ARCHIVÉ -  2004-09-22 Volume 2 - revised

TRANSCRIPT OF PROCEEDINGS BEFORE

THE CANADIAN RADIO-TELEVISION AND

TELECOMMUNICATIONS COMMISSION

TRANSCRIPTION DES AUDIENCES AVANT

CONSEIL DE LA RADIODIFFUSION

ET DES TÉLÉCOMMUNICATIONS CANADIENNES

SUBJECT:

VOICE OVER INTERNET PROTOCOL (VoIP) PUBLIC CONSULTATION/

CONSULTATION PUBLIQUE SUR LES SERVICES DE

COMMUNICATION VOCALE SUR PROTOCOLE INTERNET

HELD AT: TENUE À:

Conference Centre Centre de conférences

Outaouais Room Salle Outaouais

Portage IV Portage IV

140 Promenade du Portage 140, promenade du Portage

Gatineau, Quebec Gatineau (Québec)

September 22, 2004 Le 22 septembre 2004

REVISED EDITION 1.0

Transcripts

In order to meet the requirements of the Official Languages

Act, transcripts of proceedings before the Commission will be

bilingual as to their covers, the listing of the CRTC members

and staff attending the public hearings, and the Table of

Contents.

However, the aforementioned publication is the recorded

verbatim transcript and, as such, is taped and transcribed in

either of the official languages, depending on the language

spoken by the participant at the public hearing.

Transcription

Afin de rencontrer les exigences de la Loi sur les langues

officielles, les procès-verbaux pour le Conseil seront

bilingues en ce qui a trait à la page couverture, la liste des

membres et du personnel du CRTC participant à l'audience

publique ainsi que la table des matières.

Toutefois, la publication susmentionnée est un compte rendu

textuel des délibérations et, en tant que tel, est enregistrée

et transcrite dans l'une ou l'autre des deux langues

officielles, compte tenu de la langue utilisée par le

participant à l'audience publique.

Canadian Radio-television and

Telecommunications Commission

Conseil de la radiodiffusion et des

télécommunications canadiennes

Transcript / Transcription

VOICE OVER INTERNET PROTOCOL (VoIP) PUBLIC CONSULTATION/

CONSULTATION PUBLIQUE SUR LES SERVICES DE

COMMUNICATION VOCALE SUR PROTOCOLE INTERNET

BEFORE / DEVANT:

Charles Dalfen Chairperson of the CRTC /

Le président du CRTC

Andrée Wylie Vice-chairperson /

Vice-présidente

David Colville Vice-chairperson /

Vice-présidente

Andrée Noël Commissioner / Conseillère

Ronald Williams Commissioner / Conseillier

Joan Pennefather Commissioner / Conseillère

Barbara Cram Commissioner / Conseillère

Jean-Marc Demers Commissioner / Conseillier

Stuart Langford Commissioner / Conseillier

ALSO PRESENT / AUSSI PRÉSENTS:

Carolyn Pinsky Legal Counsel /

James Murdock Conseillers juridiques

Chris Seidl Commission Staff /

Gestionnaire

HELD AT: TENUE À:

Conference Centre Centre de conférences

Outaouais Room Salle Outaouais

Portage IV Portage IV

140 Promenade du Portage 140, promenade du Portage

Gatineau, Quebec Gatineau (Québec)

TABLE DES MATIÈRES / TABLE OF CONTENTS

PAGE / PARA

PRESENTATION BY / PRÉSENTATION PAR:

Microcell Solutions Inc. 429 / 2117

Coalition for Competitive Telecommunications 477 / 2350

Pricing

Ontario 9-1-1 Advisory Board 513 / 2531

City of Calgary 524 / 2599

Association des centres d'urgence 911 du Québec 535 / 2632

Union des municipalités du Québec 543 / 2662

Yak Communications Canada Inc. 555 / 2703

Call-Net Enterprises Inc. 576 / 2778

MTS Allstream Inc. 620 / 2956

Pulver.com 652 / 3132

Cybersurf Corp. 684 / 3228

AT&T Global Services Canada Co. 713 / 3369

Telecommunications Workers Union 750 / 3528

Nortel Networks 770 / 3628

Alcatel Canada 839 / 4041

Gatineau, Quebec / Gatineau (Québec)

--- Upon resuming on Wednesday, September 22, 2004

at 0900 / L'audience reprend le mercredi 22

septembre 2004, à 0900

2111 THE CHAIRPERSON: Bonjour, mesdames et messieurs. Good morning.

2112 Madame la sécretaire.

2113 LA SECRÉTAIRE: Merci, Monsieur le Président.

2114 Bonjour, messieurs et mesdames les conseillers.

2115 We will now proceed with Appearance No. 10, Microcell Solutions Inc.

2116 Gentlemen and lady, please introduce yourselves. You have 20 minutes to make your presentation.

PRESENTATION / PRÉSENTATION

2117 MR. PROCTOR: Good day, Mr. Chairman and fellow commissioners. My name is Dean Proctor. I am here representing Microcell Telecommunications, along with our subsidiary company, Microcell Solutions, who most of you know as the company behind the Fido brand and Inukshuk, our broadband Internet division.

2118 I have to thank the Commission for allowing me a second day out of the office. I haven't had many of those.

2119 With me today is Johanne Lemay, to my right, Co-President of Lemay-Yates Associates. Johanne has been helping us in this process.

2120 Simon-Pierre Olivier is to my immediate left. He is Microcell's Director of Regulation and Economics.

2121 Don Falle is with the Inukshuk Venture, which company is busy deploying a broadband wireless access network across the country.

2122 Don may be familiar to some of you. I found out yesterday that, in fact, the first time he appeared before the Commission the Chairman was the Vice-Chairman, and he was working for CN/CP Telecommunications. So it has been a little while.

2123 We felt that we could best contribute to this review by speaking from our own experience as an industry player. This is not as a player offering voice services using Internet Protocol, for neither Microcell as a retailer selling wireless communications services under the Fido brand nor Inukshuk as a wholesaler of broadband wireless access is currently selling VoIP services, although we do plan to do so in the future.

2124 That said, one slight advertisement -- but I hope it is a bit of education rather than an advertisement -- we have brought along an iFido broadband wireless access modem, which is actually now available in Cumberland, Richmond, and, as some of the commissioners know, in a number of communities in northern Canada.

2125 Along with this we have a WiFi router, which connects directly to the next net modem, providing a wireless local area network, and a WiFi phone.

2126 Again, we will talk a bit about the use of these terminologies properly, but, if you want, this is a potentially disruptive technology, where there is wireless running through IP.

2127 To assist the commissioners and others, there is actually a description of how the network pieces fit together attached to the back of our presentation.

2128 Plutôt que de mettre l'accent sur les technologies, aussi excitantes qu'elles soient, nous souhaitons plutôt vous parler de notre expérience en tant que nouveaux venus dans le marché local des services téléphoniques.

2129 Comme nouveau venu dans le monde du sans fil, Microcell a choisi de substituer une nouvelle technologie à celle de paires de cuivre enfin utilisés pour dispenser de bons vieux services téléphoniques.

2130 Nous aborderons trois points au cours de la période qui nous est allouée aujourd'hui :

2131 - Le premier point, nous expliquerons pourquoi nous supportons les positions préliminaires du Conseil telles que définies à l'Avis public 2004-2;

2132 - Deuxième point, nous vous ferons part de quelques délais auxquels nous avons été confrontés en tant qu'exploitant de services sans fil dans le cadre de notre conversion au statut de CLEC situation qui, espérons-nous, ne se répétera pas avec l'émergence des technologies utilisant le VoIP;

2133 - Troisième point, nous allons examiner quelques balises qui, d'après nous, pourraient aider le Conseil à garantir que le cadre réglementaire mènera à une véritable concurrence locale.

2134 To be clear, we believe that the Commission's regulatory focus should not be on new and emerging technologies. Rather, the focus must remain on the here and now: on checking dominance in the local voice services market; on ensuring that consumers benefit from competition in the local voice services market; and on developing and enforcing a regulatory framework that allows this to happen.

2135 In this regard we can do no better than to cite Vice-Chairperson Wylie from a speech earlier this year. Madam Wylie was reviewing the principles the Commission applies when dealing with transitions in the telecom industry, in particular the emergence of new technologies such as VoIP. She underscored the Commission's first principle, stating: "We focus on the industry as it exists today. We regulate what is, not what might be."

2136 This simple principle should become, we believe, a mantra for the Commission as you review the potential and role for VoIP technology.

2137 To date, the record of this proceeding is full of promise, hope and hyperbole. To be frank, it is also full of inconsistencies, with parties staking out positions all over the map. In some ways this shouldn't be surprising. It is, in part, a reflection of the still early days for VoIP technology, although it may appear as if we are witnessing the proverbial blind man describing an elephant.

2138 There appears to be no agreed upon definition of VoIP, nor to what it corresponds. As an example, the definitions provided by some parties in their submissions focus on or suggest that VoIP is access independent, that it is a retail Internet application, and that it is already or should be forborne as such. While VoIP can be access independent, it is not necessarily so.

2139 And while VoIP may indeed ultimately deliver attractive choices for consumers in the local voice market, it ain't there yet.

2140 To recall the mantra, the CRTC must focus its regulatory efforts on the market as it exists today. The local voice market is one where the incumbent phone companies, the ILECs, possess a very real stranglehold, not a hypothetical one.

2141 We stated in our written submissions that Microcell generally supports the Commission's preliminary views set out in Public Notice 2004-2. We appreciate the emphasis given to technology neutrality as it applies to entry rules and forbearance.

2142 The Commission expressed the view that the characteristics of VoIP services are functionally the same as those of circuit-switched voice telecommunications services and that VoIP services should be subject to the existing regulatory framework, including the Commission's forbearance determinations.

2143 We agree with this. VoIP services are basically local telephone services provided over a new technology platform. So if we are looking at the regulation -- or not -- of VoIP, the Commission's local competition policy framework has already anticipated the emergence of new and innovative technology platforms to deliver local voice services. Indeed, as Microcell has often pointed out, technology neutrality was enshrined as one of the founding principles of the CRTC's local decision 97-8.

2144 Considered from this perspective, one can see that the arrival of VoIP services does not undermine the Commission's established local competition policy framework, nor does it call for the creation of a new VoIP-specific framework.

2145 Going further, an Incumbent Local Exchange Carrier's dominance in the local services market is a question of market fact. It does not disappear simply because the ILEC chooses to deploy a new underlying local service technology.

2146 VoIP is a new technology that can be adopted by the ILECs, allowing them to provide what may be a more efficient means to deliver local voice services to consumers. Whether it is disruptive remains to be seen.

2147 Again, to use the phraseology of Clay Christensen -- Mr. Christensen has been quoted a lot, but he unfortunately is not here -- Mr. Christensen developed the concept -- VoIP could actually end up as more of a sustaining technology than a disruptive one for the ILECs. That is, while radical in nature, it will serve to improve -- these are Mr. Christensen's benchmarks for sustaining versus disruptive -- it will serve to improve product performance for mainstream customers of ILECs in major markets. VoIP technology will impact telecommunications service providers differently than, for example, manufacturers of circuit-switching equipment.

2148 From this perspective -- disruptive/sustaining -- in many ways it is in the eye of the beholder. It is also where you are positioned in respect of the new technology.

2149 The introduction of VoIP can be compared to the introduction of digital switching by Nortel in the 1970s -- the local voice services ultimately delivered to consumers did not change, but the means of delivering these took a quantum leap forward in terms of quality and efficiencies. Such is the nature of new technologies, be they ultimately defined as sustaining or disruptive.

2150 Vice-Chairman Colville took us through a longer history than I gave there, but there has been no shortage of development in new technologies to deliver what is the plain old voice service.

2151 In light of this, we agree with the Commission's view that ILECs must remain regulated in the delivery of local services in their home territories until such time as they no longer possess market power.

2152 Microcell is particularly concerned about the potential for abuse of dominance and anti-competitive conduct by ILECs in the local voice market, irrespective of the technology used to serve that market, be it circuit-switched wireline, wireless or IP-based.

2153 The assessment of ILEC market power must not just consider ILEC market share in the local voice market, but must also consider whether sufficient protections are in place to prevent the ILEC from thwarting competitive entry, for example, through anti-competitive restrictions and access to essential facilities.

2154 Microcell believes that the ILECs must be required to provide the services necessary for the offering of competitive VoIP services to others on an unbundled and non-discriminatory basis.

2155 Given that the cable companies, and indeed anyone other than the ILECs, do not currently hold a dominant position in the local voice services market, we do not believe that the same degree of regulatory oversight is necessary for them as is required on the ILECs.

2156 Going further, since VoIP is a local voice service, Microcell believes that the ILECs should be subject to the same win-back and promotion rules for IP-based telephony services as they are for circuit-switched services.

2157 Le Conseil doit s'assurer de ne pas décider trop rapidement de s'abstenir de réglementer les activités des ILEC dans le marché de la téléphonie locale.

2158 Si on prend, par exemple, le marché de l'interurbain. Depuis la Décision 97-19, dans laquelle le Conseil choisissait ou choisit plutôt de s'abstenir de réglementer, en fait, les ILEC, les ILEC ont effectivement accru leur part de marché et de grands écarts existent toujours entre les régions aujourd'hui, contrairement à ce à quoi on s'attendait à l'époque.

2159 On pourrait avancer que la décision de s'abstenir de réglementer le marché de l'interurbain, malgré les accolades d'hier, a été prise trop hâtivement, trop vite, même si, comme le soulignait le CRTC à l'époque, les barrières à l'entrée étaient relativement faibles.

2160 Enfin, en ce qui a trait à ce premier point, Microcell appuie en principe les opinions préliminaires du Conseil à l'égard de l'imposition de certaines obligations sociales, telles le 9-1-1, le MRS et les mesures de protection de la confidentialité, aux fournisseurs de service VoIP.

2161 Nous considérons comme particulièrement sensée l'opinion du Conseil, qui soutient que tous les fournisseurs de service VoIP devraient offrir ces services le plus rapidement possible.

2162 Cette référence au sens pratique à ce qui est possible à l'égard des obligations sociales est à la fois convenable et conforme au principe de la neutralité de la technologie.

2163 Le Conseil fait preuve d'un bon jugement quand il fait remarquer que les mécanismes mis en place pour assurer l'exécution des obligations sociales, comme le E9-1-1, ont été élaborés pour une technologie statique à commutation de circuits et vont demander du travail pour l'adaptation ou l'adaptation des technologies VoIP.

2164 Traiter des technologies selon le principe de la neutralité ne revient pas à les traiter de la même façon.

2165 Une plateforme VoIP ne permet tout simplement pas l'exécution de toutes les obligations sociales de la même façon qu'une plateforme de téléphonie par commutation de circuits.

2166 À cet égard, nous sommes d'avis qu'il serait sage que les utilisateurs des services locaux VoIP soient mis au courant, par exemple, de la disponibilité et des limites du service 9-1-1.

2167 Moving to the next point, despite the Commission's preliminary views on VoIP and the technology-neutral policy framework currently in place, opportunities will arise for incumbent interests to delay the entry of competitive local VoIP providers.

2168 We know this from our own experience in the wireless PCS industry. In late-1966, we launched our Fido PCS service, with an approach meant to deliver consumers clear, consistent and measurable value. Our goal was, and still is, to go after the mass market, to make Fido the preferred means of communications for consumers, with attractive wireless products and services and predictable, affordable pricing.

2169 Our regulatory approach was developed to be in line with our approach to market. We became the first company in Canada to seek CLEC status using a mobile wireless access technology. Once achieved, CLEC status allowed us to become a more efficient and a more cost-effective operator. We interconnect with ILECs via bill and keep trunking architecture and we offer consumers' benefits, such as number portability with the ILECs.

2170 Malgré le fait que la décision 97-8 tienne compte de la neutralité de la technologie, nous ne sommes pas devenus un CLEC facilement.

2171 Le passage du réseau de Microcell au statut de CLEC a été retardé par une série de débats interminables, notamment au sein du CISC, portant sur de prétendus problèmes que pourrait soulever l'attribution du statut de CLEC à l'exploitant d'une compagnie de sans fil comme nous.

2172 Aucun problème d'importance n'est survenu, mais le retard attribuable aux débats se chiffrait en années.

2173 Les conclusions à tirer sont claires. Afin de ne pas retarder la mise en oeuvre du VoIP au profit des consommateurs, il faut limiter les accusations vagues et sans fondement portant sur les effets nuisibles des nouvelles technologies, au risque de voir ces accusations ralentir énormément le processus d'innovation et limiter le choix offert aux consommateurs.

2174 The final point, we will quickly offer some proposals meant to facilitate the introduction of competitive VoIP services into the local market in an environment that encourages innovation.

2175 One, Canadian carriers employing VoIP technology must be eligible to operate a CLEC. This should be self-evident, but is, nevertheless, worth specifying for the record.

2176 Two, all ILECs must be mandated to file VoIP access service tariffs. There already exists, and will likely continue to exist, a category of VoIP service providers ineligible to become CLECs, for example, because they are not Canadian carriers. We understand that they are hold the status of reseller.

2177 These VoIP -based resellers require telephone numbers and a suite of interconnection service in order to exchange traffic with the PSTN. While CLEC sources of supply for telephone numbers and PSTN interconnection services exist in some places of Canada, the only source of supply for these services in many places for the foreseeable future will be the ILEC.

2178 To ensure that all Canadians have the possibility to benefit from new and innovative VoIP services, Microcell proposes that all ILECs be required to file VoIP access service tariffs with the Commission on terms that are equitable and cost-effective for VoIP providers.

2179 Again, the various components of ILEC VoIP access tariffs must be available on an unbundled basis and those services provided by ILECs that are necessary for VoIP services to be offered, such as telephone numbers and 9-1-1 services, should be categorized and regulated as Category 1 competitor services. And when we use Category 1, it's the way the Commission uses it, not the way some of the intervenors use it. That's, of course, at cost, with certain mark-ups allowed.

2180 CLECs must be allowed to innovate in the provision of VoIP access services is the third point, is the third guidepost. The Commission should not dictate the interconnection arrangements that CLECs offer to resale VoIP customers.

2181 Four, the Commission must facilitate direct IP-to-IP interconnection arrangements. This is a bit forward-looking, but there does appear to be an implicit acceptance that VoIP providers, directly or through third parties, will be required to convert their IP-based traffic to circuit-switched traffic in order to interconnect with the rest of the PSTN.

2182 This may be an offshoot of the circuit-switched Legacy, the PSTN, but over time it risks becoming a significant source of inefficiency for VoIP providers, and for the PSTN, as a whole.

2183 Microcell believes that the Commission should begin considering how to facilitate direct IP-to-IP interconnection arrangements. The Commission should establish in advance criteria under which ILECs are required to offer direct IP-to-IP interconnection to VoIP -based carriers and resellers.

2184 Clearly, an environment where ILECs have transitioned to a substantial share of their own voice traffic to VoIP platforms, it makes no economic or engineering sense for parties to convert this traffic to circuit-switched format before exchanging it with each other.

2185 Finally, parties must act constructively to permit VoIP providers to fulfil their social obligations. It is important that the Commission and that Commission staff act vigilantly to ensure that all parties act constructively to permit VoIP providers to fulfil their social obligations. No VoIP provider should have to find itself in the position of being mandated to fulfil a social obligation while the means to fulfil that obligation are withheld by a third party.

2186 Once again, Microcell speaks from experience. In some locations, and most notably this is in Saskatchewan, as well as in the City of Edmonton, Microcell is still impeded from operating as a CLEC due to the ILEC's refusal to make available wireless E-9-1-1 services.

2187 VoIP providers should not be presented with a similar squeeze. Never should the incumbent operator be able to play the role of gatekeeper in determining how effective or efficient a competitor will be.

2188 Ici, en bref, nous appuyons les opinions préliminaires du Conseil telles qu'il les a avancées dans l'Avis 2004-2.

2189 Il faut éviter tout délai imposé par la réglementation et l'utilisation des technologies conférentielles et alternatives.

2190 On doit permettre l'émergence et le développement des services VoIP afin de permettre aux consommateurs de bénéficier pleinement de ces nouvelles technologies.

2191 Et permettez-nous de rappeler nos cinq balises. Un cadre réglementaire approprié ne constitue que la première étape du processus dans lequel le Conseil assurera enfin un contexte local concurrentiel.

2192 Microcell believes the Commission has done an effective job recognizing that the arrival of VoIP services is readily accommodated within the existing technology-neutral, local competition policy framework. Remember the mantra: intriguing as new and emerging technologies are, the CRTC must focus on the market as it exists today.

2193 So we thank the Commission for having allowed us the opportunity to present before you today and we would be pleased to answer any questions you may have as best as we are able.

2194 THE CHAIRPERSON: Thank you.

2195 Commissioner Noël.

2196 CONSEILLÈRE NOËL : Alors, je pense que vous êtes devenus des spécialistes de la 417.

--- Rires / Laughter

2197 Bonjour.

2198 M. Proctor, si je me rappelle bien, vous êtes vous-même originaire de la Saskatchewan?

2199 M. PROCTOR : Oui. C'est bien cela.

2200 CONSEILLÈRE NOËL : La contrée dite choisie des dieux.

2201 M. PROCTOR : C'est cela. Le pays des dieux.

2202 CONSEILLÈRE NOËL : Vous n'avez pas réussi à vous négocier d'entente avec SaskTel. Non. Mon dieu. Il faut croire que vous avez dû faire quelque chose qui n'est pas correct dans votre vie.

2203 M. PROCTOR : Non, non.

2204 On a bien vécu.

--- Rires / Laughter

2205 CONSEILLÈRE NOËL : Moi, j'aimerais savoir. Vous nous parlez d'ESLT. On va parler de ILEC et de CLEC parce que tout le monde comprend.

2206 Vous ne voyez pas les câblo comme étant un concurrent important potentiel et qui pourrait agir comme * gate keeper +.

2207 Est-ce que vous pouvez élaborer là-dessus ? Parce qu'ils ont l'accès haute vitesse, qui est absolument nécessaire, et ils le fournissent, alors, ce qu'il est absolument nécessaire pour faire fonctionner la téléphonie sur IP, sur protocole Internet.

2208 Est-ce que vous pouvez nous dire pourquoi vous ne les voyez pas dans un rôle de * gate keeper + comme vous semblez voir les compagnies de téléphone titulaires?

2209 M. PROCTOR : Oui.

2210 C'est sûr qu'il y a un potentiel pour les compagnies de câble dans le marché de VoIP, mais le problème qui confronte le Conseil aujourd'hui, ce n'est pas de réglementer le potentiel, c'est de réglementer ce qui existe aujourd'hui.

2211 Quand on regarde le marché local, c'est dominé, en fait, presqu'exclusivement tenu par les compagnies de téléphone.

2212 Le fait que l'accès Internet à haute vitesse va faciliter, en fait, le VoIP parce que, évidemment, ce peut être utilisé avec un d'ILEC aussi, ne veut pas dire qu'il faut réglementer les fournisseurs alternatifs d'accès Internet à haute vitesse tels cela.

2213 Ce que nous voyons en fait avec les DSL, enfin le service Internet à haute vitesse offert par les compagnies de téléphone aujourd'hui, il y a même des restrictions d'acheter de * dry copper + qui permet à une compagnie complètement indépendante d'une compagnie de téléphone d'offrir le VoIP et disons le service Internet à haute vitesse via, en fait, le cuivre des compagnies de téléphone.

2214 Malgré toutes les propositions qui ont été avancées à date par certains des intervenants en disant qu'il faut absolument réglementer les compagnies de câble, je me demande si ces mêmes gens ne seraient pas beaucoup plus contents si, en fait, il y avait un accès réglementé et obligé au * dry copper + par les compagnies de téléphone.

2215 Encore, pour revenir au mantra, comme on dit, il faut réglementer ce qui existe aujourd'hui, pas ce qu'il pourrait exister.

2216 CONSEILLÈRE NOËL : Par contre, les entreprises de câble, en tous cas certaines, ont annoncé qu'elles mettraient leur produit en marché d'ici quelques mois. On parle de Cogeco. On parle de Vidéotron. On parle de Shaw Cable.

2217 On ne parle pas d'années, on parle quatre, cinq, six mois d'ici.

2218 M. PROCTOR : Oui.

2219 Mais aussi, on parle à propos de quelque chose au futur, même si on regarde les parties en fait de marché qui pourraient être prises par les compagnies de câble, quand on regarde certaines des analyses, on peut parler de Merill Lynch qui parlait à propos de VoIP en totalité, c'est d'ici cinq ans, cela prendrait 20 à 25 pour cent de * residential mass +. Ce n'est pas des chiffres énormes.

2220 CONSEILLÈRE NOËL : Oui.

2221 M. PROCTOR : Goldman Facts(ph), je crois, cet été aussi, a projeté que d'ici quelques années, les compagnies de câble prendraient un marché de 10 pour cent du * residential mass +. Ce n'est pas des chiffres énormes.

2222 CONSEILLÈRE NOËL : Mais 20 à 25 pour cent, 10 pour cent, c'est quand même beaucoup plus que ce qu'on a connu comme érosion du marché résidentiel local chez les compagnies de téléphone titulaires à date.

2223 M. PROCTOR : Oui. Mais depuis 1997, on a déréglementé le marché local.

--- Rires / Laughter

2224 Enfin, on commence à voir la possibilité -- pas la réalité -- mais la possibilité d'une émergence d'une alternative.

2225 CONSEILLÈRE NOËL : Qu'est-ce que vous pensez de la position de TELUS ? TELUS nous a expliqué que l'accès était complètement découplé de la fourniture du service. Pourriez-vous commenter un peu là-dessus ?

2226 M. PROCTOR : Oui. On a discuté pas mal depuis quelques semaines là-dessus.

--- Rires / Laughter

2227 CONSEILLÈRE NOËL : Je vous ai vu (hors champ...), alors vous n'étiez pas encore reparti pour Montréal.

2228 M. PROCTOR : Malgré nos mots d'introduction ce matin, ce n'est pas possible, en fait de parler à propos de * access independent +.

2229 I think we should move this one to English. I apologize for that.

2230 MEMBER NOËL: Okay.

2231 MR. PROCTOR: VoIP service is not access independent. You have to have an access technology to allow VoIP service to be delivered. Much of what, in fact, the -- and, again, if I'm understanding the position of a Primus, of a Vonage, from yesterday, they are asking for a certain guaranteed quality of service. If you want a certain guaranteed quality of service, you are having depending on an access technology, you are having to make arrangements with that access provider. And again, if I understood them properly, what they are asking for is no unjust treatment with respect to that access.

2232 In terms of the TELUS proposal of access independent and access dependent, let's focus on the market, the local voice market. Is it delivering local voice and who is it being delivered by?

2233 CONSEILLÈRE NOËL : Maintenant, on va passer à des questions sociales -- où est-ce que je les ai mises; elles sont ici --, Monsieur Proctor.

2234 Vous nous dites, dans votre présentation de ce matin, dans votre mémoire écrit que, d'après vous, les fournisseurs de services de communication vocale sur protocole Internet -- pour utiliser la vraie appellation en français, on va continuer de services de voix sur IP, d'accord -- devraient contribuer au financement des ressources d'urgence 9-1-1 et des centres d'urgence 9-1-1, soit directement ou indirectement par le biais d'un frais ou d'une charge qui serait recouvrée par --

2235 Est-ce que, d'après vous, cela devrait être financé par une charge qui est recouvrée par le fournisseur de service local ?

2236 M. PROCTOR : Malheureusement -- et je pense qu'on a répondu dans les interrog. là-dessus -- c'est que c'est un peu préliminaire pour nous de répondre pleinement parce que c'est toujours trop tôt pour voir quelles sont les solutions 9-1-1 qui vont être adoptées d'abord et où sont les frais reliés à adopter ce service ? C'est certain qu'on va tenir notre bout.

2237 CONSEILLÈRE NOËL : Àlors, vous n'avez pas d'opinion à savoir si cela devrait être collecté par l'entreprise de téléphonie locale ou cela devrait être chargé d'une autre manière.

2238 M. PROCTOR : Dans l'hypothèse -- c'est juste une hypothèse -- qu'il y ait une obligation pour les fournisseurs de services de contribuer à un service 9-1-1 via le VoIP, ce qu'on avait dit dans les interrog., c'est que, étant donné que le service est déjà été déterminé, le service VoIP par des concurrents va être déréglementé au point de vue de prix de service.

2239 Pour le consommateur, on ne veut pas voir une obligation de dire chaque mois c'est 25 sous qui vont être enlevés. Ce doit être pour les fournisseurs d'absorber cela dans le service mensuel ou dans d'autres façons de contribuer ou de facturer des clients. Disons que c'est * prepaid +.

2240 C'est une façon prépayée pour offrir le service VoIP. Cela devient compliqué de mettre une charge de 25 sous par mois, par exemple, de contribuer.

2241 Hors, ceci étant dit, c'est certain que --

2242 CONSEILLÈRE NOËL : On revient à une taxe cachée --

2243 M. PROCTOR : Hein ? Oui. Mais, ce n'est pas caché, c'est absorbé. C'est * all included +, you know. Tout compris

2244 CONSEILLÈRE NOËL : Est-ce que vous êtes d'accord avec le principe selon lequel les fournisseurs de service de voix sur IP devraient être immédiatement tenus de se conformer aux obligations réglementaire en matière sociale, si c'est techniquement possible de le faire ?

2245 MR. PROCTOR : Techniquement possible devient une barrière énorme. Cela, c'est une chose qu'on a vécue comme CLEC sans fil.

2246 Malheureusement, dans les travaux de CISC, on a été confronté avec des théories de ce qui était techniquement possible, malgré que c'était, économiquement et au niveau de tous les autres sens, pas pratique, le fait que les gens prononçaient des choses qui étaient techniquement possibles, on a commencé à entrer dans des débats interminables.

2247 Alors, il faut ajouter le concept de pratique, et pratique, cela devient quelque chose qui est achevable dans un délai raisonnable et qui va avoir un coût relié au bénéfice qui est, en fait, pratique.

2248 Parce qu'il ne faut jamais oublier que, en autant que c'est quelque chose pour le bénéfice du consommateur, si le consommateur doit payer cinq, six, sept fois plus cher pour le service, on a perdu le bénéfice original.

2249 CONSEILLÈRE NOËL : Est-ce que vous avez une idée d'une date butoir ? Est-ce que vous voyez un échéancier particulier ?

2250 M. PROCTOR : Pour les services sociaux ?

2251 CONSEILLÈRE NOËL : Pour que les services sociaux soient obligatoirement fournis par les fournisseurs de voix sur IP ?

2252 M. PROCTOR : Pour nous, étant donné toutes les avances qui s'actualisent, on peut voir à l'intérieur de 12 à 24 mois, et cela est vraiment un estimé de notre part. Mais, d'ici 12 à 24 mois, on pourra voir que pas mal des questions seront réglées.

2253 Si cela veut dire que les services comme tels sont prêts à être implantés, cela est une autre chose.

2254 S'il est possible de prendre une période de temps pour trouver des solutions et puis de prendre un autre période de temps pour les implanter.

2255 Ce que nous ne voulons pas, c'est d'avoir en fait des * timeframe + qui sont --

2256 Disons que c'est, je ne sais pas, le Conseil va déterminer que d'ici 36 mois toutes les obligations X, Y, Z doivent être rencontrées. Sinon, les services VoIP ne sont plus --

2257 CONSEILLÈRE NOËL : Autorisés --

2258 M. PROCTOR : Plus autorisés de faire n'importe quoi.

2259 Cela est un désastre parce qu'en fait ce que vous faites là, vous créez un scénario, une occasion, pour certains qui ont un intérêt de retarder l'introduction du service VoIP dans le marché, de retarder le processus, et puis Bang! de stopper tout.

2260 CONSEILLÈRE NOËL : Qu'est-ce que vous pensez de la position de l'Association des consommateurs de Colombie-Britannique qui recommande de ne pas autoriser les services de voix sur IP tant et aussi longtemps que toutes et chacune de ces obligations-là ne soient pas remplies ?

2261 Je vous parle de MRS (le système de relais de messages), de la protection de la vie privée, et cetera.

2262 M. PROCTOR : Oui. En fait, une partie de la discussion d'hier, c'était, est-ce que la société aurait été mieux si on n'avait le service cellulaire, le service sans fil, si on devait attendre l'introduction du service sans fil avant d'avoir rencontré toutes ces obligations.

2263 Un problème avec certaines de ces obligations, c'est que cela évolue avec le temps. Il est possible, comme je crois les intervenants de Vonage avaient dit hier, il est possible qu'on va développer des solutions pour 9-1-1 qui sont plus attirantes qu'on trouve aujourd'hui.

2264 Mais, sans avoir la possibilité d'utiliser ces technologies, cela va être extrêmement difficile d'introduire des services sociaux, disons, pour raffiner ces services sociaux d'une manière qui est bénéfique aux consommateurs.

2265 Comme a dit M. Martin l'autre jour, il faut mettre le * horse before the cart + et puis aller.

2266 Sans avoir ces services, on ne peut pas en fait développer les services sociaux qui y sont attachés.

2267 CONSEILLÈRE NOËL : Alors, votre opinion est la même, que ce soit le 9-1-1, le 9-1-1 amélioré --

2268 M. PROCTOR : Absolument.

2269 CONSEILLÈRE NOËL : -- le service de relais --

2270 M. PROCTOR : Absolument.

2271 CONSEILLÈRE NOËL : -- la protection de la vie privée.

2272 M. PROCTOR : Ceci étant dit, c'est certain que c'est pour le Conseil de garder un bon coup d'oeil non seulement dans le marché canadien, mais dans d'autres marchés. Surtout le marché américain, étant donné --

2273 CONSEILLÈRE NOËL : La proximité.

2274 M. PROCTOR : Pas la proximité, mais plus le fait que les standards sont essentiellement les mêmes --

2275 MADAME NOËL : L'architecture.

2276 M. PROCTOR : La technologie est la même. L'architecture est toute la même.

2277 Quand on commence à voir le développement de services -- soit 9-1-1, soit faites une chose quand, comment on dit aux États-Unis, CALIA, c'est au point de vue * de lawful intercept +, de l'interception des appels -- c'est certain que le Conseil va avoir un * benchmark +, va avoir un très bon point de référence, pour déterminer si les choses avancent assez rapidement ou non au Canada.

2278 CONSEILLÈRE NOËL : Moi, ce sont toutes mes questions.

2279 Je vous remercie, Monsieur le Président.

2280 THE CHAIR: Counsel.

2281 MS MURPHY: Thank you, Mr. Chairman. Good morning. I just would like to follow-up on a few comments that you have made in your presentation this morning which, of course, reflect your submissions as well.

2282 You have referred to the submissions of parties who have suggested that VoIP is access independent and that it is a retail internet application. Then you went on to say that while VoIP can be access independent, it is not necessarily so. I wonder if you can comment on the other aspect of the submissions of parties that you have referred to with regard to whether VoIP services that are access independent are retail internet services?

2283 MR. PROCTOR: I think, you know, despite what we said this morning as we were responding to the first question from Commission Noël, for these services to be delivered properly there is going to be a dependence on the access in terms of, you know, the quality of the voice packet delivery. It is difficult for us to consider a quality VoIP product without a quality delivery of the packets, certainly there might be a market for that. So, there would still be retail internet services in that sense. I'm not sure if that is answering your question or not.

2284 MS ANNE-MARIE MURPHY: I'm just trying to understand your position, because you are suggesting that the Commission should regulate the tariffs for VoIP services provided by ILECs and that you are suggesting in your submission that they are basic local telephone services. Given this, you are suggesting that they are basic local telephone services. I was just asking you to comment on the position of other parties which seems to be taking different a position that they are a retail internet service.

2285 MR. PROCTOR: That helps actually, yes. No, we want to look at it as the voice market. A voice service is a voice service no matter how it is delivered and I guess we are going to have to take a look at, again with the exception of pier to pier which has already been ruled on I guess. But in terms of crossing the PSTN using local phone numbers and so forth, as the Commission has determined, we would believe independent access to go back to that vernacular if it is being delivered by the ILEC in the ILECs' home market, it is something to be regulated.

2286 MS ANNE-MARIE MURPHY: Thank you. You have also suggested that ILECs be regulated until they no longer possess market power and you referred to the potential for abuse of dominance and anti-competitive conduct by ILECs. I was wondering if you could be more specific in terms of how the ILECs would use market power and, in particular, with respect to the so-called access independent VoIP services?

2287 MR. PROCTOR: Yes, we had a bit of a discussion on that one on the way in again this morning following yesterday's discussions with some of the panellists.

2288 To give a simple example, and again in theory this shouldn't happen but one never knows, if you were to have an ILEC... again also the ILEC is still dominant in the manner that it has to be regulated in the local voice market. But assuming an ILEC in a certain market were to purchase access services or were to use the access services, if you want, not even to purchase the access services from an alternative broadband provider, and let us say it is off of the NexNet service here, you can see in theory a situation where the ILEC did in fact purchase in bulk those services or simply use the access from another broadband provider to undercut in terms of pricing and so forth other third parties who might also be wanting to use access services or an access independent type service from other broadband providers.

2289 To give a simple example, if you were to have company X using cable company Y's services and cable company Y makes them available at this certain price and either the phone company takes no mark-up on that or, in fact, even undercuts the prices that are available, you could see a lot of mischief caused in an accent wholesale market.

2290 MS ANNE-MARIE MURPHY: Okay, thank you, those are all my questions.

2291 THE CHAIR: To follow-up on that, Mr. Proctor, were you here for Mr. Crandall's exchange with Commissioner Colville? His answer to that was, why would they continue to do that overtime? He referred to what would be the source of the subsidy that would continue to--

2292 MR. PROCTOR: The source of the subsidy--

2293 THE CHAIR: --that would continue to cause them to price... I suppose you are suggesting below cost, are you?

2294 MR. PROCTOR: Or even matching the cost, taking no mark-up at all, sir.

2295 THE CHAIR: Or at cost, okay. What would sustain them in a market that, he was saying, has a very low barrier to entry?

2296 MR. PROCTOR: Simon Le Bon, who is a rock star, was once asked why rock stars marry movie stars and models? And he said, "Because they can?" And I think in this case, again, it is an emerging market to the extent that a number of the emerging players are not yet established, they don't have the brand, they don't have the confidence of consumers. You can see, in fact, the possibility of this happening.

2297 Certainly, to the extent that a phone company... an ILEC wants to get into that market, wants to either be access independent using a third party's access, let them do it. But we don't see why over the next little while that shouldn't be regulated, given that you are looking at the voice market if, in fact, six, 12, 18, 24, 36 months down the road you find that there is no threat of an abuse, of an undercutting of pricing, of closing of the markets to the newcomers because of those types of shenanigans... I think we can call them shenanigans, economists would call it other things. At that point in time, the Commission can revisit it.

2298 We just believe it is just too early right now, given the market shares that the ILECs have in the local voice market to allow that type of possibility. And again, in theory it is not supposed to happen and in practice a lot of things happen.

2299 THE CHAIR: As I understand the TELUS position, it is basically not to dispute that it is part of the voice market, but to really carve out a sub-market, access independent services, and say if you look at the factors at play in that market what are the evil that you are trying to remedy by continuing to regulate.

2300 MR. PROCTOR: That is right. And again, what we are trying to suggest to you is that there are possibilities. I mean, we thought of that in the last--

2301 THE CHAIR: Possibilities, and I understand that, but do you have any evidence from this or other jurisdictions of behaviour that you would care to suggest, you know, as more evidentiary based than possibility?

2302 MR. PROCTOR: No, at this point no.

2303 THE CHAIR: Okay.

2304 MR. PROCTOR: But, if we do find some we will certainly present it to you.

2305 THE CHAIR: Thank you. I have one further question and that is in respect of your point two, which is on page 13, where you suggest that ILECs be required to file voice access service tariffs with the Commission on terms that are equitable and cost effective for VoIP providers. I guess again I'm looking at is there a problem currently? I don't think we heard from those in the market like Primus and Vonage, that there wasn't a problem. Do you see a problem that your suggestion again would address?

2306 MR. PROCTOR: Yes. On June 8th, I believe, we gave fairly detailed comments on Bell's proposed... this tariff, the voice interconnection service provider tariff. Without going through that in gory detail, we gave some very specific comments to the Commission on how that tariff could be fairly significantly improved. If you care for me to run through those I can do that.

2307 THE CHAIR: I don't think... if you have filed that, that is fine. But the proposal here was a more general one, I thought, relating to the VoIP market generally.

2308 MR. PROCTER: Yes. Again, speaking in general terms, there is two ways to look at the VIS tariffs. First of all, there is going to be a number of markets where the only possible provider or, for example, local phone numbers, local interconnection to the PSTM will be via the ILEC. So, for that reality, and it's going to be the reality in the vast majority of markets, and I say the vast majority of the population, the vast majority of markets in Canada for the foreeseable future, there is a need for this tariff. Then, we get down to the terms of those VIS tariffs and that's where the nature of our intervention was, the pricing of it and the fact that it should be available on a bundle basis. We say that because I know that Mr. Greeves who really has some questions as to why we're asking for that. Well, in some markets, if all you can do is buy the VIS tariff as a whole, when in fact what you're doing is preventing the VIS provider from finding the best means, the most efficient means, most economical means of providing a complete package for consumers. So, in scenarios where in markets where there might be an LEC providing some alternatives, be it interconnection, be it phone numbers, be it MRS service, certainly the VIS provider should be able to pick and choose as to which one of those products they can take from certain providers.

2309 THE CHAIRPERSON: Thank you. Commissioner Wylie.

2310 COMMISSAIRE WYLIE: Pour vous, monsieur Procter, l'émergence d'un régime qui permettrait de ne plus avoir de tarif pour les ESLT, dépend sur une question, à savoir si les ESLT n'exhibent plus de domination dans la fourniture du service local, que ce soit par commutation de circuit ou par voie de l'internet et non une question d'établir qu'ils n'ont pas de dominance dans la prestation de service VoIP?

2311 MR. PROCTER: Oui.

2312 COMMISSAIRE WYLIE: Alors, pour vous, c'est le service local. Alors, même si dans le futur il n'y avait pas de dominance dans la prestation de service VoIP, s'ils continuent à avoir la dominance dans le filaire et que les deux ensemble leur donnent la dominance, il n'est pas question de ne pas exiger de tarif. Parce que... c'est fort possible que nous avons discuté pendant plusieurs jours des caractéristiques qui sont différentes, que le service n'est peut-être pas équivalent. Vous n'êtes peut-être pas d'accord mais, par exemple, à la page 29 des commentaires des compagnies, on établit exactement les caractéristiques différentes et la difficulté d'avoir une vraie équivalence, ce qui veut dire que même si dans la prestation de service VoIP, les ESLT ne sont pas dominants puis s'il n'y a pas de substitution puis que les gens gardent quand même leur filaire, ils seront dominants parce que les deux ensemble leur donnent la dominance.

2313 M. PROCTER: Oui.

2314 COMMISSAIRE WYLIE: C'est ça votre position?

2315 M. PROCTER: Oui, c'est carrément ça la position. Malheureusement, et je ne pense pas que le conflit va se régler avec ceci, mais nous croyons que, sans doute, il faut avoir une autre... pas nécessairement une audience, mais un autre processus pour déterminer quels sont les points de référence, quels sont les benchmarks pour vraiment déterminer quand on peut commencer déréglementer certains marchés dans le service local. Je sais que c'est un peu frustrant parce que c'est une partie de cette audience, mais je pense que cette audience est, d'une certaine manière, plus une étude sur le potentiel de VoIP et pas nécessairement un benchmark ou des points de référence pour quand est-ce qu'on va déréglementer le marché régional pour ILEC dans le service du VoIP traditionnel.

2316 COMMISSAIRE WYLIE: Mais cette position est basée sur le fait que vous y trouvez une équivalence parce que des...

2317 M. PROCTER: Oui.

2318 COMMISSAIRE WYLIE: C'est justement les arguments que nous entendons que ce n'est pas équivalent. Donc c'est le marché VoIP seulement qu'il faut examiner et d'essayer de déterminer. Dune façon futuristique, on parle de hyperbole mais tout le monde des deux côtés de la médaille en ont.

2319 M. PROCTER: Oui.

2320 COMMISSAIRE WYLIE: Alors, c'est très important pour nous, il me semble, d'avoir de l'aide à déterminer jusqu'à quel point c'est équivalent ou ça ne l'est pas.

2321 M. PROCTER: Et pour la maintenance, je dirais que c'est l'équivalent.

2322 COMMISSAIRE WYLIE: C'est l'équivalent?

2323 M. PROCTER: Comme je viens de le dire avec la question du président, c'est qu'il est possible que dans 18 à 36 mois on commence à trouver qu'il y a quelque chose qui était access independent, par exemple. En fait, c'est peut-être on a été trop vite pour dire ou, enfin, un peu trop sévère au moment de cette audience. Mais, tu sais, il vaut mieux être sévère maintenant étant donné que la réalité reste un marché local qui est complètement dominé par les ILEC.

2324 COMMISSAIRE WYLIE: Tant et autant que le marché local est votre point de référence plutôt que le marché élargi.

2325 M. PROCTER: Et tant et autant qu'on a pas encore vu que le VoIP n'est pas quelque chose qui est équivalent ou un substitut. C'est les deux côtés.

2326 COMMISSAIRE WYLIE: Merci.

2327 LE PRÉSIDENT: Merci. Madame la conseillère Cram.

2328 COMMISSIONER CRAM: Mr. Procter, things are good in Saskatchewan, don't worry about it, except for your one small problem. I wanted to talk about the concept and you were talking about the fear, using the market dominance in your discussion with the Chair and I wanted to see if we could find an analogy in present times and then there was a lot of discussion in the initial comment about the offer by Bell of $5 long distance and linking it with other forborne services and I think it was you would get $5 long distance unlimited long distance if you took two of their services, two of their other forborne services? And I guess that sort of centres around the issue that Commissioner Colville was talking about too, as that would be the kind of fear that there would be 50-cent VoIP in addition to. And the Chairman asked if you would have any sort of imperical data on the ability to do that and essentially not be able to recupe at the end. Are you aware of the impact of this $5 long distance offer either on the wireless side or on... Has there been a noticeable impact as a result of that?

2329 MR. PROCTER: None that I could speak to. That doesn't mean there hasn't been, I just can't give you any evidence of that. Certainly there was a lot of excitement when that offer came out. In some ways, it might still be a little early. It's only three of four months that that came out.

2330 COMMISSIONER CRAM: Yes. I think it is.

2331 MR. PROCTER: So, we might have to wait a bit to see the impact, but you are absolutely right. I assume, in response, that question we are talking about other jurisdictions with other VoIP issues or other means of undercutting the market, but clearly, if you're bundling something with a product that can only be taken with one other product it is certainly an incentive to delay or at least to put up a pretty good hurdle for suppliers of another product that just can't match that.

2332 COMMISSIONER CRAM: And there is the distinction between the two that long distance has been around, long distance competition has been around whereas VoIP is a brand new market and also, the other bundle services have been around, like wireless and those things.

2333 Ms Lemay, would you like a comment on that or are you aware of the impact in the market place of that offer?

2334 MS LEMAY: I'm afraid I don't have any specific numbers to give you, but I think the impact, I think, on Bell may not be that significant and because it is being offered only to the customers taking bundles, but it has... these things have an impact on the competitors first and foremost, I think, because they are forced to revise their pricing and adjust their pricing downwards and that has usually been the kind of action and reaction that you can see prior to a big change in a competitive environment and we have seen that.

2335 On the business side, we saw this prior to the show of the competitive services. In the late nineties, we saw repricing of certain new business lines incentive services by Bell. And that's obviously a game that gets played, but I think that's the main impact. But, you know, I have to say there is no hard numbers that I could give you as to the impact of this to date in the market. We might see it, you know, in six months from now and a few months and be able to assess it.

2336 If I might add in terms of potential for bundling of, let's say, you know and access independent and I would say that term a little bit guardedly, but an access independent VoIP service and what you could do as an ILEC is you have mobile, you have long distance and you have access independent. These are foreborne services, you can do very interesting packages with WiFi phones and IP phones and mobile and then totally even riding on somebody else's type access and I think there is lots of possibilities for that. Mind you, it might be very interesting also to the consumer, but it's how you look at it and how you regulate it.

