issues involving not only ownership restrictions, but also the critical question of the bypass rules in respect of traffic requirements and how traffic will be carried between countries.
From our standpoint, the items that we have mentioned, from domestic competition to the discussions within the trade organization, take us to a point where today, we are on the leading edge of setting the ground rules that will determine the marketplace for the years to come.
We have an opportunity to get the rules right. I think the benefits for our country will be quite obvious.
Senator Spivak: On the issue of investment, how much money are you talking about? We got some indication of that, I think, the last time around, but you can refresh my memory.
As well, what, if any, are the barriers to investment in Canadian companies? Are there any legal or regulatory barriers? And I wonder if you could explain again in a bit more detail the subsidization of the entry of AT&T and Sprint. I must say that when we originally looked at this policy in terms of moving from monopoly to competition, it was suggested at that time that huge American companies, such as AT&T, would not really be able to get a foothold in our country. That was the prevailing climate of optimism.
I wonder if you could comment on those two things.
Mr. Murphy: Dealing first with the issue of investment, what we are essentially talking about here is two levels of investment, if you will.
The first is related to what I will call the backbone of the network across the country. As you may know, our companies have fibre optic systems that cross the country. What we are looking at doing is upgrading that technology to handle not only voice and data requirements for all of our clients, but also video distribution -- and being able to do those simultaneously. So we are looking at upgrading the switching equipment across the network to do that. I will deal with both of these together.
The other part of it is the much more critical component of upgrading the access into homes and businesses. When it comes to the business sector, we are almost at the point, as are many of our competitors, where we now fibre facilities into most of the major buildings within the downtown cores of all of the urban ---
Senator Spivak: That is not the hybrid.
Mr. Murphy: Well, that is one of the technologies that is used here. When you look at the opportunity to decide how you are going to provide electronic access to a customer, one of the great challenges for our technologists today -- and, I would suspect, for others -- is choosing the right technology in terms of meeting those requirements at the local level, the facilities right into the customer's premise. And this notion of a hybrid fibre coaxial cable facility was also under discussion, and has been for some time. But we are also looking at wireless and other technologies, as well.
So you have some technology decisions to make; and all of them are going to be expensive, there is no question.
Of the two sectors, in terms of upgrading the backbone network versus upgrading the local access portion, you are looking at very different cost levels. It is safe to say that you are into the multiple billions of dollars on a national basis.
Senator Spivak: Is venture capital the difficulty here? What do you face in terms of getting investment?
Mr. Murphy: Well, I would think two things.
Senator Spivak: By comparison to the Americans, I mean.
Mr. Murphy: One, which would not necessarily be different from our U.S. friends or others, is a technology decision; that is, how do you make the right decision before you are actually going to implement a solution. One of the things we have come to discover is that there will be no one single winning technology, if you want to look at it that way, in terms of reaching customers, from a local service perspective.
We have come to understand that many technologies will be at our disposal; it is a question of making the right decisions. The barriers to making those decisions are essentially from a policy and regulatory standpoint; they are not from a financial perspective. However, obviously, good financial health, for capital-intensive companies like ours, is essential. Without that kind of financial health, one would not be able to make the same level of investments as we, historically, have been able to do.
So, we are looking at the key questions that I raised in my presentation. The successful resolution of those will essentially determine whether there are barriers to entry into new markets, in terms of how you would serve customers -- what flexibility you might have to bundle and package services in the marketplace. To the extent that we resolve those in a way that is going to permit the Stentor companies to deal in the marketplace as effectively as our competitors, there will be no barriers to spending the capital.
Senator Spivak: In connection with that, you have now, say, an $8 billion initiative, the Beacon initiative, and now that is no longer alive; is that correct? And why?
Some people have said that there will not really be serious competition between cable and television because of the huge expense in each of those facilities getting into each other's business. Is that a valid statement? And why was this particular initiative abandoned?
Mr. Murphy: First of all, the initiative has not been abandoned. One of the things that has changed since the spring of 1994 when we made the announcement -- we felt reasonably certain at that time that we knew what the technology solution would be. At that time, it was felt that the future of the marketplace was essentially one of competing for switched broadband services into homes and businesses.
It is hard to believe, sitting here in the fall of 1996; but we were not engaged in the phenomenon of the Internet in the spring of 1994 like we are now. The Internet has had a profound impact. We are now looking at a much more narrowband world, if I can put it that way, in terms of providing services to our clients, as are others.
This is an evolutionary situation. We had made a technology prediction and some prognostications at the time, and events have basically changed. However, we are still committed to the same ideals, in terms of providing competitive alternatives in markets where we do not compete today and ensuring that we have the necessary technology in place to ensure that our core business is well served.
To those who suggest that there will not be vigorous competition in that segment of the market, I disagree. Each segment of this business is essentially a part of a whole. If you listen to all of the players in the market today, what we are all saying, essentially, is: We want to be able to meet all of the communications needs of our customers; therefore, we want to be able to jointly bundle and package services, long-distance services, local services, multi-media services, cable television services, and so on -- bundle those services into packages for customers. That is why some long-distance competitors say they want to be in the local telephone market; and vice versa for cable companies.
Senator Spivak: Right. But could you just refresh my memory again as to how AT&T and Sprint are subsidized with respect to their entry into the Canadian market?
Mr. Murphy: I will go back to the 1992 CRTC decision which essentially formalized the competitive arena in long-distance at that time. We had an environment that was already competitive, through the phenomenon of resale which had been going on for some time prior to 1992. But starting in June 1992, we had competition from facilities-based providers, Unitel and others -- these companies have now essentially migrated, through changes in the marketplace, to new names and new corporate structures. AT&T and Sprint are the two that I mentioned. There are others. We have well over 200 competitors in our market today.
