Proceedings of the Subcommittee on
Communications
Standing
Senate Committee on
Transport and Communications
Issue 4 - Evidence - December 11 meeting
OTTAWA, Wednesday, December 11, 1996
The Subcommittee on Communications of the Standing Senate Committee on Transport and Communications met this day at 4:30 p.m. to study Canada's international position in communications.
Senator Marie-P. Poulin (Chair) in the Chair.
[English]
The Chair: Welcome to our committee, Mr. Ignacy. As you know, we are focusing on Canada's international position in communications -- how Canada can remain at the leading edge of communications as we enter the year 2,000. It is a complex and rapidly evolving issue.
Please proceed with your presentation.
Mr. Ted Ignacy, Vice-President, Finance and Treasurer, Telesat Canada: Telesat is pleased to appear before this committee to present its views on certain subjects in the telecommunications industry of interest to the committee. Telesat operates in a sector of the industry which is experiencing rapid change, which necessitates that the company constantly revisit the way it operates and the way it views the future, including the plans which must be put into place to compete effectively.
Telesat is currently Canada's sole provider of domestic Fixed Satellite Services (FSS) and has provided Canadians with state-of-the-art satellite solutions since the launch of its first satellite in 1972. In fact, with the launch of Anik A1, Canada was the first country in the world to put into service a commercial domestic communications satellite. Since that time, Telesat has successfully deployed 11 of its own spacecraft and has built on this base of expertise to market its experience in these same kinds of services to other customers around the world.
At the present time, Telesat operates three satellites -- Anik E1 and E2 which carry the bulk of Telesat's broadcasting and business traffic, as well as Anik C3 which is approaching its end of life and is used to provide limited services. Telesat's customers include national and regional broadcasters and broadcast distribution undertakings, telecom carriers and resellers, as well as individual business customers who use Telesat's business services. Telesat fulfils its mandate by providing these services to all regions of Canada, including the Far North.
Earlier this year, Telesat was involved in structuring a Direct Broadcast Satellite (DBS) plan to provide space segment capacity jointly to Canadian and U.S. customers from a Canadian orbital position. These plans were terminated when the Federal Communications Commission (FCC) in the United States dismissed the uplink licence applications of the two U.S. customers who would have taken service from Telesat.
At present, there is outstanding from Industry Canada a Gazette Notice requesting proposals to provide DBS transmission services to Canadian broadcast distribution undertakings. Telesat intends to be an active participant in this process, and as we will expand on today, sees this activity as a vital growth area for our business.
Our comments today focus on those areas in which Telesat is involved: the provision of satellite-based services and the overall implications of technological and commercial trends on the future of this industry. The structure of these comments follows the general categories suggested by the committee in its "Key Issues and Questions" guidelines.
Technological and Commercial Issues: As I have noted, satellite technology is not new. Telesat has been in this business for 27 years and throughout that period, telecommunications services over satellite have been subject to competition from terrestrial networks and foreign satellites. In many ways, a satellite transponder and a length of fibre optic cable are similar in that both are a "pipe" through which signals are transmitted at one end and received at the other.
While it is possible to use competing systems to transmit data or signals from a technical viewpoint, there are distinct advantages to using satellite in some cases. A terrestrial system may be more suitable in others. Once a signal is transmitted to the satellite, it is possible to receive it in any place which the satellite's beam can reach, by as many subscribers who want it, and all at the same instant. In contrast, terrestrial systems such as fibre optic cable, coaxial cable and microwave need a link of equipment stretching between the origination point and the destination. As a result, the cost of delivery rises with the distance covered and the number of receive locations. Nonetheless, the economics which used to say "satellite equals broadcast" -- that is, point-to-multipoint distribution -- and "terrestrial equals point-to-point" are continually changing so that terrestrial systems are now price competitive in many point-to-multipoint applications. Telesat's bread and butter revenue base, broadcast programming distribution, is under constant threat from terrestrial systems for the distribution of signals to cable headends. It is this grey area of competition which has the largest potential to impact Telesat's business in the domestic market.
Technological advancements continue and bring with them more competition. For example, this past year, three new applicants were licensed by Industry Canada using LMCS, or Local Multipoint Communications Systems, which uses the 28 gigahertz band to distribute digital programming signals directly to the home with wireless technology -- neither terrestrial cable nor satellite.
Nonetheless, satellite does have some natural niches. Most notably is that of delivery of narrowband or broadband signals to the rural and remote areas of Canada. Many of these areas do not have adequate terrestrial facilities to access the range of services which is considered standard in urban areas, and other more remote regions will probably never receive terrestrial service as the market size would not justify extending the terrestrial network to those areas. This makes satellite systems well suited, for example, to the extension of educational services to remote regions of Canada -- or to use the popular term "distance learning".
