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37th PARLIAMENT, 2nd SESSION

Standing Committee on Industry, Science and Technology

EVIDENCE

CONTENTS

Monday, February 17, 2003

1530

The Chair (Mr. Walt Lastewka (St. Catharines, Lib.))

Mr. Grant Buchanan (Partner, McCarthy Tétrault LLP, Directors Guild of Canada)

The Chair

Mr. Dimitri Ypsilanti (Directorate on Science, Technology and Industry (Paris), Organization for Economic Co-operation and Development)

1535

1540

1545

1550

The Chair

Mr. Grant Buchanan

1555

The Chair

Mr. James Rajotte (Edmonton Southwest, Canadian Alliance)

Mr. Grant Buchanan

Mr. James Rajotte

Mr. Grant Buchanan

Mr. James Rajotte

1600

Mr. Grant Buchanan

Mr. James Rajotte

Mr. Grant Buchanan

Mr. James Rajotte

Mr. Grant Buchanan

Mr. James Rajotte

Mr. Dimitri Ypsilanti

Mr. Grant Buchanan

Mr. James Rajotte

Mr. Grant Buchanan

Mr. James Rajotte

Mr. Dimitri Ypsilanti

Mr. James Rajotte

Mr. Dimitri Ypsilanti

1605

The Chair

Mr. Serge Marcil (Beauharnois—Salaberry, Lib.)

Mr. Gilbert Normand (Bellechasse—Etchemins—Montmagny—L'Islet, Lib.)

Mr. Grant Buchanan

Mr. Gilbert Normand

Mr. Dimitri Ypsilanti

Mr. Gilbert Normand

Mr. Dimitri Ypsilanti

Mr. Gilbert Normand

Mr. Dimitri Ypsilanti

1610

Mr. Gilbert Normand

Mr. Dimitri Ypsilanti

Mr. Gilbert Normand

The Chair

Mr. Paul Crête (Kamouraska—Rivière-du-Loup—Témiscouata—Les Basques, BQ)

Mr. Dimitri Ypsilanti

Mr. Paul Crête

1615

Mr. Dimitri Ypsilanti

The Chair

Mr. Serge Marcil

The Chair

Mr. Brent St. Denis (Algoma—Manitoulin, Lib.)

Mr. Dimitri Ypsilanti

Mr. Brent St. Denis

1620

Mr. Dimitri Ypsilanti

Mr. Brent St. Denis

Mr. Grant Buchanan

Mr. Brent St. Denis

Mr. Grant Buchanan

1625

Mr. Brent St. Denis

The Chair

Mr. Brian Masse (Windsor West, NDP)

Mr. Dimitri Ypsilanti

Mr. Brian Masse

Mr. Dimitri Ypsilanti

The Chair

Mr. Grant Buchanan

Mr. Brian Masse

Mr. Dimitri Ypsilanti

1630

Mr. Grant Buchanan

Mr. Brian Masse

Mr. Dimitri Ypsilanti

Mr. Brian Masse

Mr. Grant Buchanan

The Chair

Mr. Dan McTeague (Pickering—Ajax—Uxbridge, Lib.)

1635

Mr. Dimitri Ypsilanti

Mr. Dan McTeague

Mr. Dimitri Ypsilanti

Mr. Dan McTeague

The Chair

Mr. Grant Buchanan

Mr. Dan McTeague

1640

Mr. Dimitri Ypsilanti

The Chair

Mr. Grant Buchanan

The Chair

Mr. Brian Fitzpatrick (Prince Albert, Canadian Alliance)

1645

Mr. Grant Buchanan

Mr. Brian Fitzpatrick

Mr. Grant Buchanan

Mr. Brian Fitzpatrick

Mr. Grant Buchanan

Mr. Brian Fitzpatrick

Mr. Grant Buchanan

Mr. Brian Fitzpatrick

Mr. Grant Buchanan

The Chair

1650

Mr. Serge Marcil

Mr. Dimitri Ypsilanti

1655

The Chair

Mr. Paul Crête

Mr. Dimitri Ypsilanti

1700

Mr. Paul Crête

Mr. Dimitri Ypsilanti

The Chair

Mr. Gilbert Normand

Mr. Dimitri Ypsilanti

1705

The Chair

Mr. Brian Masse

Mr. Dimitri Ypsilanti

Mr. Brian Masse

Mr. Dimitri Ypsilanti

Mr. Brian Masse

Mr. Dimitri Ypsilanti

Mr. Brian Masse

Mr. Dimitri Ypsilanti

1710

Mr. Brian Masse

Mr. Dimitri Ypsilanti

Mr. Brian Masse

Mr. Dimitri Ypsilanti

Mr. Brian Masse

Mr. Dimitri Ypsilanti

Mr. Brian Masse

Mr. Dimitri Ypsilanti

Mr. Brian Masse

The Chair

Mr. Dan McTeague

Mr. Dimitri Ypsilanti

Mr. Dan McTeague

Mr. Dimitri Ypsilanti

1715

Mr. Dan McTeague

Mr. Dimitri Ypsilanti

Mr. Dan McTeague

The Chair

Mr. Brian Fitzpatrick

Mr. Dimitri Ypsilanti

Mr. Brian Fitzpatrick

The Chair

Mr. Brian Fitzpatrick

The Chair

Mr. Dimitri Ypsilanti

The Chair

Mr. Paul Crête

1720

The Chair

Mr. Gilbert Normand

Mr. Paul Crête

The Chair

Mr. Dan McTeague

The Chair

Mr. Paul Crête

1725

The Chair

Mr. Brian Fitzpatrick

The Chair

Mr. Paul Crête

The Chair

Mr. Brian Masse

The Chair

Mr. Brian Masse

The Chair

Mr. Brian Masse

The Chair

Mr. Serge Marcil

The Chair

Mr. Paul Crête

The Chair

Mr. Dan McTeague

1730

The Chair

Mr. Brian Fitzpatrick

The Chair

Mr. Serge Marcil

The Chair

CANADA

Standing Committee on Industry, Science and Technology

NUMBER 019

2nd SESSION

37th PARLIAMENT

EVIDENCE

Monday, February 17, 2003

[Recorded by Electronic Apparatus]

¹ (1530)

[English]

The Chair (Mr. Walt Lastewka (St. Catharines, Lib.)): We'll call this meeting to order. The order of the day is, pursuant to Standing Order 108(2), consideration of foreign investment restrictions applicable to telecommunications common carriers.

Today we have a witness from the Directorate for Science, Industry and Technology, Paris, of the Organization for Economic Co-operation and Development, Dimitri Ypsilanti; and from the Directors Guild of Canada, Mr. Grant Buchanan.

Was Mr. Goluboff going to appear also?

Mr. Grant Buchanan (Partner, McCarthy Tétrault LLP, Directors Guild of Canada): Yes, he was, but he's unable to make it today.

The Chair: I see.

We'll begin with Mr. Ypsilanti, and then Mr. Buchanan, and then we'll open for questions.

Mr. Ypsilanti, thank you for coming. We really appreciate it.

Mr. Dimitri Ypsilanti (Directorate on Science, Technology and Industry (Paris), Organization for Economic Co-operation and Development): Thank you, Chair.

Thank you very much. I come from the Organization for Economic Co-operation and Development, based in Paris, France. We have 30 member governments. Our governments come from the developed economies of the world. I'm responsible there for telecommunications policy.

My presentation will be in four parts. I'll have short introductory remarks and then I will try to benchmark Canada's policies for foreign investment in the telecom sector against those of other OECD member countries, try to look at benchmark investment performance in the telecom sector in Canada, and talk a little bit about reform.

I'm sure you're all aware of Canada's telecom policy objectives, which are set down in section 7 of the Telecommunications Act, and obviously you're looking at paragraph 7(d), which is promoting ownership and control of Canadian carriers.

The reason I put this up is that I believe these objectives are inconsistent with each other. They are a mixture of economic, social, and political objectives; and I would classify paragraphs 7(d) and 7(e)--which is in fact now defunct--as political objectives. In all other OECD countries, telecom objectives are a mixture of economic and social. They do not have the political type of objective.

Let me read out, if I may cite to you, the U.S. 1996 Telecommunications Act preamble:

To promote competition and reduce regulation in order to secure lower prices and higher quality services for American telecommunications consumers and encourage the rapid deployment of new telecommunications technologies.

So these are consistent with Canada's economic and social objectives, but as you note, there are no political objectives in that preamble.

In Australia, the 1997 act places emphasis on the long-term interests of end-users of networks and network services. It places emphasis on the efficiency and international competitiveness of the Australian telecom industry and it tries to ensure that telecom will promote other sectors of the economy.

In my mind, the Canadian objectives, on the one hand, espouse a market economy--they talk about efficiency and competitiveness--and on the other hand, they try to prevent the market from working effectively and try to control access to investment and capital by new entrants and incumbents, which, as I said earlier, I find incompatible and inconsistent.

The act, as you know, was enacted in 1993, and since that period there have significant changes in the telecommunications market. Perhaps the most significant has been the explosive growth of the Internet and services supported by high-speed networks. For the OECD, we've estimated that there are now about 250 million Internet subscribers and 52 million of these subscribe to high-speed Internet broadband connections.

¹ (1535)

Since 1993, new concepts have become firmly embedded in our economies: concepts such as e-commerce, the information society, and the knowledge-based economy. Equally important, since 1993 there has been significant telecom liberalization across the OECD. Only a handful of countries had open markets in 1993. Today, 29 of 30 OECD countries have fully competitive telecommunications markets. The last country to open up will be Turkey, which will do that on January 1, 2004.

The emphasis on the creation of competition in telecom as a tool to benefit the economy as a whole is not an OECD phenomenon. In the context of the World Trade Organization and its agreement on basic telecom services, there are now 65 governments that have submitted schedules to that organization. A lot of these include developing economies that are willing to open their markets to competition and to foreign investment.