Essentially, the Commission said at the time that they would create rules vis-à-vis the start-up costs to get into the business, in terms of the facilities that you would have to get, the arrangements that would have to be made to interconnect a network into ours. "The telephone companies will essentially end up paying for 70 per cent of that," is the way the rules were set.
We also created -- and this became a very important topic; it has evolved since 1992, but it still has not been fully resolved -- we created an environment where the subsidy that was coming from long-distance service to keep local rates low, which had been in place for decades as a public policy approach -- that approach was set up such that the new entrants would pay less of a subsidy to keeping local rates low than the incumbent telephone companies. They received very significant discounts off that requirement. So their requirement to subsidize local was far reduced from that which the telephone companies had to pay. In the early years of 1992-1993 and into 1994, you were looking at subsidy rates that approached two-thirds; in effect, they were only paying a third of what the telephone companies were paying.
A number of adjustments have taken place since that time, in terms of changes at the CRTC. Hopefully, there are more to come because this still is not an issue that has been completely resolved.
Senator Spivak: What would you like to see from the CRTC? Do you want to see completely open competition, or managed competition? What are you looking for from the CRTC?
Mr. Murphy: I cannot think of a worse environment than managed competition. Either you have a competitive environment -- and as I mentioned earlier, the CRTC is now having a look at whether or not the telephone companies should be forborne from regulation, to use their terminology, and they will make a decision on that next year. I think the important point is that they set out some rules in 1994 that would have to be met in order for that to occur, and those rules are essentially in place.
The discussion today concerns one last item, which deals with the amount and evidence of rivalry in the marketplace. As I said earlier, we think we are in an environment that could only be characterized as vigorous rivalry. So we are hopeful that a positive decision will come out of there, where the telephone companies will essentially have the same freedom as our competitors to price and package services for their clients. To date, we do not have that, and it is certainly a serious disadvantage for us.
Senator Spivak: You are of the view -- because forbearance is only when there is enough competition. You are of the view that there is enough competition now, so "Get out of our way and let us compete."
Mr. Murphy: Absolutely, especially since we are into a proceeding that is not going to terminate until some time next year. We will see what happens after that.
The Chair: Mr. Murphy, Senator Watt has had to return to the chamber, but he has asked me to ask you about the Beacon initiative and the fact that it included long-distance learning initiatives, mainly in Newfoundland, Labrador and Manitoba. Are these available to native schools? Could we receive more information on that?
Mr. Murphy: Absolutely. When we first talked about the changes that were occurring in the marketplace and the evolution of the marketplace -- as I mentioned in one of my slides, the opportunities in a number of sectors are phenomenal, and we would say education perhaps is at the top of that list. We know what kinds of pressures those who are responsible for education are under from a fiscal perspective.
We think that communications, broadly, and the telecommunications sector in particular, have an important role to play. The opportunities are there for us to participate, as we have, for example, in a wonderful program that Industry Canada has spearheaded called "SchoolNet," a program that is under way now to connect all of the schools, from kindergarten through to grade 12, across the country to the Internet. We are well down that road today and believe that by the middle of next year, we will have all of those schools, some 16,000, I think the numbers are, connected. And that is the start.
What it basically does is take geography out of the equation. And for students, that becomes a critical advantage, because you are talking about the opportunity to have access to learning regardless of where you are located. It therefore removes the necessity for a student of being in a large geographic area in order to access certain kinds of resources. So that is one example.
We are working on many other programs, as well. If the committee is interested in hearing more about that, we would be delighted to send you some information.
The Chair: That would be perfect.
Mr. Murphy, I am an old radio producer from the early seventies, so my appreciation of telephone lines goes beyond the use of a private phone or a company phone. I used to deal regularly with the various phone companies across the country to ensure a good line -- quality of sound -- for the radio show that we were putting on air. You referred to the fact that you are slowly moving toward the Internet world.
When we look down the road, if you had to make a recommendation to the CRTC, do you think that the regulations should specify Canadian content?
Mr. Murphy: Historically, if you look at the Commission's role, they have had to walk a very difficult line -- and it has not been easy for them, I am sure -- between protecting our cultural sovereignty, if I can put it that way, on the one hand, and looking at the economic drivers of the country, ensuring that we realize the economic benefits of the kind of infrastructure that we have in this country, on the other.
Those are very different responsibilities. Effectively, from the telecommunications perspective, they have been looked at from an economic point of view; from the broadcasting side of the Commission, from a cultural point of view.
We are now in an environment where the two worlds are merging. The current technology is no longer technology that can be classified as either broadcasting technology or telecommunications technology. It is technology that you can do many things with. So, the challenges remain there.
I think what you have here is an opportunity to promote Canadian content. There are a number of ways that you can come at this. You can talk about the need to protect in this environment.
In terms of our policy paper on the Information Highway that we launched three years ago, we tried to position this as opportunities for Canadians and for content producers in Canada to get new avenues of distribution. From the CRTC's standpoint, it is a case of having new technologies and new opportunities and ways to be able to promote Canadian content.
I was talking to some of our people today who are involved in the "Sympatico" Internet product that our telephone companies offer, and the demand for Canadian-produced material on a number of our sites in that vehicle is extremely high. There is a market out there. The idea of having an opportunity to promote it -- and we gave some specific examples of how you might do that in the CRTC's Convergence Proceeding.
The Chair: Could we have a copy of that?
Mr. Murphy: Sure. I would be happy to pass that on to you.
The Chair: Would Americans -- because it would happen that certain feeds, as already is the case, are coming in from the States -- view it as a commercial opportunity for them to include Canadian content on their own all-American feed? In your dealings with American companies, how would they react?
Mr. Murphy: To the opportunity to have Canadian content on what they are providing?
The Chair: To Canada.
Mr. Murphy: Well, that is interesting. Quite frankly, I have not given that too much thought. I think it has been proven -- and you can talk to broadcasters as one example <#0107> is that the high quality material that we produce in this country finds a market elsewhere. There is lots of evidence to that effect.
