Proceedings of the Standing Senate Committee on
Transport and
Communications
Issue 10 - Evidence
OTTAWA, Monday, February 17, 1997
The Standing Senate Committee on Transport and Communications, to which was referred Bill C-57, to amend the Bell Canada Act, met this day at 5:11 p.m. to give consideration to the bill.
Senator Lise Bacon (Chair) in the Chair.
[English]
The Chair: We have before us Bill C-57, an act to amend the Bell Canada Act. Our first witnesses are from the Department of Industry. They are Mr. Leonard St-Aubin and Ms Millie Nickason.
[Translation]
You have 15 or 20 minutes to make your presentation. Senators will then put their questions. You may proceed.
Mr. Leonard St-Aubin, Director, Business and Regulatory Analysis, Telecommunications Policy, Department of Industry: I really do not have a formal presentation to make. This bill is quite brief. Its purpose is to repeal section 7 of the Bell Canada Act.
[English]
The bill is brief. It amends the Bell Canada Act to delete section 7 which prevents Bell Canada, or any company controlled by it, from holding a broadcasting licence or operating a broadcasting undertaking.
The passage of this legislation follows upon the government's convergence policy which is intended to allow telephone and cable companies to compete with each other in their core markets. Bell Canada is the only telephone company prevented by statute from holding a broadcasting licence. Therefore, the government undertook, as a follow-up to its convergence policy, to delete section 7 of the legislation.
Senator St. Germain: This applies to B.C. Tel and others as well, does it not?
Mr. St-Aubin: This amendment does not affect B.C. Tel, or any of the other telephone companies. B.C. Tel and Quebec Tel are different. They are prevented from holding a broadcasting licence because they are foreign-owned companies. Close to 51 per cent of those two companies is owned by GTE, which is an American company.
The ownership structure of the two companies was grandfathered under the Telecommunications Act. In recognition of that, the government agreed to exempt those two companies from the ownership requirements for broadcasting licensees to allow them to hold licences as broadcasting distribution undertakings, that is, a cable company essentially, through an affiliate, and subject to certain conditions.
That is not affected by this bill. However, it is the subject of a separate action in which the Department of Canadian Heritage is amending the Order in Council under the Broadcasting Act which establishes ownership of those two companies.
Senator St. Germain: Does it keep the playing field level for everyone?
Mr. St-Aubin: It does. This is one of three steps to keep the playing field level for everyone.
Senator Forrestall: Has the rule changed? If it has not as yet, when do you anticipate that it will be changed?
Mr. St-Aubin: With regard to B.C. Tel and Quebec Tel, as a result of discussions with our colleagues at Canadian Heritage, my understanding is that they have been working closely with legal counsel and with the companies to finalize the wording of amendments to that Order in Council. They should be coming forward soon.
Senator Forrestall: What do you mean by "soon"?
Mr. St-Aubin: I cannot give you a fixed date, senator. However, I know that the work is very close to being finalized.
Ms Millie Nickason, Counsel, Industry Canada Legal Services, Department of Justice: The intentions are to bring it forward within weeks. However, much of the timing depends upon how quickly the drafting can go and whether or not we can reach an agreement on specific elements of the drafting. They have been working fairly intensively over a period of time on it, and the intention is to bring it forward as soon as possible.
Senator Forrestall: Will allowing Bell Canada and the Stentor group to become involved in cable television affect the fledging DTH satellites?
Mr. St-Aubin: Both the convergence policy and the DTH policy put out by the government support competition in broadcasting distribution. It will be up to the marketplace to decide the success of individual participants. Whether it is cable or satellite distribution, these companies have advantages and disadvantages. It will be up to consumers to decide which option they want to go with.
Senator Forrestall: Will Bell Canada's cable endeavours be subject to regulation by the CRTC? Do you know if that tribunal plans to regulate actively Bell's cable plans?
Mr. St-Aubin: The answer to both questions is "yes". Bell Canada, or any other company which wishes to become involved in broadcasting, would be subject to regulation under the Broadcasting Act for those broadcasting activities.
Senator St. Germain: In regard to the question posed by Senator Forrestall about B.C. Tel and Quebec Tel, you said that you are in the drafting process, providing that an agreement can be reached. Is there anything which would indicate that there is a problem or that their approvals would be delayed as a result of negotiations? Is there anything in the negotiations that could be problematic and which would create an uneven playing field where Bell would be in one position and B.C. Tel in another?
Mr. St-Aubin: Ms Nickason is closer to the talks at the moment. I do not see anything like that, senator. The major distinction here is that it is easy enough in this case to draft a clause to repeal section 7. In regard to the other two cases, and recognizing that B.C. Tel and Quebec Tel are foreign-owned companies, part of the policy requirement of the convergence policy was that amendments to the ownership requirements must provide for the establishment of a subsidiary, subject to certain rules. The drafting in that case is a little more complicated which, essentially, is why it is taking a bit more time.
Ms Nickason: It is the technical aspects and not the substantive aspects which are taking the time.
Senator Forrestall: What are the privacy issues which affect a decision to repeal section 7 of the Bell Canada Act? Can Bell Canada use any of this information to exploit its business opportunities, if you will?
