ARCHIVED -  Transcript - Hull, QC - 2001/10/01

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.

BEFORE / DEVANT:

ALSO PRESENT / AUSSI PRÉSENTS:

Hull, Quebec / Hull (Québec)

--- Upon commencing on Monday, October 1, 2001

at 0900 / L'audience débute le lundi 1^er octobre 2001 à 0900

1 LE PRÉSIDENT: Bonjour et bienvenue à tous.

2 As most of you know, my name is David Colville. I am the Chairman of the CRTC and Vice-Chairman for Telecommunications and Commissioner for the Atlantic Region and junior mail-room operator.

3 I will be chairing this public hearing.

4 Je vous présente mes collègues. Commissioner Barbara Cram, Commissioner Andrée Noël, Commissioner Stewart Langford, Commissioner David McKendrie, Commissioner Jean-Marc Demers and Commissioner Ron Williams.

5 Over the course of this hearing we will be assisted by a number of Commission staff. At the front table on my left are the Hearing Secretary, Michel Spencer, Karen Moore, Senior Legal Counsel, Natalie Turmel, Legal Counsel and Valerie Plaskacz, Staff Team Leader.

6 The purpose of this oral public hearing is to review the price cap regime for the major incumbent telephone companies and to establish an appropriate regulatory regime that will go into effect in 2002.

7 In Price cap regulation and related issues, Telecom Decision CRTC 97-9, dated May 1, 1997, the Commission set out the regulatory framework for the price cap regime.

8 Le régime actuel a été fixé pour quatre ans et s'applique aux principales compagnies de téléphone. Ce régime a été mis en place avec l'apparition de la concurrence dans le marché local.

9 The current proceeding is the Commission's first opportunity to consider how price caps functioned during the past four-year plan and to establish an appropriate regime for the future.

10 This hearing will help the CRTC determine how best to continue to balance the interests of the three main stakeholder groups -- consumers, incumbent telephone companies and competitors.

11 Many issues must be examined. This proceeding will help to answer many questions. Among the most important of those questions will be the following:

12 Is the current price cap regime the most appropriate form of regulation?

13 If it is, what are the appropriate components of a price cap formula? How should the components, for example the measure of inflation, a productivity factor or any exogenous factor be determined?

14 What is the appropriate service basket structure?

15 How should the new price cap regime define and treat capped and uncapped services?

16 For how long should the new price cap period run?

17 What changes, if any, should be made to the current treatment of utility segment competitor service rates?

18 We will consider, in light of four years of experience and other factors, whether it would be appropriate to include a quality of service component in the new price cap regulation regime, or should other methods be considered such as targeted refunds to customers to address inadequate service quality.

19 Finally, we will also be reviewing the telephone companies' service improvement plan proposals to ensure that they meet the basic service objectives and other key elements of the Commission's High Cost decision.

20 Your comments on these and other issues outlined in Public Notice CRTC 2001-37 are a key part of the decision-making process that the Commission will undertake.

21 All of your comments are important and valuable to us and we look forward to what promises to be a very interesting and informative hearing.

22 Before we begin, I would like to say a few last words about the administration of the proceeding.

23 First, in order to ensure the court reporters are able to produce an accurate transcript, please make sure your microphone is turned on when speaking. Anyone wishing to purchase the transcript should make the necessary arrangements with the official court reporter to my left. Also it can be at times difficult to see who is speaking in the room, especially when it's as full as it is today. So if parties are raising procedural issues from the body of the room, I would ask they raise their hand to identify themselves.

24 As indicated in the Commission's Organization and Conduct letter of September 7, 2001, we plan to sit from 9:00 a.m. to 5:00 p.m. each of the scheduled days, although depending on where we are at at the end of the day we may go a little beyond that.

25 We will take a one and a half hour lunch break around 12:30 and 15-minute coffee breaks at mid-morning and mid-afternoon. We will not sit on Thanksgiving Monday, October the 8th.

26 While the Commission doesn't expect to have to sit on evenings or weekends, if we fall behind our timetable we will review the schedule and sit longer hours on one or more days or sit one or more Saturdays. We may also sit during the week of October 15th. We will watch our progress and let you know of any changes.

27 La révision du régime actuel est importante. La décision finale touchera tous les Canadiens. Nous souhaitons avoir le plus de commentaires possibles.

28 To this end we will begin today by hearing from members of the general public who are here in person to speak with us. After we have heard from all of those who have come in person to speak with us, we are holding a Canada-wide teleconference that will allow us to hear from people all across the country.

29 We expect this phase of the hearing to last most of the day today.

30 I would like to take this opportunity to welcome members of the general public who will be joining us either in person or via teleconference this morning.

31 We thank you for taking the time out of your busy day to be with us here today. I would like to assure you that your comments are important to us and carry the same weight as any others.

32 Bienvenue au public. Merci de prendre le temps d'être avec nous aujourd'hui. Vos observations sont importantes et elles ont autant de poids que toutes les autres.

33 So that you will all have the opportunity to speak, we ask you to please limit your presentation to ten minutes as this portion of the hearing is designed especially for you and we want to listen to as many participants as possible. We do not intend to ask questions unless we need clarification of your presentation.

34 The telephone companies will not be responding to the comments from the general public orally today, but will have an opportunity to respond in their written final reply. After the general comments from the public, we will move to cross-examination. Parties' witnesses will appear in the order set out in the Commission's letter of September 26th.

35 As is our usual practice, rather than take oral appearances at the beginning of a hearing we will do so in writing. Our Hearing Secretary has forms which when completed provide a written record of appearance. If you have not already done so, please ask Mr. Spencer for one and fill it out. The information will allow us to contact parties, if necessary, during the course of the hearing.

36 The Commission does not intend to have oral final argument, rather parties are to file and serve their written argument in accordance with the procedures set out in Public Notice 2001-37.

37 As is our usual practice, traditional examination-in-chief by any party will not be permitted. Rather a party calling a witness will generally be entitled only to examine its witnesses briefly regarding the preparation of evidence, any errors or routine updates to the evidence, and the witnesses' qualifications.

38 The order for cross-examination was updated in the Commission's letter of September 26th by adding the City of Calgary as number six, after number 5, Consumers' Association of Canada, Alberta. I understand there have been some discussions between the parties to modify this order based on witnesses' availability and you can check with the Hearing Secretary as to the current status or the order of cross-examination.

39 Generally, Commissioners' questions, if any, and those of Commission counsel will come after other parties have completed their cross-examination of a particular representative or panel of representatives. Parties should provide the Hearing Secretary with their best estimates of the time they will need for cross-examination of each witness or panel of witnesses.

40 Please advise him as soon as possible of any changes to those estimates. Parties should also inform the Hearing Secretary as soon as possible if they no longer intend to cross-examine a witness or a panel.

41 Nous comptons sur la collaboration de tous pour mener l'audience de façon ordonnée.

42 The order in which parties conduct their cross-examination may be changed by agreement between the parties with advance notice -- and I would encourage everybody to turn their cellphones off and leave them off while the proceeding is going on.

43 The order in which parties conduct their cross-examination may be changed by agreement between the parties with advance notice to the party being examined and to the Hearing Secretary.

44 Generally there is no need to engage in redirect examination, although we recognize there may be situations where redirect is necessary and appropriate.

45 The Organization and Conduct letter indicated that the commission wold issue a ruling on any requests for disclosure or for further responses regarding interrogatory responses filed on September 13, 2001. That ruling will likely be made October 3rd.

46 I also note there is currently pending before the Commission an application by TELUS to review and vary a confidentiality ruling made in Decision 2001-582 and a request for an interim stay of that portion of the decision. I anticipate that the decision on that application will also be released on October 3rd.

47 All parties may not be planning on attending every day of the hearing. I remind all parties that it is their responsibility to monitor the progress and content of the hearing in order, among other things, to ensure that they are aware of any documents that may have been filed in their absence, any changes to the order of presentation of witnesses or order of cross-examination and any Commission ruling.

48 Similarly, parties should keep themselves informed of the progress of cross-examination so that they will be ready with their own cross-examination at the appropriate time, in the case of parties that have filed evidence so that their witnesses can be called to testify in accordance with the order established by the Commission.

49 Parties should also be aware of the cross-examination that precedes their own in order to eliminate duplication of matters dealt with by earlier parties.

50 I also remind parties that with respect to all documents filed at the /public hearing, 20 copies must be provided to the Hearing Secretary. In addition, they must copy all other parties present in the hearing room at the time of the filing.

51 I would note that the Briefing Book is available in the public examination room -- that's the Briefing Book for the members. It reflects the record up to August 20, 2001. There have since that time, of course, been two Commission rulings on scope matters.

52 We will now to hearing comments from the general public.

53 Mr. Secretary, would you please call the first individual we will hear from today?

54 Thank you very much. Merci.

55 MR. SPENCER: Thank you, Mr. Chairman.

56 Our first presentation this morning will be given by the Honourable Walter Noel, Minister, Government of Newfoundland and Labrador.

57 Mr. Noel, welcome.

PRESENTATION / PRÉSENTATION

58 THE CHAIRPERSON: Mr. Noel, would you turn your mic on please?

59 HON. WALTER NOEL: Sorry.

60 Merci beaucoup, Mr. Chairman. Bonjour, mesdames et messieurs.

61 I appreciate this opportunity to present my province's views on the issues before you. I must say, however, that we believe our citizens and governments should be able to engage in these important discussion in our home province as we formally requested by letter of September the 12th. We are still waiting for a response.

62 As Minister Responsible for Consumer Affairs in Newfoundland and Labrador, I am very concerned about what is happening with telephone rates for basic local residential service. They have increased significantly, more than necessary in our opinion, in recent years and now we see substantial new increases being proposed.

63 I have come to make this presentation in person to emphasize our level of concern. We will be submitting more detailed comment in due course.

64 Our province is a geographically distinct area on the periphery of the country, with a thinly spread population dependent on good communications. Our citizens are dramatically affected by the decisions you make.

65 Current telephone rates have been determined by the Commission to provide sufficient return on investment for telecoms.

66 We reject proposals for further increases and for moving to a user-pay basis within our province because it would cause rural rates to rise excessively.

67 We reject proposals to raise our rates generally simply to standardize rates in the Atlantic region as a consequence of reductions in the national subsidy.

68 Consumers see the current regulatory regime as something cloaked, complex and distant, giving the inside track to service providers through access to resources financed by customers. They question whether under such circumstances their interests are or can be truly protected.

69 Consumers are at a distinct disadvantage in this process because they lack expertise and do not have the resources available to service providers. They rely on government and this Commission to protect their interests.

70 I too am far from being an expert with respect to your regulations and processes. Our provincial government does not have the expertise to adequately scrutinize corporate proposals or the work of the CRTC itself.

71 Newfoundlanders and Labradorians want a regulatory system which is good for consumers as well as service providers. We are committed to employing good business practices in conjunction with good public policy, but we must be convinced that service is efficiently provided, decisions are justified and regulation is in our interest.

72 Everyone must be clear as to what is happening, why it is happening and what criteria are governing those making decisions.

73 I am here today to help ensure that the concerns of consumers in my province are voiced and their interests protected.

74 The submission filed by Bell Canada on behalf of Aliant Telecom Incorporated, and other companies, on May 31, 2001, is of particular interest to Newfoundlanders and Labradorians. Basic telephone communication is as an essential service as transportation, health care and public safety. It must be available at reasonable cost.

75 If the framework proposed by Aliant were to be adopted, all customers would see a $3.05 a month increase in their basic residential rate, with bills increasing to $29.95 per month by 2005 in rural areas, in addition to inflationary increases for low-cost areas. We do not believe that would be fair or necessary.

76 When the telephone companies changed to being regulated according to price caps instead of rate of return on investment, they were given the ability to earn more money. They have increased earnings through increasing costs to consumers.

77 Local service charges have grown significantly in recent years. You have approved a further $2.00 a month increase for Aliant in May of this year. Such increases appear relatively small per consumer per month, but they are substantial in aggregate and largely responsible for impressive growth in corporate valuations.

78 Aliant officials have been good enough to meet with us to outline the reasons for their proposal. They claim to be promoting competition in the consumer's interest. But we have to remember that their primary responsibility is to further Aliant's interests.

79 Like other telephone companies, they have long enjoyed a protective regime, producing good profit levels. The company has been rebalancing its product for years and is now seeking a rate rebalancing, apparently to compensate for the reduction in the national subsidy.

80 Regulating rates on a user-pay basis would create higher costs in less populace areas, reduce accessibility and affordability and discourage business development. We ask you to reject that approach.

81 Competition implies that consumers have a choice in a price-competitive environment in obtaining the lowest priced provider for a particular product. But what is the reality in Atlantic Canada? Where is Aliant's competition in the local service market? They control 97.1 per cent of the market in my province.

82 Indeed, I understand that a recent CRTC report confirms that residential competition in local markets has not effectively materialized anywhere in the country. Established regional monopolies have retained the bulk of business through their competitive advantage over new entrants.

83 Under the current regime companies claim that local rates have been kept artificially low, resulting in a disincentive to competitive entry. Raising prices would encourage competition, they contend, in spite of the failure to date and without demonstrating how consumers would benefit. What is the point in artificially raising prices to attract competition expected to lower them, which appears to be the rationale for increasing market efficiency.

84 While companies may appear to be championing competition, it seems to us they are seeking new ways to require consumers to finance risk in facilities simply by raising basic rates. If the regulatory regime permits customer interests to be subordinated to those of investors and corporations, it will fail to meet its public policy responsibility and undermine confidence in the system.

85 Aliant's proposal for a rate rationalization at a common level of $25 a month per line across all bands in the Atlantic region might be good for the company, but it offers only increased cost for consumers in my province. It would not be acceptable to have our rates raised above existing levels, which have been established by the Commission as sufficient to provide reasonable profits for phone companies, simply to achieve regional uniformity.

86 Aliant's proposal to charge higher rates in high cost areas such as small, remote or widely dispersed exchanges, is flawed from a public policy perspective and contrary to our concept of national interests.

87 Basic telephone service is a necessity for all citizens and should be available to all at equitable rates. It is not acceptable for residents in our province who live in rural areas to pay more for this basic service than those who live in urban areas. The proposal would see rates in rural areas increase to $29.95 from the current level of $21.95. This is an increase of $8.00 per month or 36 per cent.

88 If the proposal is accepted, it will affect 43 per cent of our population and 97 per cent of communities in our province.

89 We vigorously oppose imposing a price ruling requiring that basic residential prices across the Atlantic region become consistent with the price in Nova Scotia, which is $25 per month.

90 Newfoundland and Labrador is a distinct geographic region from the rest of Atlantic Canada. How could it be justifiable to charge our residents a higher rate simply because the rate is higher in another province?

91 NewTel is already a profitable company. There is no reason to charge our consumers more.

92 As you know, rates in our province recently increased by $2.00 per month to $21.95. If this proposed rate structure is accepted, our consumers will be faced with a further rate increase of $3.05 per month, or 14 per cent, without legitimate justification. We strongly urge you not to approve this aspect of the Aliant proposal.

93 Our government sees no reason, from a competitive perspective, why Aliant requires any increase in basic telephone rates. We all have a responsibility to do what we can to ensure the provision of quality and efficient telephone service at the lowest necessary price. We all realize prices have to deliver returns on investment high enough to attract reliable providers. Creating a system capable of allocating costs equitably among consumers is our common challenge. Our province simply believes that what is being proposed does not further these objectives.

94 Our government considers basic telephone service a necessity in today's world. It should be available at equitable cost throughout the country.

95 Low-cost areas should subsidize high-cost areas nationally and regionally as a matter of principle and fairness, because low-cost areas generally benefit in other ways as a result of how our country is organized.

96 Toronto benefits enormously from providing services to Newfoundland, just as St. John's benefits in providing services to rural residents of our province.

97 These are essential ties binding our society together. If they are frayed, those who are disadvantaged will seek other solutions. We all have to understand that we must share the costs which make the benefits of Confederation possible.

98 Thank you very much for your time and attention.

99 THE CHAIRPERSON: Thank you, Minister Noel.

100 I would just say this to you and the others who have come here today, that we understand and appreciate that travelling is particularly difficult these days so we thank you for taking the time to be with us here today to express your views on behalf of the people of Newfoundland. Thank you.

101 HON. WALTER NOEL: My pleasure. Thank you for having me.

102 THE CHAIRPERSON: Mr. Secretary.

103 MR. SPENCER: Yes, Mr. Chairman.

104 Our next presentation will be given by the Honourable Jane Purves, Minister, Technology and Science Secretariat for the Province of Nova Scotia.

105 Madam Minister is appearing on behalf of the Government of Nova Scotia.

106 THE CHAIRPERSON: Good morning.

PRESENTATION / PRÉSENTATION

107 HON. JANE PURVES: Thank you, Mr. Chair, Commissioners. Bonjour.

108 Mr. Chairman, Commissioners, I sincerely appreciate this opportunity to appear before you today on behalf of the Province of Nova Scotia to offer comments on this important proceeding.

