THE STANDING SENATE COMMITTEE ON TRANSPORT AND COMMUNICATIONS
OTTAWA, Tuesday, May 26, 2009
The Standing Senate Committee on Transport and Communications met this day at 9:30 a.m. to study on emerging issues related to its communications mandate and to report on the wireless sector, including issues such as access to high-speed Internet, the supply of bandwidth, the nation-building role of wireless, the pace of the adoption of innovations, the financial aspects associated with possible changes to the sector, and Canada’s development of the sector in comparison to the performance in other countries.
Senator Lise Bacon (Chair) in the chair.
The Chair: Honourable senators, I have some notes from Mr. Geist, but they are in English only. It is in your hands if you would like them to be distributed. We do not usually distribute them when they are not in both official languages, but I would like you to have something. However, it is your decision.
Senator Cochrane: I would like to have them.
The Chair: We can have them translated and distribute them in the other official language of Canada later.
Welcome to our committee Professor Geist. I hear you were also away last week. We had a very good trip to Europe — France and U.K. — on our dossier. We learned much in both countries. We look forward to hearing from you this morning to complete the knowledge that we acquired last week. We are happy to have you here.
Michael Geist, Law Professor, University of Ottawa: Thank you for the invitation. Let me apologize that the notes were not submitted in both languages. I am simply a law professor on my own, and it was difficult given that I only got back from Geneva yesterday.
My name is Michael Geist, and I am a law professor at the University of Ottawa where I hold the Canada Research Chair of Internet and E-commerce Law. I am also a syndicated weekly columnist on law and technology issues for the Toronto Star and the Ottawa Citizen. I served on the national Task Force on Spam and was a member of the board of directors for six years on the Canadian Internet Registration Authority, CIRA, which governs the dot-ca domain in Canada.
However, I appear before the committee today in my personal capacity representing only my own views. I am grateful for the opportunity to appear before you, but I am also grateful that this committee is taking on this issue because it is critically important.
Canada was once a leader in the telecom field as you know. Nortel led the world, and we consistently ranked near the top of most telecom measures befitting a country with geography like ours. That is no longer true. While Research In Motion, RIM, has carved out an important niche and become a household name, the reality is that the Canadian telecommunications scene is in a state of crisis.
That is no exaggeration. I do not use those words lightly. Following years of neglect by successive governments, the absence of a forward-looking digital agenda and a cozy, uncompetitive environment, we now find ourselves steadily slipping in the rankings just as these issues take on even more importance for commercial, educational and community purposes.
Your focus is primarily on the wireless sector, but our problems within the telecommunications infrastructure are not easily divisible.
The Chair: I am sorry to interrupt; could you please speak a little slower?
Mr. Geist: My apologies; my students ask the same thing.
I would like to talk about three issues, in particular, wireless, broadband or high-speed network access and the issue of network neutrality. They are all interconnected in many respects.
Let us begin with wireless networks. The promise of an always-on mobile Internet — delivered through cellphones and wireless devices — has long been touted as the next stage in the evolution of electronic communication and commerce. That next stage is a reality in many countries, as you may have seen yourselves last week. However, Canada finds itself falling rapidly behind even developing countries as a consequence of overpriced mobile data services.
Canadian carriers, until recently, have treated mobile Internet use as a business product, establishing pricing plans that force most consumers to frugally conserve their time online. Indeed, the mobile Internet in Canada is reminiscent of Internet access in the mid-1990s, when dial-up access dominated the market and consumers paid by the minute for their time online.
The evidence is everywhere. Last year the World Economic Forum pointed to problems in the wireless market as a key reason for Canada's slipping global ranking for "network readiness." We moved from sixth worldwide in 2005 to thirteenth today. Canada ranks seventy-fifth in terms of the number of mobile subscribers, trailing countries such as El Salvador, Kazakhstan and Libya. It lags behind countries such as the United Kingdom, Singapore, Italy, Sweden and Norway on mobile pricing.
Research In Motion has expressed frustration with Canadian pricing, predicting that carriers could sell eight or nine times more BlackBerrys if they lowered the data prices to levels found elsewhere. Reduced sales are only part of the story. High data prices mean that Canadians use the mobile Internet less than people in other countries, which Google, for example, has noted leads to lower Canadian usage of web-based email or online mapping services for their wireless devices.
The new entrants in the wireless market may help, but they appear to be targeting the lower end of the marketplace, precisely where Canada's pricing compares favourably with other countries. It is the medium- and particularly the higher-end users that face significantly higher pricing in Canada than elsewhere.
What can be done about this wireless issue?
Last year's spectrum auction obviously opens the door to more competition, but it should be viewed as a start to addressing the issue, not the entire solution. Other possibilities include, first, more spectrum; we are hopeful in getting that as part of the 700 megahertz, MHz, auction that should take place within the next couple of years. This is a result of the transition in television from analog to digital that will free up the current analog television spectrum.
Second is a move toward open spectrum. The next auction could include mandatory open-access requirements that would allow carriers, device manufacturers and service providers to use Canada as a sandbox for mobile innovation, freeing that spectrum so that new companies — device manufacturers and others — would have the freedom to interconnect and engage in innovation here in Canada.
Third is a move toward white spaces. In addition to the auction spectrum, there is the potential for some unused spectrum that currently sits within the broadcast spectrum known as white spaces. It is used by the broadcasters, but will be freed up by the move from analog to digital. There are those who believe it can be used for other innovative new services.
Fourth, foreign investment should be put on the table. The emphasis on openness could move toward telecom ownership where the current foreign ownership restrictions may well artificially limit Canadian competition.
Fifth, it is critical that we remove consumer barriers. Restrictive long-term contracts and the possibility of copyright legislation — as seen in Bill C-61 that died on the order paper last year — that could prohibit consumers from unlocking their cellphones make it harder for consumers to move between providers. Other countries place caps on the length of long-term contracts so that consumers are not locked in for the terms we see in Canada, often three years. Some countries in Europe have placed caps on roaming charges, which, as many of you may have experienced during your trip last week, are enormous when you try to call Canada. Some countries have rejected legislation that stopped consumers from having the ability to unlock their phones and move more easily between carriers. This is exactly what Bill C-61, the copyright bill, would have stopped consumers from doing.
Finally, the Canadian Radio-television and Telecommunications Commission, CRTC, may also play a role. It is committed to a deregulatory approach and has largely left the mobile marketplace alone for years — with the exception of undue preferences and unjust discrimination — yet the regulatory hole has not served Canadians well. Our regulator may need to revisit the sector.
Those are a few of the ideas I have concerning wireless, but I think this is connected to broadband access more generally. We all recognize the critical importance of high-speed or broadband access. Whether for communication, commerce, creativity, culture, education, health or access to knowledge, broadband networks represent the basic price of admission for Canadians. If you do not have broadband access, much of what is taking place online is inaccessible to you.
We should recognize that Canada was once a leader in the area. In the late 1990s, we became the first country in the world to ensure that every school from coast to coast to coast was connected to the Internet. Soon after that we launched the National Broadband Task Force committed to developing a strategy to ensure that all Canadians had access to high-speed networks.
In the years since that task force, Canada's global standing has steadily declined. Many Europeans countries have eclipsed Canada in its broadband rankings. The Telecommunications Policy Review Panel from a couple of years ago undertook a detailed analysis of the Canadian marketplace with the goal of identifying whether the market could be relied upon to ensure that all Canadians would have access to broadband. Their conclusion was that it would not be relied upon. The panel concluded that at least 5 per cent of Canadians — hundreds of thousands of our fellow citizens — will be without broadband access without public involvement. Last week, the Organisation for Economic Co-operation and Development, OECD, released its latest report on global broadband, and the results should be mandatory reading for anyone concerned with these issues. Canada ranked ninth out of the 30 OECD countries on broadband penetration. That is not great, but the situation becomes even worse once you delve into the details on pricing and speed.