Ms Nickason: I am not sure that I understand your question, senator. Are you asking if there are privacy concerns?
Senator Forrestall: Yes.
Ms Nickason: No privacy concerns have occurred to us during the course of the work that we have been doing on this subject. Are you referring to the billing information that Bell has concerning individuals?
Senator Forrestall: Is section 7 of the Bell Canada Act not about to be repealed?
Ms Nickason: Yes. We are here to discuss the repeal of section 7 of the Bell Canada Act.
Senator Forrestall: Are there any privacy matters which are of concern?
Ms Nickason: I am not aware of any privacy matters associated with the repeal of section 7.
Mr. St-Aubin: If there were privacy concerns, they would be dealt with under generally applicable legislation. As well, there are certain regulations which apply under the Telecommunications Act with regard to telecommunications carriers. There may be generally applicable regulations that apply to broadcasting undertakings. However, repealing section 7 does not entrain any particular privacy concerns.
Senator Forrestall: For what purpose was the decision made to repeal this section?
Mr. St-Aubin: Section 7 currently prevents Bell Canada from holding a broadcasting licence. Under section 7 of the Bell Canada Act, neither Bell nor any person controlled by Bell, can hold a broadcasting licence.
Senator Forrestall: That makes sense. What does Bell Canada intend to do when it has this authority? Do you anticipate that it will move quickly?
Mr. St-Aubin: Currently, Bell Canada, along with Telus, an Alberta company, have before the CRTC proposals to conduct trials for broadband networks which would, among other things, distribute broadcasting. My understanding is that the company is very much interested in moving into this area.
Senator Forrestall: Are there any objections that have come to the attention of the department in this regard?
Mr. St-Aubin: The government's convergence policy was subject to broad public consultation through the CRTC's public process and otherwise.
Senator Forrestall: Are they fully anticipating this?
Mr. St-Aubin: Yes. There was broad acceptance of the policy when it was released.
Senator Forrestall: Do you have any idea of what Canadian content we might insist upon should Bell receive cablevision licences?
Mr. St-Aubin: One of the underpinnings of the convergence policy is that people offering similar services will be subject to the same rules. To the degree that Bell becomes involved as a broadcasting distribution undertaking, they would have to follow the same rules as any other cable company with respect to Canadian content.
It is possible, however, that competition in Canadian broadcasting distribution could well help to stimulate Canadian content and provide alternative channels for distribution of Canadian content that is not in place at the moment.
Senator Forrestall: While both the Telecommunications Act and the Broadcasting Act are of relatively recent vintage, does the government have any plans either to amalgamate these two acts or to replace them with a new, more comprehensive communications act?
Mr. St-Aubin: I am not aware of any such plans at the moment.
Senator Milne: I see that Bell Canada and Telus have applied to the CRTC for permission to wire up areas in four different cities across the country. The CRTC is expected to decide on the issue within three months. This bill is enabling legislation, is it not?
Mr. St-Aubin: It is enabling legislation, senator, to allow Bell to hold a broadcasting licence, just as any other telephone company can, with a few exceptions, such as B.C. Tel, Quebec Tel and SaskTel. There are a few telephone companies which, because of legislation, regulation or Order in Council, are prevented from holding broadcasting licences. However, by and large, all other telephone companies would be allowed to do so.Therefore, it is very much a part of levelling the playing field.
Senator Milne: If this bill passes, is there any doubt as to which way the CRTC will rule?
Mr. St-Aubin: In effect, the CRTC had before it two applications. One is from Bell Canada, as Bell Canada; the other is from a subsidiary of BCE, Bell Canada's mother company. The commission would have that option. However, I understand that it is not Bell's preferred route to have to do this as a subsidiary of BCE. From their perspective, it is less efficient. Their clear preference is to go with Bell Canada holding the licence.
[Translation]
Senator Poulin: Mr. St-Aubin, as an Industry Department official, can you tell us what impact this enabling legislation will have on users?
Mr. St-Aubin: Consumers will ultimately have even more broadcasting choices. At present, their choice is limited to cable companies. This market is attracting other competitors. For example, I am thinking about the new LMCS or Local Multipoint Communications Systems technology for which Industry Canada has recently issued a licence for the operation of broadband networks. The plan is to compete with cable companies and telephone companies interested in this field.
Generally speaking, with competition, consumers have a wider range of choices available to them and prices fall. As a rule, competition gives consumers an edge. Even if prices do not fall, the number of available choices always increase.
Senator Poulin: When you say that consumers have more choice, what you are saying as well is that there is a broader choice available in terms of content because of the authorization given to Bell Canada to produce content, instead of limiting itself to the distribution side. Is that correct?
Mr. St-Aubin: That remains a possibility. I do not know what Bell Canada's plans are. Do they want to get involved in production and in television or radio channels? Distribution is always subject to CRTC regulations. The CRTC is currently in the process of deciding the future of distribution regulations. Among other things, it is considering giving licence holders greater choice as to what they can do, at their discretion, in terms of offering services to consumers. However, the same rules will apply to everyone. Each player will have to follow the same rules, even if there is a greater choice available.
[English]
Senator Spivak: Can you give us some examples where there is this competition between cable and telephone and there is more choice and the price falls?