109 I would also like to note the fact that both opposition parties from Nova Scotia are also represented here today.

110 My remarks will stress three main points:

111 One, the Province of Nova Scotia strongly supports uniform pricing for basic telephone service for all Nova Scotians.

112 Two, any future change in the Canadian telecommunications regulatory environment should not be made at the expense of rural telephone subscribers.

113 Three, public interest in this proceeding has been growing steadily, therefore the Commission should consider holding regional hearings on this issue to allow for increased opportunity for direct public input.

114 I would like to preface my remarks by first acknowledging the commendable efforts of the CRTC to ensure that the evolving Canadian regulatory environment supports the continued development of a world-class telecommunications sector, while at the same time protecting the interests of Canadian consumers.

115 The task of balancing the policy objectives of the Telecommunications Act with the continued development of a more market-driven telecommunications sector is a difficult one. These policy objectives include the provision of high quality affordable services in both urban and rural areas and, in our opinion, the Commission has handled this difficult balancing act in an exemplary fashion.

116 Let me now highlight the central ideas we would like to present this morning.

117 Point No. 1: Nova Scotia strongly supports uniform pricing for basic telephone service for all Nova Scotians.

118 My government's opposition to any move to reinstate higher rural versus urban pricing has been stated unequivocally by our Premier. We know that Atlantic Canada is in a fairly unique regulatory position compared to other regions of the country when it comes to differentiated rates.

119 Differentiated rates exist in other Canadian jurisdictions and they existed in Nova Scotia as well as late as 1997, but we don't want to see a return to that situation.

120 Fundamentally this is why: We believe in a postage stamp rate for basic telecommunications service because we believe this is a fundamental service. It is a well-established principle that basic services should cost subscribers the same whether they choose to live in a small town or a big city. This applies across the sectors from postal services to services in health and education.

121 Government policy in Nova Scotia is aimed at fostering a level of self-sufficiency in small towns and rural areas comparable to the opportunities for economic and social development in larger towns and cities. We are attempting to create the conditions in which Nova Scotians find a level playing field or an equal opportunity to prosper, no matter where they happen to live or want to live.

122 A return to different rates for different geographic areas for basic telephone service runs counter to these efforts.

123 Some examples of our mandate in action may help to illustrate this point.

124 One example is the Federal-Provincial Community Access Program, or CAP as it is better known. This program provides the public all over the province with more than 340 free access locations for internet connections and computer training. Up to 2,000 CAP volunteers are active in our communities at any given time, helping friends and neighbours acquire the IT skills that are becoming increasingly necessary for success in a knowledge economy.

125 We also have what we call the Information Economy Initiative. This is the single largest investment in information technology infrastructure in Nova Scotia's history. Over the past three years this initiative has leveraged more than $90 million in IT investment in our schools, universities and communities.

126 And there is our work in responding to the Federal Broadband Task Force. We are attempting to ensure that Nova Scotians will enhance their level of connectivity even further when task force recommendations are implemented.

127 By promoting widespread access to high quality, affordable IT infrastructure and skills training, we are actively trying to bridge the digital divide between urban and rural areas. A return to higher phone rates in smaller centres would move us in the opposite direction at a basic technical level.

128 Reversing the current practice of uniform rights also runs counter to pricing approaches that are either in place or in planning for other vital services in Nova Scotia. I refer to utilities like electricity and natural gas.

129 Overall, a return to differentiated rates is out of step with current efforts to foster economic and social development in all regions of our province. This is especially true when it comes to issues of telecommunications and information technology.

130 Point number two. Any future change in the Canadian telecommunications regulatory environment should not be made at the expense of rural telephone subscribers. We fundamentally oppose any measure which would penalize Nova Scotians for choosing to live or locate their business in a rural area of the province.

131 Philosophy and pragmatically, we oppose any such measure. In one sense rural residents already pay the price of living away from the centre when it comes to levels of service available to them. Let's not ask them to pay even more to receive less. It does not strike us as a recipe for successful economic and social development and these are outcomes desired by both our government and the Canadian Telecommunications Act.

132 It recognizes that there is a social as well as an economic aspect to be used on telecommunications services.

133 By contrast, we believe that maintaining uniformity in rates is more likely to foster population stability and increased business activity in our rural areas resulting in opportunities for the competitive telecom market to grow there.

134 The proposal currently before the Commission from the incumbent telephone companies outlines a framework for rate changes over the next four years. We see no evidence that this proposal would benefit the long term competitive viability of rural telecommunications. In fact, if implemented, we believe the proposal capable of further widening the rural-urban digital divide at the very time we are trying to bridge it.

135 We are not in the position to offer specific detailed advice on how the telecommunications regulatory environment should evolve, but we do want to urge the Commission to give the current price cap system and related compensation mechanisms more time to work.

136 We do not feel the current system has had sufficient opportunity to produce the desired results. It needs time to demonstrate whether it can increase the level of rural competition for basic telecommunications services, one of the goals the CRTC had in mind when it implemented the price cap in 1998.

137 We believe the system can foster a competitive local telecom market and we believe that the costs of any future rate changes need not and should not be borne by rural telephone subscribers alone.

138 Point number three. Public interest in this proceeding has been growing steadily. Therefore, we would like the Commission to consider holding regional hearings on this issue to allow for increased opportunity for direct public input.

139 In correspondence sent to you, Mr. Chair, on September 21, I asked for the addition of a regional hearing component to this proceeding. Similar requests have been made publicly by all four Atlantic provincial governments.

140 While I value the efforts the Commission has made to allow for increased input from the general public, I also believe the momentum and demand for more opportunities for direct public participation will grow stronger as the hearing process continues and the public becomes more informed of the issues involved.

141 I would, therefore, like to reiterate my request that regional hearings be held as part of this proceeding following the conclusion of the main hearing process here in Hull.

142 In conclusion, let me briefly recap our case. The Province of Nova Scotia strongly supports uniform pricing for basic telephone service for all Nova Scotians. Any future change in the Canadian telecommunications regulatory environment should not be made at the expense of rural telephone subscribers and public interest in this proceeding has been growing steadily. Therefore, the Commission should consider holding regional hearings on this issue to allow for increased opportunity for direct public input.

143 Thank you for the opportunity to appear before you today. I wish you well in your deliberations as this process continues.

144 Merci.

145 THE CHAIRPERSON: Thank you, Minister Purves, Mr. Findlay.

146 Mr. Secretary.

147 MR. SPENCER: Thank you.

148 Our next presentation will be given by Mr. Wayne Gaudet, Leader, Nova Scotia Liberal Party.

PRESENTATION / PRÉSENTATION

149 MR. GAUDET: Good morning, Commissioner, Commissioners. On behalf of the Liberal caucus I would like to thank you for this opportunity to address the concerns of rural Nova Scotians about the proposed changes to the current price cap regime.

150 As of 1996, the most recent Statistics Canada information available, 45 per cent of Nova Scotia's population lived in rural Nova Scotia.

151 La province de la Nouvelle-Écosse se situe au troisième rang après le Nouveau-Brunswick et l'Ile-du-Prince-Édouard sur l'échelle indiquant la proportion des citoyens vivant en milieu rural.

152 Un autre fait important à signaler est que notre province avec celle du Québec et du Nouveau-Brunswick sont les provinces qui ont connu une croissance de la population rurale pendant la période de temps qui s'est écoulée de 1971 à 1996.

153 Nous voulons voir cette tendance se maintenir parce que nous croyons qu'il s'agit d'un déséquilibre sans avoir un développement tant du côté urbain que du côté rural.

154 We would like this trend to continue. As a caucus, we have heard the expressions of frustration and concern of many Nova Scotians. I will endeavour to express some of these concerns and hopefully impress upon the Commission how potentially divisive it might be to charge different rates based upon where people live.

155 Ladies and gentlemen, simply put, Nova Scotians do not view their telephone service as a luxury or mere convenience that one can do without. For a resident, it has been and continues to be a most essential service as basic and necessary to our modern way of life as access to electricity and clean water.

156 Whether the telephone is used to access a growing list of government and private services, to search for employment or to maintain cherished networks of family and friends, everyone agrees that the telephone is vital for full participation in Canadian society.

157 It bears reminding that it could be, of course, nothing less than a matter of life and death through universal connection to the 9-1-1 emergency system. We must keep in mind, however, that reliable and affordable access to police, fire and medical assistance is even a more critical need for rural residents.

158 The absence of public transit outside our major centres, infrequently, geographic isolation from our neighbours, make the telephone a vital lifeline in times of need and emergency. Can anyone be surprised then that Nova Scotians, and our rural residents in particular, flatly oppose any regulatory changes that might see up to a 19.8 per cent increase in their residential phone rates?

159 It is proposed that monthly rates be permitted to be increased by no more than $1.65 each year, moving towards a rural rate of $29.95 for local service. It is suggested that the above proposal will encourage investment in the communications industry and increase competition while ensuring that rural rates remain affordable.

160 Many Nova Scotians have questioned the assumptions upon which the application by Aliant is based given the economic status of many of our residents who may be affected.

161 Un autre fait que nous voulons signaler à la Commission est le haut pourcentage de nos aînés qui vivent en milieu rural. Notre province se situe au troisième rang après les provinces du Manitoba et de la Saskatchewan en ce qui a trait à la population aînée en milieu rural.

162 La population aînée a un revenu fixe et pour elle le service de téléphone est considéré un service essentiel.

163 Pour ceux et celles qui se situent dans la catégorie de faible revenu fixe, une augmentation des frais de service téléphonique peut déséquilibrer le budget.

164 In addition, Canada's poorest families live in Nova Scotia. While this is not a statistic we like to relate to others across the country, it again is reality. The poorest 20 per cent of Nova Scotian's households have a disposable income of just $8,205. That's 12 per cent less than the poorest family in Newfoundland. In addition, middle income Nova Scotians have lost most income in absolute terms since 1990, almost $3,600.

165 We recognize that your Commission is not responsible for the economic status of the residents of any given province. That responsibility lies with the current government. However, we feel strongly that these economic realities are the context which you must bear in mind when you make your determination concerning accessibility and affordability of future regimes.

166 En vous présentant ce contexte dans notre bref, nous vous invitons à prendre en considération la situation où une personne est née et une famille avec un faible revenu fixe recevant une facture majorée sans retenues supplémentaires.

167 The natural reaction would be to look for cheaper alternatives. With respect to local phone service, this is currently not a viable option for many rural Nova Scotians. We understand that the potential for competition in rural Nova Scotia exists in the field of local phone service. However, for all intents and purposes right now, MT&T is a virtual monopoly in rural areas.

168 Residents of rural Nova Scotia will not have any option but to pay the potential increase in their local phone service. While we recognize cellular phones may be a solution embraced by some consistency and reliability of coverage in certain parts of rural Nova Scotia, it begs the question as to whether this is an equivalent alternative.

169 Nova Scotians have also been told by Aliant that a second consequence of increased rates for local service in high cost areas will be the encouragement of greater competition within these markets. By moving rates closer to the actual cost of service delivery, Aliant suggests that this shift in pricing will increase the attractiveness of competitive entry by improving the margins on these services.

170 It is argued that market forces should then stabilize prices at affordable levels. Many Nova Scotians have dismissed the suggestion that rate hikes will result in real competition in the small markets of rural Nova Scotia. It is felt that competitors will be satisfied to cherry pick the most lucrative urban areas and forego expansion beyond larger town limits.

171 Perhaps the greatest source of frustrations related to our caucus from Nova Scotians pertain to service levels currently being experienced in rural parts of our province. Static on phone lines, a reduction in repair service due to the elimination of resident service staff, weak cellular reception and the lack of high speed Internet connection are reoccurring complaints from customers in many rural areas throughout Nova Scotia.

172 Many felt that as rural residents they would be paying more money for a smaller range of services than their urban counterparts. As an essential service, basic residential service must be equally accessible and equally affordable regardless of place of residence.

173 Rural Nova Scotians have spoken and we have heard them. They feel alienated, unfairly singled out and even victimized by the company's proposals. To them, a one-sided rate increase smacks of discrimination in being penalized for choosing to live in a rural area. To some it even represents an offensive and divisive distinction between two equally valid ways of life.

174 The need for basic phone service is shared equally among all Nova Scotians. They demand a uniform price structure applicable to all consumers, a common charge for basic phone service throughout the province.

175 La population rurale de la Nouvelle-Écosse nous a fait connaître leurs opinions sur cette question. Nous les avons écoutés et c'est pourquoi nous avons décidé de nous présenter devant vous.

176 Dans la dialectique du milieu rural vis-à-vis milieu urbain, la décision prise par cette Commission sera un facteur déterminant. La proposition présentée devant vous par la compagnie Aliant, si elle est acceptée, sera tout probablement un facteur d'aliénation pour les gens vivant en milieu rural.

177 Cela sera perçu par les communautés rurales comme un traitement injuste et inégal. Cette perception de discrimination sera accentuée pour les années à venir. Nous voulons éviter à tout prix une division entre le milieu rural et le milieu urbain.

Voilà l'enjeu. Nous souhaitons un service de téléphone de base offert à tous les citoyens de notre province à un même prix de base.

178 Aliant's proposal has fostered a sense of mistrust and criticism that is detrimental to future progress. It is incumbent upon all of us here today, elected and non-elected, to try our very best to foster progress and competition and not play into this agenda.

179 The climate in which we live makes it difficult for rural Nova Scotians to believe that by increasing phone rates competitors providing the service at a lower cost will enter the market. Evidence must be shown that affordability and accessibility to service in rural Nova Scotia is to be delivered next year, not five or ten years from now.

180 It is your mandate to ensure Nova Scotians that fair competition prevails, that those affected by this change in the price cap regime are able to afford basic telephone service and that accessibility will be maintained in the absence of competition and rising prices.

181 I wish you well on your deliberations. Thank you very much.

182 LE PRÉSIDENT: Merci, monsieur Gaudet.

183 MR. SPENCER: Our next presentation will be given by John MacDonnell, Provincial MLA, Nova Scotia NDP caucus.

PRESENTATION / PRÉSENTATION

184 MR. MacDONELL: Good morning. Bonjour.

185 I want to say thank you, first of all, for an opportunity to come and make a presentation to the Commission. I would like to say that Hull, Quebec is a long way from Enfield, Nova Scotia where I awoke at five o'clock this morning.

186 The fact, I think, that these hearings are held thousands of kilometres from the people they affect is a poor way to hear from most who are affected. The CRTC would be better informed about the true impacts of its decision if you go to the communities affected. The Commission will make a better decision if you hear directly from all the people who want to speak directly to you in the communities where issues really matter.

187 I want to add that these hearings, in part, will deal with the issues of whether the telcos can make a reasonable argument for an increase in rates for high cost service areas. You do not provide fair opportunity for an equal consideration of the effect an increase will have on rural communities. This is a mistake, I believe, the result of which is a hearing that is weighted in favour of the companies.

188 It is important I voice these concerns with you because these concerns were voiced to me by rural Nova Scotians. My office will forward for entry into the record a few letters from rural Nova Scotians and a list of people who contacted us but who could not, for obvious reasons, attend this hearing.

189 Hope Bridgewater from Wentworth, Nova Scotia wrote that and quote:

"When a corporation proposes to introduce increased rural phone rates, it is very important that the democratic will of the people, carried through elected politicians, prevails." (As read)

And that is why I'm here.

190 I want to speak to you about the application for a rate increase in rural areas. I want to make sure you understand the impact that this increase will have on many rural Nova Scotians.

191 In an article from the August 23rd 2001 Halifax Chronicle Herald, Aliant is paraphrased as saying:

"The hikes would improve the company's profitability." (As read)

Now, I understand this isn't the whole of Aliant's argument in this matter, but I want to address this first.

192 Mr. Chairperson, I don't believe the burden of approve Aliant's profitability should rest with rural Nova Scotians. We know from the CRTC's decision of May 1st 1997 that it set a benchmark profitability rate of 11 per cent. We also know Aliant's profit share in 2000 was 17 per cent.

193 Let me address now the argument that increasing the revenues generated in high cost service areas is good for the consumer because it will generate competition. In rural Nova Scotia we would say that that is the kind of support that the hangman gets from the rope.

194 Mr. Chairman, I'm skeptical that Aliant is motivated by doing what is best for it's competition, and I think it's also fair to say that rural consumers could do without Aliant's good intention.

195 With that said, the CRTC has a role to level the playing field and if it's true that the competition basically has tried to milk the more lucrative areas of the province and has not either been forced or encouraged to go to the areas that may represent higher costs, then I think this generates an uneven playing field for those income and providers.

196 I do want to say for the record that my comments all seem to be headed in the direction of slamming this proposal by Aliant without any concern for viability of the company. That is not true. I have a brother-in-law who works for MTT in Nova Scotia and certainly ensuring that Aliant is a viable company in that province is a major concern for me. I want you to be aware of that. But I also want you to be aware that the concerns of the rural constituents that I have is also a major concern. I look to you for that balance of the interests of both people.

197 Rural residents have no real choice for basic local phone services. Differential increases will leave them with no choice but to pay higher costs.

198 Mr. Chairman, my office has spoken with Aliant officials. As I am sure you are aware, the company is concerned about the CRTC decision to reduce subsidies from about 900 million to about 270 million next year. I am led to understand the Commission did this after its recent hearings which established the costs for incumbent local exchange carriers.