Let me turn to benchmarking policies. You have copies of my slides, so I'm not going to read all the text out.

I will note that the countries with the most severe restrictions in the OECD are Korea, Mexico, Turkey, and Canada. The types of restrictions are fairly similar across these four countries. I should also note that Turkey is a candidate to become a member of the European Union. I would assume that in the next several years they will start adopting European Union best practice regulations, which would imply that they will eliminate their restrictions on foreign investment.

In all other OECD countries, there are no restrictions on new entrants, on licensed operators, except incumbents. I'll come to them in a minute. Australia has a system of prior approval, which most market players don't view as being restrictive in that it's automatically granted to WTO signatories of the basic telecom agreement with the WTO.

As far as restrictions on incumbents go, I've given on this slide two examples. One is Australia, which has fairly stringent types of restrictions on Telstra Corporation Limited, which is its incumbent and which is majority owned by the Australian government. As you can see, there are restrictions both in terms of shareholding but as well in terms of requirements that the chair and the board are Australian citizens, the head office is in Australia, etc.

And there is Japan, which has a restriction on its incumbent, NTT, that no foreigner is allowed to own more than one-third, or 33%, of NTT. In 1997 that limitation was at 20%. They've lightened up their restrictions a bit.

¹ (1540)

New Zealand is an interesting case, because they have a two-tier approach to limiting ownership in the incumbent. First, there's an overall limitation of 10% on voting shares that any single party can hold without any prior consent. In addition, there's a cap on foreign ownership.

Prior consent in New Zealand was given to two U.S. companies, Ameritech and Bell Atlantic, who in 1993 owned 49.6% of the incumbent. Since then Ameritech has sold its share, so Bell Atlantic is a major shareholder with 20.7%.

New Zealand also has a so-called golden share, in its case called a kiwi share, which imposes obligations for universal service on the incumbent.

For some other OECD countries, there are limitations that are non-discriminatory in the sense that they apply to nationals as well as foreigners and that restrict the ability of people to buy into the state-owned operator, which is usually the incumbent. Spain has restrictions that only apply to EU citizens, but let's not view it as a problem, since any entity that decides to set up business in the EU is considered as an EU entity.

Golden shares are also a tool used to limit access to incumbents. As you can see, these golden shares are held by governments in Italy, Hungary, Netherlands, Spain, and Turkey. I should note that the European Commission has said that it will take action against member states that continue to maintain golden shares.

Let me move now to benchmark investment in Canada. This slide shows public telecommunication investment per capita from the period 1990 to 2001. I chose Australia because the geographic distribution of population is very much similar to that in Canada. It's concentrated, in the case of Australia, along the coastal region, and there are two major cities, Melbourne and Sydney.

I think it's fairly evident, if you look at the data, that following the 1996 act in the U.S., which opened up local markets to competition, and with the development of the Internet, investment increased significantly. If we look at Australia, it had a duopoly between 1993 and 1997, and during that period investment increased and continued to expand after 1997.

In the case of Canada, investment per capita increased, but at a much slower pace than the other countries and the OECD as a whole. In the year 2000, Canada's per capita investment was 40% of the U.S. level.

Again, we see the same pattern emerge when we look at public telecommunications investment as a percentage of gross fixed capital formation, which is the total investment that takes place in manufacturing and service industries. Canada underperformed significantly in the last part of the 1990s. In Canada, the ratio of telecom investment to total investment actually went down from 1997, when it was 3.1%, to 2.9% in 2000, compared to the OECD average of 4.2% by the year 2000.

¹ (1545)

I just want to talk about the last slide, which is basically on reform of restrictions against foreign investment in the telecom sector. Along with my slides, I submitted a small paper to you in which I noted that the OECD undertook a review last year of regulatory reform in Canada, including an examination of the telecom service sector. In that report, one of the main recommendations was the elimination of the existing restrictions on foreign investment. It was argued in that report that such restrictions had no place in an open international and competitive market economy based on the principles of non-discrimination. Clearly, this would be the optimum step to take in terms of reform.

Some people have suggested taking what I would call half measures, which is to lighten the restrictions. I don't view the restrictions as serving any purpose. I think you either believe that these restrictions have a positive impact on the economy or not, and if they don't, then they should be eliminated. Some analysts also argue that limitations on foreign ownership should be imposed only on the incumbents and be eliminated for new entrants. I believe the incumbents already have asymmetric regulation imposed on them by the regulator, which I think is sufficient. I don't think there's a need to further encumber and burden the incumbents vis-à-vis new entrants.

One of the important questions that need to be asked is whether the foreign investment ownership restrictions have a positive impact. The burden of the proof is being imposed on those wishing to eliminate these restrictions, but as far as I am aware, little evidence has been shown over the last decade of these restrictions having had a positive impact.

If goals such as ownership and Canadian control are deemed to be important, then another important question to ask is whether you can uphold these goals with less burdensome means; for example, through ownership limitations capping the percentage of voting shares of a company that an individual or entity can own. I personally think ownership limitations would not work, because they would still place limitations on the market players in accessing capital markets.

What is most important is to ensure there is effective competition in the markets as a way of enhancing the welfare of Canadian consumers and in helping to meet social goals, which we already have in section 7. I think such effective competition can come through the regulatory framework.

I mentioned the review we did last year of Canada's telecom market, and I think that if we benchmark the CRTC it is one of the better regulators in the OECD area. The framework adopted by the OECD over the last few years is quite effective, but there is a last step, which is to enhance choice for Canadians. Choice means competition, and competition means access to scarce investment funds.

With that I'll close my statement. Thank you, Chair.

¹ (1550)

The Chair: Mr. Buchanan.

Mr. Grant Buchanan: Thank you, Chair, and members of the committee.

My name is Grant Buchanan, and I'm a partner in the law firm of McCarthy Tétrault. On behalf of the Directors Guild of Canada, I've been asked to deliver to you these remarks with respect to the issue of foreign ownership. As mentioned, the staff members of the Directors Guild who would normally accompany me today are in other parts of Canada, and they have asked me to extend their regrets.

The DGC is a national labour organization representing key creative and logistical personnel in the film and television industries. The DGC's interest in this proceeding relates to the request by Canada's broadcasting distribution undertakings, the BDUs, including both cable companies and other video distributors, such as MDS and DTH, to have the foreign ownership restrictions lifted for them.

While the DGC has no comment on the rules as they relate to telephone companies, it is opposed to any such amendments of the ownership rules as they apply to the BDUs. In the DGC's view, there are important cultural issues attached to the roles that BDUs perform in Canada distinguishing them from the telephone companies.

As the present time, Canadian companies are free to raise capital outside Canada, either by way of loan or by way of non-voting shares, as long as they do not breach the requirement that control be in the hands of Canadians. In other words, if anything is impeding investment in Canadian BDUs, it's not the ownership rules, but rather the requirement that control rest in the hands of Canadians. That is what this is all about.

It's not about raising capital, but rather about selling control of Canadian companies to non-Canadians. If non-Canadian investors simply wanted to invest in Canadian companies, they can do this now. It is the desire on the part of non-Canadians for control, perhaps matched with the desire for an exit strategy on the part of would-be Canadian vendors, that propels the current BDU position.

Under a regime of no restrictions, integrated foreign media companies would be eligible to acquire Canadian BDUs. They would not be passive investors. If they wanted to be passive, they could also do that now. These mammoth enterprises are also distributors of a large volume of programming and would have every incentive to promote their own content. There's a huge potential for influence over programming undertakings by non-Canadians who control Canadian BDUs. Since they can also take minority interests in programming services, it would be very difficult to make sure Canadian control over programming decisions continues.

BDUs have suggested that the problem can be solved by structural separation. In other words, BDUs that own programming services could spin them out into a separate company and retain the transmission assets in the original company. Only the latter would be eligible to sell out to non-Canadians.

This is not an acceptable solution for the following reasons. The concept of structural separation has been borrowed from the telecom world and was designed to allow for costing allocations and accounting treatments relating to cross-subsidization by basic subscribers of unregulated ventures, both in Canada and abroad.

In the current situation, the role of a BDU is central and critical to the Canadian broadcasting system. Whereas a telephone company is prohibited from controlling or influencing the content of what is being carried, the BDU's function is very different. It has a very active role in controlling or influencing what the content provider offers. While the CRTC sets the general parameters for what signals can or cannot be carried, it is the BDU that decides which services to market, package, and promote, and how much support should be given to each. It establishes the wholesale price and creates program packages.

The fact that BDUs make programming decisions everyday is well recognized. BDUs are involved on a daily basis in making a myriad of decisions that have cultural ramifications within the general rules set by the CRTC. They are the gatekeepers selecting which channels will occupy precious capacity on their pipeline to the home. They operate the local community channel, which has changed significantly in recent years and which provides local service to the citizens of the communities where it operates. The community channel also provides access to groups that otherwise would not be able to present their views.

¹ (1555)

The selection of which channels will be carried is constrained by the CRTC, but this is only the beginning. Following that threshold decision, there are decisions to be made about launch, about channel positioning, about marketing expenditures, and about rates. These giant BDUs hold the power to make or break a Canadian programming service, and anyone who has been in a room negotiating the details of an affiliation agreement knows they're aware of this power. To allow it to fall into the hands of a non-Canadian enterprise would run contrary to the very intent of both the Broadcasting Act and direction to the CRTC regarding non-Canadian ownership.

The great majority of Canadian pay and specialty channels have conditions of licence based on revenues. This means the higher the subscription revenues of a given service, the more that service must spend on the creation of Canadian content programming. The ability of the BDUs to affect the size of the revenues of Canada's pay and speciality licensees, and thus the amount they spend on Canadian content programming, is too important to be entrusted to non-Canadians.