Mr. St-Aubin: At the moment, there is no competition about which I am aware in Canada in broadcast distribution. They are just starting to get licensed. There is an MDS system, a wireless cable system, which I believe was licensed in Winnipeg. I am not sure if they are off the ground yet and I do not know what is being offered there.
Senator Spivak: It does not have to be in Canada; it could be elsewhere. Thus far, do you think his will curb the competition between the cable companies and the telcos when such a huge investment is required?
It seems to me there is something that cable companies must do before the telephone companies can get started. I have forgotten what it is. Can you assist me?
Mr. St-Aubin: Under the convergence policy, the telephone companies are not allowed to get into broadcasting distribution until the regulatory framework is in place for competition in local telephone service.
Essentially, The CRTC has concluded the submissions part of its hearings on local telephone competition. We expect a decision to come out in the late April or May. After that, telephone companies will have to file tariffs. However, the commission is master of ensuring that there is no-head-starts issue.
Senator Spivak: My next question is not a legitimate one. However, the Chair has not ruled me out of order thus far because this is only enabling legislation and I am questioning the convergence policy. I would like to know what evidence we have that this will result in more choice and lower prices. Do you have examples of other countries in which this is happening where they get more choice and lower prices?
Mr. St-Aubin: The best evidence in Canada is in the long-distance market where there is no question that as a result of competition in long-distance services, prices have declined, in some cases dramatically, while the range of services offered to consumers has increased. There are now various ways of getting long-distance service. The various discount packages have provided a lot of choice, not only for residential consumers but especially for business consumers who really do have quite a range of alternatives available to them, not only in terms of billing but also in regard to service offerings. Competition has really stimulated a lot of innovation and choice.
Senator Spivak: We do not have the whole picture yet because we do not know what the local telephone rates will be like. We do not know yet whether we as consumers will be subsidizing business.
Mr. St-Aubin: We certainly should not end up in that circumstance. The CRTC continues to regulate. Certainly, part of its proceedings on local telephone competition is an examination of such issues to ensure that the framework takes that kind of concern into account.
Senator Spivak: Is it your expectation that in short order, when all the technical things have been done to permit local telephone competition, the telephone companies all across Canada will go into cable and that cable companies will go into telephone?
Mr. St-Aubin: What I can say is that the convergence policy allows for that to happen. Business decisions on the part of individual cable companies and telephone companies as to how much they get involved in that will be the determining factor in that regard. Some cable companies, in particular Fundy Cable and Vidéotron, for example, have spoken enthusiastically about getting into the market. Others have been less enthusiastic. The same is true in the United States where larger cable companies have questioned whether they will get into local telephony or not. Similarly, telephone companies have been making claims one way or another. It will be very much a business decision on the part of the individual companies. However, I think what government policy allows is competition to emerge. From what we have seen, competition has generally benefited consumers.
The Chair: Thank you, Mr. St-Aubin and Ms Nickason.
Our next witnesses are Ms Sheridan Scott and Mr. Al Wallace from Bell Canada. Please proceed.
Ms Sheridan Scott, Vice-President, Multimedia Law and Regulation, Bell Canada: Madam Chair, on behalf of my colleagues at Bell Canada, I want to thank you for this opportunity to present our views on this simple but very important legislative initiative.
I have provided to the committee copies of my speaking notes. In the interest of time, I will highlight some of those notes and leave you with the rest of the text to read at your leisure.
What is being proposed in Bill C-57 is the elimination of section 7 of the Bell Canada Act. This amendment will remove the prohibition on Bell Canada from holding a broadcast licence.
Effectively, it will open the door to Bell Canada to apply for a licence to compete in the distribution of broadcast services to Canadians, creating new channels for the provision of Canadian content, and giving Canadians access to greater choice.
This initiative has been supported by the Canadian Radio Television and Telecommunications Commission in its convergence report. The commission's recommendation was endorsed by the Information Highway Advisory Council whose members include representatives from all sides of industry, including the cable companies, as well as our long-distance competitors.
[Translation]
In addition, the federal government, when it tabled its policy framework on convergence last August, called for an end to the restriction on Bell's ability to hold a broadcast licence. By removing section 7 of the Bell Canada Act, you will be responding to the public's demand for choice. You will also be helping to open a new channel of access to Canadian content.
[English]
We are very excited about the prospect of this legislation being amended. In terms of the trial applications that we have before the CRTC, it is certainly our preference. Mr. St-Aubin mentioned that there is a parallel set of applications. The licences in that case would be held by a subsidiary of BCE, which would introduce enormous complexity, something which we do not think is required and which would certainly make the service less accessible to consumers. We are looking forward to the speedy removal of this prohibition, which is the only legislative prohibition in the country against telephone companies holding broadcasting licences.
Senator Spivak: There is some thought that the Canadian content rules will be altered. What is Bell Canada's view on that? There was talk that they would take out sports and news.
Ms Scott: You are referring to the proposal mentioned by Ms Copps last Friday. There are many discussions going on regarding Canadian content regulations, their purpose and what they are addressing. In terms of our own participation, we have no difficulty in adhering to the current Canadian content regulations that will apply to cable distribution undertakings.
Senator Spivak: If they are changed, will you be happy to comply with them?