First, Canada is relatively expensive, ranking fourteenth for monthly subscription costs at $45.65. By comparison, Japan costs $30.46 cents and the U.K. is $30.63. Second, the Canadian Internet is slow, ranking twenty-fourth out of the 30 OECD countries. It is truly a different Internet experience for people in Japan, Korea and France, where the speed allows for applications and opportunities that we do not have. Moreover, Canada lags behind in fibre connections direct to home fibre with 0 per cent penetration, according to the OECD. By comparison, Japan sits at 48 per cent, Korea at 43 per cent, Sweden at 20 per cent and the United States, which has been slow in this area, is at 4 per cent. Third, when you combine speed and pricing, Canada drops to twenty-eighth out of the 30 OECD countries for price per megabyte. In other words, as consumers, we pay more for less — higher prices, slower speeds. Fourth, in addition, Canada is one of only four OECD countries where consumers have no alternative but to take a service with bit caps. That means the service provider caps the amount of bandwidth that the consumer can use each month. In almost every other OECD country, consumers at least have a choice between providers that use bit caps and those that do not.
What can be done about this issue?
We need a firm commitment to universal broadband access akin to the same type of commitment that we once had to universal telephone service. As I say, it is the price of admission for much that the Internet has to offer. All Canadians should have access to reliable, high-speed networks. In addition, we need a strategy for faster networks because it is clear that we cannot rely on our existing networks as we slip further and further behind. This might mean more competition, market-based incentives and potentially community-based networks as local communities take this issue into their own hands.
Finally, I want to touch briefly on the issue of network neutrality, which cuts across both wireless and the broadband issue, that has generated an increasing amount of attention in recent months. The definition of "net neutrality" is open to some debate, but, at its core, it is a commitment to ensuring that Internet service providers, ISPs, treat all content and applications equally with no privileges and no degrading of service or prioritization based on the content's source, ownership or destination.
Several concerns are often raised in the context of network neutrality. The first is what is sometimes called a "two-tier Internet." As ISPs build faster networks in some countries, there is reason to believe that they will seek additional compensation to place some content in the fast lane and leave those unwilling to pay consigned to the slow lane. Consumers already pay different prices, but imagine a world in which Chapters cannot compete in the online book space because its content is in the slow lane while Amazon’s content is in the fast lane. Imagine an Internet where U.S. television shows and movie productions zip along quickly to consumers because U.S. studios have paid for the fast lane while user-generated content by Canadians creeps along in the slow lane. Think about an environment where two-tier health care is replicated online, such that some health care providers find themselves in the fast lane and some find themselves in the slow lane. This is a vision of the Internet that might well become a reality. In the United States, major telecom companies, such as Verizon and BellSouth, have talked about this type of activity. In Canada, Videotron has publicly mused about a potential new tariff for the carriage of content.
The second network neutrality concern is that ISPs will block or degrade content or applications that they do not like, often for competitive reasons. In the U.S., one ISP, Madison River Communications, blocked access to competing Internet telephony services. In Canada, we have had a spate of examples of such activity. Several years ago, TELUS blocked access to a union that was supporting a website during a labour dispute. In the process, it blocked more than 600 other websites. Shaw Communications has advertised a $10-premium surcharge for customers using Internet telephony services, opening the door to creating a competitive advantage for Shaw over third-party services. Currently, Rogers Communications degrades the performance of certain applications, such as BitTorrent, which is used widely by service software developers and independent filmmakers to distribute their work. Bell Canada openly throttles BitTorrent traffic, a practice that has been challenged before the CRTC.
In response to these concerns, there has been growing momentum for network neutrality legislation. The provisions would require ISPs to treat Internet content and applications in a neutral fashion so that the opportunities afforded to today's Internet success stories, such as Google, Amazon and eBay, will be granted to the next generation of Internet companies along with the millions of Canadians who contribute content online.
It should be noted that network neutrality legislation concerns have grown in Canada due to two problems in the marketplace — and this spans across wired and wireless. The first is the lack of competition: Canadians have limited choice in wireless providers and broadband, typically limited to cable or DSL — the phone company — or neither. A viable third provider in broadband specifically rarely exists. Markets with greater competition face fewer concerns about network neutrality because consumers can make alternate choices. That is precisely what we see around bit caps in other countries. The second is the lack of transparency: When companies such as Rogers or Bell degrade the performance of some applications, they rarely disclose these practices. In contrast, ISPs in other countries transparently identify how they treat all forms of content and applications.
The CRTC will conduct hearings on the issue of network neutrality this summer. This is a welcome development, but the government should stand ready to act — as other governments around the world are — in case the regulator were to conclude that the current law is unable to address network neutrality concerns.
All of these issues are connected. They reflect a Canadian telecommunications environment that is in crisis, lacking in competition and gradually declining in comparison to peer countries around the world. I welcome your questions.
The Chair: Thank you, Professor Geist. We came to some of the same conclusions on last week's trip. We are happy to hear about it from you this morning. According to Industry Canada, 78 per cent of Canadians have access to a 3G — third generation — wireless network, while the other 22 per cent still rely on first and second generation networks. What is holding up the expansion of 3G networks?
Mr. Geist: Part of the reason is cost and part is the lack of competition. Wireless providers that face no significant competition have no incentive to provide services at faster speeds for better prices. The roll out of the Apple iPhone was instructive. The long-awaited device attracted attention from consumers in Canada and around the world. Only one provider, as you know, was able to carry that device in Canada. Unlike other markets, where Apple was able to negotiate with a number of different carriers to strike the best deal for itself and for consumers so that they would buy the device, in Canada, Apple had no choice other than Rogers to bring the iPhone to the marketplace. When the iPhone was introduced in Canada, we saw higher data prices than in any other country around the world for the device.
The very premise of these next-generation devices is that they are far more than simply phones in that they are similar to pocket computers that run a wide array of applications that depend on fast and affordable wireless broadband access; yet in Canada the pricing was so high that most who looked at it suggested that it would ruin the iPhone. Indeed, it led to a protest called "Ruined iPhone." In response to some of that pressure, Rogers ultimately lowered some of the prices and offered a better plan than at the outset, as this turned into a marketing fiasco. The reality is that in other countries there is no need for tens of thousands of people to protest data pricing because the market addresses that issue through competition. The culprit is straightforward, in particular in the GSM — global system for mobile communications — space, where we have had only one provider for a number of years.
The Chair: Should we recommend that the government intervene to speed up the process?
Mr. Geist: As I mentioned, the government can do a number of things. I suspect that many will say, "Hold on a second. We know we will get a number of new providers into this space, hopefully later this year."
As I mentioned, the initial sense, based on some leaks and on some other marketing materials, is that they will come in with better pricing. They are targeting the lower end of the marketplace to target Canadians who do not yet have cellphones. That is a viable place in the market because we know Canadians run far below other citizens in other countries, such as Europe, Asia and elsewhere, in terms of wireless cellphone penetration. However, when talking about how to transform the way in which people use devices and telecommunications infrastructure, I am not convinced that we will see the carriers compete directly in that space. For that, we need more spectrum, the possibilities of new competitors through foreign investment and more openness. Openness allows others to come into the marketplace, sometimes in an unregulated fashion, to spur new competition and innovation.
The Chair: If we look beyond 3G, should local authorities push wireless providers to install equipment to enable them to make the leap from the current networks to fourth generation 3G networks? Would that be feasible?
Mr. Geist: The issue of the role that local communities ought to be playing in this is interesting. A couple of years ago, this notion of communities installing Wi-Fi within the communities was all the rage. The idea was to have wireless access within the communities and focus not so much on telephony, although it would apply to telephony as well. If you have a wireless signal, in theory you can use Voice over Internet Protocol — VoIP — Internet telephony once you pick up on that signal and make a call.
It is worth noting a couple of things. First, many of the providers themselves have tried to stop that from happening because they see that as competition. Although these devices can accommodate Voice over IP so that people could use things such as Internet telephony on their cellphone, some of the carriers have required the device providers to disable that functionality. They intervened directly in the marketplace to stop consumers from being able to use those sorts of signals.