In summary, there are a variety of areas where the BDUs are called upon to make contributions to culturally significant matters pursuant to the Broadcasting Act and to CRTC policies and regulations. In the DGC's view, these decisions should be taken by Canadians and not by foreign-controlled multinational companies.

In conclusion, the DGC respectfully suggests that the committee not recommend changing the foreign ownership rules for BDUs at this time.

I'd be pleased to respond to your questions on behalf of the DGC.

The Chair: Thank you very much.

I just want to advise the committee that Mr. Buchanan has to leave at around 4:50 p.m. to catch a flight, and we have Mr. Crête's proposed motion to discuss at 5:20. So I would ask that we begin questioning for six minutes. I'm going to have to adhere to the time limit and go back and forth. We'll see how close we can stick to the time limit this week.

Mr. Rajotte, please.

Mr. James Rajotte (Edmonton Southwest, Canadian Alliance): Thank you, Mr. Chairman.

Thank you very much for coming in today.

I want to start with the last presentation. You stated in paragraph 16 that “Whereas a telephone company is prohibited from controlling or influencing the content of what is being carried, the BDU's function is very different”. I'm sure you're aware that a lot of telephone companies now want to be in, or are certainly moving into, the broadcasting field. Will this alter your perception at all, or have you taken this into consideration? How will it affect your statement here?

Mr. Grant Buchanan: No, we have not. When they're acting as broadcasters, they would fall under the Broadcasting Act rules, as they do now. And when they're acting purely as telephone companies, they'd continue to fall under the telco rules under the Telecommunications Act. So those rules wouldn't change particularly.

Mr. James Rajotte: But if you had a situation in the future where a typical Canadian home would have a cable wire and a telephone wire going into it, and the telephone wire could carry both, then how do you apply two different acts and two sets of regulations?

Mr. Grant Buchanan: It will probably get even worse, because the hydro company will also probably have fibre and try to carry some or both of those things. But the way we've got it now seems to be working. As you know, the phone companies have had experimental licences to be broadcasters in Calgary and Edmonton and have operated under the Broadcasting Act. Similarly, the converse is true.

We have the status quo now allowing those players to do these things. I'm not sure how you are thinking this would change.

Mr. James Rajotte: Well, how do they regulate it now? If a telephone company is broadcasting into a home, do they know when that is happening versus when it's being used for telephone purposes?

º (1600)

Mr. Grant Buchanan: If they're doing any broadcasting whatsoever, which is a clearly defined concept under the act, they need a broadcasting licence. So if they're not delivering anything classified as broadcasting or are not delivering programs, and if they're simply acting as a carrier, they do not have to have a broadcasting licence.

Mr. James Rajotte: What if they're doing both?

Mr. Grant Buchanan: Then they need both licences, which was the case in Calgary and Edmonton. When Telus was carrying on its trials, it needed both a broadcasting licence for its Broadcasting Act activities and a telephone licence for its telecom activities.

Mr. James Rajotte: But if the committee decides to recommend lowering the foreign ownership restrictions for the telco side, it is still not clear to me how we would split that if the telephone companies—

Mr. Grant Buchanan: If you were going to do that, I guess you're suggesting that is what would create the problem. Right? Because right now they co-exist fine, and the cable guys have a situation where they are primarily under the Broadcasting Act. So the status quo works fine for the Directors Guild. What you're talking about is something that would begin to skate it offside.

Mr. James Rajotte: One of the suggestions made by Mr. Ypsilanti on page 4 of his brief was that “one way some countries have ensured that their incumbent remains independent of any foreign company has been through something called share limitations”. Obviously, you haven't had a chance to read his brief prior to this meeting, but maybe Mr. Ypsilanti would like to explain more of what he means. If Mr. Buchanan responds, we could see whether this would address some of the concerns of the Directors Guild.

Mr. Dimitri Ypsilanti: It's very simple. No party can own more than x% of the shares, say 5% of the shares. This can be non-discriminatory in that it applies to nationals as well as foreigners. So it's just a cap on the percentage of shares anyone can own.

Mr. Grant Buchanan: It is simply a subset. You're saying which non-Canadians would be allowed to own the shares, because you'd cap at a certain level. I don't think this takes you there. We've had situations where non-Canadians have owned 60% to 65% of the non-voting shares of BDUs, for example, but those are pension funds or separate entities not controlling the Canadian enterprise.

Mr. James Rajotte: So that would not in any way address any of your concerns?

Mr. Grant Buchanan: No.

Mr. James Rajotte: Okay.

In your presentation, Mr. Ypsilanti, you mentioned that incumbents already have asymmetric regulations imposed on them. First of all, did I hear that correctly? Secondly, this seems to run contrary to what we've heard from most witnesses up until this point. They've pointed out that the asymmetric regulations go the other way.

So I'm curious why you said this, and perhaps you could just expand on it for us.

Mr. Dimitri Ypsilanti: Most incumbents have an obligation to provide access to their networks at cost-based prices. I'm talking generally here, not necessarily in the case of Canada. Actually, in some countries the universal service obligation is imposed only on the incumbent, and not on new entrants. But the regulatory burden usually falls more on the incumbent than it does on the new entrant. The new entrant is not usually constrained as much as the incumbent in terms of regulation.

Canada is slightly different in terms of access—access to networks, for example—because incumbents as well as new entrants have to provide access. This may not necessarily be the case in other countries, where the obligation is on the incumbent to provide access to a network, but the new entrant who is building up their network may not have that obligation.

Mr. James Rajotte: So are Canada's regulations more symmetric than the asymmetric regulations generally present in OECD countries?

Mr. Dimitri Ypsilanti: We haven't actually benchmarked that, because it would be quite hard. You would have to go through the whole gamut of regulations to see what kind of weight is put on the incumbent vis-à-vis a new entrant, so it wouldn't be an easy exercise.

º (1605)

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

Mr. Marcil.

[Translation]

Mr. Serge Marcil (Beauharnois—Salaberry, Lib.): I will give my time to Gilbert Normand.

Mr. Gilbert Normand (Bellechasse—Etchemins—Montmagny—L'Islet, Lib.): What strikes me right now is the fact that people like Mr. Grant Buchanan are very worried that the container is going to be leading the content. Let me explain. Naturally, we have structures that are used for sending communications, and the people who produce television and radio programs are presently concerned that it is the owners of large corporations, what I would refer to as the broadcasting conduits, that are going to assume control. Perhaps we should be asking ourselves these questions, but I am surprised that we are not putting more trust in our Canadian, Ontario and Quebec producers. People think that we will not be able to compete in terms of the quality of the production. Personally, if we have more means, I think that we should be able to improve the quality of production. This is the first question that I would like to ask Mr. Grant Buchanan.

[English]

Mr. Grant Buchanan: If I understood your question, it's the age-old content and control question. I don't think it's people who are afraid to compete who are creating these programs. The dilemma is that it pyramids up to a point where the single pipeline into the home is controlled by someone you have to have a handle on. Letting that power slide outside your borders is not something the Directors Guild thinks is a good idea.

The programs themselves are sold to a multitude of specialty and pay television services in and outside Canada. But who picks which ones get what placement, get promoted, and get all of the benefits depends on these very powerful BDUs who are concurrently allowed to own programming services that are sometimes competing. So it's a very delicate balance, and already a situation needing a lot of scrutiny, with remedies that are often after the fact. The thought of letting it escape unnecessarily is not something the guild supports.

Mr. Gilbert Normand: My second question is for Mr. Ypsilanti. In these countries, do you think it is necessary for the state to have financial control, so that a certain organization is able to give a guarantee of recording for everybody inside of the country at low cost?

Mr. Dimitri Ypsilanti: Are you talking about the creation of media...?

Mr. Gilbert Normand: No, I am talking about networks, communications, phones, the Internet, and broadband.

Mr. Dimitri Ypsilanti: Is your question about whether the state should control...?

Mr. Gilbert Normand: No, my question is whether the state must invest in this new technology and....

Mr. Dimitri Ypsilanti: No, I don't believe the state should invest. I think the market is quite competent to try to invest. There are obviously geographic regions in a country where the market will not invest, and there are policies already being implemented in Canada and elsewhere to make sure that you can get broadband in scarcely populated areas. But as far as far as possible, I think you should make sure that the market invests.

I was struck by Mr. Buchanan's statement on a single pipe coming into the home. What I'd like to see are multiple platforms coming into the home to provide users' choice as much choice as possible. This choice will only come through the market and through competition in the market.

º (1610)

Mr. Gilbert Normand: But do you think that some foreign investors will guarantee better technology and better access to the population?

Mr. Dimitri Ypsilanti: I don't see why. If you have a good regulatory framework, you can impose those guarantees without imposing a big burden on the market players. You can do that if you have the regulatory framework in place with universal service types of obligations.

Mr. Gilbert Normand: Thank you.

The Chair: Thank you, Mr. Normand.

Monsieur Crête.

[Translation]

Mr. Paul Crête (Kamouraska—Rivière-du-Loup—Témiscouata—Les Basques, BQ): Thank you, Mr. Chairman.

Thank you for your presentation, Mr. Ypsilanti. I would like to make sure that I have understood your presentation properly, because, indeed, you have added a twist to our information. Officials from the Department of Industry provided us with a list of countries such as those you named, in which there are now no restrictions on foreign investment. From what I could get from your presentation, because of the reference to the incumbent, there is, to all intents and purposes, for each of these countries, some flexibility provided for the incumbent—perhaps we can call this the mother company—or again for companies that are already present in the country. When, for example, we read that in Australia, Japan, Norway, France and Switzerland, the law presumes that the state must be the majority shareholder, am I mistaken in thinking that, although there has been some liberalization, significant restrictions have been maintained to protect the main shareholder or, at any rate, the mother company?

