INDY Committee Meeting

STANDING COMMITTEE ON INDUSTRY

COMITÉ PERMANENT DE L'INDUSTRIE

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, December 4, 1997

• 0911

[English]

The Chair (Ms. Susan Whelan (Essex, Lib.)): Pursuant to an order of reference dated Tuesday, November 25, 1997, consideration of Bill C-17, an Act to amend the Telecommunications Act and the Teleglobe Canada Reorganization and Divestiture Act, our hearings continue.

Today our first witness is from Teleglobe. We have before us Mr. Guthrie Stewart, president and chief executive officer, and Ms. Meriel Bradford, vice-president, government and external relations. If you'd like to begin, go ahead.

[Translation]

Mr. Guthrie J. Stewart (President and Chief Executive Officer, Teleglobe Canada Inc.): Good morning, Madam Chairperson and members of the Committee.

[English]

Good morning. I hope you have received a copy of the remarks.

[Translation]

I intend to make my presentation using both official languages, in accordance with Canada's happy tradition.

Mr. Eugène Bellemare (Carleton—Gloucester, Lib.): Madam Chair, have we been given the document?

[English]

The Chair: The document was just delivered now. Thank you.

[Translation]

The Clerk of the Committee: Two minutes ago.

Mr. Guthrie Stewart: I am Guthrie Stewart and I am President and CEO of Teleglobe Canada Inc. With me is my colleague, Meriel Bradford, Vice-President, Government and External Relations.

As you know, Teleglobe Canada has been Canada's overseas telecommunications carrier since 1950 and is a subsidiary of publicly-owned Teleglobe Inc.

[English]

Right at the outset I would like to say that we support Bill C-17 and will not be proposing any amendments. During the WTO negotiations, and all the way through to the drafting of this legislation, the government has done a superb job of consulting and listening to the telecommunications industry. Bill C-17 is a true reflection of the government's commitment at the WTO and fulfils its obligations.

The bill substantially modifies the Teleglobe Canada Act, established at the time of the company's privatization in 1987. We see it as an historic but appropriate milestone in our history. It has a significant impact on our company because it puts us on the same footing as our competitors. It also ensures us access to foreign markets. For both of these reasons, Bill C-17 is critical to our future growth and success.

[Translation]

Before dealing further with the bill, it might be appropriate to supply you with some statistics about our company. Today Teleglobe employs a total of about 1,200 people with almost 900 of those based here in Canada. We will have revenues of around $2 billion in 1997 and carry about 2.7 billion minutes of traffic for the year. We have one of the largest networks in the world and assets of $2.3 billion at the end of 1996. I believe that you have also received a copy of our network map.

[English]

I think you've also received a copy of our network map, which you may find interesting, just to give you a pictorial representation of what Teleglobe is and the extent of our international network.

[Translation]

Our commitment to offer innovative services and competitive prices to Canadians has continued throughout the transformation of Teleglobe: first from a Crown Corporation to private undertaking, and now from monopoly provider to vigorous competitor. Moreover, we are looking forward to contributing to the Canadian telecommunications industry in new ways and to assuming a leadership role in an environment governed more by reliance on market forces and less by regulation.

• 0915

In less than one year, the liberalization of the Canadian telecommunications market will advance with the opening of the Canadian facilities overseas telecommunications market on October 1, 1998. Teleglobe Canada has been actively promoting this liberalization for over two years. Competition will clearly benefit the Canadian consumer but also frees up a company like Teleglobe to take on the world.

The WTO agreement involves 90% of the world's telecommunication services market, a market evaluated at $880 billion. The Canadian Government in its negotiations at the WTO acknowledged the reality and the benefits of global competition while preserving and pursuing uniquely Canadian objectives. Bill C- 17 is instrumental in implementing this policy.

For Teleglobe it is the opportunity to go from a market of 30 million people to a market of 6 billion people. To go from a market of roughly two billion minutes of international traffic to a market of about 75 billion minutes this year. In the year 2000 it will be a market of 100 billion minutes.

This international perspective was recognized early in 1992 with the arrival of a new management team at Teleglobe lead by Charles Sirois. From a company which had no physical presence outside the Canadian market, we have now expanded our network presence into the three largest telecommunications markets—the United States, the United Kingdom and Germany—and have some 30 representative offices around the world. We have clients in 70 countries and operating agreements and relationships with nearly every major telecommunications carrier in the world. In 1996, our traffic from markets outside our original Canadian base grew by 300%. We will more than double our international traffic this year.

This is to say that 40% of our revenues come from some of the most competitive markets in the world.

We are not as big as some of our competitors such as AT&T, British Telecom, MCI and Sprint, but we have the advantage of being completely focused on our niche-market: international services. With its 1,200 employees, Teleglobe has no difficulty in adapting to new challenges and in seizing new opportunities on the market.

Along the way, Teleglobe has become the sixth largest intercontinental carrier in the world and has built the second largest intercontinental network in North America. We manage our global network from Montreal with a very advanced international network management centre, in which we recently invested some $25 million for its construction .

I wish to insist on the fact that our international expansion will ensure Canadian customers reap the benefits from very competitive and innovative services. Teleglobe will be able to pass on to the customer its economies of scale. Clearly, Teleglobe is not the same corporation it was when it was privatized ten years ago. The telecommunications environment is also quite different. In fact, the global telecommunication industry is in the midst of the most profound changes in its history—changes driven by the twin forces of competition and technology.

There is a growing global trend towards privatization, competition and deregulation. Technological developments have also blurred national and international boundaries. The traditional world of Government agreements for exchange of traffic between state-owned PTTs is disappearing.

Teleglobe too has been working actively in reducing its distribution costs, negotiating lower accounting rates, increasing its network efficiency and finding alternative methods of carrying its traffic, all to the benefit of the Canadian consumer. Since 1992, the combined effect of Teleglobe Canada's price reductions amount to $272 million in 1997. For this year alone, we forecast total reductions of more than $80 million, far exceeding our obligation under our regulated price-cap regime.

As Canada enters the global telecommunications environment it is only fitting that it adapt its domestic structure to ensure the competitiveness of Canadian enterprises in this new world market. That is precisely the purpose of Bill C-17.

[English]

I'll turn now to amendments to the Teleglobe act. Since the fall of 1995, Teleglobe has been proposing the end of its monopoly and the establishment of a sustainable competitive environment. Our position at the time was that all telecommunications should be on a level playing field and operate under the Telecommunications Act. We were effectively asking for the abolition of the Teleglobe Canada Act. We were also advocating in favour of increased access to foreign markets, notably the United States market.

• 0920

While Bill C-17 does not respond completely to our initial request, we are satisfied that it puts us on a level playing field with other Canadian carriers.

Yesterday, I understand that one witness had comments on proposed section 33, so I'll speak perhaps for a moment specifically to that clause. Let me simply say that this clause is designed to ensure that Teleglobe can make the transition from its existing operations to the new regulatory environment that will be in operation when the CRTC completes its current public process, which is ongoing as public notice 97-34.

Teleglobe advocates that any agreements entered into with foreign carriers should be kept confidential. This approach will allow Canadian companies to make the best possible arrangements for the carriage of Canadian traffic on commercial terms. If necessary, the CRTC may request the agreements be filed with them on a confidential basis.

I would now like to turn to amendments to the Telecommunications Act, in particular to the licensing regime set out in clause 3 of Bill C-17.

Before doing so, I believe it would be helpful to place the licensing issue into context. In February of this year, when Industry Canada announced the details of Canada's expanded offer at the WTO negotiations on basic telecommunications, the press release included an announcement that the CRTC, by way of a new licensing regime, would establish the conditions of operation applicable to all companies offering international services.

In May, the CRTC was advised, through a letter from Industry Canada, that the government intended to amend the Telecommunications Act to provide the CRTC with the statutory authority to require all members of any class of service providers to obtain a licence and to impose terms and conditions on such licences. This intention has been carried out through the provisions contained in clause 3 of Bill C-17.

It's important to emphasize that the introduction of an international licensing regime is necessary and desirable for the orderly provision of international telecommunications services. The Canadian market has been opened as a result of Canada's commitments to the WTO agreement, and the licensing regime will ensure respect for our policies and regulations by all carriers, particularly those from outside Canada.

Please make no mistake about the fact that foreign carriers may seek to take advantage of our marketplace if operating conditions are not established for all players. A recent example arose in the case of Hong Kong Telecommunications. There have been other instances of non-compliance that have created an uneven playing field for international services in Canada.

It took threats of disconnection by some of our domestic carriers, as well as a CRTC order, before this company made changes to its policy. The lesson to be learned from that example is simply that although we already have a regulatory regime in place, without operating conditions under licence, it is not necessarily sufficient for the purposes of dealing with a foreign carrier that seeks unfair advantage. It's this type of market abuse that we need to prevent to ensure that Canadians will feel the positive advantage of true competition.

I would also like to emphasize that the introduction of the licensing regime in Bill C-17 does not impose a new level of regulation on telecommunications carriers. Rather, it establishes a far more effective and efficient regulatory regime. It's also worth repeating the fact that similar regimes exist in major countries around the world, including the United States, the United Kingdom, France, Germany, and Australia, to name just a few.

For example, just last week, the Federal Communications Commission in the United States implemented the WTO agreement and adopted its own market-opening rules, which will go into effect on January 1, 1998. The FCC has kept safeguards in place, and of course it has a licensing regime to prevent foreign companies from using their market power to distort competition in the United States. In a moment, I'll share our own experience with that licensing regime in the United States.

One final thought is that the licensing regime for international telecommunications carriers will be dramatically different from that of television or radio broadcasters. The reason for the difference is the provision in Bill C-17 that makes licensing applicable to an entire class of telecommunications providers. As a result, everyone within the class who meets the qualifications established by the CRTC will be awarded a licence. As the CRTC itself has stated—all carriers agree—licensing will not be a barrier to entry but rather it will ensure that the regime is respected by all providers.

• 0925

In our submission on the CRTC notice, public notice 97-34, Teleglobe has advocated a light-handed and streamlined licensing regime, not designed to be burdensome on any of the applicants and with minimal conditions for licensing. Such a regime is necessary to prevent market abuse and to ensure all players know and play by common rules. It will also ensure competition is introduced in the most beneficial manner for the Canadian consumer.

In conclusion, as we get closer to October 1, 1998, we at Teleglobe see the future with confidence both in the Canadian market and in other markets. The WTO agreement gives us greater confidence to support our market expansion.

I for one was involved for years in trying to gain access to the United States market. I have lived through the Country Music Television trade dispute between Canada and the United States, during which Teleglobe's licences were held up even though we were in a different industry. While we have our main licences there, we are still awaiting additional authority to operate as efficiently as possible in the United States market.

[Translation]

On a world scale, Teleglobe is a small player. We are aggressive and competitive, but our competitors are many times our size. One only has to look at the recent acquisition of MCI by Worldcom for some $37 billion to understand what we are up against.

Furthermore, most of our competitors, AT&T, Sprint and others, are already well-entrenched in the Canadian long-distance market and are part of large global alliances.

However, we are confident that, with rules that will foster fair competition, we will be able to continue our growth and to serve the Canadian market and other markets well.

We have been proposing the introduction of sustainable competition in the Canadian market, which will encourage entrepreneurship and innovation, for over two years. A streamlined licensing regime is essential in ensuring a level playing field and sustainable competition in the international market.

[English]

The WTO agreement comes into force in less than one month, on January 1, 1998. Bill C-17 needs to be adopted quickly. Changes to the Teleglobe act will ensure the company is on a fair footing with its competitors and can continue to further its international expansion while preserving its Canadian base of operations. It will also ensure competition is introduced in the most beneficial way for the Canadian consumer.

We thank you very much for your attention, and we would be pleased to answer any questions.

The Chair: Thank you very much, Mr. Stewart.

[Translation]

Would you like to begin, Madam Lalonde.

Ms. Francine Lalonde (Mercier, BQ): Yes. Thank you for having come and for your presentation.

Madam Chair, I would have liked to have had all of the briefs before the beginning of our meetings. I hope that that will be possible next time, because it seems to me that having the briefs ahead of time enables us to be better prepared for hearing our witnesses.

I would first of all ask you to tell us more about the Hong Kong Telecommunications episode, because I understand it is necessary...

Mr. Eugène Bellemare: Excuse me, madam Lalonde, for interrupting you. I agree with your criticism and I believe it was wise to mention this problem. However, to be fair—and I know that you are always fair—we would have to know when they were advised that they would be appearing as witnesses. If they were invited at the last minute, then it was difficult for them to prepare a statement.

Ms. Francine Lalonde: You are right. I was simply making a general remark. We could have taken three more days and given witnesses more time. It was just an observation for us. We will talk about it amongst ourselves.

[English]

The Chair: Just to clarify, we ask all witnesses to present their briefs in advance and to get the clerk to ask for them. Some are able to comply and some are not, depending on the timeframe of their presentation.

[Translation]

Ms. Francine Lalonde: Thank you very much. It was not a criticism; I simply wish to ensure that we are able to better understand and better react.

It seems to me that the strongest or most descriptive argument in response to the remarks we have heard and the recommendation to limit licences to international carriers is the case of Hong Kong Telecommunications. Am I wrong in believing this? Could you explain this in greater detail?

• 0930

Mr. Guthrie Stewart: You are right. It is an example I used. I would not want to place too much emphasis on this example in particular, but it is a good example to illustrate the fact that generally speaking, Canada, as is the case of some of its trading partners, is ahead of other countries as far as market- liberalization is concerned.

This situation will however correct itself with the enforcement of the World Trade Organization Agreement. The example is both very pertinent and a little bit behind the times given the changes that have taken place. The agreement should correct this situation.

However, at the same time, there will be a transition period during which different countries will not necessarily be experiencing the same things. What this example illustrates, quite simply, is that when a strong competitor such as Hong Kong Telecommunications... but it could be the case of any telecommunications company coming from a relatively closed market... when such a company is able to establish itself in Canada with the open market without having to follow the rules, it is privileged because it is dealing with itself within its own closed markets. That is in essence what I meant to say with this example.

Once again, I can tell you that Teleglobe is very pleased with the WTO agreement. I believe that this agreement will result in correcting situations because all of the markets are going to open up.

Ms. Francine Lalonde: Allow me to insist a little bit in asking you to confirm that the authority to grant licences to international telecommunications providers is not sufficient because a company from another country can set itself up as a national carrier and use that status to enter other countries.

Mr. Guthrie Stewart: That is an excellent question, Ms. Lalonde. We are an international, intercontinental carrier, and I can tell you that the example I used illustrates a fear that exists essentially at the international level.

It is a concern relative to a situation in which a carrier from another market is competing with itself on other markets. It is therefore a concern only in the international context.

Ms. Francine Lalonde: I do not understand very well. I will ask you another question and it will be my last one for this round, because we have an hour with you, which is good.

In the presentation you made to the CRTC and that I have looked over—unfortunately, I only have an English text, and here I am complaining again, but that is another matter—, you say

[English]

that in a competitive environment where Stentor would be free to migrate its customers to a new country-direct service, if Teleglobe were not able to contrive to offer the service to holders of Stentor calling cards, Teleglobe would face the potential of a significant and dramatic loss of business for service in which it has invested and developed.

[Translation]

What do you mean by that?

Mr. Guthrie Stewart: You are giving me the opportunity to argue a point in another context, something that I do not wish to do here, because this is a question that was asked of the CRTC. To put this matter in the proper context, we are discussing changes to the Telecommunications Act in view of the establishment of a system whereby the market will be opened up.