I think Newsworld and some other players have some services on U.S. satellites today that are fed into the U.S. market. One of the great challenges in a universe where their is an extraordinary amount of choice is how do you find a niche for Canadian products and services in that environment?
The Chair: If we look at the other side of the coin -- because I am really looking at it from a commercial point of view -- one of our previous witnesses mentioned that few Stentor companies are present in foreign markets as competitors. Could you explain to us why?
Mr. Murphy: Well, let me take it from two points of view. A number of our companies have international operations that are actively engaged today. I can give you an example. While today we are prevented from competing in our home market in the cable television market -- and hopefully that is about to change -- we are not prevented from doing so in other countries. The U.K. is a good example of that. We have had up to three of our telephone companies across the country actively engaged in competing with other companies in the U.K. cable market. We still have two there today.
So, it depends on which market segment you are looking at, because those companies are also competing in the local telephone service business in those countries.
We also have, from the standpoint of investments in a number of operations, a number of our companies who have international affiliates, if you will, because we have basically separated our local telephone company environment from our overseas area. They are actively engaged in a number of countries.
I know the Bell family, for example, is doing an awful lot of work in the cellular market, in the long-distance market and in the local market in India, and is operating major systems there today.
Having said that, and having looked at those, we also have investments where we are not even operating the telephone companies or the telecommunications enterprises, but we are investing.
The Chair: Like Bell Canada, for instance?
Mr. Murphy: Yes, Bell is doing a lot of that. For example, look at their involvement south of the border in the cable business in the United States. Again, a lot of this has been driven by the restrictions that have been placed domestically. We do not have an environment today where our companies are free to compete in a number of domestic markets, so we have looked abroad where that has been feasible.
I would also say, though, that from our standpoint, we are faced with some significant challenges in our home market. Our world has changed drastically in the last few years. There has been much to do here in terms of retooling and getting organized to take on what has become an extraordinarily competitive environment in our own market.
Senator Perrault: The member and associated companies of Stentor have done some great pioneering work in this country. Out in my part of the world, BC Tel has been around for a considerable period of time. They are good corporate citizens, as well. There are complaints from the local market telephone users, people who pick up the telephone and make local calls, that there have been inordinate increases in rates in recent years.
This is a result of all this increased competition; that expansion has to be paid for and the local market is being creamed in order to assist the process. How would you respond to that?
Mr. Murphy: I will respond in two ways, senator, and I will deal specifically with BC Tel, since it is your home province. Until BC Tel's $2 increase earlier this year, resulting from the CRTC rate rebalancing process last year, to be implemented over a three-year period, BC Tel had not had a rate increase in some ten years, on the local side. That is not a phenomenon that is shared by other players in this sector. Not too many sectors would be able to make a statement like that.
In the Bell Canada situation, the increase that occurred there had effectively been the first across-the-board rate increase in 12 years. That is the Ontario and Quebec market.
So you have a phenomenon where rates had essentially not gone up in the local market for many years in significant parts of our country.
Senator Perrault: So you do not regard this as an inordinate increase?
Mr. Murphy: No, and there are two comments I would make there. It is directly tied to the introduction of competition. We had a monopoly market, essentially, for decades, and pricing was done on the basis of keeping local rates artificially low and pricing long-distance services artificially high. We did that for many years. You had one supplier, and it really did not matter where the money was going.
In a competitive environment, your ability to subsidize, obviously, is greatly reduced because your rates are dropping dramatically in the long-distance market as a result of being under siege there. So our ability to sustain the subsidy towards the local market has been eroded.
Just as has happened in the U.K., and just as has happened in the United States, when you introduce competition, you have to start moving rates towards the cost of providing those services. And that is what is going on: long-distance rates are decreasing, and local rates are increasing.
Senator Perrault: Do you think that some of your competition, some of Stentor's competition out there, is in the process of high-grading the market? They do not have any responsibilities for local television service, do they? Are they creaming the market?
Mr. Murphy: Are you talking about the long-distance business?
Senator Perrault: Yes.
Mr. Murphy: The long-distance business is a wide open affair; you are permitted to decide where you want to compete. You may decide that you want to compete only in the business market or only in the residence market; maybe you want to compete only in large markets. Those decisions are yours to make.
So, to the extent that our competitors put business plans together -- and they are all probably quite different -- they will decide where they want to compete with us.
I think the same thing is going to happen in the local service market, where there will be expectations on us to continue to provide service. For example, a new competitors may decide, "Downtown Vancouver looks attractive to me, but I am not sure that the interior of the province is as attractive; I do not want to go there." And there will not be an obligation to do that.
Senator Perrault: It seems to me it almost invites chaos, though, to live in one company's territory and attempt to interconnect with other companies in other territories.
Mr. Murphy: Well, some people describe a competitive market as a chaotic market; but you will not have us saying anything that does not sound like we are quite supportive of a competitive market. Quite frankly, that is what our customers want. Customers played a major role in driving these decisions, and I think they are going to continue to do that.
Senator Spivak: Industrial customers, not residential customers.
Mr. Murphy: I will agree with that. They certainly played a significant role.
The Chair: Mr. Murphy, thank you so much.
[Translation]
The Chair: Mr. Poirier, thank you for coming here today. As you know, our time is limited and we'd especially like to spend it in discussion with you. We have to leave the room at 4:55 p.m. to go back to the Senate. We also enormously appreciate your brief. We received it earlier, we have read it and so you can quickly lead us to the heart of the matter and your recommendations.
I'd like to introduce my colleagues: Senator Spivak, from Manitoba, Senator Perrault, from B.C., Senator Watt, from Quebec, who went back to the Senate chamber for a few minutes, but who will be coming back, and Senator Rompkey, who should also be here, from Newfoundland. So you have a lot of people listening to you.
