Speech by Tom Pentefountas, Vice-Chairman, Broadcasting, Canadian Radio-television and Telecommunications Commission

To the annual meeting of the Association des Compagnies de Téléphone du Québec

Saint-Marguerite-du-Lac-Masson, Quebec
October 7, 2013

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I am very pleased to be here today to represent the Canadian Radio-television and Telecommunications Commission (CRTC). Thank you for this invitation to attend the Annual Meeting.

This year you are celebrating your 65th anniversary. I congratulate you on this occasion and wish you continued success.

Current situation

It seems to me that it was not so long ago that the decision to make a long-distance call was not taken lightly. We would wait for Sunday, when it cost less—and we were careful not to talk too long. That was when land lines were the only “instant” means of communication. Other than that, there was the mail.

Today, very few households do not have a high-speed Internet connection. Almost all Canadians have access to advanced wireless networks that support smartphones and other devices that connect to the Internet. Consumers now have unprecedented access to services they can use anytime and anywhere, on the device of their choosing. The telephone has become one means of communication among many. And those means are multiplying: we text, we skype and we e-mail.

This dramatic progress is continuing, driven by technology. And it is showing no signs of stopping. In fact, I think we are at the beginning of the change curve, not the end.

The outcome is the gradual disappearance of boundaries between platforms, products and services, in a world dominated by the Internet. And this convergence entails very specific requirements. We need to manage the regulatory issues created by the existence of multiple platforms. We need to study the impacts of those technological changes—on our businesses as well as on our regulatory system.

Faced with a future that reveals so few of its secrets, we must all prepare. And you are not alone in having to adapt to this new world—we do too. With a view to maintaining an environment of healthy competition and fairness, the CRTC published its three-year plan, which outlines our path of activity—and which may affect yours.

CRTC's vision

In June 2012, Jean-Pierre Blais was appointed Chairman of the CRTC. He has since shared his vision: to ensure that Canadian citizens, creators and consumers have access to a world-class communication system. A system that gives them access to innovative services at reasonable prices and to compelling and diversified creative content. This system must also enhance the safety and interests of Canadians.

But it is not merely a matter of access. Canadians must also be at the centre of their system.

As service providers, you play a key role. Businesses know better than anyone how to conduct themselves in their markets. As much as possible, we will step aside and allow you to do what you do best: innovate, compete and serve. That said, we will not hesitate to intervene if there’s a market failure or if we see that the public interest is not being adequately served.

I want to emphasize that a healthy system requires healthy businesses. We want to establish an atmosphere that encourages investment and creates a stable environment for shareholders. We want to see successful businesses—large and small, national and local—compete with one another with the needs of Canadians firmly in mind. That way, everyone wins.

Overview of the regulatory framework

This brings me to an issue of interest to us all, namely competition in local markets. Last year at your annual meeting, my colleague Chris Seidl [Executive Director, Telecommunications] informed you that local competition would soon be a reality in your markets, and that to help you manage this change, the CRTC had implemented special measures and was reviewing the regulatory framework applicable to your businesses.

I know that some of you were concerned about the effects of local competition on your businesses. You were wondering to what extent the CRTC would require you to serve customers in remote areas in your territories. Further, you did not know how the CRTC’s review of the regulatory framework would change the conditions under which you operate. We are not insensitive to your points of view, nor to your representations to have the decisions amended. But, as I emphasized, the balance between the interests of businesses and those of consumers is delicate. The CRTC must always weigh both sides of this issue.

The big news since last year is that the CRTC issued in March its regulatory framework for small incumbent local exchange carriers. This new set of rules gives you regulatory certainty, and the means and incentives you require to innovate and adapt to a world where it appears that the only constant is change. It also reduces the regulatory burden you face. It’s a framework deliberately aligned with the one already in place for large service providers, but which also takes into account the particular differences of smaller service providers. Let me explain.

Our decision maintains the regulatory framework for small incumbent local exchange carriers, with a few modifications.

First, the regulatory framework, which now has no fixed duration, gives you more flexibility when pricing services. You may now use rate ranges and rate de-averaging. In certain situations, you may lower the minimum rate if the CRTC has already approved an equivalent rate for the same service, unless you choose to submit detailed cost studies. That’s one way the new framework will help you compete in the market.

Second, to allow for more creativity in setting prices for services, you will be able to, under certain conditions, to offer bundles and promotions—and hold market trials—without the CRTC’s prior approval. You will need to move quickly to respond to an evolving marketplace. By cutting away some of the red tape associated with the CRTC’s approval process, we are giving you the leeway to be more nimble in the face of competition.

The third and final key aspect of the new framework is the long-distance, or toll interconnection, regime. Our decision signals a clear intent to change this regime. The CRTC decided that you can peg your toll interconnection rate at the same rate used by TELUS Quebec or you can conduct your own cost study to determine a more appropriate rate. The choice is yours. The CRTC will continue to work with you to arrive at a solution that makes good sense for you, for other carriers and for consumers.