At the same time, the CRTC is already trying to determine under what rules new players will be allowed to enter into this market. As an example, I will give you licence requirements.

I believe that you have brought up a very important issue for us, but rather in a national context, because we are opening up the intercontinental market before the CRTC and at the same time Teleglobe is attempting to defend its position as a long-time intercontinental carrier that played the role of wholesaler.

• 0935

We also need to consider the measures that are important for us and to ensure that Teleglobe is able to offer its services to Canadian consumers in the most flexible way possible. This is an issue that involves the CRTC, as is the case with the interconnection conditions we will have with Stentor, for example, or with other Canadian carriers.

Ms. Francine Lalonde: But your view is that a licensing regime lends itself better to the establishment of fair rules of competition?

Mr. Guthrie Stewart: Yes, absolutely. Once again, the licensing conditions will apply in the international context. We have not yet suggested licensing conditions that would have an impact on the market for carriers offering national services but not international ones.

The example that you mention really relates to the conditions that Teleglobe would like to establish with national carriers. These will not be covered by the licensing process. This is really a separate issue that the CRTC is studying.

[English]

The Chair: Thank you, Madam Lalonde.

[Translation]

Mr. Guthrie Stewart: I can understand that it is not easy to follow.

Ms. Francine Lalonde: Thank you for your answers. I would like another turn, Madam Chairperson. I hope we will have enough time.

The Chair: Mr. Bellemare.

Mr. Eugène Bellemare: Mr. Stewart, Ms. Bradford, welcome to this morning's meeting. It is rather rare to hear companies ask us to remove their legitimate rights and to change the rules of the game. You are certainly asking for this legislative change because it will help and not hinder you.

You say that a licensing regime would be more efficient. In what way would that be more efficient?

Mr. Guthrie Stewart: I will ask one of my colleagues to supply you with more interesting and important details. Allow me to answer that, overall, it would be more efficient because we would have a system that would be accompanied by clearer conditions. It is not a matter of having a lot of conditions. What is important is that these conditions be specific—as I stated in my response to Ms. Lalonde's excellent question—to the situation we face where international carriers are establishing themselves in Canada and are able to have privileged ties with themselves, on their very own market. The idea, therefore, is to have a very simple, clear and transparent condition stating that one cannot favour oneself.

A transparent rule would be much more efficient and much easier to apply. At the present time, to resolve such situations companies must resort to all sorts of obscure measures.

Mr. Eugène Bellemare: Let us come back to the issuance of international licenses. Further to the discussions that have taken place, it is my understanding that the Government feels that we should change the purpose of the license: in other words, one could not have both a national license and an international license. If I understood correctly the feeling of Committee members, it appears that we agree on the fact that licenses should be issued strictly for the international market.

That having been said, I would like to ask you if we would have rules that would truly be proper for everyone, in other words a level playing field vis-à-vis the Americans. You said that the Americans have an international license system. If we had an international license, would the rules be the same? If you had an international license granted in Canada and you wanted to establish yourselves in the United States, would you be required to apply for an American license?

• 0940

Are the rules the same? Do we really have a level playing field?

Mr. Guthrie Stewart: Allow me to first emphasize that, even though we have not suggested changes to the bill, we approve of the change you mentioned, aimed at restricting the licensing process to the international arena. We are an international carrier and we obviously are very concerned by the situation.

As to the question relating to the United States, it must be underlined, first of all, that the international licensing process only applies to operations involving Canada and the United States. You must remember that, when we talk of international telecommunications, two-thirds of Canada's international telecommunications activities involve the United States, the remaining third involving the rest of the world.

Relations between Canada and the United States are very important, and this is why we consider this telecommunications activity to be international. It is obviously a natural interpretation.

You asked me a third question regarding our own situation in the United States. After having studied the entire issue, from one end to the other, I can tell you that we are very confident that with the licensing system that is being proposed here, we will have a level playing field with the United States.

[English]

Mr. Eugène Bellemare: In a licensing regime, the WTO, the U.S. is in agreement. Are the rules going to be the same? Is the U.S. going to say to a company “Teleglobe, you are going to get a licence and these are the conditions”? Would the conditions for you be the same as those for AT&T, for example?

Mr. Guthrie Stewart: Your question is a wonderful illustration of the significance of the WTO agreement.

The significance of the WTO agreement and the number of countries, the 60 or so countries that have signed it—which were of course led by the so-called “Quad Four”, Canada, the United States, Japan and the European Community—is that those countries have engaged themselves under a legal process to open their markets on the same fair basis to all of the members that have signed the agreement, the way they would treat their own companies. So yes, we are absolutely satisfied, and I could say we have the scars to cause us to reflect very seriously on the question you are asking us. The fundamental effect of the WTO agreement is to give us the positive assurance we need.

Mr. Eugène Bellemare: Has the U.S. passed a similar law to date?

Ms. Meriel V.M. Bradford (Vice-president, Government and External Relations, Teleglobe Canada Inc.): Through the FCC, the U.S. is just establishing a new licensing regime for international so that it will be in conformity with the WTO requirements. They have had to modify their own licensing regime, and in Geneva last week countries had to indicate whether they were in the process of meeting the requirements. It is my understanding from the Canadian government that the FCC is going to be in compliance.

Mr. Eugène Bellemare: If there is a subclause that is creating problems for you with respect to compliance, what is your mechanism to complain to us, to say “whoa, they just threw a curve at us”? Is there a mechanism?

Mr. Guthrie Stewart: I'm sure Meriel could explain it better than I. The first mechanism, and the most important one, would be under the WTO agreement itself with the international mechanism that is established to ensure that the parties who have signed the agreement abide by its terms. Again, the terms of that agreement are quite clear. There can be no discrimination vis-à-vis a Canadian company or any other company from a country that has signed that agreement.

The Chair: Last question, Mr. Bellemare, please.

Mr. Eugène Bellemare: A company called ACC came in the day before yesterday, I believe. ACC is a reseller.

Mr. Guthrie Stewart: Yes, they're an important customer of ours.

Mr. Eugène Bellemare: I want to phrase this properly since you just told me they're one of your customers.

Some hon. members: Oh, oh.

Mr. Guthrie Stewart: I should say we consider everyone in the market a customer.

• 0945

Mr. Eugène Bellemare: I was surprised. I think we're all taken aback that the American way of life is a free-for-all. There should be no licensing: this is the impression they give in business. All of a sudden we get ACC, who came in doing business in Canada without licensing and all of a sudden they want to switch everything. Contrary to all the other witnesses we've seen so far, they say we should have internal licensing.

Do you have any comments on that? Since you introduced part of the answer, while I was asking the question, that they are one of your clients, maybe it would be an embarrassing question. If so, we'll drop it and I'll ask someone else.

Mr. Guthrie Stewart: I can only speculate—and this would be pure speculation—that if they are advocating a general licensing regime that goes beyond international, then they're essentially advocating that there should be licensing conditions on their competitors, Canadian carriers in the domestic market. So presumably they see an argument in terms of their own competitive positioning in the domestic market, which is not really something I could comment on, since, again, we are only in the international domain and our view is that everyone should be subject to a licensing regime in the international domain.

The Chair: Mr. Axworthy, did you have any questions?

Mr. Chris Axworthy (Saskatoon—Rosetown—Biggar, NDP): I have just one question really, on the point of that last comment. I was going to ask what you thought about limiting the licensing requirements just to international carriers, but I won't do that because that's your only market.

Given your general satisfaction with this legislation, is there anything else that would make your life easier and still be in the interests of Canadians? Are there other changes that you would like to see?

Mr. Guthrie Stewart: At this time, no. At this time, as I mentioned at the outset, we're very satisfied with the legislative process, the bill as it has been introduced.

For the benefit of the members, you're no doubt aware that this WTO agreement is a process that is likely to be revisited again in two or three years' time. Therefore there may be important questions that will come to light at that time, but at this time we're very satisfied with the process.

Mr. Chris Axworthy: I have one other brief question in terms of your market concentration. You pointed out how important the North American market is. Do you have an increased concentration on that market? You have operations in other countries, of course. Is your focus to expand proportionately more in markets other than North America, or not?

One of the problems—it's not a problem with you, perhaps—we're having as a country, after all of the trade deals we've signed, is that we're increasingly reliant upon the American market rather than being more international as an economy. I just wondered what your plans are in that regard.

Mr. Guthrie Stewart: In our case I would say that very clearly the trend is to expand onto other continents. We're very proud of our Canadian heritage and our Canadian network base, as you see portrayed in the map, and we are very fortunate that Canada, as part of North America, is a very natural hub in the international telecommunications world. A lot of the activity between Asia and Europe, for example, goes through Canada, goes through North America, and this is something, of course, that we are encouraging. As we go into Europe and Asia we are using our Canadian expertise, our Canadian network, to promote exactly that activity.

The Chair: Mr. Lastewka.

Mr. Walt Lastewka (St. Catharines, Lib.): I'm sure your graphic is very clear to some people that aren't as much advised in this field, including me.

There has been some discussion about sunsetting this bill because it should be open season in licensing. I'm not very familiar with any countries that have just a free-for-all, and I'd like to hear your comments on a sunsetting clause in this type of bill, where it would be just open season.

Mr. Guthrie Stewart: My general comment is that it's unnecessary. Again, only a certain number of countries have signed the WTO agreement, so there are other countries that need to be brought along.

• 0950

I referred a moment ago to the fact that I'm sure this would be an ambition the next time...and I'll allow Meriel to jump in here to explain for a few moments when the next round of the WTO discussions are likely to take place. I think that would be the appropriate time to ask the question you're asking, because I think at this time it's unnecessary.

As I mentioned, there's always a possibility that you'll be faced with new legislative amendments following that process. That, I think, would be a more appropriate and pragmatic time to look at that question.

Ms. Meriel Bradford: I would encourage the government to continue to monitor the opening around the world and to take account of how things are progressing. This is not the end of a process that we've seen at the WTO; this is a milestone in starting another ongoing process.

First of all, we have to bring in countries that are outside the scope of the WTO, large economies like China, former Soviet Union countries, and a number of others. That work still has to go on.

Second, even though countries have signed on to be members of the agreement here, they're not opening their markets on day one. Many of them have staggered them off into the early years and later years of the third millennium. We're talking about the year 2004 for India, for example, and for a number of other countries.

So I think it's extremely important that the government retain this tool but come back and revisit it in light of changing markets.

Mr. Walt Lastewka: Having had to operate under licensing for many years in my previous life, I've always looked at licensing as giving a playing field and the rules of the game, because the people without licence want to have their rules in their game. What this process is trying to do is to establish rules, as we get into a field that is changing and expanding, such that we don't all end up in courts and spending money in courts, to give a framework of how to operate.

I think that's the message you also tried to give us fairly early in your presentation.

Mr. Guthrie Stewart: Yes, absolutely. I couldn't have said it better myself.

Mr. Walt Lastewka: Thank you.

The Chair: Mr. Lowther.

Mr. Eric Lowther (Calgary Centre, Ref.): Thank you, Madam Chair. I have a couple of questions.

I appreciate Mr. Lastewka's perspective on licensing. I need a little bit of clarity on a couple of issues.

Looking at your presentation here, Teleglobe currently is very aggressively pursuing a global market type of activity. You're actually carrying traffic for other nations, which has nothing to do with Canada, particularly. You're just offering your expertise and greatly increasing revenues.

I think there was a 40% increase in 1996. Is that right?

Mr. Guthrie Stewart: Roughly 40% of our revenue actually comes from that activity.

Mr. Eric Lowther: Great. I'm assuming this is going to carry on—

Mr. Guthrie Stewart: Yes.

Mr. Eric Lowther: —in a very aggressive way.

I was looking at the draft here, where it says that on a world scale, Teleglobe is a small player, and that you're going to be up against some big competitors, I guess, when this divestiture takes place in October 1998. Yet it would seem to me you have another year here under this legislation where you can continue to advance your global position.

Would that be accurate, as you stated you wanted to do?

Mr. Guthrie Stewart: The legislation in fact determines, again, the skeleton for opening the market. Yes, we've been pursuing an international expansion plan for a few years now. Over the last three years we've been attempting to enter the United States market. It took us almost two years to in fact get the licensing, which again is another illustration of the importance of the WTO agreement for us to assure market access.

Absolutely, we consider it essential to our Canadian base of activity that as the market opens here, of course, we are able to broaden our reach and to use the Canadian assets and expertise we have to serve more markets than Canada from our base here.

• 0955

The competitors are clearly coming. Clearly, competition will have an impact on us as a company in the Canadian market. We accept that. It's good for consumers, and we accept that that will occur in the market. Therefore our strategy is to grow as a company in other markets using that expertise and those assets, which will also benefit the Canadian market through our ability to keep lowering our prices by spreading our activity over a broader base.

Mr. Eric Lowther: You now have another year, don't you, to expand without competition, to put yourself in an even stronger position come October 1998? You're not really facing any competition from within Canada, from people trying to carry Canadian traffic. You also can participate full bore as the only Canadian entity that's out there selling the expertise we have in the global marketplace. Is that accurate?

Mr. Guthrie Stewart: Well, to put that in context again—and I'm not really sure I understand the sense of your question—Canada and the United States, which is fully open, competitive, and no-border in terms of telecommunications activity, represents some two-thirds of the international telecom activity involving the Canadian market. So that is a tremendously competitive market. Therefore, although we currently have—and I think this is the sense of your question—exclusivity on the building, construction, and ownership of facilities that go offshore, if you will, i.e., the cables and satellites you're seeing in your map, there is already a tremendous competitive pressure across the border.

That is of course reflected in our pricing and the pricing you are seeing in the Canadian market. I don't think there are many Canadian consumers, if they have actually compared the U.S. market, who would lay claim to being unfairly treated in the Canadian marketplace. At the current time there is only one carrier that has invested in these facilities. Again, this is a very vibrant and competitive North American marketplace.

I'm not sure, Meriel, if you recall, but there is a study that was mentioned to me again yesterday that illustrates in international terms that Canada has the lowest telecom connection prices amongst the OECD countries. It has been pointed out that for Internet services, for example—and Internet is essentially an international service we are very active in ourselves—Canadians have the lowest-cost Internet services in the world.

Mr. Eric Lowther: I guess what I'm trying to dig at here a little bit—and I apologize for not phrasing it right, because some of these concepts are hard to get your head around.... You make reference to these other large players on the global stage in your document, which you are going to have to compete with, and in fact are competing with, I guess, outside of Canada today.

We're talking about opening up the market here, opening up a window for more competition in the Canadian arena. Yet I see that you have grown your Canadian base outside of Canada by 300% in 1996.

I'm just wondering: are there going to be new players who come to the party after October 1998? Or is this a case where you have one more year to build up your strength here nationally, and then when the lid is taken off we just see the MCIs and the Sprints and all the existing players have access to the Canadian market? There really are no new players. It's just that Teleglobe has a chance to get stronger so you can compete with existing large players. If you can give me a sense of that it would be helpful.

Mr. Guthrie Stewart: There certainly will be new competition in the sense that again, as we currently have exclusivity on the building and ownership of those facilities, the effect of this market opening will of course be to permit anyone else to similarly invest and own those facilities.

Who those new competitors are likely to be—I think you're certainly correct in your observation that amongst the most obvious ones will be players who are already established in the domestic market in Canada: Stentor, the members of the Stentor alliance, AT&T Canada, Sprint Canada—I could go down the list—ACC, etc. Many of our existing customers in fact will of course assess whether it makes sense for them to enter the marketplace.

I believe you're going to hear from Mr. Kedar today, if you have not already heard from him. He certainly represents a brand-new competitor planning to establish himself in this arena.