2337 COMMSSIONER CRAM: So, we can only expect to see the impact of that $5 bundle, foreborne bundle, you think, in five or six months?

2338 MS LEMAY: Well, I think in the results, yes, you will see it in a launch of counter, you know, services.

2339 COMMISSIONER CRAM: Yes. And also, in the lower prices from the way other people had to react.

2340 MS LEMAY: Yes, yes. I think on the overall results of Bell, it would be very difficult to, you know, pinpoint every little impact of this on the short term.

2341 MR. PROCTER: You may want to ask some of the other panelists coming behind us too who would have more direct hip than us on that type of an offer.

2342 COMMISSIONER CRAM: Thank you. Thank you, Mr. Chair.

2343 THE CHAIRPERSON: Madame Lemay, your notion about your guard as when you use... you hold your nose when you used the term "access independent". Could you elaborate?

2344 MS LEMAY: Well, I guess... guarded, it may be because I don't particularly like the term of "access independent". If you can have the access, you can provide the service obviously. There was not an access provided. So, I do think that right now you have companies that are, you know, providing the service and they are not paint right for the band width and that's basically why we call it "access independent" because there is no change of money for it. But if, you know, they evolve that service and they wanted to have a certain quality of services we were talking of privatization of package, I doubt this will be provided without any additional fees. It will not become access independent and I think that relates back to some of the questions yesterday about this are they resellers, and I think in that sense then they would lease, you know, and certain quality of service access, it's not any more access or it's not access independent.

2345 THE CHAIRPERSON: I can see what you are saying that the evolution of features may reduce the independence in some way, but conceptually, isn't it as simple as I am providing my service, I'm Vonage or I'm Primus, use whatever broadband access you have, plug it it, in that sense, independent of whatever access you use?

2346 MS LEMAY: Yes. Right now, I think that's the issue of grappling with and that is being done right now and it is as simple as that. Now, eventually, would you see increases, you know, traffic certainly VoIP carries less traffic than in a lot of the data or downloading major files but, eventually I think you will see an impact on the peering agreements and there will be some costs associated with that. So, maybe, you know, as the provider of the underlying facility, you are not that keen on having that riding on your network.

2347 THE CHAIRPERSON: Perhaps in their reply comments, I guess the companies can tell us who proposed that characterization might be able to address that point of how independent perhaps at the get go, but then what happens as the service evolves and how does dependency set in. That's right. Thank you.

2348 Those are our questions. Thank you very much. Madame la secrétaire.

2349 THE SECRETARY: Thank you, Mr. Chairman. I will now call on the Coalition for Competitive Telecommunications Pricing to make its presentation. Good morning, ladies and gentlemen. Please introduce yourself and you have 20 minutes to proceed with your presentation.

PRESENTATION / PRÉSENTATION

2350 M. RUSSELL : Merci, Madame.

2351 Bonne journée à monsieur le Président et aux membres du Conseil.

2352 Je m'appelle Ian Russell et je suis président de la Coalition des prix de télécommunication compétitifs.

2353 Avec moi aujourd'hui sont mes collègues Suzanne Sabourin et M. Gary Bernstein.

2354 Après mes remarques d'ouverture, je ferai la présentation.

2355 Merci.

2356 I would like to begin by describing the Coalition, its mandate and why our members consider the issue of Voice over Internet Protocol, or VoIP, as it is colloquially referred to, to be so important.

2357 The Coalition is comprised of a number of Canadian business, trade and service associations, including the Association of Canadian Acquirers, the Association of Canadian Travel Agencies, the Canadian Depository for Securities Limited, the Canadian Manufacturers and Exporters, the Canadian Newspaper Association, the Insurance Bureau of Canada, the Investment Dealers Association of Canada, the Investments Funds Institute of Canada and the Retail Council of Canada.

2358 Our coalition consists of more than 12,000 corporate entities and organizations, which represent a broad cross-section of Canadian business, users of telecommunication services.

2359 Our members are involved in financial services, manufacturing, exporting, newspaper publishing and travel services and they operate thousands of small- and medium-sized retail business across Canada.

2360 For these companies, telecommunication services have evolved far beyond other utility services, like water or electricity. Efficient, cost-effective and advanced telecommunication services have become a vital input in the operation of a modern business and are among the most critical factors in the success of any business today.

2361 Advanced communications have been integrated with IT systems to completely revolutionize internal back office process, which support order, account, claims processing, inventory control, resource allocation, billing, collection and customer service. These new internal process allow industry to operate faster and at lower cost.

2362 Furthermore, advanced telecommunications have now been integrated directly into the interface with customers. Through the Internet and e-mail, companies can communicate directly at any time and place convenient to the customer. Direct Internet-based communication with customers and suppliers is the new reality, which has been embraced by business and by millions of Canadians and, indeed, transformed Canadian business and the Canadian economy.

2363 I can talk to my own industry sector, the securities industry, as an example of the critical role of telecommunications. Indeed, I would be happy to provide a bird's-eye view of the application of the Internet in our industry in follow-up questions if there would be an interest in that from the commissioners.

2364 Telecommunication services in our industry is the second most important cost component. For companies in the securities industry, like many other sectors of the economy, our companies operate internationally and compete against companies based outside Canada. As a result, we must ensure that we have access to advanced communication service like VoIP at the lowest possible prices so that Canadian business remains efficient and globally competitive.

2365 If regulatory approvals and processes slow down or impede access to new IP services or better prices, then the efficiency and the competitiveness of Canadian business will suffer.

2366 The Coalition for Competitive Telecommunications Pricing was form about a year ago. A number of people in the business community who are close observers of the telecommunications industry and its regulation felt that there was a need for a voice from the business community on telecommunications issues and on the making of telecommunications policy.

2367 Since the demise of the CBTA, no one has been speaking directly to the CRTC on behalf of business telecom users. It was becoming evident that the direction of telecom policy in Canada was beginning to handicap business competitiveness and innovation. So we come before you today as experienced people in the business community in Canada, but certainly not as experts in telecommunications matters.

2368 The Coalition's mandate is to reflect the views of the business community as best we can across its many sectors on telecommunications regulation and policy. The issue that first galvanized business users to form the coalition was the CRTC's proposal last year to establish new floor price rules for the provision of telecommunication services.

2369 In our submissions to the Commission in that proceeding, we explained that intervention in the business marketplace on that matter was not only unnecessary, but would prove to be quite harmful to business users.

2370 As business consumers of telecom service, we regard the Canadian telecommunications marketplace as very competitive in regard to most services, and becoming more competitive every year. As consumers, we can tell you that while regulation may still be necessary in certain aspects of the business, even in a competitive market to address certain selected matters, there is no more effective discipline on service providers than the knowledge that the consumer has a choice and is prepared to exercise it.

2371 With this background, I can turn to the subject of VoIP services and their importance to our members. As major consumers of telecommunication services, the members of the Coalition are very aware of new developments in telecommunications and the adaption of that new technology in our business.

2372 Our members stand ready to implement quickly new telecom services that come to the market which provide greater choice, lower cost and newer functionality that will assist business to operate more efficiently.

2373 Given that telecommunication services and information technology are essential to the operation of every modern business in Canada, our members welcome any technological advancement that is likely to result in benefit to end users.

2374 In this regard, Voice over Internet Protocol is a particularly attractive new service. It is expected to quickly deliver significant efficiency gains, in terms of price, choice and, importantly, features. VoIP is, in our view, another Internet-based application, a service which may be provided by any supplier.

2375 Most members of the Coalition have already implemented high-speed connectivity to enhance their accessibility in communications with customers, employees and suppliers. As I described a moment ago, business will add VoIP to their existing Internet and e-mail interface with customers to provide the customer with a richer interactive experience using a single, integrated Internet platform.

2376 VoIP enables business to provide a human dimension to the interaction with customers. Business and customers can communicate directly, both visually, with video and data, and in real-time voice. Regulation, a part of the integrated IP platform, that is the voice part, in connection with VoIP, but not the rest of it, seems to us to be a rather unworkable formula, as well, at bottom, unnecessary.

2377 Moreover, regulation risks adding significant costs and uncertainty in the marketplace and, indeed, slowing the adaption of IP technology and impeding the competitiveness of Canadian business.

2378 I would also note that once the high-speed access is in place, VoIP permits the user to select from a much wider range of potential providers of integrated voice and data services. Voice services have traditionally become available from only conventional local carriers, long distance carriers and wireless service operators.

2379 The migration from circuit-switched services to IP-based applications running over broadband will enable a number of new service providers to offer services directly to business consumers. Thus, at a minimum, the members of the Coalition anticipate that their businesses will have an increased choice of suppliers. This alone is an important benefit to business customers.

2380 Mr. Chairman, it is clear to Canadian business consumers that VoIP, in a variety of forms, is already rolling out across Canada. I think the testimony in the last two days has demonstrated that.

2381 It is currently being offered to business and residential consumers prior to any regulatory framework having been established by the Commission, but this rollout demonstrates clearly there is no barrier to entry into this particular market.

2382 Vonage, Primus Canada and others have launched their services. Neither of these companies owns its own underlying transmission network, nevertheless, they have been able to proceed with their VoIP service rollout. There are also VoIP service providers which offer services to Canada from locations outside of Canada.

2383 VoIP service innovation is progressing at an impressive rate. We noted that on June 14th, within hours of each other, three major providers, Primus, TELUS and Bell, announced new VoIP service features for business customers. Business users of telecommunication services welcome the choice, innovation and responsiveness that the VoIP service market is clearly delivering, even in this nascent stage of commercial development of this service.

2384 Therefore, given the current dynamic nature of the market, the rivalry and choice that characterizes VoIP service, the Coalition believes that the Commission should apply the statutory objective of the Telecommunications Act to foster reliance on market forces consistent with the Commission's often-expressed preference for competition and, absent clear evidence to the contrary, we believe there should be no presumption that VoIP services markets in Canada is failing or will fail. In fact, in our view, the market evidence supports the opposite conclusion.

2385 The current rollout of VoIP services in Canada is responding well to customer needs. No customer with high-speed access is constrained by any network operator, nor should they be.

2386 Mr. Chairman, this is truly a market in which the customer is in control and "choice" is the operative word. Accordingly, it is our view that the Canadian market should be open to all VoIP providers facilities-based here in Canada and non-facilities-based Canadian or foreign equal with only the minimum of regulation with any service provider.

2387 Every current or perspective VoIP provider should be permitted to serve Canadian customers freely without the regulation of prices, features, standards or other conditions of service. Competition and innovation can, and will, best respond to what the users really want. More than a decade of telecommunications experience has proven this to be the case.

2388 In the Coalition's view, the Commission should be guided by the successful precedents of wireless service and, indeed, retail Internet services. When VoIP is compared with wireless and Internet services at their early stages, it is clear that VoIP needs only minimal regulation. Customers already have the ability to choose from many VoIP providers, and the list is growing.

2389 The underlying high-speed access management is a service which the Commission has found to be competitive. Any connections to the PSTN metered by VoIP providers is already available from several sources. Thus, like wireless and retail Internet services, the conditions in the developing VoIP market warrant very little regulation.

2390 In a few minutes, we will address the limited regulatory measures, which we do consider appropriate for the CRTC to mandate and implement.

2391 I would like now to turn to my colleague, Gary Bernstein, to provide his perspective as a planner and a purchaser of IP services on behalf of a major telecom customer.

2392 Thank you.

2393 MR. BERNSTEIN: Thank you, Ian.

2394 I am director of Network and Communication Services, McGill University in Montreal. In addition, I was the chair and CEO of the Canadian Business Telecommunications Alliance in 1998-99 and for over 25 years I have been deeply involved in the planning and procurement of telecommunication services.

2395 I was asked to join this panel today not as a representative of McGill University -- I am not speaking for the university -- but as a former executive of the CBTA and as someone with extensive knowledge of the planning, management and procurement of advanced network services for larger organizations.

2396 At McGill, my department, Network and Communication Services, has a staff of about a hundred people. We manage all aspects of McGill's data, voice and video services. For example, we manage over 50,000 e-mail accounts, 25,000 IP ports and over 10,000 phone lines, a small city.

2397 We are responsible for all forms of communication services to over 160 buildings spread over two campuses, all of which are linked by an extensive fibre network. In our procurement and management of these networks, we deal with all the major telecom service providers in Canada and the major vendors of IT equipment and services.

2398 You are undoubtedly aware that CA*Net, through Canary, and, as you would expect, McGill University has been involved since 1993. You may not be as familiar with the Quebec component of CA Net, which is Réseau d'informations scientifiques du Québec, known as RISQ. RISQ members are Quebec universities and post-secondary institutions, as well as the major scientific research centres in Quebec.

2399 The mandate of RISQ is to establish an advanced research network to link Quebec centres of research and higher learning and to provide a platform for collaboration between its institutions and research centres around the world. Some examples of what RISQ member institutions have accomplished over this advanced network include grid computing, high-resolution video-conferencing, database hosting and sharing for fentes research, tele-medicine capability and a test bed for research on advanced network innovations.

2400 You may ask: how is this relevant to the subject of today's proceeding? I would answer, firstly, by pointing out that RISQ members have already integrated IP voice over the RISQ network. We have done so for several years. We have partnered with our various network service providers in a way that has produced one of the most advanced, integrated and unregulated voice data and video platforms in the world.

2401 We, and our network service providers, have achieved without regulatory constraint or interference. When members add functionality, such as voice or video, to any of the elements of our networks, they do so according to their needs and their imagination and without regard to the carriers or to regulation.

2402 In an environment where rapid technological innovation requires constant upgrading, we seek to be governed only by the ordinary rules of commercial contracts and our own ingenuity. Any government regulation of the provision of these services by any provider would simply impede our process of innovation and slow down the pace at which we can move forward.

2403 There is one qualifier or caveat that I would add at this point. As major consumers and users of IP services, it is evident that we support choice for consumers. We would be very concerned if any provider of any underlying high-speed access were to try to prevent us from using the VoIP service provider of our choice.

2404 We do not believe that broadband access providers should be permitted to constrain end user access to IP service provider of their choice -- sorry, we do not believe that. Therefore, we would support measures to ensure that customers continue to have unfettered choice.

2405 Mr. Chairman, we regard RISQ and the unregulated framework in which it has developed as a great success, we are anxious to continue the advancement of IP applications on the RISQ network in a framework where market forces, vision and technology, and not regulation, determine our evolution.

2406 My colleague, Suzanne Sabourin, will now address certain issues raised in the Commission's public notice.

2407 MS SABOURIN: Thank you, Gary.

2408 Mr. Chairman, I am executive director, Government Relations, for the Insurance Bureau of Canada, one of the members of the Coalition.

2409 I would like to address several areas where the Coalition would agree that certain safeguards, as proposed by the Commission, are both appropriate and necessary. These involve matters of safety, security and privacy.

2410 In the insurance industry, safety, security and privacy are key issues which we deal with constantly. They affect our customers and our companies on a daily basis. We understand and support the Commission's proposal to adopt certain requirements intended to safeguard the safety, security and privacy of the public when it comes to VoIP services.

2411 More specifically, the Commission has proposed that VoIP providers offering service in Canada would have to develop technical needs to provide 9-1-1 functionality. The technical solution to achieve this would be developed with the 9-1-1 service provider through the CRTC's CISC process. This strikes us as a reasonable and necessary measure. A similar approach was applied to develop a 9-1-1 technical solution for the wireless sector.

2412 Based on discussions yesterday and today on E-9-1-1, the Commission might be interested in its follow-up questions to discuss with Mr. Bernstein the very innovative E-9-1-1 solutions that McGill is using.

2413 VoIP has its own unique technical challenges, but we believeeve that the Commission would be protecting the interests of users, business and residential, by implementing its proposed approach to 9-1-1 and VoIP. In the meantime, when VoIP services is provided before a 9-1-1 technical solution is developed, customers should be advised very clearly, as the Commission has suggested, of this limitation of the service.

2414 Customer privacy is another value which is important in our industry, just as it is in telecommunications. The Commission's preliminary view suggests that VoIP providers would be subject to the same privacy rules that apply to all Canadian service providers. This is a reasonable proposal and one that we endorse. Canadian customers would expect nothing less. Therefore, we would support this aspect of the Commission's view.

2415 Security and law enforcement issues must also be considered. To the extent that any telecommunications service provider in Canada is required by law to cooperate with law enforcement authorities acting under a legal power, we think that the same rules should apply to the VoIP providers.

2416 While this issue has generated some debate in the U.S., there is likely broad support from industry and the public in Canada for the principle that the same rules should apply for all.

2417 One could characterize the Commission's proposals on this issue as social or public security matters. In the end, our view is that the terminology is not very important. What is important is that these proposals are commonsense. Therefore, the Coalition would support such measures for VoIP services.

2418 Our closing comments will now be delivered by Ian.

2419 Thank you.

2420 MR. RUSSELL: Mr. Chair, we have described to the Commission the importance of advanced, cost-effective telecommunication services for Canadian business. IP applications and services, such as VoIP, represent the leading edge of that technological innovation. These services are evolving more quickly and growing faster than all other telecom services. Our members are already proceeding with plans for the integration of voice over existing IP platforms and systems, and I can talk to you, to some extent, about that development in the Canadian capital markets.

2421 VoIP, and other IP-based services, present tremendous opportunities for Canadian business to achieve more at lower cost and sees the comparative advantage that this country has in advanced technology. We and our customers benefit from the current market-based, non-regulation approach to Internet services and applications that have been the principle underlying regulation in Canada in this matter.

2422 Except for the limited forms of social regulation we have described, we believe that the market can continue to determine the prices, the features and all the terms of these services. Regulators should only intervene in the VoIP marketplace if the market fails to proceed in an efficient and in an effective manner.

2423 As business customers, we know how to manage the process of selecting from a wide and increasing complex set of choices offered us. Our members are excited about the growing number of service providers offering IP-based services.

2424 We do not know precisely what the future holds for VoIP. None of us do. But what we do know is that our businesses and our customers will decide the future of VoIP. The market is working well now and we urge the Commission to continue to allow it to flourish.

2425 That concludes our remarks, Mr. Chairman, and we would be happy to respond to any questions you might have.

2426 THE CHAIRPERSON: Thank you.

2427 Commissioner Langford.

2428 COMMISSIONER LANGFORD: Thank you, Mr. Chairman.

2429 That's an incredibly clear submission this morning, as was your original submission. I don't have any questions about it precisely because I don't see the point of asking questions just to make everybody feel warm and fuzzy, but I do have just one question arising from one of the theme words I heard, one or two of them. "Risk" and "security" were mentioned a number of times, both by Mr. Bernstein and, most recently, in terms of the insurance agency -- or insurance business.

2430 I assume you must be familiar with the Companies' submission, that is part of this record, and, as part of that, if you were here yesterday, you will know that they created a list comparing distinctions between the current telephone system, as we have known it for years, and what they call a Category 2 service, so type one of the forms of VoIP that you folks are obviously so excited about.

2431 Interestingly enough, under the heading "Secure", and in brackets they say, "Not Susceptible to Hacking", it seems that the current systems wins hands down. I suppose somebody could climb up a telephone pole and start a wire tap; whereas, the proposed VoIP services don't seem to be very secure under that heading -- I'm just going by what the Companies have provided here -- and I wonder whether your businesses -- and you are dealing with some pretty important businesses here, insurance, the privacy of McGill University students, banks, I assume, stockbrokers -- are you worried about taking this leap of faith now into a whole new form of delivering a product that may, in fact, not be secure.

2432 MR. RUSSELL: Mr. Langford, it's a very good question and I can appreciate the concern that the Commission would place on that. But, again, I think I would start my comment -- and, again, I'm not an expert -- by saying that VoIP is really an extension of the Internet. It's on the broadband and it will work in a compatible way to existing Internet services and the security dimension is absolutely critical.

2433 Now, one has to bear in mind that the Internet has not been regulated, and yet the users, the business users on that system, have applied it in ways that make security absolutely essentially. For example, the banks, I mean, you can do all your banking through the Internet, and so it was absolutely critical that the banks ensured that there was absolute privacy and confidentiality of information, not to mention the system having to work effectively.

2434 From what I can see, in terms of the way the Canadian banks have applied Internet technology, it has been undersurpassed. I mean, the security is absolutely formidable. I would think that VoIP used within the same medium would provide the same guarantees of security.

2435 COMMISSIONER LANGFORD: And yet out there we have Mafia Boy, from Montreal, who was convicted recently of just simply maliciously attacking business systems and bringing them down. We know that the great and mighty eBay was attacked in the United States, and other major institutional users have been attacked by people who just seem to think this is a good idea. It's a hobby or something, a kind of malicious hobby that they do.

2436 Why, in that sense, are you so confident about this nascent form of communications? Why do you recommend that we kind of take such a light approach to it when, in fact, you may find yourself trading in old technology, but secure technology, for something that you may be cursing down the line?

2437 MR. RUSSELL: Well, again, I will just make a brief comment and turn it over to Mr. Bernstein, who is really an expert on these matters.

2438 I think the reason why I have confidence is, first of all, experience -- experience in the past that Canada has had with the Internet. While, yes, I will grant you that there have been breaches of security, I mean, the Pentagon computer systems have been breached, but the fact of the matter is, I think, that those incidences have been very few and far between. In fact, I can't think of an example of an egregious hacking into a Canadian bank system. The publicity surrounding the Royal Bank was more an internal technology problem. It wasn't a hacking problem.

2439 So to my way of thinking, the experience has been very, very good and I would think that VoIP will just simply -- just gives me the confidence that when that technology comes on stream, it will be secure, as well.

2440 And the second reason is that this technology is so absolutely critical to Canadian business that I just have a huge amount of confidence in the technological wherewithal and ability of Canadian business to take on the challenges.

2441 If there are gaps, or if the system can be improved, from a security standpoint, then I think that it will be met. Because, again, I can't underemphasize -- or overemphasize, rather, the importance of this overall Internet technology to Canadian business, generally, and particularly to Canadian capital markets.

2442 But, Gary, you are mor qualified that I am.

2443 MR. BERNSTEIN: I don't know that I'm more qualified, just maybe I know a little bit more about security.

2444 I would, first, argue against the premise that IP-based telephony is, in fact, less secure than TDM-based telephony. We have to distinguish between the media on which things are carried and the protocols which are used.

2445 So in the IP world, as most of you know, there has been a great emphasis on security of data, and most of that has been in the way of encryption. And if it's not done today, it's certainly not very far behind, where telephone conversations will be encrypted, not by regulation, but by choice.

2446 In the TDM and analogue world, it's really easy to steal a phone conversation. So easy, in fact, that I guarantee you that you could do it, any one of you.

2447 COMMISSIONER LANGFORD: Even me?

2448 MR. BERNSTEIN: Even you.

2449 COMMISSIONER LANGFORD: My colleagues will be impressed by that.

2450 MR. BERNSTEIN: Even a lawyer can do it.

2451 If you walk down the street and you look at most residential -- I'm talking residential, but it applies to business, as well -- the point of entry in a residential environment is a little box on the side of your house. On my house, it's about this high up off the ground and even a little guy like me can reach it with a pair of alligator clips attached to a telephone.

2452 And not only can I listen to all the telephone conversations that go on in your house, but I can also make long distance calls for free using that technique. In fact, we have seen people standing on the street selling telephone calls right outside a Bell Canada telephone pole. They do this because in some cases the telephone wires just sort of come down near the street and they are real easy to tap into.

2453 So having said that --

2454 THE CHAIRPERSON: I bet you a lot of people will wish you just hadn't said that.

2455 MR. BERNSTEIN: Yes, but that's the reality.

2456 In the business environment, you don't see telephone calls stolen nearly as frequently as you might in the residential environment because businesses realize the importance of security.

2457 For example, I mentioned that at McGill we have 160 buildings. Within those buildings, many of them have 10 or 20 wiring closets. So imagine somewhere in the order of 800 wiring closets, all of which have wire terminations that, at some point, end up on a person's telephone.

2458 If I were an enterprising fellow, I could go in there with my butt set, as the old Bell folks used to say, and tap into any of those wires and listen to any of your conversations.

2459 What we have done is, we have spent an enormous amount of money putting physical locks on those wiring closets, and on other things, so that people don't have that opportunity.

2460 I think that is really what I am trying to say -- it is the opportunity that counts, not the technology.

2461 COMMISSIONER LANGFORD: Thank you very much. Those are my questions, Mr. Chairman.

2462 THE CHAIRPERSON: Thank you.

2463 Commissioner Noël.

2464 COMMISSIONER NOËL: Mr. Bernstein, I will seize the occasion. Madam Sabourin mentioned that you could enlighten us on what you have developed in the field of E-9-1-1, so please go ahead.

2465 MR. BERNSTEIN: First, I would like to say, again, that a somewhat simplistic view of 9-1-1 services has been presented, at least in terms of what I have heard.

2466 There are warts associated with 9-1-1 services. I will mention one of them, which for me, in my job at McGill, is a major problem.

2467 Again I come back to the 160 buildings that we have at McGill, most of which are research and teaching buildings, and approximately 20 of which are resident student buildings.

2468 We provide our phone services to our faculty, staff and students through a PBX. That PBX, in turn, is interfaced to the PSTN.

2469 When someone at McGill dials 9-1-1, or somebody in any organization that happens to be multi-locational dials 9-1-1 and goes through a single PBX, the PSAP really hasn't got a clue where that call is coming from. So one must redefine the problem. The problem is to identify the location of an individual who is in distress or a situation that is a disaster situation.

2470 To identify the location, I think that is important.

2471 Given the technology that even exists today, with dedicated wires, copper running from Place A to Place B, Switch A to Switch B, we can't always do that because if I happen to be a professor in the Stephen Leacock building and I dial 9-1-1, the folks down at the Ville de Montréal emergency centre only see the call coming from Mcgill University, 845 Sherbrooke Street West. Which of the 160 buildings is that?

2472 The way in which we have dealt with the situation is, in effect, we have become a participating PSAP, if you like. We have implemented a system whereby we know where all of our buildings are, where all of our phones are, and who the people are behind them. We have constructed our own database -- not only for this purpose, but because we need a database of telephone users -- that has this information in it. When somebody dials 9-1-1, those calls are put into an immediate three-way conference mode. Obviously, the first conferencee is the caller, the second one is the McGill University security department -- the security agent -- and the third one is the Ville de Montréal PSAP.

2473 There is tremendous value in doing this, first of all, because we also capitalize on the database that exists in our PSAP centre, where a screen pop comes up on a computer at McGill security that says, "It is Professor Jone's phone in the Leacock Building, whose room number is such-and-such, who is in trouble."

2474 The three-way voice telephone conversation between the person in distress, the McGill security agent and the Montreal PSAP individual would usually go something like this: "I have terrible chest pains." "Where are you?" And the security dispatcher would say: "He is in the Stephen Leacock Building. What I am going to do is, I am going to send out a McGill security vehicle to meet you on the corner of Université and Sherbrooke, because you won't find the building on your own based on the civic address. We will send some people there in advance, so they will know where to take you and where the individual is."

2475 If you think about it, this is precisely the problem that was described by the Vonages and the Comwaves and the Primuses of the world. You need some kind of intermediary in order to determine location when it can't be transmitted using traditional methods.

2476 I emphasize the word "traditional" because we must always keep in mind that we are trying to solve the problem of: Where is the location? We have historically chosen to do that on the basis of wires that run from Point A to Point B to an ILEC phone system.

2477 We chose that several years ago. It doesn't mean that it is the best, the most efficient way to determine location.

2478 As an example, look at the emerging consumerism of GPS devices. Global positioning systems are being built into everything now. In the same way that a digital camera cost $2,000 five years ago and costs 39 cents today, GPS devices are being built into cell phones -- they are being built into all kinds of stuff.

2479 I could anticipate looking at the particular 9-1-1 problem eventually, in the long term, by using other technology -- GPS systems that speak IP -- as opposed to trying to leverage off the pretty ancient circuit-switched approach that we have taken so far.

2480 Really, I do believe in 9-1-1 services. Although, as director at McGill, I spend a lot of energy and a lot of money making sure that the systems work well, I really believe that in the long term we ought not to impede the benefits we will realize with Voice over IP telephony by regulating that such 9-1-1 services have to come into place using existing mechanisms in a very short period of time.

2481 I think they evolve is what I am saying.

2482 I would like to make one further point, and I will get it all off my chest.

2483 THE CHAIRPERSON: No pain, I hope.

--- Laughter / Rires

2484 MR. BERNSTEIN: Several people have been talking about Voice over IP being replacement technology, and I really do not believe that it is going to be replacement technology for a long time. It is going to be a disruptive technology.

2485 The reason I say that is because, when you come back to 9-1-1, if you think about it logically, in the business environment -- don't think residential, think business -- just about every business in Canada will have a fair number of circuit-switched telephones that will still reside next to their Voice over IP telephones.

2486 So if someone is in distress, or if there is a fire, then it is really easy either to call the receptionist, who has the TDM phone, or to go to the next desk, which may have one, and dial 9-1-1 from there.

2487 Again, in a business environment, the whole issue of educating the user is much more simple than in the residential environment.

2488 My piece is said.

2489 THE CHAIRPERSON: Thank you.

2490 Commissioner Cram.

2491 COMMISSIONER CRAM: Thank you, Mr. Chair.

2492 Mr. Russell, Mr. Bernstein and Ms Sabourin, surely you are not saying though -- your coalition -- that the prices you pay for telecommunications services should be below cost.

2493 MR. RUSSELL: No.

2494 COMMISSIONER CRAM: We may have reason to fear, if we forbear, that some of the VoIP services -- voice services provided you, may in fact be priced under cost by the ILECs.

2495 You would agree with me, if that happened, that you would end up with a less competitive market because the new entrants could be killed by lower pricing by the ILEC.

2496 MR. RUSSELL: I don't want to get into too much detail about the competitive issues and the need for pricing.

2497 Do you have an answer for that?

2498 MR. BERNSTEIN: I have an opinion, I don't know that I have an answer.

2499 COMMISSIONER LANGFORD: That has always been good enough for us.

2500 MR. BERNSTEIN: Actually, I have two opinions. People say that I never have one.

2501 One is that I think there is some regulation required at the access layer.

2502 I really do view voice as just another application on the Internet. Once one has access to the public or a private network, then you are in good shape.

2503 What you want is, you want unfettered access to that, and you want the folks that are providing it to you to do so on a very fair and equitable basis. So I would not like to see an ILEC take advantage -- or a cable company for that matter -- of the fact that they own the infrastructure and that they can then use that to price their Voice over IP services in such a way as to eliminate the competition.

2504 I would not like to see them use that to control the technology that they make available to other people, which might impede the implementation of Voice over IP services at that level.

2505 I have another view, which probably will not be so well accepted or popular. That is, I think that the ILECs, in particular, are at a great disadvantage when it comes to providing Voice over IP services.

2506 I have been through a lot of different waves of technology. I have been through the Ciscos of the world and the Bell Telephones, both service and product providers. What I have seen is, when you have a new paradigm in networking or in communications or in computing, the people who usually end up winning are the most innovative companies that are able to turn quickly and modify their products based upon the needs that their customers are telling them they have.

2507 I think that the ILECs are really handicapped. To a certain extent they have been handicapped because they have been regulated -- which is not a criticism of regulation, it's just a fact -- but they have also been handicapped because they are big, enormous, giant companies and they can't respond in the same way that the Vonages or the Skypes or the Comwaves of the world can.

2508 I buy my long distance -- and I won't say from whom, no free plugs here -- but it is a marvellous service. It is IP based. It is absolutely marvellous. It is ten times better than what I can get from any of the ILECs or some of the LECs. It is a company that just sort of came out of the blue, which probably developed their software and a website in a basement somewhere.

2509 For that reason, I am really for allowing the ILECs to operate completely unregulated, as long as the access layer is regulated.

2510 MR. RUSSELL: Just to echo that, I think that our first and foremost position is that the new entrants should certainly have unfettered access to the marketplace.

2511 What you are talking about is, really, predatory pricing by a large player, and I can understand your concerns for that. That would apply over the Internet as well. It would, presumably, also apply in the cell phone world.

2512 I think the response to that would be that the Commission should be monitoring market developments, as I presume it did with cell telephony and with the Internet, and dealing with obvious predatory or uncompetitive business practices.

2513 I don't think that by presuming that is going to happen you should get very actively involved in setting pricing restrictions or pricing rules or other regulations, at least at the outset.

2514 COMMISSIONER CRAM: Thank you.

2515 Thank you, Mr. Chair.

2516 THE CHAIRPERSON: Thank you. Those are our questions. I want to comment, though, that it is a good thing to have business interests represented. I think that the CBTA did a very good job over the years as the spokesman, so we are very pleased that there is an organization now representing business users, an important segment of our stakeholders. That's a positive development.

2517 You mentioned 12,000 corporate entities. I take it that represents members of associations who are, in turn, members of your coalition.

2518 MR. RUSSELL: That's right, Mr. Chair.

2519 THE CHAIRPERSON: How many association members would you actually have?

2520 MR. RUSSELL: Associations?

2521 THE CHAIRPERSON: Are there corporate members as well?

2522 MR. RUSSELL: I read out the list.

2523 THE CHAIRPERSON: Yes, you read the list, and they were pretty well associations.

2524 MR. RUSSELL: They are all associations, as far as I can see, yes.

2525 I don't think we have, at this point, really gone beyond associations and groups. The 12,000, as you say, are really the constituent members of those various organizations.

2526 THE CHAIRPERSON: Thank you very kindly.

2527 MR. RUSSELL: Thank you.

2528 THE CHAIRPERSON: Madam Secretary.

2529 THE SECRETARY: Thank you, Mr. Chairman.

2530 I would now call on the Ontario 9-1-1 Advisory Board to make a 10-minute presentation.

PRESENTATION / PRÉSENTATION

2531 MS BROOMFIELD: Thank you and good morning. My name is Judy Broomfield and I am here as the Vice Chair of the Ontario 9-1-1 Advisory Board.

2532 Today with me is Peter Glen. He is also a member of the Ontario Advisory Board, representing the Ontario Association of Chiefs of Police, as a member of their technical committee.

2533 I would like to thank the Commission for the opportunity to speak directly to you today on this most urgent public safety matter. In understanding that only 10 minutes has been allotted for each of the 9-1-1 representatives, I would first like to state that we are united in our cause. Therefore, in order to make the best use of today's opportunity, we have decided among ourselves to focus on a variety of 9-1-1 related matters to minimize repetition and to make the best possible use of our time and yours.

2534 Each of us will more fully elaborate on a variety of 9-1-1 system concerns associated with Voice over IP. These concerns include public safety, public access and public trust, Canadian carrier accountability, funding mechanisms for 9-1-1, the importance of proper 9-1-1 routing and caller location information, potential solutions and the current CISC process.

2535 You should not assume that if a specific 9-1-1 issue is not mentioned by one that the concern does not apply equally to all of us. You will find us very focused and supportive of each other, and we share the same common view: the 9-1-1 obligations must remain mandatory for all types of local voice service.

2536 It does not matter which part of this country we represent, the 9-1-1 system is our common bond, and the integrity of that system is already under attack. We believe this is fundamentally wrong.

2537 We further believe that the Commission understood that when it issued its preliminary views on April 7th of this year.

2538 Many industry representatives seem surprised by your preliminary views on 9-1-1 requirements for Voice over IP, but we are not. You have remained the regulatory gatekeepers of this system since local competition entered the Canadian landscape in the late 1990s.

2539 And, yes, now that I have heard all of the other presentations, I really wish that I hadn't used the word "gatekeeper".

2540 Your unwavering support of 9-1-1 and all aspects of local service has directly benefited the people of Ontario and, in our view, has only been common sense and good judgment. We are here today to urge the Commission to stay the course.

2541 Since January of this year the Ontario 9-1-1 Voice over IP experience has been as follows -- and these are, at least, the circumstances that we are aware of.

2542 There was a 9-1-1 dialed call from Phoenix, Arizona to the Toronto Public Safety Answering Point. The caller location indicated a data spill of an address of an office building in downtown Toronto with a "416" telephone number displayed.

2543 Actually, we had an explanation for that from Comwave yesterday, and that is the first explanation we have heard as to how that occurred.

2544 There were two 9-1-1 dialed calls from London, Ontario to the Toronto PSAP. There was no caller location data available. Both with "416" telephone numbers.

2545 There were two 9-1-1 dialed calls from Oakville, Ontario to the Toronto PSAP. Again, caller location data was not available. Both with "416" telephone numbers.

2546 There was a 9-1-1 dialed call from Montreal to the Toronto PSAP. The caller location data was an address in Toronto with a "416" telephone number. While speaking with the caller, both pieces of information proved incorrect. What we do know is that the woman thought she was, in fact, speaking with the Montreal police.

2547 There have been a further 66 instances where we have answered calls with "416" telephone numbers with no 9-1-1 address information.

2548 When we contacted the Canadian carrier to have the records updated, we were advised that they were Voice over IP customers outside Toronto and, as such, the records could not be corrected.

2549 We were further advised that "all end customers have been repeatedly warned not to use their VoIP service for emergency assistance calls." What we don't know is if they also told the cleaning staff working in those same buildings after business hours.

2550 It has been suggested this morning that the Commission should be dealing with the here and now, and this has been our 9-1-1 here and now.

2551 Many carriers and Voice over IP companies alike have unilaterally decided that 9-1-1 access is now a consumer's choice and that identifying the technical limiations in a customer's "Terms of Service" should be sufficient to deal with the issue. From a public safety perspective, that is just not good enough.

2552 In Toronto, on September 2nd, a woman answered her door at her home at 10:15 in the morning. A 26 year old man forced his way inside, repeatedly stabbed the woman, bound her with duct tape and left her for dead. We know this much is true. Between the time the man left the house and she somehow managed to make her way to the phone to call 9-1-1, the furthest thing from her mind would be her "Terms of Service".

2553 We hold the Canadian carriers accountable for this precarious situation. They knowingly resold access to their services and local numbering pools, even with a clear understanding of the technical 9-1-1 limitations associated with Voice over IP.

2554 As noted in our correspondence to the Commission of March 8th of this year, all Canadian local exchange carriers are fully aware of their 9-1-1 obligations under CRTC Decision 97-8.

2555 Further, they attested in writing in order to be allowed to compete in the local Canadian marketplace. These same LECs actively participated at the CISC Emergency Services Working Group and were instrumental in developing the 9-1-1 voice and data standards needed to ensure that their own subscribers had equal and immediate access to local emergency services.

2556 It is the OAB's assertion that even with their understanding of local 9-1-1 service matters, these Canadian LECs entered into reselling agreements with VoIP providers and others with a clear understanding that their 9-1-1 obligations could not be met, ignoring the potentially dangerous consequences.

2557 THE SECRETARY: Ms Broomfield, could you please summarize your remarks in 30 seconds. You have exceeded your time.

2558 MS BROOMFIELD: I'm sorry, I thought I had timed it out better than that.

2559 The bottom line is, many Ontario municipalities also signed 9-1-1 agreements with these same LECs in good faith, and we had never imagined that they would so blatantly disregard these obligations.

2560 If I am summarizing in 30 seconds, the conclusion is, where 9-1-1 exists in Ontario, it is clearly listed in the front page of every phone book. It is on the side of every police vehicle, ambulance and fire truck driving down the road. There is a public trust and accountability that we all share for 9-1-1 access to those services.

2561 Once again, we ask that common sense and good judgment prevail. We urge the Commission to hold its preliminary view that 9-1-1 should be a mandated requirement.

2562 THE CHAIRPERSON: Thank you for summarizing that quickly. We have your written submission, of course.

2563 Commissioner Cram.

2564 COMMISSIONER CRAM: While you were doing your 30 seconds I was reading your written comments on CISC.

2565 Welcome to our hearing.

2566 Do I take it that you believe you are at an impasse?

2567 MS BROOMFIELD: We have had two conference calls and a two-day, face-to-face meeting, and I would say yes, that we are at an impasse.

2568 We have not talked about 9-1-1 solutions so much as 9-1-1 work-arounds -- third party solutions, backdoor solutions -- anything but trying to figure out how to interconnect to the existing system.

2569 COMMISSIONER CRAM: Is the problem of the individuals at the table, other than the ILECs, the fact that they have to connect through the ILEC? Is that part of the problem?

2570 MS BROOMFIELD: I would suggest that that would be part of the problem. The investment required, or the way to really take a serious look at technical solutions -- that has not been the discussion to date.

2571 COMMISSIONER CRAM: So, clearly, you need to get to the point of talking about technical solutions, or something like that.

2572 MS BROOMFIELD: I think we are actually looking to the Commission to provide some direction on this, because as long as there is no specific direction it will be endless debate about possibilities, rather than serious technical discussions.

2573 Typically the CISC does not have a lot of internal deadlines, so it could go on endlessly, and we would expect that 9-1-1 issues, with this technology, would grow further.

2574 COMMISSIONER CRAM: If we were to impose a deadline, what would be a realistic deadline?

2575 MS BROOMFIELD: I don't know. I really don't have an answer for that. I guess our position is, the sooner the better.

2576 If the discussions continue as they have so far, then at least being able to report back to you as to our progress, and providing some direction to the CLECs themselves perhaps.

2577 MR. GLEN: If I could add, I think that one of the other problems we are encountering is not simply a deadline, but a deadline as to what it is that we are trying to reach.

2578 There is certainly a wide variance at the table, as PSAP suppliers and VoIP providers, as to what is a suitable solution. I think that is certainly one of the main stumbling blocks.

2579 One of the problems as to why the two-day, face-to-face really went nowhere was that, as PSAP operators, we were being put in the position by the VoIP providers that if we accepted anything they had put on the table, we knew, or believed that it was unsafe for the citizens we are serving, so we couldn't accept that.

2580 So there is a total impasse as to where we are heading. I think we believe that there is a role for the Commission to say: This is the 9-1-1 service that needs to be provided. How do we get there technically? And then with a timeline as to how long to get there.

2581 COMMISSIONER CRAM: Thank you.

2582 Those are my questions, Mr. Chair.

2583 THE CHAIRPERSON: Thank you very much.

2584 Counsel.

2585 MR. MURDOCK: Thank you, Mr. Chair.

2586 I have one follow-up question. In the earlier presentation Mr. Bernstein described how the use of an intermediary had solved the locational issues associated with the problems presented by the use of a PBX at McGill University, and yesterday we heard from both Comwave and Vonage on their solution, which also involved the use of an intermediary to solve the locational issues associated with the nomadic capabilities of VoIP services.

2587 Could you share your views on that proposed solution for the locational problem?

2588 MS BROOMFIELD: Let me start by saying that I wish everybody was as conscientious as McGill University. That is not necessarily the case elsewhere.

2589 We have run into the situation on occasion in Toronto, as an example, where staff or tenants on the university grounds understand that they might be giving up their right to confidentiality when they dial 9-1-1 to a police agency; not necessarily did they want the security people being involved in that call. But it is a reasonable approach to emergency response.

2590 With regard to the Comwave solution, I was actually quite surprised to hear that alarm company employees, who typically sit in a room and monitor alarm signals and then pick up the phone and call us to say that there is an alarm signal at 123 Main Street, are now trained emergency call takers.

2591 I would suggest to you that when somebody is choking on smoke and there is a smoke detector in the background, it's a really good thing that we have the address in the wire in the wall, and the quicker the better.

2592 So the intermediary solution causes us some concern. Again, we don't necessarily see it as the solution.

2593 Third party solutions -- if we support them and something goes wrong, then we have bought into some of those issues -- or liability -- or culpability -- saying, "Yeah, that's okay." We understand that when a person dials the digits 9-1-1, there is a certain expectation, and it is not to go to an alarm company employee who is sitting in a monitoring station in Buffalo, New York.

2594 MR. MURDOCK: Thank you, I have no further questions.

2595 THE CHAIRPERSON: Thank you very much.

2596 We will break now and resume at 11:15 a.m. Nous reprendons at 11 h 15.

--- Upon recessing at 1100 / Suspension à 1100

--- Upon resuming at 1117 / Reprise à 1117

2597 THE CHAIRPERSON: Order, please. À l'ordre, s'il vous plaît. Madame Secretary.

2598 THE SECRETARY: Thank you, Mr. Chairman. I will now call on the City of Calgary to make its presentation.

PRESENTATION / PRÉSENTATION

2599 MR. WORKMAN: My name is Don Workman and I hold the position of Telecommunications Engineer with the Calgary Fire Department. I am here representing the City of Calgary.

2600 In Calgary, the Fire Department manages and operates the public safety answering point or PSAP. This means that the Calgary Fire Department telecommunicator answers the call when a citizen of Calgary dials 911. Calgary is unique amongst the registered parties to public notice 2004/2 and its ability to comment on 911 and voice over internet protocol from a fire department perspective. Most fire departments strive to meet demanding minimum response time standards that are set by the National Fire Prevention Association.

2601 Response time is the time that it takes from when a department receives a call to when it arrives on scene of the emergency. In Calgary, the number and location a fire stations is carefully planned and continually optimized, new fire stations are built and existing stations are relocated with the goal of improving response time.

2602 The Calgary Fire Department is continually investing in technology as an important of a time going quest to shorten the amount of time that it takes to arrive at the scene of an emergency. For example, a computer rated dispatch system of CAD system works in conjunction with global positioning system devices installed in our emergency response vehicle to automatically select and mobilize the Calgary Fire Department unit that should arrive at the scene of an emergency most quickly.

2603 Municipalities make very significant public investments in order to shorten the amount of time that it takes to arrive at the scene of an emergency. Using the example of a building that is on fire, the reason for the emphasis on speed is simple. Really intervention prevents fires from spreading, preventing fires from spreading reduces the risk of property damage, injury and loss of life.

2604 The systems and technologies that I have just described are only useful once an emergency has been reported and the precise location of the emergency determined. The ability of the fire department to respond and to fight fires is vitally important, but so is the ability of the public to report fires. If a delay occurs, the reasons for the delay is unimportant. A delay of one minute at the 911 answering centre is just as potentially damaging the delay of one minute due to a fire truck being stuck in traffic. The crucial first step in the whole emergency response process is to answer the phone call for help and quickly determine the location of the caller.

2605 Public safety emergency response is all about location and speed. If a VoIP subscriber attempts to dial 911 and the call does not complete, the emergency response will be delayed by the time that it takes the caller to find an alternate method of contacting help. If a VoIP subscriber dials 911 and the call is sent to the answering centre for the wrong city, a delay will occur while the telecommunicator attempts to determine the correct answering centre and then transfers the call.

2606 If a VoIP subscriber dials 911 and the call arrives with missing or incorrect location information, the resulting confusion may cause the delay. The situation will be much worse in those cases where the caller cannot communicate effectively because they are confused or incapacitated. The existing enhanced 911 systems and 911 calls from local landline telephones to the correct answering centres along with accurate location information. By doing so, these systems help to prevent the kind of delays that I have just described.

2607 The regulatory framework for voice communications services using internet protocol must ensure that the same capabilities are also available for VoIP users. Calgary is aware of five VoIP service providers that are offering local VoIP service as defined in the Commission's preliminary views that does not provide access to 911 service.

2608 Calgary is also aware of another VoIP service provider that has implemented a third party solution that requires an intermediate step in the process and that does not provide colour location information at the PSAP. In Calgary's view, this is unacceptable and poses a risk to the life and property of a VoIP user trying to call 911.

2609 The commission indicated in its preliminary view that the principle of technological neutrality should be appliled to VoIP regulation. This principle dictates that is it the nature of the service that is being provided and not the underlying transmission technology that is significant. It shouldn't matter whether a signal is delivered over a twisted pair or a collateral cable or whether the service is provided by an ILEC or a SELEC or a reseller. A service that uses the North American numbering plan and provides access to the public switch telephone network must provide access to 911.

2610 This is the preliminary view of the Commission and Calgary fully supports this view. Calgary submits that the principle of technological neutrality must also be applied to the funding of 911 networks in Canada. Funding has received very little attention despite the fact that the deployment of voice over internet protocol has the potential to reduce the funding that is available for PSAP and for provincial 911 networks. All users of local telephone service should be required to contribute to the funding of 911, whatever the underlying technology.

2611 In Alberta, funding for the provincial enhanced 911 network comes from local telephone subscribers. Customers of Telus the incumbent local exchange carrier pay Telus the tariff monthly rate for access to the provincial 911 system. Customers of competitive local exchange carriers and wildest service providers also contribute to the provincial E911 network because the CLEC and wildest service providers pay 911 access rates to Telus.