[English]

Mr. Dimitri Ypsilanti: First we have to go back quite a few years to when there was a monopoly in those countries. The incumbent, in cases like France, was a department of the government. It wasn't even a company. Then France Télécom was created as a wholly owned state company. So the process of setting up a competitive market took a long time.

Then the process was to start privatizing over time in a number of places. I mentioned Spain before. It was completely privatized, whereas in countries like France, Norway, and Switzerland there's still a requirement that the state own a share in the incumbent.

There are a number of reasons for the state to do that. The first one is very political. In France it was very much linked to the fact that the trade unions were an important factor in slowing down the liberalization process. There had to be a quid pro quo in order to allow a market opening.

I don't want to go through every country and give you a reason. I would like to see them move toward complete privatization, and I think that'll happen over time. It is a question of time. But the fact remains that new entrants do not have any restrictions imposed on them. So any company that's set up in the EU can come in and invest in France, or any company that's set up in Switzerland can set up a telecom operator without any limitations.

The second point I tried to make was that the restrictions in those countries that have restrictions on the incumbent are not discriminatory. They don't apply to foreigners any more than they apply to nationals within that country.

[Translation]

Mr. Paul Crête: I have two questions. If I look at your table, I would tend to say that the situation is that all of the countries have, to some extent, liberalized their markets but nevertheless have safeguarded, for the incumbent, a little bit more than 50 per cent, or else they have given themselves parliamentary control enabling them to intervene in the case of an emergency. Is that not more accurate than saying that everybody has completely liberalized their market? Your slide provides us with the list of countries where there is “no restriction on authorized undertakings”, but there are some important words: “with the exception of the incumbent”. If I were to take out the words “with the exception of the incumbent”, how many countries would be left on the list?

º (1615)

[English]

Mr. Dimitri Ypsilanti: Slide six lists those countries that have no restrictions on incumbents. I can go through them and tell you which ones have state owned. In Europe the reality is that there was state ownership and they moved to privatization. In Austria, Ireland, Italy, and the Netherlands the incumbent has been completely privatized. So there are still a number of them where there is state ownership. Again, I don't think that matters. As I said previously, I would like to see them completely privatized. But the fact remains that new entrants can come in and they're wholly owned by foreign companies. They are very active in each of these markets. They are competing against the incumbents.

If I may add something, the extent of state control over the incumbent actually differs from country to country. In some cases the state has a member on the board, and in others they do not. But due to the fact that they are the owners, one would implicitly assume they have some say not in how the company is run on a day-to-day basis but on some crucial decisions that would impact the company.

Let me take France Télécom as an example, which is having tremendous problems. It has a huge debt. During the process of accumulating that huge debt, which is due to the purchase of other companies, the state had very little say. The CEO of the company went outside of France, purchased other telecom companies, and accumulated that debt. That was a decision of the CEO of the company. It was not a government decision.

The Chair: Thank you very much.

Mr. Marcil, are you going to ask questions?

[Translation]

Mr. Serge Marcil: Can Brent begin?

[English]

The Chair: Okay. I'll come back to you.

Mr. St. Denis.

Mr. Brent St. Denis (Algoma—Manitoulin, Lib.): Thank you, Mr. Chair.

Thank you, gentlemen, for being here.

First, I want to refer to page 10, public telecommunication investment per capita. I notice that for 2001 the line representing Canadian investment is going up while the others are going down. There must be forecasts for the four categories--U.S.A., Australia, OECD, and Canada. If I were to jump ahead two or three years, would it be possible that the Canadian line would keep going up while the others went down, or is that just a blip?

Mr. Dimitri Ypsilanti: No. That's just a blip. I think it's fairly clear that in 2002 Canada is going down just as the others are.

Mr. Brent St. Denis: Okay. I just wanted to clarify that. If that's what the estimates are, we won't disagree with you on that point.

We've had different witnesses give us different points of view on the relationship between foreign ownership and control of content. Being an expert in the field, you appreciate that our proximity to the U.S. has caused Canadians to be concerned about content issues.

Mr. Buchanan, please feel free to comment on this as well. I think that in your presentation you suggest that it's virtually impossible to separate content issues, especially when we're talking about cable, from the infrastructure, the pipes, or what have you.

Mr. Ypsilanti, is it that in general OECD nations aren't concerned about content issues because their countries have caused a different history to happen when it comes to making their own cultures survive in relation to their neighbours? Is it possible that our context in Canada makes it necessary to be concerned about content when it comes to those areas where it may be difficult to separate content from the pipes? I don't think you discussed content in your presentation.

º (1620)

Mr. Dimitri Ypsilanti: No, I didn't. I was dealing with telecommunication infrastructure services. That's what I viewed the issue as, what it should be.

There is one country--France. The French are concerned about the cultural exception and, like Canada, they are concerned about content. My feeling is that we need to separate infrastructure from content, and I think we can. We need to find regulatory means to do that, and I think it's possible to do.

There may be a problem in the longer term, as someone mentioned, with telcos getting into content. I guess we need to differentiate between programming and content in general, because there's a lot of content that is not restricted in any way, including in Canada. And in some cases, the border between that content and the content we normally consider restricted may be quite difficult to define.

But my feeling is that we can and should separate infrastructure questions from service questions. I think regulators are very imaginative and they can come up with ways and means to do that.

Mr. Brent St. Denis: Mr. Buchanan.

Mr. Grant Buchanan: You asked about whether perhaps there have been differences in the history of how this developed, and I think in Canada we had a very early cable history. We became much more cabled, much more quickly, than any place else.

The cable industry in Canada, partly because of our geographical proximity to the United States, was an instrument of government policy. It was the tool that carried the Canadian channels, which were set up to carry the U.S. programs together with Canadian programs into Canadian homes, and they became the preferred instrument of Canadian cultural policy for the last couple of decades. So I think there is a historical difference, perhaps, between Canada and some other countries in terms of cable.

Mr. Brent St. Denis: You suggested that it was virtually impossible to separate the two.

Mr. Grant Buchanan: It's extremely difficult when you consider what a cable operator does. How would you isolate the choices a cable operator makes when distributing video signals? How would the foreign owner be insulated, if the suggestion is that you would have a cable company qua telephone company all by itself? I think that would be very difficult. The financing for all of that would have to come from somewhere.

Earlier we spoke of Telus and the trials they had out in Alberta. If you consider that Telus is free to raise foreign capital, in terms of its voting shares, up to the legal limit--the 46% or 47% interest--and that it's also able to tap non-voting shares and so on, the suggestion that it can't raise money to become, for example, the fourth video distributor into the market doesn't seem right. It's such a pinprick of the business it wouldn't be influencing investment decisions.

I think what's going on now, of course, is that the worldwide malaise in telecom is depressing investment in every country at every level. I think it would be difficult to try to separate the functions.

º (1625)

Mr. Brent St. Denis: Thank you.

The Chair: Thank you very much.

Mr. Masse.

Mr. Brian Masse (Windsor West, NDP): Thank you, Mr. Chair.

Mr. Ypsilanti, Mr. Buchanan has brought up a point with regard to voting shares and non-voting shares. Why is it right now that there isn't more investment with regard to non-voting shares, or is this just about control at the end of the day?

Mr. Dimitri Ypsilanti: I think you have to go and look at what the user wants, and the most important telecom users are of course the multinational companies that want end-to-end telecom networks and services available to them. They don't want to deal with multiple companies. They want someone to look after their network, both within their own company and with their suppliers and end customers. That does demand that they deal with someone who has end-to-end control, so control is important.

Mr. Brian Masse: What we're going to see is the elimination and consolidation of companies through foreign control, then.

Mr. Dimitri Ypsilanti: Not necessarily. What you may see are some large--which you've seen on the Internet market--backbone service providers. WorldCom obviously comes to mind, but there are a couple of European ones. Telia, which is the incumbent in Sweden, has a significant network in the U.S. and across Europe.

A lot of companies are expanding and getting intranetworks, particularly intranet, so they can reduce costs and keep the traffic as much as possible in their own networks. It doesn't mean that you will end up with, if we go back to the computer world, a single IBM. I don't think that will happen.

The Chair: Mr. Buchanan.

Mr. Grant Buchanan: I was simply going to add that I think the answer is yes, that it is about control. At least in the context of the BDUs, my recollection of the testimony in front of the heritage committee was that they aren't tapped out yet in terms of what they could attract in terms of the voting interests. The shares that could be purchased by foreigners for investment now aren't being used. Obviously, if foreigners were interested in investing for investment's sake rather than control, there's lots of room to do that now.

Mr. Brian Masse: That's one of the difficulties I face throughout this process, hearing delegation after delegation talking about that, but at the same time they haven't maximized the options under the current.... In fact, one could argue that they can have ownership past the 46.7% because there's no limitation on non-voting shares.

We know that right now consumers enjoy relatively good pricing compared to the rest of the world. How could we guarantee that this would increase that position for consumers, or does it create a potential vulnerability by limiting competition where, at the end of the day and after competition is eroded, there is the potential for prices to increase?

That's a general question for both Mr. Buchanan and Mr. Ypsilanti, please.

Mr. Dimitri Ypsilanti: I view elimination of foreign investment and ownership restrictions as a means to increase competition, and competition is good for the user, so I don't think it will harm the users. I think it will help the users. As long as you have the CRTC there, which I would foresee staying in place for at least the foreseeable future, they can ensure that there's no dominance in the market by a single player. They have been doing that all along.

º (1630)

Mr. Grant Buchanan: With respect to the BDUs, remember, I'm not talking about the phone companies. I think that what you're talking about would be severe control, a hollowing out.