In the context of local communities getting engaged, the results have been mixed. Some communities have said that they will start providing this, and they have found that it is not easy to run or to manage a network. Others have done well. Fredericton is cited as one of the best examples today as a community that has installed wireless access and used it for competitive advantages. There is the prospect of a renewed opportunity for this type of service. As wireless access, Wi-Fi in particular, has moved increasingly toward pay-based systems, people are hanging out at Starbucks to gain some access when they are on the road. There are opportunities for a community to set up these access points and to do it in affordable fashion to ensure that all community members have access. At the same time, to link that with the possibility of allowing people to use this for basic telephone service in a Wi-Fi-enabled environment represents a huge opportunity. We will see local communities trying to do just that, namely, spur innovation and attract new, innovative companies, knowing that they have that infrastructure built locally within the community and a ready group of people prepared to use it.
The Chair: Research and development, R&D, are crucial for the information and communication technology sector. I am trying to find some recommendations that we could give the government when we submit our report. Should the government revise its long-term funding policies for private and public research projects to ensure the competitiveness of Canadian companies, or should companies look for ways to diversify their R&D financing?
Mr. Geist: On a number of occasions, when I have run pieces talking about this issue in the local media, you find that there are software developers and other companies who are doing R&D who come forward and say that they may be based here in Canada but are doing the R&D and the roll outs in other countries. They have pointed to not so much the strategy for R&D, but, rather, the marketplace conditions as the rationale either for leaving Canada altogether or for ensuring that their innovation is tested and developed elsewhere.
The reality is that if you are developing a new mobile application, for example, you have to depend on a marketplace to do it actively. I had a number of real estate agents coming forward to say that mobile applications, for them, are an ideal way to practice their business. They are rarely in the office; they are always on the road. They want the ability to access everything that they depend upon and do it in a mobile environment. We can think of doctors for in-health care doing the same things. They indicated that in terms of the sorts of applications that they are seeing, few are rolled out in Canada. Even those who are targeting that market do not target the Canadian market at all. It does not make any sense because the speeds are not fast enough and the prices are too high. If we solve some of these marketplace conditions, there is the potential that some of that innovation and R&D will follow. It will take more than strategy or pronouncements on this issue. It will take a real change in some of these marketplace conditions.
Senator Johnson: Thank you for coming here this morning. I find your comments excellent. I really want to focus for a minute on network neutrality because it is a specific area to come up with suggestions for legislation. You said that there is a growing momentum for network neutrality legislation based on lack of competition and lack of transparency. How would you fashion such legislation, and what are they doing in other countries?
Mr. Geist: The situation in other countries breaks down in two. There are countries that have enough competition that they do not have to deal with the problem. The ability for a provider to discriminate is limited by the fact that consumers can easily jump around. If you start degrading performance of your services or limiting access to certain types of content or engaging in the range of activities that we have seen, consumers have the ability to move more easily.
In those countries where consumers do not have that ability, for example, in United States, in some European countries and elsewhere, we are seeing legislation that would ensure appropriate transparency. This is a no-brainer. You cannot say that you rely on the marketplace where consumers make informed choices and then have a marketplace where consumers are unable to make informed choices because the carriers do not tell them what they are doing. In the case, for example, of Bell Canada last year, they rolled out new types of throttling — that is, ways to limit access to the bandwidth for certain applications — and did not disclose any of it initially.
Senator Johnson: How can they do that?
Mr. Geist: They engage in deep packet inspection, DPI. At a deep level, they try to identify the packets of information that are running through, and based on what is the in those packets, they can figure out certain applications. They can identify the application, and where it is an application that overuses or is a drag on network performance, such as BitTorrent, they then throttle or limit the amount of available bandwidth for that application. Therefore, the end users, for example, were finding themselves facing degrading of up to 80 per cent or more.
It is important to recognize that, for certain applications, when you throttle at that level, it renders the service unusable. For example, your cable provider or satellite provider wants to offers video on demand. Someone says that they want to offer Internet-based video on demand, and they want to use peer-to-peer client to do it; there are companies that do that now. You can either click a switch on your remote with the cable provider or, using your cable Internet, you find that it takes eight hours to download the same thing because your bandwidth has been throttled. It affects not only consumers but also businesses. There were multiple reports from businesses that were using virtual private networks, VPNs, for employees working from home and connecting in a secure fashion between their home computer and the home office. They rely upon, in some instances, the same types of technologies. Some businesses were finding that their VPNs — that is, the connections between the employer and the employee — were being degraded as well. It is both a consumer issue and a business issue.
Senator Johnson: There are certainly ways around cutting into these. You said that Rogers degrades performances of applications. Is that a common practice?
Mr. Geist: Yes.
Senator Johnson: That is scary. How will this affect innovation in the wireless industry?
Mr. Geist: This is one where we get a bit of overlap between wireless and Wi-Fi, in part because there is the same potential for the degrading or limiting access in wireless broadband as in wired broadband. In home broadband, we are already seeing what it means. If you are a Canadian creator, an independent film maker who wants to distribute your film using an application similar to BitTorrent using this protocol, you do not compete nearly as effectively as you might with, say, the Hollywood studios that are not facing that same throttling because they may be using a different application for the way they disseminate their content. You face some real concerns in terms of your ability to disseminate that content.
In the context of wireless, the same concerns begin to appear because as we see more and more people move toward a wireless broadband solution, whether on their phones or even on the stick — the device you can put into your personal computer — using these wireless networks, they are subject not just to the throttling but also certain caps.
We saw, as an example, a number of providers in Canada roll out what they called "unlimited" service. You could get unlimited broadband on a wireless basis, until you read the fine print. Once you read the fine print, you found they excluded Voice over IP, so you could not use this for Internet telephony. They did not want to compete with themselves, effectively. You could not use it for certain multimedia applications, and they reserved the right to cut you off if you started using more broadband. Therefore, "unlimited" was not unlimited; it was very limited.
In the United States, the regulator ran into precisely the same issue with Verizon and ultimately stepped in and said that this is unacceptable. If you call something unlimited, it had better be unlimited, and you cannot bury all of these restrictions in the fine print. We have not seen anyone take steps to address those issues here in Canada.
Senator Johnson: That is exactly what we should be addressing.
Senator Zimmer: Thank you, professor, for your presentation. It was refreshing and almost inspirational. It is frustrating. I have a BlackBerry, and it is limited in what it can do. I saw the iPhone and its capabilities last night on television; how creative. You can do calculations, you can level your siding; how innovative. On a BlackBerry, you cannot do those things. I want to change over to iPhone, but I cannot. I am told that, for some reason, there is a secure system on the system I have that I cannot convert over. I do not know if that is true, but it is very frustrating.
Then, in a world of competition and free enterprise, you hear verbs such as "exclude," "limit," "throttle," "choke," "reserve the right," "not allowed" and "degrade." Those words are not usually used in free enterprise. Am I passionate about this? Yes; I am tired. It is so refreshing to hear someone such as you come in and tell the truth.
Where is the blockage? Is it CRTC? Is it hoarding by the operators? What can be done? What do you recommend we do and put in our report to whoever to get this unplugged?
Mr. Geist: Thanks for those comments. I tend to agree. I am an iPhone user myself. The types of applications you can use are, frankly, nothing short of remarkable. The cover of this week's The New Yorker was literally created on the iPhone using a software program that allows to you create and draw right on the iPhone itself.
Some of the other applications are remarkable, but even within the iPhone, it should be noted restrictions still apply. As an example, just last week, Apple reserved the right to approve the applications that can go on the iPhone. There are tens of thousands of those. One group created a book reader for the iPhone that would rely on public-domain books. There are more than 20,000 digitized public-domain books. Apple, at least briefly, declined to approve this application because the Kama Sutra was one of these public-domain books, and they said that it was inappropriate to allow people to have access to this type of content.