2612 In addition to this, some municipalities including Calgary, enter into billing and collection arrangements with the ILEC and with the CLECs in order to fund the operation of a local PSAP. In this case, each local exchange carrier submits a fixed monthly amount per local subscriber to the PSAP.

2613 Calgary is concerned that the funding for subscribers may decrease as a result of VoIP adoption. For example, it appears that VoIP resellers will contribute, based on a number of lines that they use to connect to the public switch telephone network instead of the number of telephone numbers that are placed in service. In this case, the number of line is certain to be less than the number of telephone numbers and the decrease in funding will be the result.

2614 Responses to Calgary's interrogatories indicate that this is occurring today. In Telecom decisions CRTC99-17, the Commission ruled that customers employing multiline telephone systems should be charged for 911 service based on the number of access line equiped for network calling. The Commission's reasoning was as follows:

2615 The argument that a substantial effort would be required to obtain this information is not applicable when a reseller is involved.

2616 In Telecom decisions CRTC 99-17, the Commission determines that it was appropriate for ILEC to charge wildest service providers on the basis of telephone numbers rather than accessline. The following reason would apply to this decision.:

2617 The exact same reasoning can be applied to VoIP resellers. As with wireless service, the most equitable arrangement is for the VoIP subscribers to pay for 911 service on the basis of the number of working telephone numbers that are equipped for outward access, for outgoing access to the PSTN.

2618 There may be other aspects of that have not been anticipated, which could cause users of landline telephone service to bear a disproportionate share of the cost of 911. The Commission has established a record of decisions that recognize the importance of 911. Calgary is asking the Commission to establish a framework for VoIP regulation that continues to make 911 a priority. Further, this recognition of the importance of 911 should be extended to ensure the funding is adequate, equitable and sustainable for many years to come.

2619 I thank the Commission for this opportunity to speak to you today and I would be happy to entertain any questions that you may have.

2620 THE CHAIRPERSON: Thank you, Mr. Workman. Commissioner Williams.

2621 COMMISSIONER WILLIAMS: Good morning, Mr. Workman. Your presentation and your submissions have been very clear and thorough, so I have very few questions.

2622 You have requested that the CRTC establishes a specific target date for all providers to implement E911 for all subscribers that call from their home addresses. Other interveners have suggested this provision and implemention of E911 for all VoIP customers happen before they commence business. Does the specific target date that you want us establish have to be before the introduction of VoIP or is it acceptable to have it at a later date?

2623 MR. WORKMAN: Well, clearly, for some providers it is too late.

2624 COMMISSIONER WILLIAMS: It has alerady happened.

2625 MR. WORKMAN: It has already happened, so it has to be after the introduction of VoIP, but I think there should be a date in the near future and I don't know what that would be, where any new entrance would be required to meet those requirements.

2626 COMMISSIONER WILLIAMS: And the existing entrance as well?

2627 MR. WORKMAN: And existing entrance, yes.

2628 COMMISSIONER WILLIAMS: Thank you very much, Mr. Workman. I have no further questions, Mr. Chairman.

2629 THE CHAIRPERSON: Thank you. Thank you very much. Madame Secretary.

2630 THE SECRETARY: For the record, Mr. Chairman, I would l ike you please to note that the Greater Vancouver Regional District notifies the Commission that it wishes to cancel its participation to this consultation.

2631 Nous allons maintenant poursuivre avec la comparution numéro 15 de l'Association des centres d'urgence 911 du Québec.

PRÉSENTATION / PRESENTATION

2632 M. RICHARD BOYER : Monsieur le Président, membres de la Commission, madame, messieurs, mon nom est Richard Boyer, je suis président de l'Association des centres d'urgence 911 du Québec. J'ai à ma gauche, madame Nancy Dubois qui est la vice-présidente de l'Association et, à ma droite, monsieur Leblanc, Richard Leblanc, qui est notre conseiller en matière de communications.

2633 Si vous tentez de suivre la présentation, j'ai abrégé un peu le texte pour être sûr de l'entrer dans le délai qui m'est imparti.

2634 L'Association des centres d'urgence 911 du Québec désire d'abord remercier le Conseil de lui donner l'occasion d'exprimer ses vues quant à l'implantation de la téléphonie sur protocole internet. D'entrée de jeu, l'Association se dit solidaire des positions exprimées par nos collègues des autres centres d'urgence 911 qui veulent signifier leur inquiétude face à l'avènement d'une technologie dont les bénéfices pour les citoyens sont indéniables, mais, paradoxalement, dont les modalités d'application mettent directement en jeu la santé et leur sécurité en cas de situation d'urgence.

2635 J'aime mieux parler de santé et de sécurité que de parler de conditions sociales parce que c'est vraiment de santé et de sécurité dont on parle ici. Malgré cela, nous croyons donc qu'un cadre minimal de réglementation doit être envisagé car dans le cas qui nous préoccupe l'enjeu central touche directement la vie des citoyens en situation d'urgence.

2636 Dans l'avis préliminaire 2004-2 le Conseil reconnaît qu'il est possible au début de certaines entreprises offrant des services de téléphonie par internet ne soient pas en mesure d'offrir l'accès au 911 ou 1911, les services de relais téléphoniques ou des garanties de protection de la vie privée. À ce propos, il est même étonnant de constater que dans les mémoires déposés dans le cadre de l'avis public certaines entreprises sont réfractaires ou carrément opposées à une telle obligation.

2637 Nous pensons qu'un service 911 aléatoire dans le cadre du développement de la téléphonie sur protocole internet ouvre toute grande la porte à la confusion chez la clientèle et met directement en cause l'accessibilité de la population canadienne au service d'urgence.

2638 Les citoyens attendent, de toute façon, cette accessibilité-là. Un citoyen nous écrivait dernièrement, faisant affaires avec une entreprise qui vend des systèmes sur le Voice over IP, il leur demande des numéros de téléphone à sept chiffres pour rejoindre la police, l'ambulance et les pompiers. Le citoyen, lui, s'attend être en mesure et on ne peut lui fournir, évidemment, ce type de numéro-là. La porte d'entrée étant en Amérique du nord pour les services d'urgence, les centres 911.

2639 En ce sens, l'Association trouve nettement insuffisant que les fournisseurs qui ne donneraient pas accès au 911 ne fassent qu'en informer la clientèle par un dépliant ou du matériel professionnel. Nous tenons respectueusement à rappeler au Conseil qu'au fil du temps, des générations de citoyens ont été habitués à composer le 911 pour obtenir des secours. Que se passerait-il lorsque l'abonné de service composerait le 911 alors que sa vie ou celle de l'un de ses proches est en danger? Qui sera tenu responsable lorsqu'un citoyen aura perdu la vie à la suite d'une attaque cardiaque, d'une agression ou autrement parce qu'en composant le 911 il aura entendu une voix : Il n'y a pas de service au numéro que vous avez composé. Nous désirons également attirer l'attention du Conseil sur l'acheminement des appels. Là encore, rien n'indique dans les mémoires déposés dans le cadre de l'avis qu'un appel 911 sera dirigé au bon centre d'urgence 911.

2640 Puisque, par essence, la technologie du Voice over IP permettra aux utilisateurs de se déplacer partout où ils le veulent, il est clair que le nombre d'utilisateurs mobiles ira en augmentant, rendant de plus en plus compliqué l'acheminement des appels au bon sens.

2641 L'importance de répondre rapidement aux appels et les exemples utilisés précédemment par notre collègue du Service d'incendie de Calgary sont éloquents. En matière d'urgence, les secondes comptent.

2642 On imagine facilement ce qui peut se produire si un centre d'urgence reçoit un appel qui ne lui est pas destiné parce que l'appelant se trouve dans une ville autre et que le centre d'urgence doit entreprendre des recherches pour trouver la bonne ville, laquelle peut se trouver n'importe où au Canada, aux États-Unis ou dans le monde. Comment le centre d'urgence 911 pourrait-il trouver les coordonnées du centre d'urgence de Pittsburgh ou de Cincinnati? En combien de temps?

2643 Finalement, l'Association souhaite soulever la question de la disponibilité des coordonnées de l'appelant. Il n'est pas rare, en effet, que nous recevions un appel alors qu'il n'y a aucun interlocuteur en bout de ligne, malaise cardiaque, violence conjugale, enlèvement, des situations au cours desquelles l'appelant n'est pas en mesure de dire ce qui se passe ou de fournir sa localisation.

2644 Actuellement, presque tous les fournisseurs du Voice over IP se disent incapables d'indiquer au centre les coordonnées exactes de l'appelant.

2645 Enfin, nous ne saurions terminer notre présentation sans parler du financement et à ce chapitre, l'Association supporte la position exprimée par le Service d'incendie de Calgary et celle que présentera l'Union des municipalités. De fait, on peut raisonnablement penser que nous assisterons avec le Voice over IP à un accroissement du nombre d'appels, et de deux chose l'une. Ou nous aurons les coordonnées X, Y, aniali, on ne sait encore comment, et nous devrons modifier nos systèmes, acquérir de nouveaux systèmes ou nous ne les aurons pas. À ce moment-là, nous devrons les rechercher, trouver une façon de les obtenir avec l'appelant en bout de ligne et, là, on va allonger nos temps de réponses, nos temps de traitements et donc, augmenter le nombre d'effectifs. Dans les deux cas, on s'attend à ce qu'on ait des augmentations de coûts assez importants. Qui paiera pour ça?

2646 En conclusion, il se trouve plusieurs pour affirmer qu'à ce stade-ci, le Conseil ne doit pas réglementer la Voice over IP, laissant entendre qu'il faut faire confiance aux entreprises pour régler les problèmes. À cela nous répondons qu'il y a quelques semaines on apprenait que le centre d'urgence 911... on apprenait au centre d'urgence 911 qu'une compagnie de Voice over IP réaffectait les appels 911 non pas à un service de sécurité, mais à la réceptionniste. Et, là, la réceptionniste agissait comme préposée 911 et nous transférait les appels. On pense qu'on met suffisamment d'énergie dans tous les centres d'urgence à travers le Canada pour former correctement nos personnels, être en mesure de traiter des appels en situation d'urgence. On pense qu'une telle pratique va dégrader les services d'urgence. Enfin, on est conscient du potentiel que représente la téléphonie sur protocole internet et des bienfaits sur la croissance de l'industrie des télécommunications.

2647 On partage également le point de vue exprimé par le Conseil à l'effet que la réglementation doit favoriser la fourniture de services efficients, innovateurs et abordables au lieu de les entraver. Toutefois, l'Association soumet respectueusement que dans le cas qui nous occupe, la qualité des services 911 n'est pas une question, la périphérie des services VoIP, elle se trouve, au contraire, au coeur du développement des nouvelles technologies et nous souhaitons vivement l'appui du Conseil pour ne pas que ces nouveaux services soient la cause d'une dégradation de la sécurité du public.

2648 Merci.

2649 LE PRÉSIDENT: Merci, monsieur Boyer, et je donne la parole maintenant à la conseillère Noël.

2650 CONSEILLÈRE NOËL: Bonjour, monsieur Boyer, madame, monsieur. Alors, votre présentation est très claire et j'aurai moi non plus pas beaucoup de questions.

2651 Par contre, on a entendu ce matin monsieur Bernstein de l'Université McGill. Bon, il a mentionné son système qui fait une interface avec le système de sécurité de l'Université pour contacter le centre d'urgence de Montréal. C'est une façon de faire, il y en a probablement d'autres. Mais il a mentionné également la possibilité d'introduire la technologie GPS pour permettre une localisation des appels provenant de postes qui sont mobiles.

2652 Est-ce que vous pourriez nous faire valoir votre point de vue là-dessus? Je comprends que ça implique des coûts additionnels, mais qu'est-ce que vous pensez de cette possibilité? Est-ce que c'est une piste de solution d'introduire la technologie GPS à l'intérieur des appareils?

2653 M. BOYER: J'apprécie que vous me posiez cette question-là puis j'aimerais faire juste une petite parenthèse sur le cas de l'Université McGill et je pense que vous saisissez très bien. La problématique à l'Université McGill, c'est une problématique de switch PBX. Le téléphone, il est fixe à partir du moment où il est mobile de transférer les appels à la sécurité, n'amène pas de plus value.

2654 La technologie GPS, oui, je pense que c'est une technologie et c'est une avenue qui devra être examinée. Devra être examinée, je dirais, en corollaire avec ce qu'on examine et ce qui est examiné actuellement en matière de téléphonie cellulaire. On sait que le GPS a des limites si on est dans un bâtiment, mais je pense que c'est une des technologies qui doit être évaluée et qui, probablement, serait source... une avenue qui serait source de solutions, mais peut-être en allant vers de la triangulation et d'autres technologies.

2655 CONSEILLÈRE NOËL: Une plus grande précision quant à la localisation en tout cas.

2656 M. BOYER: Oui. La problématique avec le GPS c'est à l'intérieur des bâtiments. Là, on a une difficulté.

2657 CONSEILLÈRE NOËL: Avec les cellulaires aussi tant qu'à ça.

2658 M. BOYER: C'est exactement la même chose.

2659 CONSEILLÈRE NOËL: Je vous remercie beaucoup. Je n'ai pas d'autres questions.

2660 LE PRÉSIDENT: Merci beaucoup, messieurs, mesdames. Madame la Secrétaire.

2661 LA SECRÉTAIRE: Merci, monsieur le président. Nous allons maintenant poursuivre avec la comparution numéro 16 de l'Union des municipalités du Québec.

PRÉSENTATION / PRESENTATION

2662 M. MICHEL TREMBLAY : Alors, on peut aller tout de suite? Très bien. Alors, monsieur le président, madame la vice-présidente, mesdames, messieurs les Conseillers et conseillère.

2663 Permettez-moi tout d'abord de vous présenter les gens qui m'accompagnent. D'abord, monsieur Richard Montpetit qui est directeur des services corporatifs et du Centre des ressources municipales à l'Union des municipalités du Québec, maître Lise Bertrand qui est associée au cabinet d'avocats Borden Adner et Gervais. Mon nom et Michel Tremblay, président de l'Union des municipalités du Québec.

2664 L'Union des municipalités du Québec, mieux connue sous l'acronyme UMQ représente les municipalités de toute taille et dans toutes les régions du Québec. La mission de l'UMQ est de contribuer au progrès et à la promotion de municipalités démocratiques, dynamiques et performantes dédiées au mieux-être des citoyens et des citoyennes.

2665 En plus de faire des représentations auprès du gouvernement afin de contribuer à l'amélioration continue de la gestion municipale, l'Union des municipalités dispense une gamme variée de services à ses membres. Les membres de l'Union des municipalités du Québec représentent plus de six millions de citoyens et citoyennes et gèrent plus de 90 pour cent des budgets municipaux, couvrant près de 75 pour cent du territoire municipal jusqu'au Québec, son poids et sa légitimité lui permettent donc d'intervenir dans le débat public au nom de plus de 80 pour cent de la population québécoise.

2666 L'Union des municipalités du Québec souhaite faire part de ses inquiétudes et des impacts qu'elle entrevoit en regard de la sécurité de même qu'en matière de fardeau fiscal sur les citoyens du Québec résultant de l'absence d'encadrement relié au déploiement des services de communication vocale sur protocole internet, soit les services VoIP.

2667 L'Union des municipalités du Québec, tout en souscrivant au principe de développement des nouvelles technologies en télécommunications croit cependant qu'un déploiement anarchique des services VoIP risque d'entraîner une plus grande difficulté à localiser et à répondre aux appels d'urgence des citoyens. De plus, l'avènement des services VoIP augmentera le volume d'activités au sein des centres d'urgence et exigera la mise en place de nouveaux équipements, ce qui aura pour effet d'augmenter de façon significative les coûts municipaux.

2668 L'Union des municipalités croit donc qu'il est de la responsabilité du CRTC d'édicter un cadre minimal de réglementation afin de ne pas mettre en péril la sécurité des citoyens, tout en permettant aux municipalités d'assurer le financement adéquat des centres d'urgence sans augmenter le fardeau fiscal des payeurs de taxes.

2669 La téléphonie filaire garantit l'acheminement des appels au centre d'urgence approprié de même que la localisation de l'appelant, adresse de l'immeuble ou de la résidence, le numéro de téléphone utilisé, et caetera. La téléphonie filaire assure également une qualité sonore durant toute la conversation de même qu'une série d'autres fonctionalités, qui vous aura sans doute été présentée par le représentant des centres d'urgence qui nous ont précédés. Or, la mobilité des utilisateurs alliée à l'incapacité des fournisseurs des services VoIP de fournir correctement leur localisation lorsqu'ils sont en déplacement crée une forte pression sur les municipalités et les services d'urgence qu'elle gère, délai d'intervention accru, risque d'erreurs dans l'acheminement des secours, perte de vie possible, sans compter une augmentation probable de poursuites devant les tribunaux.

2670 Malheureusement, l'avènement de la téléphonie sans fil et la sécurité accrue qu'elle devait permettre aux citoyens ont été ralentis par le manque d'encadrement. En effet, il aura fallu attendre la décision du CRTC 97-8 avant que le citoyen qui compose le 911 voit son appel acheminé au bon centre d'urgence et que ce dernier dispose du numéro de téléphone de l'appelant. Aujourd'hui encore, les centres d'urgence attendent que l'industrie soit en mesure de fournir des coordonnées géocodées permettant de faciliter la relocalisation des citoyens qu'ils soient en détresse, qu'ils soient incapables... ou encore soient incapables de parler ou de se faire comprendre correctement par le préposé au centre d'urgence.

2671 Dans ce contexte l'Union des municipalités du Québec croit que le Conseil devrait s'inspirer des situations provoquées par le développement de la téléphonie sans fil pour mieux encadrer le déploiement des services VoIP. Ainsi, même si les experts nous disent que les services VoIP ne posent pas de problème technique. Pour le téléphone IP non mobile puisque ses appelants pourront être localisés sans difficulté, il importe de considérer que les services VoIP favoriseront également l'émergence d'une clientèle mobile. À cet égard, nous partageons les craintes exprimées par les centres d'urgence en regard des difficultés à prévoir en matière d'acheminement des appels au centre d'urgence approprié, de même qu'en regard de la relocalisation de l'appelant.

2672 Au-delà de ces préoccupations spécifiques, l'Union des municipalités du Québec est également inquiète de constater, tout comme le CRTC, qu'au départ, certains fournisseurs de service VOPI locaux ne pourront offrir le service 911 ou le E911. Dans ces conditions, l'Union des municipalités du Québec souhaite vivement que le CRTC impose au service VoIP une obligation claire et un échéancier de réalisation très court afin que la technologie nécessaire soit développée et déployée afin d'assurer aux citoyens un accès universel au centre d'urgence 911, tout en fournissant à ces derniers les informations nécessaires afin d'offrir les services sécuritaires qu'attendent les citoyens.

2673 Il est clair que le développement et la croissance des services VoIP se répercuteront sur les coûts d'opération des centres d'urgence puisqu'il en résultera une hausse des dépenses pour le traitement des appels et l'adaptation des systèmes. Or, la gestion des centres d'urgence 911 du Québec est sous la juridiction du milieu municipal qui devra, dans ce contexte, inévitablement augmenter les budgets de ces centres.

2674 Tous les acteurs en conviennent, l'application d'une nouvelle fiscalité dans une optique de redéfinition du partage de la richesse collective a atteint un degré frôlant la limite de ses capacités. L'Union des municipalités et les citoyens qu'elle représente, profite donc de la tribune qui lui est offerte aujourd'hui pour souligner avec force que l'arrivée déjà palpable des services VoIP et des services financiers et des exigences financières afférentes doit se faire dans une perspective de contribution conjointe des entreprises et des clients de ce service.

2675 Sur ce point, l'Union des municipalités du Québec partage les craintes exprimées par le milieu des centres d'urgence à l'effet que dans l'état actuel des choses, rien ne laisse croire que le financement actuel des centres d'urgence 911 du Québec de l'ordre de 0,40 $ par ligne téléphonique filaire doit être préservée sous le régime des services VoIP. L'Union des municipalités du Québec joint sa voix à celle des centres d'urgence qui réclame que le CRTC oblige les entreprises offrant un service VoIP à suggérer à l'intérieur d'un calendrier précis un mode de perception des redevances de financement des services 911 auprès de chaque abonné ou autrement.

2676 Ces services devront également ratifier les ententes existantes de cession de créances et de perception des frais municipaux avec l'Union des municipalités du Québec. L'Union des municipalités du Québec souhaite que le CRTC garde ses préoccupations à l'esprit lorsque sera appliquée la grille d'analyse du financement des services VoIP.

2677 L'Union des municipalités du Québec, de concert avec le Ministère de la sécurité publique et l'Association des centres d'urgence 911 du Québec travaille actuellement à l'élaboration d'un cadre de références en matière de normalisation des opérations des centres d'urgence de la province. L'objectif visé est d'assurer une qualité optimale des services d'urgence à la population. Les discussions se déroulent avec, en toile de fond, la gestion, la standardisation des équipements et l'adaptation aux nouvelles technologies.

2678 Dans ce contexte, l'Union des municipalités souhaite que les travaux du Conseil débouche sur l'adoption d'une réglementation établissant des protocoles standards de télécommunications pour les services VoIP de manière à ce que tous les intervenants en matière d'urgence aient une compréhension commune du mode de fonctionnement de ce service. Sans une intervention du CRTC, d'une réglementation appropriée, l'Union des municipalités croit que la nécessité des abonnés faisant appel au 911 en soit réduite à sa plus simple expression.

2679 En conclusion, l'Union des municipalités du Québec apporte son soutien plein et entier au CRTC dans sa recherche d'un équilibre entre le développement d'une industrie des services VoIP solide et compétitive et la protection des citoyens qu'elle a le mandat de servir.

2680 L'Union des municipalités croit que le financement des services publics d'urgence par le biais de redevances dont les paramètres demeurent à être confirmés est au coeur de la croissance harmonieuse de ce nouveau service.

2681 L'Union des municipalités du Québec est convaincue que la protection de la population passe par l'accélération du déploiement encadré et réglementé des services VoIP. L'Union des municipalités du Québec appuie donc et demande les centres d'urgence à l'effet qu'il est nécessaire d'établir un échéancier précis pour le déploiement du E911, l'acheminement des appels et la délicate question des coordonnées de l'appelante.

2682 Voilà, monsieur le président, madame, messieurs, le rapport de l'Union des municipalités du Québec.

2683 LE PRÉSIDENT: Merci beaucoup. Monsieur le conseiller Demers.

2684 CONSEILLER DEMERS: Merci, monsieur le président, bonjour madame, bonjour messieurs.

2685 Alors, on a l'impression que le 911 a été ébranlé, surtout quand on entend et qu'on appelle 911 un peu ce qu'on a décrit hier pour un 911 où on répond à une société de protection qui est comme Chubb. Je suppose que vous ne faites pas de compromis sur la base et la qualité des services que vous exigez des citoyens de votre région et de ceux que vous desservez.

2686 Vous avez indiqué que l'Union des municipalités est en train de travailler, est à l'élaboration d'un cadre de référence en matière de normalisation des opérations. Est-ce qu'il y a un échéancier connu ou qui nous serait important de connaître dans le cadre de l'étude qui se rapporte au 911?

2687 M. TREMBLAY : On pense finaliser cette opération au courant de cette année et au début de l'année prochaine.

2688 CONSEILLER DEMERS : Donc, d'ici 2004, d'ici la fin 2004?

2689 M. TREMBLAY : Plutôt vers la fin de 2005.

2690 CONSEILLER DEMERS : D'accord. Donc, au cours de cette période, les centres et les gens qui sont responsables, c'est 911 au Québec, auront... seront normalisés donc. Est-ce que c'est une échéance dont on devrait tenir compte lorsque vous nous demandez d'agir, je dirais, fermement dans le cas du 911 et de faire en sorte qu'il soit disponible sur VoIP?

2691 M. TREMBLAY : Bien, je pense qu'il serait souhaitable, évidemment, pour qu'on puisse avoir une tarification.

2692 M. MONTPETIT : Donc, effectivement, il serait souhaitable que le Conseil tienne compte de cette prérogative que les centres d'urgence 911 ont au Québec. Ça devrait se terminer probablement quelque part au cours de l'année 2005, c'est assez difficile de donner une date précise, on est en cheminement à l'intérieur de ça. Il s'agit d'établir l'ensemble des protocoles nécessaires pour assurer un niveau de qualité qui serait similaire un peu partout dans l'ensemble des centres d'urgence du Québec et suite à ça, la mise en place de cette harmonisation des centres d'urgence du Québec.

2693 Donc, on anticipe quelque part au cours de l'année 2005, ça devrait être finalisé et l'ensemble des centres du Québec devrait être en mesure de répondre à un niveau qualitatif de service.

2694 CONSEILLER DEMERS: Ce niveau qualitatif-là, est-ce que c'est le E911? Est-ce que c'est techniquement à ce que vous travaillez?

2695 M. MONTPETIT : Au niveau des équipements, c'est au niveau des protocoles de fonctionnement, c'est au niveau de la gestion, c'est au niveau de la formation du personnel, ça englobe l'ensemble des fonctions d'un centre d'appels d'urgence 911 au Québec. On fait... on révise l'ensemble du fonctionnement des centres d'appels d'urgence 911 et, également, le financement.

2696 CONSEILLER DEMERS : Merci. Merci beaucoup. Merci, monsieur le président. Merci, messieurs, madame.

2697 LE PRÉSIDENT : Merci. Madame la conseillère Pennefather.

2698 CONSEILLÈRE PENNEFATHER : Oui, juste une clarification sur la dernière question de mon collègue. C'est en effet le 911 que vous visez à la fin de tout, pas seulement le 911, le E-911.

2699 M. TREMBLAY : Oui, oui.

2700 CONSEILLÈRE PENNEFATHER : Merci.

2701 LE PRÉSIDENT : Merci beaucoup. Merci beaucoup, messieurs, madame. Madame la Secrétaire.

2702 THE SECRETARY: Thank you, Mr. Chairman. I will now call on the Yak Communications Canada Inc. to make its 20 minute presentation.

PRESENTATION / PRÉSENTATION

2703 MS FERRARO: Good morning, Mr. Chairman, and Commissioners. My name is Valerie Ferraro and I am the president of Yak Canada. Here with me today is Ben Rovet our senior legal or regulatory counsel and Ken Carrier, our vice president of Product Development, specifically VoIP.

2704 Some of you may know me from a previous role I had as the Bell Canada Carrier Services Group. In those days, I was on the frontline between the ILEC and the competitive industry. I am therefore no stranger to regulatory issues that can develop and the battles that can ensue between the ILECS and the competitors.

2705 My purpose here today is not to look backward, but rather to look forward. As you have heard, VoIP technology is an exciting development for the Canadian telecommunications industry. Yak is making substantial commitment to this market. Within the last two weeks, we've launched our VoIP product called "World City Voice" in both Canadian and US markets. Although, it is in the very early days, we are encouraged, very encouraged with the response so far by Yak's customer base.

2706 In the limited time I have before you today, I wish to cover four topics. First, I'll give you a brief overview of Yak and its business. Yak has not traditionally been an active participant in CRTC deliberations. As such, we're probably a bit of a question-mark to many of you, but we do expect that you will become more familiar with us in the future.

2707 Next, I will address three regulatory issues that we consider to be particularly important in these proceedings. We will, of course, address additional issues when we file our final arguments next month. The three issues that we wish to address are the value of imposing a VoIP access condition in ILECS and cable companies. The importance of requiring the ILECS to offer internet access on a stand-alone basis and on bundles from their primary exchange service, and the value in preserving the Commission's equal access rules in a VoIP world.

2708 Yak is a Canadian based reseller. The company was founded in 1999 by Canadian entrepreneur Charles Zuegner. We are best known for our dial around or casual hauling product, a consumer dials 1010 Yak, 1010-925 to gain access to our long distance network. We provide a good quality connection, very attractive pricing and simplified billing. Approximately 800,000 customers regularly use Yak to call within Canada and abroad.

2709 It sounds straightforward, but building a successful business is never easy. From our dial around and other services we generate revenues of about $110,000,000.00 annually. We are profitable and do not carry any long term debt. By any measure, Yak is a Canadian success story and has achieved this success during the brutally tough times for start-up telecom ventures.

2710 You can find more information about Yak at our website, Yak dossier. We also have listed company and you can access of various disclosure documents that we file with the securities regulators.

2711 Yak launched our VoIP product world city VoIP on September 8th 2004. Yak has made a substantial investment in time, effort and money to launch its new VoIP service and we certainly do not subscribe to the view as expressed by Sash... proceeding that establishing a VoIP business is as easy as falling off a log. For us, it was a bit of a swag. We have made this investment because we believe that VoIP is a logical extension of our existing business. Many of our 800,000 customers, particularly those that make overseas calls are strong supporters of the company. We record to offering these customers a valuable new service with many attractive features. Consumers can welcome a new and very competitive supplier of local telephone service.

2712 Yak recognizes that the regulatory framework for VoIP will be crucial and will be a crucial factor in the success or failure of this VoIP initiative. In this regard, we have been comforted by the Commission's preliminary position, as expressed in Public Notice 2004-2.

2713 Still, there are many important issues that will be addressed in this proceeding and many of the Commission's preliminary positions are under attack. With this in mind, we felt that we wanted to participate and express our views.

2714 Let me now turn to the first of the three regulatory issues that I will address in this oral presentation.

2715 As an independent VoIP provider, Yak is understandably concerned that it not be subject to discriminatory treatment by the two main suppliers of broad band service to the homes, namely the ILECS and the cable company. For this reason, we ask the Commission to impose a VoIP access condition.

2716 Simply put, the VoIP access condition states that "Consumers should have access to the VoIP provider of their choice and on reasonable terms and conditions. The VoIP access condition would be imposed on ILECS and cable companies using the Commission's authority under section 24 of the Telecommunications Act."

2717 There is a precedent for the Commission imposing such an access condition. Last summer, the Commission imposed an MDU access condition on LECs as a means of assuring that consumers and multi-tenant buildings can gain access to the LEC of their choice. Then, as now, the Commission faces concerns that certain operators were undermining the competitive market with discriminatory and preferential arrangements designed to foreclosed competitors.

2718 Imposing a VoIP access condition is an important first step, but it is also important to expand on what the VoIP access condition means in particular circumstances.

2719 THE CHAIRPERSON: Excuse me, Mrs Ferraro. I think if you just pushed the mike a little farther from your mouth, we wouldn't get that knocking sound. I think you still have to turn it on, but just distance it perhaps a little bit from...

2720 MS FERRARO: I didn't hear the knocking sound. Otherwise, operators will be left to interpret it as they decide, leading to further wrangling before the Commission. Accordingly, in our comments, we set on a number of examples of how the VoIP access condition should be applied.

2721 Consider, for example, the situation that what arrive if ILECS and cable companies could impose contract provision on a broad band customer that prevents the customer from using a competitor's VoIP service. Such a contract provision would clearly be in the interest of the ILECS and cable companies, but it would succeed in strangling the VoIP industry before it started. Would they do this? Bell doesn't believe so. It tells the Commission in CRTC interrogatory five that market forces will discipline broadband suppliers from engaging in such anticompetitive conduct and further rules are not needed.

2722 But we are sceptical. History has shown that the dominant suppliers play hardball with competitors and they regularly overstep the permitted bounds. We have provided a recent example of such overstepping in Yak's response to Primus interrogatory one. We enclosed a letter from TELUS to a long distance customer imposing a contract provision prohibiting the customer from using a dial-around service. Further, the letter authorizes TELUS to block all such calls. Thus here, we have the monopoly supplier of a local telephone service using its monopoly to block calls to competitors and thus advantage its own long distance service.

2723 At a stroke, TELUS demolished the Commission's equal access rules prohibiting customers from using these services of Yak and other suppliers.

2724 Another concern that a VoIP access condition should address is discriminatory quality of broadband service. A broadband service provider can give itself a large competitive advantage if it can either degrade the internet service furnished to customers that use a competitor's VoIP offering or improve the internet service furnished to customers that use its own internet offering.

2725 There are many ways in which quality of service can be managed by the internet service provider. One such way is by tinkering with the packet priority. One of the perils of internet telephony is choppiness in voice quality. This choppiness arises because the internet packets carrying the voice message can be slightly delayed. Although the delay is seldom a problem when conveying text or picture messages, it can be a problem for voice communication. An operator that is able to manage packet traffic can therefore manage voice quality.

2726 We believe that the VoIP access condition should require ILECs and cable companies to make available to competitors the same quality of internet service they make available for their own VoIP offerings. There can be no justification for these dominant broadband suppliers to reserve to themselves alone packet prioritization or any other technical feature that can improve service other than to foreclose competitors.

2727 If an operator does offer quality of service related features, they should be available on non-discriminatory terms to competitors. There are many precedents where the Commission has imposed such non-discrimination requirements on dominant operators. In the same vein, they should be prohibited from degrading broadband service available to their competitors. You might be tempted to think that this is a remote possibility, but then I suspect that you may never have expected an ILEC to block access to dial-around long distance service. The sad fact is that this sort of conduct does take place and only the Commission can prevent it.

2728 A third example of conduct to be deterred by the VoIP access condition is misuse of information about broadband customers. ILECs, in particular, and cable companies can use such information to disadvantage competitors and give themselves a competitive advantage. For example, the ILEC will know immediately when a customer decides to switch to a new supplier of local telephone service, either the customer will want to transfer its number or to disconnect service. Either event is an alarm bell ringing a call to action for the ILECs' marketing team.

2729 In other similar context, the Commission has established win back rules to prevent such conduct by ILECs. We believe that such win back rules should be implemented in a VoIP environment and applied to the ILECs. In the same vein, it is possible for a broadband provider to monitor packet traffic and discern if the customer is using its broadband connection for voice traffic. Such monitoring gives the broadband supplier valuable marketing intelligence that no competitor can match. As long as the ILEC and cable companies remain the dominant broadband providers, they should be prevented from using traffic information in this manner.

2730 To sum up, we strongly believe the Commission should impose a VoIP access condition using its section 24 authority. When the Commission imposed an interrogatory on our proposal to other participants in this proceeding the response was strongly in support, except for a few predictable parties. Such a condition will go a long way to bringing about a competitive VoIP environment.

2731 The second issue we wish to address is the ILEC practice of bundling high speed internet service with PES. Today, consumers do not have a choice. If they want DSL service, they are forced to take the ILECs' PES service as well. There is an exception. The Commission has recently ordered the ILECs to offer standalone DSL where a CLEC uses the ILECs' unbundled loop to offer PES. But this is a recent development with very limited penetration. Yak strongly urges the Commission to end this practice, failure to do so will preserve the ILECs in the dominant position in local telephony that they enjoy today and the opportunity to bring meaningful competition to the local market will be substantially compromised.

2732 The ILECs control a huge installed base of DSL customers, all of which are potential customers for VoIP service from competitive suppliers. However, these customers already take PES from the ILECs as a precondition to obtaining DSL service. Why would a customer that is already paying for PES then take and pay for an equivalent telephone service from a VoIP service provider? The obvious answer is, except in very exceptional circumstances such as where the customer wants a second line, there is no incentive for such a customer to take service from a competitive VoIP service provider.

2733 We understand that historically there has been a technical reason for the forced bundling of DSL and PES. Whatever its origins, it is now abundantly clear that this technical reason is no longer an impediment. Two large U.S. ILECs, Quest and Verizon, have recently begun to offer a naked DSL service. Even Bell says that the technical issue is not a problem. Indeed, Bell states that it will offer naked DSL, but without any serious justification for delay, it is waiting until later in 2004 or sometime in 2005 to do so.

2734 The Commission might thus be tempted to say that the problem will solve itself. We believe this would be a mistake. We do acknowledge TELUS' commitment to introducing then naked DSL that they brought-up yesterday in their submissions. However, we do believe that a Commission deadline is necessary to bring about such a result. Second, without Commission direction the ILECs could decide to price the unbundled components at levels that foreclose meaningful competitive entry by VoIP providers.

2735 For example, an ILEC that levied a charge of say $50 for DSL when combined with PES, but $70 for standalone DSL would clearly deter many many customers from switching from ILEC supplied PES to VoIP. The ILECs might argue that such a pricing strategy would be counter productive as the ILECs would then abandon the naked DSL market to the cable companies. However, this argument does not hold water, as the ILECs obviously do not care very much about the naked DSL market given how long they have dragged their feet on even offering such a product to Canadian consumers.

2736 Accordingly, the Commission should impose restraints on unbundled pricing by the ILECs in order to prevent such anticompetitive discrimination. The most straightforward approach would be to impose a condition under section 24 of the Act to require the ILECs to charge no more for DSL service on an unbundled basis than they charge as part of a PES bundle.

2737 We recognize, however, that the ILECs may argue for some uptake in prices for standalone services as compared to bundled services. If the Commission is persuaded by these arguments it may consider performing reverse engineering of the Commission's preliminary approach to bundles outlined in 2003-10. In that public notice the Commission indicated that an acceptable bundled price is one that cannot be discounted by more than 10 percent off the non-tariff component than the individual component prices. Such an approach would permit the ILEC to charge not more than 10 percent for standalone DSL than when DSL is bundled with PES.

2738 Equal access is the third issue we would like to address today. Yak is an equal access long distance provider. As explained earlier, we are best known for dial-around service. However, we also offer one-plus long distance service on a pre-subscription basis and have about 6,000 customers subscribed to that service. As a long distance provider we know that the Commission's equal access rules have lead to a competitive market with attractive consumer prices.

2739 Yak, for example, currently offers long distance service to Canada and the U.S. at only .05 cents a minute. This is less than half the rates of a few years ago and but a fraction of the rates of 1992 when the Commission first ordered Bell Canada to offer equal access to competitors. By contrast, long distance calling by cell phone, where no equal access rules apply, remain very expensive. Indeed, prices have seen very little reduction in recent years and in some cases even seem to be going up. Rates of .20 to .25 cents a minute are not unusual with airtime charges in addition. Only Microcell has evidenced much interest in reducing long distance prices and that company seems destined to be swallowed-up in a merger.

2740 Bell argues that the equal access rule should be removed for VoIP providers, including most importantly for itself. It believes that, first of all, implementing equal access would be costly and complex; two, there would be little demand; and three, that it is unnecessary. In response, we believe that equal access will not be costly or complex for the LECs or CLECs to implement. All ILECs and CLECs provide equal access today. These operators are well able to implement equal access for VoIP offerings.

2741 Nortel tell us in interrogatory one from Cybersurf that there is no technical reason why a LEC cannot provide equal access. Indeed, Call-Net, a CLEC, has already announced that it will do so.

2742 Second, we believe there will be demand. One should be cautious in assuming that today's flat rate pricing will never change. In any event, most overseas calling is not flat rated and equal access can be a valuable consumer safeguard for such callers. Third, equal access does provide demonstrable consumer benefits. The Bell company claim that it is unnecessary, is self-serving and an attempt to roll back the clock on competition. We cannot believe the public interest is served by such a step.

2743 In short, the equal access rules work and they have provided real consumer benefits. There is no reason to destroy the equal access rules as some incumbents warrant.

2744 Today the Commission requires ILECs and CLECs and their affiliates to offer equal access. These requirements should be maintained. For completeness, the Commission should impose similar requirements on cable companies and their affiliates in their prime operating territories. Today unaffiliated resellers are not subject to equal access rules. We do not believe that this requirement needs to change.

2745 This concludes our oral presentation. To sum up, we would urge the Commission to implement a VoIP service access condition to prevent ILECs and cable companies from foreclosing competitive entry into the VoIP business. Second, we urge the Commission to compel the ILECs to offer DSL unbundled from PES and with fair pricing for naked DSL. Third, we urge the Commission to retain equal access in a VoIP world. These key regulatory steps are, in our view, essential to allowing VoIP providers a fair opportunity to participate in the market. Thank you.

2746 THE CHAIRPERSON: Thank you very much, Ms. Ferraro and gentlemen. I found both your written submission and your oral presentation very clear. There are a few follow-up questions though that I would want to address to you and I will base them on your oral presentation since you have just finished that and it is fresh in your mind.

2747 Page five, at the bottom where you are concerned about the potential for the degrading by a broadband service provider of internet service, and you talk about tinkering with packet priority through managing traffic. I am trying to understand how this would work in practice. I assume your service is similar to the Primus service and Vonage in the sense of providing an adaptor of some sort that plugs into the computer and you then gain access through broadband, access already there, is that correct?

2748 MR. ROVET: That is right.

2749 THE CHAIRPERSON: So, at what point in the journey is the tampering or tinkering likely to occur?

2750 MR. ROVET: I will try this first. I believe where it would start is in the journey from the customers' voice packets to the underlying ISP, in this case we are saying it would be Bell or one of the cable companies, in the journey to their router. It could be dropped or probably more likely just not getting packet priority, so it would be choppy getting there, so before it gets to the internet.

2751 THE CHAIRPERSON: If I could just stop you there. So, what you are saying is they would instruct the router when it sees a VoIP call to drop it or mess it up?

2752 MR. ROVET: That is what we are worried about, yes. And I am saying is how... and can maybe help out here but, how it would work is the SIP protocol would be in the packet, so that would be one of the ways they could identify it, that it is a VoIP call, these data packets, is sort of there is a tag on the packet saying this is SIP and it would be an easy way for them to identify that.

2753 THE CHAIRPERSON: I assume that the quality of your submission reflects the quality of your engineering. And from an engineering point of view have you had this possibility confirmed as a real likelihood? Mr. Kerry, perhaps you can help us. Are you an engineer?

2754 MR. KERRY: No, I am not an engineer, but I am responsible for the service. What I would say is that we haven't experience it directly yet, so we don't have any evidence to directly say that this is something that has happened. However, from a technical standpoint, it is something that could take place. What we want to ensure is that when we do have ultimate VoIP providers using an incumbent's internet service is that measures are not taken such that our service is degraded.

2755 Now certainly, the internet itself does have its own quality service issues in VoIP on its own. So, the issue here is not the underlying technical issues that are within internet transport itself. It really has to do with the local ISP and the potential of that local ISP could affect the grade of service.

2756 THE CHAIRPERSON: I understand that point. I guess if you are in the competitor business over the last decades you will lose -- just because you are paranoid doesn't mean they are not trying to get you.

2757 MS VAERIE FERRARO: It took such a detour... it took a (inaudible) to get here.

2758 THE CHAIRPERSON: Right, but by the same token, do you have any evidence from your own experience or sound evidence from other parties in the game that this has occurred in any jurisdiction?

2759 MR. ROVET: We have only been up for about two weeks, so we just haven't had that opportunity. But, I mean, the evidence in this proceeding has given us comfort or discomfort if you will that there are parties that have identified this possibility. A lot of Nortel's responses have pointed out that the technical capability exists. I believe the Merrill Lynch report that was filed as evidence by Allstream and the companies pointed out that this was a possibility that I think they mentioned cable companies may engage in.

2760 THE CHAIRPERSON: So, assuming a condition like there were imposed, the policing of compliance with it would presumably be a highly technical exercise to ascertain protocols that the underlying service provider was using and the like in order to make a determination as to whether your call droppage so to speak was significantly higher than their call droppage or call droppage from any customers and the like?

2761 MR. ROVET: Yes, I believe we would have to, and Primus has evidenced, they have indicated that they have actually invested in equipment to monitor this and I think we would likely have to do the same thing.

2762 THE CHAIRPERSON: Okay, next question is your unbundling point. You probably heard TELUS' commitment, early 2005, and we have a letter on file from Bell in another proceeding which indicates March, 2005 as the time for what they refer to as dry loops. Is your point that it shouldn't take until March, because that would appear to be roughly the target of both the largest ILECs?

2763 MR. ROVET: Our point more is that it should be mandatory, not voluntary. So we are encouraged by that news and that probably would be, I think in the circumstances, a reasonable timeline. But we would just prefer that it be in writing so to speak and be mandatory.

2764 THE CHAIRPERSON: Okay, I understand. And then finally, on your final condition proposed, the equal access part, I guess what you are saying... you offer 1-Plus long distance service, as you say, if you are pre-subscribed. So the problem isn't dial-around, of course, because a VoIP subscriber could presumably dial-around 10-10 as can anyone else. So your idea is to require that you have the 1-Plus pre-subscribed capability and then VoIP customers have that equal access opportunity? Is that correct?

2765 MS VALERIE FERRARO: That is correct.

2766 MR. ROVET: Exactly, as Call-Net's offering provides.

2767 THE CHAIRPERSON: Okay, well I am sure we will hear from the ILECs on that. Those are basically the only questions or clarification that I require. Counsel has one question.

2768 MS PINSKY: I just have one question of clarification actually from your written submission of June. In your submission at page 20 you state that cable companies who would provide VoIP services would not be subject to CLEC obligations. I was just wondering if you could expand on that?

2769 MR. ROVET: Yes, I think we are assuming that there is a possibility, and it doesn't look like this is happening at least with Shaw and Rogers, that a cable company could conceivably enter the local services market without becoming a CLEC through VoIP, like what we are doing or Vonage or Primus is doing. It doesn't seem that that's the way it is going, but I think it could be a possibility they could enter the market that way.

2770 MS PINSKY: So, it is your view that the current rules would allow them to be a carrier and a reseller at the same time?

2771 MR. ROVET: I think the current rules would let them... yes, basically without becoming a CLEC and fulfilling all the CLEC obligations.

2772 MS PINSKY: Thank you.

2773 THE CHAIRPERSON: Thank you very much.

2774 MR. ROVET: Thank you.

2775 THE CHAIRPERSON: Madam Secretary.

2776 THE SECRETARY: I will now call on Call-Net Enterprises Inc. to make its presentation.

2777 THE CHAIRPERSON: Please proceed.

PRESENTATION / PRÉSENTATION

2778 MR. BRAZEAU: Good afternoon, Mr. Chairman and Members of the Commission. My name is Jean Brazeau, I am Senior Vice-President of Regulatory Affairs at Call-Net Enterprises. With me today is Don Bowles, he is a Vice-President of Regulatory Affairs, and we will be dividing up our presentation this afternoon.

2779 Unfortunately, Mr. Bill Linton, President and CEO of Call-Net who was scheduled to appear here today cannot be here, but he does certainly send the Commission his best wishes and good luck in its deliberation in this important matter.

--- Laughter/ Rires

2780 M. BRAZEAU : J'aimerai, d'abord, vous remercier pour cette occasion que vous nous donnez aujourd'hui de nous adresser au conseil face à face. Le danger dans le cas d'instance comme celle ici, en utile, en quelque sorte par les médias, la technologie et les milliers de pages de preuve et des réponses aux demandes de renseignements et de parfois de perdre de vue des questions de politique publique importantes.

2781 Je crois que cet volé oral de l'instance public permet de simplifier les choses et de porter notre regard surs les aspects importants de la politique publique.

2782 The first point I would like to raise today with you is that that IP is an enabling technology. There is unquestionably a lot of hype surrounding IP based services and the provision of VoIP services using IP technology in particular. IP has been widely described as a disruptive technology. This is a useful term for those parties who are pushing for deregulation of the telecommunications market. It lends itself to the argument that the world as we know it is over, that the existing public policies no longer apply, that the provision of VoIP services using IP technology is a new and different beast and that regulators should step aside.

2783 Proponents of this view not only claim that IP technology is capable of rectifying the existing market sharing balances that exist in the provision of local exchange services, but they assert that they should be accepted on faith in advance of the facts. I don't see things this way. I see IP as an enabling technology and I see the provision of VoIP services using IP technology as simply a new way of providing a voice service with some extra bells and whistles.

2784 As the Commission is aware, telecommunications carriers have gradually been introducing IP into the transmission network for a number of years now. This has been part of a long-term transition of telecommunications networks from analogue to digital technology. IP in conjunction with packet based networks and broadband access is the means whereby carriers can now deliver the long promised convergence of voice, data, video on an efficient basis. It is part of an ongoing technological evolution of the telecommunications networks. Like the introduction of digital technology in the early 1980s, IP will lead to network efficiencies and the introduction of new services and features.

2785 Viewed in this context IP is a enabling technology, not a disruptive one. Whether or not it will ultimately correct existing market power imbalances in the industry is highly speculative at this point in time.

2786 The second point that I would like to make is that when we talk about the provision of VoIP services using IP technology we are talking about the provision of a service not a facility. While this may appear to be an obvious point, it has important ramifications in the context of this proceeding. IP technology can be used in conjunction with many different types of facilities, including copper loops, coaxial cable, wireless and satellite. The service we are talking about in this proceeding is a VoIP service.