199 Aliant says they are asking for a high cost service area increase because they are concerned, first, about the amount of subsidy, but primarily about the sustainability of the subsidy program. I believe the CRTC could refuse the rate increase and still somewhat satisfy the incumbent local exchange carriers by ensuring it will maintain the subsidy program for a longer term.

200 Today I also want to address the specifics of the rural rate increase. Aliant's request means rural Nova Scotians would see their basic phone service charges rise to about $29.95. Aliant, I know, will argue that CRTC has readily approved basic phone service rates of between $30.00 and $35.00 in the rest of Canada. Aliant will argue that the experience across the rate of Canada has shown these rates would be sustainable in Nova Scotia and the rest of Atlantic Canada. I'm here to tell you that they are not.

201 Historically the strength of the economy in our region has not been equal to the other regions of Canada. Rural Nova Scotia, including parts of Cape Breton, have some of the highest unemployment rates and lowest incomes per capita in Canada. The population distribution in most of the Maritimes is different from other parts of the country; we are much less urbanized. Many Nova Scotia phone users expect to see their rates rise if you proceed to reduce cross-subsidy and permit the phone companies to take the money from their rural customers.

202 To use parts of Ontario, Alberta or British Columbia as a test for whether a fee is sustainable in rural Nova Scotia would be unfair. Not only that, but any rate increases must be taken in the context of other recent increases. All Nova Scotians have seen new fees for 9-1-1 service, new fees for activation of pay per use services and new fees for those using call display.

203 Mr. Chairman, I will close my brief remarks by quoting from a letter Mrs. Brown wrote from Annapolis, rural Nova Scotia:

"Seniors on fixed income can't afford this increase. To us living in a rural area like this, the phone is a necessity, not a luxury. You pay $26.00 a phone for unlimited long distance. This is on top of your basic phone costs. So you are looking at $70.00 a month or more in total. I sincerely hope you will be able to do something." (As read)

204 Mr. Chairman, I sincerely hope the CRTC will see that charging rural people more for a basic necessity is not right.

205 I wish you well in your hearings. I certainly hope that my comments and the comments of the other colleagues of mine from the other parties will be listened to and this has an impact in Nova Scotia and I certainly hope that that message can be conveyed.

206 Thank you very much.

207 THE CHAIRPERSON: Thank you, Mr. MacDonell. I assure you your comments will be listened to as well as those who will be calling in later in the day. Thanks.

208 Mr. Secretary.

209 MR. SPENCER: Thank you, Mr. Chairman.

210 La prochaine présentation sera donnée par M. Yvon Godin, député de Bathurst-Acadie.

PRÉSENTATION / PRESENTATION

211 M. GODIN: Bonjour, monsieur le président et membres de la Commission.

212 Je pourrais dire ça arrive à temps.

213 Avez-vous besoin que je vous donne votre copie maintenant?

--- Pause

214 M. GODIN: Monsieur le président, Monsieur le secrétaire général, membres de ces audiences, mesdames et messieurs.

215 Mon nom est Yvon Godin. Je suis membre parlementaire de la Chambre des communes depuis juin 1997. Je représente la circonscription d'Acadie-Bathurst qui se trouve au Nord-Est du Nouveau-Brunswick.

216 La population en date du recensement en 1996 était de 87 600 habitants. Cette région est une des plus pauvres du Nouveau-Brunswick. Éloignée des grands centres urbains du Nouveau-Brunswick, elle vit des ressources premières, soit la pêche, la mine, la foresterie, les pâtes à papier, les tourbières et le tourisme.

217 Cependant, depuis quelques années, comme vous devez le savoir, l'industrie de la pêche est en crise. Cette crise a un impact très négatif sur l'économie régionale et locale.

218 Dans les dernières années nous avons ouïe que le secteur minier dans le Nord-Est est en menace aussi. Le monde des affaires et les communautés appréhendent avec angoisse ces rumeurs et les effets que cela pourrait avoir sur les familles et les communautés.

219 Vous devez sûrement vous demander dans quelle direction je vais en vous étalant ces propos mais avant d'aborder directement le sujet, je crois qu'il est important de bien comprendre l'aspect socio-économique de ma circonscription car elle sera fortement touchée par vos décisions et je juge qu'il est de mon devoir comme représentant de ma communauté de bien les représenter ici aujourd'hui.

220 Afin de vous donner une image globale de l'économie de ces communautés, je m'attarderai davantage sur la question avant d'entamer la raison des ces audiences publiques.

221 La pêche est la ressource la plus exploitée dans la péninsule acadienne. Il demeure que toute l'économie régionale s'appuie sur les secteurs d'activités saisonnières.

222 Or les travailleurs et les travailleuses qui oeuvrent dans ces secteurs sont considérés comme des travailleurs saisonniers. La pêche s'étalant sur des saisons établies par le ministère des Pêches et Océans, la majorité de ces travailleurs et travailleuses ne travaillent que trois mois en moyenne par année.

223 L'économie régionale ne peut donc pas soutenir ces périodes sans travail. Les emplois étant déjà très rare, il est très difficile pour un travailleur saisonnier de se retrouver du travail dans un autre secteur d'activité.

224 On retrouve généralement des dizaines de milliers de travailleurs et travailleuses affectés par le travail saisonnier. J'estime en moyenne que la période sans-emploi touche 45 pour cent de la population d'Acadie-Bathurst, ce qui est énorme. Donc près de la moitié de la population se retrouve à la merci du programme d'assurance-chômage.

225 Or depuis quelques années ces travailleurs de l'industrie de la pêche et autres secteurs saisonniers tels que la foresterie ont bien de la difficulté à joindre les deux bouts. La crise qui sévit dans ces industries a beaucoup affecté ces travailleurs et travailleuses.

226 Chaque année, je reçois des centaines d'appels téléphoniques de mes commettants me suppliant de les aider à leur trouver du travail afin qu'ils puissent au moins obtenir des prestations d'assurance-chômage. Malheureusement, cela n'est pas mon rôle comme représentant parlementaire. Plusieurs d'entre eux doivent vivre avec les conséquences.

227 Dans ma région, nous retrouvons une situation particulière que nous appelons le "trou noir". Cette appellation signifie la partie dont les travailleurs ou travailleuses saisonniers ne reçoivent plus de prestations d'assurance-chômage.

228 Durant cette période, la majorité de ces personnes doivent souvent avoir recours à l'aide au revenu pour survivre -- et je dis bien "survivre". Un chèque mensuel de l'aide au revenu pour une famille de cinq membres est généralement de 700 dollars. Ce 700 dollars est un montant minime lorsque l'on pense que cette famille doit payer l'hypothèque de la maison, le chauffage et l'électricité, la nourriture, les besoins scolaires des enfants et le téléphone, évidemment.

229 Seulement dans ma région la demande pour les banques alimentaires a doublé depuis quelques années. Dans le milieu scolaire, les professeurs ne suffisent plus avec leur programme de petits-déjeuners gratuits aux enfants démunis tellement la demande est grande.

230 Avez-vous idée c'est quoi pour un enfant d'aller à l'école avec les chaussures à talons de sa mère parce que cet enfant n'a plus rien à se mettre aux pieds? Voilà la réalité de ma région.

231 En mars dernier, le CRTC a donné un avis public d'amorcer une révision du régime de plafonnement des prix pour les grandes compagnies de téléphone titulaires. En lisant les compagnies visées par cette révision, la compagnie provinciale qui dessert ma circonscription était mentionnée.

232 Je suis fortement concerné d'apprendre que les compagnies de téléphone à travers le pays veulent augmenter les tarifs de base de leurs clients des régions rurales. Cette préoccupation est d'ailleurs partagée avec mes collègues élus de la province du Nouveau-Brunswick.

233 Pourquoi faire assumer une hausse des prix à des gens qui ont habité toute leur vie en région ou encore ont fait un choix de vie en habitant en région?

234 Chers membres de ces audiences, vous devez comprendre qu'en région ce ne sont pas les gens les plus fortunés qui habitent là.

235 Pourquoi faire assumer à ces gens une augmentation des prix de base tel que les compagnies de téléphone le proposent? Je suis certain que l'entreprise Aliant dont le père NBTel va présenter plusieurs raisons à cette demande dont une sera que cinq dollars ce qui n'est pas la mer à boire. Ce cinq dollars pour un enfant ou une famille qui compte chaque sous de son budget peut avoir une différence.

236 C'est une question de justice et de principe alors qu'une décision en faveur de cette demande créerait une fossé entre les gens de milieux urbains et régionaux.

237 Cela me surprend d'une telle demande surtout que les deux dernières années nous entendons parler sans cesse de régionalisation et de fusion de la part des gouvernements provinciaux et municipaux.

238 Le 10 avril 2001, Télécommunications Aliant avait envisagé de modifier son tarif du service téléphonique résidentiel au Nouveau-Brunswick. Cette modification s'est traduite par une augmentation de deux dollars par mois pour les clients résidentiels ayant une ligne unique. Le CRTC a approuvé cette hausse.

239 Si je comptabilise cette information, la population a déjà dû assumer une hausse du tarif de base résidentiel à une ligne unique de deux dollars et Télécommunications Aliant veut maintenant l'augmenter de cinq dollars. Au total, cela fera une hausse de sept dollars pour les gens qui habitent en région. Je trouve cette facture un peu trop salée.

240 Dans les documents du CRTC, vous indiquez que les objectifs pour le cadre de réglementation des prix plafonds visent à établir un équilibre entre les intérêts des consommateurs, les compagnies de téléphone titulaires et les concurrents.

241 Malheureusement, cette augmentation va créer un déséquilibre au sein même des consommateurs. Je ne trouve pas que cela soit sain comme environnement concurrentiel.

242 En conclusion, la plupart des compagnies qui vont comparaître ont un intérêt commun soit d'être rentables au meilleur de leur performance pour le bien des actionnaires et des actionnaires potentiels.

243 Pour une compagnie de téléphone ne serait-il pas mieux d'offrir le service à coût moindre mais à plus de monde possible ou encore augmenter les prix et ne l'offrir qu'à certaines personnes?

244 Au Nouveau-Brunswick, le téléphone est un service essentiel dont personne ne pourrait se passer. Cependant, comme je l'ai indiqué au début, les gens sont de moins en moins fortunés. Pour certains individus, joindre les deux bouts signifie faire des compris sur certains biens dont le téléphone. Lorsque l'on a seulement 400 dollars par mois pour subvenir à tous ses besoins, le téléphone n'est plus une nécessité. Le cinq dollars proposé par les compagnies de téléphone ne semble pas énorme mais dans un petit budget cela peut faire une grande différence.

245 D'ailleurs j'ai reçu copie de lettres de certaines institutions telles que les villes et les villages qui vous demandaient de ne pas augmenter le tarif étant donné la situation économique dans habitants. Vous le considérez vous-même que ces sentiments d'appréhension sont partagés et ne viennent pas seulement de ma part.

246 Ma présence ici n'était pas de vous présenter des tableaux avec des statistiques et des chiffres, mais plutôt de vous imager la condition socio-économique d'une région du Nouveau-Brunswick qui sera très affectée par cette hausse de prix.

247 Mesdames, messieurs, j'espère que vous prendrez en considération cette réalité pour des milliers de prestataires du service téléphonique.

248 Je vous remercie de m'avoir permis d'être ici présent et représenter les intérêts des commettants d'Acadie-Bathurst.

249 LE PRÉSIDENT: Merci, monsieur Godin.

250 MR. SPENCER: Our next presentation will be given by Mr. Bernard Richard, Leader, Official Opposition for the Province of New Brunswick.

PRÉSENTATION / PRESENTATION

251 M. RICHARD: Bonjour, monsieur, mesdames, membres de la Commission.

252 J'aimerais dire que je comprends et je sympathise avec vous. Je sais que vous aurez à traiter de centaines, sinon de milliers de pages et de documentation au cours des prochains jours et au cours des prochains mois quand vous allez délibérer sur tout ce que vous avez entendu.

253 Je tenterai de ne pas ajouter de façon substantielle au nombre de documents que vous avez à considérer.

254 Let me say that I understand the weight of the job that you have to do given the enormous amount of information you will be receiving. I don't want to repeat everything that has been said.

255 I suppose the one point that would want to make starting out is that the fact that you are hearing from ministers and opposition members from all four Atlantic provinces, we so rarely agree on anything, that this must mean something to you -- at least it should. We are unanimous in opposing the application by Aliant for a substantial increase of its rate to rural residents in our provinces.

256 A mon tour je veux exprimer notre vive opposition à une proposition à une proposition faite pas Télécommunications Aliant Inc. en réponse à l'Avis public 2001-37 qui portait sur la révision des prix plafonds et les questions connexes.

257 Je crois comprendre que Télécommunications Aliant Inc. a demandé au CRTC d'approuver des changements qui lui permettraient d'imposer aux abonnés des régions rurales et à ceux des régions urbaines des tarifs différents pour le service de base.

258 Au terme de la proposition, les abonnés des régions urbaines paieraient 25 dollars par mois pour les services de base tandis que la facture serait de 29,95 dollars par mois pour les abonnés des régions rurales.

259 Tout d'abord, nous nous opposons à une telle proposition parce qu'un principe fondamental est en jeu. Nous croyons fermement que les services essentiels, dont le service de téléphonie, doivent être également accessibles et également abordables sans égard à la situation géographique.

260 En 2001, nous devons certainement considérer le service téléphonique comme une nécessité et non comme un luxe.

261 Il est inacceptable et discriminatoire de pénaliser les gens en raison de leur situation géographique.

262 Aliant Telecom Inc. has attempted to justify this scheme by citing the increased costs associated with servicing rural customers. While these higher costs may be present, they seem to be having little impact on the corporation's overall financial health.

263 May I point out an increase of 19 per cent last quarter -- the last quarter that I had information on -- ending June of this year over the same quarter in the previous year, an increase of 19 per cent in revenues which amounts to $96 million, an increase of 11 per cent in profits.

264 Under these circumstances it seems absurd that the corporation should attempt to justify a rate hike for rural consumers only. As a representative of the most rural province in the country, it is incumbent on me to voice my extreme displeasure that Aliant intends to punish those people who choose to live in rural communities.

265 So I would certainly would urge the CRTC to deny any request that would open the door for such inequalities.

266 I just will remind you perhaps of a number of things that have been brought to my attention, again trying not to repeat all of the argumentation that has been made to date and that will be made through the conference calls that you will be hearing later on today.

267 In fact, NBTel, a member of Aliant, equalized urban rates just five years ago. Surely, they must have thought at the time that that was the thing to do. It seems ironic that five years later they are proposing to again provide rates that are not uniform between urban and rural residents.

268 In our province more recently, perhaps a couple of years ago, we adopted a natural gas distribution scheme that provided for a postage stamp rate. After much deliberations, much public consultations, it was deemed to be the fairest scheme for the distribution of natural gas in New Brunswick.

269 I would argue that the same argument applies today with regard to Aliant's application. Certainly, there is no real competition for basic telephone service in rural New Brunswick or any other part of rural Atlantic Canada.

270 Other private sector providers such as Sobey's, Home Hardware, banks and credit unions don't charge different rates depending on where they are situated in the different parts of our province. At least the Home Hardware catalogue is the same whether you receive it on Grand Manan or in Moncton or Saint John.

271 So again, without repeating everything that has been said, we oppose very strongly the application.

272 We understand that this is a complex issue and that there are many factors before you, but surely if Aliant has to justify a greater need for revenue -- and we dispute that, but if they can make the argument to you, surely there is a better way of doing it.

273 Thank you for hearing me and I wish you godspeed in your deliberations.

274 Merci.

275 THE CHAIRPERSON: Thank you, Mr. Richard.

276 MR. SPENCER: Our next presentation will be given by the Honourable Joan MacAlpine, Minister of Business, New Brunswick.

PRESENTATION / PRÉSENTATION

277 HON. JOAN MacALPINE: Mr. Chairman, Commissioners, I am very pleased to have the opportunity to express the views of the Government of New Brunswick during the Commission's review of the price cap regime and related issues as outlined in the Public Notice CRTC 2001-37.

278 As you know, we would have preferred to address the Commission during the regional hearing held in the Atlantic region as part of this proceeding.

279 We believe that there is merit to considering the possibility of holding a regional hearing after the completion of the Hull hearing in order to provide the opportunity for a broader consultation of the population of the four Atlantic provinces.

280 My comments today will deal with the May 31, 2001 submission of Aliant Telecom Inc., Bell Canada, MTS Communications Inc. and Saskatchewan Telecommunications.

281 I specifically wish to address the Aliant proposal for the introduction of new price caps for basic telephone service.

282 The Government of New Brunswick believes that the CRTC has a responsibility to balance the interests of four main stakeholders. Firstly, residential customers, business customers, incumbent telephone companies and competitors. Obviously, as New Brunswick's Minister responsible for communications policy and regulation, my comments on Aliant's proposal will be focused on the effect it would have on residents of our province.