[English]
As you know, this study was really undertaken, Mr. Poirier, with the intention of looking at Canada's international competitive position in the communications sector. In our report, we would like to be able to identify what measures can be taken to ensure that Canada is on the leading edge in communications in the 21st Century. We know that it is a complex issue; we know that it is a rapidly evolving sector. We are very aware of that.
However, we would like to focus mainly on four areas: the technological issues, the commercial issues, the human capital issues and the cultural issues.
[Translation]
Mr. Roger Poirier, President, Canadian Wireless Telecommunications Association: I'm Roger Poirier, President and CEO of the Canadian Wireless Telecommunications Association.
[English]
With me today is the Chairman of the Board of CWTA, Mr. Robert Koven. Mr. Koven is also the President of Liaison Communications Inc., a new company headquartered in the Toronto area, specializing in providing national paging and advanced messaging services.
Also with me is Mr. David Farnes, the Vice-President of Regulatory Affairs at CWTA.
[Translation]
Our presentation this afternoon will start with a brief description of the wireless telecommunications industry and its importance in Canadian telecommunications. We thus hope to be able to specify where we stand as an industry and, finally, we will look at certain matters of public policy which, in our opinion, are important for the future competitivity of the industry, both in Canada as well as on a world-wide scale.
[English]
Mr. Robert Koven, Chairman, Canadian Wireless Telecommunication Association: The wireless telecommunications industry is an incredible Canadian success story. It is, today, the fastest growing component of the telecommunications industry and an increasingly important component in the Canadian economy, creating thousands of high technology jobs, with annual investments of over $1 billion.
The Canadian wireless industry is, first and foremost, highly competitive, delivering a wide variety of innovative services and products to Canadians.
Today, 2.8 million Canadians have opted for the convenience, the added productivity and security of the cellular telephone. Three thousand new cellular subscribers are added every single day in Canada. That is an annual growth of over 30 per cent.
On a global scale, there will be some 300 million mobile phones around the world by the year 2000. Remember, this is only a ten-year-old industry. Cellular in the fastest growing consumer product in history.
Other sectors of our industry are equally important, as well. On the paging side, the industry continues to show impressive growth. Over 1.3 million Canadians now use pagers, growing at a rate of over 20 per cent per year.
Mobile radio is also growing rapidly, driven by technological innovation. Clearnet has recently launched Canada's first enhanced specialized mobile radio service, ESMR, creating a wealth of business applications.
Mobile satellite services are now a reality with the launch of MSAT, Canada's domestic mobile satellite. Other satellite ventures, including Orbcomm, Odyssey and Iridium, are bringing the wireless revolution to all parts of Canada.
In this environment, we will soon seen the launch of a wealth of new products, as new players enter the market. These include recently licensed Personal Communication Services, PCS; two-way paging, also known as narrowband PCS; and Local Multipoint Communication Services, known as LMCS.
The Canadian wireless industry makes a major contribution to business and to Canadian society by creating employment in high-technology, stimulating investment and research, and contributing to education and training in specialized fields. The industry also provides telecommunication services essential to business productivity and contributes to added personal security and convenience.
For example, the industry has created over 10,000 direct high-technology jobs over the last ten years. That number is expected to double over the next five years. In fact, the demand for skilled individuals particularly in the engineering field outstrips the supply.
Ericsson has recently launched the Centre for Wireless Communications, a graduate program at the University of Waterloo. With an initial investment of $1 million, the program is intended to provide some of the needed talent in the wireless industry for years to come.
Major research is conducted by Nortel, Ericsson Communications and others. Ericsson alone employs nearly 1,000 engineers at its world-class wireless research centre in Montreal.
A growing number of Canadian companies are actively involved internationally in the development of wireless delivery systems and in the export of equipment and services. Examples of such companies include Bell Canada International, Telesystems International Wireless Corporation, LanSer Telecom, Nortel, Com-Dev and Research in Motion.
In the area of health and safety, time and again wireless phones have saved lives or have benefited individuals on a personal basis. Most instances do not even get reported. There are some 2,000 calls made to 911 every single day of the week using a wireless phone.
The industry will soon be announcing another major university research initiative of $2 million to study wireless health and safety related issues.
On the paging side, we would like to mention the Canadian LifePage Program, where the Canadian paging companies donate pagers to patients awaiting organ transplants. This allows individuals awaiting organ donations to continue to lead an active life.
Mr. Poirier: We can characterize the wireless industry today as being at the end of its first generation, a generation characterized predominantly as an analog technology dedicated to serving the business community.
The industry is now moving to the second generation, a generation characterized by a digital infrastructure, which opens up tremendous potential for new services, including integrated services, a much more efficient network with greater capacity, higher quality and privacy, and ultimately lower cost.
It is also characterized by rapidly expanding business in consumer markets. This second generation has been termed the "age of personal communications services," something we call a paradigm shift from communications between places to communications between people. This is nothing short of a major revolution in its truest form. It is changing not only the way we work, but also the very way we live.
New devices will be capable of multiple uses, including voice and computer communications. Hand-held devices will be capable of receiving many forms of data, including messaging, faxes, stock information, Internet access, weather information -- whatever you personally desire.
We have brought some devices -- which we will just pass around quickly. These are devices which are entering the market today. Bob will describe some of them.
Mr. Koven: This is a two-way messaging device produced by Research in Motion, a company out of Kitchener, Ontario. It is designed to give two-way messaging on a mobile radio network; as well, it can access the Internet. It has a "QWERTY" keyboard.
This is another device, produced by Motorola. It is the same type of device as the previous one, working on a two-way paging network. You will notice that it has a little mouse and is driven by icons; at the back is an infrared input application written in Microsoft. For instance, if you wanted to find out all of the restaurants in Ottawa, an icon would come, and on pushing a button, it becomes two-way interactive. And it is an Internet device.