2787 This services is delivered over packet switch networks that have been in existence for some years now. The protocol used in this case is the internet protocol. This protocol enables calls to run over networks used in internet as well as other packet switch networks. It does not alter the fact how voice communication is being transmitted. Like the introduction of digital technology in the 1980s, the introduction of IP technology may provide a more economical means of providing VoIP services than has previously been the case and it offers the potential to create some enhanced calling features, it also opens the door to combining voice with data and video services.

2788 By way of example, IP technology appears to provide the means for cable companies to enter the telephony market using their own hybrid fibre/coax networks. The introduction of IP technology in the ILECs network may also lead to greater efficiency in providing voice services and other communication services.

2789 Viewed in this context, voice over internet protocol is simply a voice service that rides on packet switched networks using the IP protocol. The service provided is essentially the same, it is just riding on a different network that enables more features and connectivity with the internet.

2790 Now, the third point that I would like to make is that VoIP services provision using IP are a substitute to primary exchange service. I should process my comments by saying that I am using the term VoIP in the same way that the Commission has done in its public notice to exclude pier to pier VoIP services provided exclusively on the internet.

2791 In my view, the Commission has a right. Once a customer is provided with the means to make and receive real time voice calls to and from the universe of telephone user using a NAP address, he or she has received essentially the same functionality as primary exchange service. It is really irrelevant what protocol or network technology is used to transmit the communication. The core attributes of the voice communication between two or more parties is the same regardless of whether it is delivered over copper pair, using analogue or digital technology, or packet switch network using the internet protocol.

2792 Whether a customer will switch from existing primary exchange service to VoIP service depends on a number of factors including price, quality, reliability, supply and service features.

2793 I fully expect that some portion of the telephone users will switch to VoIP service provision over IP and will use this service as a substitute for primary exchange service. But we will have to wait to see how popular a substitute it is or how widely the LECs embody IP in their own networks.

2794 The fact that IP technology provides the means to enhance voice services by adding new features does not alter the fact that VoIP services provision over IP based network are a substitute to test. These addition features may prompt some users to switch from traditional local services to VoIP services, but will not undermine VoIP as a substitute to the primary exchange services.

2795 This is really no different from the situation 20 years ago when digital local services were introduced. While digital switch enabled new call management features to be introduced in conjunction with local services such as voicemail, call forwarding and call ID, this does not mean that digitally provided local services were suddenly no longer considered to be primary exchange local services. Local services were enhanced, not eliminated.

2796 Moreover, telephone subscribers did not switch from analogue to digital primary exchange services, it was the ILECs that determined how and when to deploy the new technology in their networks. Subscribers merely decided whether to subscribe to the new call management features that the new technology enabled. The same will be true, we believe, with new IP based features provided in conjunction with VoIP services. They enhance the use of voice services, they do not alter the fact that VoIP services provision using the internet protocol and NAP addresses are a substitute to primary exchange services.

2797 The fourth point that I would like to make is that the ILECs remain dominant in the provision of primary exchange services. While one would hope that the introduction of VoIP services might erode the incumbents' dominance over time, we will have to wait to see whether that happens prior to taking any steps to lighten the ILECs' regulatory constraints.

2798 It should be recalled that when the Commission first opened the local market to competition some seven years ago the ILECs predicted a rapid decline in market share and a lots of their dominance in the local market. Thank goodness that the Commission did not buy into those rosy projections. It would be equally dangerous to forbear from regulating the ILECs VoIP services at this early stage. As the Commission is all too aware, the introduction of competition in the local market has been a slow and painful process, Call-Net knows because it bears the battle scars. While progress is continuing on this front, it remains slow and the ILECs continue to prove themselves extremely adept at retaining a market share through a variety of rear guard actions.

2799 It is only through the Commission's persistence in maintaining and strengthening its regulatory safeguards on the ILECs that any competition has managed to emerge. These efforts to create an environment that is conducive to local competition are still ongoing, as evidenced by the ILECs' reluctance to unbundle DSL services and provide CDNA services. Now is clearly not the time to abandon these efforts by giving the ILECs the green light to provide local VoIP services using the internet protocol on an unregulated basis. It is vitally important that the Commission hold its course and continue to regulate the ILECs' primary exchange services whether they be provided using analogue, digital or IP technology.

2800 Again, this is fully consistent with the Commission's technology neutral regime governing local competition. If it turns out after a few years that the ILECs are no longer dominant in the provision of local exchange services, whether due to the introduction of IP based VoIP services or for some other reason, they will be able to apply for forbearance in accordance with the Commission's well-established test, market dominance. This approach is fully consistent with the approach taken in the past to the deregulation of the ILECs' inter-exchange services as well as the Commission's own approach of regulating the industry as it finds it, not as some party projects it might be.

2801 Now, against this backdrop it seems obvious to me that the Commission's preliminary view of how to treat VoIP services for regulatory purposes is correct. VoIP services provision using the internet protocol in conjunction with NAP addresses and PSTN access are a clear substitute for primary exchange services. The ILECs remain dominant in the provision of primary exchange services and they should remain regulated in the provision of these services, including any IP based substitute until such time that they are no longer dominant. Existing regulatory regime for local competition is designed to address the ILECs' dominance and to provide the lighter form of regulation for CLECs and resellers. However, the efforts to breakdown the barriers to entry in the local market are still ongoing and have yet to achieve their intended result.

2802 The local competition regime established by the Commission in 1997 is supposed to be technology neutral and should apply equally to IP based local services such as VoIP. Failure to apply this regime to providers of VoIP services using the internet protocol could be catastrophic for the development of local competition in Canada. Therefore, the prudent course is for the Commission to wait and see if sufficient competition actually develops to eliminate the ILECs' dominance in the provision of local exchange services, including any such IP based services and only then to consider forbearance of the ILEC services.

2803 This approach is fully consistent with the Commission's treatment of other services, such as long distance services and inter-exchange private lines and is totally consistent with the regulatory framework set out it the Telecom Act.

2804 MR. BOWLES: A number of parties, including Call-Net, have attempted to categorize VoIP services in order to simplify the regulatory analysis. Generally speaking, there appears to be widespread support for the Commission's preliminary view to exclude pier to pier services from the regulatory framework for VoIP services. Since pier to pier services use the internet exclusively and do not access the PSTN, they are appropriately dealt with as internet services.

2805 At the other extreme, there are VoIP services provided over the ILECs' existing local exchange networks where that network is simply upgraded to a packet switch IP based technology. There is general support for the view that for regulatory purposes these services should be treated in the same way as the ILECs' primary exchange services. Call-Net notes with approval TELUS' statement that, "It does not seek to escape local exchange regulation in its traditional incumbent territory merely by changing the technology inside its network."

2806 Unfortunately, Bell Canada and its alliance do not appear to share this view. Bell's approach appears unreasonable in contrast to the position taken by TELUS and most other parties. It ought not to be possible to avoid regulation simply by upgrading one's network.

2807 In between these two bookends of pier to pier and end to end IP voice services there is another category of services that Call-Net has called hybrid VoIP services and TELUS has called VoIP services provided on an access independent basis. This category includes voice services that utilize the public internet for either access or egress, and it is this category of service which has attracted the most comment from interested parties and the clearest division of opinion.

2808 The ILECs have argued for forbearance of this class of service, either because it touches the internet or because the service provider might not have to provide access facilities as part of the service. Call-Net, however, believes that the focus of the Commission's analysis should be on the ILECs' market power and dominance in the provision of local services, not on whether access facilities are offered as part of the service or whether the ILEC owns those facilities.

2809 As I have already discussed, the ILECs have attempted to avoid regulation of their VoIP services by arguing that VoIP is not a substitute for primary exchange service. This leads to their claim that they have no market share and hence no market power in this narrowly defined market. I have already addressed the fallacy of that argument.

2810 A second approach by the ILECs has been to confuse the issue of facility provision with the issue of service provision. According to this argument where VoIP is provided separately from an underlying access facility, such as when an internet access is used rather than a local loop, the VoIP service should be unregulated. The rationale for this position is that the ILEC dominance arises out of their former monopoly in the provision of local loops, which are not included in the VoIP service. This attempt by the ILECs to muddy the waters by injecting a facilities analysis into what should be a services analysis should rejected.

2811 While it is certainly true that the ILECs' dominance in the local exchange market has been preserved in part by the high cost of replicating local exchange facilities, this dominance was originally derived from the ILECs' century long monopoly in the provision of local exchange services. It is the ILECs' dominance in the provision of these services to end users that attracts regulation, such as the requirement to file tariffs and to ensure that rates are just and reasonable.

2812 While monopoly, ownership and control of access facilities are the root causes of this dominance and may be of historical interest, the ILEC dominance in the provision of local services remains and must continue to be addressed by the Commission until such time as it ceases to exist. It is therefore immaterial whether or not ILECs provide a local access facility in conjunction with their VoIP services. It is the services which must be regulated. The ILECs are free to use a number of different types of facilities, different local services, including VoIP services. As mentioned above, these facilities could include fibre, coax cable, copper loop, satellite or wireless. The ILECs may be dominant suppliers of some, but not all of these access facilities.

2813 However, this does not alter the fact that the ILECs remain dominant in the provision of local exchange services, which include VoIP services. It is also immaterial to this analysis whether or not the ILECs offer their VoIP services over their own or over third party facilities or whether customers contract the third party to provide this access. Until the ILECs' dominance in the provision of local exchange facilities is eliminated they should continue to be regulated in the provision of these local services.

2814 I would like to address what I would call the scare tactics used by parties who favour deregulation of VoIP services. These parties are suggesting that Canada will fall behind the rest of the world in the provision of IP based services if the Commission adopts its preliminary view and regulates these services. The ILECs take this argument a step further by stating that they will have their hands tied while trying to compete with unregulated entities, including foreign controlled companies such as Primus and Vonage. This is not a new argument.

2815 A similar argument was made by the ILECs in 1997 when they opposed asymmetrical regulation of the ILECs and CLECs in the provision of local exchange services. The ILECs' dire predictions made in 1997 have not come to pass and they will not come to pass this time. The type of regulation embodied in the Commission's local competition regime does not inhibit technological innovation and the Commission's price cap regime is designed to encourage and reward the ILECs for using more efficient technologies. There is little danger of the ILECs falling behind technologically or of Canadians being poorly served as a result of the Commission's regulatory policies.

2816 On the other hand, there is a far greater danger of the ILECs re-monopolizing the local market if they are permitted to provide VoIP services on an unregulated basis.

2817 Another argument advanced by the ILECs and particularly by Bell Canada, is that the internet has developed successfully without any regulation by the CRTC and that regulation would threaten its success. This argument is factually wrong. The internet has not developed in Canada in a regulatory vacuum. Although the Commission declined to regulate content on the internet under the Broadcasting Act it has not declined to regulate access to the internet. Regulatory intervention has been required on a number of occasions to ensure that non-discriminatory access is provided to both the ILECs' and the cable companies' high speed internet access facilities. These regulatory interventions have resulted in access conditions, resale requirements and tariff rates. Absent these intervention, they ILECs and cable companies could have run a cosy duopoly on internet access to the detriment of end users and other service providers.

2818 Furthermore, the internet does not run on ether, it runs on networks and, in Canada, those networks are regulated to varying degrees by the Commission. Absent the Commission's policies of non-discriminatory access and its interconnection policy of encouraging a network of networks, it is doubtful that the internet would be as opened and as successful as it has been in this country.

2819 Moreover, the Commission is not trying to regulate an internet service in this proceeding. Pier to pier services will remain unregulated. VoIP services, as defined by the Commission, are not internet services, they are hybrids that may touch the internet, but they rely on traditional telephone numbers and the PSTN to be useful to consumers.

2820 The final points that I would like to make concern the provision of VoIP services by the cable companies. While not directly raised by the Commission as a separate topic for discussion in this proceeding, it has been the subject matter of interrogatories and has been raised by many of the parties.

2821 For its part, Call-Net has a number of concerns relating to Cable Co entry into the local exchange market as a provider of VoIP services, as a dominant supplier of high speed internet access services and as an incumbent monopolist in the provision of terrestrial broadcast distribution services.

2822 Turning first to the provision of local exchange services, including VoIP, the cable companies should be treated the same as any other new entrant: they should have to register as CLECs and comply with the regime governing CLECs in the same way as Call-Net and other local exchange carriers.

2823 Turning to the issue of access facilities, the Commission has already determined in Telecom Decision 99-8, that the cable companies possess significant market power in the provision of high-speed Internet access services. It was for this reason that the Commission decided to regulate these services.

2824 Call-Net believes that this situation continues today, with the cable companies and the ILECs enjoying a duopoly in the provision of high-speed Internet access. For these reasons, Call-Net agrees with Bell Canada that some of the regulatory requirements applicable to the ILECs, because of their dominance in the provision of local access facilities, should also be extended to the cable companies. Principal among these obligations are the requirement to provide nondiscriminatory access to their networks and to unbundle local access facilities at cost-based rates. These principles include an obligation on the cable companies to make their cleared Q of S channels available to competitors at cost-based rates.

2825 Finally, it is important that the cable companies' CLEC affiliates not obtain facilities or services from the cable companies at preferential rates. The cable companies' dominance in most BDU markets dictates that strict safeguards should be put in place to prevent their CLEC affiliates from competing unfairly in the local exchange market.

2826 All transfers between these entities should be transparent and the same services and facilities should be made available to competitors on the same terms and conditions.

2827 I believe these conditions on cable companies will facilitate the development of a fully competitive marketplace.

2828 Again, we would like to thank you for the opportunity to make this submission. If there any questions, we are now willing to take them.

2829 THE CHAIRPERSON: Thank you.

2830 Vice-chair Wylie.

2831 COMMISSIONER WYLIE: Thank you, Mr. Chairman.

2832 Good afternoon. With or without hype or hyperbole, your position is clear on most of the issue, so I only have one question.

2833 At the beginning of your oral presentation today, at page 3, you talk about the fact that the service is a voice service and it doesn't matter how it's transmitted or what its attributes are, I gather -- I read here -- it does not alter the fact that a voice communication is being transmitted. Similarly, at page 4, that it's really irrelevant what protocol or network technology is used to transmit a communication, it's a voice communication, et cetera.

2834 There appears to be not much use in asking you to tell us -- to discuss the difference that has been brought forward, for example, at the table the Companies filed showing the differences between the two services that the chairman referred to with the Companies yesterday, because it's apparent from your written submission, and today's oral presentation, that to you it's equivalent.

2835 What I would like you to comment on is -- and taking also into consideration your reference to the comment that the Commission regulates the world as it finds it -- what's the difference between voice communications involved here, the market as we find it and the fact that the Commission, in 1984, chose not to regulate voice communication provided by mobility companies, because the world, as it found it, was nothing, the attributes were voice communication.? So what's the difference between that situation and today?

2836 MR. BRAZEAU: I think there is a huge difference between VoIP services, as it relates to the substitutability to PES and wireless. We have had wireless services now in place for 20 years and even though we have seen rate increases for local services, we have never seen the cross-elastic effects of people moving from their primary exchange service, their wireline primary exchange services, and go after wireless services. So I think that, unlike VoIP, wireless is not really a substitute for PES.

2837 We are in the PES business. My competitors here, that own both wireline services and wireless services, have never called to win back one of my customers by saying, "Give up your Call-Net local service and here is a wireless service for you". You don't do that.

2838 But what we are concerned is that, with forbearance of VoIP, that would certainly be the response by the ILEC, to go after the customers they don't have, because they are not going to be selling their own VoIP services to their own customers, they will be selling VoIP services to my customers.

2839 So you can see that I think the substitutability of the two services, a wireless and wireline, are just not there, but they are there for VoIP and primary exchange services.

2840 COMMISSIONER WYLIE: So that is, for you, the world as we find, despite the differences --

2841 MR. BRAZEAU: For me, that's the world I have to deal with from Monday to Friday, and sometimes on the weekends.

2842 COMMISSIONER WYLIE: Thank you, gentlemen.

2843 Thank you, Mr. Chairman.

2844 THE CHAIRPERSON: Thank you.

2845 Vice-chair Colville.

2846 COMMISSIONER COLVILLE: I suppose it should be self-evident from your presentation, but just to be clear, so I understand, at least, what you have been saying, if we can use, as an example, the case of TELUS, which perhaps you referred to, if TELUS were to offer a VoIP service using Shaws' broadband infrastructure in territory in Alberta or British Columbia, is it your position that would fall within --the pricing for that service over Shaws' infrastructure by TELUS would fall within the existing price cap pricing parameters?

2847 MR. BOWLES: I don't think we think there would be any difference between what facility are used to provide their VoIP service. It's still a VoIP service that we believe should be regulated in a similar manner to PES service. But the actual access facilities that are being used, I don't think, are really relevant to that distinction.

2848 COMMISSIONER COLVILLE: Mr. Brazeau.

2849 MR. BRAZEAU: I wasn't sure how that tied into a price cap regime.

2850 COMMISSIONER COLVILLE: Well, presumably, if the service is just voice service -- I'm presuming your position here, so correct me it I'm wrong, if the service is just voice service, and therefore should be price regulated, that the price is set by the price cap regime, is that -- or is it some other price or is there some other, and if there is --

2851 MR. BRAZEAU: No, I think we would be hard-pressed to argue that there would not be any cost difference in providing a VoIP service using somebody else's facilities versus using your own facilities to provide a PES service.

2852 So even though terms and conditions would apply, I would assume that there could be a different -- if you are talking about price, there could be a different price based on the cost of providing that service using somebody else's facility.

2853 COMMISSIONER COLVILLE: So are you suggesting, then, if TELUS, or Bell, for that matter, or any of the ILECs, was not using their own facility but some other facility, it could be cable companies, it could be wireless, that we would have to develop some sort of separate regulatory framework to determine the price for that service, based on the costs of the underlying infrastructure to that service provider?

2854 MR. BRAZEAU: I don't know if you have to develop a new model. There is one that exists today that --

2855 COMMISSIONER COLVILLE: Phase II.

2856 MR. BRAZEAU: That's right. I'm just assuming, if buy into our position, which is this is just another form of PES, the question is: what are the cost structure for them providing a PES service based on someone else's facilities? They have to file a tariff, they will provide a cost study and then people will argue on whether sufficient costs have been included or not, and then a rate will be approved by the Commission.

2857 COMMISSIONER COLVILLE: It strikes this is perhaps a little bit of a flaw in your logic, then, because this is now somehow different. It isn't just primary exchange service, which would naturally fall within the existing price cap parameter.

2858 What you are saying is that, in fact, it does depend on the underlying infrastructure as to the cost, and therefore the rate that they would be charging for that service.

2859 MR. BRAZEAU: No, I think I'm saying that the underlying structure -- infrastructure, has a cost to it. It's still the same service. I think there is a difference there.

2860 COMMISSIONER COLVILLE: But your argument now becomes: how far do we break that down? Because heretofore we have said TELUS or Bell, or whatever ILEC has a network infrastructure, that infrastructure for the service we are talking about has an overall cost.

2861 Now, if we are going to start subdividing this, and say -- I mean, perhaps TELUS' offer of VoIP, even on its own broadband infrastructure, bears a different cost than its PES service. Does that imply that we should be looking at that cost as a separate cost and, therefore, determining a separate cost for that, too?

2862 Here it seems -- I'm trying to better understand your logic, because if the logic is: it shouldn't matter what technology we are writing over here, but now you are saying it really does, because that should then drive us to what the cost is and then the price.

2863 MR. BRAZEAU: But, I mean, haven't we been doing this throughout the whole period that you have been regulating the incumbents on their infrastructure? The infrastructure has been changing over the years, their cost structure has been changing over the years. We keep seeing new cost studies about all sorts of infrastructure, including the loop, from time to time. So that will exist, that will continue, and I don't think being a VoIPs provider or not being a VoIPs provider will somehow change that.

2864 THE CHAIRPERSON: Mr. Bowles.

2865 MR. BOWLES: If I may, I mean, I think we have examples of situations like that currently. Centrex is, for example, for all practical purposes, a primary exchange service provider on a bulk basis. It has a different set of rates, based on a different set of cost structures, than regular primary exchange services. So I think this will fall into this same sort of approach.

2866 There is a fundamental difference in that they don't have to provide one component of the service, the local loop. Presumably, that could be reflected in separate pricing.

2867 COMMISSIONER COLVILLE: Okay. Thanks for that.

2868 Just to finish up on that, then, I presume out of territory would be forborne.

2869 MR. BRAZEAU: Yes and no, and let me explain.

2870 Again, I think the major theme here was: do you have market power and can use and exploit that market power?

2871 Now, out of territory, I think you can make an argument that you cannot use or exploit that market power and therefore, if that's the case, then you are right. But if you can, and maybe I can cook up examples where you could, then the question is: even if it's out of territory, is there a need to continue the regulation?

2872 So my tendency would be, out of territory, you probably don't need to. But maybe it's being in this business for too long you sort of develop some cynicism, but my knew-jerk reaction would be you probably wouldn't need to regulate out of territory.

2873 COMMISSIONER COLVILLE: Sorry, you probably would not.

2874 MR. BRAZEAU: Not, out of territory.

2875 COMMISSIONER COLVILLE: Okay. Thank you.

2876 Thank you, Mr. Chairman.

2877 THE CHAIRPERSON: Right. Just to follow up on the line Commissioner Colville was on for a moment, in your analysis, I assume that when you speak of and you quote TELUS as saying we won't escape regulation by changing our technology, but in the tradition of moving from analogy to digital and so on, that your network costs are what they are and PES prices are what they are, but when we move to the Category 2, as Bell calls it, or access independent, I don't want to cover ground that Commissioner Colville has just covered, but I'm not sure why providing service to a customer who also subscribes to Bell's or TELUS' high-speed access would be treated differently from a subscriber to that service who uses Shaws' access, as an example, since it's access independent and since somebody, Shaw, or TELUS in this case, is already being paid for the access.

2878 MR. BOWLES: Yes, I think -- and the telephone companies pointed this out -- the point is that the customer has already subscribed and is already paying for that access component, therefore, it would be inappropriate to include in the VoIP services, to double dip on the customer for access again.

2879 THE CHAIRPERSON: So that would be irrespective of who provides the access.

2880 MR. BOWLES: Yes.

2881 THE CHAIRPERSON: But now, on the second point, so you are saying that although it's equivalent to PES service, that Category 2, again, could have a different price structure from PES?

2882 MR. BOWLES: Yes.

2883 THE CHAIRPERSON: What would be the reason for that?

2884 MR. BOWLES: Well, the same point: the traditional rates for primary exchange service includes switching transport and the access component. If you remove that access component -- or you don't remove it, you have the customers paying for that access component separately, so now you would have to, presumably, consider the rates for VoIP to be different and have to address that fact.

2885 THE CHAIRPERSON: Yes.

2886 MR. BRAZEAU: Just to add, I mean, the service has to be provided using access, switching, transport, back office. I mean, all of those costs are still relevant here in the provision of this service. The only issue here is that your access component has already been paid for by someone else.

2887 So those elements that are necessary to provision that service, the other elements are still there and they still have be recovered.

2888 THE CHAIRPERSON: Right. And going back to your image on page 4 here, where you make the point -- this is of today's presentation, where you refer to the switch from analogue to digital as an enhancement, in that environment, which was then a monopoly environment, charges were made for what became optional features, and you list these: voice mail, call forwarding and caller ID above and beyond the basic service, now, presumably, in a VoIP environment that is inherently competitive, as we have heard, a lot of the pricing in the marketplace, effectively, throws in features like nomadic, the ability to, in effect, roam, to be nomadic, the ability to have numbers in other jurisdictions and other possible benefits.

2889 In the marketplace for VoIP, Category 2, let's call it, those are not cost-driven, those are, in effect, market-driven. So that today's environment, even if one accepts your image of it being an enhancement of existing service, there is a marketplace out there very different from the marketplace that existed when analogue transformed over to digital 20 years ago.

2890 I guess the argument that we are hearing from particularly TELUS is that in that marketplace, but I suppose it would be Companies, as well, is that in that marketplace you can subdivide it for regulatory purposes into a market in which competition clearly exists and as a basis for arguing forbearing from that category of service.

2891 As to the arguments about low barriers to entry, the answer is: how could a carrier, which, while dominant in overall PES, predate? We have had answers to those questions. Do you have any comments on that line of presentation to us?

2892 MR. BOWLES: Going back just to the features, I guess there is two ways to look at this VoIP. I think if you look at the way the ILECs would present it -- and we are not allowed to use audio visuals here, but perhaps you could just visualize this great huge cloud called VoIP, with a little arrow off to the bottom that says, "Access to the PSTN" -- I think we would turn that on its head and say there is this big cloud called the PSTN, with a little arrow out the bottom called "Internet Access".

2893 Certainly, Internet is competitive to access, and certain of those features are competitive, but I guess what we are suggesting is that that Internet access, you could almost look at it as a new feature for PSTN. And yes, that's going to be acquired on a competitive basis from any Internet service provider, but, as the end of the day, it's still regular old PSTN service with a new way of accessing it which does provide certain interesting features and those interesting features could be analogous to the optional local features we have right now and treated by the Commission in the same way.

2894 The Commission, generally, has not treated those certainly in the same way it has treated the basic service. The telephone companies are more free to -- there are certainly more pricing flexibility in those options. I guess that's the way we would look at VoIP services.

2895 MR. BRAZEAU: Just to add, it seems -- at least, Don and I have certainly had a number of conversations in this area -- is that the point that there are these features and that you can carry this phone anywhere in the world sort of somehow has taken over the major billing in this proceeding and I think it's very much the tail wagging the dog. It's very much about providing --

2896 THE CHAIRPERSON: But, then, I'm taking your point: treat it as an enhancement --

2897 MR. BRAZEAU: Yes.

2898 THE CHAIRPERSON: -- but I guess what I'm saying is you say, at that bottom of page 7 here:

-- which is the term of our forbearance section of our act, and so on --

-- and I guess you are meaning it in the broadest sense -- but our 94-19 analysis focuses on the relevant market, which is the smallest market in which the services can be offered with the effects that we speak about. So they are carving out a market here. Should we not be looking at their dominance in that market?

2899 MR. BOWLES: Well, I guess that's our point. We look at the market as the PSTN, with this just being a little add-on and that's the market the Commission should be looking at when it discusses rates.

2900 THE CHAIRPERSON: I know that's what you are saying, but I guess I'm asking you: what would be your answer to saying -- because, as you say, we sometimes subdivide markets or look at tariffs, even among tariff services look at services that might otherwise be expected to be PES and priced as PES, but are not, for specific reasons attached to that service. Whether you use "service" or "market", depending on -- again, I don't want to be hung up on those words -- is that a 9-1-1 message for you, Mr. Bowles?

--- Laughter / Rires

2901 MR. BOWLES: When it is from your boss, it's always a 9-1-1.

2902 THE CHAIRPERSON: Well, it's all right. If you have no comment, that's fine. I thought you might want to -- you can perhaps comment on that in reply.

2903 I have other commissioners who want to ask questions. In order, Commissioner Cram, then Langford, then Wylie.

2904 Commissioner Cram.

2905 COMMISSIONER CRAM: Thank you, Mr. Chairman.

2906 That, in fact, was the question I was going to ask, was "the market" and what constitutes "the market".

2907 I'm looking at paragraph 57 of the Companies -- and I will read it to you, you don't have to -- and it's their definition of the "residential market", in 57 of their initial comments. They talk about "comprising numerous services offered by a range of providers", wireline and wireline competitors, and then they talk about wireless services as part of the market, they talk about certain Internet data services, such as instant messaging, and talk of that as the relevant residential market.

2908 Now, I heard you, Mr. Brazeau, talk about your experience, in terms of substitutability. So in what you call -- and I would like to limit it even to residential voice services, just so we don't have business in the way -- and I'm not saying business is in the way -- but out of that market, what's in that market? Is Internet data services? Or instant messaging, is that a substitute within this voice service, as a residential voice service market?

2909 MR. BRAZEAU: We have not found that. Those submarkets are interesting -- I don't want to use the word "optional services", because they have a certain connotation to them -- but they are interesting services that certainly consumers do want, but they are not prepared to substitute those services for their basic communication needs.

2910 Again, I think the proof is in the pudding. Our competitors do not call our win-backs, our customers, and say, "I have got an interesting chat line, how would you like to use that instead of your basic local service?", right. They don't do that. Nor do they do that for wireless. So I think that, to us, is that those services are not really substitutable at this point in time.

2911 COMMISSIONER CRAM: Okay. So what we have really got then in this market that you would be saying we should be assessing, in terms of dominance, is what?

2912 MR. BRAZEAU: Well, I think Don, as an engineer, sort of drew you a little picture, as he normally does. His universe, as he says, where we are starting from is that it's the PSTN, basically. That's where it starts. This Internet thing is interesting, but it's really an appendix to this universe of people who want to talk to each other every day. That's what it's all about.

2913 COMMISSIONER CRAM: So the market is PSTN?

2914 MR. BRAZEAU: Yes.

2915 COMMISSIONER CRAM: Thank you.

2916 Thank you, Mr. Chair.

2917 THE CHAIRPERSON: Commissioner Langford.

2918 COMMISSIONER LANGFORD: Everything was perfectly clear until you started answering questions --

--- Laughter / Rires

2919 MR. BOWLES: Until we started.

2920 COMMISSIONER LANGFORD: Yes, until you clarified your submission, everything was perfectly clear.

2921 I want to go back to this notion of an appendage hanging off the PSTN, whether it's a PSTN hanging off the appendage or the appendage hanging off the PSTN, because I want to return to one of the examples that was key to what I thought TELUS was presenting us yesterday. You referred directly to TELUS in your submission today, so I think it's fair ball to make sure I understand it.

2922 As I understand, you said, Mr. Brazeau, in reply to Mr. Colville's last question, that as long as it's out of territory, you are happy with it not being tariffed, at this point, anyway, but if it's in territory, no matter how they dress it up, you want it tariffed.

2923 The example, I think, that the TELUS representatives gave us yesterday, in talking about an unconnected service, an independent service, was that they would make a national offering, that they would say, "Look, we have put together a VoIP offering here. We are going to offer it in Newfoundland, we are going to offer it in Calgary, we are going to offer it in Toronto, we are going to offer it places where we don't have an access situation and places where we do, where we don't own an access situation, and we are going to offer it all at the same price.

2924 So my question to you is: what complaint could you have with that scenario? If you are offering a product, let's just call it the VoIP product, and it's defined, in St. John's, Newfoundland and in Ste-Foy, Quebec, and in Richmond Hill and in Calgary and Edmonton, where your situation, as an ILEC or a CLEC or whatever, is different, varies, how could you have a complaint with that offering? Why would you want it tariffed only in their territory?

2925 MR. BRAZEAU: I think I would be a little more incredulous than you are on thinking that the ILECs have an incentive to sell VoIP services to their existing base. So if that's not the incentive, then to whom will they be selling the service to? The only answer I can come up with is: the customers that they don't have. And the customers they don't have are the customers I have or somebody else has, an other competitor has.

2926 So will they be providing a national VoIP service that has all the same features and all the same functionality and characteristics in their territory, outside their territory, to their customers, to other customers? I don't think they will. I don't believe that.

2927 COMMISSIONER LANGFORD: Could I stop you there? I try not to interrupt, but it's not really a question of credibility here, a credulity. What I want to ask you, though, is to respond to that specific question. If they actually did that, what would your position on that be?

2928 MR. BRAZEAU: I think that I have to answer the same way that I answered Vice Chair Colville, which is to say that I see this as a little like asking for forbearance on an exchange basis. The exchange is now bigger, it has become the country, but the question remains that if you have market power in one segment -- an exchange, for example -- and you get forbearance on a different exchange -- and let's use Alberta versus Ontario -- can you use that to give yourself an undue advantage. I think that you can find circumstances where you can.

2929 For example, you could establish -- I am trying to think of the MCI -- a Friends and Family calling program, whereby if you are a monopoly customer in Calgary, you would get free something in Ontario, or vice versa. Somehow you are leveraging out your advantage in one area in order to establish a market share somewhere else.

2930 I think you could see all sorts of opportunities that could be created whereby it would be difficult for somebody who doesn't have that embedded base to compete against.

2931 COMMISSIONER LANGFORD: Is it really just their deep pockets that you are worried about?

2932 MR. BRAZEAU: It is really trying to use and exploit some of their monopoly power in one area -- not monopoly power, but dominance in one area and leverage that somewhere else.

2933 COMMISSIONER LANGFORD: It's deep pockets really. That's what it comes down to.

2934 MR. BRAZEAU: Deep pockets is part of it.

2935 COMMISSIONER LANGFORD: And yet they make the example of other people with hugely deep pockets getting into the market.

2936 MR. BRAZEAU: They may. We are not suggesting that we should regulate this forever. What we are saying is, as long as there is evidence of market power, it should be regulated. Once they can demonstrate that there is no market power, then we can have the debate as to what sub-markets we are talking about, how small is the market we are trying to define.

2937 We will have that debate, and if there is evidence that there is no longer market power, then, yes, absolutely.

2938 MR. BOWLES: It is not just deep pockets, of course; it is also the fact that they effectively control the PSTN and effectively have 95 per cent of the residential base still served by them.

2939 COMMISSIONER LANGFORD: But in the example they gave, which I am passing on to you, they would be offering the same product, where they don't effectively control the PSTN -- thousands of kilometres away from where they effectively control anything. You would still want it regulated?

2940 MR. BRAZEAU: I didn't necessarily suggest that we would want it regulated. All we suggested was that there are still opportunities for someone who has market power to somehow leverage that market power in a different territory. That's all we said.

2941 That would certainly have to come into the debate, and if people felt persuaded that that market power could not be leveraged, then I don't think we would be opposed to them providing VoIP services in Toronto.

2942 COMMISSIONER LANGFORD: But under no circumstances in-territory.

2943 MR. BRAZEAU: Until the issue of market power is resolved.

2944 COMMISSIONER LANGFORD: Thanks very much.

--- Pause

2945 Except under tariff, the chairman wants us to remember. I think that is a given, yes. Thank you.

2946 THE CHAIRPERSON: Counsel.

2947 MR. MURDOCK: Thank you, Mr. Chairman.

2948 I understand that in your VoIP offering you provide an equal access capability for long distance, and some parties have indicated that this would be costly to implement in a VoIP environment. I was wondering if you could comment on the cost.

2949 MR. BOWLES: There was no significant cost. I mean, it was no different from providing equal access over our regular service -- regular CLEC service. There were no significant additional costs.

2950 THE CHAIRPERSON: Thank you very much. We will break now and resume at 2:30 p.m. Nous reprendons à 14 h 30.

--- Upon recessing at 1325 / Suspension à 1325

--- Upon resuming at 1430 / Reprise à 1430

2951 THE CHAIRPERSON: Good afternoon. I gather that last night there was a little difficulty in getting food during the brief supper break we had. As I said yesterday, we will go through to the end of the Alcatel Canada presentation, which means that we have seven more presentations this afternoon.

2952 My intention would be to break at about 6:00 p.m. or 6:15 p.m. for a supper break. So for those of you who are appearing later or who want to be here and want to order food in advance, you can do so.

2953 It may not be necessary. We may finish at that point. But if we don't, then we will probably have to have at least some evening session.

2954 That said, I turn the microphone to Madame la Secrétaire.

2955 THE SECRETARY: Thank you, Mr. Chairman. MTS Allstream Inc. will now make their 20-minute presentation.

PRESENTATION / PRÉSENTATION

2956 MR. PIERCE: Thank you. Mr. Chairman and commissioners, this is our first opportunity to appear before you as MTS Allstream. We have two faces that are probably overly familiar to you, Teresa Griffin-Muir and myself, Chris Pierce, but we have also brought a fresh face along for you. Kelvin Shepherd is the Chief Operating Officer and Chief Technology Officer for MTS Allstream.

2957 The themes that you will see permeating our presentation are really fourfold. One, that you as a regulator are regulating for a few different purposes -- for social purposes, to pursue the goals of the Telecommunications Act and, importantly for players like us, to constrain the behaviour of dominant providers.

2958 Secondly, we would say that the world is not being turned on its head by the advent of VoIP services and other IP-based services, but since we are, more or less, at the beginning of the network transformation that will inevitably occur over time at the beginning of that transformation, you have a singular opportunity to ensure that open access and vibrant, sustainable competition characterize that transformation, rather than a reiteration of the dominant provider control of the network that has pertained to the present time, given that competition only followed a hundred years of monopoly provision of service.

2959 Third, we believe that your preliminary conclusions have, by and large, gotten it right.

2960 Fourth, we believe that there are issues around VoIP and IP-based services that you do need to deal with quickly -- from our perspective, those being dealing with unbundling and interconnection.

2961 In terms of placing MTS Allstream in front of you, starting with slide 2 of our presentation, we present now what we believe to be a unique player in the Canadian telecommunications market. Really the largest national competitor, MTS Allstream approaches both regional and national markets. We are, of course, the dominant provider in Manitoba, and a competitive provider -- usually No. 2 -- in every market we are in outside Manitoba.

2962 We view the proliferation of IP-based technology as an opportunity for sustainable competition, innovation and for establishing the framework for the next stage of the evolution of competition in telecommunications. It represents both challenges and opportunities for us. In Manitoba it is clearly a challenge to respond to the possibility of more imminent competitive entry than has existed before.

2963 What has that resulted in? It has resulted in investment and innovation by MTS and MTS TV, with a broadcast offering that is now well deployed in Manitoba.

2964 Competition spurs investment. The notion of competition spurs investment, not the other way around.

2965 Outside of Manitoba, of course, for Allstream, it represents the possibility to achieve that elusive thing for competitors -- growth -- how to actually grow revenue, and grow revenue with new value added services that are not just pure commodity plays, which we have all talked about ad nauseam in this industry.

2966 Turning to slide 3, you can see how we manifest ourselves in comparison with the larger incumbent players, Bell and TELUS, which I think is important to understand the perspective we bring to the table.

2967 Our revenues are almost equally split between in-region and out-of-region revenues. So when we are coming on any regulatory issue, there are absolutely puts and takes in terms of open competitive access having a corollary in-territory.

2968 With both TELUS and Bell Canada the in-region revenues are far more important, really in terms of Bell Canada. Anything out of region is largely immaterial to the big picture.

2969 The last time there were public reportings from Bell and Trigna in the 2002 period, the revenues were declining and were under $100 million.

2970 In terms of hearing from us, you are hearing about how we can absolutely protect the market at home and prepare for competition, but also, as importantly, how outside of Manitoba we can grow the business. Whereas we would suggest that the predominant perspective of the others is how to protect that revenue base that is the in-region business.

2971 In terms of policy, if with IP we are talking about something that is more perhaps fast-paced, but more evolutionary than revolutionary, how should policy respond? We would say that you need to return to first principles and that the goals of the regulatory framework governing the deployment of services using IP technology should be the same; that is, to nurture investment, to promote innovation, and to ensure customer choice. Those have not changed with the advent of IP.

2972 Similarly, the guiding principles that are contained in the Telecommunications Act remain as valid as they ever were, and a proper foundation for regulatory policy.

2973 The key to encouraging investment, innovation and choice remains, as you have repeated on numerous occasions, the elimination of barriers to entry. As technology evolves, the regulatory framework has to ensure that there is timely and competitive access to the next generation local loop.

2974 What we would say is that the local loop of the future is broadband.

2975 IP-based technologies do hold significant potential to facilitate additional revenue, through innovative services and features. They offer the potential of lower costs, and they offer the potential of greater competitive choice for consumers.

2976 None of that has really been realized yet. That exists out there as potential for new entrants and incumbents alike to execute and realize.

2977 However, the potential to promote competition will only be met if the interconnection and unbundling regime keeps pace with technological change, because even in the categories that have been put before you by the incumbents in all but the peer-to-peer example, that connection or use of the PSTN remains crucial, and hence control over that PSTN remains key in terms of taking advantage of the new market.

2978 We say that, generally, we believe your preliminary conclusions got things right. VoIP services should be subject to the existing regulatory framework governing local exchange services, which, of course, goes to a bit of the myth discussion in terms of the public discussion we have heard on VoIP so far. It is not VoIP services as VoIP services that are being regulated, it is dominant providers that are going to be rolling out VoIP services that need to be regulated. We recognize that means MTS within Manitoba, just as it means Bell within its territory and TELUS within its territory.

2979 Existing social obligations, such as 9-1-1, et cetera, should become mandatory as soon as practicable.

2980 MTS Allstream has been a key player in facilitating some of those who have already been in front of you, like Primus or cable providers, in figuring out how to address those obligations. Consequently, you see Primus now being able to do that in a number of circumstances -- in most circumstances.

2981 And we believe that VoIP services should be contribution-eligible.

2982 In terms of the regulation of dominant providers who are rolling out VoIP services, who is dominant?

2983 The local market shares -- you know the numbers all too well -- have not really changed significantly. They are all near-monopoly numbers, over 95 per cent or over, and that includes MTS Allstream in Manitoba.

2984 To those who have put a variety of categories of VoIP services to you, again, if those VoIP services are going to connect with 95 per cent of the customers, up to 100 per cent, as is the case in Saskatchewan, they are going to have to access the PSTN and, consequently, those who control the PSTN remain the dominant providers.

2985 Turning to slide 8, we really are saying that this is another service -- this is a voice service. It is primarily a vehicle to offer voice services local and LD -- people talking to each other. So the various slicing and dicing thus far that has been put before you in terms of categorization is not really describing real markets, in our view, that are separate from the local voice market. Maybe they will over time; they certainly don't now.

2986 In our view, the legislative framework that is before you says that you forbear once markets have taken hold and competition has taken hold, not on the hope that a new market may or may not develop with adequate competitive entry to have you not regulate.

2987 The service does not change just because technology changes.

2988 We heard from Dr. or Mr. Crandall -- whichever is the appropriate appellation -- yesterday that, in terms of that local market, you can't differentiate. For the consumer it is local voice.

2989 There is the possibility of enhanced features with VoIP. They aren't all there yet. In fact, if you look through the categorization that even Bell Canada put in front of you, you would wonder if it is not an inferior service, generally, with the things it is backing versus the additional things it has.

2990 In our view, IP-based voice services -- how they are being marketed, how they will be received by the population for now -- are functionally equivalent to conventional circuit-switched local services and form part of a single market for any regulatory purpose.

2991 Indeed, the current competitive offerings of IP-based voice services support this conclusion. They are being marketed as competitive substitutes for existing local voice service.

2992 The possibility for enhanced features does not create a separate service. If that is the case, your treatment should not be tied to the mode of delivery.

2993 In terms of the issue of access independent or access dependent, coupled or de-coupled, whatever the categorization, at this point they are in a market that is local voice.

2994 The approach that has been put in front of you in terms of categorization, we would suggest, will be plagued with problems. From the customer's perspective, it is dealing with nuances that are really not relevant. To our mind, it immediately goes to the heart of your desire, and our agreement with that, to be technologically neutral in your approach, and to approach services not technology, and that your regulation needs to be tied to the underlying rationale for that regulation, which is dominance in a service market -- apart from the fact that any approach that has been put in front of you so far, in our view, would be unworkable in practice. Even the Bell Canada panel told you that the categories they have included in their submission now are not, by any means, the end of the list. They could see others arising over time.

2995 How could you possibly deal with technological nuance over technological nuance purporting to present a new and different market to you?

2996 In terms of network dominance that we say will underlie the provision of this service, absent competitive access and unbundling -- and interconnection -- I will turn things over to Kelvin Shepherd to talk to you a bit about the network.

2997 MR. SHEPHERD: Thanks, Chris. Good afternoon.

2998 What will the impact of VoIP be on the competitive framework?

2999 One of the key issues that we think the Commission should be concerned with is dominance from a network perspective, in particular in ensuring that competitive neutral access to underlying broadband facilities is provided.

3000 Obviously, in the case of telephone companies, networks are evolving. They are moving from the digital circuit-switched world to an IP-based network, and that network will be capable of handling a variety of services.

3001 We believe that incumbency does have its advantages. The evolution to a new IP-based platform is comparable to previous evolutions of the public network, such as the introduction of digital switching in the 1980s.

3002 Carriers with ubiquitous networks are in the best competitive position to take advantage of IP technology, to deploy it, to leverage it with the existing investments they have in both their core and access networks, and they will use a variety and a combination of technologies, including VoIP, to leverage that ubiquity into a competitive advantage.

3003 Looking at slide 12, this is a very high level picture of where the network is going.

3004 There is a general view in the industry that we are moving toward a converged network model, which would be a network that is based on broadband access and packet technologies, and a network that can deliver a wide range of services.

3005 VoIP is only one service that will be provided on this converged network.

3006 This evolution to a converged network capable of delivering reliable voice service is, in some ways, more complex and perhaps challenging than previous network evolutions, such as the analog to digital evolution which occurred over the last 20 years.

3007 Some of the challenges today include the existence of multiple and, in many cases, immature standards for the technology, the challenge of trying to make IP networks deliver real-time services with quality of service, the challenge of evolving the very extensive embedded access network from, primarily, an analog voice network today to one based on broadband and perhaps wireless technologies, and of course managing mobility and the nomadic and portable services that the new network will make available.

3008 Our view is that, while IP has been described as a disruptive technology, that does not mean that change will occur quickly, nor necessarily in the way people predict.

3009 At the end of the day, the control of underlying facilities, including local broadband networks, provides major advantages to existing carriers, implementing real-time services such as voice and video.

3010 Some examples of the advantages would be their ability to control the end quality of service, the ability to have or to access detailed knowledge of the customer, including access to information on the traffic types, the destinations and the services being used by customers, and probably the major advantage would be the ability to bundle voice, video and data services together with network access components.

3011 In summary, we believe that the view presented by some that IP represents an overwhelming, immediate revolution that will quickly displace current voice services and networks is overstated. The PSTN will remain a very significant and central unifying network for many years. In fact, interconnection and interworking between VoIP and PSTN voice services will be essential for VoIP services to be essential over the longer term.

3012 We believe that equitable competitive access to next generation network components, in particular broadband access, is a key to encouraging sustainable competition.

3013 And we believe that VoIP is a voice service delivered on a telecommunications network, and that it represents an evolution of current voice services, much as enhanced calling features, touch-tone, and even the move from multi-party line to individual line service did in previous generations of the public switch telephone network.

3014 MR. PIERCE: With respect to our view about broadband becoming the new local loop, we believe that competitors must have access to next generation network components and services on an unbundled basis, hence our application a year and a half ago with respect to Ethernet and DSL. Tariff access to those services will be crucial for competitors to be able to meet the incumbents in the marketplace.

3015 Interconnection is another area where incumbency holds the possibility of control.

3016 Consequently, to Commissioner Colville's questions yesterday around 9-1-1, about whether the mandate of the Commission to assist groups to resolve issues is helpful, we would say yes, those types of mandates are.

3017 And with respect to interconnection and furthering the co-carrier relationship, that could be a very important direction of the Commission in this instance.

3018 When you hold that incumbent control, there is really no incentive to resolve issues like that. Another day of control is another day of better returns.

3019 In conclusion, we support your preliminary conclusions with respect to VoIP services -- that economic regulation of VoIP services, when furnished by dominant providers, is the right approach; that social obligations should be equally applicable to IP-based services as soon as practicable; and that VoIP services should be contribution-eligible.

3020 Thank you.

3021 THE CHAIRPERSON: Thank you.

3022 Commissioner Langford.

3023 COMMISSIONER LANGFORD: Thank you, Mr. Chairman.

3024 Thank you for your presentation this afternoon. As you can imagine, we are about halfway through this process now, so the questions are starting to sharpen up a bit. You will probably be glad to know that. There are not too many leap-of-faith questions any more. They certainly worked well yesterday morning, but they are getting to be old hat, and everybody is waiting for them, so we will skip that line.

3025 I would like to talk about some of the specifics that have arisen this afternoon, as well as some questions that are holding over in my mind from your original submission.

3026 One of those questions refers to paragraph 7 of your original submission, where you use the term "real and sustainable competition" as kind of a test or a hallmark of when we might move away from our preliminary view. I wondered whether you had any kind of formula that you folks had tossed around, or any sort of notion of a threshold or a test.

3027 In cable, for example, we use that 5 per cent real market loss. Somebody flew that one at the last price cap. I think it might have been Bell Canada, but I'm not sure.