The truth is that there are ways, if we had unlocked devices and had a more open space, we would encourage this innovation without the gatekeepers that we see. Fundamentally, that is what we see taking place here. Certain gatekeepers exist in the chain; sometimes it is the device manufacturers; often — particularly in Canada — it is the carrier themselves who set limitations on what can come into the marketplace, precisely because it is to their competitive advantage to do so. We do not have enough competition to counteract that at the moment.
Who is to blame? I think there is plenty of blame to go around. We have the CRTC — to be honest — asleep at the switch, particularly on this wireless issue; they have not been involved at all. On net neutrality, for example, a complaint was brought against Bell Canada’s activities. They found for Bell in a manner that just last week was appealed asking for a reconsideration, noting that the CRTC itself has acknowledged in public statements that they may not have had all of the facts. Even when they do get engaged, the perception is that they may be overly cosy with some of the companies that they regulate, so there is ample reason to lay some of the blame at the CRTC.
It is not just the CRTC, however. I think we can blame the Competition Bureau as part of this. It was the bureau that, when we had two providers in the GSM space — Fido and Rogers — allowed a merger of those two services to go ahead, taking away the only competition we had in the GSM space and leaving us with just the one provider.
We can look to governments. This is not a partisan issue because this falls under both the watch of when we had Liberal governments and now, more recently, Conservative governments. In both instances, they let broadband task force reports sit there. There has been no digital strategy for Canada for more than 10 years now, while we see other countries move ahead more aggressively. I think we can look to all of these players to say that they have let us down, quite frankly.
The results are in the independent statistics. You can certainly get lobby groups or association groups to come in and spin the numbers any way they like, but if you take a look at statistics from the independent people — groups such as the OECD that no one will question — the numbers do not lie. We are falling behind other countries, and Canadian consumers know it intuitively. I suspect many of you know it, based on the experience you may have had just last week when you had a chance to compare what they have in Europe to what we have in Canada.
Senator Zimmer: Can you provide us with an update on the 700 MHz band? From what I recall, it was presented at a round of spectrum auctions last year. Do you know the current status of that?
Mr. Geist: The 700 megahertz spectrum is a spectrum — as I alluded to briefly — that will be freed up once there is the transition from analogue to digital. This is for the television broadcasters.
You will recall from years ago, television broadcasters used to be on very low numbers on the dial before we had cable boxes and access to many channels. They use analogue spectrum. That is a very good spectrum with easy access because, as you know, if you put rabbit ears up on the television or something up on your roof, you were able to get access to full television channels, sometimes from a distant community. If you lived close to the U.S. border, you would get some of the U.S. channels and the like.
However, it uses that spectrum in a very inefficient manner, and the move is toward digital. Other countries, once again, are far ahead of Canada on this. A number of European countries have already completed the transition. The United States had a short delay but will complete its transition in a couple of weeks, in mid-June.
Once we do that, there are a number of benefits. First are the benefits that come from having our broadcasts go in digital rather than analogue, and a number of efficiencies come with that. Even more beneficial, we now free up this entire spectrum that is being used inefficiently, and that spectrum can be auctioned off.
In the United States, they saw that as an opportunity, not just to auction it off but to experiment a little to see if they could find new innovation into the marketplace. Essentially innovate in the auctions themselves by bringing in certain openness requirements.
In Canada, it is not clear if we will follow suit. Frankly, we should, at a minimum, do as much as they did, but we should seek to surpass what they have done. The timeline for Canada is 2011, for when we will see this transition that we are supposed to see. However — and this is separate from some of the issues you are following — there is reason to sound the alarm on the transition as well. The CRTC, government ministers in the area, have now noted repeatedly that the broadcasters themselves are behind on this issue. They have not been doing what they need to do to ensure that Canada is ready for this transition. Moreover, all the broadcasters have been quite up front in saying that they do not intend to ensure that all Canadians have access to over-the-air digital signals.
Therefore, whenever they happen to complete this transition, we will find that certain Canadians — it is about 1 in 10 — who rely upon over-the-air signals rather than a cable or satellite provider, no longer have access to television in certain communities because the broadcasters have decided not to service those communities. You will hear about that from people in your communities, frankly, once that happens.
In order to be able to leverage the opportunities for digital broadcast and around this wireless space, we need to make the transition. Frankly, we need government and regulator to sit down with the industry players and say that we must find a way to ensure this happens in a timely manner. We are already years behind our peers, even those directly across the border.
Senator Zimmer: Professor, I was incorrect in my opening remarks; you are an inspiration. Thank you for your testimony this morning. It was very refreshing.
Senator Cochrane: According to the data I have seen, Ontario, Quebec and British Columbia are the only jurisdictions in Canada where no one company has over half of the market.
Can you tell us what it is about these provinces that enable them to enjoy a greater level of competition? Is it simply the size of their markets or are there other factors here at play?
I am from Newfoundland and Labrador. Bell Canada has 80 per cent of the market there.
Mr. Geist: It is exactly what you pointed to. The carriers have targeted those marketplaces that they view as potentially the most lucrative. We saw that even within the context of the last spectrum auction, the advanced wireless spectrum, AWS, auction. We are bringing in new providers, but it is not as if all Canadians will benefit equally from the new competition that comes into the marketplace.
Some of those providers are only targeting urban areas of Ontario and Quebec, at least in the beginning. They focus on limited jurisdictions where they think it is most profitable and there is the greatest number of consumers to gain. That is not surprising. That is simply the market at work.
I agree with you that it is not fair at a consumer level. There is an obvious preference for ensuring that the market does its thing. Robust competition takes away much of the need for regulation.
However, in areas such as telecommunications, many countries have recognized that this is too critical for the reasons I articulated — basic education, communication, commerce, health care and almost every aspect of our daily lives — simply to say that we will leave it strictly to the market. It might be a light-handed touch that the government takes, but it has to be a touch nevertheless. We need to recognize that unless we have some oversight, we will have consumers who will not enjoy the sort of competition that Canadians in other parts of the country enjoy. Note that these other Canadians are not enjoying this competition all that much either; it is rather limited in terms of the differentiation we see between providers currently.
Senator Cochrane: My main focus is education and medical care. We have smaller communities where I come from. It would be wonderful if we could have access to this information for doctors, et cetera within their small communities. There would be savings for health care, and it would be beneficial to all residents. Smaller communities should have access to many of these things that they do not have.
Mr. Geist: Yes, absolutely. It is true for health care and particularly for education. Think of the libraries that we have here in Ottawa — the Library of Parliament, the University of Ottawa and Carleton University. An inequity exists for many Canadians. You and I have access if we are here in Ottawa. However, we do not have to go far outside of these larger communities to find people who do not have that access to knowledge.
I wrote a piece calling for a national digital library four or five years ago. I argued that if we made the commitment for a relatively small amount of money, we could literally try to digitize everything ensuring that we would create a digital library accessible to all. It would be a terrific export of Canadian culture and content to the rest of the world. We have done virtually nothing in digitization and many Canadians still do not have the high-speed access that they need.
Think about what you could do in that regard in an education context. For example, I have been running a virtual lecture series this spring. I take several of the best videos on a given issue and put it together in a single posting. If you were to spend three hours, as you might if you went to a conference, you can watch these three or four experts lecture on this issue and become well informed about whatever the issue happens to be.
We are already at a stage where experts on many issues are readily available on websites such as YouTube and other video spaces. That is the kind of experience people can have. My aunt lives in a smaller town in Ontario. She tells me that when I send her a link to a video that I think she should watch, she clicks on the link before she goes to bed in the hope that it is fully downloaded when she wakes up in the morning. That is simply not acceptable in the current day and age. The reality is that that is how many Canadians are still forced to experience the Internet. It is a real barrier to that basic education.
Senator Cochrane: I realize all the organizations in which you are involved. You are very knowledgeable about all these things and what needs to be done. Is there an avenue in which you can get involved so that you could make a difference for all of Canada?
Mr. Geist: Some consumer groups that have taken on this issue. Many consumer groups have seen telecom as an important issue, but they are fighting any number of different fronts.