Senator Perrault: Is there a keyboard on it?
Mr. Koven: Yes.
Senator Spivak: You say it is two-way interactive. Can you use it to make a telephone call?
Mr. Koven: No.
Senator Spivak: Paging back and forth.
Mr. Koven: For Internet.
Senator Spivak: No voice. Okay.
Mr. Koven: This device is a PBA, produced by Casio, that has a pager integrated into it. It receives information off the Internet.
Senator Spivak: Is this on the market?
Mr. Koven: It will be.
Senator Spivak: How much would it cost?
Mr. Poirier: It can access the Internet in the same way that you would access the Internet from a home computer or your business computer.
Senator Perrault: It has a very small screen, though.
Mr. Poirier: Yes, the screen is very small. You simply want the information. You are not going to get a lot of the graphics, but you could grab information.
Senator Perrault: You would go to the non-graphic format then?
Mr. Poirier: That is correct.
This is another new product, called "MIKE," that has just been introduced in the market. It is a product introduced by a company called Clearnet out of Pickering. It is the first in a generation of products. It is an integrated mobile phone, pager, text messaging and radio dispatch device. It acts as a pager, as well as a data communicator. It can send and receive data in any form. This is what you call integrated communications. Again, this was introduced by a Canadian company a short while ago.
Senator Perrault: Is the technology Canadian technology?
Mr. Poirier: The technology is Motorola technology. It is American technology, but Clearnet is the first company in Canada to introduce it.
We are seeing other ones. In two days from now, you will hear about the launch of Microcell in Montreal. Microcell is a new PCS company in Canada, and they will launch a service called Fido this Friday. You will certainly read about it in the newspaper. This is the first launch of true PCS in Canada, which adds to the competitive market.
Their phone looks very much like this one. You can pass this one around.
The Chair: Will it be multi-use?
Mr. Poirier: The final product will be.
Senator Perrault: Could it be purchased at Radio Shack, or somewhere like that?
Mr. Poirier: They will be available starting this Friday at various distribution points. Phones in the future will be essentially generic. What will drive the phone will be the SmartCard, which you essentially insert inside the phone.
I have a Fido card here -- I will pass it around. You can see the actual microchip on this. It contains information about you -- your personal home number and all kinds of other bill information. It also tells the phone how to act, finally, depending what country you are in. So we are moving to the area of very smart phones.
Senator Perrault: What is the capacity of the card?
Mr. Poirier: I am not sure; however, it contains a lot of information.
The Chair: For what purpose and in what context would one make use of the Fido card?
Mr. Koven: This Fido works on the GSM standard. For example, when you land in Europe, you can pick up a telephone. It really has no memory in it. You insert your personal card, which is the Simmcard, and all of a sudden it takes on all your characteristics. It knows where to bill you and it knows what services you have. That is the idea behind that network.
Senator Perrault: A lot of technology has been developed to assist you in finding addresses in various towns and cities. I suppose there is a satellite that provides that information; is there?
Mr. Poirier: There are a lot of devices and facilities to do virtually anything you desire.
I have one last product to show you. This is a little larger than some of the other devices. This a mobile satellite phone. We invite you to have a look at this afterwards. With this device, you can make a call virtually any place in North America -- from the Arctic Circle, the tundra or your back yard. This brings a wireless revolution to any part of the world, where you can literally have anything, any time, anywhere communications.
This is a first of a generation of mobile satellite communications products. It is currently available, in Canada, through TMI and other vendors.
Senator Perrault: They are mobile; you can access from almost any point?
Mr. Poirier: That is right. You could set this up in the middle of a desert.
Senator Spivak: This uses a satellite. What about all of those other products?
Mr. Poirier: Those other products are terrestrial in nature; they operate in the same way as cellular phones do today.
Senator Spivak: Off of towers?
Mr. Poirier: Off of towers.
Senator Spivak:You have to build infrastructure for them?
Mr. Poirier: That is correct.
Senator Spivak: Why are we building all of these towers, if we can put satellites up in the sky and use that? Surely, the technology will roll all of these products into one; eventually, you will have one phone to do everything.
Mr. Poirier: It is really a question of economy. Satellite technology is extremely expensive and has certain limitations, particularly in urban areas. This product is designed to accommodate those who will never be in reach of a terrestrial wireless system, a cellular system, in other words. There will always be major areas of this country and others where cellular or conventional wireless technology simply cannot reach; it is simply too expensive.
At one point, I think satellite technology will compete to some degree with conventional, cellular and others. But it is simply much more cost-effective to build terrestrial networks of that nature.
Senator Spivak: Okay. So wireless is still going to be, for the most part, a terrestrial system, because it is cost-effective. That means that we do not have all the infrastructure everywhere, right? Or do you have infrastructure everywhere?
Mr. Poirier: Well, it currently reaches 93 per cent of Canadians. In terms of land mass, it is very small. But you cannot go much further than that without some major changes in the cost structure.
Senator Spivak: So you have the infrastructure?
Mr. Poirier: Well, to operate at 93 per cent of the population. The next step will be satellite communications. These things are integrated, by the way. You get the service through a cellular company which will sell you a service, a seamless one, cellular or mobile satellite. It simply means that you can be in communication any place.
Mr. Koven: Each one of these devices works off a different infrastructure. Each one of these devices, as we pass them along, has a different weight, different functionality and a different cost.
Wireless is meant to address all sectors of the population, and therefore you need different infrastructures in order to support the different sectors. It is really a matter of cost. Throughout the development of wireless -- wireless is not something that is new; the paging industry has been around for 25 years. When cellular telephones became available, they were not the be-all and the end-all; people still required multiple devices. It was a matter of cost.
Senator Perrault: What about security and confidentiality? The Royal Family has been "burned" several times in the last five years. I would hesitate to use my credit card in one of those devices.