3028 Do you have a test in mind, or is it just that we will recognize it when we see it?

3029 MR. PIERCE: To start with, I will let Teresa comment.

3030 Your approach to forbearance in 94-19 and beyond, I think, has generally, over time, proven out, in terms of those services with respect to which you have forborne.

3031 Clearly, when you look at the levels of local market share ownership right now, we will surely recognize it better than now.

3032 Should you feel compelled at this point to say, "Here is what we will need to see to forbear in the local voice market as we look out from September of 2004"? Frankly, I don't think you need to feel compelled to do that.

3033 You have a regime where parties are able to come before you when they think the market supports a credible argument about forbearance.

3034 Clearly, for you, it is going to be relevant how these services roll out. Do they roll out so that you start to see local market share dropping? Does this access independent approach to providing a service actually prove to be a real product that people are taking to an extent that you should consider forbearing the local service provider in that region?

3035 That is how, I think, we would approach it. I don't think you would start out by necessarily saying that the test in cable should apply to the test in telecommunications, because those companies have come from different places.

3036 We think that things like equal access or competitive access -- absolutely, they are both dominant with their facilities, and that is an important principle. But where historically they come from, the control they exert, the inertia that is there in the customer base, I don't think would lead to thinking that necessarily the two should be treated identically.

3037 MS GRIFFIN-MUIR: I think that Chris has really covered most of it.

3038 Fundamentally, though, what we are thinking of here is more the criteria that is enunciated in Decision 94-19. We don't have a magic number, and certainly we don't advocate the broadcast criteria. We think it is a different market, with a different mandate.

3039 COMMISSIONER LANGFORD: Okay. Don't ask and you don't find out. I thought you might have something in the back of your file folder somewhere.

3040 You talked, in answering Question 1, about the access independent notion, and it will come as no surprise to you, I am sure, having read some of this stuff and having been around for the last couple of days, that not everyone agrees with your position, and not everyone agrees with ours, and since they are somewhat similar, we have supporters and we have -- whatever.

3041 We are in the happy position that ours is preliminary, so we can change it. Unfortunately, you are stuck with yours -- or fortunately. You may turn out to be a soothsayer, who knows.

3042 We did hear kind of an interesting middle-ground argument from TELUS yesterday, and we were exploring it a little earlier with the two representatives of Call-Net, who were here just before lunch, and that is the notion of a special category, even for ILECs, of a kind of access independent offering.

3043 I don't pretend to be able to present it as well as Mr. Grieve did, but the notion being that if we are offering a pure VoIP product -- call it that -- completely independent from an access -- they can take access with it if they can, or they might not -- and we offer it nationally, so that we even actually offer it in places where we don't have access to sell, and we have to buy it just like everyone else, and we offer it for the same price across the country, should that be some kind of special category?

3044 There is no question of using our dominance --

3045 I am trying to make their case for them, I am not making my own case.

3046 I think they would say, and they have said, "There is no question here of being able to exploit a dominant position because we are offering the same product, the same service, right across the country."

3047 Do you think that is a special category? Is that something we should look at? Should we push the envelope a little at this point, based on this record and perhaps buy into an argument like that?

3048 MR. PIERCE: If it is, MTS Allstream will be able to carry on business differently than before, because that is what Allstream will be --

3049 COMMISSIONER LANGFORD: That is one of the reasons I am asking you.

3050 MR. PIERCE: I jest, but, really, one of the challenges for Allstream now is that our national offerings need to recognize the fact that within Manitoba there needs to be separate treatment flowing from the Nexxia decision.

3051 So, no, I don't think, frankly, commissioner, that anything different is being suggested there.

3052 Probably all three of us have something to say here. Kelvin could offer something on the business side.

3053 We would say that probably it is the case that control can be exerted beyond the boundaries, to your back and forth with Jean Brazeau, but we wouldn't argue that TELUS, for instance, should be regulated ex-B.C./Alberta when they are offering services across the rest of the country, and they will have a national price for that.

3054 But within Alberta and British Columbia, or their incumbent territories, that would be a tariffed service. Maybe the pricing regime would be a little different, depending on the costing elements, but there is nothing new there.

3055 In terms of their own DSL, it almost struck me that open access equals forbearance. If we offer open access to our DSL without necessarily primary exchange, then we should be forborne when we are utilizing the same thing, which I don't think really follows.

3056 So it has the patina of being something interesting, but I don't think you need to dig down very far to find that it is not unlike any offering outside of an incumbent territory versus inside.

3057 COMMISSIONER LANGFORD: We are trying to be sensitive to -- and maybe this will lead into a business case discussion -- we are trying to be sensitive to all of the stakeholders' particular problems, and certainly one of the problems that we heard from a number of ILECs yesterday was, it's pretty hard to be nimble if you have to file tariffs. I know all of the counter-arguments to that, of course. But, in and of itself, out of context, it is pretty hard to argue with that. It is hard to be nimble if you have to file tariffs.

3058 In looking for ways to assist that kind of problem, it is interesting to be confronted with something like what TELUS brings here, because they are saying, "We are not leveraging our market power. We are going to offer the same thing in St. John's, Newfoundland as we are going to offer in Calgary. We are not leveraging it. We are not capitalizing on what would normally be a competitive advantage for an ILEC."

3059 MR. PIERCE: I would say that it is impossible to be nimble for a competitor if you can't see in tariff form what is being put together as an end-to-end service in-region.

3060 Outside of the region they can have at it, but in the region, our challenge, as in their region -- our challenge as a competitor is to be able to compete with them, given what they can put together, because of their control of the network.

3061 That is the whole story of DSL and Ethernet, and customers being taken away from us when we can't even see what the offering is, let alone replicate it. That is one of the primary reasons for tariffing in-territory.

3062 We would say at this point that the service that is being described is not describing a separate market, let alone a separate service that is really even out there with any sort of take-up.

3063 If we get sometime when there is a describable market and they do have a real problem because they are facing competition in this market and don't bring incumbent advantage, then that is the opportunity for forbearance, which I think goes to whether or not, at the business end, it is really describing something --

3064 You could even conceive at first instance of being able to offer significantly to your customer base.

3065 MR. SHEPHERD: I would like to try to address the question of whether that is really even a practical example.

3066 It is hard to really conceive of a reason for an incumbent carrier to offer a VoIP service, say, to their consumer base on an access independent basis. If it is really going to be a national offering and competitive nationally, that will have a major impact on their in-region revenues.

3067 So it is difficult to see carriers such as TELUS and Bell, which have such a huge portion of their revenues and their customers in-region, really going down that route.

3068 COMMISSIONER LANGFORD: I guess that I don't have as hard a time envisaging it. If you have a VoIP product that you are researching and developing and bringing to market, and you offer to market it even in your own territory -- let's make it simpler -- as a CLEC, if you will, it is access independent.

3069 I am picking up their term. I am not trying to make their case for them, but I am very interested in your reaction to their case and probing it.

3070 It is access independent. So they tell us, "The cable companies in our territories have a bigger share of broadband than we do. We want to sell to these people. We want to be nimble. We want to meet their marketing charge, and we want to be able to beat them, and we don't want to be filing tariffs, so we will remove this" -- not just remove it from a kind of PSTN, but remove it completely from everything else we do and say, "This is a separate product" -- like Rogers selling magazines almost -- and they can attach it to any kind of broadband access they want, or not.

3071 Can a case be made for that?

3072 MR. SHEPHERD: I don't believe there is a strong case in-region. I think, in-region, the main reason for offering that service would be, clearly, to maintain their local voice share against a new competitor, in this case perhaps the cable company.

3073 The fact that they may be offering a similar service nationally doesn't impact the fact that in-region, in effect, it is enabling them to maintain their share of the dominant voice market.

3074 MS GRIFFIN-MUIR: Just from a customer perspective, though, in terms of the offer you are describing -- it is completely access independent, but from the customer's perspective, they are receiving voice service, which really does speak to a common saying.

3075 If we actually look at Manitoba, we are the dominant provider of voice service. I guess the difficulty --

3076 Theoretically it is quite appealing, but practically speaking, apart from the fact that we are talking about offering the customer the same thing, it is very hard after a while to distinguish whether you are offering primary exchange voice service to a customer and pricing it under tariff, or whether you are offering IP-based or VoIP service.

3077 I am not sure exactly, practically, how you would even know what the price should be in certain markets, and whether or not it is VoIP as opposed to primary exchange.

3078 COMMISSIONER LANGFORD: But won't the customer know it is VoIP? He or she will have to have a computer. That will be a give-away, won't it?

3079 MS GRIFFIN-MUIR: Okay. But today I am offering you DSL.

3080 COMMISSIONER LANGFORD: Right.

3081 MS GRIFFIN-MUIR: I am offering you voice. I am actually doing it over the same copper pair.

3082 Essentially, the argument is to flip that. First I offer you the DSL, then I offer you the voice.

3083 I am not saying that you, as a customer, don't know; I am saying that you, as a regulator, don't know. If I am dominant, in order for you to speak to all of the other customers you still need access to the PSTN, and I am the dominant provider of that access.

3084 I am not sure after a while how you distinguish that from truly a practical point of view. If there is a business case to offer it, and if initially the dominant provider has to tariff that, and if there is some cost savings because the access is paid for separately, you tariff it.

3085 That is basically how I think it could be dealt with.

3086 COMMISSIONER LANGFORD: My colleagues may have some follow-up to that.

3087 I have one specific question on a completely different subject. I am referring again to your principal submission at paragraph 80. If you were here, I did have a discussion with somebody on it. It seems so long ago now that I can't remember. It was probably the folks from the companies.

3088 At paragraph 80 you refer to the chances of what you call proprietary designs of services and the challenges of dealing with that, and you give Bell's Managed Internet Telephone Service as an example.

3089 I would like to know a little more about that. How real is this example? How real is this fear? What are your experiences in the sense of having to meet the challenges of proprietary services?

3090 MR. SHEPHERD: I think they are real, and I think there are some fairly concrete examples.

3091 Probably one of the best examples is an existing service called Centrex, which, although you may not call it proprietary, essentially, in its implementation by most incumbents, it is proprietary in that there is not an open interconnection and interworking capability.

3092 For example, a competitor can have the same telephone switch, manufactured by the same vendor, but without an interconnection and interworking agreement. Effectively there is really no way for them to go to a customer of that incumbent and, say, offer to serve 10 per cent of their lines, or to connect a new office with a service that interworks.

3093 That is a legacy example, but certainly when you look at the evolution of Centrex into the IT world, you can easily imagine the situation where perhaps a company that has 60 per cent of the Centrex access lines, and control of them, can use IP Centrex essentially to extend that reach across that customer's line base for the entire country, and by not really opening that up and maintaining essentially a closed or, more or less, proprietary platform could make it very difficult for customers to even contemplate choosing a competitor because of the closed nature of that service.

3094 MR. PIERCE: And look no further than the tariff in front of you, which has been granted interim approval, around Centrex IP; and look no further than the largest customer in the country, the federal government. The federal government is looking to sole source its whole Centrex offering because no one else can break in there.

3095 Even when a little piece is put out for competition, for anyone who is responding, the interoperability is just not there.

3096 Now they want to have the benefit of being able to migrate --

3097 This is your first instance of how IP will be used by stealth to maintain control over the network, in our view, because they want to be able to, at their discretion --

3098 COMMISSIONER LANGFORD: I'm sorry, who is "they" now?

3099 MR. PIERCE: Bell.

3100 COMMISSIONER LANGFORD: There are a lot of pronouns going on.

3101 MR. PIERCE: Excuse me. I am following myself.

3102 Bell wants to move their customer, at their discretion, over to this new service.

3103 To the customer they are saying: Technology doesn't matter. We will take you when we want to take you. But to the regulator they are saying: We should be forborne for this service.

3104 That is how the proprietary features of the old network could lead to control of the new.

3105 COMMISSIONER LANGFORD: In terms of this process, what do you want from us to stop this mischief?

3106 MR. PIERCE: Of course, we have made interventions in that specific proceeding, but what we are saying, at a minimum, is that, in terms of these new, as they may emerge, VoIP offerings, you need to continue to regulate the dominant service providers to ensure that there is open access -- as far as you are prepared to go and, Lord knows, you know how far we tell you we want you to go --

3107 COMMISSIONER LANGFORD: We don't always listen.

3108 MR. PIERCE: I was thinking when you said that seldom people agree with us.

3109 We want that and, in terms of Centrex, of course, we have asked for equal treatment as to how they would choose to treat others under the tariff.

3110 COMMISSIONER LANGFORD: Those are my questions, Mr. Chairman. There may be others.

3111 THE CHAIRPERSON: Thank you.

3112 Commissioner Cram.

3113 COMMISSIONER CRAM: Thank you.

3114 Thank you very much for colour graphs, they are very helpful.

3115 I was looking at your slide 3, and that is a percentage of revenues. When we are looking at that, that is not total revenues.

3116 MR. PIERCE: Thank you, commissioner. As much as we would dream, no, the numbers would come out --

3117 We were looking at the last quarterly numbers, which I think would put Bell somewhere in the vicinity of $3 billion, TELUS somewhere in the vicinity of $1 billion, and MTS Allstream at about $500 million.

3118 COMMISSIONER CRAM: Okay. So we are talking, really, a factor of 1 to 6, and therefore, really, 1 to 12.

3119 MTS Allstream's competitive revenue is one-twelfth of the total revenues of Bell.

3120 MR. PIERCE: When we put the graph together it showed the actual revenues. The distinction we were trying to draw -- out of region and in-region -- became meaningless because it was too small.

3121 COMMISSIONER CRAM: Yes. That's what I thought.

3122 Mr. Shepherd, I wanted to talk to you about slide 11. Was the issue of Centrex with the federal government the example of leveraging the ubiquity of the existing network that you are talking about at the second bullet on slide 11?

3123 MR. SHEPHERD: It would be a small example, but I think, broadly, the leverage is generally in the very extensive deployment of local access networks, so the infrastructure which is there and readily available to evolve to a broadband network.

3124 Then there is the fact that this TDM switching environment, circuit-switched environment, is not going to disappear overnight, so there are certainly capabilities that various vendors are providing to evolve that circuit-switched environment into an IP world in a hybrid way, allowing you, for a period of time, to continue to leverage that existing investment.

3125 Certainly, when you look at business services, in particular, and complex services, there is an enhanced ability for the incumbent to make that transition more seamless for a customer, and Centrex is probably a very good example of that.

3126 COMMISSIONER CRAM: Thank you.

3127 Thank you, Mr. Chair.

3128 THE CHAIRPERSON: Thank you very much.

3129 Madam Secretary.

3130 THE SECRETARY: Thank you, Mr. Chairman.

3131 I will now call on Pulver.com to make its 20-minute presentation.

PRESENTATION / PRÉSENTATION

3132 MR. PULVER: Good afternoon. I am Jeff Pulver, and I would like to thank all of you for the opportunity for us to be here today.

3133 Sitting at the table is, to my right, Carl Ford, who within the world of Pulver.com is known as a community developer. When we get to Q&A you will better understand his role.

3134 To my left is our general counsel, Jonathan Askin.

3135 To his left is Glenn Richards, who is our outside counsel. Glenn Richards and his team were instrumental in helping us in Washington with the Pulver Order and the first positive regulatory ruling that happened with UIP.

3136 What we wanted to do by coming to Canada and participating in this hearing was to provide an independent voice, where we have no legacy to worry about, and perhaps represent a group of people that are not necessarily heard from on a regular basis.

3137 Re-reading my remarks prior to coming up here, I realized that we probably will be saying things that you haven't heard before, and some things which will actually be heard during the proceeding.

3138 What I find is that a lot of the statements that are being made -- we actually agree with a lot of what is being said, it is just the conclusions we have issues with. It is perhaps based on our background. We hear the same thing and we all see what the issues are, but we get a different result.

3139 We are concerned that many of the entrepreneurs and innovators and Internet enthusiasts driving the communications revolution are not sufficiently represented in this proceeding.

3140 Certainly, we have heard some very well stated testimony from largest, most established players in the Canadian Telecom industry, the ILECs, the CLECs, cable companies, wireless carriers, while we have heard very little from really small start-ups, Canadian or foreign based. People that have actually been driving hopefully will continue to drive some of this communications innovation.

3141 The truth is that many entrepreneurs simply don't have the time, the staff or the resources to participate in this proceeding or similar proceedings underway around the world. Many of these entrepreneurs and innovators, some of them that actually to start coming up with their ideas are not there yet and they only will do so if there is a positive ruling from the CRTC from their perspective. We are concerned that the authorities create an environment that forces innovation and entrepreneurship and, for this reason, I am quite grateful to be here today to be allowed to present and talk, not only for just Free World Dialup and the other Pulver.com enterprises, but also for the IP communication entrepreneurs, innovators and enthusiasts around the world.

3142 I myself became engaged in this industry back in 1995. I have no formal telecommunications background. My communications background came from being an amateur radio operator when I was 12. Professionally, I am an unemployed accountant, I think. But I have learned what is possible and not possible and I have just been in this odyssey of just having fun and extending the ability to communicate with people around the world is one of my life's joys. Early in my career I was really into amateur radio and I was doing things like having mobile phones in my car in 1980, going out to impress some girlfriends, no one quite understood, they thought it was very geeky. But I thought it was kind of cool that I could use my amateur radio and make phone patches to make phone calls 30 miles from my house. It was pre-cellular and it was a lot of fun for us, at least for me.

3143 Back in 1995 I came up with this idea to interconnect computers and telephones, not to make money but just to see what was possible. This was known as Free World Dialup and it was a whole internet revolution that got started and it got me well noticed by a lot of people. Even though I had a day job -- I used to work at the World Trade Centre in New York City -- that was my day job. My night job, I basically had this idea to interconnect the world and this thing called Free World Dialup got launched and at the time it was the world's first internet communications network.

3144 Then from those activities, in the United States there was some noise about trying to regulate VoIP back in 1996 and that was because of some misunderstandings. With the help of Glenn Richards' partner, I created the Voice on the Net Coalition as a way to help educate government and others about where the technology was. In 1998 I started a company which became Vonage. I know Vonage was here yesterday, I actually started the company which is now Vonage. We had some ideas, but other people made it happen. I have incubated many other companies, IP communication related, during the past decade.

3145 I am known for running the Voice on the Net Conference, and I have to say in Canada "Voice on the Net" because we actually in the States call it the VON Conference. But when we did the VON Conference in Canada we found out that VON also stands for the Victorian Order of Nurses and so we do apologize, whenever we are in Canada we have to refer to it as Voice on the Net. So, but that was a settlement. Anyway, we do do that and publish a magazine for the space and I like to think that from our own viewpoint that Pulver.com provides thought leadership and incubation services for emerging technologies.

3146 Free World Dialup was started in 1995 and it started and stopped several times. It re-launched in November, 2002 and today it is actually evolved into, from what we tell, the world's largest open communications network. Open versus closed, that is to say that we don't stop people who want to use it, it is free and it is based on open source, so it is open source software and open standards. I just like to think that Free World Dialup is really a living greenhouse for IP communications innovation.

3147 Since its inception, we have grown to having more than 300,000 members around the world, people who are on it. They don't pay anything, so we can't call them subscribers, but they are people who have accounts and they are in 187 countries, including 15,000 people in Canada. Based on a National Post story last week about VoIP in Canada, apparently there are only 15,000 people in Canada who are paying for voice over broadband. So today, for a moment in time, we as big as everyone else combined. I think that is probably not going to stay true for a long-time, but there we are today.

3148 We do empower people with the ability to communicate and what Free World Dialup has been known for in the past year is this Pulver order. In Washington my name became a subject noun because we filed a petition with the FCC, because in the States it wasn't so sure whether or not, end to end IP that doesn't touch the public switch telephone network, what the regulatory treatment was going to be. While it may be obviously intuitively clear that it should not be regulated, there was threats as voice over IP was becoming more popular in 2003 after we came out of this Telecom darkness of 2002.

3149 I was fearful that the same forces that brought forth the act petition in 1996 were going to come forth again and try to thwart this activity and innovation. So, I worked on creating a petition to state the obvious and learned that in Washington nothing is obvious. By a unanimous ruling it was... pretty well Dialup was granted this special regulatory status and it was a first positive ruling anywhere and I hope that it is a start for some good stuff. The FCC ruled it to be an interstate information service and exempted it from traditional telecommunications regulation.

3150 One of the reasons I am here today is to ensure that the entire world may avail itself with the capabilities of Free World Dialup, as well as many of the other evolving flavours of IP communications. Now, when I look to the future what I see are end to end IP networks which have the power to disrupt traditional telecommunications and to empower consumers and enterprises future uses of communication services. Over the next decade, I'm not saying it is going to happen tomorrow, but over the next decade as traffic continues to move from legacy PSTN networks to both wireless and broadband what is really needed here is fair and unfettered access to the internet and frankly not much more.

3151 The advent of open source communications is helping to level the playing field and put high quality communication software into the hands of communication enthusiasts. As much as there is email and web servers today, what I look for is the evolution of things what I will call communication servers to become part of the internet experience. The deployment of such servers will empower a new generation of communicators, these are people who can talk on the internet without any formal billing relationship or need for a VoIP service provider. People are just effectively talking on the net.

3152 Now the internet, as far as I can tell, has grown-up being a users' network, not a service provider's network. It has a rich history as a result of the universities, enterprises and entrepreneurs that represent the end points that utilize the technology and not because the service providers are transport to bitstreams. IP communications are disruptive and very disruptive communications, but in the most positive sense, and if allowed to evolve will dramatically enhance the ways in which we communicate applications and services, be they video, music or even voice, are now clearly severable from the telecommunications transport on which they ride.

3153 Today we are talking about voice over IP, but tomorrow is really EOIP, everything over IP. Services and applications can be deployed from anywhere to anywhere. Like email, voice will be enabled from a variety of everyday consumer devices managed in a variety of architectures. Anyone can deploy new applications and services and no one is beholden to this one size fits all service provider model of the legacy communications network. IP communications are capable of empowering users to control their own communications experience. I implore the service providers of today as well as the regulators to look at IP communications much more than a mere replacement or substitute for traditional telephony.

3154 We must establish a regulatory structure that nurtures innovation and does not constrain the future with a legacy, vision and the rules of the past. We, the IP communications pioneers, need room to innovate and experiment in a regulation free zone for the internet. This should be a broad hands-off approach to IP based communications, particularly pier to pier IP communications, that do not touch the public telephone network. But if there is going to be regulation it should be smart, targeted and narrowly tailored to achieve a very precise goal that is not otherwise achievable with market solutions.

3155 It is for these reasons that we are concerned about the approach that the CRTC might take in imposing unnecessary and debilitating regulations on an emerging IP communications industry. It is evident that IP communications obliviate traditional geographic distinctions and an IP communication service provider could easily deliver services to residents in Ottawa from a computer base in St. John's Newfoundland or even a computer base in St. John's Virgin Islands. I mean Free World Dialup services people in 187 countries from a publication facility in New York City. In our world we truly are the application.

3156 To the extent that, you know, Canada embraces IP communications with a favourable regulatory environment and it is my opinion that it is far more likely that these services will be based in Canada. When thinking about this and listening to some of the testimony I started to realize that, at least technology wise... technically speaking, nothing is stopping any of the large incumbent operators from today from let us say empowering all expat Canadians who have broadband internet access living anywhere in the world to have a local Canadian phone number. So that if you have internet access, you are living in the States, you are living in Hong Kong, you are living the UK, if an incumbent wanted to they could very easily take a number and offer it to a Canadian citizen living abroad.

3157 Think about the large Canadian expat community, it is kind of cool, because then everyone can stay in better contact with their friends and family, they just have to make a local phone call and it is one of those things that totally disrupts business as usual, but it is quite possible and very low cost and it is fun, right.

3158 So, you know, I think the real trick to regulate is to establish the proper regulatory structure that will empower consumers to control their own communications experience. Regulators and other authorities should ensure that consumers genuinely have a freedom to access the internet, the freedom to use applications, the freedom to attach personal devices and the freedom to obtain service plan information. Giving more than lip service to these consumer freedoms and ensuring no one can encroach on these freedoms will serve to maximize consumer choice, foster competition and promote investment and infrastructure and internet applications.

3159 The issues before us today, while they appear to be national issues in Canada, are really global issues which need to be addressed on a worldwide basis. For this reason, Pulver.com and other members of the IP communications industry are committed to promoting the public good by establishing international industry based solutions to the host of social issues confronting IP based communications. To this end, Pulver.com has established the global IP alliance and international consortium of IP based communication providers committed to realizing the promise of interconnecting IP based communications. The global IP alliance will adopt and implement common principles designed to promote their social good.

3160 I am pleased to promote at the recent Voice on the Net Conference in Canada that we hosted in Toronto a few months ago... we brought together a few members of the industry, together with the public safety experts, to start to hammer out an emergency response solution, an emergency response solution that should because of the power of IP technology dramatically surpass the capabilities of the PSTN solution. We intend to continue these efforts at our next VON Conference which is in Boston in a few weeks and when we hold Voice on the Net Canada next April in Toronto. I am hoping that some of you will join us as our guests to see what the industry is doing in the VoIP space.

3161 The countries that embrace the new technology and foster the growth of IP communications will simultaneously become havens for IP communication entrepreneurs and allow their residents to avail themselves of the benefits of IP communications. The countries that choose to impose unnecessary burdens on IP communications will find that they become the deprived of the would be entrepreneurs who will take their business, money and ideas to more inviting locations. Additionally, the residents of those backward looking governments may become disenfranchised at the communications revolution.

3162 Now, from our side we imagine a very limited role for government and one primarily focused on consumer protection and consumer empowerment. Regulations or at least the proper application of antitrust principles should ensure that consumers can control their own communications experience and avail themselves of all that the internet and IP technology can afford. Now, under some circumstances this logically might compel minimal antitrust or regulatory oversight over bottleneck transmission facilities. Regardless of how many potential applications exist on the internet, there will be only a limited supply of transmission facilities available to the consumer. A control of such a bottleneck, be it a wire line local exchange carrier or cable company or a wireless carrier, must not be allowed to parlay its dominance over a bottleneck facility to choke the consumers' access to the internet or the application of his or her choice.

3163 With emerging last mile technologies, such as WiMAX and broadband over power lines, these oversight obligations might become increasingly less necessary. But for sometime to come, there will still be an opportunity for unfair market control and gamesmanship that could stifle innovation and competition and we are quite concerned about that. Having said that, I think it is important that we not prejudice a company solely based on its DNA. The CRTC should allow incumbent carriers the same latitude to offer IP based broadband services largely free of onerous regulations. Frankly, these are the companies that have the money and deep pockets to invest in the infrastructure and to seed innovation.

3164 Now, the default presumption should be that regulation need not apply. Now, if potential monopolists demonstrate that they can't play fair, please slap them silly or bring them into place, but give them the benefit of the doubt that in the new public internet that they actually can be an innovator and we need their support.

3165 While there might be a need for a limited oversight role for government to push the industry to support law enforcement objectives where the market might otherwise not compel industry to develop its own market based solutions, the other social goods are more readily achieved through the pure play of the competitive market. For instance, we don't believe that CRTC needs to address quality of service for IP based communication services.

3166 Today, we can only really see a glimpse or a hint of the IP based communications future. Personal and enterprise instant messaging at present continue to grow and empower users. I don't know if you at all every play with instant messaging or your kids do, but in the States what I have noticed is that people who have like graduated from high school since 1999, it is a new generation of people, because when kids go online and they see their friends in college or home and all of a sudden people start communicating and text chatting at work and other places and it is just a whole different set of... I graduated from high school almost 25 years ago, I don't have too many friends I remember. But my friends' kids who are old enough to have friends and instant messaging, it is just a new generation.

3167 When you look at the evolution of communications, to totally disregard the idea of innovative communications not happening today, not being relevant I think is a mistake. I happen to have 10 year old twin sons who are my own personal drivers to keep me sane. They are the ones that push me at the envelope to make sure that technologies and communication services are evolved to meet their needs. Because when they grow-up... the way they communicate on the internet and the way they act is so dramatically different than me.

3168 They have been on the internet since they have been three years old. It was a big controversial feeling in my house, because how do you put three year old kids on the internet? But I did, that was their birthday present. My kids weren't even... they were actually not even talking so much, we were a little worried about that, but we put them on the internet, we gave them Disney.com as a homepage and over a series of days and weeks they started to explore the power of the internet. They went down about six years ago this idea of learning how to .com. I don't know if you have kids but, you know, people who effectively... they see a noun, they go to the .com of it. My kids happen to like toy trains, so one day my son Jake says, "Daddy, I want to go to ThomastheTankEngine.com." He is four years old, he doesn't read, right, but he knows he wants to go to this .com. I typed it in. Do you know the website existed? And not only did that website exist, but many other websites came up. So, we went through an entire year and a half where my kids were basically trying to look at a noun, go to the .com of it, and this is truly on my part... the start of it is always on generation.

3169 It got to a point where Thanksgiving holiday when they were like six and a half, when they really were very proud of themselves, they would go around the table and everyone introduced themselves. So my son Jake said, "Hi, I am Jake Pulver, this is my brother Dylan Pulver, this is my mommy Risa Pulver and this is my daddy Jeff Pulver.com." And that is the mindset. When I come here to testify and talk about this next generation of people for communication services these are the people I am trying to protect. It is not so much us, we are older, but it is for the kids of tomorrow and the kids of today, no matter what your age is you stay young by looking at the internet and these things just help us grow.

3170 And so from instant messaging and present to social networking, you know, things are changing. Open source communication is disrupting the vendor marketplace. It was push to talk, people are rediscovering walkie talkies, at least in my youth, and certainly disrupting mobile communications. We don't know the full potential and promise of IP communications, it is our children that are dreaming this up, so we give them the tools and latitude to innovate and evolve the ways we communicate.

3171 What we do know though is that VoIP has emerged as killer app and arguably the first great driver of broadband. It is important to note that VoIP is still in its infancy. Apparently only 15,000 Canadians today can be counted to subscribing or paying for voice over broadband services, and many of these simply to compliment and not to replace the standard lines. Compare that statistic with the growing number of consumers who have abandoned their wire line services for wireless alternatives, not to mention the degree of which email has cut into traditional wire line telecom revenue.

3172 On top of that, lawmakers and regulators do not consider wireless with its millions of customers a substitute for traditional wire line service. Based on this fact alone, it is frankly absurd to impose regulations on an industry that has really made a dent in legacy telecom revenue streams and will in fact drive new broadband revenue to the builders of telecommunication networks and infrastructure.

3173 Being a communications enthusiast, I lived through the CB revolution in the 1970s and I always think to myself, gee if CB radio happened in the States tomorrow for the first time would the wireless guys be up in arms because of lost revenue, would the ILECs be up in arms for lost revenue and would the States, in the case of the U.S., what would they do since everything is local? It is just interesting to look at how communications disruption happens. You know, putting CB aside, where would mobile communications be today if the cellular rollout was disallowed simply because the cellular industry at the time did not have an emergency response solution?

3174 Open IP based communications has already enabled early adaptors, carriers and enterprises to interconnect directly as peers, end users have access to numerous alternative solutions, customers can utilize multiple providers as well as enterprises or end user systems, end users can attach a variety of hardware and software, including their own switching, from a variety of locations or location points. The scenario exists because today IP based communication pioneers had the courage to test the waters to experiment with internet and other IP based communications under the belief that voice is simply an application and will not be pulled into the myriad of telecom regulation.

3175 THE SECRETARY: Excuse me, Mr. Pulver.

3176 MR. PULVER: Yes?

3177 THE SECRETARY: Could you resume in 30 seconds please in conclusion?

3178 MR. PULVER: Okay.

3179 THE SECRETARY: Thank you.

3180 MR. PULVER: I will conclude by just suggesting that acoustic regulation is absurd and it makes no sense to think that the acoustic applications are somehow qualitatively different than any other bitstreams that appeal to any other senses except the ear simply because of the existence of archaic voice regulations that make no sense in an IP enabled world.

3181 Confirmation of this logic will go a long way in giving the innovators and IP based communications the comfort to continue developing the technologies and services enabled by IP technology. Thank you very much.

3182 THE CHAIRPERSON: Thank you, Mr. Pulver. I thank you and your colleagues for coming up from Washington, I believe it is.

3183 MR. PULVER: New York.

3184 THE CHAIRPERSON: New York. Unfortunately, I don't have many questions. Your written brief and your oral presentation had a rather high level of generality and to say possibly at a generic level and they don't touch the ground of our public notice at very many points on this specific issue. So, there really isn't much follow-up I have on your submissions, but we have them. So, thank you very much.

3185 Commissioner Colville.

3186 COMMISSIONER COLVILLE: Thank you, Mr. Chairman. Just a couple of questions, Mr. Pulver, and I don't mean to embarrass you by asking this question, but are you familiar with our current sort of regulatory framework in terms of how we regulate... our broad approach to regulation of local competition?

3187 MR. PULVER: It was suggested to me that you regulate based on other peoples' reactions, you ask them to come into a situation and react, so you are reactive rather than proactive.

3188 COMMISSIONER COLVILLE: Who told you that? Was that at the VON? Yes, that must have been the Victorian Order of Nurses that you were talking to. So you wouldn't be aware that largely our approach to local exchange telephone competition is that the new entrants are not rate regulated, but the incumbents are?

3189 MR. PULVER: I was real intrigued about that and that is what drove me to file a petition to come up here and talk. Because I fully appreciate, you know, given the legacy and the infrastructure, it is wonderful that incumbents are given the opportunity to come in and be innovative. It is just that in the voice over IP industry, having lived through it for the last 10 years, the people who actually are there to invest in these new innovations and new technologies happen to be incumbents. To be in an environment where people are not incentivized to invest to support innovation I thought was silly, so I thought I would at least come up here and suggest that maybe we give people the benefit of the doubt. Because I have seen in Australia, in the UK, and Austria and in the U.S. similar arguments where people are trying to protect the groundswell around them to let competitors come in. And to date, so far, people have been treating it fairly nicely.

3190 Our biggest concern, frankly, is packet prioritization to the extent that cable operators or incumbents with voice over DSL services... if they come in and all of a sudden in an application driven world start to prioritize their packets over their competitors', that is a great concern to me. I was at the U.S. Senate, I testified in June and I will tell you that at least from the U.S. side of it is a great concern to Congress because they like to see fair and unfettered access happen and the FCC is very concerned about that. So they want to see a competition but they want to see at the congestion level to make sure that people play... and that is where the factor is really, is making sure that at the tipping point there, that everybody can get in fairly.

3191 To date, no where in the world have I seen a policy where discriminating against incumbents has helped investment in Telecom.

3192 COMMISSIONER COLVILLE: Okay, just a couple of other points. Part of your presentation this afternoon that you didn't get a chance to read but which I, reading forward, did pick-up on it. At the bottom of page 13, you encourage the Commission to adhere to two core principles. Number one, do not impose regulation unless absolutely necessary, and I think we would agree with that. And two, to ensure that no entity can leverage its market power to stifle choice and innovation. Now I guess, rightly or wrongly, we have chosen to regulate the prices of the incumbents in the local exchange market because we felt that not doing that they might be able to leverage their market power. And really, one of the fundamental issues facing us today is does the extension of their business into VoIP lead to an extension of that market power. So, that is one of the things we are really trying to address for the last few days. So, we would agree with your two core principles, I think.

3193 Just going back to just a couple of other points. When you say at the bottom of page five, approach of CRTC might take in imposing unnecessary and debilitating regulations in the nation emerging... Is there some aspect of our preliminary view that you see as being what you characterize as debilitating?

3194 MR. FORD: I think one of the biggest fears we have is what represents features for local service. One of the concerns that you have to hold in play here is the fact that voice over IP, you know, Comwave and Vonage and all these guys have done great innovations and it is basically because they have a platform where they can do it instantaneously and it is an amazing technology. The biggest fear that we have is that what happens is you find yourself having creep on what represents local service and what represents telephony, because of the fact that you find that as the features get added on more and more and more they basically become part of what Bell's offering or what TELUS is offering or somebody like that and you find that now you are looking at that as well.

3195 We used to run an instant messaging conference and we would sit there and it was like I was Jerry Springer, I was having to cope with all these guys who had developed instant messaging systems and complained about the fact that AOL was a monopoly and controlling the world. Microsoft and Yahoo then became monopolies after they had a significant market share. I don't think that is the right way to look at anything that has to do with IP technology. I think the way to look at IP technology is that as long as it is free and unfettered and, you know, it is hard to suggest that there is a monopoly on something when people offer it for free, you then have to sit there and say okay what really represents monopoly. The only thing we are really worried about in this world is access. Just to emphasize Jeff's point, on Free World Dialup we service 187 countries. To date, we really don't have any problems with the internet. The internet works the way the internet is supposed to work. No one is sitting there and taking the packets and blocking them. We know it is a possibility, but we haven't seen it occur.

3196 We are aware that we want you guys to hold on to the choke and make sure that no one does that kind of stuff, but we don't see any other rationale for worrying about what happens on the internet. The internet will take care of itself is our general viewpoint.

3197 COMMISSIONER COLVILLE: So, is it your view then if we saw that sort of preferential treatment in terms of packetization, that we should take regulatory action to deal with that?

3198 MR. PULVER: Yes.

3199 COMMISSIONER COLVILLE: A final point, on page six you talked about this... nothing stopping any of the large incumbents from empowering all expat Canadians from broadband access anywhere in the world and so on or anybody. Is there anything, in your view, in our framework that would prevent that?

3200 MR. PULVER: The bigger issue, I think, is what you were hitting on earlier and I absolutely agree with. The fear is that if we don't create an environment for the incumbents who have the deeper pockets or the venture capitalists or someone to come out of the woodwork and say hey we have money, let's invest everything. Because really, there is a lot of great people I met in Ottawa last night and I have been in this industry for 10 years, I have seen great great innovations, great ideas and we see these bubbles and we burst it a few years ago and it is building up again. What I was looking for or hoping for was some sort of public policy that would incentivize people with the money to share it with others who need it to grow their ideas into businesses.

3201 I was hoping for policy that would encourage people to take these visions and turn it into reality. So, maybe I misunderstood, but I thought that the incumbents who had the deep pockets, if they somehow had a policy to encourage local services in their own domain as much as in other domains that would be a good thing and there would be money there to fund the future. So anyone today in Canada, whether they are a CLEC or an incumbent, they have access to numbers, anybody could turn around and do what I am suggesting, I thought it would be kind of cool. It is just that they needed... if they do so, they need to look at the business model and look at the returns and they have to figure out where the money is going to come from and to be disincentivized is a concern.

3202 Being an outsider it is easier for me to say this, but I have seen this happen in other places and I have seen people do well where there was public policy that encouraged investment. I would just hope that if you are looking at the situation with a clean slate that perhaps you can help put in place things to encourage more people to come out and invest in Canadian companies.

3203 COMMISSIONER COLVILLE: Bell Canada has a big deferral. Can I talk to Mr. Sabia? Thank you very much, gentlemen. Thank you, Mr. Chairman.

3204 THE CHAIRPERSON: Thank you.

3205 Commissioner Williams.

3206 COMMISSIONER WILLIAMS: Actually, Mr. Chair, the answers to Commissioner Colville's second and third questions dealt with my concern.

3207 THE CHAIRPERSON: Counsel.

3208 MR. MURDOCK: Thank you, Mr. Chairman.

3209 I was hoping I could get you to share your experience in emergency response solutions. It's something that you said that you dealt with at your conference in Toronto and it has been a prevalent theme throughout this consultation, in terms of everyone's aware of the issue, but the only solution we have heard so far is it's sort of a third-party or intermediary that deals with the location issues associated with 9-1-1 and VoIP. I was wondering, if you have a take on that issue, where you think -- is that the end point or do you think there is going to be another solution? And if so, what that may be and how far off that may be, as well.

3210 MR. PULVER: I'm going to hand the microphone to Carl because he actually wrote out an answer to exactly answer your question.

3211 Just so you know, part of our activities at our conference has been to bring communities of people together. It was over a year ago, I guess it was in December of last year, that the Farm Coalition got together with NENA. We agreed to a bunch of principles, where we would work together without any pressure from government to create and deliver IP-based solutions for 9-1-1, and to do so in a timely fashion.

3212 The good news is that these things are happening. In fact, when we were in Toronto, what we hosted was a critical issues forum, on behalf of NENA, and there were more people from the Canadian telecom industry that showed up than at the meeting we hosted in the States.

3213 So there is a great amount of desire from industry to come up with solutions.

3214 Carl has his answer. I just want to give it to Carl.

3215 MR. FORD: Okay. I will actually send this to you in an e-mail later, but, in general, the biggest issue you have is, in the interim, I think Comwave has done, and Vonage, and what McGill has done, is admirable, given the fact that the major issue is the PSAPs are connected up directly to these tandems through the SS7, which is, in effect, not something that most Voice over IP players connect up to.

3216 We use SIP for our signalling, or predominantly we use SIP for our signalling, and we don't have a good SS7-to-SIP interface that's publicly available to us at the present time.

3217 If there was such a thing available to us, the next thing I would say to you is the biggest issue we have to face is it's probably better that a service exists in common than sitting there and demanding that every single one of the Voice over IP providers connect up to all the PSAP network. Because the trunking, when you look at how much trunking you would have to deploy and how much traffic would actually be going through it, it's cost-prohibitive, it doesn't add up right.

3218 So a common solution is kind of what NENA has been working on and what we have been looking for. I would like to talk more about the fact that I think something is going to be available soon, but I'm under NVA to a Canadian company, so I can't promise you anything, other than I think you will see some good news in that space.

3219 I will say that, having said that, I don't have an answer for the nomadic stuff in the near term. I can't even give you a good horizon on that because, fundamentally, the problem with nomadics is that we would have to have some sort of positioning equipment in that and I don't expect that any of the people who are doing Voice over IP, in any way shape or form, to sit there and swap out Legacy just because of the fact that the technology is there.

3220 Having said that, I see the price of positioning equipment going down. I know there are lots of people who are trying to get it into VoIP technology and I expect to see that in the next two to three years.

3221 MR. MURDOCK: Just one point. You mentioned you would like to send us your written response to that in an e-mail. If you could, in fact, put that in your written reply, as opposed to an e-mail, and not only the Commission, but it would be on the public record for the benefit of everyone.

3222 MR. FORD: Fine.

3223 MR. MURDOCK: Okay. Thank you.

3224 THE CHAIRPERSON: Thank you very much.

3225 Madam Secretary.

3226 THE SECRETARY: Thank you, Mr. Chairman.

3227 I will now call on Cybersurf Corp. to make its 20-minute presentation.

PRESENTATION / PRÉSENTATION

3228 MR. TACIT: Good afternoon, Mr. Chairman, commissioners and staff.

3229 I'm Chris Tacit of Nelligan O'Brien Payne. I am counsel to Cybersurf Corporation.

3230 With me is Mr. Marcel Mercia, vice-president of Operations for Cybersurf.

3231 Cybersurf wishes to thank the Commission for the opportunity to be here today to make an oral presentation in this important proceeding. Before starting, I just wanted to point out that, after listening to some of the other presentations in this public proceeding, we have amended our oral presentation, copies of which were provided yesterday morning to Commission staff, in order to eliminate some duplication and to address more precisely some of the issues that are of particular significance to Cybersurf.

3232 We have provided the revised argument to the Commission. It is labelled as being revised today. We would ask you to refer to that version and discard the previous one.

3233 In this presentation, I will provide a brief overview of Cybersurf's present business, describe the kinds of VoIP services that Cybersurf may some day provide as a natural evolution of its present business and provide Cybersurf's views concerning the regulatory regime that should apply to such services.

3234 Cybersurf is a leading-edge Canadian technology company that develops and deploys innovative software solutions for Internet Service, Internet Portal and New Media applications.

3235 Cybersurf is also one of Canada's largest independent Internet service providers and offers dial-up and high-speed Internet services under a variety of brand names, including Cybersurf, Cyberus, ComNet, Surf the Net and 3web. We don't use VON.

3236 Cybersurf also provides long distance services to its customers. In order to provide its high-speed Internet services, which are a prerequisite for the delivery of VoIP services, Cybersurf depends on both ILEC unbundled loops and colocation and cable carrier TPIA services.

3237 Given the nature of its business, Cybersurf views Voice over IP as an additional Internet application, much like an e-mail or firewall service, that could be provided as an option to customers subscribing to Cybersurf's Internet service.

3238 In essence, Cybersurf views the kind of VoIP services that it may provide as falling within the definition of Category 2 VoIP services, according to the classification system adopted by the companies in this proceeding or access independent services, according to the TELUS Voice over IP classification system.

3239 At this point in time, Cybersurf has not perceived enough demand in the marketplace to deploy such an application. Cybersurf's experience is that even the best VoIP services available today cannot offer a consistently acceptable voice grade quality of service. So Cybersurf does not expect Voice over IP services to become a substitute for primary exchange service.

3240 Rather, Cybersurf believes that a narrow segment of customers with specific long distance needs who are trying to reduce long distance charges and who are less sensitive to the variable quality of Voice over IP services will constitute the primary Voice over IP services' market.

3241 At the same time, telecommunication service providers and their shareholders need the certainty of knowing how various classes of Voice over IPs services will be treated for regulatory purposes before deciding on whether or to what degree to invest in the delivery of such services. Regulatory certainty is a necessary precondition for Voice over IP technologies and services to reach their full potential, whatever that potential may be.

3242 For this reason, Cybersurf welcomes this proceeding and urges the Commission to articulate the regulatory rules applicable to the provision of various classes of Voice over IP services, clearly, as soon as possible.

3243 This begs the question of what the regulatory rules applicable to Voice over IP services should be. In answering that question, Cybersurf will only focus on the kinds of Category 2 or access independent Voice over IP services that it perceives it may provide in the future.

3244 Cybersurf's first regulatory proposition is that regulation, where employed, should be tailored to achieve two specific types of objectives. These are: one, preventing incumbents from thwarting competition; and, two, promoting essential social objectives that would not otherwise be promoted due to economic constraints.

3245 Preventing incumbents from thwarting competition involves two aspects: first, regulatory rules are required to ensure that all competitors can gain access to essential and near-essential facilities and services that the competitors require to provide Voice over IP services that compete with the VoIP services of the incumbents; second, incumbents must be prevented from leveraging their incumbency advantages with respect to Legacy services and networks in a manner that confers market power upon them in the markets for new or emerging Voice over IP services.

3246 Costing, tariffing and bundling rules can play a crucial role in these variants, just as they have in the past. In the case of Voice over IP services, the ILECs and the cable companies are the incumbents that need to be regulated in order to address these concerns.

3247 Part of any such regulations should involve insuring that these incumbents are not allowed to prevent any competitors from using essential or near-essential services, such as unbundled loops or collocation in the case of ILECs, or TPIA in the case of cable carriers, in order to provide their own competing VoIP services.

3248 The competitors entitled to obtain these files should include ISPs, such as Cybersurf, that employ such access services in order to provide their own higher speed Internet services that can constitute a platform for the provision of VoIP services.

3249 In that respect, Cybersurf is somewhat unclear concerning the positions of the incumbents regarding how this issue should be resolved. For example, in this proceeding most of the cable industry has taken the position that the restrictions contained in Order CRTC 2000-789, relieving the cable companies from the obligation to make a TPIA service available for the purpose of supporting a public switched public exchange service

3250 How are we to interpret the "may"? For its part, Quebecor Media has stated that the restrictions should be retained without any further qualification.

3251 The Companies take the position that Voice over IP services are not switched local voice services and appear to suggest that there is no prohibition on the use of unbundled loops by DSLSPs to deploy VoIP services. It's not clear whether they take this view with respect to colocation services, as well.

3252 TELUS has taken the position that the restriction on the use of unbundled loops, colocation services and TPIA services,

3253 The logical corollary of this is that the restriction would not apply to access independent services. Is that what TELUS intends?

3254 Only MTS Allstream has been unequivocally clear in stating that, quote:

3255 In Cybersurf's view, the Commission should make it unequivocally clear that nothing in the ILEC or cable carrier tariffs or other conditions of service prevent a customer from providing an access independent of Category 2 VoIP service using such services as unbundled loops or collocation, in the case of an ILEC, or TPIA, in the case of a cable carrier.

