Speech by Leonard Katz, Acting Chairman, Canadian Radio-television and Telecommunications Commission

To the Canadian Telecom Summit

Toronto, Ontario
June 5, 2012

Check against delivery

 

The content of this text was delivered in an interview format, which covered all the issues included in the speech.

 

Thank you very much.

I'd like to review a few of the major issues that the Canadian Radio-television and Telecommunications Commission (CRTC) is addressing today. And I'd like to make two points in the process:

The growth of our digital economy depends on the continuing expansion and acceleration of broadband services.

Broadband

Canada is one of the most connected countries in the world: 99% of households have access to broadband Internet services through telephone, cable, fixed-wireless or mobile wireless networks. This is remarkable for a country of this size with a relatively small population and harsh winter conditions.

Canadians are in fact the heaviest Internet users in the world, based on the time they spend online. A recent comScore report showed Canadians leading all countries surveyed with a monthly average of 45.6 hours on the Internet — well ahead of the U.S. with 40.3 hours, the U.K with 37.1 and South Korea with 31.2. The world-wide average is 24.4 hours per month.

We're buying more and more smartphones and tablets, which are creating an enormous consumer demand for bandwidth.

Virtually every aspect of Canadian life — education, business and industry, health, community, government, culture, entertainment, science and technology — now depends on high-speed digital services.

The development of these services is driven by the marketplace, by government and by the regulator. And the most important of these is the marketplace.

Marketplace

Wireless companies have been building Long Term Evolution wireless networks (LTE) in regions across the country. As these networks expand, they will provide the speed and capacity to support the increasing demand. The latest figures show that 45% of Canadians now live within the footprint of LTE networks. They're concentrated in the large cities, but this is still an impressive figure, since the companies started upgrading only last year.

Xplornet has bought 100% of the Canadian Ka-band capacity on the ViaSat-1 4G satellite that was launched last year. All of that capacity will be used for rural broadband. Xplornet will also be using the EchoStar XVII satellite that will be launched later this year.

The private sector is also bringing service innovations to Canadians. For example, the major providers recently announced that they are working with financial institutions to extend their mobile banking platforms to include retail payment. Customers will be able to pay for their purchases using their smartphones instead of cash or ATM cards.

This is welcome news, and we look forward to seeing more of these kinds of announcements in the future.

Government

As for government initiatives: A few years ago, the government created a $225-million program to extend broadband Internet services to unserved and under‑served communities. The Broadband Canada: Connecting Rural Canadians program has supported over 80 projects that brought broadband access to over 210,000 households.

The government is also taking steps to encourage competition and ensure that new entrants and regional providers have access to the capital and the spectrum that they need to compete effectively. Proposed amendments to the Telecommunications Act declare an exemption from foreign investment restrictions for companies that hold less than a 10% share of the total Canadian telecom market.

This will open up new sources of capital to help them compete with the established players. Companies that then increase their market share beyond 10% by growth alone, rather than through mergers or acquisitions, will remain exempt from the restrictions. This will encourage long-term investment.

Caps will be applied in the upcoming spectrum auctions that will enable four or more providers in each region to obtain spectrum in both the 700 MHz and the 2500 MHz bands.

Obligations will be attached to spectrum licences to ensure that companies deploy next-generation services with wide coverage for rural Canadians within stated deadlines.

Regulator

The Commission will continue to promote the spread of broadband service across the country. We established a national speed target: By 2015, we expect all Canadians — regardless of where they live — to have access to download speeds of at least 5 megabits per second (Mbps) and upload speeds of 1 Mbps. We're delighted with the progress that's been made. Already 88% of Canadians have access to download speeds of 5 Mbps or better. In fact, 76% of Canadians have access to 50 Mbps or higher — that's up from 30% in 2009.

The industry has made significant strides in providing these higher broadband speeds to Canadians in a relatively short time.

Of course, as many Internet users are aware, the maximum advertised speed is not always the speed that you actually get. Testing of actual broadband speed at the customer's end of the line can be an important tool for measuring achievement against objectives.

Broadband testing programs using the SamKnows technology are being conducted by the FCC in the United States and Ofcom in the U.K. The CRTC is looking into the value of this testing, and we're now completing a pilot project in collaboration with an ISP.

Deferral accounts

I've already mentioned initiatives by industry and government to ensure that Canadians in rural and remote communities are not left behind while the rest of the country enjoys the benefits of the digital revolution.

This is a high priority with the Commission as well. In August 2010, we directed the large phone companies to spend over $420 million from their deferral accounts on extending broadband Internet service to 287 rural and remote communities by 2014. This initiative will bring broadband access to over 80,000 households.