Based on this discussion, it becomes clear that many of the issues we are discussing overlap in many places. We are talking about telecom, but at the same time we are talking about education, health care and copyright reform. All of these ultimately have an impact on some of these issues. That is difficult for any individual group to take on.
However, community wireless associations in some communities have tried to solve some of the issues. Groups such as the Public Interest Advocacy Centre, PIAC, based in Ottawa and some of the Quebec consumer groups, such as Options consommateurs, have also been very active on these issues.
I do not know that we have seen this issue reach the level necessary to see change. It is instructive. This is one of the first times I have seen either a house committee or a Senate committee take on this issue in this direct fashion. These issues arise from time to time, but typically it is as a result of a piece of legislation and someone comes in to talk about it.
I am grateful you are taking on this direct issue because few if any have bothered to do it. It is clear to me that it is essential that someone does.
Senator Merchant: What are companies' justifications for not providing net neutrality?
Mr. Geist: They argue that it is their network and that they should be able to run it in the way they see fit. They argue network management is their private concern, and it is a smaller number of users that are limited; it is a more robust experience for everyone else in return.
The reality is that we see many network providers that do not feel the need to follow suit. In the telecom area, I mentioned TELUS in relation to blocking, but TELUS has denied that it engages in any kind of throttling to date. It has a similar network to Bell. Bell throttles, but TELUS does not.
It seems like an easy solution. One submission from the Chief Information Officer of the Government of British Columbia pointed out that in many ways turning to net neutrality is seen as an option for not investing. Telecom companies will potentially come before you to tell that you they need to be able to throttle in order to ensure that they can invest. That is how you ensure investment. I think it is a compelling case that it is the opposite. Once you engage in throttling, you are actually trying to ensure that your legacy systems last longer. If you can find a way to squeeze appropriate usage from your existing network, it is an incentive not to invest in future types of network.
Throttling, in many ways, serves as a barrier to new investment because they find a way to make the network last for another few years rather than making the investments to ensure that all of their customers get the broadband experience that they should be getting.
Senator Merchant: While travelling last week, we found that other countries have comprehensive broadband plans. France has France Numérique 2012 and the U.K. has Digital Britain. Should Canada have a comprehensive broadband plan?
Mr. Geist: Yes. If there is one crucial recommendation to be made from a big-picture perspective, it is to recognize the need for a broad digital strategy, not only digital broadband. Many other countries have done this. Europe and Australia have done it. Some countries even have ministers directly charged with dealing with these issues.
Looking at other countries, we see that not only are the three issues that I pointed to in my opening remarks interconnected — not only wireless, wired and net neutrality — but also it is an appropriate balanced copyright law; it is broadcast as we move from analog to digital; it is the consumer issues we have already discussed; it is privacy and how to ensure appropriate privacy; it is consumer confidence in electronic commerce; it is access to knowledge; and it is a digitization strategy that brings Canadian content online. All of this falls within a broader digital agenda.
We had such an agenda in the mid- to late 1990s in Canada, when John Manley was the Minister of Industry. As part of an OECD meeting in 1998, Canada mapped out a digital strategy that we ran with for a number of years. We had privacy legislation, a cryptology policy, an assurance of access to the Internet for schools and consumer protection. As of last week, we have anti-spam legislation. All of these issues came out of strategies back from the late 1990s.
However, it is amazing that while other countries over the last number of years have recognized that you cannot target for 2009 only because you have to look ahead to 2020 and 2030 from a strategic perspective, we have had an utter void. Absolutely, we need a strategy that incorporates these issues and other issues, recognizing that they are all connected and will all be critical. It is almost guaranteed that Canada will continue to slip relative to other countries because many of them have seized the issue and laid out a plan to address it in the coming years.
Senator Merchant: The United States uses breakup power. A few years ago, they broke up American Telephone & Telegraph Company when they created what we used to call the Baby Bells. Does Canada need a breakup law, or are we too conservative to do that?
Mr. Geist: I do not think we have the same situation that the U.S. experienced back with Ma Bell. If anything, we went in the other direction when we allowed a merger of the only two providers in the space. As I mentioned, that was a mistake.
We might want to look at the potential for separation of carriage and content. Some of the concerns that have arisen, such as the prospect of a Canadian content owner facing restrictions that are not faced by a different kind of content owner, stem from the fact that the provider is often providing both carriage and content at the same time. For example, a major cable provider can own an interest in a television station, a radio station and a baseball team all at once. When that occurs, it is quite clear that those providers have some built-in incentives to potentially favour their own content over other content. There is a growing chorus of calls, not only in Canada but elsewhere as well, that there might be some benefit derived from structural separation of the carriage of content from the content providers because otherwise, at minimum, a provider has an incentive to favour their own content or degrade the competing content.
Senator Munson: I was curious by your comment about the CRTC being asleep at the switch and the Competition Bureau being not too far behind. Your remarks are inspirational. We are living in a digital revolution. I am curious to hear your view on the feeling at CRTC and the Competition Bureau. Is it a case of old school playing by old school rules while not quite grasping what is coming full throttle down the track?
In terms of the private sector, you talked about cover of The New Yorker, which I saw. Is that type of thinking happening at the CRTC and the Competition Bureau? I ask that in terms of attracting young, aggressive, innovative digital-minded people in the private sector, which is a big-time operation. How do you think things can change at these two institutions? Do we accept what other countries have accepted?
Mr. Geist: It would be nice if there were one simple solution to address some of the problems that we face with those regulatory bodies. I do not think there is one single issue. Certainly, some of the newer leadership at the CRTC understand some of these issues, but others who have been around might deem it a bit of a threat to consider doing things in a new way. Some in the community have the perception that there is an overly cosy relationship between the regulator and the regulated given the movement back and forth between the two. There are some benefits to that, for example to ensure that the CRTC understands the marketplace, but it creates a problem when it becomes overly cosy.
At the same time, the CRTC has been hamstrung by its legislation. For example, we have separation of telecommunications and broadcast under two separate acts. This creates all sorts of problems because, in the current environment, these are pretty much one and the same. It is difficult to distinguish between telecom and broadcast.
This came up in the context of the regulation at the new media hearings conducted by the CRTC in February and the issue of net neutrality. The CRTC tried to argue that what they were doing as part of new media was a broadcast issue and that net neutrality was a telecom issue, so it could not address net neutrality. Fundamentally, I disagreed with them, as did many people who appeared before those CRTC hearings. There ought to be recognition that we have two statutes that should be updated and merged into a single communications and broadcast act that would allow the regulator to at least have the tools to move more aggressively.
We have some problems with older mechanisms and some problems with the statutes. This applies not only to the regulator but also to government more generally: Often some of the incentives built in within regulators and government are based on not taking risks. You get into trouble when you take a risk, so the easy approach is to take the same conservative, safe approach. It might not be very effective or keep pace with what we can do, but no one will lose a job over it. We have to find a way to break free of that mindset.
We tell our companies, our educators and our researchers to try to be innovative and think outside the box, yet it is precisely that kind of thinking that is discouraged in some of these environments because it is considered too risky. The CRTC has tried to do a couple of online consultations, but they have been conservative in their approach because that do not embrace fully the potential that the Internet has to offer. They are moderated by someone who runs surveys to ensure that no one goes too far out of line. The consultation does not take the full advantage that it could take. Others that we see trying to embrace these tools are able to go much further. We might sense that the regulators have failed to keep pace because of some of the experiences that people have seen over the last number of years.
Senator Munson: That is why we have a confused public these days over issues around saving local television that have prompted massive ads. No one quite understands what is happening, but it has a great deal to do with regulation. That is simply an aside.
I am curious about the Fredericton example. In simple terms, could you explain why they took the initiative and whether others could follow that initiative? What does it mean in a knowledge-based economy to such a community? Why is it that other communities do not embrace it? It would seem to be a no-brainer.