Mr. Poirier: The newer technology that I spoke about, the second generation, is digital. That, in itself, provides a quantum leap in added security and privacy. It is much more difficult to intercept a digital signal and make any sense of it.
The government has also moved to prohibit certain devices used in the interception of digital signals, called digital scanners. In addition, you can also encrypt these signals fairly easily now with digital technology. So you are looking at a major change in the level of security and privacy with the second generation.
We will now turn to some of the specific issues and questions which you provided us with in preparation for our appearance here today.
The international wireless market represents an incredible opportunity for export. Half the world population, three billion people, has never made a telephone call. By the year 2000, there with be approximately 300 million mobile phones, as we have said, in use worldwide. Many less developed regions of the world are leapfrogging past traditional wireline technology, or wire technology, and going straight to wireless local access. This provides many more cost-efficient infrastructures.
A recent study forecasts 200 million wireless local access subscribers worldwide by the year 2005. These are subscribers that will not have traditional wired phones. They will be using a wire technology for their principal means of communication. By the year 2005, half of all calls in the world will be wireless.
One of the key components to international competitiveness, from our point of view, is to foster an intense domestic competitive market. The wireless industry in Canada is already intensely competitive. Even in mobile technology where the market is shared between two service providers, Cantel and an affiliate of Mobility Canada, there is fierce competition for market share. With the arrival of new PCS entrants, Microcell which we mentioned earlier, and Clearnet, competition will intensify, providing consumers with a wealth of new packaging and pricing options. Other sectors of the industry, including paging and mobile radio, are already similarly intensely competitive.
The industry is also increasingly seeing a convergence of technologies and services. As we have mentioned, new PCS providers, as well as existing cellular companies, will soon offer a number of integrated service packages to business and consumers. Such competition is providing Canada with a world-class wireless telecommunications infrastructure which is on a par, and in many cases, exceeds, with those of other places in the world, including that of the U.S.
As an example, Canada's cellular network, offering seamless roaming, reaches over 93 per cent of the population. This is a remarkable success story.
The need for international competitiveness fosters alliances between Canadian and international players. Such alliances through partnership arrangements are necessary in order to maintain our position in know-how and technological developments in wireless communications. Alliances enable Canadian carriers to better serve their customers in a global marketplace.
A second component related to competitiveness is access to spectrum. The wireless industry is, of course, fully dependent on access to spectrum resources on a timely and affordable basis. In this regard, Industry Canada has an excellent record of providing such spectrum resources to industry on a timely basis.
The process used to date has been called the comparative licensing process, where applicants submit licensing information to Industry Canada. While on the whole we think this process has worked quite well, we recommended changes to the process some time ago, to make it more transparent, possibly involving public hearings and requirements for the department to provide reasoning for decisions made.
Recently, Industry Canada announced -- without formal public consultation, I might add -- that it would soon pursue the appropriate means to adopt competitive bidding process or auctions for future use in licence selection. The association has, on numerous occasions, raised concerns over the adoption of the auctioning process in Canada, which could significantly increase the cost of the spectrum.
All costs absorbed by wireless carriers in a competitive market will be reflected in subscriber costs. Whether these costs are for infrastructure, licensing costs, auction bids or taxes, they will, out of necessity, be borne by the subscriber, either in higher service fees or lower service levels, in terms of quality and coverage.
These costs not only have direct impact on the profitability levels and access to capital markets, but have direct bearing on the industry's overall competitiveness, both domestically in relation to Canadian wireline carriers and also internationally.
A related issue is licence fees. The annual outlay of the industry for radio licence fees has continued to increase over the last 20 years, all too frequently in quantum leaps. Today, moneys extracted from the radio communications industry amount to over $100 million annually. The industry does not dispute the basis for establishment of fees as charges for rights and privileges for the use of a natural public resource.
However, fee levels must be determined in a manner which gives recognition to the role and economic contribution of the radio communications industry in Canada and the need for the industry to compete, both nationally and internationally. In particular, the development of innovative wireless telecommunications services which can offer competitive alternatives to existing wireline telecommunications providers depends to a great extent on government objectives to foster such competition.
The amount of licence fees paid should not put at risk the government's policies and programs of job creation, investment stimulation and the development of a competitive telecommunications industry.
Mr. David Farnes, Vice-President, Canadian Wireless Telecommunication Association: A third component related to competition is the regulatory environment that fosters such competition. There are currently a large number of regulatory processes before the CRTC which focus on the mobile or wireless telecommunications sector. Decisions regarding these could have a profound effect on the industry's growth and competitive positioning for the foreseeable future.
In general, the association supports a minimum of regulatory intervention. The wireless industry is already, for the most part, highly competitive, and most forms of regulation should be abandoned in favour of reliance on market forces, subject to competition law.
We suggest that there is little rationale for mandating access to wireless facilities. Wireless telecommunications assets are neither natural monopolies nor essential facilities, as is the case for some wireline telephone facilities. In fact, wireless services will provide competitive alternatives to wireline bottleneck facilities in the future, eliminating the natural monopoly or essential facility characteristic of incumbent wireline companies.
The government should concern itself with regulating access to wireline local exchange networks. This is particularly crucial for the wireless telecommunications industry.
Following the recent hearings on local competition, the CRTC is now looking at setting the terms and conditions for local network interconnection. There is an historic opportunity to establish, for the first time in Canada, a regulatory regime which treats all facilities-based carriers as equals.
The current relationship we have with wireline carriers is rooted in the outdated notion that wireless carriers are secondary to, and mere customers of, the local telephone companies. For example, wireless carriers make payments to Stentor not only for the termination of calls on the wireline network, but also for calls that originate on the wireline network and terminate on the networks of wireless carriers.
This is exactly the opposite what the FCC in the United States has already determined. Wireless carriers there are entitled to compensation for terminating wireline-originated traffic.