• 1000

The Chair: Thank you, Mr. Lowther.

If I could remind the committee members we have other witnesses coming, so could you keep your questions as brief as possible?

Mr. Murray.

Mr. Ian Murray (Lanark—Carleton, Lib.): Thanks, Madam Chair. I'll be very brief.

I think I'm following along the thought processes of Mr. Lowther here. You have a pretty impressive installed base already, when one looks at the map you provided us, and I assume it's a very capital-intensive business when you're talking about satellite transmission and undersea cable.

Could you just paint a picture for us briefly of how you see the world unfolding once all of this kicks in? Do you feel you've positioned yourselves now that you're very well established around the world and you can compete, or are we going to see companies with very deep pockets stepping in? Are we going to see mergers of companies and perhaps a very small number of people controlling the international transmission of telecommunications?

I notice you have alliances with I think you said nearly every major telecommunications carrier in the world. Some of them may be some of the older PTTs around the world, which are also in countries that have been deregulated, and perhaps everything has changed.

I wonder if you could sketch out for us how you see things unfolding, in a nutshell.

Mr. Guthrie Stewart: I'll try to do that in a nutshell. It's a very important theme for our company and it's a question the answer to which distinguishes us, if you will, from the large companies. Not only are we distinguished by our focus in that we're only in the international business, whereas most of the large companies are trying to offer every type of service to everyone—so we believe our focus is going to be a key to our success—but we're also distinguished by our approach to the marketplace.

We do not believe the market will be overwhelmingly dominated by a small number of large conglomerate companies. We believe that with the impact of competition—and we believe we'll see this with the opening of our own market—there will be new players. There will be the Mike Kedars. There will be others who will establish themselves in the marketplace. We're going to see more of a fragmentation, as we've seen in the computer business, for example, where I think if we'd asked ourselves this question ten or fifteen years ago we might reasonably have thought there was a danger that IBM would dominate the computer business, whereas today clearly with the new technological possibilities, and even more importantly in the telecommunications world with the opening of markets.... You're absolutely correct that traditionally our main commercial relations have been with the so-called PTTs, the post and telecommunications companies, their authorities around the world.

Increasingly, where our growth is coming from, the growth we referred to in new markets, is not from the established players. We are a wholesaler. Our main business is to help new competitors. Our main business is to allow a new competitor—and a new competitor in the Canadian market, for example—to have access to the international market through our network. We will sell to anyone who wants to use our services, even if they may be partially in competition with ourselves.

Our fundamental business is to help new competitors, and we are all for opening up markets for that reason. As I say, we have quite a different view on what the ultimate scenario will be. There will no doubt be a continuation of some activity of mergers and alliances, as we've seen around some of the key players in the industry. But our own philosophical view is that's more of a protection effort by some of the current large players and that nonetheless the forces of competition will open those markets. There will be new players, and that's where our focus is directed.

Mr. Ian Murray: Thanks very much.

The Chair: Madam Lalonde, you had one final question.

[Translation]

Ms. Francine Lalonde: Do you think that if we limited licenses to international carriers, the CRTC would have the necessary means to prevent people from skirting Canada's information highway by going through the United States to come back to Canada? For example, you arrive in Montreal, but you then have to go to Chicago before coming back to Calgary. Do we have all the necessary means at our disposal to prevent this type of thing?

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Mr. Guthrie Stewart: We believe that the CRTC will have every pragmatic and reasonable means at its disposal to control the situation. We also believe, as we explain in our brief—and as a matter of fact the Government has committed itself to doing this a year after the opening-up of the market—, that the Canadian market will in any event have to be balanced and fully open alongside the American market. I also believe that the only way to answer the question is to ensure that our telecommunications companies are as competitive as any American company coming here.

[English]

The Chair: Mr. Bellemare, do you have one final question?

Mr. Eugène Bellemare: Yes.

What market access barriers have you met while trying to establish yourselves outside of Canada, and how will Bill C-17 help you gain access to other countries?

Mr. Guthrie Stewart: I'm sure many of you are even more familiar with all of the nuances of market access barriers. They can come in many forms. In the United States, for example, prior to the WTO agreement, the United States had a licensing process and there was no apparent barrier. One barrier was time. It was a very lengthy process; it took us well over a year.

Second, prior to the WTO agreement they had certain public interest clauses that they were able to invoke for various reasons. Country music was one I referred to. We were simply swept up in an executive order with reference to the trade dispute that was going on with Canada on the country music licensing under the Broadcasting Act. That again, we're satisfied, has been corrected, and we're satisfied that access to the United States market will not be an issue.

In other markets, barriers can be as varied as fees. One possibility is that government decides to exact a fee from entrance into the market. Again, I would say generally in developing countries this is not a significant issue, as we speak.

The other more pragmatic issue on the ground that you've heard of course as part of the competitive debate in Canada is access to the dominant domestic carrier. A new player coming into the market will build some facilities but will be for a long period of time, and perhaps forever, very dependent on being able to access the facilities of the existing player in order to be able to offer services in the market.

For example, some of you may take long distance services from a carrier that is different from your local carrier. Your local carrier today, except in certain limited circumstances, is your provincial telephone company, and you have a choice for long distance service. Of course, that carrier has to have access to the domestic provincial carrier. That's another barrier.

Under the WTO agreement the countries are setting up regulatory agencies. I think this is another thing where I can just put a plug in for the CRTC. Canada can be justly proud of the CRTC. In fact, what you're seeing, as one of the results of the WTO, is that other countries are coming to visit us to replicate what we're doing here with our regulatory approach. That, of course, addresses the last question of interconnection, which I just referred to.

The Chair: Thank you.

I want to thank you, Mr. Guthrie and Ms. Bradford, for being with us this morning. Your presentation obviously was very informative and has stimulated many questions. We could probably go on for another hour; however, we don't have the time this morning.

Thank you very much for coming.

Mr. Guthrie Stewart: Thank you.

The Chair: Our next witnesses are from the Fédération nationale des associations de consommateurs du Québec and from the Public Interest Advocacy Centre. We are going to have both witnesses before us at the same time.

We have Marie Vallée, analyst, from the Fédération, and Philippa Lawson, counsel, from the Public Interest Advocacy Centre; and I see a third person.

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I'll let you introduce yourselves.

[Translation]

Ms. Marie Vallée (Analyst, Policy and Regulations, Fédération nationale des associations de consommateurs du Québec): Good morning, Madam Chair.

Madam Chair, members of the Committee, we thank you for having given us the opportunity to come to you today to express our opinions on the proposed changes to the Telecommunications Act.

As you mentioned, my name is Marie Vallée. I am an analyst and spokesperson for the Fédération nationale des associations de consommateurs du Québec in the areas of telecommunications, the information highway and privacy protection.

I am accompanied by Ms. Philippa Lawson, from the Public Interest Advocacy Centre, and by Ms. Marnie McCall, director general of the Consumers' Association of Canada.

The Consumers' Association of Canada is a national non-profit organization representing residential consumers all across Canada. The Fédération nationale des associations de consommateurs du Québec represents several groups of residential consumers in Quebec and the Public Interest Advocacy Centre is a non-profit national organization that has been defending the interests of residential consumers for some 20 years before the CRTC as well as other forums.

We have come here today, first of all, to express our support for the proposed amendments, in particular those that will grant the CRTC and Cabinet broader powers in view of the achievement of the objectives of Canada's telecommunications policy, namely high quality service and dependable service at reasonable prices, all of this in an ever more competitive market. Our comments will obviously be limited to a few clauses only.

Before going any further, I would like to mention that if our comments and suggestions reflect a lack of knowledge about the various forces that have lead to the proposed amendments, we apologize. Contrary to industry representatives, consumer representatives were not consulted by the Government during the drafting of the bill, which is extremely surprising since we are not new at this game. We have been speaking out for more than 20 years. Our comments, then, are solely based on the text as published on October 30th, following first reading.

I now give the floor to Ms. Lawson.

[English]

Ms. Philippa Lawson (Counsel, Public Interest Advocacy Centre (PIAC)): We support the new provisions that would give the government control over quality, safety, and technical standards for telecommunications equipment sold in Canada. In an increasingly global market, such standards will be essential if we are to maintain the quality of service we have achieved under a regulated monopoly system.

We also support the provisions extending the commission's powers to include regulatory oversight of third-party administration of such matters as numbering, which we recognize is also a new power being handed over to the commission, and the operation of a fund to support continuing access by Canadians to basic telecommunications service.

The establishment and operation of a fund to support access to basic telecom services in the competitive environment is essential if we are to respect the policy goals set out in clause 7 of the bill. It is truly ironic that one of the first and most tangible effects of competition in this industry has been higher rates for basic residential telephone service. We commend the commission on its recognition of the need for a fund through which to ensure Canadians living in high-cost areas face affordable prices for basic service, and on its recommendation that another fund, or the same fund, may be needed in the future to ensure low-income Canadians can continue to afford basic service.

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The commission must have regulatory authority over whatever body is established to operate this fund or these funds; hence we fully support the inclusion of proposed section 46.6.

At this point in time, it is possible to identify numbering resources and high-cost area funding as matters that may best be handled by a third party over which the commission should have regulatory oversight in order that our policy goals are achieved in the most efficient and effective manner. However, other matters for which the exercise and/or delegation of commission powers is appropriate may well arise in the future.

For example, it's clearly in the public interest to have a single, comprehensive directory assistance database for use by all service providers and all consumers. Such a database may be most efficiently and fairly administered by a neutral third party. As with numbering and portable subsidies, this is not explicitly provided for in the current legislation.

Similarly, the provision of 911 emergency services in a competitive environment may best be handled through an independent body, subject to commission oversight, but the existing statute does not appear to provide for such an approach even if it would be the most efficient.

Another example is that of dispute arbitrations between competing carriers. As competition increases, so will disputes between carriers.

Industry working groups in which we are involved are currently considering different approaches to dispute arbitration, one of which is for the commission to mandate the use of a private arbitrator in the case of customer transfer disputes, for example. In such a case, the commission may wish to delegate its powers of dispute arbitration.

These are just a few examples that we can think of now of valuable activities that may not be permitted under the existing legislation. Who knows what will arise in the future? Given the fast pace of this industry, we can assume that new matters involving the provision of telecommunication services and for which the commission's existing powers are inadequate will arise and demand action.

If there is no provision allowing for the administration of such new activities by the commission or for the delegation of commission powers other than numbering and fund administration, then we may be limited to a less efficient, less orderly, and less competitive telecommunications environment. For this reason, we support proposed paragraph 46.1(1)(b).

In addition—and I stress “in addition”—we think the delegation powers set out in proposed section 46.2 need also to be broadened to cover all existing commission powers, not just those arising out of numbering or new activities under proposed paragraph 46.1(1)(b).

Moving on to another area in which we wish to express our particular support, reseller licensing, we strongly support using this opportunity to provide the commission with the power to regulate resellers, whether through licensing or otherwise. From the consumer perspective, there is absolutely no justification for distinguishing between different types of telecommunication service providers when it comes to basic consumer safeguards.

Under the existing legislation, the commission considers that it does not have the jurisdiction to regulate resellers directly. So while facilities-based service providers are required to respect rules protecting customer privacy, to provide certain important information to consumers prior to contracting for service, and to follow certain procedures when signing up customers so as to avoid transferring customers against their will, non-facilities-based service provides are free to ignore such requirements. That gaping disparity in consumer protection as between resellers and facilities-based carriers makes no sense. Consumers don't generally know, let alone care, whether the company they are dealing with owns its own facilities. Both companies, facilities-based and reseller, are engaging in the same exercise that involves the same risks to customer privacy, the same potential for insufficient or misleading information, and the same potential for error when it comes to transferring a customer's line. Where the same potential problems exist, the same consumer protection regimes should apply. There is no reason why resellers should not be subject to the same consumer protections as our other service providers operating in Canada. It is therefore essential in our view that the commission be provided with the tools to apply consumer safeguards to resellers.

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The proposed licensing power, drafted to cover both domestic and international resellers as well as facilities-based carriers, provides such an opportunity and therefore has our support. We do not believe this section should be narrowed to cover only those providers of international services. That would leave the commission in the strange position of being able to regulate facilities-based carriers and resellers of international service, but not resellers of domestic service. Nor do we think the licensing provision should be narrowed to cover resellers only. The commission should have as much flexibility as possible in determining the most efficient and effective way of regulating facilities-based carriers where necessary.

Should the licensing power be redrafted to cover international service providers only, we submit that the existing section 24 should be broadened to cover resellers as well as facilities-based carriers. In this way the commission would be able to impose consumer safeguards directly on resellers. The domestic reseller gap would be covered.

It is essential from the consumer perspective that the commission has the power to impose conditions directly on resellers as well as on facilities-based carriers. It should have the ability to enforce those conditions, whether through licence revocation, court orders, prosecution, or other means.

Marie.

[Translation]

Ms. Marie Vallée: Thank you, Philippa.

Lastly, we cannot refrain from mentioning a rather blatant omission: indeed, there is no definition given for the new terms "basic telecommunications services". In passing, in case it has not been mentioned yet, in the French text, the word "basic" has been forgotten.

We believe that the reason for this omission is that the concept is constantly changing and that it therefore must not be engraved in stone. We agree on the fact that the commission should have the freedom to define the concept as it sees fit at any given point in time.

We believe it would be appropriate to outline what is involved here in the definitions section of the bill. Why not be more explicit on the notion of a constantly evolving concept and on the role of the commission in the area of definitions? It could, for example, be stated in the bill that basic telecommunications services must be defined by the commission periodically, by request from an interested party or of its own initiative, and that these services should include those which are necessary for a person to participate fully in Canadian society.

In this way, you would ensure that the concept is clearly entrenched in a basic principle, that of access—I am certain that this is not a new word for anyone here in this room—, that the elements included in basic service would be changed from time to time and that the commission would have the duty to ensure that the definition of basic service remain up-to-date.

We thank you for your attention and we would be pleased to answer all of your questions. Thank you.

[English]

The Chair: Thank you very much, Madam Vallée.

Mr. Lowther, do you have any questions?

Mr. Eric Lowther: Yes, I have a couple of questions.

I notice on page 3 of your submission that you talk about the need for the commission to have these powers so we'll have a more orderly environment, one that is more efficient, more competitive, and all that kind of thing. It makes the case that CRTC oversight will lead to a more efficient, more orderly, competitive environment.

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That's your position there, as I understand it. I see you nodding, so I guess I'm on the right track there.

Yet you want to have CRTC involvement in overseeing the protection of customers against being signed up against their will, customer privacy, not moving customers around between services without their knowledge. I would suggest other legislation is in place to protect customers from misrepresentation of what they are buying or what they have signed up for, or not being totally informed about fees. Legislation is already in place.

I would put to you that if you want to layer on this new licensing regime and expanded control of the commission in order to protect consumers and provide the cost-benefit of lower services to consumers, there are going to be some costs in setting up the licensing structure. Some costs are going to be involved in having the commission work through every dispute between licensed parties who say, “Well, he's not adhering to his licence and I am and we want you to come in and regulate it and arbitrate it, CRTC”. All the costs of layering on a new level of licensing and policing and arbitration are going to be worked back into some sort of public tax-funded cost or potentially carried by the consumer back through the people who are paying for these licences.

It almost seems as if you really are working against the best interests of the consumer. Calling for more control and more licensing of the CRTC actually is working against your long-term best interests, I would suggest to you. I would be open to some feedback on that.