In terms of service to subscribers, I think what we have now is the optimum situation, where it's controlled in Canada, the services are Canadian. and the entire chain has Canadian entities capable of being regulated in this country by the CRTC all the way along. That's very different from widgets and phone lines, which are what my colleague is talking about. That's not what we're here talking about today.

Mr. Brian Masse: Lastly, where do you suppose the greatest array of investment will come from? Will it come primarily from the United States when we lift restrictions in terms of voting shares?

Mr. Dimitri Ypsilanti: That's an interesting question. Again, if we go back historically and look at what happened in Europe as they opened their market to competition, there were all these opportunities for investment in those markets. You saw, for example, a couple of U.S. companies coming very strongly into the cellular sector and setting up not wholly owned subsidiaries but usually joint ventures with local companies to provide mobile telephony. Over time they actually withdrew from the market and consolidated and went back home.

You've seen that as well in the wireline area, where some U.S. companies have come in and bought and where a couple have stayed. Telecom Denmark, the incumbent in that country, is partially owned by a U.S. company. It's the same thing in Belgium as well, but some of them have actually retreated. There are very few--except for backbone or end-to-end networks--examples of U.S. companies that have come in and set up wholly owned wireline companies.

In fact, I have difficulty actually thinking of a new entrant that has much U.S. capital in it. Some European companies have been much more aggressive in branching out and going into the States, for example, and setting up companies. Canada, being on the border, may of course be a bit different, but I would still see that Canada would be viewed as an important market for European companies as well as for some of the U.S. ones, and I think they'd come here.

Mr. Brian Masse: Mr. Chair, Mr. Buchanan had a remark.

Mr. Grant Buchanan: I was simply going to add that on the BDU side, I think it would undoubtedly come from the United States and very quickly. They are the owners of the content and the pipes in some cases there and would undoubtedly and quite correctly want to annex this market and simply extend the brands--and that makes good economic sense for them--the moment we say yes.

The Chair: Thank you.

Mr. McTeague.

Mr. Dan McTeague (Pickering—Ajax—Uxbridge, Lib.): Thank you both for being here.

I think we have quite an interesting position taken by both of you here, and we have quite a few questions. Obviously, the issue of content seems to be playing an increasing role in our deliberations on foreign content.

Mr. Ypsilanti, we've talked a little bit about the content in terms of the BDU side. I'm wondering if you have any comments for this committee as to whether or not we should be entertaining the issue of content as it relates to telecom. I notice that the examples you've given don't exactly let us really get a firm understanding of whether or not there is in fact an impact. All things being equal, a lot of the countries you have cited here are nations with rather entrenched cultures, such as Poland and Germany. I don't see a Germany trumping a France--at least, I hope that's not the case--or it being involved, unless of course you're prepared to use subtitles.

The situation in Canada may be somewhat different in that you have similar cultures and the presence of a very dynamic and very strong capitalized market in the south. Is there the possibility that you would see the need, for instance, for...? I don't want to draw you into the broadcast area, but it would certainly have to be a balancing act that would apply as to well to content towards telecoms.

º (1635)

Mr. Dimitri Ypsilanti: Are you asking whether a telecom company providing broadcast-type content should be regulated?

Mr. Dan McTeague: Right.

Mr. Dimitri Ypsilanti: I'm a believer in convergence and in allowing different platforms to compete—which are obviously starting to compete. I'm not a very strong believer in putting restrictions on content or in trying to limit the type of content the different platforms can provide.

Given that you have that restriction in place, then you'll need to devise some sort of mechanism to separate your regulation of infrastructure from regulation of services. At least you'll need to treat the market players even-handedly. I think it would be very unfair if certain requirements were imposed on telcos that weren't imposed on the cable companies, or vice versa.

I will give you France as an example. The main private broadcaster in France has a giant venture with a telco to start providing content on DSL or high-speed Internet. I'm not sure that even the French have figured out what to do with this, because it is a phenomenon that is going to accelerate over the next few years.

If you want to control content, I think you just need to separate it from.... It's going to be a bit of a balancing act, but you need to separate it and ensure you're treating all of the platforms fairly and that they can have the same opportunity to provide the content as the other platforms do.

Mr. Dan McTeague: I have a question for perhaps both of you. How would you then handle a situation where, for instance, in the cable industry they benefit from a production fund from which they're able to acquire a certain amount of public money from subscribers, versus a telecom? I'm not arguing one against the other. But from previous experience, would this not be seen in a world environment...where you open this up to foreign investment and say, hey, folks, listen, we have a great reason. Maybe you can't affect content, but there's another reason. You have access to public funds here in terms of the way in which we structure our billing to clients, and we would allow you to see this as an opportunity to make a decent return on your investment, short of having an influence on content.

One would certainly not want to see a level playing field between those who are carriers of product one way or another.

The Chair: Mr. Buchanan, go ahead.

Mr. Grant Buchanan: I'm not completely sure I understood your example. In the world we have now, you have a Bell Canada, which is obviously a phone company and a BDU, with a BDU licence for its Bell ExpressVu operation and a DTH licence. It's also a programming undertaking for its pay-per-view sources. It exists perfectly fine now. It's able to attract capital; in fact, it did attract capital and got rid of the foreign capital.

The question I think you have to ask yourself is, what evil or what benefit are you trying to achieve in changing the rules? Because they seem to work now in terms of attracting capital.

So I'm not sure about your fund example. Who would tap into which fund? Are they private or public moneys or—

Mr. Dan McTeague: The funding as it currently is arranged for cable companies allows a certain percentage to be recovered. A certain amount of the infrastructure that the cable companies put in in the past is recoverable under the basic program. We called it CAPEX years ago. It was sunsetted and turned into a number of other things, including the Canadian Television Production Fund--something, of course, the telcos probably don't have on their own.

The purpose of my introducing that was simply to ask if this is an incentive, in a perfect world where we would open foreign investment doors, to say, look, we already have a situation here where we're able to capitalize part of your investment, therefore your investment won't have to be subject to an undertaking of increasing your essential facilities; it's already there.

I certainly don't want to play devil's advocate, but I think it's an important point.

Perhaps, as another example, are we going to say to people, look, the first step is foreign investment; the second one around the corner is opening up or liberalizing local rates, as they did--as Mr. Ypsilanti suggested--in the United States in 1999. These things are only down the road, so don't worry, foreign investment is the first one; the next ones we'll start to knock out are things like deregulating local rates, impacts on content, etc. I mean, how far are you prepared to go? How far do we want to go down this road?

I understand your point, Mr. Buchanan. But, Mr. Ypsilanti, I think there would be some concerns expressed about what the next logical step would be once you begin to open the door to foreign investment.

º (1640)

Mr. Dimitri Ypsilanti: My understanding is we're talking about telecom infrastructure and investment in that infrastructure, and telecom services and any restrictions on those. I'm not well placed to say there's going to be a sort of domino effect and once you lift those restrictions you'll have pressure down the road to change your content and programming laws. I think if that's going to happen, it's going to happen in any case through the developments you're seeing now, the ability of telcos to provide programming, to access programming on the Internet, where it's much harder to control where that content is coming from. I think that's going to put the pressure on the content laws more than any change in paragraph 7(d) of the telecom act.

The Chair: Mr. Buchanan, do you want to finish off?

Mr. Grant Buchanan: On the cable side, basic rates are fundamentally deregulated as we sit here. Most of them were deregulated last summer, and the few remaining ones that are still regulated are in the process of being deregulated. So there already is very little rate regulation left in Canada on cable.

With respect to the funds, the large funds are normally set up on transfers of ownership now, with the exception of the CTF. What that would be is in the blaze of glory as the sellout occurs. You would have one fund set that would go for a number of years and then expire. And that would be the end of that; that would be the exit price for the loss of Canadian ownership of the BDU industry.

The Chair: Thank you very much.

I'll switch to Mr. Fitzpatrick.

Mr. Brian Fitzpatrick (Prince Albert, Canadian Alliance): I have a few quick comments.

I do have problems with Canadian elitist groups controlling and monopolizing the incumbent business and deciding what's good for Canadians. If our future as a nation requires Da Vinci's Inquest to be forced through the pipe in the name of Canada, I think we're in trouble. I think I'd prefer a system in which the Canadian consumer would have a say on what they're going to choose for content, rather than technocrats and Canadian incumbents.

I have noticed a lot of Canadian content providers are already complaining about the monopolies we have in the affiliation agreements--controversies with Quebecor and with the Bell system--as it is.

So I'd just raise that. But I guess the bigger question I'd have is on the 46% ownership rule. There seems to be an implicit understanding that there's something magical about that and if you go over it, somebody is going to gain control. I would suggest that if Ted Turner bought 46% of Bell Canada, he would be able to appoint the board of directors, he would be able to appoint the CEO; there would be nothing there to prevent him from doing that at all, especially a widely held company like that--or Disney or any of these others. They could do that.

I really don't understand how this 46% was pulled out of the air, because it doesn't really achieve that goal. If there's no law preventing Ted Turner from buying 46% of Bell Canada, I would say if he bought it, he would be able to control it because the other 54% would not be able to...no matter what kind of alliances came up, they would not be able to overcome that domination in shareholding.

Maybe you could respond to that, because I really don't buy into this 46% thing.

º (1645)

Mr. Grant Buchanan: The 46% is one prong of a multi-pronged defence system. It is only the voting shares.

Mr. Brian Fitzpatrick: What are the others?

Mr. Grant Buchanan: You cannot control the board. You cannot name the CEO; you cannot otherwise control through legal or contractual means. There's a multitude that would capture all the stuff you were just talking about, so we would not be able to control it.

But it's not 46% of a single company. He gets 20% at the operating company level, and then 33% at hold-co level, for a combined economic interest of 46.77%.

So there are a number of other parts of the direction that would capture that.

Mr. Brian Fitzpatrick: The follow-up question I have on this is that Bill Gates and Microsoft are working on a strategy where, if they're successful, content will move through the Internet.

