Telecommunications Service in Canada: An Industry Overview

Section 6: The Evolution of Competition in the Canadian Telecommunications Service Market

6.3 Major Government Policy and Other Initiatives Announced Since 1995

Personal Communications Services (PCS)

PCS is a family of advanced mobile wireless digital telecommunications services rich in features that offers voice, data, and image communications. In December 1995, Industry Canada licensed fourteen companies to provide PCS services on a competitive basis across Canada. Two national 30 MHz PCS licences were awarded to Clearnet PCS Inc. and Microcell Telecommunications Inc. One national 10 MHz PCS licence was awarded to Rogers Wireless Inc. and 11 regional 10 MHz PCS licences were awarded to the members of the Mobility Canada consortium. The Mobility Canada consortium dissolved in 1999 with three members, TELUS, BCTel Mobility, and Quebec Telephone, merging under TELUS and the remaining members forming the Bell Wireless Alliance. In October 2000, TELUS acquired Clearnet to form a national wireless company.

Convergence Policy

On August 6, 1996, the Government issued its Convergence Policy Statement, which established broad policy objectives for telecommunications and broadcasting in the context of the information highway. The Policy Statement was issued following an extensive public consultation process launched by the issuance of an Order in Council in October 1994. It covers three broad subject areas: network facilities, Canadian content, and competition. In summary, the Policy supports: 

• interconnection, interoperability, unbundling and resale and sharing of network facilities that deliver telecommunications services to the public;

• continued measures to support the production and exhibition of Canadian content in broadcasting; and

• competition in facilities, products and services for the information highway.

Of particular interest, the Statement established a framework for competition between telecom carriers and cable TV companies in their core markets. Adopting a "no head starts" rule, the policy stated that telecom carriers may enter broadcasting distribution only after the CRTC has set the regulatory framework for competition in local telephone service and has approved related tariffs filed by the telephone companies. By January 1, 1998, barriers to entry into local telephony had been sufficiently addressed that the CRTC began permitting telephone companies to apply for broadcasting distribution licences.

The Convergence Policy statement also supports regulatory safeguards to ensure that competition is fair and that policy objectives are met. Consistent with the Statement, the Bell Canada Act was subsequently amended to remove the prohibition on Bell Canada from holding a broadcasting licence.

Wireless Broadband

Canada has made spectrum available for wireless broadband in a number of frequency bands and has plans to open up additional spectrum in the near future.

The 2500 MHz band is currently licensed for Multipoint Distribution System (MDS) broadcasting and for wireless Internet Multipoint Communication System (MCS) services. In November 2001, the Minister of Industry announced that mobile and fixed allocations would be made throughout the band. Incumbent licensees were reassured that they would not be relocated and that they could continue to deploy their networks according to their business plans. A consultation process is to be initiated to consider any licensing considerations flowing from this change in allocations.

The Department initiated public consultation in 2001 on opening the 3500 MHz band for Fixed Wireless Access (FWA) and Wireless Communications Services (WCS) currently operating in the 2300 MHz range. The Department indicated that up to 200 MHz for FWA and 30 MHz for WCS could be opened in the 3500 MHz band. The Department hopes that assignment of this additional spectrum will encourage deployment of FWA and WCS networks in all areas of Canada.

Other wireless broadband spectrum suitable for high capacity point-to-multipoint has also been made available. For example, 1200 MHz of spectrum in the 24 GHz and 38 GHz bands was auctioned for this purpose in 1999. Also, 1000 MHz of spectrum designated for Local Multipoint Communications Systems (LMCS) in the 28 GHz band was licensed through a comparative licensing process in 1996. That licence was recently returned to the Department; however, plans to re-assign this spectrum have not yet been developed.

The Department is currently undertaking a comprehensive review of the use of spectrum in the 3 to 30 GHz range. As a result of this review, additional spectrum could be designated for wireless broadband access.

The Department has a strategic plan for releasing new spectrum. The plan can be found in Radio Systems Policy 020, Guidelines on the Licensing Process and Spectrum Release Plan (RP-020), available at http://strategis.ic.gc.ca/epic/internet/insmt-gst.nsf/vwGeneratedInterE/sf01853e.html on the Spectrum Management and Telecommunications Web site.