3256 There is no policy rationale for preventing a customer of an ILEC or cable carrier that requires these access services in order to operate as an ISP from using them to provide voice services as well, when another VoIP service provider that does not happen to obtain unbundled loops or colocation from an ILEC or TPIA from a cable carrier can use the infrastructure of the ILEC or the cable carrier to provide a VoIP service.

3257 In order not to disadvantage ISPs with respect to the provision of VoIP services, the Commission must also be vigilant to ensure that essential and near-essential services, such as unbundled loops, collocation and TPIA are provided on reasonable terms and conditions on an ongoing basis and that, as the underlying cost of providing these bottleneck services falls, the rates for the services fall, as well.

3258 Similarly, bottleneck access services corresponding to all higher speed retail Internet service offers available from the incumbents must be available to competitors and each rated according to its underlying costs, if VoIP services are to be truly access independent.

3259 In order to ensure that the ILECs and cable carriers do not unduly discriminate against their competitors VoIP services, Cybersurf also agrees that the access condition proposed by Yak should be imposed on the ILECs and cable carriers.

3260 Access to numbering resources and to local number portability must also be made available to VoIP service providers if the promise of the geographic nature of VoIP service is not to be unduly constrained.

3261 In order to ensure fair competition, Cybersurf is also proposing two changes to the bundling rules. First, the bundling rules should apply not only when a tariffed telecommunication service forms part of a bundle, but also when a broadcasting service offered by a cable carrier and any telecommunications service forms part of the bundle, whether the telecommunications service is tariffed or not. This is because cable carriers are dominant in the provision of broadcasting services.

3262 Even if rates for some broadcasting services distributed by cable carriers are subject to automatic approval upon application unless disallowed or are wholly forborne from rate regulation for other policy reasons, this does not diminish the dominance of the cable carriers in the markets for those services.

3263 The market power associated with that dominance can be leveraged into adjacent markets for telecommunication services in the absence of any bundling-related regulatory safeguards.

3264 The Commission has summarily determined on a number of occasions that a bundle containing a broadcasting service is not subject to bundling rules unless the bundle also contains a tariffed telecommunications service; however, it does not appear that the Commission has ever conducted a detailed examination of the economic or other policy justification leading to that conclusion, given the cable carriers' dominance in the provision of broadcasting distribution services. Cybersurf submits that it is in the public interest for the Commission to conduct such an examination now.

3265 The second modification that is required to the bundling rules is for the ILECs and cable carriers to be required to specify on customers bills the price attributed to each item in a bundle. This is not only helpful to consumers wishing to make informed purchasing decisions, but can also serve as an added safeguard with respect to the reasonableness of the amounts charged by the ILEC or cable carrier to a competitor for an item forming part of a bundle when the item is offered to the competitor on a standalone basis.

3266 The social objectives that may need to be promoted through regulatory intervention include such matters as the provision of 9-1-1, E-9-1-1, MRS, safeguarding consumer privacy, as well as issues relating to access to VoIP services by persons with disabilities. However, the development of VoIP services should not be delayed or limited until these issues are fully resolved, just as the development of cellular technology as not delayed or limited pending the resolution of these kinds of issues in that environment.

3267 Cybersurf agrees with the Commission's preliminary view that CISC would be an appropriate manner of addressing these matters and that all local Voice over IP service providers should be required as a condition of providing service to advise potential and existing subscribers specifically and clearly of the availability of limitation on 9-1-1/E-911 service. However, the method by which this is done should be flexible and recognize that the Voice over IP service providers will use a broad range of methods to sign up customers, including, for example, telephone and online tools.

3268 Finally, Cybersurf does not object to the Commission's preliminary view that the revenues from all VoIP services, but not P2P services, should be contribution eligible, but the ongoing relevance of the contribution regime should be periodically reviewed.

3269 Before concluding, Cybersurf notes that the establishment of a regulatory framework for Voice over IP is just one of a number of ongoing steps required to deliver the full promise of the Internet to consumers.

3270 For example, now that Internet access services are making the delivery of higher speed broadband service practical, the time may have arrived for the Commission to initiate a proceeding to consider granting competitors access to the broadcasting distribution services offered by the cable industry.

3271 Innovation will not end with Voice over IP services. Without ensuring competitors open-ended and nondiscriminatory access to all services by the ILECs and cable carriers with respect to which these service providers are dominant, the incumbent carriers will be the only parties able to provide multimedia bundles, resulting in a duopoly instead of a vibrantly competitive environment. This will marginalize all other service providers, irrespective of the details of the regulatory regime adopted by the Commission for Voice over IP.

3272 Cybersurf would like to thank the Commission for the opportunity to make this presentation. Mr. Mercia and I would not be happy to answer any questions that the Commission may have.

3273 THE CHAIRPERSON: Thank you, Mr. Tacit.

3274 We will take a break now and resume at 4:25. Nous reprendrons dans 15 minutes.

3275 MR. TACIT: Thank you.

3276 THE CHAIRPERSON: We will have questions for you after the break.

--- Upon recessing at 1607 / Suspension à 1607

--- Upon resuming at 1625 / Reprise à 1625

3277 THE SECRETARY: Order, please.

3278 We will continue the question period with Cybersurf.

3279 THE CHAIRPERSON: Order, please. À l'ordre, s'il vous plaît.

3280 Commissioner Pennefather.

3281 COMMISSIONER PENNEFATHER: Thank you, Mr. Chairman.

3282 Good afternoon, gentlemen.

3283 Welcome. It's nice to have someone here with the ISP point of view in the discussion. I really don't have too many questions.

3284 One that I did want to ask you to talk to us about in some detail, and as specifically as you can, in both today's presentation, and in your original comments, at paragraph 17, you talk about the "incumbency advantages".

3285 I don't think you need to look for it because you say exactly the same thing in the presentation today, "the incumbency advantages".

3286 Could you describe to us, as specifically as you can, what those advantages would be, in your view?

3287 MR. TACIT: A lot of it boils down to access issues, the gatekeepers of the network, the ability to bundle different kinds of services with different elasticities of demand. Some of their services, they can be very dominant in certain markets, and so there has to be care taken how bundling is applied so that improper cross-subsidization doesn't occur and below-cost pricing of bundles doesn't occur.

3288 So those are the two main areas, I would say, would have to do with the ability to leverage advantages and services, Legacy services, in markets to emerging services and networks -- sorry, old services or networks to new services and networks, partly because of control over access, bottleneck facilities, essential/near-essential facilities and partly because of the ability to bundle services, some of which are still in a monopoly or quasi-monopoly environment or, at the very least, ones with respect to which they have market power.

3289 COMMISSIONER PENNEFATHER: Would that be a similar analysis, whether we were talking about in territory, out of territory or access dependent/independent? Is there a difference when you look at it that way?

3290 MR. TACIT: Well, there would be in most cases. Not necessarily all, but there would be in most simply because a lot of it has to do with the infrastructure, the Legacy infrastructure, and the use of that infrastructure to provide services in which they are dominant, and that tends to happen, obviously, in territory.

3291 So, obviously, some of the biggest -- the biggest concerns that we have tend to be with their in territory behaviour, whether they are cable carriers or ILECs.

3292 COMMISSIONER PENNEFATHER: Okay. And I guess both today and in your original presentation, you put the focus on costing, tariffing and bundling rules as a result of those being the advantages you see?

3293 MR. TACIT: Yes. We just said those tools are familiar and used by the Commission and they ought to continue to be used where appropriate.

3294 Oh, by the way, we passed no judgement on whether the Category 2 or access independent services ought to be forborne or not. That wasn't where we were heading with this, just to be clear. Rather, we were concerned about the fact that, for example, access be properly tariffed and that access be made available to everyone in a nondiscriminatory manner because it's possible to interpret some of the existing rules in a way that, for example, could basically disadvantage ISPs, like the TPIA restriction -- the use on restriction of TPIA, the restriction on the use of ADSL and so on. It's possible.

3295 And I'm not saying all of the cable carriers and ILECs intend that. Part of it was that not in all cases were they very clear, in our view, about their bottom-line position is. We would either like them to be unequivocally clear in reply, if they haven't been already, or to, obviously, have a ruling from the Commission, if they are not all in agreement on that point already.

3296 On the actual issue of Category 2 or access independent services, we don't necessarily see a problem with forbearance provided those other two things are looked after, and that is access and the leveraging of their dominant positions into the emerging markets. If there are appropriate safeguards to deal with those two issues, you know, we don't take a particular position on, no, they shouldn't be allowed to forbear.

3297 So just to be clear on what we meant by "tariffing".

3298 COMMISSIONER PENNEFATHER: Okay. And just to be clear on what you mean now, when you say "leveraging in emerging markets", this comes back to this question we have asked a few times about what market you are referring to. Because part of the leverage component or the components that we are talking about is what they can offer in PES, as well as perhaps VoIP.

3299 So if you are talking about the emerging market, what market are you talking about?

3300 MR. TACIT: We are talking the specific markets that are the subject of this proceeding, the Voice over IPs, specifically.

3301 We were pretty specific, I guess maybe moreso now than in our original comments, but adopting, for example, TELUS' access independent nomenclature, we are specifically thinking more about those than anything else because those are the ones that we see as a potential, if we think the market develops right in the future, that Cybersurf might go into.

3302 COMMISSIONER PENNEFATHER: And that brings me to your comment today.

3303 So that I understand clearly, you say you do not expect VoIP services to become a substitute for primary exchange service rather than -- I believe, the now segment of customers with specific long distance needs would be the market.

3304 So, again, could you be precise on what you meant by that and how that affects your analysis of this emerging market?

3305 MR. TACIT: Sure. I will start it off, and then I will turn it over to Mr. Mercia, because he is the guy that's much more in touch with the marketing than I am.

3306 But from a regulatory and economic perspective, in terms of substitutability, I guess what Cybersurf has observed is that the initial use of Voice over IP tends to be by people who want, for example, to have a number in a foreign NPA or NPA/NXX in order to avoid or reduce toll charges because they have a particular affinity to a calling area that they would otherwise have to pay long distance charges to call. That's just something that they have observed in the market, and Mr. Mercia can tell you a bit more about that.

3307 What we haven't observed is people saying, "Oh, yeah, we are going, to do this to give up our local service, because we think it's a great substitute for that".

3308 So the initial driver -- and we don't know how long that will be that way -- we are not saying it will always be this way, but right now the initial driver that they have seen in the marketplace has more to do with substituting specific long distance calling patterns than with for primary exchange substitution or even general, I think, long distance substitution.

3309 COMMISSIONER PENNEFATHER: That was my next question: if you saw a change in that eventually.

3310 Sorry, go ahead.

3311 MR. MERCIA: I was actually hoping to get a leap of faith question from Commissioner Langford, but --

3312 COMMISSIONER PENNEFATHER: I'm sorry. Happy to follow, I'm sure.

3313 MR. MERCIA: We have evaluated, probably half-a-dozen different platforms. What we are seeing is that in the Category 2 -- I can't speak to what maybe the cable cos are going to offer -- but in the Category 2, where it's access dependent, there is still a lot of work to be done on quality. There is still lots of latency --

3314 THE CHAIRPERSON: I think you meant "independent".

3315 MR. MERCIA: Oh, yes, access independent, sorry -- there is still lots of latency and echoing and we really don't see that there is going to be a huge -- I don't think people are going to adopt this readily and throw their local phone away.

3316 Now, given that, considering the credibility a Rogers and Shaw and the big players will give to the product, that might change and the quality may change, but right here and now I tend to agree with the Commissioner, again, that this is just an emerging technology and we really don't believe -- and we are not getting, you know, lots of demand from our customers for this service, presently.

3317 COMMISSIONER PENNEFATHER: But it's enough to bring you to the table with some concerns about access?

3318 MR. TACIT: Well, that's the basis --

3319 COMMISSIONER PENNEFATHER: It's enough of a concern that you would want to look at new bundling rules, for example. So it's somewhere -- it may be not right here, but it's certainly something that you see as important. And that's what I'm trying to get at specifically: what the advantage is, on the side of the incumbents, to a technology that you say is really not going anywhere at the moment.

3320 MR. TACIT: Well, I think the danger would be the danger of the kinds of things happening that, for example, the companies have proposed, whereby they get forborne largely by just changing the mode of delivery of their traffic within their networks and we call that Voice over IP and suddenly it's forborne, when it's really just primary exchange service.

3321 Another danger is if access issues are not addressed ahead of time -- and this is, I guess, a little bit where it was interesting to note the comment about, you know, regulatory lag. Part of the biggest reason we are here is that we are concerned about what regulatory lag may do -- may do -- to the competitiveness of these emerging markets as they develop. What we are trying to do is sound a warning bell that we need to look after the access and the bundling issues first.

3322 That's why we are not so much focused on forbearance not forbearance. We really see that as a secondary issue that can largely be managed if the access issues and the dominance issues are properly addressed now. That's really what brings us here today.

3323 MR. MERCIA: Specifically about VoIP is that we believe, as Mr. Pulver was saying, there is lots of IP-based technologies that are coming forward and we really don't need access to the application, we need access to the access in order for us to be competitive.

3324 So currently, in this stage, you know, we have done TPIA, we are looking at DSLSP services. We don't think that the access right now would make, you know, a widespread intersection very economical for anyone. I think Allstream and Call-Net made that same point.

3325 COMMISSIONER PENNEFATHER: Thank you. Thank you very much.

3326 Those are my questions, Mr. Chairman.

3327 THE CHAIRPERSON: Mr. Colville.

3328 COMMISSIONER COLVILLE: Thank you, Mr. Chairman.

3329 As I understand your position, and taking the TELUS example about access independent -- and you said you don't take any position on that, which I find a little bit surprising in that, presumably, one of the reasons for having pricing protection, if I can call it that, is to protect the new entrants in this area -- I take it it's your view that -- or is it your view -- that you don't need price protection to enter this business from the incumbent in the given territory.

3330 MR. TACIT: Not with respect to services. I think what we want to make sure is that access isn't priced to us in a way that makes it uneconomical when they don't face the same internal imputed cost structure.

3331 COMMISSIONER COLVILLE: I'm sorry, let's look at this on the three points.

3332 MR. TACIT: Okay.

3333 COMMISSIONER COLVILLE: My question was related to the price, the retail price, for their VoIP services.

3334 MR. TACIT: No, as long as the other issues are --

3335 COMMISSIONER COLVILLE: Okay. No, there is three issues here, then, so let's assume, for the purpose of this question, that you have access under terms that satisfy you.

3336 MR. TACIT: Okay.

3337 COMMISSIONER COLVILLE: So it leaves, as I see it, two issues. There may be others and, if there are, correct me. One would be the price against which you have to compete. Do I hear you correctly, you don't have a problem with that price being unregulated?

3338 MR. TACIT: I don't believe we would at all because --

3339 MR. MERCIA: No.

3340 COMMISSIONER COLVILLE: So that, then, takes us to bundling. If our bundling rules largely relate to bundling a tariff with non-tariff services, so if we now have a bundle, where is the tariff service? We have now forborne from the price of the VoIP service you are competing against. I don't see where there is a tariff service that would be in the bundle here.

3341 MR. TACIT: There may not be in some cases, and in those cases we wouldn't seek the application of the bundling rule.

3342 What we said, in terms of the major change that we were seeking, was more related to the cable carriers, their so-called triple-play bundles, where they can bundle broadcasting distribution services, in which they are a dominant provider. We would want those treated the same way as tariffed telecommunications services are today, for the purpose of the bundling rule. In other words, if you had either a tariffed telecom service or a cable carrier provided broadcasting distribution service, either of those would trigger at the bundling rule, otherwise there would be no bundling rule.

3343 COMMISSIONER COLVILLE: So we would ave to come up with some whole new bundling rule, because there is no tariff for --

3344 MR. TACIT: Well, I would say that they don't have to tariff them, but we do have costing methodologies. For example, under the present regime for non-tariffed elements, you use Phase II costing. And the cable carriers have already learned how to do Phase II costing, so they could apply Phase II costing for the purpose of applying a bundling rule, they don't have the tariff the broadcasting service. I'm not suggesting that.

3345 COMMISSIONER COLVILLE: I'm missing a step in the logic here, though, because, obviously, the ILECs could do Phase II costing for any number of the services. We have just accepted that for their VoIP service, which, presumably, they could do Phase II costing for. We don't have a bundling problem because there's no tariff, so there is not bundling issue there. There's no tariff for the BDU service, for the broadcast service, either.

3346 On what basis do we come to the conclusion that we have a problem with bundling here?

3347 MR. TACIT: On the basis of the sheer dominance of the cable carriers in those specific markets. I think that's the issue. I think even the ILECs would tell you that cable carriers, as much as the ILECs are still dominant in primary exchange service, the cable carriers are still dominant in the broadcasting distribution services. Yet, when we are looking at each of them entering each other's markets and both of them providing multimedia bundles involving all three -- two or three of those together, we are still saying to the ILECs, we are going to control you with the bundling rule because we know that you are dominant in PES, but to the cable carriers we are not saying the same thing when it comes to broadcasting distribution services, even though they are as dominant in those markets as the ILECs are in primary exchange services. So that's the issue, that's the analogy.

3348 COMMISSIONER COLVILLE: Well, given the Commission is forborne from regulating those services with the broadcast distribution undertakings, given the degree of competition that we face there, what's the test for dominance, in your view?

3349 MR. TACIT: Well, the forbearance there, I believe, is though -- a lot of it is for different reasons than necessarily the section 34 kind of analysis. Not all services that are offered by the BDUs do they not have market power in. They still have the overwhelming majority of the specialty and payTV channels, the digital set-top box pricing, all of that, they are the dominant player. They are just as dominant in that market as the ILECs are in providing primary exchange service.

3350 COMMISSIONER COLVILLE: I am having trouble with this logic. I don't know how we apply section 34 to our broadcast service.

3351 MR. TACIT: I'm not suggesting you do.

3352 COMMISSIONER COLVILLE: In the Broadcasting Act, we have chosen to -- we are arguing they are not dominant, so on what basis do we arrive at dominance?

3353 MR. TACIT: Well, maybe what we are saying is we disagree with that conclusion. Certainly in a lot of the markets in which they operate, we do view them as being dominant. In the distribution of signals, we absolutely view them as being dominant. There is nobody else that has the reach and the market share that they have when it comes to broadcasting distribution. That's, I guess, our view of it.

3354 COMMISSIONER COLVILLE: Okay. Thank you, Mr. Tacit.

3355 Thank you, Mr. Chairman.

3356 THE CHAIRPERSON: And that's the examination that you are proposing that the Commission --

3357 MR. TACIT: Correct.

3358 THE CHAIRPERSON: -- include in that kind of application. I think I have your point.

3359 Switching to the ILEC side, though, I guess the logic of your position is that, even though on the ILEC side you could be confronted with a bundle, including the Category 2 ILEC-provided service, by the logic of Vice-chair Colville's example, that would be a forborne service and you wouldn't be concerned about that because I guess it would follow that you wouldn't believe that they were dominant in that Category 2 market. Is that correct?

3360 MR. TACIT: That's correct. If there was not -- say it wasn't bundled with something else, in which they are, that is tariffed --

3361 THE CHAIRPERSON: It's unlikely to be bundled --

3362 MR. TACIT: -- so it's unlikely, I agree. I agree.

3363 THE CHAIRPERSON: Okay. Thank you.

3364 Thank you. Those are our questions.

3365 Madam Secretary.

3366 THE SECRETARY: Merci, monsieur le président.

3367 For the record, Mr. Chairman, the Commission was informed that the Canadian Association of Internet Providers has withdrawn its participation to this public consultation.

3368 I will now call on AT&T Global Services Canada Co. to make its presentation.

PRESENTATION / PRÉSENTATION

3369 MR. ANTECOL: Good afternoon, Mr. Chairman, and members of the Commission.

3370 My is Ed Antecol and I'm here as external counsel for AT&T Global Services Canada Co., which we will be referring to as AT&T Canada.

3371 AT&T Canada provides a suite of Internet and data services in Canada and is a wholly-owned subsidiary of AT&T Corp.

3372 AT&T Canada does not currently provide local VoIP services in Canada as the Commission has defined this term in the public notice, but is actively evaluating whether to introduce such services based on technology developed by AT&T Corp. Of course, the regulatory framework for VoIP will influence this analysis.

3373 With me today is Eric Loeb, International Regulatory Law and Policy Director for AT&T. Eric is currently working on VoIP regulatory proceedings in several countries in Europe, Asia and Latin America on behalf of various AT&T affiliates. Our plan is for Eric to present AT&T Canada's submission, and then we will both be available to respond to your questions.

3374 MR. LOEB: Good afternoon. Thanks for the opportunity to speak today.

3375 As our prior comments highlight, AT&T Canada is quite concerned with the CRTC's proposal to apply its existing traditional LEC regulatory framework to VoIP.

3376 We don't believe that the existing regulatory framework is appropriate for local VoIP service because the current framework does not fit the facts of contemporary VoIP services.

3377 Rather than applying the familiar rules that address specific economic or social regulatory concerns associated with the circuit switched voice to a very different VoIP technology we respectfully recommend that the Commission take a fresh look at each of the underlying concerns in light of the VoIP technology and the associated market characteristics for that technology.

3378 With such a review, the Commission should regulate only where it is clearly necessary.

3379 The Commission's proposed approach of applying traditional regulations we believe would have the effect of impeding the efficiency of market forces which in turn impacts innovation cycles and the affordability of new forms of communication services to Canadian end users. It also would set a precedent for regulators around the world that seek to protect their traditional voice service providers by justifying the maintenance of certain market entry barriers.

3380 We urge the CRTC to re-evaluate its underlying assumptions about the definition of new services that use VoIP technology, and about the potential of these services to deliver substantial benefits to consumers if provided the right regulatory framework.

3381 To highlight what AT&T Canada considers the most important issues in this proceeding, my comments today focus on two topics.

3382 First, the technological differences between VoIP and the traditional circuit-switched telephone, including both the opportunities and also the challenges raised by these technological differences.

3383 Second, to talk about the need for a new regulatory framework that reflects these technological differences and that can promote and protect consumer concerns with a light-touch regulatory approach.

3384 First, the differences between VoIP and circuit-switched voice.

3385 As you know well, the CRTC stated a preliminary view that VoIP services providing access to or from the local PSTN and that use telephone numbers that conform to the NANP have the same functional characteristics as the primary exchange service. In turn, the Commission reasons that to be consistent with the principle of technological neutrality, such forms of VoIP providing this familiar look and feel should be subject to the existing regulatory framework for traditional LEC services.

3386 AT&T Canada has a strong interest in this proposed treatment. Of course, pursuant to Commission Decision 97-8 and subsequent determinations, non-Canadian controlled telecommunications service providers are not eligible for traditional LEC status.

3387 Under the Commission's preliminary views in this proceeding, such entities including AT&T Canada would not be able to provide local VoIP services except as a local reseller of another local exchange carrier's local service and at that in a manner with the same features as required for traditional primary exchange service.

3388 This approach also makes non-Canadian controlled service providers subject to direct LEC oversight through commercial agreements for access to elements necessary to provide VoIP as you would find it, such as Canadian numbering resources, rather than to direct Commission oversight which could be applied as a consideration for use of such public resources. We believe that this restriction does not benefit consumers.

3389 Turning to the underlying definition, the commission's preliminary view that local VoIP service and traditional primary exchange service offer the same service attributes misses several facts. Many contemporary forms of VoIP, and in particular those provided over broadband connections, offer far more than the service attributes of traditional voice services, including: nomadic capabilities, access-independent characteristics and many integrated computer application features that I will discuss in just a moment.

3390 The CRTC based its equivalency analysis on the use of NANP resource and local PSTN access only. Although this does indeed identify common look and feel call attributes, it does not acknowledge the advanced service attributes as well as the service limitations associated with use of VoIP technology, and there are real differences which mostly will result in consume benefits and, as we have been discussing, also result in some consumer challenges. Either way, these differences merit a flexible regulatory approach that is not tied reflexively to the regulation of circuit switched voice services.

3391 As you have heard repeatedly during these hearings, contemporary VoIP not only offers voice communications but also offers the seamless conversion to voice communications with additional data or video services and devices.

3392 For example, AT&T Canada's affiliate, AT&T Corp, is offering a service in the U.S. that provides both standard voice telephone functions and also enhanced functions not even possible with a traditional wireline service. These features can be controlled and customized by the end user at a personal computer.

3393 Current examples include: advanced call forwarding features that allow sequential or simultaneous forwarding to multiple alternative numbers; do not disturb functions that allow the user to set times to restrict incoming calls and as well an override of function for urgent incoming calls; voice mail that can be accessed, saved or forwarded by computer as an electronic file as well as being accessed by your standard telephone device; and advanced call management features such as personalized call logs, phone books and click to dial functions. These are standard features of the service and this demonstrates the considerable consumer value that these service attributes can bring.

3394 Equally important however, these innovative service attributes are expanding rapidly. Because contemporary VoIP is a sophisticated computer application, new features can be added efficiently by software upgrade, rather than by upgrade to switching hardware. By orders of magnitude, this reduces the cost and the time to bring service improvement from a concept in the labs to the end user at home.

3395 Just last week, for example, AT&T Corp introduced several new features to its popular AT&T CallVantage service, based on customer demands, including the ability for a subscriber to have multiple virtual numbers routed to their phone. These new features supplement a service that has been in the market for only a few months. With traditional telephony, service changes of this type might be cost prohibitive and if not would take months or years to release, not weeks.

3396 With the full integration of voice, data and advanced computer applications, with the ability to provide end users with the capability to interact with stored data such as their click to dial phone logs or electronic file voice mail, and with the capability to convert communications from IP to TDM protocols on an end-to-end basis, VoIP undeniably is an enhanced application service built on top of certain basic voice transport components.

3397 To conclude that VoIP has only functional characteristics that are the same as traditional telephone service, requires that the Commission first disregard all of VoIP's advanced computer processing service attributes that exceed transport, and also to disregard the factors that have always distinguished enhanced application services from the basic transport elements which such applications utilize.

3398 It is precisely because VoIP is a software-based applications service and not a basic transport service requiring ownership or resale of last mile access facilities, that VoIP can offer some unprecedented opportunities for direct and robust competition. With VoIP it is possible for multiple service providers to directly compete for a consumer without needing to lease last mile facilities from a facilities-based provider, particularly one that is nearly always as horizontal competitor as well as the vertical supplier.

3399 This challenges the assumptions in Telecom Decision 98-12 that facilities-based LEC entry will be the best way to promote end user interests. Because it is not essential to operate LEC access facilities to be a VoIP competitor, it is not appropriate to restrict all VoIP competitors under a LEC regulatory regime.

3400 Finally, with respect to the fundamental technological differences, in addition to all the potential benefits that VoIP can bring, VoIP providers also have been at the forefront in identifying and working to solve the challenges in areas such as emergency service, disability access or line power assurance.

3401 Given the considerations raised during these hearings to emergency services, I will take a moment to discuss work in this important area.

3402 For the immediate term, many providers such as AT&T Corp are ensuring that consumers are clearly informed about the limitations of their services in our promotional material, then that they contractually consent to their awareness and understanding of such limitations, and then the customer is reminded of the limitations in the service fulfilment material.

3403 Right now, AT&T Corp also works with a vendor, a third party vendor, that provides a database look-up which allows the routing of emergency calls to the PSAP geo-coded to the address that the customer registers with AT&T Corp as the location of use, regardless of the area code associated with the VoIP telephone number. This provides a basic 911-like service. This is not E-911 service of course.

3404 For interim and long-term solutions for VoIP emergency service, providers are leading cooperative efforts with both government agencies and end users to design technological solutions that will better address these challenges, which include providing callback and recontact information to a PSAP, providing location of caller, and that PSAPs have direct IP connectivity. These are by no means insignificant challenges.

3405 We fully expect that in the IP environment, the long-term VoIP solutions will improve from what is possible in today's circuit switched environment, particularly in areas such as IP-enabled services. However, as the Commission rightly recognizes in its preliminary views, these efforts will take time and will best develop by cooperation and not by mandate.

3406 By contrast, to prohibit VoIP unless a party satisfies existing emergency service capabilities using existing infrastructure will not improve emergency services delivery and will jeopardize Canada's telecommunications leadership in the VoIP space by holding providers back.

3407 The point is, whether we focus on the benefits or the challenges that are all recognized, VoIP is a fundamentally different technology with different capabilities and raising different regulatory considerations. It requires and deserves a new regulatory balance to promote and protect consumer interests. The CRTC need not apply the principle of technological neutrality here, and it should not constrain 21st Century VoIP in the straitjacket of 20th Century circuit switched LEC regulation.

3408 VoIP offers different technological capabilities from traditional voice services, both in terms of increased competition and innovative features and also in terms of the different ways that it will satisfy consumer protection needs. Therefore, we urge the Commission to reconsider the right balance between encouraging VoIP providers to enter the market with low entry barriers and ensuring that consumers are properly informed and protected.

3409 Applying current LEC regulations that have not succeeded in promoting competition, and forcing VoIP service providers to offer the same features as traditional voice providers as a condition to enter the market is not the right balance. It would stifle service provider innovation and consumer choice.

3410 Now, turning to what AT&T Canada recommends as the proper regulatory framework, as proposed in our earlier filed comments in this proceeding and as recommended by some other parties, AT&T Canada supports a new, layered regulatory framework that recognizes the fundamental differences in how service providers can deliver VoIP to consumers. This approach would distinguish the regulatory considerations of VoIP at the applications layer from the regulatory considerations of the underlying access and transport at the network layer.

3411 In this model, if regulation adequately protects against the abuse of market power at the network layer, that is, the broadband network facilities through which consumers access VoIP applications of multiple service providers, then the preconditions for market power at the VoIP applications layer typically will be absent due to the ability for many VoIP providers to directly serve consumers.

3412 We believe that only modest regulation of the network layer should be necessary to protect VoIP competition. One rule certainly should be to forbid any network provider, or entity providing Internet access to subscribers, from impeding or degrading access to the Internet content or other applications such as VoIP of another service provider, except of course where such access would threaten the integrity of the network or where required by law.

3413 Second, the Commission should broadly prohibit any broadband transport provider from requiring subscribers to purchase any IP-enabled service as a condition from obtaining broadband Internet access service. This form of tying would restrict applications layer competition.

3414 These modest and reasonable but important conduct restrictions at the network layer will create the market conditions for active competition at the application layer and in turn should eliminate the need for many of the economic regulations associated with current LEC rules.

3415 Further, by properly distinguishing the network layer transport from application layer services, the CRTC has an additional reason to not apply its current LEC rules which are in part premised on an assumption that facilities-based competition would best promote the consumer interests.

3416 With VoIP, consumers will benefit most if network providers and non-network providers can compete on a level playing field to offer their network-agnostic VoIP applications. Accordingly, given that a VoIP provider need not own underlying facilities, there is no valid reason to limit service provider competition by applying the Canadian ownership restrictions associated with traditional LEC rules.

3417 The Commission will jeopardize Canada's leadership for VoIP and broadband service demand if it applies an unnecessarily heavy-handed regulatory framework. AT&T Canada urges the Commission to develop light-handed rules that are appropriate to the distinct technological characteristics of VoIP and for which consumer protection regulations can be phased in over time as technological solutions and customer needs evolve.

3418 As an example of laudable forward-looking VoIP regulation, we urge the Commission to consider the recently articulated views of the UK regulator Ofcom. On September 6, Ofcom stated its current thinking on VoIP, which it has been reviewing for several months, or as Ofcom has called it more broadly, New Voice services. Their approach is succinctly expressed by the Ofcom CEO Stephen Carter, who states:

3419 Ofcom has recognized that a strict legal interpretation of its existing regulatory framework does not satisfy its objective to foster the pro-consumer New Voice services. They find that a more flexible approach for the short term will be coupled with a long-term plan to study market performance, during which Ofcom will consider whether intense competition, combined with informed consumer choice, is indeed satisfying important social and safety regulatory requirements.

3420 Specifically, this translates into the following principles about VoIP, which all support Ofcom's preliminary view that New Voice service providers should not be required to meet all the obligations of their traditional publicly available telephone service or PATS operator definition.

3421 They state:

3422 Finally:

3423 In this Ofcom is pivoting its regulatory theory around a confidence in the long-term potential of VoIP to deliver substantial consumer benefits through competitive market forces and consumer information. For example, Ofcom posits that most providers of public voice services will have very strong market-based incentives to develop consumer protection solutions because their customers will demand it in order to migrate from their traditional services. Ofcom is focusing on the potential of the market to embrace a new technology, rather than on fears that VoIP creates certain disruptive near term challenges.

3424 Ofcom is not alone in seeing a need for VoIP regulation to break from historic voice regulations in order to promote consumer interests. In a speech also earlier this month in Berlin to the Biennial Conference of the International Telecommunications Society, the Director General of the Hong Kong Office of Telecommunications Authority, or OFTA, Mr. MH Au, stated that notwithstanding OFTA's technology neutrality principle:

3425 Mr. Au went on to state stressing the importance of relying on consumer choice over regulatory mandate:

3426 Finally, just yesterday, the Singapore regulator IDA initiated its new consultation on what should be the policy framework for IP telephony and stated in its paper:

3427 Of course, many of these proceedings are, like this, preliminary views and they will consider their preliminary views as they go through their evidence.

3428 With a light-handed approach, instead of applying a full slate of rules developed based on technical characteristics of circuit switched telephony, the regulatory should allow time for market-based serviced provider innovation and differentiation, coupled with consumer awareness obligations, to shape solutions for social and safety needs. This go-slow approach to regulating VoIP, recognizing that government mandates can do more harm than good, both with respect to the quality and the timeframe of a solution, if it pre-empts efficient innovation and private/public voluntary collaboration.

3429 Given the distinct potential of VoIP technology, AT&T Canada strongly urges that the Commission change its preliminary view that traditional LEC regulation is appropriate for local VoIP services. The Commission should adopt a light-handed approach that focuses on network layer access regulation more than on application layer service regulation. This will best serve the long-term interests of Canadian consumers and will keep Canada at the forefront of VoIP and broadband adoption.

3430 Thank you very much for the opportunity to present our views at this critical time for this important technology.

3431 THE CHAIRPERSON: Thank you.

3432 Commissioner Noël.

3433 COMMISSIONER NOËL: Good afternoon, Mr. Loeb and Mr. Antecol. I have very few questions because your presentation and your written submissions were quite clear.

3434 You have heard yesterday TELUS referring two classifications of Voice over IP services, access-independent and access-dependent. Do you consider that there are any differences between access-dependent VoIP services and access-independent VoIP services, bundled or offered jointly with high-speed Internet access?

3435 MR. LOEB: With this, I would focus on the attributes of the service itself with the access-independent services where we are often talking about CPE-involved that perform some enhanced functionalities such as the ability to prioritize traffic, and you have your access-agnostic capabilities and all of the various service attributes that I have discussed. There is the potential there for a consumer to reach out to many different service providers and there are many enhanced applications involving stored data interacting with the consumer for the use of that service.

3436 With respect to access-dependent, there may be many variations of this of course as parties have talked about. That could be as simple as replacing a switch with a router and just deploying IP in the middle of a network without changing the characteristics of the communications experience or the end user control or it may be much more. I think there could be quite a number of variations upon the spectrum of VoIP service.

3437 COMMISSIONER NOËL: And what would be your position concerning access-dependent services? Would you suggest that we should continue to regulate them the way we do actually or that the -- it wouldn't be subject to tariff application in the ILEC's case?

3438 MR. ANTECOL: At this point we recommend the continuing regulatory regime for access-dependent VoIP services. So the ILECs would be regulated the way the ILECs are for local type services and the CLECs the way the CLECs are regulated, et cetera.

3439 COMMISSIONER NOËL: Okay.

3440 Concerning what some people refer to as the social side of this equation, do you have a time frame in mind concerning the availability of working E-911 or a variation that would be a workable solution to what we have? I am also talking about MRS and privacy safeguards. Do you have timeframes in mind?

3441 MR. LOEB: I don't have a precise timeframe. I know that in the U.S. the groups are working very actively on this. As I have stated, there are market-driven demands because of what consumers want, not just pressure from a regulatory side, that are encouraging people to work cooperatively to look to find a national-based solution rather than a market-by-market or state-by-state or PSAP-by-PSAP solution.

3442 COMMISSIONER NOËL: In the United States I think you have 50-odd regulators.

3443 MR. LOEB: One thing I would say in addition is that the solutions that are being developed, one of the benefits is that in the IP environment, once some of the difficult hurdles are solved in one place they will be replicable in others as well. Of course it will require quite a bit of cooperation across the industry, in every market and with the government as well.

3444 COMMISSIONER NOËL: Do you think that if the CRTC was to retain -- I am trying to find the proper English word -- "une date butoir", a drop-dead date for this that would help find rapid solutions?

3445 MR. ANTECOL: I just wanted to supplement Eric's previous answer.

3446 Part of the problem with defining a specific deadline is one has to have a very clear idea of the goal when one sets the deadline. It may be that in a shorter timeframe carriers could work out sort of a backdoor basic 911 solution, but if is the longer term solution is to replace equipment in the PSAP offices with new screens and IP capabilities, then that timeframe would be different.

3447 Just a little bit of caution on setting a timeframe is that one should have an idea of the goal first.

3448 COMMISSIONER NOËL: Finally, a last question.

3449 Do you think that the costs associated with the 911 services should be recouped from the local exchange carrier or do you have another mechanism in mind?

3450 MR. ANTECOL: Under today's regime, as I understand it, the costs of the transport to the wall of the PSAP are covered through, in Bell's territory, the 22 cent a month charge levied on telephone numbers. Whether the Commission sees fit to recover additional monies for equipment within the PSAP offices, that is a trade-off that the Commission and municipalities are involved, provincial governments are involved. It really is a ballot that has to be struck. How you strike that balance I don't know. It is a very difficult question given all the parties involved and their differing responsibilities.

3451 Some parties may have different requirements. The PSAPs and the public security people may have a greater wishlist. Maybe they are unhappy with the current databases they get and the information they get. My understanding is for business lines, multi-line, they don't get the information, the location information they need. Many of the screens are old. There are a lot of problems with the database information that we have heard about in the past, so they may have additional wants and wishes to fix, or improve would be a better word, 911 services.

3452 COMMISSIONER NOËL: Thank you. Maybe one last question.

3453 You talked about that layered approach and the access being the one that still be regulated somehow. Would you apply that also to the cable operators or just to the ILECs?

3454 MR. ANTECOL: Yes, to both.

3455 COMMISSIONER NOËL: Thank you very much. Those are my questions.

3456 THE CHAIRPERSON: Thank you.

3457 Commissioner Cram.

3458 COMMISSIONER CRAM: Thank you.

3459 I was confused, and that may be a normal state for me, by some of your statements in your submission today, Mr. Loeb, particularly on page 4, the top paragraph, where you talk about the restriction which appears to be that resellers cannot get phone numbers doesn't benefit consumers. Is that what you are saying there?

3460 MR. LOEB: Can I get directly from the Canadian numbering authority?

3461 COMMISSIONER CRAM: Yes.

3462 MR. LOEB: We can only get them through a LEC.

3463 COMMISSIONER CRAM: Through a LEC.

3464 MR. LOEB: A service provider that is non-Canadian controlled can only get them through a LEC.

3465 COMMISSIONER CRAM: How does that not benefit consumers?

3466 MR. LOEB: How does our inability to get the numbers directly not benefit them?

3467 COMMISSIONER CRAM: Yes.

3468 MR. LOEB: First, I would focus it on is there any valid reason why in the VoIP environment where a facilities-based operation is not necessary to promote competition merits still keeping that restriction that would have a non facilities-based service provider from being able to get them directly. I don't believe that there is a good basis for that restriction.

3469 The ability to directly obtain the numbering resource provides a flexibility to service providers and constraints if necessary on conduct by LECs that would provide them with that number of resource, so that whether it is a term and condition or whether it is pricing issue, we have direct recourse to come to the Canadian numbering authority to obtain one of the essential elements that we need to provide a competitive service rather than having to work with a supplier to get that, who also would be a horizontal competitor of ours.

3470 COMMISSIONER CRAM: Okay.

3471 Then on page 6, again the top paragraph starting with "It is precisely", the last sentence:

3472 Which essentially means you don't want to be a reseller. Do you want the status of a LEC, like the bill and keep and those issues?

3473 MR. ANTECOL: No. I'm not saying that at all.

3474 What we are saying here is a couple of things.

3475 One, VoIP providers shouldn't have to meet all the requirements of a CLEC or a LEC. In other words, the VoIP service shouldn't have to fit the mould of primary exchange service. I think that is the primary issue here.

3476 The second thing is that when we want to go and negotiate for the essential elements needed to be a VoIP service provider, right now we are at the whim of commercial negotiations, as Eric mentioned, with horizontal competitors and we can't even go to the ILECs for these services today because they filed a tariff to provide these services to VoIP providers but that proceeding is on hold.

3477 So what we are faced with is commercial negotiations which involve the bundling of a lot of other services that a VoIP provider doesn't necessarily need.

3478 COMMISSIONER CRAM: But once the tariff goes through it will be less problematic.

3479 MR. ANTECOL: It will be less problematic when the tariff goes through in that it will set a public benchmark so that when we are negotiating with the CLECs for similar resources the CLEC won't be looking to recover more than what we can go and buy it directly from the ILEC.

3480 But that still places the ILEC in the role of a policeman, so to speak, of the VoIP service provider. It just seems more efficient if the Commission could directly regulate that VoIP provider as a precondition to getting numbering that though shall do X, Y and Z rather than relying on indirect regulation through contract.

3481 MR. LOEB: Again, in both instances, whether it is the requirements that a LEC provider must satisfy or whether it is a question of access to numbering resources, both issues beg the same re-evaluation of whether with this technology and the characteristics of providing service there is still an underlying policy rationale to apply exactly the same rules or exactly the same restrictions to a VoIP service provider as have traditionally been applied to a LEC provider on the assumption of promoting facilities-based entry.

3482 COMMISSIONER CRAM: The requirements that you have referred to in your submission today is really 911, disability access and line power assurance. Are those the ones that you are talking about? Those are the requirements that are problematic.

3483 MR. ANTECOL: I mean, there is lots of social issues that need consideration. MRS, privacy and 911 would be the biggest elements.

3484 MR. LOEB: And I think it is critical to clarify, as I think we have stated in here, we don't deny the importance of satisfying these social obligations, that is and remains very important for VoIP providers. But whether they are satisfied in exactly the same way and exactly the same timeframe as a precondition of offering service is indeed something that we do I think is not an appropriate approach.

3485 COMMISSIONER CRAM: On the safety and security ones, as they were called this morning, by one of the 911 people, I think you can say it is fair that to date nobody has given us any guidance on a timeline for 911. Mr. Loeb, if you are not aware, in Canada any time 911 doesn't work it hits the paper big time. Right, Mr. Antecol?

3486 MR. ANTECOL: It hits the paper when it doesn't work because it is VoIP, but when it doesn't work for other reasons I would submit that it quite often doesn't hit the paper.

3487 COMMISSIONER CRAM: Well, at least in God's country out west it does. I will tell you that.

3488 MR. ANTECOL: It is probably a good thing that it hits the paper, by the way.

3489 COMMISSIONER CRAM: Yes. I am having a difficult time seeing that we could issue any decision that wouldn't come down fairly severely on having 911. I can't see a decision from this Commission saying, oh, you've got a year or two to let the marketplace work it out, because the bottom line is right here.

3490 I guess my reaction is when you come back tomorrow can you give us some deadlines and can you give us the goals that you will comply with? You said you had know the goals. You tell me the goals that you can comply with and when you can do it.

3491 MR. ANTECOL: The only reservation on that is that it is one thing to set the goals, and we have alluded to some goals for a longer term solution in our presentation today, but some of those goals like developing an IP interface at the PSAPs, that is broader than we can undertake to accomplish ourselves. I mean, that is a multiple party effort and something that we can't evaluate on our own.

3492 But if I could suggest that awhile back we had a Commission proceeding on LMP where we sort of had a pre-proceeding to discuss what it was the Commission wanted in terms of number portability, be it location portability, service provider portability. We had a round table type format and the Commission basically stated what it expected and then we had a second decision which mandated the LMP that the parties had concluded was the best approach.

3493 So if I could offer up something, I would suggest that maybe a two-phased approach to get into that deadline might be an appropriate method.

3494 COMMISSIONER CRAM: In the meantime, what can you do in regards to 911? Can you do a normal 911, a non E-911, and how long will it take you?

3495 MR. LOEB: I believe we gave some examples in the presentation of what AT&T Corp in the U.S. is working to in terms of immediate, interim and long term approaches.

3496 COMMISSIONER CRAM: So immediately what can you do?

3497 MR. LOEB: Right now, AT&T Canada is still evaluating whether it will enter into the VoIP market.

3498 MR. ANTECOL: If I could just add that other Canadian VoIP service providers are using the intrado solution that we heard mentioned yesterday and they are using PSAP, a backdoor, so using the 10-digit local numbers for the PSAP, so they are mapping the consumer location to a 10-digit number. It doesn't necessarily provide location information or other E-911 capabilities.

3499 My understanding from the Primus presentation and other presentations yesterday morning, I think that parties are reasonably close to a basic -- I am not even going to call it basic, sort of a 911-like solution. Of course it is not a nomadic solution. It depends on the user keying in where they are, but I think that the Canadian providers are very close to actually implementing a basic solution today.

3500 As far as the more enhanced solutions, I think they are quite a bit further away.

3501 COMMISSIONER CRAM: Just so you don't have to read in between the lines. There is one Commissioner who is not exactly satisfied with "we are working on it" and "fairly soon" and "let the marketplace work".

3502 Thank you, Mr. Chair.

3503 THE CHAIRPERSON: I am glad that Commissioner Cram added the individual Commissioner part. We sit as individual Commissioners, as you know, and views about collective determinations by the Commissioner are those individual Commissioner's views with neither agreement nor disagreement on the part of any other Commissioner.

3504 Thank you.

3505 I had only one follow-up question, gentlemen, and that was on the same paragraph as Commissioner Cram referred you to on page 4. She questioned you about the status and the numbers. There was another line where you say:

3506 Is that just a repetition of the list of features such as 911, MRS and the like? Is that what you were referring to?

3507 MR. LOEB: That's right. It is the concepts that to solve the same issues and to provide the exact same services the regulations developed around circuit switched voice, that they not apply exactly the same to VoIP.

3508 THE CHAIRPERSON: Thank you.

3509 Finally, on page 8 you refer, as others have, to "impeding or degrading access". I have asked this question to a number of participants as to whether they have any firsthand evidence or experience of that occurring in other jurisdictions and, if so, what that would be. Would you care to provide us with that information?

3510 MR. LOEB: In fact, AT&T currently is evaluating some global teleworker services. There is a jurisdiction where I am not going to disclose the jurisdiction or the party because it is a matter under review right now, but a complaint is open where both some of the trial customers of AT&T, as well as customers of other VoIP service providers, were finding that the ISP affiliate of the incumbent carrier and country had inserted a software patch with their broadband customers that was impeding access to that service provider. So this is the one instance that we are experiencing. It is a matter under review now.

3511 I think it is certainly sufficient to say that it is not a pure theoretical concern so we rely on what we feel are very reasonable conduct restrictions to clearly prohibit what I believe most would find as anti-competitive behaviour. These are not regulations that would require someone to undertake doing something new. It would be to prohibit them from doing things that would, in very fundamental ways, inhibit access to different service providers.

3512 THE CHAIRPERSON: Thank you very much.

3513 Counsel.

3514 MS PINSKY: Thanks. I just have one question of clarification.

3515 You referred in your remarks today to the fact that AT&T Corp routes emergency calls to the PSAP coded to the address of the customer, which the customer registers with AT&T Corp. I just wanted to clarify whether that process was dynamic and whether it allowed for customers to update their location if they travelled with the phone.

3516 MR. LOEB: There is an ability to update although there is a time lag between when the request comes in and when the database is reflecting the new address.

3517 MS PINSKY: Is the time lag a matter of hours or days?

3518 MR. LOEB: I will need to get back to you. I can do that in reply comments, if that is okay.

3519 MS PINSKY: Yes.

3520 MR. LOEB: I don't know the exact timeframe off the top of my head.

3521 MS PINSKY: Okay. Thanks.

3522 THE CHAIRPERSON: Thank you very much, gentlemen.

3523 Madam Secretary.

3524 LA SECRÉTAIRE: Merci, Monsieur le Président.

3525 I will now call on the Telecommunications Workers Union to make its presentation.

--- Pause

3526 THE SECRETARY: Gentlemen, please introduce yourselves because I noticed we are missing a player here and proceed with your presentation.