I'm not going to bet against Bill Gates. I think people lost a lot of money trying to bet against this individual.

If that happens and content starts moving through the Internet in this system, are you then going to suggest that we make a bunch of retroactive changes to our regulatory framework and everything, and bring in content police and stuff to try to shut down the Internet and control what goes in so it matches up with the cable industry?

Mr. Grant Buchanan: I don't think we need to worry about retroactive lawmaking. The question you pose is a very interesting one, though. We're all wrestling with what will happen on that day in the future when you are able to deliver some of this stuff that is not convenient to deliver now.

If you can order up a movie over the Internet now, you have to know a day ahead and wait for it--and have your kids do it for you, and so on. But there will come a time--

Mr. Brian Fitzpatrick: But we're making regulations for tomorrow as well, not just for today.

Mr. Grant Buchanan: I understand that, and we have been worried about it. Canadian content is just part of the issue there. Countries have had to wrestle with hate and pornography, and all the other issues that come over the Internet.

It's all brand new to us. Everybody is struggling with, what do we do with this thing? But I'm not sure you have to throw out all your rules in anticipation of the day that this may arrive.

Gradually, over the last few years, we've been finding creative regulatory ways to deal with some of what comes over the Internet, but no, we don't have a whole answer for your question.

Mr. Brian Fitzpatrick: I guess I come back to the content question.

With Canadian ownership of these monopolies, if I can use that term, are they the gatekeepers or protectors of Canadian culture, and so on? What's wrong with having people in my province, Saskatchewan, decide what they want?

I go to a cable company or a satellite provider, and I have to take 80 or 90 channels. Quite honestly, I'm not interested in all those 80 or 90 channels--including Da Vinci's Inquest, but I have to pay for that and I have to subsidize all that stuff because somebody in this elite group feels that this is good for our nation. But the Canadian viewer doesn't really think it's all that important. Why don't we just free this system up and let Canadians choose their content? If we really have a culture, aren't they going to find something in our nation that they can hang their hat on?

Mr. Grant Buchanan: The answer to that is that packaging decreases the costs of all of the component parts of the package. What history has taught us is that most consumers have six or seven channels that they watch a great deal. They aren't the same ones, but most of us have our favourites. If you had to go out and price those on an à la carte basis, they would be more expensive than your cable bill when you buy groups of them.

So the economics are such that it spreads across the entire country. Everybody chips in a smaller amount, and it ends up being cheaper and better.

You may find that you don't have that many, or the ones you like might not be that expensive, but you'd probably be the exception rather than the rule.

The Chair: Thank you very much, Mr. Fitzpatrick and Mr. Buchanan. I know the time is going on, and before you leave I want to thank you for being with us today.

Mr. Marcil.

º (1650)

[Translation]

Mr. Serge Marcil: Thank you, Mr. Chairman.

There are some very theorical models. Most of the professors who have appeared before us have always presented economic models where there are often some variances in terms of application. In addition, comparisons are often drawn between the two markets, namely, the European market and the North-American market. There is only one community in the European market now, because all members of the European Union share the same passport and are free to travel from one country to the next. The economies are just about all integrated and therefore there are nearly no restrictions, if indeed there are any at all.

In North America we have three completely different identities. Canada, with its population of 30 million; Mexico; and the United States, with a population of nearly 285 million. When you compare the United States and Europe, right now we are talking about equivalent markets in the sense that there are nearly 300 million people living in this integrated European market. But when you compare Canada with the United States, that is an entirely different matter. We are talking about a giant, and although Canada may have the second largest territory in the world, there is simply no comparison in terms of our population and economy.

So when it comes to deregulation, it is true in theory that markets should be opened, we should create competition, etc., but multinationals are not charities. They concern themselves with the economy and they want to make sure that their investments are profitable, they choose where they will operate, and so on.

When we compare the United States and Canada, we can see that in the North American market, where it should be easy to sell our products, particularity softwood lumber, the Americans decided overnight to impose a 27 p. 100 export tax. So I am trying to see... if we were to deregulate the telecommunications market, would we not then be running the risk of having American enterprise, which is at least 10, 15 or 20 times bigger than Canadian enterprise, take over what we call telecommunications in Canada.

In the content sector, given that our Canadian companies are currently intervening at two levels... I would use the example of Videotron, which operates both as a distributor and content provider. We have a small sector here. A wire acts as the carrier, but somebody has put the message in it, and this message, when it appears on the screen, becomes the content. So the company is the owner of the message at the same time.

So, were we to deregulate, we would not run any risk of having competition from Europe, but we would risk having an invasion of American capital and the takeover of Canadian companies. We have seen, in some cases where American companies bought Canadian companies, that some firms shut down, and headquarters were transferred south.

Mr. Ypsilanti, I do not know how you are going to react to my comments, but when you compare Canada to the United States... You will note that in Mexico no foreign company can become a majority shareholder. There ownership is limited to 49 p. 100 of the chairs of a company. So they protect their market.

How do you see that with respect to the European market? Could the same phenomenon occur here, on the North American continent, or do we not run a greater risk of loosing just about all of Canadian ownership? Perhaps my question is too broad.

[English]

Mr. Dimitri Ypsilanti: I think we had a similar question earlier. You made an analogy between North America and Europe. I should point out that within European Union Europe you have economies that are extremely small, like Luxembourg, Netherlands, and Belgium; and the large ones are the U.K., France, Germany, and Italy. I don't think the process of liberalization of telecom has led to any of the small countries losing their markets.

Some of the large new incumbents like Deutsche Telekom or France Télécom have actually done very little to go into some of the other markets. They've been busier competing at home, trying to expand into new areas, or moving completely out of Europe to the United States in the case of Deutsche Telekom, and to some of the central and eastern European economies in the case of France Télécom. So you haven't seen a collapse of local service providers, and I don't see why you would necessarily see a collapse taking place in Canada.

Canada has some very good telecom operators, both new entrants and incumbents, that I'm sure can hold their own against any new entrant from the U.S. Particularly in the case of the incumbents, they have brand names, which is very important. One of the problems I'm sure, if you talk to new entrants, is that it's quite hard to compete against the incumbent because people know Bell Canada. They attach to them, much as in the U.S. in the past they were very attached to AT&T. It takes them a long time to shift, so I don't think there'll be any sudden collapse or takeover.

There will be new investment and competition, and hopefully through that process increased benefits to end users. We should ultimately be looking at how we can best benefit the end user--the consumer and the business user.

º (1655)

The Chair: Thank you, Mr. Marcil.

Now I'll go to Mr. Crête.

[Translation]

Mr. Paul Crête: Thank you, Mr. Chairman.

I will pick up on what Mr. Marcil was saying. Basically, in all of the examples that you gave with respect to the United States, the language was different from English, whereas here, in North America, the market, particularly in English Canada, is, because of language, directly impacted by the American giant.

Don't you think that this is a special situation? I would like to know whether or not you can provide us with any other situations where something similar is occurring. Namely, whether there is a giant that speaks the same language as a smaller country, and I would like to know how the smaller country manages to avoid being overwhelmed.

I think that in all this the issue of language plays a very important role. For example, in Quebec the language barrier protects us very well from the arrival of the Americans. I am not talking about wireless companies or things along that line, but rather companies in the cultural sector. Can you provide me with other examples? If not, could you make any suggestions as to how to go about insuring the survival of English Canadian culture if ever this market is liberalized?

[English]

Mr. Dimitri Ypsilanti: We've moved from telecom investment to culture. Again there's an assumption there will be a domino effect between changing paragraph 7(b) and opening the telecom investment market to content.

Your question seems to be based on an assumption that Canadian culture is extremely frail and virtually non-existent, because it will be swept away with any kind of change. I don't quite believe that. I'm a Canadian national. I was born in Greece and I'm astounded at the amount of Greek content on the Internet that was generated not in Greece, because competition was insufficient in Greece, but in Canada and in the United States. In particular, the Greek community in Canada has been very vibrant because they've had access to Internet and high-speed Internet in generating this cultural content.

I don't think you should be linking the changes in investment and equation of further competition and investment in the telecom sector and the infrastructure sector with the content side. I think the two are separate, and the creation of competition in infrastructure will stimulate the creation of more content rather than kill Canadian content.

» (1700)

[Translation]

Mr. Paul Crête: Let us say that an American giant operating in both the information distribution and creation sectors decided to purchase, under the rules that would be applied in the event of total liberalization, some Canadian equivalents, even if these companies operated exclusively in the carriage, delivery and distribution sectors. Don't you think that, before too long, the American owner would say that he was now in a position to sell them, for a much lower cost, the Monday evening program about such and such, replacing it with an equivalent program that he would have produced in the United States and which would convey values that reflect the United States, which are not necessarily ours?

We saw this with the television series Dallas, for example, which was sold to Canada and translated into several languages. But if the person who produces the program has the means to sell it at a price which makes it much more profitable to broadcast the copy of the American series than it is to produce a series oneself, will this not have a definite economic impact on Canada?

[English]

Mr. Dimitri Ypsilanti: I think they'll try to sell the products that are profitable, which means the products consumers want. Consumers may not necessarily want the types of products the American producers are trying to sell.

You need to move a generation ahead into when we have high-speed Internet, and I'm talking about much higher speeds than we have at the moment. You will be able to choose your content without restrictions because you'll be able to get it from any service provider. You'll be able to buy movies and see them on your television, not necessarily your computer screen. So the kinds of changes you're talking about in delivery of content will be taking place. You will need to make sure the market is sufficiently dynamic that Canadian content providers can compete effectively with the larger counterparts. That's all you'll need to ensure.

I don't think a U.S. company will come here and want to dominate the whole market in content, and certainly a telecom company won't try to do that.