Another advantage of satellite is the ability to quickly deliver new broadband applications in urban areas directly to the end user, requiring only the installation of a small satellite dish compared to a roll-out of equipment to individual cable or telephone company offices and additional modifications to the distribution system. This presents an opportunity for satellite to make inroads in densely populated areas for delivery of new applications and provides a window of opportunity before other competing technologies can cost-effectively provide broadband delivery to the home.
One example of such a satellite service is Telesat's DirecPC service, which allows users to receive huge volumes of data into their computer almost instantaneously using a small satellite dish. This service is being used to implement the SchoolNet initiative delivering broadband packages to schools for services such as access to the Internet or the delivery of software upgrades. While there are alternative terrestrial solutions available right now, their availability is currently limited to specific areas of the country where the facilities are in place to provide a comparable service.
The SchoolNet initiative also serves as a good example of the ability of new technologies to improve affordability of telecommunications services. The major technological development that has made satellite services affordable and accessible to smaller retail customers is Digital Video Compression (DVC). With digital compression, the amount of information that can be transmitted through a satellite channel has increased tenfold. Consequently, the cost of satellite transmission is greatly reduced and a large number of applications that were previously uneconomic become affordable. For the benefit of all sectors, the Canadian telecom infrastructure must continually be modernized and provide the most up-to-date services possible.
Notwithstanding the developments of digital technology and compression, the capability of the Anik satellites to accommodate the next wave of applications on the information highway is limited. The technology currently does allow for an economical reception of signals from the satellite. However, the cost of an uplink and transmission to the satellite places the use of satellite out of reach for many small end users. Consequently, interactive, real-time use of the satellite for consumers is not possible with the current generation of satellites.
Telesat has grappled with how it might upgrade its satellite fleet to be able to provide the next generation of satellite services. The technology does exist in the form of advanced Ka-band satellites. However, the size of the Canadian market calls into question the viability of an investment in such a technology. If one considers that the cost of an advanced satellite placed into orbit is estimated at $350 to $400 million and that the number of Canadian households with computers would use only a fraction of the capacity of such a satellite, the end cost to the consumer will be considerably higher than necessary, and potentially higher than other alternatives which may become available. This may result in Canadians living in remote regions of the country not being able to take advantage of the latest technologies.
Therefore, the challenge for Telesat has been how to justify the investment of hundreds of millions of dollars for a new satellite which has advanced capabilities, given the limited size of the Canadian market. The solution which Telesat pursued with the DBS project was to attempt to tap into the huge American market as a source of revenue which is used to supplement the limited potential of the Canadian market. If a U.S. customer were to take service on a new satellite facility and use the part of the spacecraft not needed for Canadian use, this would allow a Canadian-owned and Canadian-operated system to be implemented in the immediate future and secure this capability for Canadian customers.
This proposition could not be carried out in isolation from the current policy environment, and ultimately the absence of a policy framework to allow such a plan was the obstacle which led to the dismissal of the U.S. partners' DBS uplink applications by the FCC. If an American customer were to be allowed to transmit domestic U.S. signals using a foreign Canadian satellite, should not Canadian domestic signals have the right to use an American spacecraft? At the present time, the use of Canadian domestic facilities is enshrined in the Telecommunications Act and therefore, until the policies which govern the supply of satellite services between the two countries are liberalized, a plan such as Telesat's cannot be implemented.
The amendment of policy which allows such a plan to proceed will bring with it foreign competition. In the U.S. satellite industry, the trends are towards consolidation and integration. In Canada, there is one satellite service company serving a population of 25 million people; in the United States, there are three domestic satellite operators serving ten times that many people. In Canada, Telesat operates three satellites. In the U.S., the smallest of the three operators, Loral/AT&T(Skynet), operates four satellites; the other two, GE Americom and Hughes/PanAmSat, operate 12 and 14 satellites respectively. These carriers are part of larger organizations involved in the design and construction of satellites and enjoy certain advantages of scale and scope economies which help to give them a pricing and supply advantage over competitors.
Over the recent months, the Loral-Skynet and Hughes-PanAmSat amalgamation in the U.S. demonstrates how this trend of consolidation is continuing. Moreover, these American carriers are aggressively pursuing plans to diversify and expand their satellite fleets into other satellite types, such as DBS and advanced satellites operating in the Ka-band.
I might also add that these U.S. companies are expanding into other markets. They are more and more becoming international players.
The question faced by Telesat is: How does the Company position itself to survive against such competitors? From its inception, Telesat has carried out a mandate which fulfils a public policy objective to provide service to all regions of Canada, including the Far North and other remote areas. Accordingly, Telesat's infrastructure and business operations are geared towards serving only the domestic market. If satellite competition in the domestic market is to include U.S. carriers -- and I am sure that it will in the very near future -- Telesat must change the way it does business and look to other markets to support the growth and size it needs to compete with larger, more integrated competitors. This transition for Telesat will not be an easy one. U.S. satellite companies are already much larger and more diversified than Telesat.