Ms Scott: We will be happy to comply with them. In fact, we are looking forward to being involved in the debates and discussions that will involve everyone in the next short while. There is great interest in this whole topic. Whatever the rules are, we are happy to live with them. They are part of holding a broadcasting licence.
Senator Spivak: What are your plans for getting into this competition? We heard about Ontario. Will this happen all across the country? Give us some idea of your plans.
Ms Scott: There are two aspects to this. First, there are the trials, the living laboratories as we call them, that we would like to begin to operate. These are separate and apart from any commercial entry into the broadcasting business. Those are the ones that are before the CRTC now. We have asked that they issue licences by June. We would like to start on that as soon as possible. We have a number of really interesting new applications that we want to explore. This is an all-digital state-of-the-art system we would build.
That aside, if you are looking at our commercial entry, I can talk at least to some of our plans in Ontario and Quebec. In terms of the rest of the country, it depends on the other telephone companies.
With respect to our own plans, we are looking at a number of technologies. Broadcast distribution business can be offered through wire, which is what we will be doing in London and Repentigny.
There is also a technology called MDS, some of which have been licensed already. We will be looking at that possibility as well. There is a third technology called LMCS, which we have not been allowed to apply for, so it is on hold for a couple of years.
We are looking at all the markets to see what the best entry strategy would be. Presently, our plan is to file with the commission, probably in the third quarter of 1997, application for a broadcasting distribution licence for commercial entry in 1998.
Senator Spivak: What do you estimate the investment will have to be to get into this to compete full time in Ontario on Quebec?
Ms Scott: It depends on the technology used. That is why we are looking at a range of technologies.
Senator Spivak: You are looking at everything, including wireless and wire, are you not?
Ms Scott: Yes. ADSL was another technology we studied, which is putting video signals down existing copper wire that goes into homes. It is unlikely that is a substitute for cable service, but it is something that we are exploring.
We look at the trials in London and Repentigny to get an idea of how expensive things can be. To enter into the broadcasting business in those two markets through our living laboratories the cost is somewhere in the order of $80 million. It is an extraordinary investment. We will build state-of-the-art facilities if we enter there.
MDS would be significantly less expensive than that.
Senator Spivak: What is MDS?
Ms Scott: MDS stands for multi-point distribution system. It is a microwave-type technology. It is wireless.
Senator Spivak: It is not satellite, is it?
Ms Scott: No, but there is satellite as well. That is another system we are looking at.
Senator Poulin: We are all quite aware that these few small words on this piece of paper represent a major turning point in communications in Canada.
Ms Scott: That is right. When we look back on this, I think we will say that it was really neat that this happened. It is a watershed in terms of looking forward to the new convergence world.
Senator Poulin: Without divulging all of Bell Canada's planning, because I know you have been planning this opportunity for a long time, if all the applications for commercial ventures Bell Canada puts forward in the next five years were approved, what would be the picture for the user five years from now sitting at home or in his or her office, given the changes that might be made to this legislation?
Ms Scott: Anyone who tries to predict the future in communications is probably doomed to failure. When I look back two years ago to when we were doing our initial planning for these trials, and it is hard to imagine, people were not talking about the Internet. It seems extraordinary when you read the paper now because everyone talks about it. People are looking at the Internet as an alternative to broadcasting. People talk relatively seriously about the possibility of receiving a range of broadcasting-type services over their computer. I am not sure we will be seeing that in the next year or two, but in five years it might be a possibility.
Our thinking to date has been to look at the possibility of obtaining a regional licence in Ontario and Quebec. In the regional licence, we would have a mix of technologies. Downtown Toronto and Montreal, for example, would likely be wireline based. More remote areas would probably be satellite based. It is highly unlikely that we would take what is called a high-fibre coaxial system, such as the one we are building in London and Repentigny, and put it everywhere throughout the province. This means that in five years, if one looks at the range of technologies, Bell Canada or a related company would be offering broadcasting services in competition with the cable companies. Many other things will be part and parcel of this.
We have come away from a hearing with the CRTC looking at our trials and describing some of the new types of services that we want. To give you a vignette of two services we are looking at which are kind of unusual and which may grow into something more interesting, we are looking at the possibility of digitizing some of the heritage holdings in this country. We will be going to all the museums, starting with the National Aviation Museum. We already have a CD-ROM on the National Aviation museum. We will use high-speed access to the Internet to make that available to Canadian citizens who cannot come to Ottawa to visit the museum. We are working with associations to look at the Museum of Civilization, the National Art Gallery and others. That is one offering. We call it a suite of heritage services.
The other application, which is perhaps two years out, is looking at interactive television. Let us say you are watching The Racoons, a popular children's animated program. It has an environmental theme. You will see a little bug on the screen, and you will take your zapper and click on it. It will go off to another screen that allows you to explore one of three issues. One would be instruction to children on environmental issues. The other would be instruction to children on how to do animation. The third would be like an e-mail chat line for children to speak to the producers of the program to find out what it is like to do that type of programming.
Those are two very experimental things that we want to do in the trials, and perhaps that is what you will see in five years.
Senator Poulin: With respect to bringing museums to Canadians from coast to coast, what kind of business arrangements do you have?