We've just received the latest reports on how the process is going. Other than the final deadline, we did not impose any formal requirement for how quickly these services should be rolled out. But we're glad to see that two of the companies share our sense of urgency about bringing those under‑served areas up to speed. So far, MTS has completed its broadband rollout to 9 of 16 communities. Telus has completed its rollout to 52 of 159 communities. I'd like to congratulate both companies for their commitment.

Unfortunately, it's a different story with Bell Canada and Bell Aliant. Nearly two years after we issued our directive, Bell has extended broadband service to only three of its 112 communities.

Broadband service is more and more of a necessity for full participation in the digital economy and in our life as Canadians. The funds were collected over a number of years from Bell subscribers. I urge our friends at Bell to give a higher priority to the needs of the people in these rural and remote communities by accelerating their rollout plans.

North of 60

All Canadians must have access to a choice of advanced and innovative communications services at competitive prices. That's why the Commission has been paying special attention to the needs of Canadians living North of 60.

Last December, we issued a decision to address the communications challenges facing citizens, businesses and governments there. They deserve to have access to reliable services comparable to those that other Canadians take for granted. But they've had to put up with aging infrastructure and service outages, as well as the geographic and demographic challenges.

Northwestel has been the only provider of local telephone service in large parts of the North, and we have ordered them to come up with a modernization plan by early July. We will review their infrastructure and services over the next two years. Based on what we have heard so far, we are encouraged.

Meanwhile, we have opened up the North to local telephone competition. Many residents could soon have the option to choose from competing providers and different technologies. Iristel, for example, has announced that it will be competing in a range of telephone services including Voice over Internet Protocol and wholesale long distance.

Accessbility

There is another group of Canadians who should be able to take advantage of the latest communications services. Four million of us are living with disabilities of various kinds.

The CRTC is exploring a number of initiatives to improve the accessibility of communications services. For example, we recently initiated a trial during which 911 call centres in four cities are communicating with pre-registered participants via text messages. Once the trial ends, we will hopefully have the necessary data to decide whether to expand the program nationwide.

In addition, people with hearing and speech disabilities already have access to text relay services that are available across the country. However, those who use a sign language as their primary language have submitted that a video relay service (VRS) would work better for them.

Telus conducted an 18-month trial of VRS, and Bell did a feasibility study which addressed technical and economic issues. The CRTC is now seeking to clarify the discrepancies between their two reports, and we're continuing the search for a sustainable solution. We're also looking at other initiatives and technical advances that could improve accessibility for people with hearing and speech disabilities.

I'd now like to turn to some issues that affect all consumers. Every technology comes with its own challenges and possibilities for abuse. That's why we defend telecom customers against unwanted telemarketing calls, and why we regulate the permissible uses of Internet traffic management policies. And that's why we will soon be defending Canadians against spam.

Canada’s anti-spam legislation

Our Compliance and Enforcement Sector will play a key part in enforcing Canada's new anti-spam legislation when it comes into effect next year. The law targets three great evils of the Internet: spam, malware and unauthorized network rerouting.

These are not only annoyances. They're a threat to the integrity of the Internet and the security of electronic commerce and communications.

To meet that threat, the Compliance and Enforcement Sector is engaging experts in digital investigation—and it's building a state-of-the-art computer lab to help detect and track down the violators.

We will host a Spam Reporting Centre to collect reports of spam, malware and other abuses of the Internet. We will have the authority to launch investigations, and to impose the largest administrative monetary penalties of their kind in the world. We will work with partners to deter these abuses so that Canadians, and those who do business with Canadians, will be able to trust the systems that are so vital to our economy.

I encourage the industry to get familiar with the law and the regulations before they come into force. There's a website with a lot of useful information at fightspam.gc.ca.

National DNCL

The CRTC has already been enforcing the telemarketing rules associated with the National Do Not Call List (DNCL). Canadians who want to cut down on unwanted telemarketing calls have registered over 10.8 million numbers with the List, and about 9,500 telemarketers have registered with the list operator.

We've responded to complaints by taking enforcement actions—sometimes involving significant penalties—and monthly complaints have declined by 40% since the end of 2009.

We'll continue to encourage telemarketers to follow the rules. We'll also continue our leadership role in the new International Do Not Call Network, which facilitates enforcement across different jurisdictions.

In order to continue the progress of the National DNCL, the program will require stable funding. Currently the costs of compliance and enforcement are being borne by Canadian taxpayers. We welcome the government's proposed amendments to the Telecommunications Act, which would allow the CRTC to recover these costs from the telemarketing industry, and to set the appropriate fees.

The Commission will be issuing a notice of consultation on the proposed fee regulations.

Internet traffic management practices

The use of Internet traffic management practices (ITMPs) has been an area of some concern for consumers. In 2009, we set out a policy framework on the permissible use of these practices. Since then, we've received 147 complaints of alleged violations.