They are also already operating in Canada -- not only legally through the transmission of U.S. programming signals authorized by the CRTC to cable headends and through the transmission of crossborder business traffic, but also through the grey market with the reception of U.S. DBS services in Canada, estimated at some 200,000 subscribers.
For Telesat to be able to compete, it must get into orbit with satellites that have coverage of the entire North American market. Telesat must also diversify its satellite fleet to augment its existing C- and Ku-band Anik satellites with more specialized DBS satellites and advanced Ka-band satellites. It must establish partnerships and alliances with service-providers that have reach into the U.S. marketplace.
This transition will require a significant investment of capital and considerable risk. Telesat believes, however, that it is possible to make the transition with the government's assistance. The Government of Canada can help Telesat by providing a policy environment which will allow Telesat to maintain its current revenue base while at the same time providing it with an opportunity to build upon new opportunities in the Canadian marketplace as it prepares to expand into new markets.
Telesat also needs certainty and advance notice that the policy is going to change. In other words, we need to know ahead of time that access to other markets will be allowed. Without such notice, it is not possible to justify the additional investment required to build more expensive North American facilities -- versus Canada-only facilities.
We looked at the cost of satellites on numerous occasions to cover only the Canadian market and in this regard, we could probably put a satellite in orbit for around $200 million Canadian. To put a satellite in orbit that will have full North American coverage will be closer to $300 million. For us, it would be $100 million gamble that the rules are going to change and that is not an investment we can justify to our shareholders.
In addition, we believe that it would be appropriate for Canada to have an opportunity to level the playing field with the U.S. As we have noted, U.S. operators are already doing business in Canada through the provision of satellite-to-cable services and crossborder business services. Telesat believes that it should be able to establish a greater presence in the U.S. market before U.S. operators are allowed to increase their share of the Canadian market.
It is critical that as Canadians we "get it right". Telesat believes that a period of transition to a more competitive environment is required to give the incumbent Canadian operator an opportunity to prepare for competition. With advance notice that competition is coming and a few years to invest in infrastructure, Telesat can position itself to compete on a North American basis.
Entertainment services are a powerful way to pull the market toward a network. Canada has scarce DBS orbital slots which are in demand by U.S. service suppliers who see a tremendous opportunity to provide lucrative entertainment services to the U.S. market. Why is this so important for Canada's future in the delivery of telecommunications services? Future satellite services will bring high power/high frequency services containing data services, games, shopping and banking services, and Internet right to the home using the advanced Ka-band. To the extent that those satellites could be colocated with DBS satellites in Canadian orbital positions, with millions of both Canadian and U.S. dishes pointing at that orbital slot, it solidifies an ongoing role for the Canadian satellite industry in the delivery of emerging and leading-edge services with the greatest growth potential.
I will now address the human capital issues. As mentioned previously, Canada was the first country to launch a commercial domestic telecommunications satellite into service in 1972. At that time, Canada was obviously on the forefront of the technology, and the leading-edge jobs were equally to be found in Canada as they were anywhere else in the world.
Telesat continues to maintain and develop the world-class level of expertise which is required to procure and operate satellites. These jobs are highly specialized: many experts are scientists, mathematicians and engineers, involved in the design and specification process needed as part of a procurement program; others are involved in the complex and critical launch process -- launch, orbit from low to high orbit, and final placement in the orbital slot for deployment; and others are operations specialists who write software to control satellites over their lifespans, which includes the development of complicated manoeuvres to compensate for aging components and to otherwise extend the lives of satellites where possible.
Countries around the world seek this expertise, and for Telesat it is an important source of revenue. These experts have earned their credentials through "hands-on" experience and their ongoing involvement as decision-makers in the development of Telesat's satellite fleet. The ability for these jobs to remain in Canada is dependent on the continued existence and continual advancement of a Canadian satellite industry.
It is critical to the long-term existence of these types of jobs that Canada evolve its policies to ensure that the Canadian satellite industry can be a survivor in a fully competitive world.
Cultural Issues: Telesat's comments on cultural issues are brief, primarily because the Company has no direct involvement in influencing the content of what is carried over its satellites. However, the provisioning of facilities is an activity which has some implications with respect to the growth of our cultural industries.
I would like to be clear. It must be emphasized that when we talk about competition and when we talk about opening of the market, we are talking about the provisioning of satellite facilities only. We are making no comment with respect to the types of services that go over those satellites.