283 Aliant maintains that rural customers are not paying the full amount of what it costs to provide them with telephone services. Therefore, Aliant proposes a two-tier system, that is a rate for urban areas and a higher rate for rural areas. This discriminatory pricing proposal is not acceptable to the Government of New Brunswick.

284 Aliant's proposal also recommends an increase for basic residential individual line service from a common level of $22 to a common level of $25 in 2002.

285 The proposal states that the adoption of such a uniform rate level will simplify customer communications and will also simplify the adoption of common processes within the Aliant Telecom.

286 When NB Tel introduced a $20 per month residential rate for all New Brunswickers in 1996/97 it put a lot of effort into minimizing the impact on each and ever customer. As a result, the NB Tel simplified customer communications by having one standard rate throughout the province without having a major impact on anyone.

287 Four years later, on May 1, 2001, NB Tel's new owner, Aliant, increased its residential rate from $20 to $22 per month. This was in line with the current price cap regime and was relatively well accepted by New Brunswick's population. We are pleased that NB Tel was able to keep its rates for residential service lower than some other telephone companies in the Atlantic region through efficient management.

288 Having a uniform residential rate throughout the Atlantic provinces is not an acceptable justification for a $3.00 increase -- 13.7 per cent actually -- in rates for residential service for each and every New Brunswick home on January 1, 2002.

289 In New Brunswick, the most rural province in Canada, rural and urban customers now pay the same basic rate. We view access to the telephone service as essential. Such a service should, therefore, be accessible and affordable to all New Brunswickers at the same price.

290 One goal of the price cap regime was to support competition in local phone service, but such competition has not materialized. The incumbents have retained a very high percentage of the market share in the Canadian residential market. Competition is viewed as mostly cherry-picking, and therefore Atlantic Canada represents minimal market opportunities.

291 On the contrary, an effort to support competition in the long distance market has been much more successful, likely due to the fact that prices are significantly above costs.

292 For 2002 Aliant Telecom has proposed that the pricing rule be established so that the basic residential price across the Atlantic region could become consistent with a higher price than Nova Scotia, which is $25 per month.

293 After 2002 Aliant Telecom has proposed that the pricing rules allow the company to recover inflationary costs to provide the service in urban non-high-cost areas.

294 After 2002 Aliant proposes that for high cost areas where rates are below the cost of providing service, monthly rates be permitted to be increased by no more than $1.65 a year, moving towards a common price level of $29.95.

295 Aliant's position is that even after such increases the cost of providing residential telephone services in New Brunswick will be higher than the rates that would be charged in certain locations. This is consistent with our knowledge that New Brunswick is the most rural province in Canada.

296 The weight of the evidence as presented by Aliant is that the sole solution is to move local residential rates upward, while holding business rates at inflation. Consequently, Aliant's proposal seems to justify a rate increase for the basic residential rates in New Brunswick.

297 We suggest that other alternatives such as the possibility of retaining the current price cap regime and freezing the contribution level for an additional two years should be considered.

298 This would be likely to delay rate increases for local residential services. Furthermore, it would provide additional time for the competitors to establish their presence.

299 It is evident that the present price cap regime is serving New Brunswick well. Moreover, we have not yet received the benefits of competition in New Brunswick. There is little evidence of significant competition, especially for the areas of rural New Brunswick.

300 It is the recommendation of the Government of New Brunswick that:

301 Firstly, the CRTC extend its current price cap regime for an additional two years to maintain current prices with some inflationary increases, but without discriminatory price increases in rural high-cost areas;

302 That the CRTC freeze the contribution level currently at 4.5 per cent for two additional years to allow for continued subsidy to rural high-cost areas for local residential service by more slowly reducing the subsidy to stimulate a more competitive environment in New Brunswick.

303 In any event, the CRTC should review the definition of what constitutes a high-cost area with the objective of reducing the number specified for New Brunswick.

304 I would sincerely thank you for the opportunity of expressing the view of the Government of New Brunswick here today and I hope that you will take our submission under close scrutiny.

305 Thank you.

306 THE CHAIRPERSON: Thank you, Minister MacAlpine.

307 M. SPENCER: La prochaine présentation sera donnée par Chantal Mino.

PRÉSENTATION / PRESENTATION

308 Mme MINO: Bonjour. J'espère que ça ne dérange pas. Je vais faire ma présentation en français. C'est ma langue maternelle. Même si je serais capable de la faire en anglais, ça va être un peu plus long.

309 Je vais juste vous dire premièrement que je viens en tant que citoyenne très concernée par la situation qui est la révision des prix plafonds et des prix connexes, mais surtout pourquoi je viens c'est en tant que citoyenne qui est à l'écoute des personnes plus démunies et plus vulnérables qui ne peuvent pas être ici, et en tant que psycho-éducatrice.

310 Je veux juste dire, peut-être une petite parenthèse d'une minute, que je trouve ça un petit peu inacceptable d'avoir su qu'il y avait des auditions publiques entre le 15 et le 17 septembre. J'ai ouvert mon courrier, mon compte seulement le 20. Une chance! On avait jusqu'au 20 pour s'inscrire. Je comprends mal que nous les citoyens on ne l'ai pas avant surtout en sachant que Bell le savait depuis le mois de mars. En tout cas, je voulais juste faire une parenthèse.

311 Et aussi le fait que ç'a pris au moins dix téléphones pour que je sache comment ça fonctionne ici parce que c'est la première fois que je viens. C'est grâce à un organisme communautaire que j'ai pu savoir qui rejoindre et j'ai payé de moi-même des frais de longue distance. Le service à la clientèle au CRTC, excusez-moi, mais premièrement il n'y a pas moyen de savoir le nom de la personne au complet, et secundo je n'ai rien pu savoir. Alors je voulais faire ma petite parenthèse.

312 Donc je suis venue quand même au nom de tous ceux qui ne peuvent pas être là parce que c'était trop juste dans le temps, et mon objectif, pourquoi je viens aujourd'hui c'est que le CRTC s'assure que tous puissent avoir accès à des services de téléphone fiables et abordables.

313 Je ne sais pas si vous le savez -- si vous avez remarqué -- mais il y a beaucoup de services, les organismes communautaires autant que les services publics, qui demandent maintenant les services de téléphone et c'est souvent le dernier cordon qui rattache à la vie les gens. C'est rendu un service essentiel. C'est vraiment rendu un service essentiel pour beaucoup de personnes démunies qui n'ont pas beaucoup d'argent, et qu'est-ce que les gens font quand ils n'ont pas les moyens de se payer le service de base? Bien ils vont appeler dans les cabines téléphoniques.

314 Alors les deux points que je suis venue toucher moi particulièrement c'est ça. Je demande au CRTC de rayer, non seulement qu'il n'y ait pas d'augmentation des primes mensuelles du service de base, mais qu'il soit à la baisse et que les services téléphoniques soient maintenus tels quels parce que même si on dit que ça va être juste pour le téléphone intérieur on est en train d'enlever les téléphones extérieurs de plus en plus.

315 Et qui se sert plus des téléphones publics? Bien les gens plus démunis parce que ceux qui ont plus d'argent ont un téléphone cellulaire.

316 Je voulais mentionner plus ça en particulier, et j'ai fait un bilan hier. J'avais mes comptes depuis 1994 jusqu'à 2001 et je voudrais vous mentionner que les frais non seulement -- en tout cas moi je n'en revenais pas -- ils ont augmenté de 12,60 à 23,43 dollars. Excusez-moi c'est beaucoup. Pour moi je trouve ça beaucoup. Je me souviens dans le temps j'étais étudiante et je voulais avoir le service à cadran. Ce n'est pas juste la ligne de base qui est augmentée. En obligeant les gens maintenant à avoir les lignes "touch tone", c'est un frais de plus, en chargeant les frais de 911, frais de la municipalité. Ce sont des frais qui se sont rajoutés.

317 Il ne faut pas juste considérer la ligne des frais de base. Il faut considérer ces trois frais-là en plus parce qu'ils sont maintenant rendus obligatoires par Bell. Donc c'est rendu à 23,43 obligatoire pour tout le monde et ça ne compte pas les taxes. Alors ça c'est la première des choses et pour les téléphones c'est ça. Les téléphones publics que pense que -- écoutez, je n'ai rien contre que les gens fassent de l'argent. Bell d'ailleurs ils font de belles publicités, l'information on voit qu'il y a de la qualité, même le service téléphonique a de la qualité, sauf que pas au prix de vies humaines. Excusez-moi, il y a des gens qui ont de l'argent. On charge des frais. Il y a Internet, il y a toute sorte de frais à côté que les gens peuvent aller chercher.

318 S'il vous plaît, je vous demande de ne pas toucher aux frais de base et même regarder le prix maintenant en englobant tous les frais obligatoires, et vous allez voir qu'il y a beaucoup de gens qui ne peuvent même plus se le permettre.

319 J'ai dû moi intervenir dans plusieurs cas de suicides et je peux vous garantir que c'est vraiment le dernier cordon qui rattache à la vie la solitude des gens. C'est rendu vraiment un service essentiel.

320 Alors je vous demande, au nom de la vie humaine, au nom du respect de la dignité humaine, de ne pas juste regarder le profit. D'ailleurs je pense que Bell est rendu à 15,4 pour cent de profits de rentabilité, je crois -- rendement aux actionnaires. Quand le CRTC, je pense que c'était en 1997 ou 1998, avait demandé 11 pour cent, je crois que c'est rendu à 15,4. Donc c'est quand même plus élevé et je crois que ça pourrait être plus élevé s'il y a des frais qui sont augmentés ailleurs sans toucher les personnes plus démunies.

321 Secundo -- tertio plutôt, je voulais mentionner que je trouve un peu inacceptable que sur les factures tous les frais ne soient pas écrits, tous les frais qu'on paye. Moi ça fait plusieurs années que je garde les factures et les frais sont détaillés seulement quand il y a une modification dans les prix. Le reste du temps on n'a aucun détail comme avant.

322 Je regardais mes comptes de 1993, 1994 et c'était plus détaillé. On voyait la différence frais "touch tone", frais -- là on ne l'a plus du tout. Ça moi j'aimerais ça que Bell remette à chaque compte la description. Pourquoi? Parce qu'il y a des gens qui ne sont pas capables de faire l'abstraction. Ils ne sont pas capables de voir dans quoi ils s'embarquent les frais, et souvent ils se ramassent avec des frais énormes. Ce qui arrive, ils ne peuvent plus payer et Bell coupe. Mais quand Bell coupe bien là c'est la vie humaine. C'est la vie humaine, c'est quelqu'un qui se ramasse tout seul et souvent peut en finir.

323 Je ne dramatise pas là. Ç'a arrive vraiment. Même si ce n'est pas la majorité des gens ç'a arrive et déjà si c'était juste une personne je considère que c'est une de trop.

324 En tout cas juste regarder ça peut-être et peut-être aussi quand il y a une modification au CRTC pour les citoyens comme moi, ordinaires, peut-être, si possible, mettre les prix qu'on nous charge. Moi mon compte Master Card ou Visa c'est écrit par-dessus le compte. On ne peut pas le manquer -- "si joint avertissement". Pourtant ça ne coûte pas cher avec l'ordinateur. Ce ne sont pas des frais ça. Vous n'allez pas me dire que ce sont des frais parce qu'on pèse sur petit piton et c'est fait automatiquement sur tous les comptes.

325 Je demanderais juste que ce soit fait comme là parce que le papier que j'ai eu, juste ça, moi j'aurais été tentée de le jeter. Pourtant Bell ils font de belles publicités habituellement mais ça c'est un papier qui était de côté et j'ai vu l'importance quand je l'ai lu mais je sais que beaucoup de gens premièrement ne l'ont pas reçu et beaucoup de gens peut-être aussi l'ont peut-être plus jeté.

326 Donc je demande à ce que ce soit écrit sur le compte si possible surtout pour l'importance que cela a. C'est quand même des services de base. C'est peut-être -- moi ça me touche moins parce que j'ai les moyens de le payer. J'ai un cellulaire, un pagette, mais travaillant dans le domaine, travaillant aussi auprès d'organismes communautaires de gens plus démunis, je viens en leur nom. Je viens en leur nom parce que c'est impossible. Ça prend un bac pour venir au CRTC juste pour savoir comment ça fonctionne.

327 Ça fait que je vous remercie de m'avoir écoutée. C'est tout ce que j'avais à dire et j'espère qu'au nom de tous ceux qui n'ont pas les moyens de se défendre que le CRTC va voir davantage à penser à eux.

328 Merci.

329 LE PRÉSIDENT: Merci, madame Mino.

330 MR. SPENCER: Our next presentation will be Mr. Butch Cummings.

PRESENTATION / PRÉSENTATION

331 MR. CUMMINGS: First I would like to say to the Commission, thanks for giving me the opportunity to appear here.

332 Maybe I could just tell everybody about whereabouts I'm from. I'm from Rock Island Lake, which is approximately 33 kilometres north of Perry Sound. It is a small lake with about 17 seasonal residents and two permanent residents.

333 What my main concern is is securing an individual line phone service, as right now I operate a radio telephone and the privacy issue is a great concern to me.

334 Also, I must admit that I did have a meeting with the Bell people on September 21st, along with Federal MP Andy Mitchell, to help explain to me why I have been unsuccessful in getting an individual line service for economic reasons.

335 However, I find this very difficult to understand when on the same lake where I am there are four residences, two seasonal and two permanent, that within a two kilometre radius of my residence they have up-to-date phone lines, individual phone lines with name display, call display, et cetera.

336 I have been promised phone service by submarine cable as of early 2000 if I paid $25,000 up-front. That would have paid for the extension of the submarine cable to my front door with individual phone line service and today's up-to-date services, i.e., call display, name display, call answer and Internet ready, et cetera. This was in discussion with the local engineer from Bell Canada for the Rock Island area. Now the charge has gone up to $163,000 as of this year.

337 While the gentlemen from Bell were at Rock Island Lake on Friday, September 21st, they were very helpful. They sort of leaned more towards an upgraded wireless, i.e., CDMA or SR Telecom, but they seemed to lean towards an analog system, which is of no difference than what I already have really, as far as the privacy issue.

338 I totally disagree with the Bell Canada Act that states you must be within 65 metres -- or 165 metres of an existing Bell facility to have a phone service connected. That leaves Bell Canada in a pretty safe situation, even in some towns and/or cities. But in rural Canada it is ridiculous. I have sailed on Great Lakes ships that are longer in length than 536 feet or 165 metres.

339 As far as the definition of high-cost areas, some companies use the resources from one store, one plant, to offset the costs of operating other plants or to defray the money made from one source to help pay the cost for other sources. The last time I read the financial page Bell Canada seemed to be doing all right.

340 In closing, I would like to say I hope with what I have said here today, and the correspondence over the years in my file with the CRTC, will indeed give us the phone service that we have been trying to achieve over the past years.

341 Ideal, by my own choice for all the people on Rock Island Lake, and I have contacted them and told them I was coming to Ottawa on my own to see what I could get as far as being right in front of the people I have been writing for the past 12 years,

342 We also have had three petitions totally ignored by Bell Canada over the years of 1987 to 1992. While one area 15 miles up the highway had a phone system installed at a cost of $500,000, and this was in 1990, I believe if we would have had our phone service installed at the same time, it would have been in the area of $20,000, but I must admit I'm not an expert in that field.

343 The past years have been very frustrating in trying to secure an individual phone line service to Rock Island Lake. I have had my federal MP, Mr. Mitchell, in conjunction with getting Bell Canada reps and they have -- Mr. Mitchell has done all he could do, I guess, from what he says.

344 I just want to say that I would like to go back to October 19, 1999, when the CRTC brought out the telephone service to high cost areas, I was really happy when I read this. One thing here really got my attention.

345 The decision guaranteed service to unserved areas. The lighter print is "The whole point of today's decision is to extend services to unserved areas with priority given to permanent dwellings before seasonal ones".

346 I seen the trucks come in there last year to put in approximately eight kilometres of upgraded cable hard line to serve four residents, two permanent and two seasonal. I guess the bottom line is either I don't understand what's going on like as far as the economics of providing phone service, but I thought we were all supposed to be treated equal.

347 I appreciate the chance to air these views

348 THE CHAIRPERSON: Thank you, Mr. Cummings. We appreciate your presentation. One of the issues we are considering today is the service improvement plans of the various companies that are before us today which is an outcome of that earlier high cost decision that you referred to. I don't know whether it will specifically solve your problem, but the service improvement plans are part of this proceeding.

349 MR. CUMMINGS: Thank you very much.

350 THE CHAIRPERSON: Thank you for your presentation.

351 Mr. Secretary, I believe those are all the people who --

352 MR. SPENCER: No. There is one more, Mr. Chairman.

353 THE CHAIRPERSON: There is one more.

354 MR. SPENCER: The next presentation will be by -- oh no, that's the last one. Sorry.

355 THE CHAIRPERSON: Yes. There is one more, but I understood that he wasn't able to be here today, so we will hear him, I understand, on Wednesday.

356 We will take our morning break now. After the break I think the staff needs some time to set up the telephone lines, so we will take our break until 11:00 and then we will proceed with the teleconference portion of the proceeding.