Ms. Philippa Lawson: To begin with, with respect, your understanding of the existing legislation is not entirely correct. There is no legislation currently protecting customer privacy. There is no legislation protecting customers from being transferred against their will. The Competition Act provisions against misleading advertising do not seem to be used or are particularly effective in the area of telecommunications. I'm not entirely sure whether that's because it's a grey area, the legal question of whether the Competition Act applies to a regulated industry, or why exactly that's the case. In any case there are areas such as customer privacy and what is known as “slamming” in the industry, transferring customers without their will, which are not covered by existing legislation and for which the CRTC is the only body consumers can turn to for recourse.

The other point is that these matters are already being regulated through industry involvement, self-regulation, and CRTC oversight. What we're talking about is levelling the playing field. It's saying we have rules out there that are applying to everyone else; the problem is they just don't apply to this particular class, resellers, and they should.

So we're not actually talking about a lot more expense or regulation. We're just saying if you're going to have it, have it apply to everyone. We think you should have it, of course.

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Ms. Marnie McCall (Executive Director, Consumers' Association of Canada): The only addition I would like to make is that if these protections are not there for consumers, then in the long run the cost will be a great deal higher. There's a chance here to take a very small step that will have a great benefit, and the risks of not taking that step will be much greater.

Mr. Eric Lowther: I guess my only comment is that we've been operating without licensing regimes over resellers for some time now. My understanding is that consumer protection laws on consumer information and privacy of information cover a quite broad range of business activities. I'm not aware of any blatant problems that we're trying to police through new regulation. It seems to me we're saying, well, this might happen, so let's layer on this licensing; as opposed to, gee, we have a problem and the only way to deal with it is by licensing. It's sort of the chicken and egg argument, I think, but I'll leave it at that.

The Chair: Mr. Bellemare.

[Translation]

Ms. Marie Vallée: Just a moment, please. I would like to mention to the member that consumer protection laws come under provincial jurisdiction and that at the FNACQ we have received complaints from consumers who had problems with long-distance resellers and who phoned the Office de protection du consommateur only to be told that it was a matter under federal jurisdiction and that the Office did not deal with that and therefore did not protect consumers. I do not know what the situation is in the other provinces, but I can tell you that that is how it is in Quebec.

Ms. Francine Lalonde: In the area of communications.

Ms. Marie Vallée: Communications are under federal jurisdiction; we do not deal with them.

[English]

Ms. Philippa Lawson: I'd like to make another point in response to the last comment made by the member.

In fact, there have been a lot of consumer problems with resellers. In particular, when new companies are trying to start up and gain customer base fast, there has been actually a tremendous amount of customer confusion, annoyance, and worse. A lot of people have been getting switched without their knowledge, let alone consent.

There's a lot of customer confusion and there are a lot of problems out there, and when you look south of the border to a more competitive environment in telecommunications, it's very striking to us how many more problems consumers often have with resellers who are small players than with the larger, more established players. If you look at the statistics, it's quite striking. There are a lot of problems.

[Translation]

Mr. Eugène Bellemare: I wish to congratulate you for your very good presentation and to thank you for having brought out the fact that the Government did not contact you regarding this matter. It seems that the bill will help Canadian industry, but perhaps in this whole game we have forgotten about the consumer's point of view.

Madam Chair, I would ask that, at an upcoming meeting, our researcher react to the comments made this morning by the Fédération nationale des associations de consommateurs du Québec and the Public Interest Advocacy Centre in order that we might recommend, if necessary, amendments to the bill so as to protect consumers.

If the Department officials are here—and I believe they are and, in any event, they should be—, I would like them to take note of the fact that from now on the consumers are the Canadian people. The Canadian industry is indeed Canadian, but if we did not have consumers, we would not have theses industries. The comments, questions and concerns of consumers, and especially those of voluntary groups such as the ones that are here with us today, should always be heard. This is a criticism I would have about the Department.

Secondly, regarding basic services, you stated that in the French text the words "de base" were missing. Did I understand correctly?

Ms. Marie Vallée: That is indeed what I said.

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Mr. Eugène Bellemare: Are there errors elsewhere?

Ms. Marie Vallée: No, that is all that I found, and I read the text carefully.

Mr. Eugène Bellemare: Madam Chair, I would like this to be noted and the correction made.

Ms. Marie Vallée: It is at proposed clause 46.6.

Mr. Eugène Bellemare: Concerning advertising, you mentioned the confusion of consumers. We all, while watching television, be it during cartoons, the news or sitcoms, have been bombarded, I would say, by ads for long-distance telephone service. Now, we are going to have international services and we are going to be bombarded with all of that.

Last night, I had the opportunity to meet with representatives from several telecommunications companies who admitted that consumers were indeed confused when they heard things like: If you move over to us, you will pay only 10 cents for every 10 minutes. Another ad might tell people: we can do better; you will only pay 5 cents if you spend the whole weekend on the telephone. People are starting to feel lost. What does that mean exactly? We know that, if we only pay 5 cents to phone on the weekend, we might have to commit ourselves to paying out a fortune for the rest of the week.

I met the director—I will not state his name because he is not here to give explanations—of one of the telephone companies in a province other than my own, and he told me that people were completely confused, that they often changed contracts for long- distance calls and that the company had to then call the customer up and say: you made a mistake; you did not understand what you were told; our program is better. The customer could even be told: given that you are a good customer, we could perhaps even change our program to accommodate you.

Now we are going to see the very same problem arise on a different and perhaps even greater scale with the passing of this new Telecommunications Act. Would you have any comments to make in that regard?

Would you have recommendations for us in view of our changing the bill further, so as to protect the consumer in the midst of all of the information he or she gets?

Ms. Marie Vallée: We have already made recommendations to the CRTC with regards to local service and we believe that the advent of competition in the area of local service will wreak havoc during the first years because there will be much confusion in the supply. The offers for long-distance service are not easy to compare and those for local service will not be any easier to compare. If we have competition for international service, the situation will be the same: here again, it will not be easy to compare the various offers.

We have suggested to the CRTC that it establish a formula enabling consumers—because consumers will have to do their part— to shop around easily and to compare the various services.

I believe that if these recommendations are followed, there should be no need to add anything to the Act. There are numerous initiatives and discussions underway to ensure that the transition to a more competitive market be done in an orderly fashion, as much for the companies, who would like to see their risks diminished, as for consumers, who are supposed to be the first ones to reap advantages from this type of thing.

I do believe that there is a tremendous amount of confusion. Five years after the arrival of competition for long-distance service, we still get calls everyday from consumers asking: should I stay with Bell? Should I go to Sprint? Should I go to AT&T? Should I take this service rather than another? It is not easy. It is a new world and we must really emphasize the need to inform consumers.

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[English]

The Chair: Ms. Lawson, do you have a comment?

Ms. Philippa Lawson: Just to add to Marie's comments, the issue you're raising is one of consumer information, which is absolutely critical if the competitive market is going to work.

What are market forces? In theory, market forces are consumers acting upon full information. It is absolutely essential that the CRTC, the government, and consumer representatives like us do everything we can in our power to make sure that consumers are as well informed as possible about the options available to them.

As you pointed out, it's difficult to compare, and we understand that it's difficult to even come up with a single chart in order to be able to compare services. I think there may be a more active role for the Competition Bureau to play with respect to misleading advertising here.

We're certainly planning to try to work more with the CRTC to help them get out that needed information, and possibly with the Competition Bureau as well. We're planning to be maybe a little more active in doing something about the misleading advertising and misrepresentative marketing that does go on in this industry.

The Chair: Thank you, Mr. Bellemare.

[Translation]

Ms. Lalonde.

Ms. Francine Lalonde: Thank you so much for your brief and for your explanations. I must say that I found them comforting, because I have several times already brought up the issue of privacy protection. As a matter of fact, at second reading, I stated that the Bloc supported the bill in general because it establishes increased regulatory powers in this world where things change so quickly, and I also stressed the extreme importance of privacy protection legislation. I was unaware at the time of the answer given to you by the Consumers Protection Bureau, so I now have an additional argument to use.

You say that we must deal with this. Do you believe that we could achieve that through this bill or that we should rather use a more general act providing protection for personal information, as long, of course, as we respect the powers of the various jurisdictions? In those areas that presently come under federal jurisdiction, would it not be preferable to have general legislation? I do however know that we should not be taking chances either.

Ms. Marie Vallée: Ms. Lalonde, one of the aims already contained in the act, is to protect personal information as much as possible in the area of telecommunications.

Furthermore, we are aware of the Government's stated intent to pass a law before the year 2000. We therefore believe that a personal information protection act should be a framework law the applications of which would be developed by sector. I believe that the present protection measures as set out in the Telecommunications Act should suffice, given that the CRTC has already shown considerable good will in recognizing that personal information should be protected in the area of telecommunications.

For the time being, that satisfies us. We will obviously be very vigilant and we will have to see how things develop.

Ms. Francine Lalonde: As long as consumers are protected from resellers.

Ms. Marie Vallée: As long as the rules apply to all of the players and are the same for everyone. Just because you do not own the cable lines or the switches does not mean that you have fewer obligations towards the customer. It is in that sense that we have supported the licensing of resellers.

Ms. Francine Lalonde: Very well. That helps me because what that means is that if, on the Government side, there is thought of abandoning that, resellers will absolutely have to be covered.

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I hope that my colleagues from across the way are following this and that they will take it into account, because it is obvious that within a few years' time we will be moving from an extremely regulated market to a market where, despite the existence of the CRTC, the players will be very numerous, at least at the outset, before things settle down as they usually do in capitalist markets and broad areas such as this. However, it is clear that we must find the means to protect consumers.

I would like now to talk a bit about basic services. You have a proposed amendment in this area. We will have to see if we could pass it as is. In any case, that is what I am leaning towards. I too had noticed that in clause 46.6 the word "basic", contained in the English text, had been dropped in the French. However, in the French version of clause 2, basic telecommunications services are defined.

I would like you to insist with your message, namely that with the changes that have taken place, in particular the increase in basic telephone service fees, lower income people are having trouble covering these extra costs, even if it might not seem like much for someone who earns an average or higher salary.

It is a fact that there has been a dramatic change over a relatively short time-frame. That is what you talked about. You are using this bill to say that we should predict what is going to happen with the basic telephone services costs and cover these services, which we are doing in clause 46.6.

Ms. Marie Vallée: We believe that there should be a definition of what basic services are and that basic services should be included in what are defined as those services that are necessary to be able to fully participate in Canadian society; and that may mean one thing today but it will probably mean something else in two years and something else again in five years.

Furthermore, we would like there to be a definition, because over the course of the last five years, we have noted a marked erosion of basic services. Take, for example, the 411 service, which is directory assistance, and other such services. People are being overcharged for repair services, etc. If you like, we could supply you with quotes from some of the briefs we have tabled with the CRTC in the past.

We therefore believe that the commission should from time to time, when it believes it is necessary or upon request, define what basic service is. If we must subsidize the service in high-cost regions or for the economically disadvantaged, then we should know exactly what it is we are subsidizing and we should put a stop to the erosion of services and perhaps even add on new ones.

It is in this sense that we believe it is important to include in the bill a definition and to state that this definition will be revised and that it will be the commission's responsibility to ensure that it is constantly updated.

[English]

The Chair: Last question, please.

[Translation]

Ms. Francine Lalonde: Yesterday, the Canadian Bar Association told us that in its view it would be dangerous to overstep, in clause 46, the delegatus non potest delegare principle, because in its view the CRTC is seeing powers delegated to it, but cannot in turn delegate them to someone else.

• 1050

We understand this fear if the power is delegated without any control being exercised. However, there is nothing in the text as it stands that provides for supervision once the power has been delegated. I would ask you to look at that and to help me formulate something in this area, because the concept you mentioned is that of a delegation of powers, under supervision, to a neutral organization. What I heard during our meetings is that it could be a private company rather than a neutral organization in certain cases.

It seems to me that the power to delegate authority should be more tightly framed. What is your view?

[English]

Ms. Philippa Lawson: We haven't proposed any specific amendment here. We have kept in mind that proposed section 46.2, as it is currently drafted, does allow the commission to review any decision of the delegated body through proposed subsection (3), because any decision of the body is treated as a decision of the commission and is therefore subject to a review and variance by the commission.

But I think what you're asking is whether or not we could have a stronger and more preliminary oversight by the commission. I think that's something I would like to take back to consider, and I'll get back to you on it.

[Translation]

Ms. Francine Lalonde: It is provided for that the commission be empowered to revoke any delegation of authority, but there is no oversight in the process. If you believe that would be advisable, then it seems that it should be done. Without that, the commission is an intermediary and can, after a certain period of time, revoke its decision. However, it is not at all the same thing as an organization that would act under the supervision of the commission.

[English]

Ms. Philippa Lawson: You're correct about that, and we don't have a specific proposal. I guess our general point was that we think the commission should have the flexibility it needs to come up with structures or ways of operating in the new competitive environment that are the most efficient, the most orderly, and that result in the most competitive environment. We're just concerned that we may run up against a legal problem that has to do with their inability to delegate.

Perhaps we could think about this a little more and get back to you if we have a more specific proposal.

The Chair: Thank you, Madame Lalonde.

We have to move on to our next witnesses, but I appreciate that you came before us today and took the time for your presentation. It has been very interesting. Thank you very much.

Ms. Philippa Lawson: Thank you.

Ms. Marie Vallée: Thank you.

The Chair: Everyone should have a brief from GeoReach Telecommunications. Does everyone have that before them?

Mr. Tacit, go ahead whenever you're ready.

Mr. Christian Tacit (Tacit and Traynor, (Barristers and Solicitors), Counsel, GeoReach Telecommunications Inc.): Thank you, Madam Chair. My name is Chris Tacit, from the law firm of Tacit and Traynor, and we're outside counsel to GeoReach Telecommunications Inc.

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For those of you who aren't familiar with the company, GeoReach is, or will be shortly, a new entrant in the international telecommunications market. The company was founded by Mr. Michael Kedar, who may be known to you. He has also been involved in starting up other companies, some of which have become quite well known now, such as Call-Net and MicroCell.

First of all, I'd like to thank the chair and this committee for the opportunity to make these submissions on behalf of GeoReach and to indicate that we certainly support the liberalization of trade in telecommunications services and the initiatives the government has put forward in that respect.

To that extent, we're certainly supportive of Bill C-17. However, we do have a concern with the bill as it's currently drafted. Specifically, we share the concern that's been expressed by a number of parties with respect to the licensing regime it's proposed for telecommunications service providers.

I don't want to belabour the point—I know it's been made repeatedly—other than to highlight a few other factors that we believe are important.

Looking at the context for international telecommunications services, we believe at GeoReach that it's important to recognize that in fact there is quite a bit of competition in the provision of international telecommunications services. Although we don't think of it as such, the exchange of traffic between Canada and the U.S. is international telecommunications, and to that extent the rules that apply work quite well. The fact that we're now adding the incremental overseas traffic in our view shouldn't necessarily change the fundamental legislative framework beyond what is, strictly speaking, necessary to meet Canada's obligations under the GATS.

The other thing we would observe is that the minister already has licensing powers in respect of international submarine cables under the Telecommunications Act and satellite earth stations under the Radiocommunication Act. We wonder why it's necessary to overlay yet another licensing regime.

Historically the provision of telecommunications service in Canada was provided by monopoly service providers in an environment that didn't involve any degree of licensing. As competition was introduced in various market segments, the commission used the powers it had initially under the Railway Act and now under the Telecommunications Act to foster climates of fair and sustainable competition in these markets.