The development of a Canadian-owned satellite system which has a North American footprint is no guarantee that Canadian programmers will have access to new markets in the United States. However, it does open the door, at a minimum, for developing niche markets outside of Canada which could bring new sources of revenues and exposure for Canadian products.
Just as Telesat needs to build upon the base it has in Canada to prepare for competition from foreigners, we believe that our customers' focus will be the same. They will continue to position and enhance their domestic services while at the same time look beyond the Canadian border to exploit new opportunities. A Canadian-owned satellite infrastructure with a North American reach will accommodate these needs by providing access to an additional customer base at no incremental cost. This larger market provides the opportunity to spread product development and production costs over a greater number of customers, resulting in lower prices and increased competitiveness for Canadian business.
Therefore, there is a direct connection between the implementation of policy strategies which provide access to new markets as a key to the sustainability of a domestic satellite industry and measures which ensure the long-term survival of our cultural industries. Telesat believes that market forces will determine to a growing extent what people will watch, and that regulation will only go so far as technology continues to develop and makes policing virtually impossible. The best strategy is to have world-class Canadian offerings and to put in place policies which allow Canadian facilities providers the opportunity to carry these offerings to other markets.
In summary, Telesat would like to leave the committee with two critical points which the Company believes summarize the role that a domestically controlled satellite operator plays in promoting Canada's prosperity: First, the long-term sustainability of leading-edge employment in the satellite industry depends upon the viability of a Canadian-owned and Canadian-controlled satellite system; and secondly, the growth, development, and long-term sustainability of Canada's cultural industries are greatly benefited by the existence of distribution options which a state-of-the-art satellite infrastructure can provide.
In order to ensure the long-term survival of the Canadian satellite industry, Telesat believes that the government must implement changes to Canadian satellite policy which provide for the phased-in liberalization of satellite markets in Canada and the United States, with the transition phase structured to allow Telesat to prepare for open competition. If properly implemented, this policy will ensure the long-term sustainability of a Canadian-owned and Canadian-controlled satellite system able to serve the needs of Canadians.
This concludes Telesat's comments. We thank the committee for this opportunity to present our views.
The Chair: Mr. Ignacy, thank you very much. We appreciate the fact that you have addressed our four main concerns.
It is a bit striking that you kept away from one of the media's favourite topics, and that is DTH. Do you think that Canada will ever have a DTH satellite television industry?
Mr. Ignacy: Madam Chair, I have not quite stayed away from the topic. We did mention that Industry Canada has outstanding now a Gazette notice calling for proposals on the provisioning of facilities which will allow DTH to develop in Canada. Telesat fully intends to participate in that process. I would note that it is a competitive process and that in this regard, I am not at liberty to divulge what our strategy is at this point.
The Chair: Can you speak to us about what your role would be or would you rather keep that for the process?
Mr. Ignacy: One of the things we would like to underline here is that we believe that we need critical mass to compete in a North American marketplace. Critical mass means a couple of things: It means that we have got to expand our satellite fleet beyond the two major operating satellites that we have now; and in addition to that, we must diversify our satellite fleet. We cannot rely on C- and Ku-band services. We have to be in the DBS game.
Currently, greater than 60 per cent of the utilization of our satellites is the distribution of broadcasting traffic. Clearly, we have to be in the broadcasting business, and if we are not in the broadcasting business, I am not entirely sure there is a business there for satellite at all.
We are participating in the Gazette process. We believe that we should be the winner of that process. If Canada wants a satellite company to survive and if they want to open the boarders to competition from the U. S., then we should get the DBS, and from there we can build a platform.
There has been a change in technology over the last few years, and the satellite is becoming more consumer friendly. For many years of our existence, we sold our services to large clients, large networks -- CBC, CTV, and so on. It is only the technology of late that allows us to actually bring satellite technology into the home, and building a critical mass of customers looking up at a Canadian orbital slot is going to be the critical factor weighing in your future.
We want to accomplice that with DBS. The push coming from the marketplace right now is for the multitude of services that people want to receive on their television sets. They can do that over a satellite. There is a good demand for it in the United States, and we believe there is a good demand for it in Canada.
If we can get those customers pointing up at a Canadian orbital slot, then the advance satellite and the services that it can bring become possible because you have got a customer base there to build from.
Senator Spivak: Your presentation is fascinating. I believe that what you are saying is that what you have right now used to be the leading edge technology; that what you have right now is an orbital slot which is valuable, but you do not have the leading edge technology because of the lack of a customer base. You cannot invest that kind of money. I take it that that is what you are saying.
Could you revisit, first of all, the reasons behind the FCC decision. I wonder if you would revisit the reasons that the FCC would not accept that application?
Mr. Ignacy: Let me just correct one thing. Telesat does not have any orbital slots. The orbital slots belong to the Government of Canada. Telesat has earned the right to use some of those orbital slots.