The Chair: Mr. Normand.

[Translation]

Mr. Gilbert Normand: I have only one very brief question and a comment.

I think that this discussion is revolving primarily around the content and the infrastructure. Personally, as a Canadian, I think that we are capable of producing high calibre programs with content that will attract viewers. If the content is not good, obviously people will switch to something else. That is a fact. We saw a series such as Un gars, une fille, which was translated into seven languages because this was a program that attracted an audience not only here, but also in Switzerland, Belgium, and just about everywhere. So in my opinion, we have to put a lot more faith in the Canadian productions than we are currently doing. Yes, we must be cautious, but I think that we have to have more confidence in Canadian productions.

However, I have noticed something else. In just about every country, there are ownership restrictions on the telecommunications companies, which has helped the core corporations, whether this be in Mexico, Switzerland, New Zealand, or Australia. Here, in Canada, I think that Bell Canada is the big corporation.

Consequently, should we be selective in the types of controls that we want to keep, particularly with respect to infrastructure?

[English]

Mr. Dimitri Ypsilanti: No, I don't think so. I'll repeat what I said earlier. You have to remember that many of these European incumbents were completely 100% state owned. In many cases, they were not companies, but rather government departments. There's been a process of setting them up as a company and then starting the privatization process. This has taken longer than expected because of political problems and a need for more political consensus.

In addition, those countries that were going to privatize 100% a few years back obviously stopped because the ministries of finance thought the stock market conditions certainly were not appropriate and are not appropriate at the moment. So this whole process has come to a stop. I don't think anyone intends to maintain control over the incumbent. They will reduce their control and they will do it over time.

Just to give you an example, one of the countries that I had imagined would actually keep control of the incumbent, namely the Republic of Korea, has totally privatized its incumbent over the last couple of years. They do have the foreign investment restrictions, but they have a private company.

I think the process of privatization will take place over time. Certainly in Europe as they privatize and as they get to 100% private companies, the foreign restrictions on the incumbent will disappear.

» (1705)

The Chair: Thank you.

Mr. Masse.

Mr. Brian Masse: Thank you, Mr. Chair.

One of the discussion pieces--it hasn't come up too much today, or in fact at all--that was brought up before by other presenters was research and development. Do you think that the opening up of these rules will increase R and D from this industry in Canada?

Mr. Dimitri Ypsilanti: I would think by definition it would, because new companies would come in. Most of them don't do research and development internally, but would outsource it. One finds that normally they would outsource it to local companies. In addition, most new companies would bring in new technology and new innovation from their home country. So I think there would be a tendency for it to increase.

Mr. Brian Masse: Would you agree that right now Canada has more foreign ownership as a country than most nations in the world?

Mr. Dimitri Ypsilanti: I can only speak of the OECD nations, which is just the 30 developed economies. I showed you on the slide. I think Canada has actually less than.... But among Korea, Mexico, Turkey, there's Canada.

Mr. Brian Masse: We're among the highest. One of the things we've always had difficulty with is R and D with our foreign ownership. It hasn't translated. We do have a low R and D investment in Canada. It's something that the government has had to address. It's diminished as we've had foreign ownership.

So convince me as to why in this situation, in this industry, R and D would increase, when the real past experience we've had is that it has diminished. We've done studies here with regards to R and D. I know there has been a paper done by Industry Canada on it that showed the correlation of foreign ownership and the reduction of R and D. So why would it be different in this circumstance? Can you convince me on that?

Mr. Dimitri Ypsilanti: Sorry, do you mean why R and D is less than telecom?

Mr. Brian Masse: You said that R and D would increase. What we've seen in Canada, though, as we've introduced more foreign ownership, is that R and D has gone down. So why would it be different in this circumstance? Why is it going to increase?

Mr. Dimitri Ypsilanti: What throws me off with your question is that you said that we've increased as we've restricted foreign ownership. That's going back quite a few years, before you had monopoly markets. I'm not sure what your question....

» (1710)

Mr. Brian Masse: Okay, let me try to rephrase it this way. You said that R and D would increase with more foreign ownership coming in, especially on the votable shares, because really that's what we're talking about here, the votable shares. As for the non-voting shares, they can still buy in if they want. There's plenty of room there. But the standard has been in Canada--and Industry Canada has actually done a study that shows this--that foreign ownership doesn't actually translate into greater R and D. So why in this particular industry would R and D increase?

Mr. Dimitri Ypsilanti: You're talking about general industry and general competitive telecom sectors specifically.

Mr. Brian Masse: Yes, try to separate the two for me, if you could.

Mr. Dimitri Ypsilanti: I'd think the difference is that telecom is much more research and development intensive. The whole ICT sector is much more dynamic, and telecom is a large user of information and communication technology. So I would suspect that to remain competitive you need to be at the forefront of research and development. That would provide an incentive to increase R and D.

Mr. Brian Masse: Has that played out in any other countries that have introduced or eliminated the restrictions?

Mr. Dimitri Ypsilanti: It's not anything that we look at in our work in telecoms, but certainly you find there is emphasis on getting the latest technology in the country. This has an impact on skills, because you need the skills to use the technology.

Mr. Brian Masse: But that's different from creating R and D in your country. It's importing R and D--

Mr. Dimitri Ypsilanti: Again, there's a difference between basic research and innovation, and application of new innovations. It's not an area where I have any expertise. But certainly in terms of applied innovations, I would say that this would increase and would have spinoffs in terms of, not necessarily basic research, but applied research and development.

Mr. Brian Masse: It would be interesting to find out, though, if you could look at some of these countries that have actually opened it up, whether or not the companies that have bought in and consolidated, or whatever it might be, actually set up the R and D in those countries and started to develop it. Maybe that's something we can look into.

Thank you.

The Chair: Mr. McTeague.

Mr. Dan McTeague: Mr. Ypsilanti, I want to shift gears here very quickly with two hopefully brief questions that won't require much hesitation to answer.

First, of the OECD countries that you've studied, is Canada alone in terms of having multi-jurisdiction with respect to telecom broadcasts? Are there examples of countries that still maintain what we had prior to 1985, where you had one department physically working on both telecom and content broadcast?

Two, has our foreign investment limit of 20% been met? Are there examples of where it has not been met? Has the general rule of 20% been met, or are there examples of where obviously it has not been met?

Mr. Dimitri Ypsilanti: Could you amplify the second question?

Mr. Dan McTeague: We're looking at the 20% increasing the foreign ownership on telecommunications. Are there examples of where some of the telcos have not used up the current 20%?

Mr. Dimitri Ypsilanti: That's not something I've looked at. I couldn't answer that.

In the first one you're talking about separate regulatory agencies, one dealing with telecom and the other with broadcasting. I can't give you a number, but I'd say that possibly a majority of OECD countries have separate institutions, one to regulate telecom infrastructure and services and the other broadcasting and content.

There is a move by the European Commission toward pushing convergence and trying to get regulations to be compatible with converging infrastructures and services. They're looking at models. The U.K. is setting up Ofcom, which is bringing together the former Oftel, the telecom regulator, with the broadcast regulator. So there is a movement toward that within Europe. But there are the same sensitivities as we hear of today in certain countries, such as France.

» (1715)

Mr. Dan McTeague: Thank you for that. Some of us are scratching our heads wondering whether it might be more efficient to have one department do both, as opposed to two trying to come to similar conclusions without fighting each other.

Mr. Dimitri Ypsilanti: I think it's much more efficient.

Mr. Dan McTeague: Thank you.

The Chair: Thank you, Mr. McTeague.

Are there any more questions on this side? Mr. Fitzpatrick.

Mr. Brian Fitzpatrick: I just want to get something clear here. I'm not an expert on how the cable system operates, but I'm going to play it out the way I think it does. The cable provider provides the hardware, and then there are all these people who want to get on the cable system. They make agreements with the cable operator to do it. If they run into a problem, they go to the CRTC. The CRTC is a regulatory body that can impose its will upon the cable operator. Through that mechanism a whole bunch of money flows to Canadian producers, such as the Alliance group, which makes great Canadian content shows, such as Bowling for Columbine.

I'm not sure in my own mind how the ownership of that cable system would change under this scenario. If Rogers didn't own the cable and it was an American outfit, I don't know that this regime would really change a whole lot with the regulatory requirements. Mr. Buchanan has left. But if I understood him correctly, he said that ownership didn't really make a whole lot of difference. Ted Turner couldn't control the content anyway, because there's a whole host of other regulatory hurdles to get through to do that sort of thing. Do you see the ownership of Canadian cable being something that is really crucial to securing Canadian content for Canadians?

Mr. Dimitri Ypsilanti: As I said previously, what you have to do is make sure you separate any content regulation from the carriage regulation, which is what countries are trying to do when they're talking about convergence or whatever. They want to have a regulatory framework that would apply just to the carriage, and if they have any problem with content or they want to have certain restrictions on content, that's a separate set of regulations. So I don't think ownership of infrastructure actually matters that much in terms of content.

Mr. Brian Fitzpatrick: I want to make an observation. Of the seven or eight channels I do like, three of them are Canadian, and I would compare them to anything else. I'll take Report on Business Television over any American program on that, and I'll take TSN over a lot of other competitors. I think that if Canadians are left freedom of choice, they will select some things that are truly Canadian, and quality will win out at the end of the day, rather than having a bunch of regulations on foreign ownership and so on.

The Chair: Is that your last question?

Mr. Brian Fitzpatrick: That's it.

The Chair: Mr. Ypsilanti, I want to thank you very much for being with us today, and not only providing us with your written reports but also answering many questions for the committee.

Mr. Dimitri Ypsilanti: Thank you, Mr. Chair.

The Chair: We'll now go to the motion that Mr. Crête has brought forward.

Mr. Crête, would you like to speak on it first?