While one can always agree or disagree with various rulings the commission makes—and we know how effective it is in doing various things in certain situations—I don't think there's been a general sense in the industry that the commission doesn't have the powers it needs to do the job it has to do. In that context, we wonder why it's necessary at this point to add another licensing regime. We believe it isn't.

To be more specific in terms of the commission's powers as they now exist, competition in various market segments has basically taken place using two mechanisms. The first is by way of interconnection whereby the commission has allowed new entrants to interconnect their facilities to the facilities of other carriers already in business. The other mechanism is the resale and sharing of facilities and services offered by incumbents.

Now, in addition to the actual enforcement provisions specifically included in the bill that give the commission the power to ensure that carriers adhere to the requirements of the bill in the commission's rulings, the commission also holds a very big stick by being able to force disconnection of offending carriers as the ultimate penalty for non-compliance. That to me seems very much like revocation of a licence.

Similarly, with respect to resale and sharing, the commission can order the companies providing services to a reseller to stop providing the services. Once again, that seems very similar to a revocation of a licence.

So to that extent, the commission, although we don't call it a licensing power, implicitly has the same ability to put somebody out of business for not adhering to terms and conditions that the commission sees fit.

• 1100

In 1993, when the Telecommunications Act was enacted, there was a specific conscious decision not to include resellers in the act. I don't think at this point there's any need to revisit that decision. There's nothing compelling to require that. As we say, the commission has sufficient regulatory jurisdiction, although it can exercise it only in a somewhat indirect manner, over resellers. So in that respect we don't support amending section 24 of the act to read telecommunications service providers or to introduce a broad licensing regime.

The other two reasons I've heard for parties trying to justify the introduction of a licensing regime are somewhat narrower. Some parties have said, well, other countries may have monopoly carriers, and if we don't have a way to regulate them and how they interact with us we might become abused by them, especially those countries that are not members of the WTO.

Once again, to that I would answer by saying the commission, through its interconnection jurisdiction, does have the power necessary to prevent these kinds of abuses. The reality is that if indirect means are used to circumvent Canadian law, all the licensing powers in the world aren't necessarily going to solve those anyway; whereas if direct means are being used, the commission already has the tools it needs to do that job.

The other reason I've heard given is that the commission may wish to allow competitive local exchange providers who are resellers and it needs some way to get a handle on them. The reality is that the CRTC in its local competition decision largely favoured facilities-based competition as opposed to resale competition. To the extent that the commission does believe, however, that resale competition is appropriate, once again it has the necessary tools, just as in the case of resale of other services, to deal with this matter.

Finally, because we don't believe international telecommunications from the perspective of commission powers are qualitatively that much different from domestic, there's no particular need to impose a universal regime. If certain issues need to be addressed very specifically, or if the commission needs a particular narrow power to deal with a situation, then we believe that should be the focus of the amending legislation, but not a wide, sweeping, licensing regime.

In conclusion, the two messages we have are that the minister already has licensing powers in this area for provision of international services through cable licensing and satellite earth station powers. The commission has all the necessary enforcement tools it needs under the Telecommunications Act and by virtue of the fact that it can order the terms and conditions of interconnection and resale and sharing. If we're truly going to maximize reliance on market forces and ensure that regulation where required is efficient, as required by the Telecommunications Act, I don't think overlaying another licensing regime is necessarily the way to do it.

Thank you very much for your time and attention. I'll be pleased to answer any questions any of you may have.

The Chair: Thank you very much, Mr. Tacit.

Mr. Lowther.

Mr. Eric Lowther: I was very interested in your presentation.

If I understand it right, GeoReach is one of the players that would like to compete in the international telecommunications marketplace.

Mr. Christian Tacit: That's correct.

Mr. Eric Lowther: Are you already competing in that marketplace in other places?

Mr. Christian Tacit: No, we're not. GeoReach does have affiliates in other jurisdictions, but it itself is not competing anywhere.

Mr. Eric Lowther: The basic premise of what you've put before us here—this is for everybody's benefit, and especially mine, because I wasn't hearing all you had to say here this morning—is that there is really no need for any licensing, because we already have in place all the administrative powers within the CRTC and current legislation to restrict any bad players. In fact, if there are some specifics that crop up, target whatever you need to those specifics rather than have a whole new infrastructure related to all its costs and maintenance and everything else to sort of control some unknown terrible circumstance that might crop up. Is that right?

• 1105

Mr. Christian Tacit: That's correct. That's essentially the message. The commission has the powers it needs and it has been using them. To the extent that some things may not be easy to police, they're no easier to police simply because you have a licence. If they are matters that can be policed, so to speak, the commission can today order disconnection or order an underlying facilities carrier to stop providing a reseller services and facilities in the event that it believes the breaches are sufficiently serious. To that extent, those powers are already implicit in the commission's jurisdiction.

Mr. Eric Lowther: Do you have a position at all on the extended administrative powers that the legislation is calling for, particularly with the North American numbering scheme and the funding for the other aspect?

Mr. Christian Tacit: We certainly prefer it to be in neutral hands and in the hands of a body such as the commission, which has the public interest as its primary mandate, as opposed to having numbering, for example, being looked after by any one market participant. So to that extent, in a broad sense we're certainly supportive of putting those powers in the commission's hands as opposed to either having a vacuum to the extent that they're needed or leaving things like numbering, for example, in Stentor's hands.

The Chair: Thank you, Mr. Lowther.

Mr. Murray.

Mr. Ian Murray: I understand your point, but if we go ahead and include licensing in this bill, is that going to cause major problems for your client? Is that going to put real roadblocks in its way or is it just the annoyance of having to apply for a licence?

Mr. Christian Tacit: I come at it from the other side. If there is a demonstrable need for licensing, then we should have licensing. I don't think we should start out from the premise of “let's licence it” if it doesn't seem to interfere too much.

The reality is that any licensing regime, to the extent it isn't warranted, is an inefficiency and a burden on the economy and on the specific players involved, even if all it does is create delays in entry or market expansion or costs of participating in the process, costs of watching everybody else's licensing process...because then you get into the regulatory gaming issues and all of those things. Why have it unless there's a demonstrable need for it at the outset?

Mr. Ian Murray: Sure, except that there is another body of opinion that believes we need licensing. I'm going to come back to what the impact would be on your client.

Mr. Christian Tacit: The impact on us is very uncertain, and in terms of trying to attract capital that's a very big problem for an upstart company like GeoReach.

Mr. Ian Murray: Wouldn't it be easier if they were able to obtain a licence?

Mr. Christian Tacit: Not necessarily. For example, at the end of the day all we're telling the commission in this legislation—if it's enacted the way it's been drafted—is that it should figure out what classes of services and providers it wants to license and go ahead and do it in the fashion it sees fit to do. For a company trying to get funding now, that's not necessarily a very comforting message. There's a lot in there that's subject to uncertainty, and business hates nothing more than uncertainty.

We know what the commission's powers are now. We have the jurisprudence of how the commission has exercised those powers, so to that extent, parties, consultants, and lawyers are able to advise their clients in a reasonable manner on the regulatory risk of doing business in Canada. This introduces another layer of cost and complexity and could interfere with the capitalization of new entrants. There's no doubt about it.

Mr. Ian Murray: I guess I'm missing something here. I'm not clear on why this is such a big problem for a firm that aspires to be in this business. Are you suggesting that firms that may appear to be unable to compete in the eyes of the CRTC wouldn't have a chance to get up and running just because they'd be shut down from the very beginning?

• 1110

Mr. Christian Tacit: It's more basic than that. As I said, there's the uncertainty of not knowing how this legislation will be implemented once it's passed and if it is passed in its current form. In order for this legislation to have meaning, the commission will have to have a process. It will seek public comments on what classes of licences, terms and conditions, and service providers we should have. In a sense, it would duplicate the very proceeding the commission currently has before it on the introduction of international telecom competition, except there would be an additional delay of having the process restarted.

We're facing the introduction of competition in October 1998, so we don't believe it's reasonable to introduce another delay in that way. If nothing else, it will delay entry. There's no question in my mind it will.

Mr. Ian Murray: Thank you.

The Chair: Thank you, Mr. Murray.

[Translation]

Ms. Lalonde, please.

Ms. Francine Lalonde: Welcome. Your brief was submitted only in English and this annoys me. I suppose you are not a small company and surely you can afford to also communicate with those parliamentarians who are French-speaking.

I would like to know who this company is.

Mr. Eugène Bellemare: This is wrong.

Ms. Francine Lalonde: What?

[English]

The Chair: Mrs. Lalonde is asking a question, please.

Mr. Eugène Bellemare: But she made a comment about language that I don't appreciate. People who come here, whoever they are, if they are not from a federal institution, may make presentations in either French or English.

[Translation]

If it were a francophone organization that could not afford to have its text translated into English, it would be up to us. But to tell a Canadian...

Ms. Francine Lalonde: This is not a Canadian; this is a company, Mr. Bellemare.

Mr. Eugène Bellemare: ... or a Canadian company that they must absolutely please Ms. Lalonde... It is rather up to us, here, to provide the translation service. People who come before us have a right to make their presentation in one of the two official languages. If they have the ability to provide their briefs in both languages, that is fine and that is what I would prefer, but we have no right to take them to task if they don't.

Ms. Francine Lalonde: Thank you, Mr. Bellemare. I, for one, respect your freedom to speak and I would ask you to respect mine. I maintain that a company that wants to be an international carrier in the area of communications should be able to provide its brief in French and I will say so. I did not say it yesterday to the gentleman whose name eludes me, to this distinguished university professor, because he was an individual. But when we are dealing with a company, I am sorry, but I expect as much.

[English]

Mr. Christian Tacit: My French isn't very good.

[Translation]

Ms. Francine Lalonde: I don't mind, Sir.

[English]

Mr. Christian Tacit: I finished this last night. If it would be helpful to the committee to provide a translation, we will certainly do that.

The Chair: Madame Lalonde, just to clarify for the record, every witness has the right to come before us and present a brief in either official language. It does not have to be in both.

There is a problem—the clerk and I discussed this—with the rule that we are to try to provide translation. It's very difficult to provide translation of briefs that come in in only one language, so it takes some time. Because of the tight timeframe...we know you are one of our later witnesses and you did not have the capabilities to do this. So I apologize for things not being done.

[Translation]

Ms. Francine Lalonde: Sir, would you explain to me who GeoReach Telecommunications Inc. is?

[English]

Mr. Christian Tacit: GeoReach Telecommunications is a company founded by Mr. Mike Kedar to provide alternative international telecommunications services once Teleglobe's monopoly ends.

It has participated in proceedings initiated through the Canada Gazette process before Industry Canada for the past two years, seeking greater liberalization of these markets and the opening up of competition. It's now participating before the CRTC in the regulatory framework that will establish the terms and conditions for competition in this market segment.

• 1115

[Translation]

Ms. Francine Lalonde: Do you already own submarine cables or do you propose to use...

[English]

Mr. Christian Tacit: GeoReach itself does not, but one of its affiliated companies, TeleBermuda International, does.

[Translation]

Ms. Francine Lalonde: Okay. I would question what you said about the lack of any need for licensing, especially of resellers. You say the CRTC has the power, at least indirectly, to disconnect a carrier in the event of a serious violation.

To govern is to anticipate what might happen. The legislator needs to look ahead. It is our responsibility in this period of tremendous change to ensure consumers will be protected. It is not enough to say: If serous problems arise, we can disconnect. This is not an adequate response, especially since Quebeckers and Canadians are used to services provided under a monopolistic regime. I would like you to amplify on this issue.

[English]

Mr. Christian Tacit: The reality is that, whether you have a licensing regime or not, the commission has to make a decision about at what point a breach of a consumer interest is sufficiently serious to warrant pulling the plug. So I don't think you'll get around having to have the commission have a process and make that determination, whether you use licensing or not.

I agree with you: we need to protect consumers. When I said serious, I didn't mean to imply that there are less serious ways of abusing consumers. That's not my intent. All I'm saying is that there is a range of consequences for inaction or wrongful action or negligent action, or whatever. These can range from a reprimand all the way to having the plug pulled. Certainly, if somebody was deliberately abusing consumers, we wouldn't expect the commission to be very tolerant of that, whatever regime is adopted.

So if licensing is seen as being a quick way to fix this, I don't think it is, because procedural fairness and natural justice require the commission, when it's about to revoke somebody's licence, to give them an opportunity to be heard. Chances are there would be interventions by other parties. It's not just an automatic process, with the commission saying, oh, you did this wrong, tomorrow you're out of business. They still have to make that decision, whatever mechanism they use. We're not arguing about whether the commission should have the power to make that decision; we're just saying that they can already do it and we don't need another mechanism.

[Translation]

Ms. Francine Lalonde: You did not really answer my question, because you just talk about serious breaches. When a license is granted, it is a privilege given to a business in exchange for commitments. The company knows, when it is granted a license, what conditions it has to meet. So it is not the same thing as a market where you can do what you want as long as you do not get caught, a market where you stay in business as long as there is not an inordinate amount of complaints. It seems to me that in an area that is so important in terms of privacy the rules of the game should be clear and that only then can private carriers be allowed to make use of a public good.

Besides, the CCA came here to advocate the licensing of resellers. In their view, it is a good way to ensure fairness in the market.

[English]

Mr. Christian Tacit: I think you made two points, and I'll try to address them each in sequence.

First of all, competitive carriers today are required to identify themselves by registering with the commission and with carriers from whom they obtain services.

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So I don't think the fact that you have a licence or don't allows carriers to hide. Any carrier not declaring itself in business would be breaching the law anyway, so they're there. The mere fact that they have a piece of paper doesn't make enforcement any harder or easier. It doesn't automatically give the commission the ability to see what they're doing any more clearly.

And the rules of the existing regime are known. There is a regime in place. It's fairly clear. I understand it, as somebody advising people, and I can tell them what this means to them. I can't tell them what this licensing power will mean to them, and that's the problem my client has with this.

As for ACC's particular request, we certainly have no objection to resellers getting into local markets. That's not our position and we don't object to that. I think ACC's issue stems from the fact that they felt left out by the local competition decision and they're trying to find a way back in. The commission may or may not decide that as a reseller they should or shouldn't participate in that market in particular ways.

I don't think the licensing power is necessary one way or another. In fact ACC has an application before the commission to have the local competition decision reviewed and varied to give it the ability to compete on more similar terms to those on which facilities-based carriers will compete. If they're successful in their application, the licensing will be redundant, and if they're not successful in their application, that tells me the commission is unlikely to create a class of licence that's going to let them operate the way they want anyway. So again, I don't see the benefit.

[Translation]

The Chair: Thank you, Ms. Lalonde.

Ms. Francine Lalonde: Thank you, Sir.

[English]

The Chair: Mr. Tacit, I want to thank you very much for coming to us. I know it was short notice and we appreciate your presentation. It's brought another view to the table.

Mr. Christian Tacit: Merci beaucoup. Thank you.

The Chair: Thank you very much.

Could I ask Mr. Denton from the Canadian Association of Internet Providers to now come and join us at the witness table? It's my understanding that the clerk is reproducing copies of Mr. Denton's statement to us as we speak, so they have not yet arrived. They will be arriving shortly.

With that, Mr. Denton, I'd still like to ask you to begin. We are running a bit behind.

Mr. Timothy Denton (Counsel, Canadian Association of Internet Providers): Good morning, ladies and gentlemen. Bonjour, mesdames et messieurs. I'm Timothy Denton and I'm the regulatory counsel to the Canadian Association of Internet Providers. That association is commonly known as CAIP in the business.