Senator Spivak: They have not been auctioned off?
Mr. Ignacy: No, they have not been auctioned off. I hope they never are.
Senator Spivak: I hope not also, but you have the use of them?
Mr. Ignacy: We have the use of them. We do not have the use of the DBS orbital slots. That is what the Gazette notice is all about right now. We are using other orbital locations that Canada has for C- and Ku-band services. I would not say that the C- and Ku-band satellites that we have right now are not leading edge. They are leading edge, and they were state of the art when those satellites were launched. They continue to provide a very effective service in Canada.
There have been, since we launched those satellites, more specialized satellites launched. We have not yet launched those types of satellites, those being direct broadcast satellites and the advanced Ka-band satellites. I think only one Ka-band satellite is currently in orbit.
Senator Spivak: When you do that, that is true convergence. Is that the reason you will be able to supply all those services?
Mr. Ignacy: Satellite has always been a converged technology. From day one, we have been carrying telephony, data services, broadcasting services, granted all in an analog format and on different satellite channels. What digital video compression has allowed us to do is to jumble it all up and put it up on one channel.
Senator Spivak: It is merely going to allow you to expand your footprint, correct? I am trying to get clear in my mind what the advantages of this Ka-band are.
Mr. Ignacy: What the new satellites have that we do not have in our satellites presently is much more power. There is an inverse relationship between the power on the satellite and the size of the dish required on the ground to receive the signal. The more power you put on the satellite, the smaller the dish you can have on the ground. Consumers like the small dishes. They are being mass manufactured in the States right now, so that you can buy them for $200 to $300 U. S. That is very consumer-friendly.
Up until this latest generation of high-powered satellites, the dishes that we were selling were at least a meter in diameter, and they had very limited service potential. Prior to that, satellite dishes were several meters wide -- the dishes that you would see in backyards. You still see them. Those are the loyal Canadians who are still picking signals off of our Anik satellites.
The Chair: They painted Canadian flags all over them.
Mr. Ignacy: I will get back to your question, senator, which is why the U.S. FCC denied the uplink applications of the two customers. Right now, the policies between Canada and the United States are such that there is a preference for the use of domestic facilities.
Senator Spivak: In both countries?
Mr. Ignacy: In both countries. The U.S. government has been somewhat more liberal in allowing foreign services. They have struck a deal with Mexico on direct broadcast satellite where they are going to be able to access each other's marketplace. They also have issued a notice for public comment and are investigating the idea of allowing foreign satellites to operate in the United States.
We thought that the policy environment was right for the Government of Canada to make a change, and indeed there was support from Industry Canada for our initiative. The Americans, unfortunately, wanted to bundle facilities with content, which where the talks between the two countries broke down. The FCC was not going to approve these uplink applications for our two partners unless the U.S. administration was able to strike a deal with Canada.
Senator Spivak: That is what the NAFTA was all about. This was a way of getting around the NAFTA provisions.
Mr. Ignacy: That's right. NAFTA protected the cultural industries.
Senator Spivak: Absolutely, and I can understand that. You opposed the deal that Power DirecTv wanted, the cross-border U.S./Canada plan, but now you are seeking to launch a similar plan. What is the difference? What is the reversal all about?
Mr. Ignacy: Let me go back. When we built the Anik A satellites, they had a tremendous amount of capacity on them. Going into 1995 -- I should go back a little bit. Telesat has been supportive of DTH going right back to the mid-1980s. The reason behind that was that we wanted to fill up our satellites with broadcasting signals. We believed that this was a good application for satellite technology.
We were very much involved with the creation of the company that actually evolved to become Expressvu. We were in the initial stages of that business plan. We applied to the CRTC for an exemption from the Broadcasting Act, the licensing requirements from the Broadcasting Act, and Expressvu was committed to using Canadian satellites for the DTH service.
Even at that time, we were under the threat of digital video compression. As I mentioned, broadcasting is about 60 per cent of the utilization on our satellites. Digital video compression meant that many of our broadcasting customers were compressing their signals. We actually saw utilization on the satellites shrinking. In fact, we still see that happening today. We believe that by the year 2000, we will be able to carry all of the traffic in Canada on one satellite. The second satellite will be virtually surplus to our needs other than DTH.
Hence, we were supportive of Expressvu's applications, along with any other DTH application that was going to make use of Canadian facilities. Our disagreement with Power DirecTv was that they wanted to use American signals on American facilities, which flew in the face of all existing Canadian regulations at the time.
At the end of the day, it was packaged and streamlined to meet as many Canadian requirements as it could. But in spirit, we were opposed to the use of American facilities and American signals coming into Canada. The difference between what Power Direct tried to do and what we are proposing is that we are not proposing to change any of the content or the cultural policies in Canada. What we are looking at is the facilities provisioning only. We would like that market to be opened up so that we can access the U. S. market, that we can gain more customers, and grow our satellite fleet.