Ms Scott: With the CD-ROM for the National Aviation Museum, we worked in conjunction with the museum. Our strategy in the trials has been to form partnerships with broadcasters and independent producers. That is their expertise. Bell Canada is not a particular expert in the production end of the broadcasting business. We would go to broadcasters or independent producers to assist us or the new generation of young folks who are doing some of these multi-media applications. These would be multi-media applications. We would have video, print and sound.
Senator Poulin: Whenever a new step has occurred in terms of communications, Bell Canada has created a new arm. Would Bell Canada consider creating a broadcasting arm of its own?
Ms Scott: A company called Media Links is owned by a number of telephone companies. It is looking largely at Internet applications. We are talking about the content side of it. Again, it is a partnering strategy. It is not for Bell to get into that business so much as it is for Bell to try to facilitate others to get into that content production business.
Senator Poulin: As you are probably aware, a subcommittee of this standing committee is doing a special study on communications. My deputy chair, Senator Spivak, and I heard about different opportunities. The more we have strong broadcasters and distributors in competition with other strong content producers and distributors, the more Canadian content there will be. It will be competitive with all content from all countries. It is good news that we are hearing from you this evening.
Ms Scott: That is absolutely correct. Part of our involvement in these trials is working hand-in-hand with the broadcasters. They think it is really neat that they can come and try out some of their applications.
One of the other new services we are developing with them is something called a Canadian promotional channel. You sometimes see these barkers promoting movies. We have put together a channel where you see Canadian programs included in the services of MuchMusic, Life, Discovery, CBC and CTV. The Canadian segments are put there. Our sense is that in the 500-channel universe, you want to ensure that people can find Canadian services and that Canadians know about them.
Senator Poulin: We have heard that because of the 500-channel universe it will be very important for Canadians to first see the Canadian menu before seeing the menu that comes from every server located anywhere else in the world. Is that technically possible?
Ms Scott: That is one of the issues we are looking at in the trial. It is called the Canadian Navigator, for want of a better phrase.
We put a proposal before the CRTC last week. We actually discussed this extensively with the Canadian Association of Broadcasters. One of the fears is that if you start grouping Canadians like an airlines reservation page -- many people think of that example -- you will ghettoize Canadian services. People say, "I will skip through there because they are making me go there, and if they make me do it, I will not do it."
We are trying to figure out, along with the broadcasters, the best way of balancing those two interests. We want to ensure that people know about the availability of Canadian services but are not turned off by the presentation. We will explore a number of presentations in an effort to do this.
The Chair: In your view, is Internet access considered a broadcasting service or a telecom service?
Ms Scott: The commission has ruled that Internet access is a telecommunications service.
Senator Poulin: Down the road, do see the necessity to better combine the Telecommunications Act and the Broadcasting Act?
Ms Scott: I do not think a single piece of legislation can cover both equally. The preoccupations for telecommunications are different from the preoccupations for broadcasting. There are questions of universal service on the telecommunications side that are quite important.
I think interconnection will be the hot issue -- the network of networks. How will it work? How will we ensure that systems are inter-operable? How will we develop standards? Those are important questions.
With respect to the content and the broadcasting side, the broadcasting policy found in section 3 of the Broadcasting Act will remain. They could be combined into a single piece of legislation, but I find it hard to imagine that the concerns and the preoccupations will be identical for both telecommunications activity and broadcasting activity.
Senator Forrestall: How do we protect ourselves from you? You are overwhelming. You are going into London, Ontario, are you not?
Ms Scott: That is the proposal. It is for a trial.
Senator Forrestall: And you will run coaxial cable into 12,000 homes.
Ms Scott: We are passing 45,000 right now. We will go to 12,000 with a view to attracting 3,500 subscribers.
In terms of service, we propose to the commission that we be capped at a certain number of subscribers. The number of homes will vary depending on the penetration rates of our services.
Senator Forrestall: Howver, in front of how many houses will the means of carrying the message run?
Ms Scott: As many as we need in order to have 3,500.
Senator Forrestall: So that could be the whole city.
Ms Scott: We have put before the commission a map which says no more than 20,000. We have told the commission that we do not think we will have to build more than 12,000. We are starting with 5,000 and we will see what that gives.
Senator Forrestall: What if there are 10 on every street in London? My point is that you will have the cable in place and who will duplicate the cable to go after the business?
Ms Scott: We will have cable running down the street, but not into the homes, of course. One of the barriers to getting cable business is digging up people's lawns. People do not like that.
Senator Forrestall: You have no intention of sharing this cable with your competitors, do you?
Ms Scott: Are you speaking of the cable that goes into the home or the one that runs down the street?
Senator Forrestall: The master cable; the one that runs down the street.
Ms Scott: Right now we have arrangements with cable companies which enable them to lease our services. A tariff has been approved by the CRTC which provides them with either support structures to put their cable on or we put cable on for them. It is called a partial support system. In both cases, we already do that.
Senator Forrestall: You are looking at 11,000 to 12,000 homes in Ontario and Quebec and only 3,400 in both Calgary and Edmonton. Is there a reason for that?