WTO Agreement on Basic Telecommunication services

WTO negotiations on basic telecommunication services were held under the framework established by the General Agreement on Trade in Services (GATS). The two primary objectives of the negotiations were to allow more competition in the provision of telecommunications services, and to establish a transparent and predictable framework for trade and investment in telecommunications services. Canada's goal in the negotiations was to help Canadian telecommunications companies gain secure access to foreign markets such as the United States, Europe, Japan and developing markets in Asia and Latin America, and to ensure that Canadians continue to benefit from world-class communication services at competitive prices provided by a strong domestic industry.

The WTO negotiations concluded on February 15, 1997 with an agreement which came into force February 5, 1998. The WTO Agreement on Basic Telecommunications Services established commitments on the part of signatory countries and created a dispute settlement process which provides the necessary safeguards to ensure that those commitments are respected.

The WTO Agreement on Basic Telecommunications Services followed the Information Technology Agreement signed December 13, 1996, which liberalized trade in information technology equipment. The combined effects of these agreements has been to spur on telecommunications investment around the world, increasing opportunities for Canadian telecommunications service providers and equipment manufacturers.

Industry Canada has adopted all necessary measures to implement, and in important areas, to exceed its obligations under the WTO Agreement. These measures include introducing amendments to the Telecommunications Act as described above in section 6.2 of this document.

In fulfilment of its obligations, Canada has removed foreign ownership restrictions in the areas of global mobile satellite services and in the ownership of submarine cables. Telesat Canada's monopoly on domestic and trans-border telecommunications carriage was ended on March 1, 2000, and Teleglobe's monopoly on October 1, 1998. Teleglobe's special ownership restrictions were also eliminated at the same time.

In March 1999, the government made amendments to the Radiocommunication Regulations in order to remove the requirement of Canadian ownership and control that applied to fixed and mobile satellite earth station licence holders.

Application of Telecommunications Act to SaskTel

In October 1998, the federal government passed an Order in Council that established June 30, 2000 as the date on which SaskTel would be subject to CRTC regulation.

Connecting Canadians Agenda

In a move to help Canadians reap the rewards made possible by the rapid expansion of the information highway, the Government of Canada announced the Connecting Canadians Agenda in the 1997 Speech from the Throne, with the goal of making Canada the most connected country in the world by the year 2000. The six pillars of the Agenda are entitled: Canada Online; Smart Communities; Canadian Content On-line; Electronic Commerce; Canadian Government On-line; Connecting Canada to the World.

Making Canada the most connected country in the world promotes a more innovative and competitive economy, puts Canadians in a better position to capitalize on economic and learning opportunities in the knowledge-based economy, and enhances Canada's ability to attract investment from home and abroad. Though the private sector will lead in building the information highway, the Government of Canada will continue to create the most suitable policy and legislative framework to support connecting Canadians to each other and the world in a way that is affordable and accessible.

Accomplishments to date under the Connecting Canadians Agenda include: all public schools and libraries have been connected to the Internet; close to 5000 community access sites have been established; over 210,000 computers have been delivered to schools; demonstration projects for smart communities have been announced; 2,500 young Canadians have been hired to digitize content for the Web; and, Canada's Digital Collections and almost 5,500 volunteer organizations are either connected or are about to be connected.

Spectrum Auctions

In June of 1998, Industry Canada announced that it would be making available, across the country, new wireless broadband spectrum at 24 GHz and 38 GHz to accommodate the increased demand for high-speed local access infrastructure. This spectrum is aligned with that in the United States, thus enabling Canadian service providers to take advantage of the economies of scale that equipment manufacturers will gain from a combined North American marketplace.

In November of 1999, Industry Canada held an auction for the 1200 MHz of spectrum in the 24 GHz and 38 GHz frequency range. The auction, the first ever held in Canada, was conducted securely over the Internet employing Canadian public key infrastructure (PKI) encryption and digital signature technologies to ensure the confidentiality and authenticity of all bids. A total of 256 licences were awarded to 12 companies. The winning companies bid a total of more than $171 million.

In January 2001, the Department held its second auction, this time for additional PCS spectrum in the 2 GHz range. Consistent with its policy of fostering competitive telecommunications markets, all were eligible to apply to participate in the PCS auction. This auction provided opportunities for existing companies to obtain additional spectrum and created opportunities for new entrants with viable business plans. The availability of this spectrum enables the enhancement of existing PCS systems, provides for the introduction of new third generation-like services and stimulates innovation in the dynamic wireless environment.