We believe that competition in satellite facilities is inevitable. In fact, it is here now. What the policy says and what the legislation says does not really hold a lot of water when you have 200,000 grey market subscribers in Canada. In fact, my boss, the president of Telesat, was in the Arctic Circle and was surprised to find that the DirecTv signal can be received that far north. How do you police that type of thing?
The C- and Ku-band services -- most of the population in Canada is just over the 49th parallel, just a spill over coverage from American satellites -- picks up better than 80 per cent of the population of Canada.
Senator Spivak: If Power Direct would have allowed Canadian content to be beamed through American satellites over there, they claim it would have increased the market.
What then is it you are specifically asking for in terms of a policy to enable you to go ahead with your plans? What are you asking for from the Canadian government or what would be useful to you?
Mr. Ignacy: With respect to direct broadcast satellites, that facilities provisioning should be opened up between the two countries as soon as possible. That would be the first step.
Senator Spivak: How are you going to get around the fact that the Americans want to bundle that? It is not all in Canadian hands.
Mr. Ignacy: I appreciate that, but we see that as a first step. It is not my responsibility to negotiate that deal with the United States. I can make a recommendation. How it gets implemented will be up to the government.
The second phase of that with respect to fixed satellite services, the C- and Ku-band services that we are providing on the Anik satellites right now, we would like advanced notice that competition is coming. It takes two to three years to build and launch a satellite. We do not have satellites right now that cover the United States. We are clearly not in a position to compete with the U.S. carriers.
Senator Spivak: You want the monopoly to be extended a bit more.
Mr. Ignacy: No, we are not asking for the monopoly. The monopoly right now on paper goes until 2002. We are saying that we want to know two to three years in advance that policy is going to change. We don't want it sprung on us overnight, because we are going to be lost.
Senator Rompkey: I want to explore the policy issue a bit further. You want Canadian policy to change; you want the policy to be liberalized so that you can invest and therefore extend your footprint, so to speak.
Mr. Ignacy: Correct.
Senator Rompkey: What happens if the Canadian government changes policy without a deal? I would like to see this issue explored. The reason I want to see it explored is because I think this holds the most promise for Northern Canada and areas of the fra North. The other technologies that we have heard from have not given any commitment that they can provide services in small remote parts of Northern Canada. However, Telesat, I think, can guarantee that.
So the first issue that I would like to see explored is that whole issue of how policy has to be changed and what are the implications of simply changing the policy without a reciprocal deal with the U.S.?
Mr. Ignacy: We are not asking that the Canadian government change policy unilaterally. That is clearly not in our interest. We need assured access to the United States. It has to be a bilateral deal with the United States. We need to know that there is open access. We do not want the U.S. administration on the one hand to strike a deal with the Canadian government and then leave all kinds of discretionary authority with the FCC so that we get blocked at the FCC level.
If we are going to allow American companies to provide satellite facilities in Canada, then we need to know that we have access to the U.S. market. So we would not be recommending a unilateral change in policy.
Senator Rompkey: What are you recommending then?
Mr. Ignacy: We are recommending that a change in policy be negotiated on a bilateral basis with the United States.
Senator Rompkey: That has been attempted and failed; is that not right?
Mr. Ignacy: I do not know how far it was attempted. There are discussions taking place right now on a multilateral basis. There are a number of items that are of interest to the United States.
Senator Rompkey: Is this the WTO talks?
Mr. Ignacy: Yes. There are a number of items that are of interest to the United States in those discussions. I cannot speak for the Government of Canada with respect to how the negotiation process is proceeding, but there may be an opportunity to reach a deal with the United States.
Senator Rompkey: What would you like to see accomplished at the WTO talks?
Mr. Ignacy: Primarily, what we are looking for, as I mentioned, is a change in the provisioning of DBS facilities, such that open access to both markets is available as soon as possible. Then, with respect to fixed satellite services, we are looking for an agreement that open trade and provisioning of satellite facilities will occur at some future certain date.
Senator Rompkey: Would you be able to provide a wide range of services? The problem in the north, as I understand it, is that while you can get television from satellite, there are a lot of other services that you cannot get, or at least you cannot get them without a lot of infrastructure on the ground --
Mr. Ignacy: That is correct.
Senator Rompkey: Infrastructure that is not there now and perhaps would not be worth investing in because of the small market. What will you be able to provide? Will you be able to provide access to the Internet, for example?