--- Upon recessing at 1039 / Suspension à 1039

---

Upon resuming at 1103 / Reprise à 1103

357 THE CHAIRPERSON: We will come back to order in a few seconds.

--- Pause

358 THE CHAIRPERSON: Mr. Secretary, we will take our first caller.

359 MR. SPENCER: Thank you, Mr. Chairman.

360 Mr. Paul Jelley will be presenting comments on behalf of the Hon. Mike Currie.

361 THE CHAIRPERSON: Good morning, sir.

PRESENTATION / PRÉSENTATION

362 MR. JELLEY: Good morning. I would like to thank you for the opportunity to present the views of the Government of Prince Edward Island regarding the price cap in Aliant's proposal.

363 Prince Edward Island is primarily a rural province. Rural communities that stretch from one end of P.E.I. to the other are the foundation of our province. The most important communication means for Islanders has been the telephone system. For more than 115 years Islanders have used their telephones to stay in touch with their family, friends and, of course, emergency services.

364 Given the signifcant importance of the telephone in the lives of every Islander, proposals that will result in steep increases in telephone rates for rural Islanders are of deep concern to the Government of Prince Edward Island. It is for this reason that the province has chosen to make an oral presentation to the Canadian Radio-Television Communications Commission.

365 This issue is about balance. The question is how to balance the need to ensure that all Islanders continue to have ready access to affordable telephone service, regardless of their location, while at the same time ensuring that the company obtains the revenue it requires to operate.

366 The Government of Prince Edward Island is concerned about the potential price incrase for the following reasons. First, differential rates for telephone service violates the principles of equity, fairness and universality that are the hallmark of Canadian life.

367 This country prides itself on providing universal services to its citizens. The principles of universality, fairness and equity are respected in all facets of Canadian life. Telecommunications should be no exception.

368 Secondly, the proposal amounts to a tax on rural households during a time when the Island economy is facing challenges of potato wart, drought conditions and crop uncertainty. The potential increase could act as a disincentive for people to remain in the rural areas or to move to the rural areas.

369 The introduction of the increased rates for high cost areas will mean that rural communities will be at a disadvantage compared to the urban areas.

370 A third reason is that there already has been a significant increase in local telephone rates. Since 1996 the cost of local telephone service has skyrocketed. The cost of local telephone service will increase by 90 per cent since 1996 if the proposed framework and subsequent proposed price increases are approved.

371 The steady increase in local rates has impacted on those who live in the fixed income and low income families. Islanders can control the amount of money they spend on long distance, but they cannot control the amount of their local telephone charges. A healthy increase in the monthly charge could result in more households' declining telephone service.

372 Statistics Canada numbers show that households with incomes less than $20,000 are most likely to report no expenditures on communication. Clearly, lower income households will be the ones most affected by a significant increase in local telephone charges.

373 Low income families may be forced to remove their telephones because of the increased cost which could result in households not having ready access to emergency services such as 9-1-1. It is not acceptable to have telecommunications policy create hardships for low income Canadians.

374 A fourth reason for concern about the price cap and the Aliant proposal is the impact that increased rates could have on the decision of Islanders to access the Internet from their homes. There is a concern that this increase will mitigate to increase the digital divide.

375 The term digital divide describes the fact that the world can be divided into people who do and people who do not have access to and the capability to use information technology such as the telephone or the Internet.

376 An increase in local telephone rates will certainly discourage rural low income Islanders from accessing the Internet which is fast becoming a vital requirement for students. Rural low income Islanders must not be left behind because of the healthy increases of local telephone charges.

377 A fifth reason is that the costs associated with providing telephone service in a densely populated province should be less than elsewhere. In fact, P.E.I. is a small rural province that is the most densely populated province in the country. There are no vast unpopulated areas.

378 Given the nature of the distribution of P.E.I.'s population and the geography of the province, the challenges of providing telephone service in P.E.I. rural areas are less than for those provinces where there are vast areas with limited population, mountains or remote regions.

379 This would seem to suggest that the costs of providing local service in P.E.I. should be less than in other provinces. Nevertheless, Aliant has proposed to have a standard charge for high cost areas. Aliant itself is proposing to adopt the standard for the region where the costs differ within the region.

380 Finally, Islanders are being asked to pay more with no promise of improved service for the higher price. The proposal will not result in more or better service for Islanders. Instead, rural Islanders will be asked to pay more money for the same service.

381 There is no additional benefit to rural Islanders in this proposal. The perception is that there is no justification for the price increases.

382 Aliant is an important player in the provision of essential telephone service for Islanders. It is important that rural Islanders are not discriminated against, but it is also important that Aliant is able to continue to provide telecommunications service on a level playing field.

383 Any policy changes should consider the impact not only on consumers, but on the providers of the telecommunications services. As a result, the Government of P.E.I. would suggest that the CRTC consider having anyone offering telephone services in urban areas making a contribution to a pool that will be used to ensure quality services in the rural areas. This is not unheard of in either the regulated or the unregulated industries.

384 Dairy farmers pool the cost of transfer of the products to plants. Car manufacturers pool transportation costs. It may be necessary to ensure a level playing field for those attempting to provide service in both rural and urban areas.

385 Urban service providers could be required to contribute to a pool to ensure that deregulation does not have the unintended consequence of regulating rural Canadians to the status of second class citizens in terms of costs and services. The CRTC might wish to explore this option.

386 The Government of Prince Edward Island believes that the Aliant proposal to charge differential rates discriminates against rural people of Atlantic Canada. It runs contrary to the principle established by the CRTC to render reliable and affordable services of high quality accessible to both urban and rural customers.

387 As a result, the Government of P.E.I. strongly recommends that the Aliant proposal for increased rural telephone rates be rejected.

388 Canada has a first class telecommunications infrastructure in this country. It has been built on the basis of wise decisions which has resulted in infrastructure that is the envy of other jurisdictions.

389 The CRTC must continue to make wise decisions in order to ensure that telephones are accessible for all Canadians as stated in the Telecommunications Act.

390 Therefore, the Government of P.E.I. would strongly recommend that all Islanders pay affordable, uniform telephone rates rather than discriminating against rural Islanders.

391 I would also encourage the CRTC to invite public input by having public hearings in evry province, including P.E.I.

392 Thank you for your time and attention.

393 THE CHAIRPERSON: Thank you for your presentation on behalf of Minister Currie.

394 MR. JELLEY: Thank you.

395 THE CHAIRPERSON: Mr. Secretary.

396 M. SPENCER: La prochaine présentation sera donnée par M. Léopold Chiasson de l'Association francophone des municipalités du Nouveau-Brunswick.

397 THE CHAIRPERSON: Mr. Chiasson, are you there?

398 MR . CHIASSON: Yes.

399 THE CHAIRPERSON: Please proceed.

PRÉSENTATION / PRESENTATION

400 M. CHIASSON: Merci. Je suis avec mon président, M. Charest, Raoul Charest, et le texte de notre présentation vous sera envoyé aujourd'hui par voie électronique.

401 Maintenant là où M. Charest va vouloir intervenir c'est en rapport aux prémisses 1 et 3 de la demande qui est devant vous.

402 La première qui traite de l'uniformisation des taux et la deuxième sera sur les taux différenciés entre les grandes communautés et les plus petites.

403 Monsieur Charest.

404 M. CHAREST: Oui, bonjour tout le monde. Il me fait plaisir ce matin de pouvoir vous adresser la parole pour vous soumettre nos objections à la demande de Télécommunications Aliant.

405 La première prémisse, comme M. Chiasson a dit, nous on est entièrement contre le fait que la province du Nouveau-Brunswick qui paie aujourd'hui 22 dollars plus taxes soit augmentée à 25 dollars par mois comme la Nouvelle-Écosse. Nous trouvons que pourquoi augmenter la province du Nouveau-Brunswick au taux de la Nouvelle-Écosse? Pourquoi est-ce que la province du Nouveau-Brunswick serait obligée de payer ou d'avoir une hausse dans ses tarifs pour que Télécommunications Aliant qui ont formé avec quatre différentes compagnies qui étaient NT&T, NTS, NBTel et NewTel, pourquoi est-ce que la province serait obligée de monter à 25 dollars comme eux?

406 La deuxième prémisse dont on veut parler est surtout le taux d'augmenter nos taux dans les régions rurales comparées à la région urbaine. Nous disons que là aussi c'est une injustice de la part de Télécommunications Aliant de vouloir charger plus cher aux municipalités ou aux régions rurales comparé aux régions urbaines.

407 Nous dans la province du Nouveau-Brunswick c'est certain qu'on a beaucoup de régions rurales et nous trouvons très injuste ce que Télécommunications Aliant veut faire.

408 Ça va.

409 THE CHAIRPERSON: Thank you very much, gentlemen.

410 Mr. Secretary.

411 M. SPENCER: La prochaine présentation sera donnée par M. Antoine Landry, Maire de la Ville de Caraquet.

412 LE PRÉSIDENT: Bonjour, M. Landry.

413 M. LANDRY: Oui. Bonjour.

414 THE CHAIRPERSON: Please proceed.

PRÉSENTATION / PRESENTATION

415 M. LANDRY: Je vais demander à mon conseiller, Germain Blanchard, de faire la présentation.

416 M. BLANCHARD: Alors membres du CRTC, il me fait plaisir de représenter la Ville de Caraquet dans ce mémoire ici aujourd'hui.

417 Nous voulons d'abord exprimer notre appréciation à la Commission de nous permettre d'apporter le point de vue de la Ville de Caraquet sur la demande de la compagnie Aliant.

418 Nous, citoyens du Nouveau-Brunswick, avons toujours eu une excellente collaboration de la compagnie NBTel. En effet, NBTel a voulu être au service des citoyens et favoriser un service uniforme et équitable à tous les points de vue.

419 Nous aussi de la Ville de Caraquet sommes heureux de joindre notre voix aux représentants des organismes provinciaux, des élus municipaux, aux députés provinciaux et fédéraux pour exprimer au CRTC nos propositions à la demande de la compagnie Aliant.

420 A notre humble avis, nous comprenons difficilement le pourquoi de cette demande de la part de la compagnie Aliant qui aurait pour effet d'imposer un prix préférentiel aux régions urbaines au détriment des régions rurales.

421 Cette demande d'augmentation est une menace au développement régional et va à l'encontre du développement économique et social de la province. Pour nous, comme ailleurs, nous considérons que le service téléphonique demeure un instrument essentiel au développement de notre pays et de notre région. Il est donc inacceptable que les régions rurales soient pénalisées au bénéfice des régions urbaines.

422 Avant de conclure, nous trouvons déplorable que pour une demande aussi importante que le CRTC n'a pas daigné tenir une telle audience à Moncton ou ailleurs dans l'Atlantique.

423 La tenue d'audiences publiques pour les provinces visées aurait favorisé une meilleure participation des organismes, des citoyens concernés par cette revendication de la compagnie Aliant.

424 Comme cette demande d'augmentation des tarifs dans nos régions nous préoccupe au plus haut point, nous demandons que le CRTC refuse d'endosser un tel projet pour une compagnie qui n'a aucun problème financier puisqu'elle a réalisé une augmentation de ses revenus de 17 pour cent au cours des six derniers mois.

425 Confiants que l'intervention des intervenants s'opposant à cette demande d'Alient sera prise en considération, nous vous remercions à l'avance pour l'attention que vous porterez à notre demande.

426 Merci bien.

427 THE CHAIRPERSON: Thank you very much.

428 MR. SPENCER: Thank you.

429 Our next presentation will be from Mr. P. Vinish from Nova Scotia.

430 THE CHAIRPERSON: Mr. Vinish.

431 MR. VINISH: Yes, this is Mr. Vinish.

432 THE CHAIRPERSON: Good morning.

433 MR. VINISH: How are you?

434 THE CHAIRPERSON: Go ahead.

435 MR. VINISH: I presume I'm to make a statement to your Board.

436 THE CHAIRPERSON: Yes.

PRESENTATION / PRÉSENTATION

437 MR. VINISH: From the beginning, I would like to say that I feel disenfranchised by the format of this hearing. It seems that when I and all the clients of the telephone company in Atlantic Canada have to be forced to participate ina bureaucratic function in Hull to decide matters that really are connected to our location in Atlantic Canada, it doesn't seem right.

438 There is a presumption by ordinary people in my area that the CRTC functions just to rubber stamp the industry requests in locating the function in this fashion only reinforces that impression. I think the CRTC owes it to the citizens it's supposed to serve to bring these hearings to the jurisdictions that are affected by those decisions. It was disturbing to move the Regional Utility Board hearings out of the regions.

439 The point in all this is that whatever representation you get from ordinary subscribers I think is only going to be the tip of the iceberg. The personal appearance at a hearing is much more powerful than an e-mail submission or a mailed-in letter. Conference calls are something most of haven't experienced before.

440 I would like to give some comments about the telephone service that I experience in my area. I live in a rural area of central Nova Scotia. My free calling area covers five very small exchanges, which, including my own, has a total of 3,100 subscribers. That is the extent of my free calling area. But ask the Board just how many subscribers can be reached from a phone in Hull, Quebec. I'm sure there is a difference.

441 The calling area that I have dictates the practical quality of the service that we experience in this area. It limits the choices available without toll charges. We have a much higher necessity to use long distance in rural exchanges, and most of us in rural areas are obliged to subscribe to additional long distance plans that people in larger metropolitan areas can do without. We already pay more overall for a lesser standard of phone service in rural areas than city folks do.

442 With competitors that have still lower rates now entering the high density areas, the price gap that is available to rural subscribers is even greater. Our small calling area limits the choices available without toll charges for things like competitive long distance plans and internet services.

443 It's significant to me that Sympatico is able to be in every exchange in the province since their toll charges go directly to a wholly-owned subsidiary. We have to wonder how many more years it will be in our area before we are allowed competitive true high-speed internet. It's already been offered in Metro Halifax for quite some time.

444 By maintaining the small rural exchanges, MTT has been able to maintain its monopoly status and virtually prevent subscribers from reaching outside their system and prevents competitors from accessing into our exchanges without running into long distance charges.

445 At this point there is no commitment by the defacto monopoly holder to upgrade our services to the current capabilities until we whine long enough and loud enough to shame them into action; then they only act to quiet the noise. I would like to submit as a reference to that the proceedings concerning the Clarksville, Nova Scotia exchange which happened many years ago.

446 Another feature of the service in my area is that two of the free calling exchanges that I have available to me are not even listed in my telephone directory. For some reason of pretzel logic these exchanges are not considered in my phone area if you can believe it. To avoid charges for directory assistance, I have to acquire a phone directory from another zone to get the numbers for non-toll calls that are only 12 and 15 kilometres away.

447 I ask a rhetorical question: What would people of Halifax Regional Municipality, would they put up with having the Dartmouth listings in a different directory from the Halifax listings? Of course not.

448 When you consider that the respective Yellow Page listings are split into two books as well, this is very disruptive to local business. A business who intends to serve its natural geographic area is forced to list in two directories to cover their natural client base. I have never heard a small or medium-sized business person who thought Yellow Page advertising was anything other than exorbitant for price.

449 Technology is advanced enough today to give precise content for any area when printing directories. Besides that, savings could be achieved in targeting the directory more closely to the clientele. The two directories that I require for my calling area having listings for Amherst, Yarmouth, Port Hawkesbury. Those are far away from my location, just nothing to do with my life.

450 The MTT operate the defacto monopoly phone provider in my area, and generally they would like to have people think they are good corporate citizens. I would like to point out some things from my observation in my own area that disagree with that impression.

451 Number one, the MTT switching building in my village is in a very visually prominent location. The exterior cladding on this building was renovated about a year ago, and as of today, has still not been finished. The view from the road still displays two large panels of Tyvek vapour barrier where the clad panelling has yet to be replaced.

452 Our community is by no means affluent. Nevertheless, this long neglected finishing up of the renovation is not the norm of our village and it really seems an insult to the community to have this on prominent display.

453 Number two, the road that people from my area are most likely to travel when they pay homage to Halifax, as they frequently must, has a long, steep hill that ends in a stop at the bottom with a "T" junction. By this I mean that you are required to stop at the bottom of a hill and then turn either right or left. This is an extreme hill and it challenges the brakes of a vehicle at the best of times. In the winter it is very hazardous and on many occasions downright treacherous.

454 If you were to go through this intersection without stopping or turning as required, you would go down a steep bank and into a deep ditch. In the time that I have lived in this area the predictable overshoots at this corner have occurred with several cars and on one occasion a gasoline tanker truck. About eight years ago MTT installed a new larger connection box at this corner and they relocated it from about 20 feet from the edge of this downhill road to exactly the centre line on the overshoot side of the intersection.

455 Now, they are not stupid and in recognition of the peril of this intersection, they realized their valuable equipment was at risk so they erected a 12-inch thick concrete wall the full width of this downhill road. Since the wall has been installed there, there have been a couple of light hits in the past years which took out some bumpers that were originally there. For the past few years it has been nothing but a stark concrete wall that is high enough that a vehicle would not rise over it but would be stopped dead in its tracks if it hit it.

456 Well, this past winter the inevitable occurred. I don't know the details exactly of what did happen, but the still existing evidence shows that it would be a miracle if there was no death involved.