Ms Scott: I do not know all the details of the Telus trial, but the trials are quite different. We are proposing to package broadcasting and telecommunications services together. We are trying to emulate the converged world of the future. Obviously, there will be a convergence of the sectors and there will be more and more sharing between the two. We think consumers want one-stop shopping. We may be right or we may be wrong, but we are interested in one-stop shopping. Therefore, we are trying to emulate it. We will provide packages of high-speed access to the Internet, broadcasting, long-distance, call answer and that sort of thing. Telus is not planning to test that range of services. We are looking at things like heritage applications with the digitization of our national treasures and a number of other applications. We are looking at the interactive TV which I was describing. Telus is not planning to have as wide a range of applications tested as are we.
In order to derive a sufficient number of participants to investigate some of the questions we want to investigate, we have proposed a higher number.
Senator Forrestall: Bell must have felt pretty confident about getting this particular section repealed. You have spent an awful lot of money and done an awful lot of work. You are prepared to go ahead even if you have to wait for this to go through.
Ms Scott: We have a second option which is not as good an option. I guess we would have to head down that road. As Mr. St-Aubin was saying before, it is in accordance with government policy. You are right, senator, it is definitely our preference to have the legislation amended, but we have a safety net in case that does not occur.
Senator Forrestall: This is a rather significant step. I just hope it is the right one. I hate massiveness. I hate things that are so big that even those like yourself understand only parts of them.
Ms Scott: In terms of the significance, the removal of this prohibition does not entitle Bell Canada to hold a broadcasting licence. It removes a barrier to Bell Canada holding a licence. We still have to go before the CRTC. As you know, the CRTC has an open process and will hear from members of the public on any concerns that might arise. The removal simply means that we can seek a broadcasting licence; it does not guarantee that we will get one.
Senator Milne: Ms Scott, you say that the trials that will run in London and Repentigny will cost you about $80 million. Does that include relaying cable to these homes?
Ms Scott: Yes.
Senator Milne: You will have to renew your cable system to the homes?
Ms Scott: Yes.
Senator Milne: Are there any areas of Ontario that are presently wired with your fibre optic coaxial cable?
Ms Scott: There are some parts of the telephone network that use fibre optics and we could obviously use that. The last mile into the home is the most expensive.
Senator Milne: Which means it will be quite a long time before this type of service will be available to rural areas.
Ms Scott: It depends on the technology used. That is why DTH is a much more likely technology in rural areas than hybrid fibre coax.
Mr. Al Wallace, Vice-President, Regulatory Matters, Bell Canada: While we have some fibre in the network which was been put in primarily for telecommunications, we do not use fibre at this time for the last part of the network that runs out to the houses. With the exception of some large business locations where we would use fibre straight into the customer's premises, we have no fibre today in the distribution.
The Chair: Is there any cost for the municipalities? You said you are spending $80 million for London and Repentigny. Are there any costs for the municipalities?
Ms Scott: I do not believe so.
The Chair: Do you pay municipalities for rights?
Ms Scott: We have negotiated with the two municipalities in question and they have agreed to our providing the service. We filed letters with the CRTC last Tuesday indicating their strong support. They are very excited about having their centres used as test beds. They are thrilled. They intervened in support of the applications. They followed up with another letter to say that we had followed all the procedures, that they had agreed with us and we had agreed with them, and that they saw no problem at all.
Senator Milne: Will this have any impacts in these areas on competing telephone companies using the same cables presently? If home owners are buying telephone service from a company other than Bell Canada, they will not be able to take part in the trial, will they?
Ms Scott: There is not competition in local telephone service now. With respect to long distance, these trials would have no impact on whether they could go to another long distance provider or not.
Senator Spivak: What do you think the impact on local rates will be once the competition is in place? Will they have to go up?
Ms Scott: Are you talking about telecommunications?
Senator Spivak: I am talking about telephone. I am interested in how much rates will go up and about universality with all the different services you are talking about.
Mr. Wallace: To some degree, we are in the same situation in attempting to forecast the future. We do know that, historically, we have had quite a significant cross-subsidy from services such as long distance. We also know that today, on average, our cost of providing resident service, which is the local service that we subsidize, is in the order of $27 to $28, whereas our average rates now are more in the order of $18.
Senator Spivak: Do you feel they will rise to the cost level?
Mr. Wallace: That might be a reasonable expectation. However, it is really a different question. We have some subsidies which can remain in the system. The commission has put in place subsidies from some competitors.
How quickly the rates go up and how far they go up is really a function of market forces. If competition develops in such a way that certain subsidies are no longer sustainable, then rates must start to move toward cost as those subsidies disappear. It is very hard to predict what the market will do and how quickly it will do it.
Ms Scott: That is quite separate and apart from our entry into the cable business. The two have nothing to do with each other.
Senator Spivak: You talked about broadcasting and telecommunications and the fact that they are quite different issues. We heard from the guru in this area that, in the end, there will not be television and computers; there will only be computers.
In that case, with one instrument in the house combining everything, then the issues would be similar.
Ms Scott: I do not disagree that, one day, we will have a single network coming into the home which will carry voice, video and the whole range of things. My point was that the issues related to the transport part, traditionally dealt with under telecommunications law, are different from the issues related to the content part.
There will always be content on the transport part. That is where I would say there are different public policy perspectives. I think that is exactly right. We will have single networks coming into the home carrying voice traffic and video traffic. They will carry bits because the bits are all the same, whether they are video, voice or whatever.