Founded at the beginning of 1966, CAIP is the principal national organization representing the commercial Internet service provider industry. We include all the larger national and regional Internet service providers in this country. Our membership is over 80 firms now, and it's likely that our membership carries about 80% of the Internet traffic in this country. Our members consist of telephone companies, telephone company affiliates, independent Internet service providers, and cable companies and others wishing to get into the Internet access business.

Complete information on our membership, policies, boards of directors, meetings, and everything you want to know is established on our website, which is “caip.ca”. You'll find reference to it when the printed part of the speech is delivered.

As time is short, I will speak to the issues that concern members of CAIP in Bill C-17. We will not be addressing issues related to the reorganization and divestiture of Teleglobe Canada, nor the parts that deal with equipment certification. Likewise, the granting of authority to the CRTC to deal with the North American numbering plan is outside the scope of our comments.

So what are we concerned about? We are concerned about the licensing regime that is at the core of the proposed new Telecommunications Act. This is in proposed section 16.1 and following of Bill C-17. We have three points to make in relation to the bill.

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First, licensing reverses the previous policy of free entry. The new bill overturns the basic thrust of the previous 1993 Telecommunications Act, which liberalized entry into telecommunications. In the current regime, the one that Bill C-17 seeks to replace, if a person wishing to enter the telecommunications service business wants to, he needs only to conform to Canadian ownership regulations. He does not need to obtain a licence from the state to do so. In that sense, the bill is contrary to the generally liberalizing thrust of recent trade policy. We aren't aware, either, of significant public discussion on why the core of the previous act has to be replaced, why these tools are appropriate, and what the problem is that has to be solved.

Second, the bill greatly expands the potential for regulation of computer-based services. While the new bill says that a licence would only be required if a person wishes to offer basic services, the meaning of that expression is not defined in the bill. “Basic services” has been defined in treaties that Canada has signed, and the CRTC has also assigned a meaning to the term. Generally in the telecommunications business, the term is understood as real-time communication, where the content of the transmission is not manipulated in any way beyond what is necessary for a person to send or receive the signal.

Basic services are contrasted with enhanced services, which are generally defined as more than basic services. The kinds of services offered by Internet service providers have, in their short existence, always been considered enhanced services.

Why, then, are we concerned? The first reason is that the idea of basic service is a flexible regulatory and political concept capable of being expanded. We have noted, for instance, that in the final report of the Information Highway Advisory Council in 1995, the definition of “basic services” was considered to be expandable. Moreover, as the Canada-U.S. Free Trade Agreement shows, “basic services” means what the regulator says it means. The regulator having jurisdiction defines the term. We therefore have no assurance that the CRTC will continue to restrict the meaning of “basic” to the current limits.

Officials come and go, but legislation remains. The lack of definition in the bill gives the CRTC carte blanche to expand its regulatory activities as it sees fit. Our concerns about the expansion of regulation made possible by the new bill are further confirmed by the new definition of “telecommunications service provider” found in the bill. It states:

“telecommunications service provider” means a person who provides basic telecommunications services, including by any exempt transmission apparatus;

I shall not recite the definition of “exempt transmission apparatus” given in the Telecommunications Act. In essence, the term refers to computers. If we simplify to get to the essence of the matter, then we can say the current Telecommunications Act excludes computers from the definition of what is covered by the act. They do not constitute transmission facilities, the term of art that lies at the core of what the CRTC is allowed to regulate.

Taking these two factors together—a flexible standard of what constitutes basic services as devised by the regulator and an expansion of the Telecommunications Act to cover computers, read “exempt transmission apparatus”—the potential for regulatory expansion is enormous.

Third, we come to the problem. The key issue here is why. What is the problem that needs to be solved? We have heard from government sources that there must be controls on international resellers so that Canadians do not send their money overseas in some large, hidden subsidy to inefficient foreign telephone companies. Fair enough, but why the choice of these tools? Renegotiation of international settlement rates might be a more appropriate course of action.

• 1130

What concerns CAIP is the lack of apparent relation between the unstated goals of the legislation and the potentially vast expansion of regulatory activity made possible by its overly vague language. We have seen no compelling rationale that the liberalized telecommunications regime established in 1993 needs suddenly to be replaced by a licensing regime that, potentially at least, could include computer-based services.

That, ladies and gentlemen, concludes my comments. I'm available for questions.

[Translation]

I would be pleased to answer any questions you might have.

[English]

Thank you, ladies and gentlemen.

The Chair: Thank you, Mr. Denton.

I believe the clerk's going to take your copy now and make more copies. This is the only copy that was made for the interpreters.

Mr. Lowther.

Mr. Eric Lowther: Mr. Denton, the issue of licensing was the primary focus of your comments. You talked about the question of where the legitimate need for licensing is. I was a little bit unclear as to whether your comments on licensing were domestic or international. Are you questioning the need for licensing at even the international level at this point?

Mr. Timothy Denton: I think the need for international licensing is beyond the commercial or other interests of CAIP. I don't believe that I would go beyond our particular mandate and interests to speak to it.

Mr. Eric Lowther: Okay.

Mr. Timothy Denton: There may be legitimate reasons for it, but we have not heard of them. They may yet be explained.

At least as far as entry into the domestic market is concerned, by Canadian owned or just by Internet service providers, we seek a regime in which there is free entry into the business of Internet service provision. The current set of laws or lack of regulation thereof is perfectly appropriate.

What I'd like to point out in all of this is that everything we have seen in terms of the development of computers and computer communications and the fantastic advances of technology in business has occurred in a business that is totally unregulated by the state. Everything you see about computers, and the Internet is nothing but linked computers—all this has occurred outside the domain of regulation. It bears thinking about when we contemplate the difference between the traditional telephone business, which is rapidly undergoing changes to adapt to this revolution in affairs, and the computer business, which is initiating it. We would be loath to consider the idea that these forms of innovation and progress would somehow be made subject to a licensing regime.

The Chair: Mr. Lastewka.

Mr. Walt Lastewka: I want you to go back and just tell me the one or two points that you want us to focus on for the Internet association.

Mr. Timothy Denton: What we want to focus on is that we do not want entry into the Internet service business to be licensed in any way. Therefore we are very concerned about the definition of basic services in the bill, that there is not one. What constitute basic services can expand over time. We now consider certain portions of the cable business, for instance, to be basic. This is an expandable balloon of regulatory jurisdiction. The CRTC decides what basic means. It decides what basic means because there is not, in so far as I understand it, a definition in the bill of what basic means. Consequently, if they so chose, they could say that basic means some level of provision of Internet service, and there you go, it's licensed. So getting a grip on what basic means is our chief concern.

• 1135

Mr. Walt Lastewka: Does the CRTC define what basic is to yourself and to other users?

Mr. Timothy Denton: It has had a meaning within the trade. I have not seen a legal definition of it. The definitions in various treaties may differ by a word or so. Basically it has been understood to mean the real-time communication of a signal through a transmission path without altering it more than is necessary to get the signal through. You're not adding value, you're just communicating a signal.

Again, for want of any kind of definition of that word, that term, it may be expanded over time to include broader ranges of services that Canadians enjoy in the home or in business. We have already seen that when the Information Highway Advisory Council published its report in 1995 they noted the growth of the term “basic”; that over time something might be considered completely optional and an unknown and then it gets transformed into being a basic service as more and more households take up the service.

Whenever you delegate to a regulatory agency, it's a sort of governing program. You want, I would think, in terms of setting clear law, to give them a clear idea of what their boundaries are. Therefore, you don't want this expandable balloon called “basic” to become the basis of an expanding jurisdiction. One would want to know why they should be given more authority, and clear law is necessary, I believe.

Does that answer your question?

Mr. Walt Lastewka: Yes. Are there any other points you want to make to this committee?

Mr. Timothy Denton: I think the idea of licensing and the expandable balloon “basic” might turn out to be are the very points we want to make.

Mr. Walt Lastewka: Thank you.

The Chair: Thank you.

[Translation]

Ms. Lalonde, do you have a question?

Ms. Francine Lalonde: The Internet is a network that is becoming more and more powerful and even the standards recently introduced by the Minister show that the goal is to transmit eventually through television.

We know that the policy aims at convergence. More and more the Internet will cease to be this communication between two persons typing away on their computer in their basement.

This is how I understand section 1, especially since "exempt transmission apparatus" includes telecommunication switching devices. In my view, this is much more than communication between two private phones. It is true that those exchanges are a bank of computers but these switches, especially with the speed of development, need to be included under section 1 as physical facilities.

Could you define a bit more clearly what you would like to see excluded?

[English]

Mr. Timothy Denton: From the potential regime of licensing?

Ms. Francine Lalonde: Yes.

Mr. Timothy Denton: I think there needs to be a definition of basic services, because the act aims at basic services. I think greater precision in that is required. You have put your finger on the essence of the problem. If exempt transmission apparatus really, in crude terms, is computers and you have an expandable definition of “basic” that could include exempt transmission apparatus, you can see that it could balloon enormously into a very important enlargement of government regulatory control. One would want, first of all, to know what is the problem that needs solving, how do these tools address that problem, and therefore why we need this legislation.

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[Translation]

As far as I am concerned, I have not heard any convincing arguments in support of licensing. There has been no public debate on this issue. There has been no attempt in government reports to convince the nation that the state needs those powers. If, for example, as you mentioned, the Internet were used to carry television signals, it could well be that in the future government would need to regulate computer-based television but I would like a public debate to take place because this is of enormous importance. We have yet to get an explanation for granting these powers to the CRTC.

Did I answer your question?

Ms. Francine Lalonde: It seems to me what you are saying is that there might very well be a need but you would like a debate first. You are not saying there is no need.

Mr. Timothy Denton: I am not taking position on the need. I have my views, but I simply point out that it is an important issue.

Ms. Francine Lalonde: Thank you.

[English]

The Chair: Thank you, Madam Lalonde.

Thank you very much, Mr. Denton, for appearing before us today. We appreciate your comments on the Internet and your expertise.

Mr. Timothy Denton: Thank you, Madam Chairman, and thank you, gentlemen.

The Chair: Our next witnesses are from the CRTC.

Does everyone have a copy of their brief? The brief is bilingual, if you flip it; one side is English and one side is French, just in case you haven't noticed that.

We have before us this morning from the CRTC several witnesses. I have five names and I see four people, so I will let you, Mr. Colville, introduce the people you have with you, please. Whenever you are ready, begin, and take your time.

Mr. David Colville (Vice-Chairman, Telecommunications, the Canadian Radio-television and Telecommunications Commission): Good morning. My name is David Colville and I am the vice-chair, telecommunications, with the CRTC. With me here this morning is my legal counsel, Allan Rosenzveig, from the commission; Leo Mevel from the CRTC's telecom branch; and Cynthia Stockley from the commission's telecom branch.

On behalf of the commission, I would like to express our appreciation for the opportunity to appear before you here today. I would like to say at the outset that the commission wants to express its full support for the provisions of the bill as currently proposed, and in particular for the amendments to the Telecommunications Act relating to the commission's powers and duties.

• 1145

As you know, over the past few years the commission has taken major steps to open up the Canadian telecommunications market to competition, not simply for the sake of competition but because of the benefits competition will bring to Canadian consumers and the Canadian economy in general. The entering into force of the GATS for basic telecommunications will mark the advent of a new and increasingly competitive environment for the international telecommunications industry in Canada, with many new players entering the game. The new licensing power proposed in this bill would provide the commission with the tools it needs to ensure the objectives of the Telecommunications Act continue to be met in this new environment. In particular, it would permit the commission to ensure foreign-owned players are subject to the same competitively neutral rules as Canadian ones. Further, it would permit the commission to accomplish that task with a minimal amount of interference in the marketplace.

The licensing power proposed is a power to license classes of services and service providers. We believe this power is necessary to replace the more traditional tools that will no longer be effective with the end of the Teleglobe monopoly on Canadian overseas facilities.

The provisions of the bill also address the changing domestic environment. For example, with the advent of competition the telephone companies are no longer the appropriate entities to administer numbering. This function is best performed by a third party in a competitively neutral fashion, consistent with Canada's GATS commitments.

The industry itself is developing mechanisms to accomplish this very end. However, under the existing legislation it has had to go about it in a circuitous fashion, in particular because the third parties who would administer central office codes and number portability, which are essential for local competition, are not Canadian carriers. The commission does not have direct jurisdiction over them. The functions they are performing are essential to the maintenance of efficient and effective telecommunications in Canada. Therefore it is important to clarify, as this bill would, that the commission has the authority to ensure these fundamental services are administered in the public interest to the benefit of all Canadians.

I will now turn to proposed paragraph 46.1(1)(b), which would empower the commission to administer certain other activities, as prescribed by the governor in council.

Just as it proved necessary to establish a competitively neutral mechanism for numbering resources and a fund to support continued access to basic telephone service, so it will likely prove necessary in this rapidly evolving environment to establish similar mechanisms for other matters. As you know, this year the commission issued a historic decision establishing a framework for competition in the provision of local telephone service in Canada. This evolution in the marketplace has called for restructuring of the way in which some telecommunications services have been provided to date. For example, directory databases are used to produce telephone directories and provide directory assistance service. Historically it has been the telephone companies that have developed and maintained those databases. With the advent of local competition, it may be necessary to rethink this approach. Some parties are already exploring the potential for creating a national directory database.

As a second example, the telephone companies currently maintain a database for screening numbers used to deter fraudulent use of the telephone network. It may well be that a national database would be a more efficient mechanism for providing such services to all carriers. It may be that these databases should not be controlled or administered by any single service provider.

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The fact that a telephone company may no longer be administering these services does not make it less important that the commission be able to ensure that such essential services are provided in a way that best promotes the interests of Canadians. A possible third example is 911. In the future, with many competitors in the local market, there may be a need for central administration to ensure universal reliable access to this crucial emergency service.

As I hope my remarks have shown, in the future there will likely be other functions that will require an approach similar to that proposed for the administration of numbering resources and the central fund. That is one involving a competitively neutral third-party administrator, subject to oversight by the commission. The intention here is to provide for less micro-regulation by the commission. Rather, where necessary, certain activities could be performed by a third party in a competitively neutral fashion, subject only to the general oversight of the commission. The provision is not overly broad. It clearly specifies that the activities must relate to the provision of telecommunication services by Canadian carriers.

With respect to proposed section 46.6, which deals with the fund, I note that this industry fund will perform two basic and important functions. First, it will provide support so that rates for basic local telephone service remain affordable. Second, it will provide incentives for carriers to provide reliable, high-quality local service in rural and more remote areas.

With the advent of local competition, it is appropriate that the subsidies that flow from some telecommunications services or service providers to the providers of basic local telephone service be administered by a neutral third party, rather than by the incumbent telephone companies.

Finally, I would like to note clause 22, which would amend the Teleglobe Canada Reorganization and Divestiture Act relating to Teleglobe's agreements with foreign carriers. This provision will ensure continuity by providing that Teleglobe is not required to obtain prior commission approval for those agreements already in place when the bill comes into effect. It would not, however, preclude the commission from reviewing any such agreement should the need arise.

Those are my initial comments. I'd be pleased to answer any questions.

The Chair: Thank you very much, Mr. Colville.

Mr. Lowther.

Mr. Eric Lowther: Yes. I'd like to draw your attention to proposed section 46.1. I think you referred to that just moments ago. If I could, I'd like to get some perspective from the commission as to why this section is phrased as broadly as it is. I want to actually read into the record some of the phraseology in this section of the bill, where it says “The Commission may administer”, and goes through a number of items. We'll go to proposed paragraph 46.1(1)(b):

(b) any other activities that the Governor in Council may prescribe that are related to the provision of telecommunications services by Canadian carriers.