457 What is still on view today -- and I might recall my previous comments about the Tyvek on the switching building and the length of time that was visible -- what is still on view today at this road intersection is about an eight-lineal feet piece of this corner concrete wall that has been completely broken off and pushed towards the ditch. This chunk of wall must weigh in the neighbourhood of two tons. The vehicle that hit it made it to the ditch obviously as in the spring you could see the recovery marks in the bushes where the vehicle landed and was removed.

458 The company MTT has had four wake-up calls that I know of about this deadly hazard that they created to protect their imprudently placed equipment, and still this deadly hazard faces the people of my area every trip to Halifax. At this point it clearly seems MTT does not care that eventually in the fullness of time that a lightweight vehicle will make a direct hit on this wall and then there will be fatalities.

459 Before the end of this hearing, I would like to request that the CRTC require MTT to supply the following information about this.

460 A) Was a permit required and obtained to place this structure on the road allowance or was it constructed under the blanket allowance for stringing utility lines?

461 If a permit was issued, have a copy of the same submitted to see which agency issued it. This is all information that I have been unsuccessful to find out about at this point and I have made the effort.

462 B) They should supply the hearing with details about the events that sheared off the aforementioned concrete corner outlining what personal injuries occurred and what accompanying property damage there was. A police report would be appropriate there.

463 C) They should state their intent with regards to removing this additional and unnecessary deadly hazard to this community and what their commitment to time is for the completion of that.

464 My third point about the service that I experienced in that area is the only 24-hour accessible payphone has been removed from our community. The nearest one is now 12 kilometres away and there are several people in this community who do not have a residential phone and rely on payphones.

465 I'm aware that the former phone was often vandalized, but I believe that was a function of the annoyance and the frustration of the open station that it was and the fact that the unit was located under the drip point of a roof or a puddle formed right where you are obliged to stand to use the phone and it was out of service for extended periods of time. You would never have seen a pay station like that in the city and its removal occurred before cellphones could reach this area as a fringe area even.

466 My fourth observation of MTT services in the area. In the same area as this death wall that I mentioned just previously is a height of land where MTT has mounted a very high communication tower. This tower is high enough that it is obliged by law to have red warnings lights operating for the sake of aviation safety and navigation.

467 Since at least May of this year there has never been a single light shining on this tower at night. To me this is a flagrant disregard of MTT's civil obligation in the operation of a communications company. This tower is marked on aviation maps and is a nighttime landmark. It's visual absence is such a factor that it can contribute to an aviation disaster.

468 In the absence of automatic monitoring of these lights, MTT must send inspectors in the dark of the night to verify the operation of these lights. Obviously, there is negligence for more than MTT if this tower has been unlit for so long and the phone company has not been challenged by the federal Department of Transport. These lights could be seen from the control tower at Halifax Airport.

469 Do we have to have another Walkerton style disaster before the various connected interests perform the necessary due diligence and their duties? I am throwing this issue into the court of the CRTC as there is at least a partial involvement in this by the CRTC and the opportunity for a resolution of this could be initiated in this hearing today.

470 All of these previously cited deficiencies, I believe, do not and would not occur in a more populated area where there is more pretence of the excellence by the company and a greater scrutiny by people of influence and authority.

471 These things are an example of the callous disregard for the customers of small rural exchanges. I believe in all the years since MTT absorbed the small independent telcos they have never missed a healthy dividend to shareholders.

472 The rural subscribers indeed contribute a significant income to MTT. The more appropriate question in this rate increase debate might be: Should high-density buildings in high-density areas have lower tariffs than the single-occupant buildings in those same high-density areas?

473 Clearly, a recently non-existent company has made a very successful entry into MTT high-density territory and is offering a significant reduction in the monthly tariff. It is interesting that they too, like MTT, have a fleet of uniformly new service and sales vehicles that would be the envy of any business that has to earn its living in a purely competitive world.

474 THE CHAIRPERSON: Mr. Vinish, could you summarize the rest of your presentation? We have a lot of other people waiting on the line.

475 MR. VINISH: I could, but I think I'm due my day in court. I'm well through my presentation and it might be things that you don't want to hear but it's things that need to be heard.

476 THE CHAIRPERSON: It's not that we don't want to hear your presentation, Mr. Vinish. It's just that there are many others, as I say, who want to be heard as well.

477 MR. VINISH: I appreciate that. I waited also.

--- Pause

478 THE CHAIRPERSON: Mr. Vinish?

--- Pause

479 MR. SPENCER: Should we go to the next person?

480 The next person on line is Mr. Harold Dyck from Winnipeg.

PRESENTATION / PRÉSENTATION

481 MR. DYCK: Hello?

482 THE CHAIRPERSON: Mr. Dyck.

483 MR. DYCK: Yes.

484 THE CHAIRPERSON: Please proceed.

485 MR. DYCK: Thank you.

486 I'm afraid I was caught a little bit short notice here. I was scheduled to be on some time after 3:30 this afternoon and I had received a call from the teleconference operator. Apparently you folks are a little -- well, things are happening that people aren't appearing.

487 So I'm not quite as ready as I would like to be, but I think I can make the pertinent points that I want to make and we will definitely follow this up with some written comments.

488 As I said my name, for the record, is Harold Dyck. I'm a leading anti-poverty activist in Winnipeg. I function on the Board of Directors of the National Anti-Poverty Organization and I chair the Poverty Advisory Committee of the Social Planning Council of Winnipeg as well as the Steering Committee of Community Action on Poverty which is a coalition of about 70-80 groups in Winnipeg that have concerns around poverty issues. I work as an advocate for people who live on welfare and continually run into problems related to poverty, including issues related to phone services.

489 So it's on that basis that I did want to address some comments to the Commission about some of the things that are happening around the specific issues that are under question right now as related to phone service and rates applied to phone service in remote and rural areas.

490 Part of the concern we have -- and I know this is shared by all the organizations I participate in, although at this point I am speaking as an individual, but I know I am conveying the views and concerns of all of these organizations, is that there seems to be an increasing tendency to regard phone service in Canada, and in Manitoba as well, as more and more of a privilege rather than something that should be provided as a right to the entire community. In this day and age for a person to try to function in the community effectively phone service needs to be recognized as a right.

491 Part of the concern that I keep running into -- and I think it's fairly common amongst people living in poverty and working on poverty issues -- is the whole idea that there seems to be a slowly evolving change in the provision of telephone services such that it's becoming more and more a factor that it's only available to those who can afford it and that it seems to be slowly undermining the concept which had been an underlining principle of the CRTC that telephone service should be regulated in a way to ensure affordability to all sectors of the community.

492 This principle of affordability is increasingly being undermined by what I view as an increasing tendency to simply say that affordability takes second place to whether any particular area of services provided by telcoms across the country are profitable.

493 That's a major undermining of what had been a long-standing social principle in Canada, that all citizens should have the right to access affordable telephone services and we are slowly but steadily losing that right.

494 The clientele I deal with on a day-to-day basis more and more we run into these kinds of problems, that people have increasing difficulty in just maintaining their basic phone service and this has a negative social impact in the community simply because many of these people, if they want to find employment, for example, it places extremely difficult roadblocks in their way by simply not having something available like a home phone where they can call prospective employers or they can have an employer call them back to do something as simple as setting up a job interview.

495 If anything, that creates the effect of accentuating poverty in our community by placing these unusual obstacles in the way of an increasing number of our citizens that reinforces them being placed in a permanent state of poverty simply because they are not provided the opportunities of breaking out of that trap.

496 I have heard -- and I have been involved in previous CRTC meetings, and much of what I say today certainly would be reflected in the brief I presented on behalf of the Social Planning Council of Winnipeg last year at CRTC hearings held in Winnipeg. I am simply echoing here that much of what I say would be reflected and reinforced by what was presented in that brief. As I say, we will do some follow-up comments.

497 But much of what we have heard from the telcom companies -- and I have heard this coming in information feedback from NAPO, and in meetings I have had with MTS in Winnipeg -- is that they are looking for ways and means of providing tools for the low income community to be able to maintain phone service in the face of these kinds of rising costs.

498 One of the problems I have observed or ran into -- and I have been informed, and members of the Commission can certainly correct me if I'm wrong on this fact -- is that one of the tools used is one that we call Bill Management Services.

499 I have been told that the one remaining public utility in Canada does provide Bill Management Services and the sole fact they have been publicizing it that up to 3 per cent of the clientele of SaskTel actually makes use of those bill management tools.

500 It has been my own experience here and what I have heard is reinforced across the rest of the country that publicizing of these tools to assist people to maintain basic phone service are so effectively hidden that most people are simply unaware of it to the point where only 0.3 per cent of the customer base in every other province is able to avail itself of that particular tool.

501 So again, this reinforces my concerns that there seems to be a general lack of attention to how these kinds of changes and the changes that are under review now and sharply increasing the cost of access to phone service in remote and rural communities are going to be impacted, especially when nothing is being put in place that will assist people living in poverty in those communities, let alone the major urban centres, in order to maintain something as basic as phone service as a necessity.

502 This also has impact in a number of other areas, people with poverty, dealing with the handicapped where they may not be able to gain financing from welfare systems for phone service but have need of access to phone service.

503 I see a potential disaster evolving out of this increasing tendency to focus solely on whether or not each aspect of phone service is profitable.

504 My view and the view of many of the people I work with is that there needs to be a maintenance of a certain social responsibility by the telecoms across Canada. It would be nice if the telecoms could take on that responsibility without interference of a regulatory agency. That does not seem to be happening at this point.

505 But if they fail to do so, then simply it is our view that the regulatory agency should then simply say that "Listen, part of the cost of doing business in Canada is recognizing that there are needy parts of our community that must be respected and that we are maintaining this mandate that as far as is reasonably practicable phone service must be maintained as affordable and accessible to most, if not all, citizens in our community."

506 That profitability, and particularly what we see -- and I have been provided with a package of figures which I will not cite to you right now because I know other presenters to your hearings are going to cite those facts and figures -- but excess profitability within the telecom corporations across Canada does create a sufficient additional financial basis that this area of social responsibility can be taken on and the telecoms can afford to take on to ensure that the neediest part of the community does have this right of access and that principle is maintained.

507 As I say, and I do apologize to the Commission, I had planned to have this a little more organized and written down. I am speaking on top of my head because I lost several hours lead time on this, but I think those are the basic points I want to be made to the ladies and gentlemen of the Commission for your consideration.

508 Simply I stress the point again that there has to be an element of social responsibility built into the rating structures of telephone rates in Canada.

509 I thank you for your time and if there are any questions --

510 THE CHAIRPERSON: I don't think we have any questions, Mr. Dyck. Thank you for your presentation and it sounded quite well organized in any event.

511 MR. DYCK: Okay.

512 THE CHAIRPERSON: Thanks.

513 MR. DYCK: Thank you very much.

514 THE CHAIRPERSON: Thank you.

515 Mr. Secretary.

516 MR. SPENCER: Thank you, Mr. Chairman.

517 The next person on the line is Ms Florence Crandall from Elgin, New Brunswick.

518 THE CHAIRPERSON: Good afternoon, Ms Crandall.

PRESENTATION / PRÉSENTATION

519 MS CRANDALL: Yes. I am a New Brunswick rural senior citizen. I am raising two grandchildren. Most of the people living in our area work at local jobs, earning minimum wage, and all of us would find this $8.00 hike to be, well, unacceptable, reprehensible and it would put us back, oh, 50 years or so when people couldn't afford phones when they first came out and very few people had them.

520 That is what is going to end up, people in the cities will have them, but the rural people won't be able to afford to have these necessities.

521 So I am totally against this increase.

522 THE CHAIRPERSON: That is your presentation, Ms Crandall?

523 MS CRANDALL: Yes.

524 THE CHAIRPERSON: Thank you very much.

525 MS CRANDALL: Thank you.

526 MR. SPENCER: Thank you, Mr. Chairman.

527 The next person on the phone will be Gloria Descorcy from the Manitoba Chapter of the Consumers Association of Canada.

528 THE CHAIRPERSON: Good morning, Ms Descorcy.

--- Pause

529 THE CHAIRPERSON: Ms Descorcy? Hello?

PRESENTATION / PRÉSENTATION

530 MS DESCORCY: Hello. Hello?

531 THE CHAIRPERSON: Yes, good morning.

532 MS DESCORCY: Good morning. Can you hear me?

533 THE CHAIRPERSON: Yes, I can. Please proceed.

534 MS DESCORCY: Okay.

535 My name is Gloria Descorcy and I am speaking to you today on behalf of the Manitoba Branch of the Consumers Association of Canada.

536 As you are probably aware, CAC Manitoba is a volunteer, non-profit, independent organization which works to inform and educate Manitobans and represent the consumer interest in this province.

537 We are grateful for this opportunity to bring a Manitoban perspective to your deliberations today.

538 In preparation for these proceedings, we have spent some time looking back at the last four years of price cap regulation in this province and I have to say that for many Manitobans the words "price caps" don't have a whole lot of meaning. After all, price caps were supposed to protect residential consumers access to an essential commodity, local basic telephone service, in a market where no competition -- where competition was possible, but non-existent.

539 Price caps were supposed to protect residential consumers from increases of more than 10 per cent in their local telephone rates in any one year. Last year, local phone rates in this province increased by more than 30 per cent in some areas.

540 Price caps were supposed to maintain a balance between healthy, profitable telephone companies and consumer access to quality, affordable, local telephone service.

541 In Manitoba, while the telephone company is very healthy, with returns between 13.6 per cent and 16.8 per cent on local service alone over the last four years, the residential consumer has watched their local phone rates increase by leaps and bounds in that same four years. Quite frankly, they are feeling a little bruised.

542 So when you talk to Manitobans about a new price cap regulation for the next four to five years, it should come as no surprise if you are met with a little scepticism.

543 Consumers in this province have endured four years of successive rate increases and have seen the 10 per cent price cap completely disregarded with absolutely no competitive options in sight.

544 From where we are sitting, the price cap regulation of the last four years has clearly failed in its objective to maintain that balance between the best interests of our telephone provider and the best interests of residential consumers in Manitoba.

545 MTS' proposal for the next four to five years would serve to create an even greater imbalance. The company would be asking rural Manitobans, who bore the highest increases in the province last year, to bear another $6.00 to $8.00 increase, depending on where they live, over the next four to five years.

546 In addition, rural subscribers in Morris and Swan River and Arviat could be asked to pay more than urban subscribers in Winnipeg and Brandon for what amounts to less service. It is inequitable to expect consumers with a more limited local calling area to pay a higher price for an essential service than those with large calling areas. It is completely unreasonable to expect the most remote consumers with the smallest calling area and the least reliable phone service to pay the highest price.

547 Add to this a continual rise of MTS return on common equity and the industry's declining costs and you can see why Manitobans are sceptical.

548 Today, however, we are on the verge of a new price cap era. Today CAC Manitoba would like to respectfully recommend that the CRTC revisit the original spirit and principle of price cap regulation, the maintenance of that balance between healthy telecommunications companies and affordable, accessible, quality local phone service, and the protection of both telecom companies and consumers where competition for an essential service is currently non-existent.

549 During the last four years under price caps the telecom companies and its shareholders have reaped all the rewards of declining costs and increased profits in local telephone service delivery.

550 Now it is time to rebalance the scales. Now it is time for consumers to share in some of those rewards. Now it is time to reduce local phone rates that increase them and to institute better monitoring of the quality of local telephone service.

551 CAC Manitoba urges the CRTC to design a price cap regulation that works for consumers, not just for telecom companies.

552 In conclusion, on behalf of CAC Manitoba I would like to thank the CRTC for the opportunity to participate in this proceeding.

553 THE CHAIRPERSON: Thank you, Ms Descorcy.

554 MS DESCORCY: Thank you.

555 MR. SPENCER: The next person is Alice Radley from Nova Scotia.

556 THE CHAIRPERSON: Good afternoon, Ms Radley.

PRESENTATION / PRÉSENTATION

557 MS RADLEY: Good afternoon.

558 Yes, I am calling concerning the increase that Aliant wishes to put through on our telephone bill.

559 We live in a rural area and there are several seniors on low income who live in this area and several low income people, too, and it is a hardship right now to have a phone when you need one. We need one because my husband has bad health and I have to be able to contact a doctor or the ambulance at any time day or night.

560 We are now paying way over what they say that we are supposed to be paying because our recurring charges come up to $57.04 every month. That is hard for us to pay, too, along with the rest -- anything else.

561 We don't have long distance here. If I have to call into the city, which is Halifax or Truro it is long distance charges so we have to get a plan, a special plan through them, which costs you an arm and a leg.