Senator Spivak: Distribution has an impact on the content in some ways, but that is not my major question.
With regard to the Internet, you are not really in business to digitize the Museum of Man. That is not what you are about.
Ms Scott: It is not one of our profit centres, you are right.
Senator Spivak: Look at the landscape. Lots of companies do not see how they will make money on the Internet. It really seems to be the commercial internets into which everybody is putting their money. If you are in it, you obviously must be in it to make a profit. What do you see as the profit-making ventures to the Internet? How will that benefit the Canadian consumer, other than the business aspects?
Ms Scott: That is a question that goes considerably beyond the trials in London and Repentigny. We are doing the National Aviation Museum because we want to see how people consume contents like that, and we are starting with heritage applications.
We are also interested in seeing whether you can consume, for example, remote CD-ROMs from home using high-speed access. That could be related because there is already the CD-ROM out on Alexander Graham Bell where you visit the museum in Baddeck, plus the National Aviation Museum. That might be a venture by which, one day, one can access CD-ROMs remotely.
We are just experimenting. The trials are not with a view to making a profit, I can assure you. We look at the revenue line, compared with the cost. In terms of the Internet, that is quite apart from these trials. Even without the trials, we would obviously be exploring the Internet and the commercial opportunities that exist there.
Senator Spivak: It is early days yet.
Ms Scott: I am not sure anyone could predict where the big bucks will be made. We know there is no killer application. There is wide consensus on that. Beyond that, there are a number of things happening right now that people are watching, but I do not think anyone has the right answer yet.
You have to experiment to figure it out. No one knows what the Internet will be. Think about it. Two years ago, we did not know what it was. What will it be two years from now?
Senator Spivak: I ask that question because it is public policy to get competition going, to get everybody in there; but the pay-off has to be something for the Canadian consumer. Otherwise, why are we doing this?
Ms Scott: Absolutely.
Senator Spivak: At the moment, there is no answer to that, is there?
Ms Scott: It depends on where you are looking for the pay-off for the consumer.
Senator Spivak: I mean the Canadian consumer.
Ms Scott: Fair enough. For the Canadian consumer, we are looking at competition in broadcasting distribution. As Mr. St-Aubin described to you, competition brings innovation and price discipline, rather than a regulatory discipline in terms of what consumers pay.
You asked him where in the world can we see evidence that this is good and that prices will fall. The difficulty is that virtually all the countries that we look at have had monopolies in the cable business. However, there are two or three examples in the United States which we examined two years ago when we filed our convergence submissions with the CRTC. One of them was in Glasgow. There was one in Kentucky and one in Virginia, if I am right. It was a couple of years ago.
There were two or three examples. The findings were that there was greater innovation and lower prices with the introduction of competition. That is a very small sample so who knows, but that is what we are shooting for and we will not know if it works until we try.
It seems to be pretty clear to consumers that regulation is not doing the trick.
Senator Spivak: Madam Chair, could this testimony be directed to the subcommittee and perhaps integrated as part of that transcript?
The Chair: That can be done if the committee agrees, yes.
Senator Poulin: Ms Scott, in the living laboratory and the trials to which you referred earlier, is there any implication for schools?
Ms Scott: What we are trying to do on the school front is interesting. We are trying to develop a couple of educational applications. We are in at Western talking to them about how to go about delivering "distance education" that is not distanced. It will be remote education. The idea is one might be able to develop a distance education approach.
The second area involves working with TVOntario and TéléQuebec to see whether we could piggyback off some of the broadcast content related to curriculum for elementary and secondary schools and see what we can develop on that front.
Third, we are looking at some of the other licensees which have educational-type product, like the Discovery Channel, for example, and others with a lot of science material. We are trying to make that material available on an on-demand basis or a near video-on-demand basis. I see that as one of the growth areas over the next two years. If we can get the licences for the trials, that is something we would like to explore. There are different ways of going about this for schools.
Senator Poulin: Has Bell Canada been involved in any way in contributing to wiring certain schools?
Ms Scott: Yes. We have been actively involved in SchoolNet which uses satellite capacity and connects schools. It is part of an Industry Canada program as well. We have assisted in connecting schools across the country through the Stentor consortium. The alliance has had each telephone company in the various territories to assist increasing the connections to the Internet for schools.
The advantage of going satellite is that you have lots of space or band width available to dump high-speed video down into the schools and use a telephone line for the uplink.
Senator St. Germain: First, I think profit is good. Big is not bad. We should celebrate success and award the achievers. I think Bell has proven that.
In Canada, our combines and anti-trust laws are not generally perceived to be very strong. In the U.S., if you violate any of the anti-trust laws or combines laws, you are virtually incarcerated. It is almost as bad as murder down there.
With Bell being such a large, predominant firm, do you feel there will be enough checks and balances in the system? You have a great deal of financial clout, which is not bad. I want you to know that I see this as a positive thing. It is like the banks; they must make a profit. I saw banks going bankrupt in the early 1980s which was devastating to the people who were losing money.
Senator Spivak: The question is how much.
Senator St. Germain: Are there enough checks and balances in the system so that it would not start off as open competition with there eventually being no competition because of the size of Bell or some of these other organizations?