[Translation]

Mr. Paul Crête: Thank you for considering this motion. I will read it quickly:

That the Standing Committee on Industry, Science and Technology summon, at the earliest opportunity, representatives of the oil companies so that they can explore the possible causes of the unexplained increase in the price of gasoline, including collusion among the oil companies, and the significant negative effects that the increase is having on the economy, and recommend appropriate corrective measures to the federal government.

I do not think that there is any need to expound on the situation that we are currently experiencing. We know that the situation has reoccured periodically in the past, but perhaps our challenge could be to examine the issue in an in-depth manner so that we can come up with some adequate recommendations. Particularly since we now have several indications, which moreover were noted by other committee members as well, particularly the vice-chair, that demonstrate the need to delve into the matter to determine who is responsible and whether or not the current price increases are really warranted. That is the spirit in which I am making this motion.

» (1720)

[English]

The Chair: Does anybody have any questions?

Normand.

[Translation]

Mr. Gilbert Normand: I think that Mr. Crête should specify what he means by "at the earliest opportunity" because, personally, I think that this should take place in the next few weeks, before our scheduled study on patents.

Mr. Paul Crête: As far as that is concerned, I am prepared to consider the committee's agenda. If Mr. McTeague is in agreement, we had set aside some time to study the bill that has already been postponed. Unfortunately, I do not recall the number of the bill and I do not know if this is technically possible for the House, but if it were done at that time, that would enable us to complete our study on telecommunications and then tackle this issue. Meanwhile, since the multinationals would know that they would be appearing before us, they may perhaps be a little less greedy as far as the market is concerned.

[English]

The Chair: Right now we are scheduled until the end of May, which is a very heavy month for main estimates in this committee and given that there have been requests for a number of people to appear in front of the committee. So our schedule has been pretty heavy all the way through, but if we get through our business we can go on to the next step. How we can conclude our business all depends on you. We have to deal with Bill C-249 and do some work on it, because we have allotted two weeks to it. I'm not sure it needs two weeks, but if we could get this work done, we could move our schedule forward.

I'm not going to start moving this bill out again. We have to deal with Bill C-249 or let it go to the House, because we have to do a motion in the House. So please don't put me in a position where we're going to have to move out Bill C-249 again. It all depends on us; if we can get our work done, then we can go at it.

Mr. Dan McTeague: Mr. Chair, I'm surprised I am going to be the first one caught in the middle on this one. I appreciate your concern about Bill C-249. In getting involved in telecom, I specifically remember asking what would happen if other urgent things came up. Of course, this is one of those urgent things.

With the indulgence of my colleagues, and in the absence of the clerk, I believe....

[Translation]

I do not know whether or not the clerk, Mr. Pagé, has given a firm or precise date for going before the House to request another date.

[English]

I believe it has already happened and that we have not put written words to speech in the House to ask for its consent to do this. However, given that Bill C-249 is about the energy industry, this may in fact strengthen the case for it. If the committee so wishes, I am prepared to work with Mr. Crête and others to compress the time spent on Bill C-249 in order to have one or two extra days.

But, Mr. Chair, I don't see us being able to do a massive study on either one of them if what Mr. Crête is proposing by this legislation is to have all chairs or representatives of all three majors and six regionals before this committee to explain themselves as to why the price of gasoline is what it is. I think it's laudable, but it has to be done sooner rather than later.

Depending on what happens, the price may tank again by June—if you would pardon the pun.

The Chair: There are two things. As I mentioned, it depends on the committee. If we can get our work done, then we can find some additional breathing room. I do have a little bit of concern when you use the strong words like “including collusion among the oil companies”, and I would take it that you would be bringing evidence on that.

[Translation]

Mr. Paul Crête: In its present form, the motion states: "...so that it can explore possible causes of the unexplained increase in the price of gasoline, including collusion among the oil companies..." That would indicate that that is one of the reasons that may explain the situation.

But if this part created problems, particularly the words "collusion among the oil companies", and someone were to suggest an amendment to this part, I would have no objection to withdrawing it. I want to make sure that we meet them. This part is not necessarily mandatory, because it is included in the possible causes. It is part of the list of causes, but there may be other causes that I have not included in my resolution.

» (1725)

[English]

The Chair: All right.

Mr. Fitzpatrick.

Mr. Brian Fitzpatrick: I'd like to make a friendly amendment to the motion. After “oil companies” we could put in “other experts” so it's not just oil companies. And where is says “unexplained”, perhaps we could just change that to “recent” increases and delete the words “including collusion among the oil companies”.

The Chair: Is that okay?

Mr. Crête needs to answer Mr. Fitzpatrick.

[Translation]

Mr. Paul Crête: Many aspects are covered. There are three related amendments. First of all, there are the "representatives of the oil companies and other experts"; that doesn't create any problems. Then, as for the "possible causes of the recent increase", I am suggesting the "recent unexplained increase". I am prepared to add the word "recent", but I would like to keep the word "unexplained" in the sentence. Finally, with respect to: "including collusion among the oil companies", this is one of the causes that needs to be assessed. I would not object to a withdrawal of these words. However, the matter needs to be studied.

[English]

The Chair: I appreciate that. So you can live with “including other experts”, “recent unexplained increases” and excluding “including collusion among the oil companies”. That's as a friendly amendment.

Now, Mr. Masse, and then we'll go to this other side.

Mr. Brian Masse: Thank you, Mr. Chair.

I think that taking out the phrase “including collusion” would actually alter it significantly. And I think that it's not insinuating there is collusion. Quite frankly, I don't know how many Canadians you can find who don't think there is collusion. So I think it's important to have the companies come and explain the whole situation so that they can either debunk the myth or at the same time we can investigate this. So I think it's important and it's a part that I'd like to see stay in there. If you talk to people around the streets, I don't know how many think there isn't some kind of collusion, because you go down a block and everything changes.

The Chair: Mr. Masse, in the past we have done a number of studies. The Liberal members did a separate study for a long time on it. If you're going to use the word “collusion”, I will be asking you for evidence.

Mr. Brian Masse: Why, Mr. Chair, when the fact is it doesn't say that we're insinuating that? It says “including”. It's exploring and including possible--

The Chair: They are pretty strong words, Mr. Masse. I'm--

Mr. Brian Masse: And we're not insinuating. What we're doing is exploring that so that they can explain it to the public.

The Chair: I would prefer the friendly amendment between Mr. Fitzpatrick and Mr. Crête.

I'll go over to Mr. Marcil.

[Translation]

Mr. Serge Marcil: I would like just one piece of information, Mr. Chairman.

You said that if we were to use the word "including" in the motion, we may have to have some evidence to back this up.

Is there any way that we could find out, either now or tomorrow—perhaps someone sitting at this table may already know—how gas price increases in the United States compare to those in Canada?

We could clarify the question in this way, given that we are talking about the same companies.

[English]

The Chair: Now you're getting into the study. The Competition Act was here. Mr. McTeague did an in-depth study on it. When we brought the Competition Act, people here they assured us they could not find any evidence. Now if you're going to include that, then you would be called upon to give that evidence. I think it's only fair.

Mr. Crête and then Mr. McTeague.

[Translation]

Mr. Paul Crête: The first two technical changes, namely "other experts" and "recent unexplained" are, in my opinion, what we could call a friendly collective amendment. Nevertheless, I would prefer that we vote on whether or not to delete the words "including collusion among the oil companies". In this way, the situation will be clarified in an official manner. Indeed, there appears to be differing viewpoints around this table. If you want to consider that as an amendment...

[English]

The Chair: Thank you. Mr. McTeague.

Mr. Dan McTeague: Mr. Chair, I've spent an inordinate amount of time on this issue, and I appreciate that the colleagues around the table recognize that. I want to know for simplicity's sake, because I think, Mr. Crête, you have the basis of an agreement here to proceed with the study.... I don't think we need to impute collusion at this point and I'll tell you why.

Mr. Chair, with your indulgence, you were able to get a study through for all of us here last May that suggested there are areas where the government must spend a bit of time on the issue of section 45, conspiracy, and I think we're going down that route. But if we were to take out the statement, “including collusion among the oil companies”, I can see absolutely no reason why we wouldn't want to support this very worthwhile proposal by Mr. Crête. I think that would settle any potential tensions or difficulties, because I think the rest of them are pretty straightforward and they would also be seen as timely--

» (1730)

The Chair: Mr. Fitzpatrick, and then I'm going to call the vote.

Mr. Brian Fitzpatrick: The biggest difficulty I have with including those words is that we're prejudging the whole process. We've already come to a factual conclusion as to the outcome. So if we're going to include that, and it seems to me everybody who's supporting this says this is the way it is, why have a study? The study is to find out the causes for this thing, hear the evidence, and come to our conclusion. So it prejudges the whole process and the conclusion.

The Chair: Now I'm going to the vote, because if I give another opportunity to speak, I'm going to have to go to both sides.

I understand that we agree as a friendly amendment that it would include the oil companies and other experts. I understand that we agree it should read “one possible cause of the recent unexplained increases”. We agree on that, yes, so it's okay.

Now, the area that we're having debate on is “including collusion among the oil companies”, and you've asked for a vote, so we'll have a vote.

All those in favour?

[Translation]

Mr. Serge Marcil: Mr. Chairman, are we including the word "including"?

[English]

The Chair: Just on whether we're going to remove “including collusion among the oil companies”. So if you vote yes, it's to remove.

Do you want a recorded vote?

An hon. member: It doesn't matter.

The Chair: All those in favour, which is to remove, hands up. All those against, to keep it.

Four and four. You guys are in collusion. This is the third time I have to vote. So we'll remove it.

(Motion agreed to)

The Chair: Done. We'll try to get it scheduled, and I'll depend on you to help us get through. It's a deal.

This meeting is adjourned.