3527 Thank you.

PRESENTATION / PRÉSENTATION

3528 MR. HIEBERT: Thank you and good afternoon.

3529 My name is Rod Hiebert. I am President of the Telecommunications Workers Union. To my left is Sid Shniad our Research Director and to my right is Jim Aldridge, Legal Counsel for the Telecommunications Workers Union.

3530 The Telecommunications Workers Union is pleased to participate in this consultation process in respect of the regulatory framework to govern voice communications using Internet protocol. As the Commission knows, the TWU has been involved in many telecommunications proceedings for more than 20 years and has consistently advanced the interests of the Canadian public as well as those of its own members.

3531 During those two decades, the TWU has consistently advanced the view that the primary consideration of all Commission proceedings should be to ensure that Canadians have universal access to high quality telecommunications services at affordable prices.

3532 The TWU submits that in pursuing this goal, the Commission's responsibility must be to oversee Canadian communications as a whole. The first objective set out in the Telecommunications Act includes this imperative at 7(a):

3533 As we have reviewed the record in these proceedings, we have noted themes that have recurred at major CRTC proceedings since the early 1980s. You are once again being told, in essence, that technological innovations have rendered regulation of telephone services obsolete. You are once again being confronted by the spectre of a potentially fatal threat to the system whose impact will only be aggravated by any attempt on the part of the Commission to impose regulatory oversight.

3534 You are once again being enticed by promises of a new Utopia of unregulated telecommunications services, and simultaneously warned that if you fail to give the corporate players what they want, Canada will fall into economic disarray with stifled innovation and a loss of competitive advantage, the unavoidable outcomes.

3535 Just as has been the case in numerous previous proceedings, you have before you a group of self-interested corporate parties, each of which is arguing that regulation would be inherently bad for them, but should be imposed on organizations that occupy a higher position on the food chain.

3536 The new and would-be VoIP competitors say that the cable and telephone companies should have their services regulated.

3537 The cable companies say that only the telephone companies should be subject to regulation.

3538 The telephone companies say that no one should be regulated in respect of VoIP.

3539 The subject has changed but the song remains the same.

3540 However, the TWU also notices important differences from previous proceedings. Most importantly, the TWU has noted how little attention has been spent in these proceedings on what previously would be the central question: how the outcome of these proceedings will affect ordinary Canadians' access to high quality telephone service at affordable rates.

3541 The TWU submits that fundamental questions must be made overt. Until the Commission addressed these questions to company representatives at this consultation over the last few days, they remained unasked:

3542 What will happen to the PSTN as VoIP services dramatically reduce the number of customers who will continue to rely on plain old telephone service?

3543 How will the rates for and quality of primary exchange service be affected if the Commission accedes to the telephone companies' arguments and allows them to offer VoIP without regulatory oversight? Not at all? Somewhat?

3544 How will the rates for and quality of PES be affected if the Commission accedes to the urging of the cable companies? Of the new and would-be entrants?

3545 How will the Commission's decision in this proceeding affect your consideration of rate adjustments when the companies fail to fulfil their quality of service obligations? Of your consideration of a consumer bill of rights? How do these and other issues relate to each other?

3546 In the face of disproportionate under-representation of ordinary Canadians in these proceedings, it is clearly incumbent on the Commission to assert and maintain your role as protector of the public interest and to recall that you are not merely an arbiter responsible for dividing up market share, nor an imperfect surrogate for the wonders of the marketplace.

` Millions of ordinary Canadians rely on you, not the benevolence of industry nor the magic of the marketplace, to ensure that they will continue to have high quality, affordable telephone service.

3547 Another noteworthy change in these proceedings compared to those of previous years is in the attitude displayed by the telephone companies to the Commission and to your role. Bell Canada and the other companies approach you with a message that combines flattery and fear. They flatter you in respect of decisions that you have made in the past to forbear or otherwise refrain from regulating. They attempt to frighten you by saying that if you persist in your preliminary view that your mandate requires you to regulate services rather than technology, you will leave Canada in a technological and economic wasteland. Bell Canada and its fellow companies' punch line is to ask you to show the vision by unleashing a future that they say is inherently unpredictable, a strange sort of a vision.

3548 TELUS displays an attitude that appears to be condescending and dismissive to the Commission's preliminary views as well as to the manner in which the Commission has carried out its responsibilities.

3549 TELUS states that it does not appear that the Commission:

3550 Paragraph 12.

3551 It states that it:

3552 As though these matters had never occurred to the Commission. Paragraph 14.

3553 It refers to filing tariffs for new services in accordance with Commission policies and procedures as a "harrowing process". Paragraph 40.

3554 It refers to your existing regulation as "anachronistic", paragraph 41, and states that your preliminary views were offered without justification other than the "appearance" of functional equivalence; paragraph 42.

3555 Perhaps TELUS thinks that these sorts of arguments are persuasive, but TELUS neglected to address the most fundamental issue: what would happen to primary exchange service and the to the PSTN if the Commission were to accede to TELUS' demand for complete forbearance from regulation of VoIP rates?

3556 The telephone companies' refusal to address these issues should be considered in the context of the recent conduct in respect of the regulated and unregulated service offerings. The ILECs' chronic failure to fulfil their quality of service obligations has forced the Commission to commence a process to consider rate adjustments and auditing of quality of service reporting.

3557 The Commission has been obliged to consider establishing a consumer bill of rights, and TELUS has yet to comply with the Commission's directive in Telecom Decision CRTC 2003-69 that TELUS refund money that it improperly charged for maintenance and repair of single-line inside wire. No wonder the ILECs would like to persuade the Commission that regulation of rates is anachronistic, that the Commission is obsolete. Oh, yes, will someone please remember to turn out the lights as soon as you solve the question of 911 and what are now being characterized as other social regulatory issues.

3558 The TWU continues to endorse the Commission's preliminary views. The Commission is quite correct in discerning that your task, with which you have been charged by Parliament, is to regulate services not technology. Nothing that has been said by any of the parties should or could alter this view.

3559 The Commission must face the fact that little competition has arisen in the provision of services to high-cost remote areas of the country or t less affluent segments of the population. At the same time, it is clear that over the past decade there have been unprecedented increases in the prices that Canadians pay for ordinary phone service, while the quality of that service has deteriorated badly.

3560 In recent years, Canada's telephone companies have sought to increase their profits by selling off assets, assets whose purchase was funded by revenues generated when rate of return regulation was in place.

3561 Furthermore, telephone companies seeking to retain the benefits of their efficiency have slashed their workforces and gutted construction and maintenance programs. It is therefore no accident that service quality has taken a major hit in the process. Degradation of service quality has been experienced most dramatically by the customers of TELUS, leading the Commission to impose stricter controls and threats of further action against that company, but similar problems have manifested themselves across Canada.

3562 Despite the prevailing hype, the Internet is not magic nor is it a cloud. When a call is made using VoIP, it is still necessary to route it to another device, whether this is another telephone, an Internet address or another numbering/address system. The call or message still must be transmitted through a computerized switching system, over transmission lines, through microwave systems, satellites, and fibre optic cables or other means of transmission to its ultimate destination.

3563 In this respect, there is essentially no difference between the technologies and systems that are employed to connect Internet-based phone calls and those handled via other technologies. But unless VoIP is regulated, it will not be available to all Canadian subscribers, nor will it be subject to quality of service requirements.

3564 A two-tiered telecommunications system is beginning to emerge. Canada's telephone companies are encouraging their high-end urban customers to move from the regulated wireline side of the business to the unregulated wireless side. Meanwhile, they continue to use facilities whose purchase was funded by revenues generated by the regulated system. The comment has been made that as a result these companies are now competing with themselves.

3565 VoIP has the potential to replace a large portion of the phone business that is currently regulated. Those who extol the arrival of VoIP do not address what is likely to happen when high-end urban subscribers, as well as major corporate customers, vacate the regulated wireline side of the business to purchase all of their communications services on the unregulated side.

3566 The negative effect of such a move is obvious. Left to stand on its own, the regulated wireline side of the business will become uneconomical. Rates for regulated services, which have already increased dramatically, can be expected to escalate even further.

3567 Canada's telephone companies have also been transferring a major portion of the profits generated on the regulated side of the business to the unregulated part of their operations. The networks used to provide deregulated cellular and data services, as well as VoIP, have been financed by the profits generated on the regulated side of the business.

3568 Why should Canadians be concerned? The answer is simple: our phone companies are building their competitive wireless networks in parallel with the existing wireline networks on the regulated side of the house using money generated by the regulated side. From a perspective that focuses strictly on the bottom line, it makes sense to starve the regulated wireline side of the business of new investment and to allow regulated service to deteriorated while pleading poverty to the Commission.

3569 As affluent clients move to the new unregulated parts of the system, there will be less and less profit on the regulated side to support the provision of service to low revenue high-cost telephone users. As regulated wireline operations become increasingly unprofitable and debt-ridden, the case will be made for massive increases in regulated rates, failing which wireline service would continue to deteriorate.

3570 Under these circumstances, it makes good business sense for Canada's phone companies to restructure their operations and to invest solely in the unregulated, debt-free, Internet-based side of the business, providing high-quality service only on those areas where it yields the highest rate of return free from the Commission's oversight.

3571 Meanwhile, as the regulated side of the business continues to be starved of funds, phone companies will argue that they can no longer provide services to high-cost, low-revenue customers or those who live in remote areas of the country. If this situation is allowed to unfold, Canadians will be confronted with the full-blown consequences of having allowed their communications system to be operated on a deregulated market-driven basis.

3572 With the advent of VoIP, Canada's incumbent phone companies are redoubling their efforts to avoid regulation of their rates. Unless the Commission resists these efforts, the very possibility of regulatory oversight will be undermined and Canadians will look back on the existence of universal, affordable communications service as a relic of an earlier, better time.

3573 Certain experts contend that VoIP is the wave of the future. If this prognosis is accurate, then it is essential that the potential of this technological innovation be combined with the country's pervasive network of cable and telephone networks to provide its benefits to all Canadians on a regulated basis, instead of merely offering it as yet another pretext for further deregulation.

3574 We ask the Commission to ensure that your rulings resulting from these proceedings reflect this fundamental goal.

3575 Thank you.

3576 THE CHAIRPERSON: Thank you.

3577 Commissioner Demers.

3578 COMMISSIONER DEMERS: Thank you, Mr. Chairman.

3579 Good afternoon, gentlemen. A very clear position and it concurs indeed with your written submission.

3580 Would you have more specific comments on the VoIP situation? It is clear that the regulation from your point of view is the way that we have been told things should go, but this is not the way you would like things to go. Could you bring it down on the field, if you wish, and would you have more specific comments to make on the fact that keeping it regulated will cause things to be better for the public interest?

3581 MR. HIEBERT: Certainly, because if it is continued, the deregulatory effort, the companies will put their capital where they get the highest rates of return and that is not best for Canadians.

3582 We believe that the regulatory system has progressed to this point in time and we are saying that VoIP should be regulated the same way as other voice services, the same way as the PSTN. Although there are some problems with that, with respect to price cap, and whether in fact the contribution and those things are really going to give the desired effects that the Commission wants to protect Canadians, those are sort of beyond the scope of this particular proceeding.

3583 So we think that we have to start out by saying that there should be no automatic forbearance for Internet providers and that they have to fulfil the health and safety and the privacy concerns, they have to ensure that is all looked after, and that any of these Internet companies who want to provide service should come before the Commission as well and it should not be automatic forbearance.

3584 We also say that cable companies should be regulated exactly the same way as the ILECs, as the telephone companies, but we would certainly be prepared and would be happy to express our concerns at a further proceeding of the more detail of where we think regulation has to go to ensure that Canadians are protected.

3585 COMMISSIONER DEMERS: Would it be fair to say that you believe the situation at the moment -- you are speaking more in terms of time, it is not time to deregulate VoIP?

3586 MR. HIEBERT: Absolutely. We shouldn't be deregulating the Internet and VoIP.

3587 What the real concern is with VoIP is that the Canadian government has stated that we should be looking towards having universal access to broadband services. Left to the rigours of the marketplace, that isn't going to happen. It will be up to the CRTC to ensure that we work towards universal service for these broadband services so no Canadians are left in an information desert.

3588 COMMISSIONER DEMERS: Thank you.

3589 Just a last point and more specific. You have probably been here all day yesterday and today but in any case you have heard the last discussion on 911. Would you have specific comments on that as it is presented, a service or a part of the service that at the moment may not be possible on VoIP?

3590 MR. HIEBERT: Yes. Our comments are on that that there should be no holiday given from health and safety and privacy consideration at this time. Those issues should be looked after before any providers are allowed to operate.

3591 COMMISSIONER DEMERS: Would you see a development of that or do I get it that what you are saying is no VoIP service without the 911 service?

3592 MR. HIEBERT: That is exactly what we are trying to say.

3593 COMMISSIONER DEMERS: Thank you, gentlemen. Thank you, Mr. Chairman.

3594 THE CHAIRPERSON: Thank you.

3595 Commissioner Langford.

3596 COMMISSIONER LANGFORD: Gentlemen, I am not sure if any of you were here yesterday. You were here, Frank. Okay. You were all here. Nice to keep your lawyer around, keep him warm on a bench down there. I always wanted to have clients like that when I was practising. Never could manage it.

3597 You will know then that I put your concerns to a number of the previous parties regarding the sort of stripping of the PSTN and the kind of feeding of perhaps a new creature which we call the VoIP network if you like.

3598 Mr. Grieve from TELUS -- I think I can capture his response, I hope I can, if not he will correct me in reply -- I believe takes the position that the contribution scheme will take care of that, that if there is a shortfall there is a contribution scheme in place, even if it has to be modified slightly, and with those funds guaranteed access for everybody out in rural areas or wherever to the sort of telephone system that they have grown accustomed to here in Canada can be continued. How would you respond to that?

3599 MR. HIEBERT: I would ask Sid Shniad to respond to that.

3600 MR. SHNIAD: I think, Commissioner, Mr. Grieves assumption is that the disruption to the existing wireline service is likely to be of such a magnitude that the existing fund can take care of that. But I think that is a major presumption, and that is one of the reasons we are advocating that the Commission take control of this and maintain control of this rather than exceed to the demands of the companies to deregulate and then try after the fact to put Humpty Dumpty back together again.

3601 COMMISSIONER LANGFORD: Perhaps we have lots of demands on those five minutes of reply from the ILECs, but perhaps they can find 20 or 30 seconds to respond to that.

3602 Thanks very much.

3603 MR. SHNIAD: Further to that though, and I think in response to the other Commissioner's earlier question, the emphasis on the part of a lot of the applicants here is on their needs and rights as would-be competitors. Our emphasis in the argument we are making to the Commission is on your role and the need for you to regulate Canadian telecommunications as a whole, including the passage that Mr. Hiebert quoted from the Telecommunications Act.

3604 Mr. Hunter argued yesterday that the public notice governing these proceedings focused too much on wireline. In that he was arguing the position of a would-be competitor. The implication is that the VoIP should be addressed in isolation. Don't talk about the ramifications, whatever they may be, for wireline and service generally. We are arguing the opposite.

3605 COMMISSIONER LANGFORD: I think that is pretty fair. Thanks very much.

3606 Is there anything more you wanted to say? Sorry. I didn't want to cut you off.

3607 MR. SHNIAD: No.

3608 COMMISSIONER LANGFORD: Thanks very much. Those are my questions, Mr. Chairman.

3609 THE CHAIRPERSON: Counsel.

3610 MR. MURDOCK: Thank you, Mr. Chairman.

3611 Yesterday we heard both the companies and TELUS refer to VoIP services. TELUS referred to access-independent VoIP services being a retail Internet service. I was hoping we could get on the record your view on whether you consider access-independent VoIP services, I think what the companies referred to as Category 2 VoIP services, whether you feel that they are a retail Internet service and, if not, why?

3612 MR. HIEBERT: We consider them to be the provision of VoIP services. No matter what name you put on them, we believe that they should be under the purview of the Commission and they should be regulated.

3613 MR. MURDOCK: No further questions.

3614 THE CHAIRPERSON: I believe those are our questions. Thank you very much, gentlemen.

3615 Madam Secretary, we will hear from Nortel after the break and I assume Alcatel as well.

3616 THE SECRETARY: Yes, Mr. Chairman.

3617 THE CHAIRPERSON: I don't have names of Alcatel representatives. Have you got that?

3618 THE SECRETARY: There is only one name left for Alcatel. We have received two cancellations from Mr. Pesquidoux and Mr. Goldberg, but Mr. Krstulich still intends to make his presentation.

3619 THE CHAIRPERSON: Is he present in the room? You are here. You will be making your presentation?

3620 MR. KRSTULICH: Yes, I am.

3621 THE CHAIRPERSON: Okay.

--- Pause

3622 THE CHAIRPERSON: Consensus is sometimes very easy to reach.

3623 We will break now and resume at 7:00 p.m., nous reprendons à 7 h 00 with Nortel and then Alcatel.

--- Upon recessing at 1810 / Suspension à 1810

--- Upon resuming at 1900 / Reprise à 1900

3624 THE CHAIRPERSON: Madame la Secrétaire.

3625 LA SECRÉTAIRE: Thank you, Mr. Chairman.

3626 I will now introduce Appearance No. 25, Nortel Networks.

3627 Gentlemen, please introduce yourself and proceed with your 20-minute presentation.

PRESENTATION / PRÉSENTATION

3628 MR. MORIN: Good evening. My name is Mr. Phillippe Morin and I am Vice-President and General Manager for Nortel Networks. In this role I have an opportunity of working with service providers of all types on their network evolution. I thank you for the opportunity tonight to speak with you about the role of Voice over IP in the network transformation.

3629 To my left is Gino Brancatelli of Canadian Business Development at Nortel. To my right is Jim McEachern of Carrier VoIP Standards Strategy.

3630 Depuis 100 ans, Northern Electric, puis Northern Telecom, et maintenant Nortel Networks, est le chef de file au Canada en innovation, répondant aux besoins d'un peuple en croissance et faisant de notre pays un leader mondial dans les technologies de la communication.

3631 Nous sommes fier d'être le plus gros, le plus important investisseur en recherche et développement au Canada, autant dans le secteur privé que dans les secteurs des télécommunications. Nous sommes à l'origine d'importants technologies qui ont constitué la caractère essentiel de la percée des communications mondialement, et la plupart de ces découvertes est ici dans notre centre d'excellence en recherche à Ottawa.

3632 Aujourd'hui Nortel Networks fournit la technologie et l'infrastructure des réseaux aux fournisseurs de services, ce qui inclut les transporteurs publics, les opérateurs de câble, les opérateurs sans fil et les fournisseurs de services de protocole Internet, aussi qu'aux entreprises du monde entier.

3633 Nous avons été les leaders technologiques dans la transition révolutionnaire de services analogiques aux services numériques, et aujourd'hui cette nouvelle transition du circuit en réseaux de paquets converge.

3634 Nous avons déployé les solutions de voies sur le protocole Internet dans plus de 50 réseaux de fournisseurs de services à travers le monde, and we are the number one global provider of carrier packet voice equipment, softswitches and line access gateways.

3635 Why are we here appearing before the Commission? Because Nortel Networks sees VoIP technology as empowering consumers with choice. We see Voice over IP as enabling enterprises to reduce costs, increase market reach and create new revenue-generating opportunities.

3636 Finally, we recognize that the outcome of these hearings will have a profound impact on how as a nation Canada can harness the economic and social benefits that derive from continuing global leadership in communications.

3637 Nortel Networks credits the Commission for its expressed sense of urgency to address the regulatory uncertainty of Voice over IP, ensuring that Canada does stay at the forefront of technology innovation.

3638 We believe we can assist the Commission by leveraging our technology expertise and experienced leadership in both PSTN and IP technologies to act as a resource, helping to provide a technology perspective on issues that may affect regulatory policy.

3639 At the outset, let me be clear that the fundamental value of IP is its ability to deliver voice, data, video and multimedia services over a cost-effective converged packet network. It is the integration of Voice over IP where these multimedia services that provides the value-add to the end user.

3640 I will now explain these statements by addressing five key technology considerations for Voice over IP.

3641 Number one: for the end customer Voice over IP is more than just voice calls over the Internet.

3642 Number two: for service providers, Voice over IP is more than just replacing voice with voice.

3643 From a network perspective, voice and IP enables services to be decoupled from the network.

3644 From a global perspective, IP creates a new geography of voice.

3645 And finally, number five: examining social obligations, IP can be configured to protect Canadian consumers and citizens.

3646 We are going to take a look at the first technology consideration in more detail.

3647 Voice over IP, number one, is more cheap than voice over the Internet.

3648 Much of the media attention around Voice over IP has been around one single niche application: cheap voice calls over the Internet.

3649 This kind of best effort telephony over the Internet is nice. It is a great place to start. I personally use it every day. However, it is really only one small application for Voice over IP.

3650 Our research does suggest that the broader consumer Voice over IP market aligns with new value-added services rather than on a cost-based voice only offering.

3651 Voice over IP will be about putting me, the consumer, in charge of my communications and not communications controlling me.

3652 One of the biggest services that we are working on with carriers globally, for either consumers or businesses, is a service that converges multiple communications and devices. For instance, if I get a phone call from you, I can choose how that phone call can be handled. I can choose if that is going to be delivered over a broadband link to an Internet café if that is where I am sitting having a coffee, or to an airport executive lounge somewhere that I might be waiting for a plane. I can choose to have it delivered to my blackberry or I can choose to have that changed to text and sent via e-mail or even over instant messaging.

3653 What is the common denominator? I, the consumer, choose.

3654 That kind of empowerment of consumers and enterprise CIOs to improve productivity of employees is key. Nortel Networks believes it will be important to think beyond singular or isolated media. Voice, data and video. It is not just the networks behind these services that are converging, but the services themselves that are converging.

3655 We will need to think beyond just numbers and think in terms of addresses.

3656 For example, most of us today have multiple addresses. We have a work number, a home number, a mobile number. We have a work instant messaging address and likely a personal instant messaging address. We work on a work e-mail address and a home e-mail address and that is only our personal address space. Look what happens when we expand that address space to include our spouses.

3657 Going forward, Voice over IP will enable us to simplify communications by integrating all of our addresses and contact information.

3658 Addresses are important. The reason people wanted local number portability is because that number is their identity. People want to keep their identity. They want one identity, not six.

3659 We will now need to think beyond the device. Today voice calls are made over a telephone device. E-mail is sent over a computer. Video is over the television. But that won't be true for much longer.

3660 From many perspectives, some voice services can be more like a data service, another application running over the Internet like e-mail and instant messaging.

3661 In the future, these services may be so tightly integrated that it will be difficult to discern one from the other.

3662 In the future, a variety of devices may be used to make or receive voice calls such as personal computers, PDAs and perhaps even television sets. As voice, video, data and wireless networks become further integrated, it will be even more difficult to distinguish the type of device used.

3663 In making its decision, a challenge to the CRTC will be to develop a response flexible enough to accommodate a wide range of not merely bundled but integrated voice, video and data services.

3664 Our number two technical aspect is more than replacing voice with voice.

3665 That is why from a technology perspective we believe it will be important to remember that Voice over IP is not about replacing voice with voice.

3666 If you were the owner of a Betamax video recorder in the 1980s who followed the trend and moved to VHS, you basically replaced one device in your home with another that performed basically the same function. It simply used a newer technology.

3667 There are some who argue Voice over IP is doing the same thing, merely using a newer technology to perform the same function as traditional voice telephone services have provided.

3668 Instead, the move to Voice over IP can probably more be compared to another transition in your home that happened in the eighties when you replaced your old typewriter with a new personal computer. Sure the PC performed the same function as your typewriter, but it also did much more. With the advent of new applications, the PC became a centre for word processing, budget planning, e-mail, instant messaging, entertainment, research and much more.

3669 Why is this important?

3670 If we look at VoIP in this manner, merely duplicating voice services already available via the TDM network replacing voice with voice, we are overlooking the most important factors, including the economic business case for widespread Voice over IP rollout.

3671 In the past, the business case for network investment tended to focus on a single type of service or application. For the circuit-switch network it was voice. For the ATM network it was data. For the cable networks it was video.

3672 The most compelling business case for service providers as they invest into IP is not merely the delivery of voice or VoIP services along, but as part of an integrated service bundle that may include a wide variety of voice, data, multimedia services such as Personal Call Agent, Video Call, Instant White Boarding and Web Push. This is only the first step in service integration.

3673 Again, in making its decision, the CRTC should recognize that the payback period for the technology investment in Voice over IP will be far quicker for a service provider that integrates voice services with multimedia services in this way. It enables them to move voice services from cost-based to value-based. This will be an important consideration to foster an industry of investment and innovation.

3674 Number three: IP enables services to be decoupled from the network.

3675 This is one way in which IP is changing the game, but not the only way.

3676 From a technology perspective, carrier-grade IP changes how services are delivered. It can decouple services from the underlying infrastructure, eliminating boundaries in terms of geography, technology platforms, access devices and classification of service providers.

3677 In the circuit-switched ear, services were linked to the access and were embedded in specific network nodes. With Voice over IP, many services can be decoupled from the network. They can be created in software not hardware and can be offered via a server located anywhere in the world. A Voice over IP service provider need not own or operate any equipment in a country in which they are providing services.

3678 What does it mean?

3679 Number one, it means that going forward there will be much lower entry barriers for new Voice over IP service providers.

3680 Number two, the rate of service change will be faster than that for infrastructure.

3681 Most importantly, it means that significant network infrastructure costs will have to remain with the established carriers, telcos, cablecos, powerline providers, while the profits could be reaped by a non facilities-based Voice over IP service provider.

3682 This economic model is not sustainable.

3683 Essentially, new Voice over IP service providers would have an opportunity to enjoy the benefits from the carriers' networks without contributing to their upkeep.

3684 In order for the underlying infrastructure to continue to be viable, there needs to be a revenue source to fund it.

3685 With some Voice over IP services, there is no inherent technological advantage of being the provider of the HFC or DSL access pipe as there was with circuit-switched local voice services. The same holds true with other emerging IP-based services.

3686 A situation wherein end users pay for Voice over IP and other IP-based services but pay disproportionately little for the high-speed access is short term.

3687 In making its decision, the CRTC should clearly recognize the opportunity for network and service independence and ensure that in the new competitive environment the economic viability of the underlying infrastructure is sustained.

3688 Geography of Voice over IP. The decoupling of the network and services gives rise to another challenge, that which we call the geography of Voice over IP.

3689 Voice over IP challenges the traditional paradigm because of its inherently non-location specific nature that makes it impossible to distinguish between local long distance or even international services.

3690 In the current regulatory environment, it can be cheaper and easier for a Voice over IP reseller outside of Canada to offer services to Canadian citizens than it may be for domestic providers to offer the same services.

3691 The experience with the online gaming industry in the United States is instructive for Voice over IP since many online gambling companies moved offshore to avoid regulation and taxes.

3692 If foreign entities are able to capitalize on infrastructure investment made in Canada, then we should have an environment that enables domestic service providers to prosper and innovate, that is, an environment that specifically encourages the delivery of IP-enabled services from Canada rather than from foreign jurisdictions which may have regulatory climates deemed much more favourable to investment and innovation.

3693 Number five, protecting Canadians. Telecommunication networks are the critical infrastructure by which people communicate, businesses transact, governments operate, and national defence is conducted.

3694 It will be important for consumers to understand what type of Voice over IP service they are subscribing to.

3695 In the past, primary or lifeline phone service was provided via a very small group of service providers. Given the unique technology attributes of Voice over IP, the cost of entry for new service providers is far lower. In theory, there could be many more service providers than ever before, and the challenge to the CRTC will take advantage of this to foster competition while ensuring that the reliability of Canadian telecommunications systems is maintained.

3696 Some service providers may choose to offer Voice over IP services that are analogous to today's primary line services in terms of reliability, service quality, E-911 support and back-up power. However, other service providers may choose to go to market with a service at a lesser cost that provides some of none of these traditional PSTN attributes.

3697 There could be a variety of Voice over IP services with different levels of quality of service at different price points to meet different user requirements.

3698 Understanding that IP enables service providers opportunities to offer a wider range of services at a relatively lower cost base, the CRTC needs to ensure Canadian end users are clear about the expectation of each of these services. The common user of voice and data services needs to be well informed as to what each type of IP-based services will and will not be provided.

3699 Nortel Networks believes the Commission is on the right path with E-911 and consumer protection. It will be important to ensure that to the extent technically and operationally feasible Voice over IP services support the emergency response needs of public safety authorities. However, we don't want to slow down the rollout of new innovative services.

3700 From a technology perspective, Nortel Networks would like to point out another potential regulatory challenge for full E-911 capabilities to be provided for Voice over IP services, additional costs and ongoing administration will be required. Given the nomadic nature of Voice over IP, there will be technology challenges for supporting E-911 that are unique from the circuit-switched environment.

3701 Nortel Networks has been working diligently with NENA, which is the North American Emergency Numbering Association, leading the development of an architectural solution to address these challenges. This proposal, should it be adopted in Canada and the U.S., would require some additional investment by both the access providers and the Voice over IP providers.

3702 The Commission should be aware of this requirement, and the impact it may have on whether the obligation to provide these capabilities would reside with the network providers or with the Voice over IP service providers.

3703 The key thing here is that the key social obligations can continue to be met. Nortel Networks is proud to play a role in that development.

3704 In conclusion, the Voice over IP revolution, which is very real and has already begun, will not be about replacing voice with voice. The fundamental value of IP is the ability to deliver voice data, video and real time communications services over a very cost-effective, converged, packet network.

3705 It is the integration of these multiple devices and media into one communication session that will revolutionize the way we interact. Canadian consumers will benefit from IP-enabled services, particularly with application involving telehealth, E-learning and distance education, teleworking as well as entertainment.

3706 Canadian businesses will be able to reduce costs, increase reach and drive new competitive advantage.

3707 Les avantages socioéconomiques sont évidents aux yeux de la nation. Le défi sera de s'assurer que la viabilité économique de l'infrastructure de base soit soutenue, et ce, sans imposer de restrictions ralentissant le déploiement de nouveaux services, et ce, dans le plus bref délai.

3708 Les changements arrivent plus rapidement que dans le passé. L'enjeu est de taille. Il y va du leadership du Canada dans le domaine de l'innovation technologique et de la compétition dans l'ère de l'information.

3709 Thank you, Mr. Chairman.

3710 THE CHAIRPERSON: Thank you very much.

3711 Commissioner Colville.

3712 COMMISSIONER COLVILLE: Thank you, Mr. Chairman.

3713 Good evening, gentlemen. Thank you for your presentation, Mr. Morin.

3714 It is not very often we have the arms merchants in front of us in this telecommunications battle, so we are pleased to have you here.

3715 I was struck by a couple of points from actually you and a previous party in your presentations.

3716 I get a sense that some people perceive that we I suppose have our heads in the sand or have a very narrow view of what VoIP is or could be. So when you talk about it is more than just replacing voice with voice, and I think the previous presentation talked about to conclude that voice has only -- and they emphasized that -- functional characteristics that are the same as traditional telephone service, I think it is fair to say we do understand, certainly not as well as you do and others here, perhaps of the total potential VoIP. But we do understand that it is more than voice.

3717 From a regulatory point of view, the question is: It is at least voice and to the extent that we do regulate that, what should our role be?

3718 I was struck by a couple of things in your brief and your presentation. Let me first ask you this.

3719 You haven't -- and I don't mean this as a criticism -- in your presentation this afternoon strictly speaking addressed our preliminary view that we had put forward.

3720 I am just curious to know -- and I have other questions I want to pursue with you -- whether you have a comment on our preliminary view.

3721 MR. MORIN: No, I don't have any comment.

3722 COMMISSIONER COLVILLE: Perhaps a question that really has not been raised much in the proceeding, but I would like to get your sense of this because it is something that has been crossing my mind more and more.

3723 We have largely been talking for the last two days now about VoIP service providers who would largely be riding on someone else's network, and the term "access independent" has been used. You even used that.

3724 You may be aware that this Commission has adopted an approach to try and encourage what we characterized as facilities-based competition. I know other jurisdictions, for example, the FCC in the U.S. has looked at this and believed that ultimately facilities-based competition is a desirable thing.

3725 As an equipment manufacturer and seller, obviously you have a keen interest in this.

3726 I would like to get a sense from you of what you see as the future for facilities-based competition, given that most of these new service providers that we are seeing, it would appear at least, are not going to be facilities-based in themselves at least. They will be riding on other networks.

3727 The two networks that we have largely heard about, aside from the Internet itself, are the networks of the ILECs and the broadband networks of the cable operators.

3728 What is your sense of the future in terms of facilities-based competition?

3729 MR. MORIN: I am going to also refer to my colleagues as also answering.

3730 My first reaction is I think when you look at IP technology, it does create an opportunity for a real converged network that allows to have a separation between services and infrastructure.

3731 I think the opportunity, when you look at the future of the network, is that because of this decoupling, service applications and new potential revenues could be potentially available faster to market and therefore creating more of an innovation in terms of these applications, creating more innovation of the service offering that the service parties could have.

3732 For us on a technology point of view, having the opportunity to see the convergence and the opportunity that IP and Voice of IP can bring, it is interesting. We foresee that it will bring opportunities for both innovation and potential additional service venues for both of our service providers that could be either facilities-based or non facilities-based.

3733 COMMISSIONER COLVILLE: Does that suggest this growth in new services is largely going to be an expansion on the existing networks or are we likely to see new facilities-based players?

3734 MR. BRANCATELLI: Technology is always going to evolve, and folks are going to find new methods of enabling that access. We see that going on in the networks today. Some facilities that I think have been talked about of recent are high-speed access providers, and those are usually typically a cable provider or a high-speed DSL provider.

3735 We are going to see those evolve, and you are going to see some things like wireless LAN infrastructures. So folks are going to have to upgrade those infrastructures.

3736 Some of the ways to incorporate those infrastructures or to build out those infrastructures also involves applications associated with them, and consumers are going to have the choice over which ones they want to ride on top of.

3737 COMMISSIONER COLVILLE: Would we essentially see then three key infrastructures: the fibre coax network, the hybrid fibre coax network of the cable operators and copper perhaps leading fibre extending out from the telcos more and wireless as being the three?

3738 MR. BRANCATELLI: Those are some of the technologies that are available today. As applications survive more and more bandwidth requirements, we will see those technologies evolve.

3739 I can't necessarily predict all those technologies but they are going to evolve. That is the only thing you can count on: that access technology is going to continue to evolve. Investment in those facilities is going to be required.

3740 MR. MORIN: On a global basis we have seen in other countries basically these new facilities-based networks being built based on business cases that might be based on a wireless line. As Gino mentioned, fibre to the home where you start to see people making additional deployment that in the past had not been there.

3741 So I think it will be depending on the business case, the application and where people will, using different technologies, be able to tap into the market.

3742 COMMISSIONER COLVILLE: In your presentation this evening, towards the bottom of page 3 you said:

3743 That is what kind of struck me about this whole notion here and what we have been hearing, as I said, for the past two days; that most of the new service providers are going to be riding on those existing networks. And that is what you see.

3744 MR. MORIN: That is what we see, but again I want to caution that if there is a new technology that from an access point of view that would make a business case more viable, whether it is wireless or fibre, are we going to see another infrastructure-based company come in and make that deployment? It is difficult for us to predict.

3745 I think what we do see is that the investment will remain with the infrastructure as we know it today.

3746 COMMISSIONER COLVILLE: As a provider of equipment, where do you see your growth in Canada? Is it in the facilities themselves or more in the intelligence of routers or switches?

3747 I guess we don't talk switches any more.

3748 MR. MORIN: Nortel Networks has a wide portfolio, ranging from optical networks to routers, to soft switches. So for us what is more important is will a decision have an impact with regard to the innovation in the country?

3749 I think the impact to our Nortel revenues, to my personal belief, if much less important than the impact the decision will ensure that innovation, ensure that research and development is being spent to make sure that we generate new services, new multimedia services, to the end consumer here in Canada.

3750 COMMISSIONER COLVILLE: The carriers, the companies, Bell and associated companies who presented to us, had sort of a layered category approach for us to consider in terms of regulatory framework, as did TELUS.

3751 In the TELUS case, they presented this network-dependent and independent approach.

3752 Have you had an opportunity to look at or consider their proposal? I wonder whether you have any particular comments on it.

3753 MR. BRANCATELLI: I guess we really don't have too much to comment. A lot of those requirements that they put forward are based on business models and market applications and specifically how they run their business. That is really an expertise that they can provide and is really not for us to comment on.

3754 COMMISSIONER COLVILLE: I suppose you would not have a comment, or do you, on the regulatory approach in terms of access dependent versus access independent?

3755 MR. MORIN: No. Our expertise is really on the technology front. I am not sure we are in a position or have the capability to respond to that.

3756 COMMISSIONER COLVILLE: That's fine. Then let's focus on that a little bit.

3757 One of the issues that has come up before us through the week is this whole question about quality of service.

3758 It struck me in your presentation this evening that you referred, at page 2, to:

3759 And then later on you said I choose.

3760 Over the years we have had this notion about where the intelligence and the network reside, and it is kind of like a pendulum that swings from the centre of the network out to the edges. I guess the notion now is this intelligence is going out to the edge.

3761 At the same time, it strikes me that there is a lot of intelligence in the network at certain points, points that you design and manufacture and sell.

3762 A number of us from the Commission were at a presentation out in Kanata from Nortel earlier this year, not related to this proceeding, just to give us a sense of where this industry is going and talking about developments that will help deal with hacking and spam and so on, and that perhaps that intelligence could be built into the network.

3763 At the same time, that intelligence presumably could allow one or more people to control the flow of packets through this packet network.

3764 One of the issues that has been raised is whether or not an incumbent, or somebody else, could use that intelligence to give themselves preferential treatment or degrade the packet flow, such as to degrade the quality of service that one of those VoIP providers riding on my network might provide to their customers, to the point where perhaps I can win them back.

3765 It has been alleged that that could happen.

3766 Can you comment on that, how that would work; whether or not that is likely to happen and whether the capability is really there? Is it something we should be concerned about and is it something we can do something about?

3767 MR. BRANCATELLI: I would like to dispel some of the fears and myths that I think have come up a bit in the last couple of days.

3768 I have heard it also referred to in some of the sessions as prioritization. It has almost been worded as prioritization to the benefit of the application provider.

3769 Really, the intent of quality of service is really to enable the service for that subscriber to be carried reliably through the network and not for the service provider to disrupt service.

3770 It is not a matter of an evil technology that is there to disrupt other people's service. It is there to effectively enable the service to be carried reliably over the IP infrastructure.

3771 So that is a prioritization that really the end consumer is going to look for, because typically voice has a higher priority versus Internet surfing traffic.

3772 There has also been discussion where this technology to disrupt Voice over IP applications is out there and deployed in current public access networks. To our knowledge, that is not the case.

3773 The technology is not out there in access networks to prioritize the traffic and to enable quality of service; or the reverse that some people have been indicating, which is to disrupt other people's service.

3774 Is that quality of service enabling going on in networks? It is starting. So people are going to be looking for some reliable method of transporting Voice over IP. An enablement of that over the IP infrastructure is going to happen.

3775 Is it commercially viable to go out and --

3776 THE CHAIRPERSON: Excuse me. I am sorry to interrupt.

3777 When you say over the infrastructure -- is that what you said?

3778 MR. BRANCATELLI: The access networks.

3779 THE CHAIRPERSON: Right. Do you include the Internet there?

3780 MR. BRANCATELLI: The Internet I guess is almost a global community, of which many providers are a part. So some traffic in facilities over the Internet, which is typically public, it is a variety of providers. Typically folks are set with a particular access provider, and that access provider then hooks up into the public Internet.

3781 Some of the infrastructure is somewhat private, and then some of it is public. The Internet is a bit of a nebulous term, because it does really imply inter networks, which is interconnection of various types of networks. So it is not really dedicated to a particular provider.

3782 Some comments have come forward, such as: Can this technology be used to go in there and disrupt?

3783 Technically, it is feasible. But is it commercially viable? We don't believe so.

3784 Today we don't think that anyone is going to go out there --

3785 COMMISSIONER COLVILLE: Sorry to interrupt.

3786 What do you really mean when you say "commercially viable" in this sense?

3787 MR. BRANCATELLI: To go and uniquely identify every source of Voice over IP traffic and to go and specifically isolate that traffic and disrupt it uniquely is a pretty difficult and expensive endeavour.

3788 COMMISSIONER COLVILLE: What does "expensive" mean?

3789 MR. BRANCATELLI: Expensive means the equipment that would need to be developed in order to do that. It is not the type of system that you would deploy, because it would basically bog down all the rest of your other services because you are so focused on disrupting other people's services.

3790 COMMISSIONER COLVILLE: That is probably partly what is at the root of the question. How feasible is this?

3791 Some parties may have an incentive. The question is: Would they have an opportunity to disrupt the traffic flow of some of their competitors who are riding on their network, let's say using your equipment?

3792 MR. BRANCATELLI: Using our equipment, specific traffic could be targeted. Anything labelled with that quality of service could be targeted, but it would not be unique in that if someone was running some other application over that service, you would not necessarily be able to tell it was voice versus some other application.

3793 COMMISSIONER COLVILLE: Can you target the service provider, the other service provider and their services?

3794 Is it possible to identify the other service provider's traffic riding on my network?

3795 MR. BRANCATELLI: It is possible to do it, but we are not aware of anyone who in fact is doing it and how effective the means would be to do that.

3796 It is more of a situation where it would an on or off situation. I know some of the conversations have been going on around de-packet inspection. You don't go, for example, in a de-packet inspection and say: Oh, this is a Voice over IP packet I'm going to throw away this one, but the next Voice over IP packet that comes along, I am going to let that one through.

3797 It is either you enable it or you disable it. Often times --

3798 COMMISSIONER COLVILLE: Can I just slow it down?

3799 MR. BRANCATELLI: Not specifically. You would be impacting all the traffic if you were doing that.

3800 COMMISSIONER COLVILLE: All the traffic on the network or all the traffic of that service provider?

--- Pause

3801 MR. BRANCATELLI: I would say it would probably be more generic as opposed to specifically to that service provider.

3802 COMMISSIONER COLVILLE: Would it be fair to say, because of your hesitation, that you are not sure?

3803 MR. BRANCATELLI: I am not entirely sure. There are technologies that people are looking at that could possibly be used. Whether they preclude all traffic or just one specific traffic is something that we could probably follow back with.

3804 COMMISSIONER COLVILLE: Mr. Morin, were you trying to jump in here? I see you reaching for the microphone.

3805 MR. MORIN: I was going to say that maybe this is one of the questions that, if you are in agreement, we can take back and reply back to the CRTC with a confirmation of the answer.

3806 COMMISSIONER COLVILLE: If you would. I am happy to let the issue go for now. It is certainly an issue that has been raised by a number of parties over the last couple of days; that it is a fear on their part that if they are riding on somebody else's network, the owner of the network may have an incentive.

3807 The question is: Is it really an opportunity or is it something that we really should not be concerned about?

3808 It is perhaps a theoretical problem but not a real one.

3809 MR. BRANCATELLI: Maybe I am not being very clear. That is really the gist of what I am trying to say. It is theoretical but, practically speaking, it is not something that can be effectively deployed.

3810 COMMISSIONER COLVILLE: We have a pretty superior quality telephone network in the country right now. One of the senses I get from a lot of the discussion that we have had is that the relative quality of the voice service offering will be somewhat, if not significantly, lower than the transmission audio quality of the existing network.

3811 Is that true? And if it is, when we would expect it to get to the point where it is as good as or better than the network we have today?

3812 MR. BRANCATELLI: In general, as I mentioned before, quality of service is a positive thing. It is a thing to enable reliable transport of the service.

3813 Right now, that is not in any of the access networks that are available for retail to the consumer. Quality of service is not enabled in those networks.

3814 If there is not congestion in the network -- and this is where quality of service comes into play. If everyone can get their share of the bandwidth available, then there usually is not an issue.

3815 Quality of service is there to deal with congestion. So when there are a lot of people using the network at the same time and there are points of concentration where congestion will occur, that is where quality of service allows you to say: This voice traffic or voice traffic in general or the signalling of that voice traffic can be more reliably transported to the network.

3816 That means within the access network the voice quality will not be as good as the existing circuit switch network in times of congestion.

3817 That congestion can be caused by other voice traffic or it can be caused by data traffic.

3818 COMMISSIONER COLVILLE: Is that likely to be a fairly common thing? We talk about it is more than voice, so as all these other wonderful things get developed and people start to seize upon using them, is that likely to mean that we are going to have a poorer quality voice service while the other features may be desirable and enhance people's welfare?

3819 Is the price one pays for that a poorer quality voice service?

3820 MR. MORIN: I would take a different tact in the fact that I think Voice over IP, if the network is engineered the same way a PSTN network had to be engineered effectively, you can get the same quality of service, the same quality of voice if you engineer it properly.

3821 If you under engineer it, then you end up having all sorts of new services enabled through IP, such as video streaming, such as videoconferencing. The same way on PSTN, you will not get dial tone because there are too many calls going to a switch, you may have the same issue with Voice over IP.

3822 COMMISSIONER COLVILLE: Except that traditionally each carrier had its own network and all the carriers developed a certain standard to which they would engineer the network to guarantee the relative quality of service that we have in North America today.

3823 The Chairman posed the question to you relative to the Internet. To the extent a lot of the traffic is travelling over that cloud that everybody refers to, which no one party seems to have any control over, isn't that an opportunity for degradation of the service?

3824 I don't know. I am putting the question to you.

3825 MR. BRANCATELLI: That is why the mechanisms of quality of service over IP have been developed, is to enable for that reliable transport.

3826 COMMISSIONER COLVILLE: On the Internet itself.

3827 MR. BRANCATELLI: Over all IP networks, private or public.

3828 COMMISSIONER COLVILLE: I am not sure I understand. We are not there yet, I take it.

3829 MR. BRANCATELLI: Correct.

3830 COMMISSIONER COLVILLE: When will we be there? Is this a work in progress?

3831 MR. BRANCATELLI: I would say it is a work in progress. How quickly that gets developed is dependent on the investment that people put in on the applications they wish to ride on top of that infrastructure.

3832 COMMISSIONER COLVILLE: It seems kind of circular: the more money I can make, the more money we can put into investing and making the network better.

3833 So it is going to be some time to come, then, at that rate.

3834 We are sort of nodding yes?

3835 MR. BRANCATELLI: Yes. Overall public networks, I would say so.

3836 COMMISSIONER COLVILLE: Let's talk about the theme du jour for a minute, that being E-911.

3837 I would like to get a better sense from you what your thoughts are on this issue. Near the bottom of page 4, the third-last paragraph, you mentioned:

3838 I go back to the point I mentioned earlier. To the extent that VoIP is voice -- and we do acknowledge it is much more than that and will be much more than that.

3839 To the extent it is that, we have a regulatory concern about it and I think the public has an expectation about it. Most people who know me know I am a bit of a motor head, so I often use automobile analogies.

3840 It seems to me it would be sort of like saying we are prepared to allow cars that may have all kinds of wonderful features, navigation systems and whatever else in them, but they don't have any seatbelts. As far as I know, every car sold in North America has to have seatbelts.

3841 I guess our approach would be, or perhaps should be, every voice service should have E-911.

3842 I would like you to comment on that statement about whether or not we should even be permitting a service provider to choose to go to market that provides none of those traditional features and in particular does not provide E-911.

3843 MR. MORIN: Our position on E-911, obviously from a technology point of view, we have stated that we believe technically with the work we are doing with NENA, that a solution will be feasible. Whether the CRTC chooses to regulate on the matter that any voice services should have E-911, I don't think we are in a good position to volunteer any recommendation on that front with regard to regulation.

3844 COMMISSIONER COLVILLE: Your being the merchant of the hardware and software, though: Do you manufacture equipment that provides the capability to offer E-911?

3845 MR. MORIN: We have the capability or we will have the capability to offer E-911 solution. As mentioned earlier, we are working in defining the standards, because to us it is important that a standard gets well established and defined. That is why we are taking a leading role in NENA to get that definition.