Mr. Geist: The Fredericton approach is quite straightforward. At the starting point in the downtown core, it was done to ensure free Wi-Fi access so that not only residents could make use of it but also others, such as business people or tourists. There are some great advantages to visitors having free access when they come to the city.
Some of these attempts have taken place in larger U.S. cities as well as some larger Canadian cities. For example, the Toronto Hydro Corporation attempted to do this as well. We have seen a mistake in a number of places: Rather than offer up the services as a value added for the community to benefit everyone and create a competitive edge, at least until others emulate it, many communities have tried to compete with the providers. They have tried to say that they will offer the same service that Rogers, Bell, TELUS, or whoever, offers. For all the criticism of these providers, they have experience and know how to deal with customers and manage networks. It is not easy for a city to say that they will do the same thing. In fact, they should not do so. The reality is that a city is not able to do so — not without a steep learning curve.
The success stories are ones that see this as sitting along side the commercial Internet, as it were, and see this as an opportunity to create a non-commercial space of connectivity for the benefit of all within the community. Once you try to go head to head on a commercial basis, you run into objections from the commercial providers that say that you are trying to take away their customers. Furthermore, you are not able to compete that effectively. Those who have tried to do that have, by and large, failed.
Senator Munson: We are living in a recession, and we see prices dropping everywhere. You talked about consumer advocacy groups, yet in your discourse you talked about RIM expressing frustration with Canadian prices, predicting that carriers could sell eight or nine times more BlackBerrys if they lowered data prices to levels found elsewhere. Why is that not happening? It is happening everywhere else, for example, with cars, computers, and so on. Is there a push back here that should not be accepted?
Mr. Geist: It is strictly competition. If you take a look at the statements from the larger players on broadband, they have noted that there is ample opportunity to raise pricing. You alluded to the whole fee-for-carriage issue. I see this as cash grab, but, on the issue of broadband, cable providers have consistently raised prices. That is something people have noted. The prices have been going up steadily over time and they have not been shy about noting that they have the ability to raise prices — not just on your cable but on your Internet access as well. That is strictly a function of lack of competition.
In other places, that type of pricing often goes down, not up, because you are facing a tough competitive marketplace. In this country, we see prices going up. With the services themselves, sometimes have you to pay more for less, and we see the introduction of these big caps. The prices go up and the amount of bandwidth that consumers can use becomes capped. That is what we have seen in the marketplace over the last couple of years. You are correct; It runs counter to what we see in almost every other sector, namely, that if you are in a tough competitive marketplace, the way you get new customers or retain the existing ones is to come up with a more competitive offering.
Senator Mockler: Thank you. I know the Fredericton experience as I am from New Brunswick. I also know the challenge we have in Northern New Brunswick versus other parts of New Brunswick. Being in a border town, I know that if I want to serve my community, I need two BlackBerrys or cellphones: one with Bell and the other one with Rogers. When I am in one part of the province, I use Rogers; when I am in another part of the province, I use Bell. When I go up the valley a bit toward Edmundston, I am immediately connected with the U.S. satellite, so I have another service. I am very sensitive to your presentation, and I think it is a step in the right direction.
What incentives could we use? It must be not only the federal government but also multiple governments looking at these issues. With your experience, could you tell us what incentives you think we could embark upon to encourage and tell the industry and governments what should be done in order to match our competition?
Mr. Geist: I am glad that you identified the role that local or provincial governments can play. If we take a look at provincial governments over the last number of years, especially in the broadband area, many have grown so frustrated with inaction at the federal level that they have taken matters into their own hands. We have seen a number of provinces make significant investments in their broadband infrastructure because they simply got tired of waiting. They were saying, "We are becoming uncompetitive as we wait for some strategy. It is not happening. It is time for us to invest." We are seeing that in province after province.
In some ways, the amount of activity we are seeing at a provincial level is creating the perverse incentive for the federal government not to act and to argue that the provinces are addressing this issue; why do the feds need to do that if we are seeing province after province trying to address it? That will create a series of haves and have-nots. Those provinces that chose to make those investments and can afford the investments will have citizens that enjoy the benefits of those networks; those that do not will be left sitting on the sidelines. That is why there is clearly still a role at the federal level.
The sorts of incentives in wireless come down to trying to accelerate to the extent possible the availability of more spectrum, making it open, and rethinking the foreign investment restriction so that other players can come into the marketplace. It is fundamentally about getting more competition into the space. Wireless is a tough place to do it unless you are creating more opportunities. You must use spectrum. New spectrum is coming in, and we must make use of that.
We should be following the lead of the Europeans. Over the last year, the European Commission has become aggressive about the way in which consumers buy these services. For example, roaming fees are incredibly high in Europe. As a result, they are putting caps on roaming fees.
Other countries are noting that, even if they have competition, if they have locked the consumer into a three-year contract, it will be years before they enjoy the benefits of the competition. If I sign a contract today, since three years is almost always the requirement, I sign a three-year contract. If a new provider starts in November or in December, I will have to wait until 2012 until I have the ability to move to another provider. Our consumers are locked in. We must be careful about introducing new laws that have the further effect of locking in consumers. Copyright was a good example of that. The bill introduced last year prohibited someone from unlocking their phone and taking the phone to another provider. That is another disincentive. Someone invests, especially in expensive devices such as iPhones, and their ability to move between providers is then blocked because of copyright. They are unable to unlock the phone and go to a new provider or stick with the provider because they are not allowed to unlock the phone. These things will not solve all of the issues, but they will move us forward to freeing up consumers to move a bit and to try to inject more competition.
Senator Mockler: On the same wavelength, professor, when I look at the providers, this is a numbers game. What are your thoughts on accelerated capital depreciation for Canada?
Mr. Geist: That is one opportunity to encourage investment. We need to take a look at tax changes as one way to ensure that that happens. We see that not only in this space but also in the media area, with new media and encouragement that came up as the part of the CRTC new media hearings. Can we find a way to create the tax incentives that we have for mainstream, traditional media and bring that into new media as a way of creating incentives? I am glad that you pointed that out. That is a way for government to create incentives through the tax systems.
Senator Adams: Are you familiar with Nunavut and the comments about the education system there? Nunavut is trying a new way to teach English, French and Inuktitut in the schools. Right now we have slow broadband, but I think you will see the use of computers to teach the children English, French and Inuktitut.
I was in Halifax a couple of months ago and met a woman who does the community’s weather forecast. I asked her how they can translate the daily weather forecasts into Inuktitut. She told me she does not have to do it; the computer does it for her. She did the forecast in Inuktitut, English and French using that system. Computers are able to do that now.
Sometimes we have difficulty, with more Inuit coming in to teach the language in the classroom. Are you familiar with the fact that many Inuit people come to Ottawa to go to university? Maybe we can teach them some way here in Ottawa. How do you see the communication system in the future in Nunavut and teaching three languages?
Mr. Geist: You are right that the translation technologies are, at this stage, creating almost one Internet. For a long time we were concerned with the inaccessibility of so much of what is said and written and created online because it is written in whatever person's particular language and made inaccessible for much of the rest of the world. English is the most common language online, but there is an incredible array of stuff in hundreds of other languages. Wikipedia has entries in hundreds of languages created by different people.
We are seeing lots of creation in many different languages. We are also seeing the technology making this content readily accessible almost instantly. For example, on my blog I have a little widget, a program from another company that sits there and allows people to translate any blog posting, any article I have written, into 20 or 30 languages almost instantly. You click on it and it uses applications such as Google Translate to allow that content to be translated very quickly. This technology succeeds in breaking down those language barriers.
We are also seeing more of the move to distance education. It is clear that tremendous opportunities can be brought out using these technologies to ensure that the communities that do not otherwise have access — either access, as we talked about, to the basic knowledge tools such as larger libraries or access to educators or materials — use the Internet as a mechanism for doing that.
Barriers still exist, too. Part of it is the telecommunications structure and another is copyright. For example, the last copyright law included a provision saying that you could engage in some of these distance lessons, but the teacher would be required to destroy the lessons 30 days after the class ended. This struck many educators as absolutely ridiculous, yet that was the so-called balanced approach.