562 They are making money, we are not. Why are they hitting us in rural areas.

563 That is really all that I have to say.

564 THE CHAIRPERSON: Thank you very much, Ms Radley, for taking the time today.

565 MS RADLEY: Okay, then. Bye now.

566 MR. SPENCER: The next person is Mr. Peter Frinton from Bowen Island, British Columbia.

567 THE CHAIRPERSON: Good morning, Mr. Frinton.

--- Pause

568 THE CHAIRPERSON: Mr. Frinton, are you there?

--- Pause

569 THE CHAIRPERSON: Mr. Frinton?

PRESENTATION / PRÉSENTATION

570 MR. FRINTON: Yes.

571 THE CHAIRPERSON: Good morning.

572 MR. FRINTON: Good morning.

573 THE CHAIRPERSON: Please proceed.

574 MR. FRINTON: All right. I didn't expect that I would be on this quickly.

575 My name is Peter Frinton. I am calling from Bowen Island in British Columbia. I am a municipal counsellor and in the past I was on the Regional Telecommunications Task Force which primarily looked at extended area service, but peripherally also looked at rate structures. I have acted as an intervenor before.

576 I am not going to take the full 10 minutes on this. I don't know how much I can materially add to the discussion. I have opinions which are rather not well backed up by facts at this point.

577 Unfortunately, I had difficulty accessing information. I had trouble with the listening in on the conference this morning because my computer doesn't seem to have enough power and the filings under the CRTC's web site are a little arcanely referenced. So I do admit that I am not particularly well informed.

578 My understanding is that the application is a continuation under the price cap regulations which were brought in in 1998 which replaced the old rate of return. My understanding is that the rationale for that was that the telephone companies -- and my understanding is this is not TELUS alone but many of the old ex-Stentor companies -- that they did not like what were then pretty fairly prescriptive or narrow margins in which they were able to work.

579 It was felt that with essentially a partial deregulation, with price caps but with the allowance for them to set rates within those caps, that that would encourage competition and the CRTC felt that this would at least open up the field to competitors. And ultimately my impression is that these companies do not wish to be fettered by regulation in the price field whatsoever and that it would become like -- or rather like the long distance service that we have come to enjoy with lower rates.

580 My feeling is that I think this is not working very well. I think that the evidence is showing that the capitalization, even with regulatory permission and with access to the copper and fibre optic cabling provided by the base company, that there are disincentives to getting into the field and we are seeing that local service is being provided only in large centres and that it is not going elsewhere.

581 I don't know how much of a price jump you would need in order to attract those people, so I have real concerns that the price cap is -- you could set it higher and it would still not have the intended effect.

582 The reason for this one more of marketing, that it is very hard to attract new customers. I also suspect that there may be some problems in providing the level of service established and the then ex-Stentor-type companies have been able to do so.

583 So unfortunately I don't have much to back this up, but this is my feeling on this.

584 Given the actual raw numbers, I look at these and I go "Well, they are approximately $23.80 now for base rate plus additional cost for EAS". This would increase as much as $3 per month for the five year duration or up the five year duration with a cap of $35 of which only 1.5 per cent of the total income would be reserved for improvement of underserviced areas.

585 Now, I did overhear some of the comments complaining about the lack of service. Well, we are in kind of the same situation, although it is not much better than it used to be with the party lines and basic perhaps service, dial service only. We did not have digital services.

586 Now those have improved over time as our community has grown. However, there is no, you know, DSL or there is very limited DSL available in our community. People are "it is". We don't have it available by cable, we don't have high speed Internet. We are one of those have-nots.

587 Perhaps we would benefit by a subsidy from other larger centres through this over time, but I feel that the amount of money requested, the cap is very high. This represents a 47 per cent increase. While I strongly feel that the telephone company have every right, every entitlement of a good return on their investment, this essentially amounts to a carte blanche of raising rates because I don't suspect they would not inasmuch that I do not believe competitors are going to move into the marketplace to bring this price down.

588 When you remove the justification from based on revenue requirement and when you do not have a requirement for full divulging of the financial statement, I do not know how you can do it other -- you can essentially adjudicate what the price cap should be, up to $35, or whether it should be $32 or $31 or $38. Without seeing those numbers, it is essentially just what they have requested.

589 I just seem to recall very clearly many years ago and this mantra is repeated, that the long term outlook for the telecommunication companies was quite bleak, that they required more money to develop infrastructure, that they were losing their base, that they were losing their long distance revenues.

590 What in fact has happened is that their returns have been very good, that their stock -- that the dividends have been high, that the stock with some modifications have in fact gone up quite considerably over that period of time, that the number of, you know, of fax and -- the number of fax hookups and the number of lines dedicated to all kinds of extras, Internet, fax, second lines, pagers and the amount of servicing which is being sold by the telecommunication companies invites call waiting, call display. There are myriad options now all available essentially a la carte or unbundled.

591 So then the revenues in addition to their base revenue have gone up very dramatically. The number of lines have gone up so dramatically that they have had to introduce all kinds of new area codes. I'm afraid that I don't buy the argument that these increases are necessary.

592 So with that I will just end, other than to say that I believe the CRTC should look more closely at financial statements and require that there be a justification given for the rate increases requested.

593 Thank you.

594 THE CHAIRPERSON: Thank you, Mr. Frinton.

595 MR. FRINTON: Okay. Are there any questions from the panel?

596 THE CHAIRPERSON: No. We don't have any questions. Thanks for taking the time today.

597 MR. SPENCER: The next person is Mairee Gandera from Vancouver.

598 THE CHAIRPERSON: Ms Gandera?

599 MS GANDERA: Yes.

600 THE CHAIRPERSON: Good morning.

601 MS GANDERA: Good morning.

602 THE CHAIRPERSON: Please proceed.

603 MS GANDERA: I'm sorry?

604 THE CHAIRPERSON: You may proceed.

PRESENTATION / PRÉSENTATION

605 MS GANDERA: I just have two brief points. The first one was my concern about the increase in costs of basic telephone service. For example, my September bill -- I'm in British Columbia -- just for a base line, which doesn't include any of the frills or whistles, was $27.66, plus 17 cents for 9-1-1, plus $1.96 for GST, plus another three cents for some sort of government levy, which essentially comes out to $29.82.

606 You know, I really strongly feel that telephones are an essential service and consequently I feel that, you know, that's too much money for that kind of thing. It seems that the competition is all around providing cheap long distance, but nobody is really doing very much in terms of competition for the basic services. That's my first point.

607 My second point is actually a question. I don't understand why in California -- they have a greater population than we have in all of Canada and they don't have ten digit dialling. We have to have ten digit dialling here in British Columbia with a population of approximately four million people.

608 THE CHAIRPERSON: Are you looking for an answer to that question right now?

609 MS GANDERA: At some point.

610 THE CHAIRPERSON: I don't have it. I suspect they have more area codes within the state than we do though.

611 MS GANDERA: Well, we should get more area codes.

612 THE CHAIRPERSON: Do you have anything else, Ms Gandera?

613 MS GANDERA: No. That's it.

614 THE CHAIRPERSON: Okay. Thank you very much for your presentation.

615 MS GANDERA: Okay. Thank you.

616 THE CHAIRPERSON: Bye, bye.

617 MR. SPENCER: The next person, Mr. President, is Jilian Tebbitt from Saturna Island, British Columbia.

618 THE CHAIRPERSON: Good morning.

619 MS TEBBITT: Good morning.

620 THE CHAIRPERSON: Please proceed.

PRESENTATION / PRÉSENTATION

621 MS TEBBITT: This is a statement similar to the letter for those people who have a copy of my letter. My name is Jilian Tebbitt, I live on Saturna Island in British Columbia.

622 The moment I receive notification of yet another rate increase will be the moment I have to consider cancelling telephone service.

623 As a person on a disability pension, it is difficult enough to afford food, so telephone service, while essential to my well-being, will no longer be affordable.

624 The current proposal to raise local service rates to a maximum of $35 by, say, January 2002, will represent almost a 100 per cent increase in my single line service rate in a 20 month period. If future behaviour can be predicated on the past, it won't be long after the $35 has been achieved that Telus will be proposing further increases, particularly as the company has a monopoly on my residential service.

625 In contrast to residential increases, business customers rates are to be constrained to not more than 10 per cent in areas where there is no competition and are unspecified in areas where competition exists.

626 I understand that my single line service rate is being targeted in part to subsidize losses incurred due to developments in computer communications technology. Such technologies are not affordable to people on very limited incomes. The good old-fashioned telephone is our only communications device.

627 It is we who are being held to ransom as victims of private sector choices to squeeze funds from the people who have the least, a logic quite extraordinarily baffling given that companies could get much more money from the folk who have a lot of it.

628 If citizens want and can afford more than one line and other expensive communications technologies, fine, increase the rates on these additional services. As for profit enterprises such as Telus, they are entitled to act without conscience and thus avoid being held accountable for the social consequences of their choices.

629 It is only agencies such as the CRTC which are able to protect the interests of citizens with small incomes in situations such as the Telus rate increase proposals. I ask you to please consider that.

630 Single line residential telephone service is an essential service, essential to personal safety, health and social connection. It is the only affordable lifeline of communication for all Canadian citizens.

631 If any subsidy is appropriate, it is a subsidy to maintain single line residential service at an affordable minimum. $35 per month is far too much, particularly in my area of the Gulf Islands in British Columbia where any call to the mainland is subject to long distance charges.

632 The choice to protect this lifeline service is in the hands of the CRTC.

633 That's it.

634 THE CHAIRPERSON: Thank you, Ms Tebbitt, for your presentation today and your written submission.

635 MS TEBBITT: Okay. Thank you.

636 THE CHAIRPERSON: Bye, bye.

637 MS TEBBITT: Bye, bye.

638 MR. SPENCER: The next person is Doreen Gee from Victoria, B.C.

639 THE CHAIRPERSON: Good morning, Ms Gee. Ms Gee? Ms Gee, are you there? Ms Gee?

640 MS GEE: Yes.

641 THE CHAIRPERSON: Good morning.

642 MS GEE: Good morning.

643 THE CHAIRPERSON: You may proceed.

PRESENTATION / PRÉSENTATION

644 MS GEE: Yes. Can I ask you, is this being recorded at all or --

645 THE CHAIRPERSON: Yes, it is.

646 MS GEE: Oh, that's good. I want it to be recorded. Yes.

647 Now, will I be asked questions along? I have a text. Can I speak without interruption?

648 THE CHAIRPERSON: You may proceed. We won't be interrupting you with questions.

649 MS GEE: Great. Thank you.

650 THE CHAIRPERSON: We want to hear from as many people as possible, so we are asking very few questions.

651 MS GEE: Thank you very much. Okay. I will proceed.

652 I am a Telus customer here in Victoria, B.C., and I am totally and strongly against any further fee increases for two reasons. I believe the territory should be frozen until Telus improves their service to customers.

653 I am opposed to any further increases for the following two reasons. Reason number one, I am on a fixed income myself. I cannot afford any more increases on my bills.

654 In the past four months there has been two increases already. I have had a $2.15 increase and then for -- and that was retroactive until May. Then there was one for 66 cents which was a charge for 9-1-1 which I don't even use anyway.

655 I have already had a $3 -- almost $3 increase in my bill already in the past four months. I am angry and fed up with this. I cannot afford to pay any more to Telus.

656 If they increase their rates at $3 per year which they propose to do in their notice to customers to $35, I simply will not be able to have a phone, period. I think that phones are very -- I mean I am going to have a hard time surviving without a phone, quite frankly. I might need a phone and I won't be able to afford it if they keep increasing the cost.

657 I feel that Telus is being socially irresponsible. They are not caring about people that are on fixed and low incomes, but they are giving concessions to businesses if there is no more than 10 per cent on this notice to customers.

658 They are giving some breaks to businesses, but they are not giving any breaks to those of us on fixed incomes. I believe this is what I call discrimination because it means that people that can afford to have a phone are going to be able to continue having a phone whereas those of us who can't are not going to be able to have one.

659 It seems as though this is a service that is becoming more and more for those that are well off and that's not fair to those of us who are not as well off.

660 Also, the way that Telus is doing this shows a disregard for those on low income -- on fixed incomes. For instance, why should I subsidize someone else's service when I can hardly afford to pay for my own? I think this is a case of the poor subsidizing the rich. It makes no financial sense to me at all.

661 I probably have less money than people in underserved and unserved areas and why should I subsidize them? This does not make sound business sense to me. I just happen to live in a high density area right now with a high cost. I happen to live in this area.

662 Like it's a $2.15 increase. I paid more because I am in this area whereas my income is probably a lot less than people in lower density areas but who can probably afford to pay the increase more than I can.

663 I am tired -- I am very angry and tired of subsidizing other people's telephone service and also this 9-1-1 service which I don't even use. I think I should pay for that if I am using it, but not for other people. I can't afford to pay for other people's service.

664 To me what Telus should do to make this fair is to make it income contingent. They should provide a means test and you should pay according to your income level. That would make it fair, to me anyway.

665 Also, you know, they should try and make the system more fair. Also TELUS is obviously making profits -- I mean they are a large company -- why they can't they use their profits to pay for the extra services in under-served and unserved areas instead of trying to make people like me pay for other people's service, which is not fair at all. I think this is a form of -- to me it's a form of financial discrimination against those that can't afford this service. And it seems like a dishonest tactic by TELUS to do this that they ask me to subsidize somebody else's phone.

666 So I think that TELUS should pay for service in under-served areas and they should give concessions to people on fixed and low incomes so that we can afford this. If you can't afford to pay it, you shouldn't have to pay it and they should give us increases according -- contingent upon our incomes.

667 Now, the second reason, which I think is even more important than that, is that I believe absolutely that TELUS does not, and I repeat, not deserve to get more money from me or any other customers. They have not earned that right. I have had a terrible time with TELUS as a company as a customer. TELUS has treated me with cruelty, a lack of respect and dishonesty. Also their service and equipment is very inadequate.

668 I think they should clean up their act and improve their service before they charge any more money. To me, when there is no improvement in service, when it gets worse all the time, why should I be paying them more money.

669 I believe, this is my belief, I think they should be held accountable by the CTRC or somebody. I think that TELUS should clean up its act and improve its service before they charge -- start to charge people more. It's like they constantly want more and more money but they are not willing to do anything for it.

670 I will be quite honest in this conversation. TELUS is the most hateful, inhumane and cruel corporation I have ever dealt with in my whole life and I am not alone in how I feel. There have been many letters to the editor here in Victoria about bad treatment by TELUS. And there is a place in Victoria called the "Open Door Ministry" that deals with people on fixed incomes, and the staff there have told me that many of their clients are treated and quoted horribly by TELUS.

671 To give you some examples of what I mean -- my own particular situation -- I have experienced inhumane treatment to the point where I am considering legal action against the company because I can't take any more. In 1998, TELUS decided to cut off my service for a day because I had a disagreement with one of their staff on the phone. I was given no notice of this cutoff. I was told the morning it was done. No reasons in writing.

672 At that time I had a close relative of mine in hospital in Vancouver. I was not able to phone them and I needed to and I told TELUS that I needed to phone. They did not even care at all. They, and to add insult to injury, they sent me a bill, charged me for the day that I had my service cut off.

673 So that was the most, I think, the meanest, the most cruel treatment I have ever had from anybody in my whole life. As far as I'm concerned, what they did was broke the rules of their terms of service and it was illegal.

674 The second incident, after 20 years of service with TELUS, I came over to Victoria to reconnect from Salt Spring Island, and after a 20-year history, I -- they were too -- TELUS staff were too lazy to look into my history and they were not even willing to look into my credit history and they forced me to get a co-signer to sign up with them. I asked them to look at the 20 years of excellent credit history and they refused to do so.

675 The third example is a week ago when I got my last bill where they -- and a previous bill where they keep on making more and more errors. On my bill are mistakes. Charge me for conference calls I'm not making. When I phoned them last week and told them, the first person I talked to would not listen to a word that I said. She was incredibly rude. The second person accused me of trying things -- she told me she didn't believe me. She made a verbal attack on my honesty and I'm very angry about that because I'm an extremely, totally honest person.

676 When I phoned them, there were errors by TELUS and that was the truth and a fact. Then she gave me a credit and then she took it away from me and she wouldn't even give me her name. So the service is absolutely terrible.

677 Also I believe TELUS' tactics are dishonest and unethical. This $2.15 increase that I received in my bill in June, there was no previous notice of it. It was a complete shock and they made it retroactive to May the 7th. These to me are unethical tactics.

678 As far as I'm concerned, this is a deliberate device by TELUS to get as much money as they could. They deliberately did not tell people they were going to do this and they made it retroactive to get as much money as they could. Any other business that did that would not last a day in this, you know, our society. Any other business that did these kinds of things to people would not last at all.

679 It's only because TELUS is a monopoly that they can do these things and I think they abuse their power. I think TELUS abuses its monopoly.

680 And the third and last thing, is their inadequate service and inadequate equipment. Twice their equipment has made a mistake with my phone. It says I'm -- they say I am making conference calls when I'm not. Their equipment is obviously malfunctioning and not working properly. Their computers are not working properly. I think they should improve their equipment and service before they charge people any more money.

681 And also, as far as customer service, it is absolutely impossible to complain to TELUS, to anybody -- to anybody about my concerns. Every time I phone their customer relations, I get switched back to their regular staff. There is no separate office to take complaints to. There is nobody -- there is no recourse for complaints.