Mr. Ignacy: We do that now. We do that on the Anik satellites right now through direct PC. That service already exists. There are a multitude of services that are possible on the Anik, but they are more reception-oriented services than they are interactive or transmission services. We see the next waive of services on the Information Highway as being of the interactive multimedia type, where you can send broadcast-type pictures from your home to someone else's home over the satellite. That is possible with an advanced high power Ka-band satellite. We are exploring that.
As I mentioned to the chair, what we are hoping to accomplish is to build a customer base with DBS. The demand right now from consumers is for entertainment services. We would like to build upon that demand. With that infrastructure in place, we can add the more advanced services.
Senator Johnson: Do you favour a 5-per-cent cultural levy on all facilities including Telesat?
Mr. Ignacy: Off the top of my head, I would not want to pay a cultural levy. We already pay licensing fees to the government for the use of the orbital slots, and those are not cheap. There are a number of costs involved with operating a satellite system. I could not be supportive of an additional cost.
Senator Johnson: As you know, the CRTC regulates this industry as well, and there is a levy on the organizations in this industry. There are new regulations coming in, but I understand you to say you pay on other things. So what do you think of the whole cultural side of it? Is it exactly as you expressed it today? It is all business?
Mr. Ignacy: No, I would like to come back to the idea of the levy for a moment, if I could. If there were a levy put on a provisioning of satellite facilities, we would have to pass that cost on to our customers. So, ultimately, that will end up in the consumer's hands. You are ultimately putting a tax on the consumer for the purchase of Canadian product. I would ask you to carefully examine that, if that was an objective.
With respect to culture, we are very interested in Canadian cultural because it has been our bread and butter from day one. We do not exercise any influence. We do not tell the CBC or CTV how to do their business. Nonetheless, we work very closely with these entities. We try to bring the latest technology to them. We work with them to maximize the efficiency of the satellite so that their costs can be lower and that they can do their job better. We do have an interest from that point of view.
The importance of Canadian satellite to the cultural industry is that to the extent that we can provide an infrastructure that will allow them to export their product and find other markets at not a very great incremental cost, that has got to be of benefit to them.
Senator Johnson: With respect to the global satellite alliances that are in place, can Telesat play any role in this situation?
Mr. Ignacy: Not directly. You are talking about the global satellite systems. There are two of them.
Senator Johnson: I am new to all of this. Maybe you can tell me a bit on the global side.
Mr. Ignacy: The latest services that are coming up -- and I think the first one that is going to be up -- is Iridium, which is a Motorola project. Their idea is to launch 66 small satellites in what is called a low earth orbit. Our satellites are geo-stationary. They are approximately -- I have got to get the numbers right here -- about 23,000 miles up in space. The low earth orbit satellites are around an 800-mile orbit, I believe. They would put a constellation of 66 satellites around the earth. Because the satellites are closer to the earth, the signal does not have to go as far up in space and down. Hence, there is less satellite delay for telephony purposes.
The other idea behind their services is that no matter where you go with a cellular-type phone, you will have one number and you will be able to be reached anywhere in the world. They are very close to launching that. They were supposed to be launching the first waive of satellites this year. That program has been somewhat delayed, but I understand it is back on track for some time early in 1997.
That is one of the global systems. We do not have a direct involvement in that system; however, we have done very well in terms of consulting to them. We have built a tracking station in Yellowknife and Iqaluit where we will be tracking their satellites for them. We will be getting some telecommunications business and all the telemetry and the data we are getting from the satellites will go over our satellite to their headquarters in the United States.
We are also building a tracking station for them in Hawaii, and we are getting other consulting business out of it. It has been good for us, but we are not directly involved in terms of an ownership position or anything of that nature.
Senator Johnson: Any limit to the number of satellites in the universe? Will there ever be any limit?
Mr. Ignacy: On the geo-stationary, our satellites have to be spaced out or they begin to interfere with each other because the signals come down to the ground. They start mixing. The satellites must be spaced out. All the geo-stationary satellites are on the equatorial plane 23,000 miles out. The satellites must adhere to certain spacing limitations in order not to interfere with each other. So, yes, there is a limit with geo-stationary satellites.
The problem is going to be radio frequency and interference issues. The more satellites you put up there, the more likely they are to interfere with each other.
Senator Johnson: How much can you have up there before you get interference?
Mr. Ignacy: It is all coordinated by the ITU, the International Telecommunications Unit, a subcommittee of the United Nations. All of the world states are members of it. They coordinate their frequency use through that body, and there are procedures for how you go about getting frequency. The Iridium system has been coordinated; Gates has been coordinated. So there is at least room for those systems. I think Odessy is in the cue, along with others.
Senator Spivak: Is Gates going ahead with this system of circling the globe?
Mr. Ignacy: If you listen to him, it certainly is. He certainly has the money to do it. We would like to get some consulting work out of that one.