We need rules that help facilitate that, and it ties directly into the question of a digital strategy. Education is a core part of that strategy, particularly if you think about our current environment when we are in a difficult economic recession and people are losing jobs; we will find more people looking for retraining opportunities. Retraining opportunities should not be limited to a local college or university but ought to be able to be accessed through these networks at a time when more people, for lifelong learning purposes, are looking to this network as the way in which they can access this. We must ensure that they have the network, the appropriate access that can provide what is already online.
Senator Adams: What do you think about the syllabics that we have in the Western Arctic? Around the Kitikmeot Region they have Roman letters, and in the Eastern Arctic, between Keewatin and Baffin, and in Northern Quebec, we have Slavic letters, and Labrador has Roman letters too. I know when Apple first came out it was able to write in syllabics; it may be better now as this was over 10 years ago. I was wondering about those things, whether there would be any difficulty with a computer teaching in the different letters in the schools?
Mr. Geist: Many computers still have those capabilities. We are seeing as well — and this would also tie into a national digital strategy — that many communities, particularly those with languages that are not as widely used, move toward open-sourced software tools, programs such as Mozilla’s Firefox browser, as well as Linux running on the desktop. These are software programs that are freely licensed that can be changed and adapted with the consent of the creator, are free to access and run on many of the web servers out there and are common and well accepted. Because they can be freely changed, many communities will use an open-source software program and then adapt it to their local language. Then you are not dependent upon a larger software provider — Microsoft or Apple — who looks at the marketplace and says that it is not a big enough market. Instead you use open-source software tools because you are free to use it and create a localized language version with the encouragement of the creator in the first place.
Senator Wallace: Thank you, professor. I thank you in particular for what I would say was a no-holds-barred assessment of the telecommunications industry in this country. It certainly is an eye-opener for this committee. We have not heard it quite as bluntly as you have stated it, and we thank you for that.
As you have said, the responsibility or how we got to where we are, and why we do not seem to be competitive with other countries, resides in a number of different directions. We have the industry, we have various governments over time, both provincial and federal, and we have the CRTC as the regulator. As you point out, to get to where we have to be, to be competitive in this worldwide business and industry and education and health care, we need a comprehensive plan. It is one thing to prepare the plan and it is another to implement it.
As we know in anything — business, law — there must be someone, some body responsible to develop the plan, implement it and then follow up, and always comparing what is happening in our country to what is happening in other countries to ensure we are always on the leading edge.
When you look at what other countries have done — and they are ahead of us, and we are lagging behind and falling even further behind — is there a model that we could look to, or do you have any suggestions of what we should look to, to develop perhaps a new entity that would have overall responsibility to deal with the state of our wireless technologies and broadband access?
As you point out, there are a number of different issues. Frankly, it leaves my head spinning with the level of knowledge you have and all the issues we must bring together. It tells me that if we leave the responsibility to turn things around in the hands of many, between different levels of government, CRTC and so on, we will probably not get up to scale within the time frame that we must.
It was a long lead-up to this, but is there the need for a singular body to be created to deal specifically with the realities we have with this technology today and get us to where we have to be within whatever that period is, one year, two years or whatever?
Mr. Geist: That is a terrific question. My response is I do not know that we need a new government department, but we need — especially because you focused on how to ensure that this gets implemented — to rethink the very top layer.
For example, at the moment, all of this, or most, resides in the industry minister's office. You can have the best industry minister in the world, but if you take a look at how broad-ranging the mandate is for the industry minister as part of the mandate, dealing with everything from university research to the auto sector to foreign investment to telecom issues to copyright — you name it and seems to fall under the industry minister's mandate — there is no way that anyone can give these issues the time they need.
We have seen in other countries, if there is a difference, that they have recognized exactly that. If you want to ensure the issues are prioritized, you need to provide someone who has the ability to ensure that they are implemented, who has a voice, preferably around the cabinet table, and has a more limited mandate. This on its own, if we talk about the digital issue generally, is a big issue.
We have seen other countries move forward with a minister specifically charged with things such as the digital economy, innovation, digital issues; different names in different places. Whether you are in Australia, the U.K. or a number of other countries, they have created a specific minister. I am less concerned about how the ministry underneath the looks; that is simply shuffling people around. It is more about ensuring that someone is in a position to get this on the agenda and argue for it forcefully. We find that the issue slips off the agenda even with the best of intentions because other issues take priority.
Further, even without a minister, we can appoint a CIO, chief information officer or a CTO, chief technology officer, as we have seen from the Obama administration. Someone should be in charge of examining these issues in the same way that companies often organize themselves with chief technology officers and so on, and we can have someone in Canada. If you had both a CTO as well as a minister responsible for many of these issues, the minister would be affecting policy and pushing through that process and a CTO would be doing the research and metrics to ensure that government is a leader and not a laggard in terms of adopting some of these technologies and moving forward on open source and related issues.
We have seen this in other countries, but not in Canada yet. Part of the blame is that we have an overburdened minister — regardless of the party or who it is — where these issues come up, but it is one of dozens. There simply is not the requisite time to deal with the issues effectively.
Senator Wallace: As you say this, I think of the work of this committee for example. This is our focus today; it is critically important; and we are happy to do it. However, we will move on to something else down the road. The issue becomes who will be there to follow up and ensure that it happens in the same way as in business or education.
I appreciate all the time and effort you have given us today and in your other responsibilities. It would be helpful if you can offer us a particular jurisdiction or essential principles that we might consider in putting together this follow-up model to take control of this crisis we are in. Are there one or two countries or hybrid models you can recommend as to how that might be structured?
Mr. Geist: Yes, I can do that.
The Chair: We learned last week in the U.K. that it is a member of the House of Lords who is responsible to apply the Digital Britain program. Maybe a senator could do that. How about that?
Senator Dawson: Minister Carter was a specialist in his field before he became a lord. The advantage he has is that when he stops being a minister, he will still be a lord.
I apologize for arriving late professor. I would probably lose some points if I was in class, but I will try to compensate by staying longer.
As you know Canada was once a global leader in the telecom field. A report was tabled by this committee 10 years ago this month. In the introduction, it said that Canada is in the vanguard of this movement in communications. I agree that it is not true any more. Last week's experience with both the French and the British made it clear that we are lagging behind. I encourage honourable senators to go back to that report to see that 10 years is a century as far as communications is concerned. They were not talking about RIM; wireless was an issue, but not as it is today. We are not in the same generation of tools today with Twitter and YouTube. There is also a picture in the report of Senator Johnson and Senator Bacon. I think people can see what 10 years will do not only on communications.
I agree that we definitely have to look at the fact that there has to be political responsibility. It is not a partisan issue. Both parties that have been in power over the past few years have been neglectful. We know that Australia has a minister who is responsible for this area. There is someone you can go to and complain. We have examples such as The Weather Network being told that they are being throttled because they are competing with products being offered by the provider. That is unacceptable, but going to the CRTC is not the solution, as you mentioned.
With respect to control of information, France has an organization that supervises what is being collected by people, and they are obliged to destroy information collected after a number of months. We do not have that. We used to be at the vanguard of protecting confidentiality. Our Privacy Commissioner probably does not have a section dealing with what is being collected on the Internet by private networks currently.
You have awakened us and given us a large number of questions that we will be asking of witnesses that will be coming forward. I agree that one of our recommendations could be a minister concerned with these issues.
Is there a country that we should be inspired by from your studies?
Mr. Geist: It is an interesting question. It is almost as though we should pick and choose from different countries. However, if I had to pick one in terms of the way consumers experience it and have the ability to take advantage of the networks, it would be South Korea.
In 1998, Canada hosted the first OECD ministerial meeting on electronic commerce in Ottawa. It reflected the fact that the OECD had then recognized it was an issue that was raised to the level of ministers attending. It was a big issue, and it spurred Canada to move forward on things such as privacy.