That's pretty wide open.

We'll carry on from there, to proposed subsection 46.1(2), which also says that the “Commission may determine any matter and make any order with respect to”. We'll go to proposed paragraph 46.1(2)(b), “any activities prescribed under paragraph (1)(b)”. And if we go back to proposed paragraph 46.1(1)(b), that means any activities that relate to telecommunications services. So basically, it's any order, any service.

Just briefly, if you'll indulge me, Madam Chair, we'll carry on to proposed subsection 46.2(1), which reads:

The Commission may, in writing and on specified terms, delegate any of its powers under section 46.1 to any person, including a body created by the Commission for that purpose.

Then, with respect to that particular body, in the next proposed subsection it says:

For the purposes of sections 62 and 63, a decision of a delegate is deemed to be a decision of the Commission.

That seems like a tremendously sweeping power that is given to the commission, totally undefined, and in addition, we've passed that power on to whomever or whatever body the commission decides to create.

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In effect, we almost have built or provided the legislative structure for, as one of our other presenters some time ago said, a whole new set of mini-CRTCs here. It seems overwhelming to me that you'd bring this forward as part of the legislation, and I can't understand why you would make it so incredibly broad. Can you give us some idea why you did that?

Mr. David Colville: Perhaps the best approach to deal with this is to tell you what our concerns and objectives are here.

As we've noted, we've been trying to move the Canadian environment to a much more competitive one. At the same time, we've been trying to move to an environment where the commission itself is being, how shall I say, less intrusive in terms of defining how this environment should operate in terms of the day-to-day administrative and technical issues. So we believe broadly that the administration and the day-to-day handling of a lot of these issues can be best done by the industry itself—all of the industry players working together.

In fact, as a result of our local competition decision we've set up a number of committees—industry committees—that are all of the players working together to resolve a lot of these issues. I might note for the record here that it's working extremely well, and I think all of the players who were working on that would acknowledge that. Broadly, this is putting in place the opportunity for these kinds of issues to happen in the marketplace, if you will, and we think that's a preferable approach.

In the act we have a particular case noted with respect to numbering, and that's clearly an area that has to be dealt with in order to allow local competition to happen, for example, in terms of being able to port numbers from one local competitor to another.

We do have a concern, though, as I indicated in my opening remarks, that there are now several other areas we know of that we are going to have to deal with and that will be dealt with through the same kind of structure: the managing of various directory databases in order to handle directory database information on a national scale and in a more competitive environment, things like 911. There are other areas that I think are likely to come up over the next short while with respect to, for example, computer software that may drive the routers that actually provide for the interconnection of some of these different networks.

So we think we have to have the power, the capability, to be able to include these kinds of things under this same sort of scheme, to allow the industry to be able to work together to develop leads but to allow the commission to have the oversight to make sure it happens.

Mr. Allan Rosenzveig (General Counsel, Telecommunications, Canadian Radio-television and Telecommunications Commission): If I could add one tiny point, which is a legal point, that is, unless the act allows the commission expressly to delegate the powers it has, then it can't do so properly. So if we want to be able to put in place a system where a neutral third party, rather than the telephone companies or the commission itself, does the day-to-day work, that's why we need the express delegation power. The fact that it's a decision of the commission provides a means for people to bring it back to the commission to review and vary it, and it becomes a public document and it has those sorts of consequences.

Mr. David Colville: I take your point about proposed paragraph 46.1(1)(b) being somewhat broad. I think part of the problem we face is that we know, broadly speaking, what are the areas that have to be covered here, and it goes beyond numbering. It goes beyond proposed paragraph 46.1(1)(a) in the sense that 46.1(1)(a) is here now.

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The problem is that it's difficult at this stage to precisely define those particular areas that we think are going to be needed in order to make this competitive environment evolve in a way that makes it fair for all the players to enter the market and continue to provide services, such as 911 emergency service, for example, to the public.

But as I said, broadly speaking, the issue relates to databases, the management of software systems, and so on that would allow for the interconnection and interoperability of these networks and allow that to happen.

I don't think we are in a position for us to be deciding upon a lot of these issues. It's better left to the industry players working together to do it. We just think we need the broad oversight.

Mr. Eric Lowther: I'd like to respond to that briefly.

Please don't get my intent incorrectly. I don't question the motives of the CRTC. Part of the critique we're trying to do here as a committee, though, is that this is legislation, and as I think somebody said earlier even today, the players are going to change over time. My concern is that this legislation can be interpreted in such a broad way that it might be very non-intrusive and very much intended to be facilitative within the industry today, but it could be taken in a totally different direction and still meet the terms of this legislation. That's a real concern I have with it.

Thank you.

The Chair: Thank you, Mr. Lowther.

Ms. Jennings.

[Translation]

Ms. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.): Good morning. Thank you for your presentation. I have a few questions that arise from presentations of other witnesses that have appeared before us over the last several days.

Canadian businesses in the domestic market have expressed concerns with regards to licensing that applies not only of the international market but also to the Canadian market. They suggest, both for the international and the domestic market, what they call a sunset clause, meaning that the licensing powers of the commission would come to an end in 1999, if I am not mistaken. So this power would exist for a maximum of only two years. I wonder if you have any comments on this suggestion.

Another witness raised the issue of existing contracts of Teleglobe and expressed concern that the CRTC would not really have the power to review these contracts after promulgation of Bill C- 17.

They suggested, with regards to Teleglobe, the grandfathering of some contracts. Since Teleglobe is a monopoly, they do not have access to the contracts Teleglobe has already signed with other businesses at the international level. They have no way to ensure these contracts do not defeat the very objective of Bill C-17 insofar as the international market would remain subject to a monopoly for a number of years after the coming into force of this bill.

Therefore, they were very concerned that the commission would lack the power to review these contracts in the public interest, to order changes, etc. I would like your comments on this issue.

My third question deals with resellers. We have heard from representatives of resellers, or at least from a company that wants to be regulated, contrary to the views of companies that are already regulated at the international level or of domestic companies that do not want to be regulated in any way. That company is Teleglobe. Companies who operate exclusively on the domestic market do not want to be subject to any regulations and want an open market regulated only by competition. So, I would like to have your comments on this question, and specifically with regards to resellers.

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We heard presentations saying that the commission already has under the existing legislation the powers it needs to regulate resellers, if it so wants.

[English]

Mr. David Colville: Okay, let me try these in order.

The issue of the sunset clause is your first question.

Ms. Marlene Jennings: Yes.

Mr. David Colville: I take the point of those people who might propose the question of a sunset clause, but part of the problem that one faces when one deals with opening up a new market to competition is, once you let the genie out of the bottle, you don't know where it's going, how fast it's going, or how slow it's going.

When we opened up the long distance market to competition in 1992, many people thought it would take as many as 15 years before some of the new entrants would be able to really reach a stage where we would have what one might characterize as sustainable competition in the long distance market. In fact that market opened up a lot faster than anybody anticipated. The competitors gained more market share than anybody anticipated in a much shorter period of time, and the prices fell much faster than anybody anticipated.

The problem with putting a defining timeframe on this, no matter how short or long it is, is we have no idea how fast this market is going to become competitive. In fact we will be putting out a decision shortly dealing with the question of forbearance from regulation of the telephone companies and the long distance business. Probably not very many people would have thought we would even be addressing that question in this short a time.

It remains to be seen how fast this market will evolve, whether we'll have the degree of competition that would allow the commission to forbear and say, “The competition is doing fine here; let's deregulate”, or whether it will take a much longer time for competition to roll out in this marketplace and it will require some regulatory oversight. So it would create a real problem if one put a defining moment, in terms of a sunset provision, on this, because it's not clear that at that point in time one would have reached it, or whether in fact it would happen before that.

With respect to the second question, the existing contracts at Teleglobe, we don't see that as a particular problem, if I understand your question right. As I indicated in my opening remarks, the fact that we would be giving approval to the existing contracts does not preclude us from having an opportunity to review those contracts or any agreement as the need may arise. We had this kind of situation when the commission took over regulation of what were the provincial telephone companies, and that hasn't been problematic for us there. So I don't foresee a problem here in having an opportunity to review those contracts.

With respect to the last question, on resellers, if I understand your question correctly—or what I think is implied in your question, because we've been trying to follow what's been going on here for the past few days and the views of the different parties—one reseller in particular has raised a concern, given its particular ownership structure, about its ability under our recent local competition decision to come in under our rules. That issue is being addressed, because they've appealed our decision in that respect, so it would be inappropriate for me to comment on the specifics of that application, but I guess my sense of their concern can probably be addressed within the context of the existing—

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Ms. Marlene Jennings: Legislation. Okay.

Thank you very much. Part of the reason for my questions is that having had them raised by other witnesses, we attempt, all the members of the committee, to understand where they are actually coming from. It's very helpful when you say about the sunset clause, for instance, when the domestic market opened up, what the actual evolution of the competition was, and how, for instance, if there had been a licensing regime and a sunset clause, they would have been superfluous, actually, because events move so quickly that you probably wouldn't have been able to respond adequately. Given that experience, the sunset clause may not necessarily be an efficient thing.

What about a date line for a review? That's another point that has been suggested: if there isn't an actual sunset clause in the sense that these powers or this regime cease on X date, on X date there is a review to determine whether or not these specific powers are still needed in the best interests of the Canadian public and to achieve the objectives of the legislation.

Mr. David Colville: As was the case with the current regime we've been operating with under the existing Telecommunications Act, there's an opportunity for a party to come before us at any time when they feel the competitive landscape has reached a stage where the rules should change. One can then look at defining how those rules should change, whether it means the commission should totally walk away from regulation or partially do so.

So I think the scope is there to do it at any time. I think you create problems if you define a particular time for it, because it may well preclude somebody coming earlier than that. As I said in the case of the long distance one, we probably did this a lot earlier than anybody would have anticipated in looking at that issue.

The Chair: Madam Lalonde.

[Translation]

Ms. Francine Lalonde: I have at least two questions. On page one there is a statement that can be interpreted in two ways. I would like you to clarify what it means.

The statement says that the new licensing power would permit the commission to ensure that foreign-owned players are subject to the same competitively neutral rules as Canadian ones.

This could mean that all players will be required to have a license or it could mean that only foreign-owned companies would need a license. You know that this has been at the core of the debate in our hearings. The way I read it this sentence could mean one or the other. Is it a political statement? If so, you may not want to elaborate, but I would still like to know. What is the meaning of this sentence?

[English]

Mr. David Colville: I'm not sure I understand the question.

[Translation]

Ms. Francine Lalonde: Do you want me to rephrase the question? You know that several witnesses said we should add the word "international" to the words "telecommunications service provider".

This sentence could mean that you agree with this or it could mean that a licensing power is required to put everybody on the same footing. Tell us what you mean because we have heard arguments on both sides of the issue.

Today, the gentleman from GeoReach told us that there should be no licensing of international companies because the CRTC already has all the powers it needs. However, the players on the domestic market tell us that international companies should be subject to licensing. Teleglobe accepts international licensing but GeoReach says that there should be no licensing at all.

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[English]

The Chair: Madame Lalonde, it appears as if it is clear in English but not in your French translation, so maybe you can explain it.

Mr. David Colville: I think I understand your question. I'm just thinking about how best to approach the answer here.

[Translation]

Ms. Francine Lalonde: I can repeat the question in English.

[English]

Mr. David Colville: Clearly, the provisions here that relate to the question, other than the ones that we've talked about relating to our domestic situation, the numbering and so on, are largely driven by—

[Translation]

Ms. Francine Lalonde: I did not hear the translation.

[English]

Mr. David Colville: —the GATT agreements and our Canadian—

[Translation]

Ms. Francine Lalonde: On services.

[English]

Mr. David Colville: —involvement in international telecommunications. I think part of the concern we have is dealing with the issue as it relates to some of the telecommunications policies in the act, in particular the section that talks about promoting the use of Canadian facilities. A concern has been raised about the question of the bypass of Canadian facilities.

I think it's clear that the concern from a regulatory point of view here is fundamentally international, but it then raises the concern about the extent to which one can make sure that one satisfies that policy concern, which may have an impact to some extent on the domestic service providers.

If I can perhaps piggyback another answer on the question of the licensing issue here, as I indicated earlier, it's certainly been the commission's intention over the past number of years not only to make this market more competitive but also to step back from the detailed regulation. That's kind of underpinned our whole strategy in terms of the local competition decision to move a lot of what were or could have been regulatory issues that we would have got involved in, to move them out into the marketplace so those experts can deal with that kind of stuff.

The commission is clearly in the direction of trying to move to a more market-based provision of telecommunications and less detailed scrutiny, less detailed regulation of this business.

The whole question of licensing, rather than overlaying, rather than adding a new layer of regulation to this business, provides an opportunity to get away from using the whole scope of the existing Telecommunications Act to providing us with an opportunity to provide a very narrow focus to deal with certain classes of licensees, to deal with certain issues, and not in fact bring to bear the whole weight of the Telecommunications Act.

So, contrary to the concerns some people seem to have that this is adding a layer, one could argue that this in fact provides us with the opportunity to remove the whole layer of the Telecommunications Act from these kinds of service providers that we have in front of us here and have a very narrow, very clear, well-defined licensing regime that speaks to the kinds of issues that I heard earlier here this morning about the uncertainty.

We hear all the time about uncertainty in the marketplace, particularly in the investment community, and we think this kind of licensing regime would provide the kind of certainty, the kind of clear definition that the players need to operate and that the investment community needs to have the confidence that these players are going to be worth investing in.

[Translation]

Ms. Francine Lalonde: Regard resellers, you said that the problem of ACC would be solved in a different way, but on the general issue of licensing resellers, if you say that licensing would apply to everybody, that matter is settled.

I would nevertheless point out that the issue of subjecting resellers to the Telecommunications Act has been raised by consumers associations who explained the problems encountered with resellers and who are concerned these problems will multiply. Therefore, consumers feel there is no reason resellers should not be covered by this legislation. Do you agree?

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[English]

Mr. David Colville: I didn't hear the specific problems the consumers felt we were having in the domestic marketplace in terms of the current regime, whether it was long distance or the ones coming into local competition. Frankly, it has certainly not been our experience that we've had any major problems with reseller activity in the marketplace that would require stringent regulation on our part.

There was the particular case of the ACC, I believe it was, which has a particular problem because of their ownership structure and given the way carrier has been defined in terms of the local competition. We have an understanding of their problem. As I indicated, they came before us.

But in the way the reseller situation has evolved in the domestic situation in terms of long distance or local, I don't believe it requires a lot of detailed regulatory oversight.

[Translation]

Ms. Francine Lalonde: Could resellers become a category under your licensing power?

[English]

Mr. David Colville: Yes, resellers could form a category within the framework here. I'm not sure, though, that one would necessarily want to capture the domestic activities that so far have not been a problem.

[Translation]

Ms. Francine Lalonde: The issue of basic telecommunications services has been raised from various perspectives. Consumers have stressed that basic services have been eroded over the years. Others are concerned that the definition could be expanded to include Internet services. However, one thing is sure: Consumers have a definite concern.

I can tell you that I share the view that basic telecommunications services need to be defined, even if this definition has to be reviewed from time to time. There is the matter of rates, but there are others. Your brief will not be very reassuring to them. If consumers have to pay for the directories, for example...

[English]

Mr. David Colville: This is our view on the whole question of defining basic service. The term is used in the act, but it's not defined in the existing act that we operate under.