3846 Once that is done, we will be offering an E-911 solution with out Voice over IP.

3847 COMMISSIONER COLVILLE: Do we have to wait in Canada until you with NENA develop a solution for the Americans?

3848 MR. MORIN: Our recommendation is that NENA and E-911 Phase 2 is expected to be agreed by the end of the year.

3849 COMMISSIONER COLVILLE: The end of 2004?

3850 MR. MORIN: Yes, 2004.

3851 We really believe that it is of interest to Nortel and I think to Canada to have a common standard for a solution like that so that we can leverage volumes across multiple countries, whether it is the U.S. or other countries who are looking at NENA.

3852 So if we are offering an E-911 solution, the overall cost will be amortized over a greater volume.

3853 Does that mean that Canada should accept the NENA recommendation or the NENA decision? I think through the CISC, obviously CISC would put forward their views on what they think about the NENA direction and its applicability for a solution in Canada.

3854 COMMISSIONER COLVILLE: What is going to be the scope of that solution that we could expect by the end of the year in terms of addressing not just the fixed number that we have today with the circuit switched world, which presumably already has its problems with foreign exchange lines, or whatever, that presumably must trip up the system from time to time but also would deal with that foreign exchange number in the VoIP world, if I can use that, and the nomadic aspect of it.

3855 So those two aspects, will they be addressed in this solution that is being worked on with NENA?

3856 MR. MORIN: Jim?

3857 MR. McEACHERN: Thank you.

3858 What is being provided in NENA is an architecture framework for the solution. It lays out the components that you have to provide to provide E-911 for Voice over IP in a range of circumstances, both fixed and nomadic.

3859 It defines several components, one of which is a gateway from the Voice over IP network to the E-911, the PSAP and respective riders that you access the PSAP through.

3860 There is a second component, which is what Dany is calling a VPC, which identifies given a specific location, it maps that to a PSAP boundary and determines which PSAP you should direct it to. So once you know the physical location, you need to be able to work out the appropriate PSAP in the Voice over IP context.

3861 The third component is the ability to actually identify the location of the terminal, where the call is originating from.

3862 The architecture is defining all of those components, and it is defining interfaces between them so you can connect them together in a standard, multi-vendor fashion.

3863 That is all going to be defined -- the target is defined in NENA by the end of this year. I have been making excellent progress on that, so that looks very realistic.

3864 Where it gets a little bit trickier is the third component, what one might consider the first component, which is actually identifying the location. That depends on the access technology.

3865 So in a Voice over IP for a fixed line, we know how to do that today. That can be done very straightforward.

3866 When you go into DSL, when you go into cable, when you go into an ethernet or wireless LAN type of deployment, each one of those will require a different solution. So depending on which access technology and which kind of mobility you are talking about, you will get a different answer.

3867 It is a solution that will roll out over time. What is available this year is a framework and something that provides a basic solution. That is similar to our solution today. We provide a solution that in fact already provides 911 for fixed Voice over IP solutions.

3868 COMMISSIONER COLVILLE: I am not sure I am understanding when you started off by saying fixed and then you went on to say DSL and coax.

3869 As I understand it, I could have a fixed phone. I could have the existing copper circuit switch telephone here in Gatineau or I could be a VoIP still fixed in my home in Gatineau on the cable network or DSL.

3870 Did I understand you to mean that the protocol or whatever is being decided upon by the end of this year would only cover existing or would it cover all three of those?

3871 By fixed, I was meaning the phone is fixed.

3872 MR. McEACHERN: Yes.

3873 COMMISSIONER COLVILLE: Regardless of the network it is on.

3874 MR. McEACHERN: Yes. And when the phone is fixed, it is a much simpler problem because you can provision it once and it doesn't change.

3875 COMMISSIONER COLVILLE: So by the end of this year, we will have that solution: a fixed phone regardless of the network.

3876 MR. McEACHERN: Nortel has that already.

3877 The key thing in what we are getting by the end of this year is a solution, a framework, that in fact has the right interfaces and the right capabilities to accept dynamic updates from a system which can dynamically determine your location.

3878 So if you take your Voice over IP phone that is on your DSL in Gatineau and you unplug it and move it to Ottawa or to California and plug it in again so that it can recognize that you are now in a different location dynamically and then provide that now dynamic information to the 911 system.

3879 COMMISSIONER COLVILLE: And that will be part of a solution developed by the end of the year?

3880 MR. McEACHERN: So yes, but -- and the but is that it has all the components, but for each access technology you have to have a solution that is unique to that access technology which will determine, which will identify a new user coming off the network and work out where they are.

3881 COMMISSIONER COLVILLE: When will the "but" be resolved?

3882 MR. McEACHERN: The "but" will be resolved over time for each technology. Again, some technologies are easier than others.

3883 COMMISSIONER COLVILLE: There are not a lot of technologies we are talking about here. What are the hard ones and why?

3884 MR. McEACHERN: What are the hard ones and why.

3885 COMMISSIONER COLVILLE: You were so certain that the first part of this is going to be done by the end of the year. All of a sudden, we are really uncertain.

3886 MR. MORIN: Let me clarify. What I said was going to be done by the end of the year was a NENA standard. The standards and the protocols will be -- what we call NENA, in 9-1-1 Phase II standard, is expected to be agreed by the end of the year. So I didn't say the solution will be available by the end of the year.

3887 COMMISSIONER COLVILLE: Yes. It's not your fault, it's mine, in understanding what you are saying. We are not trying to be critical here.

3888 So when can we expect this solution, that's what we are struggling with. Because as you probably -- you may have heard us, some people have said we should fix a date by which this must done, such that E-9-1-1 will work, regardless of the type of service I have and where I use it or where I take it. We are trying to come to grips with whether that's a reasonable approach. Others have even said nobody should be allowed to offer this service unless this capability is there.

3889 So the real question is to you, the experts, who are knowledgeable about this area: when could we expect a solution to this problem? If we were to put a fixed date on it, what would be reasonable?

3890 MR. MORIN: Well, if the CRTC were to impose a deadline, maybe a practical solution would be that -- again, assuming the E-9-1-1 Phase II would be available and agreed to by the end of the year, perhaps the deadline could be something -- a reasonable time, two months after that decision.

3891 Obviously, we need to make sure that CISC puts forward their view about the applicability of that solution to Canada, but I think a reasonable time in those sort of time frame would be a time line that could be practical.

3892 COMMISSIONER COLVILLE: Now, I'm still not sure where the "but" fits into this, though, in terms of -- because you said, "By the end of the year we would have this capable, but we still have this other technology-dependent problem".

3893 MR. McEACHERN: So perhaps it will help if I explain my hesitancy in your earlier question.

3894 What we are doing by the end of the year is defining the major components of the solution. That will then define the interfaces that these access technology-specific components need to tie into.

3895 Until that is in place, until you know where you fit into the overall solution, what interfaces you support and exactly what's expected of those components, it's problematic to begin developing those access-specific solutions in a standard way, which you clearly want to do because it has to be deployed North America-wide, world-wide.

3896 So we have ideas on how we would tackle that, but until the framework is adopted and standardized, it's premature to actually begin work on it. Clearly, until you have begun work on it, it's a bit difficult to say when it's going to be done.

3897 COMMISSIONER COLVILLE: Is it something that's going to take two months? Six months? A year?

3898 MR. McEACHERN: Well, two months would seem to me -- for the access technology, it would seem to me rather short.

3899 COMMISSIONER COLVILLE: Help me out here.

3900 MR. MORIN: So this is one, I guess, if you are agreed upon, we will take it back and respond back to --

3901 COMMISSIONER COLVILLE: Okay. Just one final question in this area, and this is my final question, anyway.

3902 Presuming that what comes out of this is really a standard proposal or a protocol, you and other manufacturers now have to get down to the drawing board and develop the specific software and equipment that will actually do this. So how long after that do we actually see a product on the market available to actually provide the solution?

3903 MR. MORIN: We have already started developing an E-9-1-1 solution, so I think for us what is critical is to ensure that we have our standards agreed upon by everybody. How quickly we can react and come out with a solution, as I mentioned earlier, will be -- it's a matter of months, it's not a matter of years, and it really comes down to how quickly can we get a common standard agreed upon.

3904 COMMISSIONER COLVILLE: Well, we will wait for your answer on both of the other issues, but would it be fair to it would probably be unreasonable for us to expect a solution available in the marketplace for this problem before another year?

3905 MR. MORIN: I guess if I could get clarification, when you say "a solution available" --

3906 COMMISSIONER COLVILLE: If the "but" is resolved and we have the equipment to put in place to --

3907 MR. McEACHERN: And you mean the "but" resolved for all known access technologies or for the key ones that we are focused on initially or --

3908 COMMISSIONER COLVILLE: The key ones, the key ones that we can expect service providers to be using within the next year.

3909 MR. MORIN: So let's take that back and we will write an answer for that one, as well.

3910 COMMISSIONER COLVILLE: All right. We would appreciate whatever you can provide us on that.

3911 MR. MORIN: All right.

3912 COMMISSIONER COLVILLE: Those are all my questions. Thank you, gentlemen.

3913 Thank you, Mr. Chairman.

3914 THE CHAIRPERSON: Thank you.

3915 I would just like to follow up on the managed network discussion that you were having with Vice-Chair Colville.

3916 Have you had a chance to review the evidence of the Companies and TELUS, and in particular the categories of VoIP service that they describe in those?

3917 MR. BRANCATELLI: Just before the session, I had a quick review of them. I will try to answer any question you have.

3918 THE CHAIRPERSON: Well, I guess in your talk about convergence of networks, and I guess services, really, and in your talk of -- this is on page 4 of your presentation tonight --

your discussion about managing packets over both private and public networks and the mixed public/private agglomeration of networks that we call the Internet, I'm wondering whether -- let me put in one other preparatory comment. Regulation is traditionally running the risk of setting up categories for regulation that technology and time either blur or render outmoded. Well, here we have a new set of categories: access dependent/access independent, Category 2, Category 3, ones specifically related to access to the Internet: PSTN to Internet, Internet to PSTN, Internet to Internet, and the other being other than access to the Internet, the energy being a dedicated link, a link that requires that access and application be combined.

3919 Does that seem to you, based on your view of the future, a sustainable distinction going forward?

3920 MR. BRANCATELLI: Sustainable? It's hard for me to comment on "sustainable" because it has to do with, I guess, the business models associated with the carrier and how they deploy.

3921 What I can comment on is some of the benefits of Voice over IP is the fact that it is agnostic to that access infrastructure. So the question comes down to: the consumers who are looking for a Voice over IP, what value do they particularly associate with that independence?

3922 I know some of our market research has shown that mobility does play a significant value in that value proposition to the consumer or to the enterprise.

3923 THE CHAIRPERSON: I understand that, but what you are saying, for the moment, it appears as though the ability to plug into the Internet through wherever you are in the world renders the distinction pretty clear, from a conceptual point of view.

3924 I guess, though, from the point of view from questions like: is the quality good enough, we have testimony that, really, this doesn't provide -- really, I have a point, I think you have confirmed, that congestion, prioritization and so forth can lead to a signal that isn't as high quality as you get on the PSTN, that we are used to on the PSTN.

3925 Is that an incorrect characterization?

3926 MR. BRANCATELLI: I think that is somewhat an incorrect characteristic. As Phillippe mentioned, it depends on how well the network is engineered. Today, I use this technology, Phillippe uses this technology.

3927 It has such a wide variety of applications associated with it that what you are looking for and the value you are associating with it really, I mean, determines what value associated with that level of reliability.

3928 Some folks may be comfortable with the mobility aspect and recognize the potential for degradation and quality, but the mobility is the value they specifically associate with that. So we look at this more from a consumer perspective. We want to give people choice and the technology enables choice --

3929 THE CHAIRPERSON: No, no, I understand that.

3930 MR. BRANCATELLI: -- and we don't want to preclude that choice by mandating certain functions associated with the service.

3931 THE CHAIRPERSON: Right. Implicit in that is accepting a lower quality of service.

3932 MR. BRANCATELLI: That's correct.

3933 THE CHAIRPERSON: That was the point. So given that, and given that is now the trade-off, is it likely that -- people speak in terms of generations -- the next version could combine the two, so that, in effect, you would offer -- the real service that could develop would be one that rendered this distinction somewhat outmoded. Or do you have a service that partook of both, essentially, possibly the Internet serving as the spillover, in the event that your main links were congested, for some reason? A combination of the two is, I guess, is what I am asking.

3934 MR. BRANCATELLI: That possibility does exist. The question is: is the market for that versus other services and what the people are specifically looking for that service from.

3935 I don't know that -- I mean, the generations will tell. It's hard to predict on that. But I think, from a Nortel perspective, we see this providing that flexibility, and that flexibility is what people are looking for.

3936 I mean, will that be the only one? I doubt very much that would be the only, in 10 years from now, method of delivery of Voice over IP service.

3937 THE CHAIRPERSON: To what extent have you found in marketing that the regulatory regime, assuming -- it has been suggested to us that we should adopt different regulatory rules for these two categories. In your experience, to what extent does that kind of decision skew the purchaser's decision and skew the network design?

3938 MR. BRANCATELLI: I don't know that I can comment on that specifically. What I can comment on, from what we have seen go on in the U.S., is that lack of that definition has stalled investment in technology and the adoption rate for new technologies has been jeopardized by indecisiveness on what is going to be regulated or not regulated.

3939 So from our perspective, I mean we leave it to you, for the greater public interest, to understand what is best, but we would like to see from an equipment provider decisions being made so that everyone can understand what the decision is made, what environment they are work, so that investment decision can be made according.

3940 What we look at from those investment decisions, we want to make sure that investment is done in Canada and that it's not out-sourced, as was mentioned in Phillippe's discussion, outside of Canada because the regulatory environment forces that situation.

3941 I mean, how you categorize those, I mean, people will always have opinions on it, but I think everyone will agree on the opinion that the sooner a decision is made, the sooner everyone could get down to business on Voice over IP.

3942 THE CHAIRPERSON: I can see that as the epigraph of our decision.

--- Laughter / Rires

3943 THE CHAIRPERSON: Commissioner Wylie, and then Commissioner Cram.

3944 COMMISSIONER WYLIE: Just a very small question. Returning to the "but", when you said that it depends on knowing what it is that's required, to use the standards that have developed, are you talking about the underlying technology or the enabling equipment that various providers will use to provide VoIP? What exactly is it that you are going to return to us on tomorrow?

3945 MR. BRANCATELLI: I think what we are really looking at is the protocols being used, not necessarily the underlying technology, although that might have an influence to it. What we are really looking at is: how are we going to communicate with the devices in the network on reliably conveying that location information.

3946 COMMISSIONER WYLIE: The devices that enable IPs to deliver --

3947 MR. BRANCATELLI: The devices that provide the access and have the intelligence to know where that user is located and communicating that into the infrastructure.

3948 COMMISSIONER WYLIE: Thank you -- which can vary, will vary -- there may be one -- more than one and the more there are the more complicated it will be to --

3949 MR. McEACHERN: Exactly. And I think that's what Jim was trying to convey.

3950 COMMISSIONER WYLIE: -- use the standards and make them actually practical or usable for the purpose.

3951 MR. McEACHERN: Exactly.

3952 COMMISSIONER WYLIE: Thank you.

3953 THE CHAIRPERSON: Thank you.

3954 Commissioner Cram.

3955 COMMISSIONER CRAM: So, did I understand you to say that you actually have the technology for Voice over IP, 9-1-1, E-9-1-1 coming from a fixed location?

3956 MR. McEACHERN: Yes.

3957 COMMISSIONER CRAM: Now we have to get to cost. If you want to make if confidential, can you, in your final comments, let us know what the cost is, some way of being able to ascertain the cost?

3958 MR. MORIN: Yes, we will take a look at what kind of information we can provide you on costs.

3959 COMMISSIONER CRAM: Because here you were talking about additional investments to access providers and VoIP providers, but at the end of the day it's going to be the subscriber that's paying both of those anyway, so we have to -- thank you.

3960 MR. MORIN: So we will try to provide you some information. Obviously, it's network specific, so that's going to be a bit of a challenge, but we will see what information we can provide to the Commission.

3961 COMMISSIONER CRAM: Okay. Thank you.

3962 Thank you, Mr. Chair.

3963 THE CHAIRPERSON: Thank you.

3964 Commissioner Langford.

3965 COMMISSIONER LANGFORD: Thank you.

3966 I'm very grateful for your patience this evening. You will probably be avoiding us like the plague after this. You will want an appointment time before you volunteer again.

--- Laughter / Rires

3967 COMMISSIONER LANGFORD: Well, yes, you will have lots of company. The bars are filled with people who volunteered to come here.

--- Laughter / Rires

3968 COMMISSIONER LANGFORD: I am interested in picking your brain about your first two kind of very eloquent categories, where you talked about choice, where you talked about all the different things you can get, it's more than voice.

3969 I am looking at page 3 on my version, where you say, in the second-last paragraph of #2, that you can get,

3970 What I would like you to do, if you can -- and I know you are not marketing these final products, you might be marketing the wherewithal to market them, but not the final products -- but if you could help us with a sense of how all of this will roll out -- and what I would like you to do, if I can be very demanding, is to put yourself in the driver's seat of some of our clients, specifically the cable companies, the ILECs -- Bell and Alliant, MTS, TELUS -- and then all the others, the little guys, if we can call them that now, although some of them are not so little, but the competitors, if I can it, the newcomers, the people who have 15 per cent of the market now in Canada, and give me an idea of how they might start to roll this products, starting with voice -- I assume they start with voice.

3971 So what sorts of packages or bundles, what sorts of products are they going to give us to choose from, these three different types? Is that a fair question?

3972 MR. MORIN: That's a fair question. I will start and I'm sure my colleagues will contribute.

3973 I think, as an example, when I'm personally using this, today I have a solution that Nortel is providing that allows me to have on one software screen eight buttons to choose from. I can choose one button to make a phone call -- voice -- I can press another button for a video, I can press another button to start having multiple conference calls, video, as well as voice onto the network. I have instant messaging. I have e-mail buttons.

3974 So the integration of these different multimedia services are available today, to both enterprise, because you can go directly into their price, or to carrier service providers.

3975 So the technology is available. The multimedia aspects and the push buttons and the Web Push, and so on, these are applications that are available today. From my point of view, they can start being deployed by anybody, as of today.

3976 COMMISSIONER LANGFORD: And who is likely to? Would it be cable, as they roll out in the next year? Or the ILECs? Or some of the newcomers?

3977 MR. BRANCATELLI: Our experience is that all of them are looking at this. Not to belabour the point, but this is where anyone can sort of take advantage of these type of applications and deploy them.

3978 Because it is application-specific, the opportunity exists there for them to create unique services and deliver them over that broadband infrastructure.

3979 It's hard to answer that question because everyone has their different viewpoint as to what market they are going to try to address: consumer versus enterprise, what niche applications do they want to develop to differentiate themselves, and, really, the flexibility of the applications and the services that can be associated with Voiced over IP leave it up to really everyone's imagination.

3980 I mean, all the ones that, you know, Phillippe has mentioned are really being looked at. I can't really, per se, identify a specific carrier, competitor, that is sort of driving something uniquely, just because they are that type of carrier.

3981 COMMISSIONER LANGFORD: Let me ask your indulgence for one more kick at this. I know you are not entirely familiar with what we call our preliminary view, our first look at this, but let me give you a really rough, rough cut.

3982 Let's assume that we follow through with something like our preliminary view, which would restrain the big ILECs, like Bell, TELUS, Alliant, from being very fast, from being nibble. They would still have a lot of money, perhaps, and a lot of revenue and a lot of interest, but they would have to come to us for permission for almost everything they do. For the cable companies which really haven't got up and running with this yet, but have big plans, we would be restrictive, but not as restrictive. And for the newcomers, we would be almost hands-offs, virtually, leaving aside 9-1-1 problems and that, but I'm talking about marketing products.

3983 If that sort of scenario rolled out, would we be depriving Canadians of the sort of innovation that only the big guys can give them because they have deep pockets? Or can the little guys, the new competitors, fill all the sorts of eight buttons on Phillippe's screen and provide that sort of thing?

3984 MR. MORIN: Let me, first of all, make the clarification. So I now understand the question you asked earlier: if we had our view on the preliminary position from the CRTC, so I apologize for --

3985 COMMISSIONER LANGFORD: Just to be clear, that wasn't my question.

3986 MR. MORIN: That wasn't? Okay.

3987 COMMISSIONER LANGFORD: And that may not be his understanding of our preliminary view either. I think we should put that on the record, but I'm trying to keep --

3988 COMMISSIONER COLVILLE: That's why I made that comment.

3989 COMMISSIONER LANGFORD: I'm trying to sort of dumb this down a little just so we can get the benefit of what the impact of that sort of thing might want to happen.

3990 There's a few people in the Bell contingent who just had a heart attack, so we may have to call 9-1-1 --

--- Laughter / Rires

3991 COMMISSIONER LANGFORD: -- but this is such a hypothetical.

3992 MR. MORIN: Yes. I think what you are asking us, and this is a challenge that we have had, is to provide an opinion on what I would call a regulatory policy. I really don't believe that Nortel is in a position to provide that. From a technical point of view, we can tell you what the rollout -- what kind of features are available, but providing a view of: would that impact the ILECs versus a newcomer or --

3993 COMMISSIONER LANGFORD: Well, I was hoping that, because you sell solutions to these people, you might have a sense of who would be in the market for the Big Meal Deal and who would be in the market only for the sandwich or the fries, if I can put it that way.

3994 You are out there selling the pieces they need to do this, and without giving away any names, but using categories of kind of ILECs, cable cos and the others, are we going to be shutting the door on Canadians being able to have access to your type of screen if we constrain some of the players more than others?

3995 MR. MORIN: Yes, I understand the question, but I'm afraid, I guess --

3996 THE CHAIRPERSON: I believe they answered twice. You are getting it a third time.

3997 Do you want to ask the question again?

3998 COMMISSIONER LANGFORD: I beg your pardon?

3999 THE CHAIRPERSON: He has answered twice. He is giving you the same answer.

4000 MR. MORIN: I'm going to give you the same answer.

4001 COMMISSIONER LANGFORD: So from your sense as a provider of these things --

--- Laughter / Rires

4002 COMMISSIONER LANGFORD: So from your sense as a provider, you would find it hard to look forward and to give me a feeling for what kind of choices I have.

4003 MR. MORIN: I think as a providers of equipment, I think the question you are asking would much be better answered from the carriers, themselves, and I think we are not in a position to do it. We are going to, obviously have -- we have discussions and we are talking with all the different carriers that you have mentioned and working on them with business cases, working on technology deployment, but in terms of how they want to deploy this, at what speed they want to deploy this, I think they will be better positioned to answer that themselves.

4004 COMMISSIONER LANGFORD: Well, thanks very much.

--- Laughter / Rires

4005 THE CHAIRPERSON: Thank you.

4006 Commissioner Wylie.

4007 COMMISSIONER WYLIE: Do you realize, gentlemen, that Alcatel has taken a position on that preliminary view?

4008 MR. MORIN: I realize that Alcatel has taken a preliminary view and when Alcatel wants to -- I'm definitely not in any position to comment on what Alcatel can do.

4009 COMMISSIONER WYLIE: Commissioner Langford was going to have a third question.

--- Laughter / Rires

4010 THE CHAIRPERSON: Counsel.

4011 MS PINSKY: Thank you.

4012 I just have a question of, basically, clarification, to follow up on your discussion, which, in part, relates to some of your answers to the interrogatories, in particular to Cybersurf, and this relates to the issue of providing quality of service at the network level.

4013 First, could you just confirm? I thought I understood you to say that the network service provider is capable of providing quality of service at this point, but that these features have not been enabled.

4014 MR. BRANCATELLI: Just to clarify, the quality of service over the access networks, the broadband access networks?

4015 MS PINSKY: Yes.

4016 MR. BRANCATELLI: To my understanding, it is not widely deployed, correct.

4017 MS PINSKY: Is not widely deployed, but --

4018 MR. BRANCATELLI: I mean, in general. I can't specifically identify a single carrier that has it available, not to say that I'm aware of all the carriers.

4019 MS PINSKY: Okay. Thank you.

4020 And I'm, in part, thinking of the approach to quality of service that you have set out in your response, where you talk about the customer's broadband access device would classify and mark the VoIP packet and the service provider would prioritize these VoIP packets to ensure quality of service throughout the network.

4021 I would like to ask whether this capability, whether the network provider, the access provider, would be able to offer these features to the application providers, so that the VoIP service provider would be able to offer that.

4022 MR. BRANCATELLI: The technology exists. I can't say, though, whether that technology is of the appropriate generation within the access providers, that they can readily do that. You would have to ask them that question.

4023 MS PINSKY: Okay. And just with regard to the responses that you said that you would provide to the Commission, when would you be in a position to do that? Could you include those in your reply comments?

4024 MR. MORIN: It will probably be before the end of the week we will be able to provide the information back to the Commission.

4025 MS PINSKY: Well, once you have offered that, would you be in a position to provide it by tomorrow? The oral component is tomorrow. Otherwise, you can do it --

4026 MR. BRANCATELLI: Sorry, which specific component did you refer to for tomorrow?

4027 MS PINSKY: I believe you have two responses --

4028 MR. MORIN: There is two responses.

4029 MS PINSKY: -- that you are going to be providing.

4030 MR. BRANCATELLI: Okay, both.

4031 THE CHAIRPERSON: If you would like, counsel, I suppose, if you are filing written comments in the last days of the proceeding, you could do it at that point, if you like.

4032 MR. MORIN: Okay.

4033 THE CHAIRPERSON: Whatever information you could present. You are going, I think, earlier -- we are reversing the order of presentations for final comments, and so I expect that sometime tomorrow afternoon you will be answering that. But if you wanted further time, you could do it in writing.

4034 MR. MORIN: Okay.

4035 MR. BRANCATELLI: Thank you.

4036 THE CHAIRPERSON: Okay. Well, I would echo Commissioner Langford's remarks, you have been very helpful and very patient. Thank you. We appreciate your contribution.

4037 MR. BRANCATELLI: Thank you.

4038 THE CHAIRPERSON: Madam Secretary.

4039 THE SECRETARY: Thank you, Mr. Chairman.

4040 I am pleased to call on Alcatel Canada.

PRESENTATION / PRÉSENTATION

4041 MR. KRSTULICH: Good evening. My name is Zlatko Krstulich, and I am the Chief Technology Officer for Alcatel Canada.

4042 I would like to first of all thank the CRTC for inviting us to speak here and also take this opportunity to make my apologies for Mr. de Pesquidoux who underestimated the stamina of the CRTC and didn't make logistics arrangements to be here at this time.

4043 So I will be pleased to cover Mr. de Pesquidoux's comments which he would like to share with you.

4044 COMMISSIONER LANGFORD: The psychiatrist's offices are littered with people who underestimated us.

--- Laughter / Rires

4045 MR. KRSTULICH: Alcatel is a leading global communications equipment and solution provider, and we address all segments of the telecom service provider market. Our operations in Canada include a large R&D facility in Ottawa -- in fact, I think it is one of our sixth largest in the world -- as well as sales offices all across Canada.

4046 It is definitely in Alcatel's interest to encourage a very, very dynamic environment for telecoms in Canada, and we want to see lots of players. It is going to provide us with a foundation for our business over the next many years.

4047 We have experienced first-hand the effects of competitive pressure between broadband service providers. Even though carrier capital budgets have radically contracted over the last three years, our telco customers have consistently invested heavily in increasing DSL footprints, that way delivering high-speed broadband to more Canadian customers.

4048 A strong competitive dynamic exists today between cable and DSL broadband providers, and that is reflected by yearly increases in service coverage, subscriber growth and higher speed access at ever-lower cost.

4049 A very clear example of how aggressive that competition has become is the so-called lights DSL or cable services where you are getting fundamentally a broadband connection at a very low price, and that is strictly there because of the competition between these two providers.

4050 We are now entering a new and something that is going to be potentially more intensive phase in this competitive cycle. Instead of just considering the access service itself, now the providers are going to be looking at competing across a whole bundle of services, specifically the addition of video and voice.

4051 Alcatel is working with broadband service providers to find new ways and solutions to add video to telco and, conversely, to add voice to cablecos.

4052 This triple play that is being pursued by both the telcos and cablecos will set in motion another wave of competition, which will further widen broadband deployment footprints and increase penetration rates.

4053 Consumers will then have more choice on the service providers they select for both basic broadband, as well as value-added services like VoIP which ride on top of those access services.

4054 The CRTC must act in the interests of the consumer to reinforce the currently healthy competitive environment for IP-enabled applications and services, of which VoIP is just one example; otherwise, the services will be more expensively deployed in other countries with more investment-friendly environments.

4055 It is also necessary to note that IP-enabled services can be delivered certainly from outside of Canada, and that might be the case if the environment from a regulatory point of view isn't suitable.

4056 If the CRTC upholds its preliminary ruling on VoIP, on which Alcatel has a strong opinion, it will eliminate a level playing field, and I think that will limit broadband providers' incentive to invest and it will unnecessarily increase costs of service and disrupt the marketplace, which ultimately limits the benefits consumers realize from competition.

4057 I think specifically that is going to be felt in terms of new feature introductions related to VoIP services.

4058 Any action that results in slowdown of broadband deployment also undermines the numerous government initiatives at all levels designed to increase broadband connectivity for all Canadians.

4059 Now I would like to make some specific comments that I think more directly address the CRTC's ruling and some of the comments that have been coming through the whole VoIP hearing process.

4060 Specifically, Alcatel maintains that the CRTC should forbear in economic aspects of VoIP regulation, and that is at odds with your preliminary position. We think this position is consistent with the need to maintain a high rate of innovation and rapid market deployment of the next generation of IP-enabled broadband services.

4061 To justify our position, I would like to raise basically four points.

4062 The first point relates to this relationship between VoIP and broadband access deployment.

4063 We are fortunate in being able to claim Canada as a leader in broadband deployment. We have a high percentage of residences already broadband connected. I think it is somewhere in the order of 50 per cent. I am sure that this success has to do with our healthy competitive environment between the cablecos and telcos.

4064 In addition, recent technology advances in fixed wireless, for example, YMEX technology, and the spectrum options that were recently held by Industry Canada, hold out the prospect for increased availability of broadband Internet in those markets that are not well served today: the rural, remote and Aboriginal communities.

4065 The availability and competitiveness of VoIP offerings in the residential context will be closely tied to wide availability and competitive pricing in broadband access.

4066 It is Alcatel's view that the predominant factor that limits the introduction of competitive telephony services in Canada is the degree to which broadband Internet access is available.

4067 Since consumers will increasingly compare complete service bundles, voice, data and video, when they choose between broadband access providers, restrictions on one element of the bundle -- for example, if there is limited pricing flexibility on VoIP, that definitely will threaten to make that particular broadband access provider less competitive overall, and that in turn reduces the incentive to compete aggressively in further broadband rollouts and enhancements.

4068 Second, I want to talk about VoIP as an IP-enabled multimedia service. I believe the point was made by the Commission earlier that you fully understand that VoIP is more than just telephony.

4069 I am going to skip through to my point No. 14 to avoid repeating some of the comments made earlier.

4070 VoIP services will take advantage of the plethora of multi-function communication platforms that are unlike today's conventional telephones, which will seamlessly blend different kinds of multimedia communication, much of which will not be carried over the voice network but rather carried over the Internet.

4071 Examples of potential VoIP service evolutions include wide-band audio, codex mesh conferencing networks with multimedia control planes, imbedded text and video messaging, seamless session transfer between multiple communication devices.

4072 Given the likelihood of rapid evolution of such services, there is significant risk of bogging down the availability of the most innovative of such services due to procedural debates over regulatory definitions of VoIP as it evolves.

4073 Essentially, this means that these things, in terms of VoIP features and extensions, are going to be changing so quickly it is going to be hard to decide what they are and how to treat them from a regulatory point of view. That, in and of itself, I think is going to slow down the ability to get these features out into the market.

4074 If regulatory oversight is mandated for ILECs in this environment, it risks significantly dampening the competitive dynamic that is always at the root of making radically new services widely available in the Canadian market.

4075 My third point. On VoIP deployment characteristics in relation to multi-line pricing, which is I think an example of how pricing regulation can be extremely problematic in terms of the competitive positioning, due to the technical differences in VoIP versus PES, networking technology, it is much easier for VoIP over broadband based deployments to incorporate a second or third line into a home at a very small incremental cost.

4076 This is significantly different to conventional wireline PES services and will very likely be exploited by VoIP providers to offer dramatically lower pricing for service bundles with multiple lines to a single residential customer. The ILECs will need the pricing flexibility to respond quickly.

4077 Finally, the issue of how equivalent is VoIP to PES service.

4078 The CRTC has stated that regulation should consider service attributes and be technology agnostic. Alcatel holds that there are substantive differences in service attributes relating to VoIP when delivered as an integral part of a broadband access service.

4079 Examples include differences in lifeline expectations, which result in greater responsibility by the consumer for local powering of in-home equipment, as well as the need to educate the public on the importance of proper location registry to support 911 services.

4080 From this perspective, the public interest would be best served by considering VoIP as distinct from today's conventional PES service belonging instead to new IP-enabled multimedia service class.

4081 This shift in customer perception will help prepare the market for innovations that will require a break from the century old model of PES telephony service, as well as ensuring consumers are aware of their new responsibilities in maintaining effectiveness of their emergency response services.

4082 Thank you.

4083 THE CHAIRPERSON: Thank you.

4084 Commissioner Wylie.

4085 COMMISSIONER WYLIE: Good evening and thank you for staying with us so late. When Commissioner Langford starts asking questions, you may wonder why you were so young and foolish and took a position on our preliminary view compared to the equipment and software providers that we just heard.

4086 You are quite adamant in both your written comment and today about what you call the economic, not having economic regulation. And I assume by that, you mean not pricing or tariffing the VoIP services.

4087 MR. KRSTULICH: Yes.

4088 COMMISSIONER WYLIE: It is less clear what your position is on whether the Commission should be concerned about what we have been describing, at least some of us, as another pillar of our preliminary view, which is ensuring access to the underlying transport facilities.

4089 We have discussed at length with the previous panel the difficulties that could be encountered in the network to effect anti-competitive actions.

4090 The only place that I have seen you make a comment about that aspect of our preliminary view -- that is, ensuring access -- is in an interrogatory from the CRTC about TPIA and the limitation of providing voice on the cable network where you support removing VoIP restrictions on TPIA, which I assume is because of the anti-competitive nature of it.

4091 Are there other areas where you think there will be a need for it, and particularly, comments on what your view is about the ability practically and in a sustainable way to actually create disadvantages to some of the packets flowing through the network?

4092 MR. KRSTULICH: In terms of the question of say malicious KEOS manipulation by incumbents or facilities based carriers, that is certainly technically possible. There are a couple of caveats or a couple of points I would like to put into play on that issue however. One is that if you look at the broadband infrastructure that has been built today, it has been built over a number of years based on really a best effort service model. Although, as time goes on, new equipment will have more inherent QS capability, the existing installed equipment typically does not and therefore any sort of a malicious attempt at KEOS, let's say a manipulation, would actually cost investment dollars by the carrier, so I think that is unlikely, quite frankly.

4093 Secondly, one of the hardest problems today in delivering KEOS over VoIP is in dealing with the contention of the traffic from the home going into the network. In that scenario, the facilities based carriers are on rather a level playing field with the non-facilities based VoIP providers because they have to take responsibility on the consumers' home equipment in educating them to avoid the pitfalls there, and that is an important issue where we don't want to suggest they get tarred with KEOS problems that they cannot control, it is the consumers' problem, they have to manage it.

4094 The other point I would like to make is while it is absolutely possible to see networking equipment being able to do what was referred to as deep packet inspection to be able to intercept flows and perhaps add delay and what not to them. That is increasingly going to become available in the future, but I rather think that the carriers will actually take that from a positive perspective of deploying that sort of equipment to earn new revenues based on added KEOS services which I think will be a very big thing in the next wave of profitability of these networks. I also believe that once that is in place they will have every incentive to offer those same KEOS tiers, if you will, to third party VoIP providers so long as they is some economic business model where that is paid for.

4095 COMMISSIONER WYLIE: That is a very elegant way of saying they are not going to spend their time and their money trying to disturb what is going down the network, but using instead... improving or discovering improvements?

4096 MR. KRSTULICH: Yes and, in fact, investing money to earn more money for those facilities on KEOS instead of to, you know, cause some kind of pain to their competitors. Which I think, if given a level playing field, they are well able to compete with the non-facilities based VoIP providers. Another point I would like to make is that it has been suggested in these proceedings that the CRTC could make comments to the effect that they would prohibit sort of malicious tampering or whatnot of third party traffic over the internet and Alcatel supports that view. I think that is a reasonable view. And, with that sort of a statement, along with the points I mentioned about rather the positive incentives for adding a KEOS where they can bill for it, I think that will pretty much take care of that problem.

4097 COMMISSIONER WYLIE: In saying that you don't support economic regulation, but you would support any regulatory efforts such as looking at the TPIA restriction on cable or any other impediment to the competitive ability to supply VoIP. Is that an area where, in your view, regulatory intervention is helpful or necessary, rather than an impediment to innovation and development, etc.?

4098 MR. KRSTULICH: I don't see that, I don't see those kinds of statements, so long as they are very clear and they don't make a lot of implications that require changes in the network. As long as they are a very clear statement I think that that won't inhibit regulation because, after all, I think what we are saying is we are just asking people not to invest money to cause some sort of impairment of a third party service which I think is a reasonable statement.

4099 COMMISSIONER WYLIE: The other area that we have discussed at length and certainly it is of interest when we speak to software providers is what has been referred to vaguely as the social obligations of VoIP providers, security, 911, security from hacking and viruses, etc. You seemed to indicate, both in your written comments and also towards the end of your presentation today, that in fact there should be a certain hands-off attitude to that. And, if I read it correctly, that in fact that would be best to not give the impression that it is like PES, but that it is not like PES, and simply ensure that customers know that and that that is the best way to treat the deployment of VoIP.

4100 Do I read that correctly from your paragraph 16 and I think it is your paragraph 18, that not pretending they are the same or think that they are the same will in fact have the effect of ensuring that customers are aware of their responsibilities rather than think that it is the same.

4101 MR. KRSTULICH: I'll answer that perhaps in two parts. First of all, I think it is completely reasonable for the CRTC to make social obligation regulation related to VoIP. I believe that there will be a phase in period, that I don't think it is necessary to mandate it day one effectively blocking these services from being deployed. And so, to that end, I think it is valuable that consumers be more aware that there are these issues and it extends even beyond the sort of E911 location issues. There is the issue of understanding powering and the fact that one facility... the access facility doesn't work, neither will their telephone.

4102 And so, I think it is reasonable that the public start to be aware of this and I think this could be hopefully maybe avoiding some, you know, tragic consequences in certain specific cases, so I think that would be helpful. Today, by way of an example, people understand when they are on their cell phone they better right away tell people where they physically are, they just understand that people don't know where they are necessarily even though, in time, the technology will resolve that problem. We sort of have an inverse problem, I think, with VoIP where the assumption is well it is a phone in my home, I guess you must know where I am and I think that this could be a topic that, from a public policy perspective, some education would be helpful.

4103 COMMISSIONER WYLIE: Having said that, are you in a position to talk about where you think we are at in terms of timing with the development of 911 services or MRS or that would at least simulate or duplicate what we know as 911 and E911 on the DS network? There was quite a discussion about it from Nortel before. Do you have anything to add as to where you think the technology is at and what type of timing we are looking at?

4104 MR. KRSTULICH: First of all, I would like to both reinforce a comment that was made about the importance of standards and maybe expand on that in the sense that I think the CRTC and other public bodies can help by putting pressure on clarifying these standards. The issue from a technology point of view is twofold. If you simply allowed one carrier to buy equipment from one vendor and they could make this work, the problem is that we have to get many vendors and many equipment providers to all work together with all these public access points for 911 service. And the problem is this isn't coordinated and the standards don't make extremely clear the sort of information that is exchanged between them, then you could end up with initial deployments where you actually have mistakes being made and it is worse than not knowing where they are because you actually think they are somewhere they aren't.

4105 So I think a lot of pressure on clarifying these standards is absolutely key and as a rough rule of thumb it takes about a year after those standards are clarified for a functionality such as this, which relates mostly to software to, you know, rollout through product development cycles and be tested by carriers. So, I would say as a good objective that would be the end of 05.

4106 COMMISSIONER WYLIE: But, would it be correct to say that your view is that that should not slow down the deployment of VoIP as long as the consumer is well aware of the limitations?

4107 MR. KRSTULICH: Yes.

4108 COMMISSIONER WYLIE: And we have in the past two days discussed with those who would deploy VoIP how best to ensure that customers are well informed, and I suspect you could say that to the extent that they know that there are limitations the pressure to correct this should be greater, because it will be difficult to sell VoIPs if the customer is aware that there are these serious limitations.

4109 MR. KRSTULICH: Exactly. I think that that... you are very right in making that observation, that some public education here also greatly increases that sort of consumer pressure and visibility and scrutiny on those points.

4110 COMMISSIONER WYLIE: Could it even cut down the year to fewer months once you have the standards? But anyway, Nortel is supposed to get back to us as to what their view is on that aspect of it. You also insist, both in your written comment and today's presentation, on the importance of the availability of broadband internet access in Canada. Do I understand that you see as the quick deployment of VoIP in a fairly unrestricted way as one way of pushing further the deployment of broadband? Is that what the comment is about when you talk about the preliminary view and the extent to which you don't agree with it? You seem to see that restrictions would be a factor in limiting the extension of access broadband in areas where it is not available or where there is no penetration.

4111 MR. KRSTULICH: Yes, very definitely so. In fact, if you look at the example of the successive ways of pressure that have caused major investment cycles, it is interesting that the Telcos have made the next big investment wave based on adding video and that is to, I think, a certain extent their response to the anticipation that cable companies will come out with VoIP probably early next year. So I think that we are already seeing that, that is already causing a big increase in investment. And, ultimately when you look at a question of investment you look at it in terms of market share relative to your competitor. You also look at it in terms of what is a justifiable investment in terms of return. And if you can start to get multiple services, add services to that broadband pipe, then it makes the case for added broadband expansion much much better. Because the incremental cost of extra band width on broadband is very small compared with the potential revenue you can get by overlaying services on that extra band width.

4112 COMMISSIONER WYLIE: Thank you, and thank you for staying so late. It is now three minutes to 9:00 and at 9:00 we lose all our enthusiasm. So I will say good night. Thank you, Mr. Chairman.

4113 THE CHAIRPERSON: Thank you. Commissioner Colville, then Commissioner Williams.

4114 COMMISSIONER COLVILLE: I will try and do this in less than three minutes. On the quality of service issue, you may be aware that we have quality of service standards for the existing primary exchange service. And, in fact, the Commission has been running a proceeding to address the issue of consumer rebates, should the ILECs not maintain their quality of service standards over a certain period of time, and so on.

4115 Some of these standards relate to access to the call centre, service intervals, installation intervals, and some of them relate to the quality of the transmission itself.

4116 When you comment on the issue of regulation, is it your view that we should not have quality regulated, quality of service standards for the ILECs provision of VoIP service?

4117 MR. KRSTULICH: My view would be that the CRTC should not get in that domain, because I think it is a domain that consumers are very well and able today to discriminate and make choices on.

4118 If you use the analogy of cell phone versus today's fixed telephony service, the quality of voices is almost always a great deal worse on a mobile phone than it is on fixed line. Consumers just choose it for its convenience, and they will choose between providers if they feel the quality is not high enough.

4119 Similarly, if you look at what is happening in video where consumers are choosing between providers that give them digital video versus analog video, they know what the difference is. So I think that regime around quality should be left where it is on the old network and should not be continued on VoIP.

4120 In addition to that, the question was raised earlier: When will the quality of VoIP be equivalent to today's fixed line network?

4121 I think the answer will come at different times for different networks. However, the voice quality or what is required technically to make a high quality voice happen end to end is kind of a fixed target, and technology is evolving around it quickly enough that I think the bandwidths that are needed by voice and the small improvements over today's latency over the Internet, even the big "I" public Internet, will very quickly make that problem go away.

4122 COMMISSIONER COLVILLE: So if a consumer calls to complain about any of these quality of service standards to us, I guess we should ask: Is your service a VoIP service? And if the answer is yes, we just say well, it's the vagaries of the marketplace. But if it no, a primary exchange service, then you do qualify for whatever measures that fit within the quality of service indicators.

4123 Would that be the case?

4124 MR. KRSTULICH: I don't know if I would characterize it or give the consumer that exact message. But I would leave it to the consumer, and I would let them deal with their service provider.

4125 For example, even the CRTC I think would be extremely challenged to sort out what was going on. As I mentioned earlier, a lot of the problems that could be occurring with VoIP are going to be from all these new devices that someone just brought home from an electronics shop. And who knows where the problem is exactly.

4126 So I think it becomes a very difficult place for the regulators to come in and say: Well, the demarc point is from here to here and I can measure it this way and that way.

4127 I think it is best left to the service providers.

4128 COMMISSIONER COLVILLE: Thank you very much.

4129 THE CHAIRPERSON: Commissioner Williams.

4130 COMMISSIONER WILLIAMS: Good evening.

4131 Are you still with us, Madam Wylie? It is after 9:00.

4132 My questions are in the area of cost and the evolution of VoIP equipment.

4133 Is the development of VoIP products expected to move at such a rate that only the most financially able providers will be able to keep up with the pace of technology?

4134 Say, for example, generation one has this set of features and six months later there is generation two and six months later there is generation three. At some point you have locked into the technology as a business or as a provider.

4135 My question is: Is this moving at such a pace that only the most financially able will be able to keep up?

4136 MR. KRSTULICH: I would answer that question by focusing on applications that are going to be associated with VoIP, because I think the basic transport issues are going to be moving along slowly and they won't really be the main sort of competitive differentiator between providers.

4137 The one very attractive thing about VoIP is that it is designed to allow any carrier to bolt a lot of new applications from different application providers, some that can be very small. And by the nature of the network you can install that new application server if you will in one location and that service can be made available to every customer you have on your entire footprint, as opposed to today's network where a new feature on a voice switch needs to be upgraded on every voice switch you have and it is a much more difficult job.

4138 So I think in terms of the question of will the big players have an advantage in deploying innovative new services compared with small ones, I rather think the converse may be true.

4139 COMMISSIONER WILLIAMS: So the early generations of the VoIP equipment will be designed in such a way that they would be compatible with future versions and they would be very easy to update, much like a software update on a computer.

4140 MR. KRSTULICH: Yes. I would perhaps make the analogy with the PC that it is more the model. I think we will have a reasonably stable operating system, which is basically the infrastructure of an NGN network, and there will be applications, interfaces which will be reasonably well standardized. So it will be fairly both practical and financially feasible to get lots of players to come in and add applications to your VoIP service.

4141 In fact, to the extent that we have been discussing this with many carriers around the world, they have exactly this intention: to bring lots of players in at the application side and speed up the availability of applications into the market.

4142 COMMISSIONER WILLIAMS: Will we see rapid drops in price for the VoIP equipment as it becomes more widely accepted like we have seen in other technologies?

4143 MR. KRSTULICH: Overall, I think those trends in technology drops will occur. But if you look at the total investment required to overlay VoIP successfully on say broadband network, I think it has to do primarily with making sure you have a good quality broadband network in the first place and the increment in terms of capex for VoIP I don't think will be the predominant factor.

4144 The increasingly larger part of the investment will be in the investment in the applications.

4145 My thinking is that there may be some area where basic service is made available over VoIP, but what you are going to see is a huge plethora of new features, which now cost a lot more, that will essentially be bundled in for, if you will, the same flat rate price.

4146 COMMISSIONER WILLIAMS: Thank you very much. I have enjoyed your presentation.

4147 MR. KRSTULICH: Thank you.

4148 THE CHAIRPERSON: Thank you very much. Those are our questions.

4149 We will adjourn now and resume at 9 o'clock tomorrow morning.

4150 We expect tomorrow to complete the proceeding, including the reply comments in reverse order of the presentations.

4151 Nous reprendrons demain matin à 9 h 00.

--- Whereupon the hearing adjourned at 2109, to resume

on Thursday, September 23, 2004 at 0900 /

L'audience est ajournée à 2109 pour reprendre

le jeudi 23 septembre 2004 à 0900

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