Last June in South Korea, the OECD held what was, in effect, their follow-up meeting 10 years later. It was called the OECD Ministerial Meeting: The Future of the Internet Economy. I was part of the Canadian delegation and appeared on one of the plenary sessions. You are struck by how different the Internet experience in South Korea is from the moment you walk out of the airport. In Canada, you would see a Tim Horton's plus a series of car rental agencies. In South Korea, you see a series of kiosks renting cellphones that run on Internet wireless networks.
For example, we think of Skype as something that we might use on our computer. It has a booth where for approximately $1 per day they will give you a phone to use on an unlimited basis; it is readily available to use for voice and Internet because it all operates with the same Internet connectivity. You arrive at the hotel and find you have connection speeds unimaginable from what we are accustomed.
When you start to see what the Internet means when you have those types of speeds, I do not think it is an exaggeration to say that it is not the same Internet. It is frustrating when our own providers keep telling us, as Rogers did yesterday, that they are raising speeds for consumers, which they are and which is good. However, it is still a fraction of the speed experienced in some other countries. When you click on a web page or video, it is literally available instantly. There is no delay. The things we have grown accustomed to because our networks are slower simply do not exist.
The Korean government played a role to facilitate enough competition to ensure an environment where you can have people competing to rent you a cellphone rather than a car for your stay. They created an environment that allows people to have that level of high-speed access so that the Internet effectively becomes the telephone for many usage purposes. They have created the environment that ensures that approximately 40 per cent of consumers have fibre to the home that enables individual consumers to have those highest connection speeds available. That is simply non-existent in this country.
It is not that South Korea or Australia got every issue right. France has some great packages for consumers and amazing rates combining television, high-speed networks and telephone for less than what we pay for just high-speed Internet. We also mentioned Lord Carter and the U.K.'s digital plan. Many things are taking place in many countries.
However, at a consumer level, it was in my experience in South Korea that it was most readily apparent to see the difference between what they have and what we have. People were walking around with cellphone devices experiencing real-time streaming, television and range of other things all made accessible through a network that simply does not exist in Canada.
Senator Munson: Briefly, my question is about taxes and how defensive Canadians become when we talk about foreign ownership rules. When this issue arises in another forum here, we talk about the rules and the need to protect Canada. People get nervous that someone will take over. However, it is a great big world, and there are really no borders in the wireless community. What type of tax changes would be proposed and how much easing up would there be to foreign ownership rules?
Mr. Geist: I am not a tax expert, so I am reluctant to wade into specific tax measures. However, I have seen a number of reports that talk about using the tax system to both create incentives for basic investment and provide a levelling of the playing field between new and old media and between the investments we might see take place in various networks.
I am more comfortable talking about foreign investment. We already have foreign investment in our telecom networks. We are seeing all manner of creative mechanisms in an effort to circumvent the current rules. Everyone claims to be playing by the rules and that the voting structure of these new entities is in the hands of Canadians, but it is a bit of fiction. Most people recognize that it is expensive to establish new networks for new providers, and they have to look for foreign capital.
Foreign capital from some of the larger players around the world, such as Verizon, might want to enter the Canadian market, although I do not know whether that is the case today. However, we ought to give them a shot by freeing up the rules. The perspective of many companies is majority ownership, but I do not know that the specific numbers matter. Certainly a company such as T-Mobile would want to enter our marketplace under its own name so that it can take advantage of its existing global efficiencies and potentially blow out of the water some of the local providers that are not playing the same game or even on the same playing field.
Senator Munson: On a personal note, I was at our massive Liberal Party convention in Vancouver a couple of weeks ago. You talked about what is happening in other countries and how it changes life as we know it. I stayed in a very modern hotel. I walked into my room with my laptop and found that I had to call the front desk to get a connection. They connected me to the hotel's site and charged me about $15 per day for the service. In layperson's terms, how would my life be different somewhere else in the wireless world of efficiency and broadband?
Mr. Geist: Certainly, some hotel chains do a better job of getting people connected. In communities where there is more universal connectivity, the ability to connect is almost instant and the speeds are faster. It is less the case in Canada because of the ability to roam more easily but becomes more of an issue when you move elsewhere. This past weekend, I was in Switzerland, where my daughters and I used Skype to communicate. That service provides both audio and visual communication and was offered free by my hotel. It is an enhanced service that avoids the usual roaming charges.
Imagine what it is like in Korea where you can access that communication anywhere if you have a phone with a camera. Walking down the street, you can Skype something that you see to someone back home on the other side of the world at no additional cost. As well, you can turn the camera so that they can see what you are seeing in real time. Such services are beginning to happen that allow for real-time streaming off nothing more than a cellphone, including the iPhone. However, you need the connectivity that for now is relatively rare in Canada but more common elsewhere.
Senator Munson: The broadband connectivity you are talking about in the North would be of immense value to health care or the environment, et cetera, by transmitting the video along with the audio when talking to the experts in the South. This is how a knowledge-based economy works.
Mr. Geist: The issue of the Canadian North is terrifically important. I did a piece based on work by Bill St. Arnaud, Chief Research Officer for CANARIE Inc., Canada's advanced internet development organization — a success story in networks. He is involved with green IT broadband and how to marry concerns for the environment with broadband connectivity in the North.
As many of you know, we are moving to what is often referred to as "cloud computing" because much of our information resides in the clouds on large computer servers often stored in the United States, for now. When you use Google Mail, YouTube or Facebook and upload your content, all of the data sit on large severs. I note that a competition is on to get the storage rights for this data. One of the biggest costs involved is energy. When Google sets up large sever farms to host their content, they do it in places where the cost of energy is the cheapest.
Mr. St. Arnaud has argued that Canada would be in a position to compete, as Iceland is doing, by setting up these large server farms in the North because we have fibre optic cable that can move the content fast, so it does not matter where the sever farms are located. If we set them up in the North, we could use geothermal energy to run the servers. The heat emitted from the hundreds of thousands of servers would be recycled for northern heating purposes. The cost of keeping things cool in the summer would be lower because it is in the North. In terms of privacy and rules to protect the data, Canadian rules would apply because the data would stay in Canada and not be outsourced.
We could do that. Countries such as Iceland see this as a potential competitive advantage because it is very lucrative to attract large, global information-heavy companies to set up their server farms somewhere. It does not matter where that is as long as it is at the cheapest cost. Canada could do that in an efficient manner with zero carbon emissions. There are huge opportunities, but we have yet to see anything similar to that take place in Canada.
Senator Zimmer: You mentioned four times the overly cosy relationship between the CRTC and the Competition Bureau. Perhaps that is what happened, to some extent. I am sure that operators have gone to the CRTC and the networks as the self-styled martyrs that provide the service in a way that will be extremely good for the consumer. However, they have almost put fear into the regulators saying that they will do this because the public does not know what is out there, unless they go to another country. They did that with the telephone systems years ago, when our telephone rates were humongous. Competition came in and they dropped out of sight. One element that can accomplish this is competition. The questions asked by Senator Wallace and Senator Dawson were extremely good. We need a model that we can use to develop this. Otherwise, we all move on to other issues and the matter falls off the table and the deal is never done. As Senator Wallace asked, are there things we should know to complete what we want to do about this?
Please send us this information as we go along. It will help us in closing the deal to ensure that these things are followed up on; otherwise, it will never get done.
The Chair: I was about to tell Professor Geist that we might need to see him again. I hope you enjoyed the morning that you had with us as much as we enjoyed it. We really know more about the study that we are conducting here. I am quite pleased that we are conducting such a study. It is about time that we do something about it. Thank you for your presence; it was beneficial to us.
Mr. Geist: Thank you.
The Chair: Senators, we will meet again tomorrow with Bill C-3. Minister Baird will appear before our committee. New stakeholders have asked to appear before us on Bill C-3, so we will decide what we do with it tomorrow, after we hear from the minister. The meeting will be in the Victoria Building tomorrow night.
(The committee adjourned.)