Flexible and streamlined, our new framework establishes predictable regulatory conditions under which you can make informed business decisions. I am convinced that you have the ingenuity and the resources to not only compete, but also to win.

Other decisions of interest

Let me turn your attention briefly to a handful of other decisions and actions—some already taken, others planned by the CRTC—that will further contribute to our vision.

We issued a wireless code that will apply to contracts for mobile devices starting on December 2, 2013. Given that the cellphone has become the most important electronic device in the country—there are now close to 28 million cellphone subscriptions in Canada—it goes without saying that this is an essential tool for both consumers and service providers.

In February, we established final wholesale rates for the high-speed access services used by independent service providers to offer Internet access and other services. Under that decision, large incumbent telephone and cable companies are to use a single billing model and offer the same rates for business and residential end users. The result will be a more straightforward billing process for independent service providers.

Later this year, we will undertake a full review of the wholesale telecommunications services rules established in 2008. Our goal for this review is to ensure we have a regulatory framework for wholesale services that facilitates the development of a competitive telecommunications market that provides consumers with choice and access to innovative and affordable services.

As part of that process, we will examine whether new wholesale high-speed access services need to be imposed, such as fibre optic services to the home. The main objective will be to ensure that the policy promotes the growth of a competitive Canadian broadband market, while encouraging investment in telecommunications networks.

Last year, we introduced more transparency in the rate-setting process. The next step will be to consider how we set wholesale rates and ensure that our models and processes remain relevant, sustainable and appropriate for the needs and interests of Canadians.

The CRTC’s Three-Year Plan also requires us to examine three issues of particular interest for your businesses.

Within the context of an ever-decreasing demand for payphone service in Canada—the number of payphones has decreased from 95,000 in 2008 to 68,000 in 2012—we are assessing the role of those telephones in the current environment. We will also examine whether the removal of the last payphone in a community should be prohibited.

In 2014–2015, we will study the future of 911 services in Canada with a view to developing a policy and a regulatory framework for next-generation 911 services that meet Canadians’ evolving public safety needs.

Finally, that same year, we will hold a public hearing on the basic service objective to determine the minimum level of service Canadians need to fully participate in the digital economy. There is no question that the Internet is at the centre of economic and social development—beginning with education. To compete in the global market, we must be educated and equipped. Broadband has become a core element of that preparation.

Should broadband be considered a basic service for Canadians? That will be one of the questions at the heart of this proceeding.

As you can see, we’ve got a lot on our plate that will bring us closer to our vision of ensuring that Canadians have access to a world-class communication system.

I can tell you that right now our telecommunications and broadcasting system is in a good position in relation to the most developed economies. We compare well with this group. But our goal is to be among the front runners. And we clearly have the talent and the motivation to get there.

What the future holds

Before concluding, I would like to come back to the rapid changes in the telecommunications industry.

The demand for broadband services, both fixed and wireless, will challenge you to offer new and faster services to your customers, and it will task us with the job of facilitating a competitive national broadband market while balancing incentives to invest in such innovative networks.

Amid such changes, we will all have decisions to make. For you, the question will be how to respond to such innovations. Which technologies, business practices and services will you adopt and how?

For us, the question is whether and how to regulate.

With the ever-increasing speed of innovation, the CRTC is committed to contributing to the implementation of conditions that will favour your development and your success. That is why collaboration between the industry, government and regulatory bodies must be encouraged. We can accomplish much more in partnership than we can individually. That is why I am here today.

You work on the front line of next-generation network deployments, and you understand better than anyone your customers’ needs. For example, some of you offer your customers Internet Protocol—or IP—television services. I note that in Canada, the number of subscribers to those services has risen from 657,000 in 2011 to over a million in 2012—that’s an increase of 45.3%. In what other field do you see near-double growth from one year to the next? I encourage you to monitor that growth closely.

But there is an inconsistency. The number of subscriptions is rising exponentially, but the shift to IP technology by telecommunications companies is happening much more slowly. In January 2012, we published a decision regarding the evolution of telecommunications networks based on IP technology—a decision that encourages the entire industry to adopt IP as soon as possible.

It cannot be denied that the networks of the future will be mostly IP-based. This technology is key to your success.

In this environment, remember that you have a unique advantage over your competitors, namely the big players. You are more adaptable, more agile and more flexible than the large companies. You are closer to your customers than they could ever be. You know your customers very well. You are personally involved in your communities and your customers know your companies’ names, and often yours too.

The larger operators will never be able to rival with that level of accessibility and special commitment. You are therefore well placed, with those advantages, to face the competition. You must seize the opportunities that come with change. Remember that technologically speaking you have the same tools as your competitors. Other than that, you’ve got what it takes to not only maintain your position, but ensure that your businesses thrive.

I am pleased with our exchanges and collaboration.

Thank you.


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