Senator Watt: I would like some clarification on the CBC. IBC, the Inuit Broadcasting Corporation, works through CBC, through Anik A2, I believe. I believe they have an arrangement with the CBC. They have a certain time allotment. You mentioned that there is not much usage of all of the facilities already available. Why is there only a certain time allotment being allowed to be fed through the satellite?
Mr. Ignacy: I am sorry, senator, I am not familiar with that specific situation.
The Chair: That is the total responsibility of CBC.
Mr. Ignacy: CBC has a number of satellite channels that they use for collecting news and that type of thing. In other words, they are not using the satellite channel to be on the air 24 hours a day. During certain peak periods in the day, they will have heavy news feeds and that type of thing which they are trying to collect in Toronto for rebroadcast later on. That channel may be freed up later on in the day, or during certain parts of the day, they may have no use for that channel.
What they have done is sublease that channel to someone else that can make use of it during that part of the day. That is actually a situation that we would encourage because it makes efficient use of the satellite channels.
Senator Watt: You also mentioned the fact that you would like to be able to compete with the United States? Are you also looking at the Canadian government spending some money on feasibility studies, for example? Are you looking at that possibility, aside from the subsidies and capital requirements? Is that also a factor?
Mr. Ignacy: I would point out to you that we do not get any subsidies from the Canadian government. We are not asking them for any money. We are only asking for a policy environment that will allow us to grow and expand. That is all we are asking for.
Senator Rompkey: I would like to have on opportunity to question the appropriate Canadian officials about the development of Canadian policy. It seems to me that in the near future, we should identify the appropriate officials within Industry Canada and invite them to come here and let us go into Canadian policy and see what is on the table and what it means.
Senator Spivak: The trade policy.
Senator Rompkey: Maybe you could help us to identify who we need to talk to, who else should we be talking to, if we want to explore the issue that you have raised a bit further, on the policy-making side?
Mr. Ignacy: We have been working with officials of Industry Canada, and I would like to put on the record that Industry Canada has been very supportive -- they have not been terribly successful with the United States, but they have been very supportive. We are looking to build upon that support and move forward. I would be happy to identify the officials.
The Chair: As you know, we had a briefing session with the officials. At the end of all of the testimony, they will be coming back with the minister. Therefore, based on the recommendations that we have received from the witnesses, we will have an opportunity to have a discussion with the minister and the same officials.
Senator Rompkey: If we do not have a separate session with the officials before they come to the concluding session, I think we should let them know what questions we have in our minds; they should come prepared to discuss some of these questions. I am wondering if we can explore the issue in enough depth, if we simply raise it in the concluding session.
The Chair: There could be a preliminary session between our research team and the officials at Industry Canada.
Senator Rompkey: Yes. I want to explore this a bit further. I am not even sure what questions I want to ask, but I want to get into it a bit further. I think the reason for that is that this holds perhaps more promise for, as I say, remote areas of Canada than other forms of technology that I have heard from so far.
Senator Watt: If there is a need; it costs money.
Senator Rompkey: They can make the money if they can get into the U. S. market.
Senator Spivak: Do you consider that your competition is other satellites, or is your competition other wireless carriers, as well?
Mr. Ignacy: I think the greatest competition we have is going to be other satellites. However, there is no doubt that terrestrial has been -- we have competed for our business services basically with the telephone companies. Wireless is going to be a significant competitor.
Senator Spivak: There will be some winners and some losers. Actually, you will be at an advantage because you can compete over the whole continent; the wireless services cannot.
Mr. Ignacy: That is right.
Senator Watt: What about the power of the signal, the ability to signal out stronger than the other satellite? You mentioned that in your presentation. Are your present satellites strong enough?
Mr. Ignacy: There is enough power.
Senator Watt: Can they be improved?
Mr. Ignacy: No, you cannot change the power characteristics of those satellites. As I mentioned, they are 23,000 miles up. There is no way of reaching them. But there is enough power on the satellites right now for DTH, direct-to-home services. Eighteen to 24 inches would have been the size of the dish on the ground needed to receive signals off the Anik satellites. Expressvu was planning to go up on Anik, but we had a mishap on Anik A1 in March of this year where we loss over 60 per cent of the capacity on the satellite.
We were able to accommodate all of the business users and all of the broadcasters, even with the loss of that. What we could not accommodate was the large blocks of capacity that the DTH players needed to provide their service. In that regard, Expressvu was pre-empted off the satellite. I think at the time they had seven or eight channels on Anik, and we pre-empted them to keep other customers on the air. We have been grappling with that problem ever since.
The Chair: Once again, thank you, Mr. Ignacy. Our research team might communicate with you with further questions. If you have any further recommendations, please do not hesitant to contact us. We would be more than receptive.
Mr. Ignacy: It would be our pleasure. Thank you very much.
The committee adjourned.