Ms Scott: It is an interesting question, senator. It is important to remember the interplay between the jurisdiction of the CRTC and the jurisdiction of the Director of Investigation of Research, who is responsible for the Competition Act. Some people think it an oxymoron that we have regulated competition. To the extent that the CRTC is active in an area and the area is regulated, the director actually has no jurisdiction.
With respect to our involvement in broadcast distribution, we will be regulated by the CRTC. We will be required to obtain broadcasting licences. The CRTC will act as the watchdog on these issues. The commission, when it issues its licences, will impose whatever terms and conditions it believes are essential to ensure that competition is real and not simply a transitory thing.
Senator St. Germain: Do you see Bell Canada as an organization going outside its traditional telecommunications area to provide these services? For instance, would you go to British Columbia?
Ms Scott: The only possibility I could imagine would be Expressvu, which is a DTH satellite-based service. BCE holds about one-third of the voting shares and has an application before the CRTC to take a controlling position. From that perspective, we could see BCE providing a national service, but it would be satellite-based. Other than that, I do not see Bell Canada going beyond Ontario and Quebec for a wire-line based service.
The whole idea of competition and allowing telephone companies is that we are building on our core competency and on the investment in the network. We have not invested in any network in British Columbia. We have a network here upon which we will be able to piggyback, to a certain extent.
Senator Taylor: We are talking about competition and telephone companies being able to bring in cable TV. Will the cable TV people be able to bring in telephone calls? Can they move into the telephone area?
Ms Scott: There is a proceeding before the CRTC now to look at that issue. They are looking at facilities-based competition -- that is, the ability of cable companies to have their own network on which they will provide local telephone service. The commission is proceeding with that and putting in place the rules which would permit that.
We spoke to the CRTC about this last week when we were appearing before them. There are options that now exist for cable companies. If they wanted, for example, to be in London offering local phone service, it would be possible for them to package up local phone services. They would lease them from Bell Canada and then insert them in their own packages and resell them in a package.
They have some limited ability to do the bundling of services we wish to do. In the longer term, the CRTC is planning to provide them access to the telephone company facilities on a tariff basis.
Senator Taylor: Technically speaking, would anything need be done with the wires coming down the back alleys for the cable companies to be able to provide telephone services, or would they be required to have relay lines?
Ms Scott: They would need to upgrade their networks. They are essentially one way now, or at least most of them are. There is some limited two-way capability that exists now.
They would have to upgrade their systems. Rogers is making investments right now, as are Shaw and some of the others, to allow for that two-way traffic to be carried on their existing networks.
Senator Taylor: About a month ago we heard from some people who were looking for permission for low-band broadcasting which replaces a line, a line of any sort. In other words, everything goes out by radio on a very low cycle. It was touted by the people proposing it as being able to replace all the cables that come to the home. It would be coming in on the airwaves in a very low cycle. Do you have anything like that?
Ms Scott: You may be referring to MMDS technology.
Senator Taylor: I do not know what it is.
Ms Scott: Is this over the air? It may be a microwave-over-the-air system. I do not know what it is.
Senator Taylor: It is a very low cycle, a low amplitude. It is similar to AM broadcasting. It does not need a microwave to focus on, and it carries about 50 to 100 miles, but it carries a huge band of services. These people will then lease it out to the cable and phone companies in order to eliminate wires.
Ms Scott: They are probably referring to LMCS.
Senator Spivak: I do not think that is the case. I think they are low-orbiting satellites.
Ms Scott: That might be.
Senator Taylor: It was not satellite. They would take signals from satellites and do away with lines on the face of the earth. It goes around corners and everything else. It is not like a microwave. The idea then is that they would lease that service to phone companies and cable companies.
Senator Forrestall: In 1968, I was part of the development of this prohibition. While I see three reasons listed here in your brief, they do not jog my memory. We were terrified of the size of Bell and what it could do because of its size. As we looked ahead, we saw nothing, not even government, nothing short of legislation, that might offer to Canadians this type of protection. Therefore, section 7 came into being. However, it was as a result of a concern for people.
I suggest to you today that there are many serious questions about this with regard to cross-subsidy and who will pay for it and whether it affect our telephone bills. People are terrified about what we will do in the next while. This was 30 years ago. If you can change anything momentous, if Canada can change dramatically as much as it will change in unleashing Bell Canada on the scene, I do not know what it is. I wish you well with it.
I hope you understand that it is an enormous trust. I doubt if you do understand that. If I thought you knew the company from beginning to end and top to bottom and inside out, then you could say, "Yes, we are aware of that trust." I wish your president or chairman of the board were here. I would have asked him if he will honour that trust. We must look out for consumers, which is the most important thing.
Senator Spivak asked a while ago about the object of all this if it is not to better serve Canadians and their families. It is with trepidation that I let this go. I am not at all sure we will not have to revisit it. Good luck with it.
I agree with Senator St. Germain. I am for big, but not that big.
The Chair: Thank you, Ms Scott and Mr. Wallace, for your presentation.
Do I have a motion to report this bill to the Senate without amendment?
Senator Poulin: I so move, Madam Chair.
Hon. Senators: Agreed.
The committee adjourned.