Canada can ill-afford to maintain regulatory policies that discriminate against the fastest growing sector of our telecommunications industry. The Commission must adopt an interconnection policy which recognizes the equality of all carriers. Such a policy will not only foster the development of competition both domestically and internationally, but also will promote the development of a Canadian telecommunications industry which will truly consist of a network of networks.
[Translation]
Mr. Poirier: In short, we believe the government's role to encourage global competitivity of the Canadian wireless telecommunications industry starts with domestic policies encouraging competition on the Canadian market.
First, the government should encourage innovation and new investments by opening the resources of the spectrum without delay and in an equitable manner.
Second, the government should lighten the regulatory burden imposed on the industry by recognizing the equality of Canadian telecommunicators; finally, the government must encourage new technologies by supporting research and development and government technological transfers.
As for research, the cell phone companies and the portable communications services companies provide 2 per cent of their net profits for research and we made some recommendations to Telecommunications and Industry Canada to broaden the definition of research.
Moreover, we believe the government must play a key role and continue to represent Canadian interests during international negotiations to free up exchanges in the area of telecommunications. On that, the spokespeople for the industry and government organizations must work together and encourage trade opportunities abroad.
The Association is anxious to participate in this "Team Canada" type approach.
[English]
Thank you for giving us this opportunity to be with you today. We would be pleased to answer any questions you might have.
[Translation]
The Chair: Thank you very much, Mr. Poirier. And so, I understand that you'd like us to be wishing you bon voyage soon, if I get your drift. In passing, when I saw the FIDO card, I just had to smile. I figured:
[English]
What comes around goes around. When I was in grade 1, "Fido" was the name of a dog in one of our readers.
Senator Spivak: I am interested in the spectrum issue and why the government has decided or is interested in auctioning spectrum. The reason I ask is that when we were in the United States, I believe, last year, one of the reasons for auctioning spectrum was the ability to use these funds to draw down deficit. It was for financial reasons. Of course, what this meant was that the big players necessarily got the spectrum.
Are you suggesting that they do not use the auction at all, or are you suggesting that they do it in a manner that would not give preference to foreign companies? What is your suggestion here?
Mr. Poirier: First of all, we have not stated that we are against auction, only that we have a number of concerns with auctions in Canada. In terms of what is driving the licensing process, is it simply a process to generate moneys for the Department of Finance? That is certainly the approach taken in the United States. This has been a tremendous boost for the treasury; it has generated some $11 billion.
We have certain concerns. If, in fact, that is the prime motivation in going to auctions, to simply generate moneys, we believe it to be extremely counter-productive to telecommunications policies. In fact, it probably goes against many of the principles enunciated in the Telecommunications Act, principles such as service to remote communities, as well as urban communities, and promotion of research and development in Canada. These things were not part of the auctioning process in the United States. It was simply that you give licences to the highest bidder.
That is really of concern to us. We have a tradition in Canada that has evolved telecommunications and radio communications as a strategic resource in such a way that you can accomplish certain goals. This has been at the root of the licensing process in Canada. By going to auctions, we tend to throw that whole approach out the door.
Senator Spivak: I understand what you are saying, and I agree with you. But I am wondering if you could live with that if it would exclude foreign interests, huge companies, coming in here and buying up the spectrum. It seems to me that that is not only a concern now, but it might be a greater concern in the future.
Mr. Poirier: It certainly could be a concern in the future. But there are other concerns, particularly in the areas of research and development, and service to sparsely populated communities.
If I bid $1 billion for a chunk of spectrum, right off the bat that seems to confer certain rights to that spectrum, and you probably will have paid an incredible amount of money. People have said, "No, no, no. People will be reasonable." They are not reasonable. In the United States, we have had 13 defaults already on the initial bids. This causes tremendous problems in raising capital, in raising equity in the market, particularly in under-funded companies.
Again, these are problems that we see happening. Unless you establish certain safeguards which are very clear, to take into account service to sparsely populated communities, investments in research and development, and other factors, you will end up with, again, an auction process which is very similar to what is happening in the United States, which we do not believe is in our interest.
Senator Spivak: Let me ask you about the international market, because it appears that this is where the major growth is. You were talking about alliances with companies. Clearnet is in alliance with an American company, correct? Is that Motorola? Who are they allied with?
Mr. Poirier: They are partnering with Motorola, and other Canadian companies.
Senator Spivak: So are you thinking that this is the way most of the companies are going to get into those markets? What are the economies of scale needed to get into those markets, and what are the barriers? Obviously, it is less expensive for developing countries to get into this kind of technology, rather than doing the wire technology, in terms of the various kinds of communications services -- maybe not all of the services, but some of them. Is that what you are envisioning in terms of the companies internationally?
Mr. Poirier: As we have mentioned, wireless growth in underdeveloped countries is going to be phenomenal in the next few years. Wiring those communities is virtually impossible, the cost structures of stringing up wires and poles, et cetera. And as we said, some three billion people do not have access to telephones today. So wireless is going to replace that. Wireless is going to be the way to bring communications to these countries.
We have an opportunity in this country, having developed a lot of the know-how, to perhaps export some of this know-how and some of the equipment. Partnering is a very important part of that. This is extremely competitive technology; the developments worldwide in wireless are phenomenal.
We think that alliances between Canadian companies and major international companies are important for a whole number of reasons. They allow us to bring to market products a lot easier. They help in research and development.
For instance, Ericsson, a Swedish company, has a tremendous investment in Canada in terms of research and development. It operates a major research organization of 1,000 engineers in Montreal which does research for the entire world. And that is because of the relationship with companies such as Cantel which uses their products.
This is all part of extending our reach, if you will, beyond our borders and into these other countries. There are various firms in Canada, Telesystems International, for instance, which Mr. Koven is quite familiar with, and others, that really see that market developing.