One of these complaints was from the Canadian Gamers Organization against Rogers Communications. The gamers claimed that an ITMP was being used by Rogers to throttle traffic on certain popular online games. Our preliminary investigation found evidence pointing to violations of the framework.

Rogers took issue with some of our findings, but eventually announced that it would stop throttling traffic by the end of 2012. We are waiting for Rogers to provide more details on how it plans to phase out its ITMPs.

Bell had earlier made a similar announcement. Both companies indicated that new investments in network capacity were helping them put an end to the practice.

We're pleased that our ITMP framework is helping consumers to get the most out of their Internet experience.

National wireless code

We're currently exploring another possible tool to help consumers: the development of a national code for wireless services. In 1994 the CRTC decided not to regulate the wireless sector and to allow it to develop in response to market forces.

Recently, several provinces have amended their consumer protection laws in ways that affect the wireless market. According to a number of stakeholders in the industry, this indicates that wireless consumers want such protection. They also point out that a patchwork of different rules across the country will create an inefficient environment for both service providers and consumers. They have applied to us for the creation of a national code.

Has the market changed enough to warrant our intervening in this way? We issued a call for comments and are now reviewing the submissions that came in.

While we continue to study this question, I'd like to point out the important role of the Commissioner for Complaints for Telecommunications Services. As the environment became increasingly deregulated, it became necessary to establish an organization to help consumers who felt they weren't being properly served by their telephone or Internet provider.

If a residential or small-business customer can't resolve a problem with the provider, the CCTS is there to help. It's an independent, industry-funded agency, and it has a range of remedies to offer in resolving complaints. We see this as a very valuable service.

Transparency and confidentiality

I'd now like to turn to some issues of transparency and confidentiality in our work with the industry.

To encourage competition in the retail telecom market, we require incumbent carriers to provide certain wholesale services to competitors at mandated rates. To help us set these rates at a fair and reasonable level, we receive information from the incumbents about the costs they incur in providing these wholesale services.

They may designate some of this information as confidential. That designation may be challenged by the Commission or by other parties through a request for disclosure. Addressing these requests may extend the length of the proceeding.

We've heard from some parties that they would like to see fuller disclosure from the start to help them participate more effectively in the process. The Commission also believes that it is in the public interest that this information be obtained on as timely a basis as possible. This would also enable third parties with relevant expertise to contribute more usefully.

Two costing issues that we had to deal with last year involved wholesale line-sharing and wholesale VDSL (a very high bit rate digital subscriber line). In both cases, further scrutiny by the Commission of costs submitted confidentially resulted in very substantial reductions of the costing basis for the rates that were finally approved.

I believe the Commission and the industry need to find a way of handling the issue of wholesale costing in a faster, smarter and more effective way. The current process is long and expensive — and for no good reason.

Perhaps the competitive marketplace should be given the opportunity to build its own costing models to give the Commission a basis for assessment. Competitors could use these to make substantiated claims when contesting costs that they believe to be excessive.

In the interests of transparency and efficiency, we have issued a call for comments. Should additional cost study elements and markups be expected to be disclosed on the public record? We'll be publishing our decision later this year.

Dispute resolution

As you know, it's a top priority for the Commission to regulate with as light a hand as possible, with primary reliance on market forces. We're operating more and more ex post instead of ex ante.

It's good for us and good for the industry if we are not running to intervene every time there is a problem. Of course it's inevitable that there will be disputes. But if the industry wants lighter regulation, it has to be prepared to settle its own disputes through negotiations, as far as that is possible.

However, as a last resort, we remain ready to help find a resolution to the really tough cases through mediation or arbitration. We have clarified our methods and structures to ensure that mediation and arbitration staff are isolated from each other, and that no arbitrator can have any knowledge of what may have transpired in mediation. We want you to have complete confidence in our fairness and neutrality when you ask for our help.

A broadband-adoption initiative

Canada has one of the largest and most advanced communications systems in the world. Keeping it that way will require all the dynamism and innovation of the industry in the marketplace, with the support and guidance of the government and the regulator.

It's not enough to roll out advanced technology and services. People must also have the means and skills to make full use of them. It's worth taking a look at the Connect-to-Compete program in the United States. Last year the Chairman of the Federal Communications Commission challenged the broadband community to help close the adoption gap. Internet service providers, technology companies and nonprofits have responded with multi-billion-dollar commitments in kind. The National Cable & Telecommunications Association is playing a leading role.

The program will help spread broadband adoption, develop digital literacy and address the gap in employment skills. Eligible families will receive low-cost computer hardware and broadband service, along with training in digital literacy.

This kind of initiative by an organized industry would be very welcome here. I know that all of us want to deliver the best possible service to our digital economy and to all the people of Canada.

Thank you very much.

 

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