Frankly, I struggled with this issue long before I came to the CRTC. I used to work for the government in Nova Scotia. We had meetings with the federal government over the years to try to struggle with this whole question of defining basic telecommunications in terms of looking at where one would develop a competitive marketplace.

Frankly, it was one of those issues that I thought you could put a bunch of wise people on top of a mountain somewhere and have them work for years and years to come up with a nice, neat definition of basic telecommunications service, but by the time they came down from the mountain it would have been changed already.

[Translation]

Ms. Francine Lalonde: It would be obsolete?

[English]

Mr. David Colville: I guess our view is that it's a rapidly changing environment such that basic service is probably going to become more expansive. It has been our experience over time that people expect more as part of their basic service.

For example, basic used to be rotary dial telephone service. Now, if people want to access various information services or voice mail or what not, you need a touch tone phone, touch tone capability. In fact, touch tone has become basic.

So I think we're going to see the definition of basic, in fact, expand over time. Whether something is basic or not doesn't necessarily define whether it ends up being free or included in what one pays for at different levels of service. So what one may consider to be sort of basic, one might have to pay for.

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I'm always arguing that the commission's job is on a day-to-day basis. It's just a continuing delicate balance of competing interests.

I take the point that was raised earlier this morning about the Internet. It's certainly not our intention, and I don't believe it's the intention of the government in putting together this act, to sweep in the regulation of Internet or computer-based services as part of any definition of basic service.

Having said that, I think the issue of access to the Internet through telecommunications infrastructure coming back the other way from a consumer point of view has certainly been an issue and will continue to be an issue. That relates to whether you include this in the definition of basic service or not.

Mr. Manley hosted the knowledge summit yesterday on how we as a country will make sure we get this kind of capability—have access to people throughout the country. I guess fundamentally that's one of the objectives we've been working toward. It's one of the reasons why we've moved on the question of competition in local telephony. We believe it will not only provide local telephone competition, but the incentive and opportunity for more players to start providing that broad-band capability in the local network to allow Internet and other broad-band services to roll out to more people. Ultimately people will expect that service to be provided. Over time that will grow, but certainly it's not our intention to regulate the Internet through provisions in this.

The Chair: Mr. Bellemare.

[Translation]

Mr. Eugène Bellemare: Mr. Colville, should the CRTC distinguish between members and non-members of the World Trade Organization in regulating their operations on the Canadian market and their relationship with Canadian service providers?

[English]

Mr. David Colville: That's a good question. I haven't thought about that, and not having thought about it I may want to defer to my counsel here.

Broadly speaking—and you'll correct me if I'm wrong, I'm sure—we've been trying to set up a competitive environment in this country that is non-discriminatory and provide an opportunity for different competitors to compete in the marketplace. I'm not particularly familiar with the details of the WTO agreement in terms of whether what we'd be doing here might preclude some of those players. But in terms of telecommunications undertakings or enterprises that would want to compete in the Canadian marketplace, we would want to make sure they were all treated in an equitable manner from a regulatory point of view.

Mr. Eugène Bellemare: We need some fairness. We want to deregulate and open up the markets internationally. We've joined the WTO, and in this particular bill we will make agreements with all of these countries. But if outsiders who did not sign this WTO want to hack in and get business, are you not thinking of treating them differently? They're not part of the gang and don't want to be part of the gang. They just want to make a buck.

Mr. David Colville: It's just been brought to my attention. It was raised this morning whether we'd start another process to deal with this licensing issue. In anticipation of the commission being in the position to deal with this question of international regulation, we put out a public notice on October 2 asking parties to comment on the whole regime we would put in place to deal with licensing. In fact, one of the questions we posed invites parties to comment on whether or not the commission should distinguish between WTO members and non-members with respect to terms and conditions and so on. So in the proceeding that we've undertaken, we've asked parties to comment on the very issue you've raised.

• 1230

Mr. Eugène Bellemare: Which parties?

Mr. David Colville: This is an open public notice, so anybody can comment on it.

Mr. Eugène Bellemare: But you may not get a reaction, either by accident or by some reason that is unknown today. You may want and expect a reaction, but you may not get a reaction, and then you'll say there's a tacit agreement. That could be an unfortunate activity, because those non-members right now may want to be active but want to play the game their way. Why should they be permitted to compete with our own people and those who belong to the WTO when they do not want to participate at all in the rules of the game?

Mr. David Colville: I take your point. I guess we'll have to see whether or not people do comment on this. Should they not, one of the factors one would perhaps want to consider in addressing that issue, notwithstanding the fact they may or may not have signed the WTO agreement in itself, is what the parameters are in terms of equitable access to their market. Broadly speaking, even if they weren't a signatory to the WTO agreement, one might want to look at whether or not the conditions that prevail or that were requirements within the WTO agreement would in fact prevail in that other marketplace.

Mr. Eugène Bellemare: Then the key word would be that there has to be reciprocity to get the permit. There has to be, because you could have a company in one particular jurisdiction that has protectionism to a scandalous limit, but they want in, in order to make good for themselves, but there is absolutely no reciprocity. I think the key word is “reciprocity”. Are you going to be looking at that?

Mr. Allan Rosenzveig: Sir, Mr. Colville did indicate that he may turn to me as his legal adviser.

What I wanted to say is this. We hear your concern, but it's an issue before the commission, to be decided by the commission in the ongoing regulatory proceedings. I think you'll understand—or I hope you'll understand—that it would be difficult for Mr. Colville, who will be making a decision on this matter, to discuss or debate it in this forum. It's an ongoing proceeding in which that's one of the issues the commission will have to determine in the near future.

Mr. Eugène Bellemare: Excuse me, but will have to determine or will determine?

Mr. Allan Rosenzveig: Well, it's an issue we've raised, and there's a good chance we will determine it.

Mr. Eugène Bellemare: Again, there's that rider word, “chance”. There's nothing definitive.

Mr. David Colville: I don't want to try to escape your question, but the issue has been raised in the public notice and we will determine it.

Mr. Eugène Bellemare: Okay.

I have one last question on this particular bill. In the third paragraph of your presentation you talked about competition. To open up competition is your new philosophy at the CRTC. That is excellent.

You also mention that consumers should be protected or competition should be to the benefit of consumers. Basically, this is the thought of your third paragraph. On this particular bill, did you consult consumer groups?

Mr. David Colville: This is not our bill—

[Translation]

Ms. Francine Lalonde: It is yours.

[English]

Mr. David Colville: —but I would note that, in the process, we've started to take a look at defining the parameters. In looking at it from the commission's perspective in terms of how the licensing regime would work, what the parameters would be, what the various interests from the industry players and consumer players are and what not, that was the purpose of us putting out this public notice—to get the consumer comments on what the regulatory regime would look like that we would put in place, assuming this is passed.

Mr. Eugène Bellemare: I appreciate your answer. The fault of non-consultation belongs to the Department of Industry, which did not consult consumers or consumer groups.

The Chair: Thank you, Mr. Bellemare.

• 1235

Mr. Lastewka, I will indulge you briefly, because we are well past our time limit.

Mr. David Colville: I'm sorry. That's probably my fault, with my long answers.

The Chair: No, it's not yours. We're running behind.

Mr. Walt Lastewka: I'm going to be very short.

The way you've written your report, the purpose of this bill is to abide by the WTO agreements and so forth. By underlining the word “international” and putting in your paragraph at the bottom of page 1 the fact that there are a number of things that pop up and that need to be faced also, it leads me to believe your intention throughout your report and your discussion this morning was not to add additional licences domestically or in classes, which sometimes I think has been misinterpreted by some people, but to focus on the removing of the monopoly of Teleglobe. We're now into an international situation and we need to have some rules put in place. That's what I got out of your report. I just want to confirm that was your intent.

Mr. David Colville: I would say there were two intents. That was one. The second one was the issue of the powers for the commission to deal with the question of numbering and administration of the fund. I might characterize that as a domestic issue, if you will, in the sense that we've now put this local competition regime in place and we need to put in place certain mechanisms to ensure that works.

It's not clear the particular powers the commission has had...because under the existing act the numbering administrator doesn't end up being defined as a telecommunications carrier. Since it's not a carrier, it raises a question about the extent to which we could oversee that. We don't want to do it ourselves. As I said, we're trying to get out of this business of micro-managing this industry. We think it's best left to the industry to do that. We still think we need the oversight.

So there are two aspects. The first one is the one you mentioned. The second is providing the capability to do those other things.

The Chair: I'm going to indulge myself. I think Mr. Lastewka has confused me a bit. Are you saying you support adding the word “international” to the bill or you don't?

Mr. David Colville: We wouldn't object to it.

The Chair: But on the powers question, then, you answered Ms. Jennings' questions earlier by saying you didn't have a problem with Teleglobe's previous contracts. If we were to reduce the powers in the powers clause before us, the powers you would have, do we have a problem with Teleglobe's previous contracts if you wanted to look at them?

Mr. David Colville: I'm sorry...if you were to reduce the powers?

The Chair: Limit the powers that...take out the clause that says you can look at other things. Do you have a problem with that in the context—

Mr. David Colville: Could you direct me to the clause? I think this might be quite an important issue.

The Chair: It's proposed paragraph 46.1(1)(b), and proposed subsection 46.1(2), but particularly proposed paragraph 46.1(1)(b), where it talks about “any other activities the Governor in Council may prescribe that are related...”

Mr. David Colville: I'm sorry; I misunderstood your question. Could you ask the question again? I was thinking of something else when you were asking that.

The Chair: If we were to limit the powers of the CRTC by removing that proposed paragraph....

Mr. David Colville: I understand the concern of some parties—

The Chair: I apologize. I mixed Teleglobe in with this part and I didn't mean to do that.

Mr. David Colville: When you started asking the question I was thinking of the Teleglobe issue we had discussed—

The Chair: I apologize. I didn't mean to bring that in.

Mr. David Colville: Okay, if we're looking at proposed section 46.1, and in particular proposed paragraph 46.1.(1)(b), the question is, would we have a problem if that were more narrowly defined?

The Chair: Right.

Mr. David Colville: In general I would say no, but I think our concern is that we wouldn't want it so narrowly defined as, for example, to limit it to proposed paragraph 46.1(1)(a). As I indicated, we already know of a number of other areas we're going to need in order to be able to allow particularly the local competitive environment to roll out efficiently and effectively and allow these networks to interconnect and inter-operate, and to allow the new entrants to get access to numbering databases, be they the directory assistance database; to sharing the capability to operate 911, for example; and—I've even given the example—I suspect maybe even software in the network that allows them to interconnect.

• 1240

So if it were narrowed down to include those kinds of things, I don't think we would have a problem.

The Chair: Okay. Because that's my direct concern. I mean, you've raised it, and I know it's a problem in remote areas, in rural areas, in northern Quebec, northern Ontario, Atlantic Canada, where there are remote or rural areas—anywhere in Canada that's considered remote. It's the first time it's been raised before the committee, really, that 911 may become a problem, and those areas have been fighting to get 911 coverage. I live in an area that's not really remote, but we had 911 coverage only as of January 1997.

So I'm very concerned that this is the first time we hear about it as a committee. We've heard that we should be limiting these powers, that it's too much power to give the government, or too much power to extend beyond.... As you said earlier in your statement, things happen very quickly. To have a problem with 911 coverage, in my opinion, that doesn't allow a government to react quickly, would cause us all grave concerns.

Mr. David Colville: If I could comment, I think there are two issues here. One is the provision of the service. Two, the issue from our perspective in terms of how this competitive regime rolls out is that we would be quite concerned, as I think users would, if one of the competitors—to wit, the telephone companies—was able to provide 911 and other competitors weren't, and to have access to the kind of database information that's going to allow that.

So if we're going to have an equitable competitive environment, then all the players are going to have to be in a position to provide these kinds of services on an equitable basis.

The Chair: Thank you.

Mr. Lastewka, you have a comment.

Mr. Walt Lastewka: I want to reinforce that this is the point I was getting at. As we remove Teleglobe as a monopoly—and we've been doing more and more things domestically to be more competitive—there are specific things that will pop up from time to time that we need to fix to make the whole system efficient and competitive.

You've named two or three items here today, but there will be other items that will pop up and will need to be fixed. It's those other activities where I feel very strongly that we need to be able to fix those things and not be misinterpreted that this is going to lead to additional licensing or additional tasks or additional interference.

What you were trying to do, I would hope, was to make sure there's an efficient way of making the whole system work efficiently and competitively.

Mr. David Colville: Absolutely.

The Chair: Thank you, Mr. Lastewka.

Madam Lalonde, you have a comment.

[Translation]

Ms. Francine Lalonde: I would like to repeat the question because I did not understand the answer, neither in English nor in French. If we added "international" to "telecommunications service provider", would this concern you?

[English]

Mr. David Colville: If you're talking about the amendment to section 16, and if the question is whether the commission would have a problem if the word “international” was put in there, my answer is no.

[Translation]

Ms. Francine Lalonde: And in section 1?

[English]

The Chair: Mr. Colville, just to clarify, are you talking about clause 3, proposed section 16.1?

[Translation]

Ms. Francine Lalonde: I am talking about section 1 of the bill, which amends section 2(1) by adding a definition of "telecommunications service provider".

[English]

Mr. David Colville: Let me try to take these one at a time.

The Chair: Go ahead. I thought Madam Lalonde was talking about proposed section 16.1. She's talking about—

[Translation]

Ms. Francine Lalonde: He said it would not cause him any problems.

[English]

The Chair: I was just trying to clarify what he was referring to.

Mr. David Colville: The other question, as I understand it, relates to proposed section 16.1, which is the definition of a telecommunications service provider.

• 1245

The problem, if you restrict that to international, is it doesn't speak to the other half of our concern with respect to this bill, and that is dealing with the domestic issues. If a telecommunications service provider for the purposes of the fund, or numbering or all that other stuff, is defined as an international telecommunications service provider, then we've just lost the whole capability for us to deal with the domestic issues. So if you deal with international in 16, I think it would solve the....

The Chair: Mr. Rosenzveig, did you wish to reply to that as well?

Mr. Allan Rosenzveig: I wanted to clarify. Mr. Colville, in effect, is saying the definition, if it is changed at the front...those words are used elsewhere. For example, in proposed subsection 46.6(1), to deal with the fund, it's telecom service providers, not Canadian carriers, only that pay in. So it would be a problem for the other uses of that word in the sections.

The Chair: Thank you.

Mr. Lowther, one final comment.

Mr. Eric Lowther: I recognize that you are not the drafters of this legislation, but having looked at it, is it correct to say that not everything in here has to do with the Teleglobe divestiture and entry into that marketplace; that there's actually a suite of things being done with this act? First of all, there's Teleglobe. Then there's the licensing fees domestically. Then there's the telecommunication hardware certification component. Then there are inspectors to make sure they do all that. So there's quite a combination of things that don't all tie back to the Teleglobe component. Is that true?

Mr. David Colville: That's true. I guess you could probably say they all tie into moving us to a more competitive environment. Two of the elements of the suite, if you will, that relate to us, which we are here fundamentally to comment on, are the issue about the international telecommunications, which does tie right to the Teleglobe question.... The second part relates to our ability to deal with some of the domestic competitive situations, such as the issue of numbering and so on.

Mr. Eric Lowther: Thank you.

The Chair: I want to thank you for coming before us this afternoon. We appreciate your time. I apologize for the delay in starting. That happened this morning. We appreciate your spending extra time with us.

Mr. David Colville: I thank you and I hope that our comments have been helpful.

The Chair: They've been extremely helpful, Mr. Colville.

We will adjourn now until 3.30 p.m this afternoon.