Mr. Koven: In the international market, Canadian talent is demanded. Once the spectrum is allocated in foreign markets, the operation of the entity requires the expertise that has been developed over the last ten years in Canada in deploying our cellular network, in our paging networks, in Internet. So with respect to alliance, the skills that we have in Canada are demanded in foreign countries. That is why in a lot of countries people that are putting in bids for spectrum in foreign countries include us.
Senator Spivak: Is that regulated by ITO, the allocation of spectrum? How is that handled, in terms of the allocation of spectrum in countries across the world? How does that work? Does each country handle its own?
Mr. Koven: There is coordination through a body -- I am not sure which body it is. But the specific rules of each country are put together by its own government.
Senator Spivak: Do you have any suggestions for us in terms of policy measures, other than what is in place, which would help? It seems to me that this is a fantastic opportunity for Canada, if we have a comparative advantage and we are on the leading edge. Are there any suggestions to us as to what we can recommend in terms of policies to further this push?
Mr. Poirier: The main one which we make, and I make it again, is to ensure that the industry in Canada is competitive, both amongst the industry, which is very important, as well as against others players in telecommunications. Our ability to grow in Canada beyond our traditional business mobile sector is dependent upon policies, both regulatory and spectrum policies, which allow the industry to find its true calling as a major player in telecommunications.
We will then export this know-how and this expertise throughout the world. Beyond that, I believe there is a role for government, particularly in international circles in terms of bilateral negotiations, to ensure that we have access to markets in the same way that they have access to our own markets; reciprocity, in other words. That is a very important component of it.
In addition, I think the role of government is to encourage companies to invest in foreign markets -- the Team Canada approach, where government and industry reach out to other countries for investment. We have tremendous opportunity, in companies such as LanSer, for instance, which has invested heavily in the Far East as a result of delegations like that.
[Translation]
The Chair: Does Senator Perrault want to put the last question because, Mr. Poirier, we have two minutes left.
[English]
Senator Perrault: I truly wish that we had more time with your group, but we have a vote at five o'clock in the chamber.
You talk about the number of jobs being created by this incredible industry and its very high rate of development. How many jobs are we losing on the other side, the conventional carrier in communications companies? In net, are we going to have more jobs?
Mr. Poirier: There is certainly an erosion of jobs in the conventional telecommunications sectors, but the net is certainly growing. Canada is a major employer in telecommunications. We are world leaders in many aspects of telecommunications, and wireless is no exception. We do not have the resources out there.
Senator Perrault: Are you receiving any cooperation from the Department of Foreign Affairs and International Trade to ship some of this Canadian technology abroad?
Mr. Poirier: Yes, very much so. They are very receptive.
Senator Perrault: Our team effort is effective then, in other words?
Mr. Poirier: Yes. We have to do more ourselves to sell this to them, though.
Senator Perrault: You mentioned that Ericsson has recently launched a centre for wireless communications at the University of Waterloo. The program, which involved an initial investment of $1 million, is intended to provide some of the needed talent in the wireless industry for years to come.
Are you doing that in other parts of Canada, in Western Canada, for instance, or is it all concentrated in Ontario and Quebec?
Mr. Poirier: There have been various initiatives. Ericsson will hire every graduate engineer from McGill for the next five years, I believe. They have been the most aggressive in making sure that that talent is there. But there are other initiatives, particularly with Humber College, for instance, which has a training program designed specifically to ---
Senator Perrault: I am not being regional here, but is consideration being given to the maritimes, for example, and Western Canada? Are they going to share in this technological training program?
Also, there was a statement on page 4 of your brief, which reads:
The industry will soon be announcing a major university research initiative of $2 million to study wireless health and safety related issues.
Hopefully, some of that will be allocated equally across the country.
The digital infrastructure: More channels are going to be available, I am told, because of these new digital processes, of all sorts. When do you run out of spectrum? At what point is the spectrum unable to handle any more calls?
You have held out the prospect that people will spend most of their time on the telephone in about ten years. On page 8, you say: "seamless roaming reaches over 93 per cent of the population." Then you talk about "200 million wireless local access subscribers worldwide by 2005." Is that going to present problems as far as the spectrum is concerned?
Mr. Poirier: There will have to be other spectrum allocations, but those are already in the works through international negotiations.
Senator Perrault: Are international negotiations going well, because like broadcast licences, I presume, the United States have certain frequencies, we have frequencies?
Mr. Poirier: These are allocated internationally, but they tend to be common for various countries.
Senator Perrault: So there is lots of room left on the spectrum of the various frequencies and bands?
Mr. Poirier: Oh, yes.
Senator Perrault: What does seamless roaming have to do with it? I have a cellular phone and I see "Roam" on it, but how do you describe seamless roaming?
Mr. Poirier: That means that you can move from one part of the country to the other and the phone will switch automatically from one cell to the next.
Senator Perrault: My cellular has that capacity, which I have never tested.
The Chair: What is going to happen to our cellular phones, Mr. Poirier? Are they going to coexist, in generation two?
Mr. Koven: I can talk about that. When cellular telephones came along, it was supposed to be the demise of the paging business. It actually stimulated growth. Now that PCS comes along, will it be the demise of the cellular telephone? -- No. They will coexist.
The Chair: Similar to the arrival of television: everyone said it would be the demise of radio.
Mr. Koven: That is right. Today, 3 per cent of the population of Canada has pagers and 10 per cent has cellular telephones.
The Chair: There is still a place for growth?
Mr. Koven: Yes, for a little while.
[Translation]
The Chair: Thank you so very much, Mr. Poirier. We much appreciate the fact that you prepared a presentation, that you made it and that you brought your colleagues with you. We appreciate this enormously. We are sorry we have to return to our primary obligation. Our research colleagues will likely communicate with you for further information.
Mr. Poirier: It has been a pleasure.
The committee adjourned.