The PCS auction ended February 1, 2001 following 51 rounds of bidding over 14 days. Fifty two out of a total of 62 licenses were auctioned. The auction winners bid a total of $1.5 billion (Table 6-1).

Undersea Cable Landings

There are currently six different cable landings in Canada, under licences issued by the Minister of Industry to 3 different companies. Teleglobe Inc. still dominates this component of international telecommunications infrastructure, but new entrants are beginning to build their infrastructure, (Table 6-2).

A description of the licensing conditions reads as follows: 

Table 6-3: Regulatory Regime for the Construction and Operation of an International Submarine Cable

CRTC Report on Status of Competition

In response to concerns that had been expressed about the status of competition in Canadian telecommunications markets, and about the availability of advanced telecommunications services at affordable prices, the Governor in Council, on the recommendation of the Minister of Industry, required the CRTC to submit annual reports for five years on the status of competition in Canadian telecommunications markets and on the deployment and accessibility of advanced telecommunications infrastructure and services in urban and rural areas in all regions of Canada. [Footnote 1] On September 28, 2001, the CRTC released its inaugural report on the status of competition in the Canadian telecommunications industry. The full report can be obtained at http://www.crtc.gc.ca/ENG/publications/reports/PolicyMonitoring/2001/gic2001-09.htm or by contacting any CRTC office. The report offers information, facts and data on the telecommunications industry, including the following:

• an overview of the Canadian telecommunications industry and regulation;

• general data on Canadian telecommunications industry players;

• information on the status of telecommunications competition in Canada, by market;

• a description of the impact of competition on customers; and

• an overview of the current status of the roll-out of broadband infrastructure across the Canada.

National Broadband Task Force

The National Broadband Task Force (NBTF) was established in January 2001 by the Minister of Industry. The principal mandate of the Task Force was to map out a strategy for achieving the Government of Canada's goal of ensuring that broadband services are available to businesses and residents in every Canadian community by 2004. The Task Force published its report, The New National Dream: Networking the Nation for Broadband Access, in June 2001.

Major findings and recommendations of the Task Force include:

• All Canadians should have equitable and affordable access to broadband services;

• Focus should be on communities where the private sector is unlikely to deliver services;

• First Nation, Inuit, rural and remote communities should be a priority along with public institutions (learning institutions, libraries, health care centres and public access points);

• Investment estimates for deployment of broadband infrastructure vary widely depending on whether they include support for transport to communities or access within communities, as well as depending on the combination of technology solutions;

• Accessibility means more than infrastructure - it also means content, services and building community and individual capacity.

The full report can be found on Industry Canada's Broadband Web site at: http://www.broadband.gc.ca.

In the December 2001 budget, the federal government outlined a revised goal of making broadband access widely available to all communities by 2005. To this end, on September 5, 2002 the government launched the Broadband for Rural and Northern Development pilot program. The program has a federal funding commitment of $105 million, over three years. The essential elements of the program are described in the document Broadband for Rural and Northern Development Pilot Program: Guidelines for Applicants, available on Industry Canada's Broadband Web site at: http://www.broadband.gc.ca.

The pilot program is intended to allow deployment funding to go to a limited number of rural, remote, northern, Inuit and First Nation communities most in need and where market forces alone will not rapidly extend the benefits of broadband access. This approach allows the federal government to test costing and technology assumptions. It can also use these communities as examples to other communities where the market could act on its own, thereby increasing the chances of the private sector playing a stronger role in the deployment of broadband without more government incentive.

Review of Foreign Investment Restrictions

On November 19, 2002, Industry Minister Allan Rock announced that he is seeking the views of Canadians on the foreign investment restrictions applicable to the telecommunications industry and that he has asked the Chair of the House of Commons Standing Committee on Industry, Science and technology to undertake a review. To support the review, Minister Rock has released a discussion paper outlining the key issues and identifying questions to be considered. Interested parties can read the discussion paper, which is posted on the Innovation Strategy Web site at: http://www.innovationstrategy.gc.ca/cmb/innovation.nsf/MenuE/Invest00.

Footnotes

1. Order in Council P.C. 2000-1053, June 26, 2000.