682 To give you an example of a company that does have, you know, a good system it's the Bank of Commerce. It has a Customer Care Centre and an ombudsperson. I think that TELUS needs to have a Customer Care Centre or a separate office people -- that we can phone and get a person right away about concerns because right now there is nothing. There is nobody I can even talk to and I think it's a good idea to have an ombudsperson at TELUS an independent agency to review what is going on. Because there are things going on at TELUS which are really not good towards customers.

683 To conclude, I think that TELUS should be forced to improve its customer service before they demand any more money out of any of us. I really think that TELUS is the worst corporation I have ever dealt with. They seem to be -- they are greedy. They want more money, more money all the time but they are not willing to do anything for it. They also don't seem to care about the people that they serve and I don't think they should get an increase until they clean up their act.

684 I also think that there should be an investigation into how TELUS operates, you know, what they are doing, how they treat people. I also think it might be a good idea to do a customer survey of all customers, you know, in B.C. and see how we, you know, give us a chance to write down how we feel about that company and they should -- TELUS should be held accountable and improve its service before they demand any more increases out of any of us.

685 I think -- I really do think that TELUS because they have a monopoly on residential service, it's becoming -- they are just becoming such a monster of a company, you know. They are just -- they really abuse their power and abuse this monopoly. I think it's time that they were held accountable.

686 And I would like to see sometime CRTC or whatever opening up competition for other residential services like AT&T. I would like to have a choice of companies. I don't like dealing with TELUS. I would like to have a choice of another company to deal with, quite frankly.

687 But I do believe the bottom line here is that their customer service is terrible at TELUS. I can't afford their increases and I think they should be held accountable for all this. I think they should be forced to clean up their act and to improve their service to people before they ask for any more money out of me. So that is essentially how I feel.

688 THE CHAIRPERSON: Thank you, Ms Gee.

689 MS GEE: Okay.

690 THE CHAIRPERSON: And I assure you, you won't be charged for this conference call.

691 MS GEE: Oh, thank you. And what is your name again, please.

692 THE CHAIRPERSON: David Colville.

693 MS GEE: My comments are going to be recorded and taken seriously?

694 THE CHAIRPERSON: They have been and will be.

695 MS GEE: Thank you very much, Mr. Colville.

696 THE CHAIRPERSON: Thank you very much.

697 MS GEE: Bye-bye.

698 M. SPENCER: La prochaine personne est Gille LePage, Administrateur, Le Village de Balmoral au Nouveau Bunswick.

699 THE CHAIRPERSON: Good afternoon, Mr. LePage.

700 M. LePAGE: Bonjour.

701 THE CHAIRPERSON: Please proceed.

PRESENTATION / PRÉSENTATION

702 M. LePAGE: Bonjour, monsieur le président.

703 Le Village de Balmoral c'est une petite communauté francophone de 1 975 habitants. On est situés au nord du Nouveau-Brunswick et fiers de son caractère rural.

704 Télécommunications Aliant vous a déposé une demande visant un cadre tarifaire qui lui permettrait, entre autres, d'imposer des tarifs plus élevés aux abonnés de son service téléphonique local qui vivent dans les collectivités rurales.

705 Le Conseil municipal considère cette pratique injuste, qui ne doit pas être permise par le CRTC. Non seulement les résidents, mais aussi les quelque 125 PME de notre village se sentent négligées et oubliées tant par les grandes entreprises que par les instances provinciales et nationales.

706 Il n'est pas tolérable que tous les habitants d'une même région, d'une même province ne soient pas traités équitablement.

707 Déjà défavorisés géographiquement et éloignés des grands centres urbains de notre province, le Village de Balmoral considère la demande d'Aliant irrespectueuse de son engagement afin de desservir sa clientèle sur une base régulière.

708 L'absence de tour de captation pour les téléphones cellulaires désavantagent les entreprises de notre région. Il n'est pas rare de voir une personne avec un téléphone cellulaire portable, un télé-avertisseur et même un téléphone fixe dans sa voiture afin de rejoindre ses clients, ses fournisseurs et même sa famille.

709 De plus, certains services tels Vibe, connexion Internet à haute vitesse, ne sont toujours pas disponibles dans notre région. Encore une fois Aliant néglige une clientèle qui lui a pourtant été fidèle depuis le tout début.

710 J'ose aussi blâmer en partie le CRTC pour son manque de leadership et son absence aujourd'hui en Atlantique. Vous venez de démonter à Télécommunications Aliant que les petites régions peuvent se passer des services personnels des grandes agences ou corporations.

711 Sachez que votre décision affectera la coeur et surtout le portefeuille des vaillants citoyens de Balmoral et les villes et villages avoisinants.

712 Mon intention aujourd'hui ne se veut pas une lamentation mais un cri à l'équité et au respect des communautés qui ont su, et continuent de contribuer au développement économique et social de leurs régions et de leurs provinces.

713 Monsieur le président, je vous remercie de m'avoir écouté et sachez que le cinq dollars additionnels par mois qu'Aliant propose de nous imposer est maintes fois plus difficile à gagner dans les régions urbaines comme la nôtre. Les statistiques régionales le démontrent très bien et je vous en fait grâce ici aujourd'hui.

714 Encore une fois merci et bonnes délibérations.

715 LE PRÉSIDENT: Merci, M. LePage.

716 MR. SPENCER: The next person --

717 THE CHAIRPERSON: Mr. Secretary, just for the benefit of those in the room and anybody on the line who can hear, I understand we have three more callers in the cue on the line. So we will hear those three callers and then we will take our lunch break until two.

718 Mr. Secretary.

719 MR. SPENCER: Thank you, Mr. President.

720 The next person on line is Mr. Jim Ervin from Burnaby, B.C.

PRESENTATION / PRÉSENTATION

721 MR. ERVIN: Yes. Well, I don't really have too much to say about this issue, the raising of phone rates, especially since I must suspect that the results of the hearing have already been predetermined and this is not really a conference kind of a call it would seem anyhow just, I believe, a message situation.

722 But I can only urge TELUS then not to raise phone rates for the people who can least afford to pay them. The underemployed, such as myself, and unemployed. For God's sake have some regard to a person's income level here. Tomorrow, in fact, I'm scheduled to go to the Social Assistance office.

723 Now, TELUS has already tacked on so many extra charges for every service they provide. They are making the phone service into a circus sideshow here where everything is a game that costs extra. Just the other day, in fact, I made a call from a public pay phone and the line was busy and I didn't even get my quarter back. Now, we always used to be able to get your quarter back when the line was busy in a public phone. So this is the kind of thing that just destroys a person's respect for their own public phone company.

724 So if you make this increase to the people that can least afford it, well you can be sure it will just cause further resentment and well cynicism, I think, is the better word -- complete cynicism for TELUS. So please I urge you to have some regard for a person's income level, which I'm sure you can easily determine by income tax records before you tack on that increase to everyone. So that would be about all I have to say on that issue.

725 THE CHAIRPERSON: I thank you very much, Mr. Ervin, and I want to say that the issue was not predetermined and neither we nor TELUS have access to your income tax records.

726 MR. ERVIN: Well, I'm surprised that anyone is even listening to me to hear that much. Well, at least in my case, you know, I am not able to afford such increases.

727 THE CHAIRPERSON: Okay. We thank you again.

728 MR. ERVIN: Okay.

729 THE CHAIRPERSON: Mr. Secretary.

730 MR. SPENCER: The next person on line is Mr. Charlie O'Shey from B.C.

731 THE CHAIRPERSON: Good morning, Mr. O'Shey. Mr. O'Shey?

732 MR. O'SHEY: Yes?

733 THE CHAIRPERSON: Good morning.

734 MR. O'SHEY: Good morning, sir.

735 THE CHAIRPERSON: Please proceed.

PRESENTATION / PRÉSENTATION

736 MR. O'SHEY: I'm calling concerning the pensioners, the aged, the welfare and the unemployed in our area, specifically the poor classes of our society who I fear will not be able to have the protection or the privilege of having a telephone in the future for their health and their personal support, and especially if the rates continue to escalate.

737 BCTel, TELUS has been downsizing constantly for years and deregulating at our expense and I would assume that a corporation like TELUS would allow some compassion on those with low or poor incomes. They seem to be progressively profit hungry.

738 Also they could possibly allow by supporting some kind of service charges exclusively to the local area support and eliminate the support of outside areas which most of these people would avoid anyway.

739 Even the present rates are becoming a serious problem and they are having to choose between money for food and a telephone. I say this because this is due to my experience with these people. It seems the constant rate of increases are designed for the upper middle classes and the wealthy and not those that I am concerned about.

740 The government, both federal and provincial, of course, have cut back services to these people as well in favour of more corporate support and I am sure will contribute to many future disconnects if there is not something done about that.

741 It is a serious problem and I imagine it's not just in British Columbia but probably all over Canada to those mentioned earlier who are under siege to exist today. Therefore, we must insist that there rates not be increased any more and if not there will be a lot of disconnects, we feel, grave suffering, and even in some cases possible loss of life.

742 So I take that the CRTC will take all of this under consideration and have some scrutiny with the TELUS people, the telephone people.

743 Thank you very much for your time, sir, and God bless you all wherever you are.

744 THE CHAIRPERSON: Same to you, Mr. O'Shey, and thank you.

745 MR. O'SHEY: Yes.

746 MR. SPENCER: The next person on line is Mr. John Kerr from British Columbia.

747 THE CHAIRPERSON: Good morning, Mr. Kerr.

PRESENTATION / PRÉSENTATION

748 MR. KERR: Good morning. I'm beginning to feel a little bit like Muhammad Ali with a cauliflower ear here.

749 My name is John Kerr. I'm speaking to you from the Tatlayoko Think Tank in Tatlayoko, B.C. The TTT is a small business partnership specializing in community development, research and public advocacy. Currently the TTT is a registered participant to the framework for the expansion of local calling areas.

750 Fourteen businesses, individuals and organizations from the West Coast of Vancouver Island to Prince George, B.C. have now joined the group of organizations which we represent in these proceedings.

751 The central purpose of the price cap review is to establish a price regulation regime for the major incumbent telephone companies beginning in 2002.

752 TELUS in its submission states that it supports the Commission's determination to continue to subsidize residential service rates in high-cost areas and seeks a regime that will allow residential rates not receiving explicit contribution to approach market levels while remaining affordable.

753 To address affordability, TELUS proposes that residential local exchange rates, including EAS, not increase by more than $3.00 per month, per year, and that no residential basic exchange rate, including EAS, exceed $35 per month. However, TELUS may request a rate of greater than $35 in a high-cost band if communities request expansion of their existing calling areas. This is not good news for residents of the Cariboo regional district where EAS here have recently been erupted by the Commission's expansion of local service hearings.

754 TELUS states that the contribution regime has been restructured and most recently the rebanding decision to reset band structures to identify high-cost areas prescribed on bundled loop costs and set rates for unbundled loops. With all these measures in place, TELUS believes the Commission can and should expect that local competition will intensify.

755 Herein lies the rub. The Commission has lowered long distance rates for residential and small business subscribers and is generally raising local phone rates. The Commission has done this to increase the level of competition in the telecommunications market. The rationale is to create the most favourable conditions for the development of new information and communications services.

756 Local phone rates are back in the news. That's because the telcos are asking the Commission to approve big increases over the next four to five years.

757 The British Columbia Public Interest Advocacy Centre of B.C., PIAC, in a recent backgrounder on the price cap hearings points out that at the same time TELUS and Bell are earning huge profits in 2000, TELUS made 27 per cent on local service, way above the 11 per cent return considered reasonable by the Commission in 1997-98.

758 B.C. PIAC goes on to say that under the law rates must be "just and reasonable". Rates are not just and reasonable when they result in excessive profits to shareholders as they have over the past few years.

759 The telcos want to charge more in rural areas than in cities because it costs them more to serve rural areas. Right now rural rates are subsidized by urban rates so that in most places we all pay about the same rate for the service. As telephone company costs decline, however, the subsidy is being gradually being eliminated. B.C. PIAC states that one of the reasons that companies give for increasing local rates is to get more competition, but competition is supposed to mean lower prices for consumers.

760 The CRTC performance report for the period ending March 31, 200 states that one of the Commission's priorities is to ensure that Canadians living in remote and rural areas have access to high-quality communication services at reasonable rates.

761 The report says that Canadian long distance traffic has grown an average of 12 per cent a year since 1995. Consumers are not benefitting from reasonably priced packages such as monthly flat rate packages offered by several carriers. That's for those who can access the competition.

762 Lower rates, the Commission says, can be attributed to competition as well as to a substantial decline in transmission costs resulting from improvements in fibre optic technology. I remind the Commission that in many rural areas throughout B.C. the fibre loops are in place but without competitive access to its benefits, the benefits are few and far between.

763 In most areas of Canada, basic local residential service is priced below cost. Contributions charges were first introduced with the advent of long distance competition in 1992 to ensure that an adequate source of subsidy was available to maintain affordable basic local service.

764 Over the past several years, the rate of increase in the price of telephone services has generally remained below the rate of increase in the consumer price index. Furthermore, the national penetration rate of telephone services over one of the measures the CRTC uses to monitor affordability has been in excess of 98 per cent over the past few years.

765 The TTT reminds the Commission that a Statistics Canada survey used to get this data, however, does not measure penetration rates for Indian reserves, and so the use of these statistics may not present an accurate portrait. Over 54,000 people live on reserve in B.C. and the population is growing rapidly. The unemployment rate is these communities can average 60 to 90 per cent. Telephones are expensive luxuries if you don't have a job. However, I digress.

766 The Commission is confident that its decision will give more Canadians access to the knowledge-based economy of the future. Its decisions are to promote the government's agenda of connectedness and help more Canadians mover forward into the information age.

767 In its decision, Changes to the contribution regime, the Commission established a subsidy mechanism where incumbents and competitors will be compensated for providing residential local service and possibly business service in high-cost areas.

768 The Commission believes that the subsidy should deliver incentives for competitive entry in these areas.

769 In a June 2000 speech, John Manley, the then Minister of Industry, spoke of competition regulation and targeted programs. He said, and I quote:

"We must strike the right balance between the need for competition and the need for access to high-quality affordable service. In some regions, the market alone will not provide high-quality services at affordable prices. In the past governments relied on telecommunications monopolies to reach these objectives. The CRTC allowed telco monopolies to set high prices for long distance, business and optional services. In that way, the telcos could price basic service, basic local service, below cost. Then in 1992, the CRTC opened long distance service to competition and prices dropped dramatically. They are now among the world's lowest".

770 End of quote. He goes on to say that:

"Competition has been good for Canadians, but to ensure that competition continues and that all Canadians have access the regulatory environment has to be right".

771 In closing, Mr. Manley said:

"Timely decision-making will go a long way to reestablishing confidence in the regulatory environment in Canada. Ensuring that rural and remote communities have access to a dense telecommunication service is an important objective. The CRTC's decisions will help make it possible for all Canadians to access the Internet and I am convinced that we are on the right track with the right balance of competition, regulation and targeted programs." (As read)

772 In closing, contrary to what the Commission, the Minister of Industry and TELUS say, competition has not arrived in rural communities in B.C. The government's agenda of connectedness to help more Canadians move towards the information age is not working in rural B.C., particularly if government is to fulfil its promise of some sort of broadband access into all Canadian communities by 2004.

773 The background report to the National Broadband Task Force, submitted by the Royal Secretariat states -- I quote:

"The digital divide between rural and urban Canadians is increasing. Connectivity to the Internet and use in rural Canada is lower than in urban Canada and the gap, the digital divide, is actually widening, particularly in rural and remote areas". (As read)

774 Rural communities in B.C. are a haemorrhaging population. The fish are gone and the U.S. tariff on softwood lumber has served to put even the Province of B.C. on notice that single industry towns are not sustainable in the information age.

775 Over the past few years the Coast Cariboo Chilcotin region of B.C. has been the recipient of much federal funding. HRDC's Office of Learning Technologies and Industry Canada's Community Access Program, CAP, have provided real and in-kind contributions totalling over $1 million. The premise of these funds is connectedness. To what end, if we cannot afford to connect and if there is nothing to connect to?

776 Ten years is a long time to wait for competitive long distance service to arrive. It is not here yet. Who knows how long we will have to wait for a competitive local service.

777 Therefore, until competition arrives in rural B.C. we urge the Commission to use the high cost subsidy to offset the telcos demands for fully compensatory rates from rural areas.

778 We ask the Commission consider that the balance of regulation that Mr. Manley speaks of is not right yet, and until it is the Commission is obliged to act.

779 Thank you very much.

780 THE CHAIRPERSON: Thank you, Mr. Kerr.

781 MR. KERR: Do you have any questions of me before I hang up?

782 THE CHAIRPERSON: No, we don't.

783 MR. KERR: All right. Thank you again for allowing me to participate in this. I am pleased that this could happen this way. It is a long way to Ottawa.

784 Bye-bye.

785 THE CHAIRPERSON: Thanks a lot.

786 And our final caller, Mr. Secretary?

787 That was it?

788 MR. SPENCER: Yes.

789 THE CHAIRPERSON: Okay. We will adjourn then until 2:00 p.m. and we will hear from the remaining callers.

--- Upon recessing at 1250 / Suspension à 1250

--- Upon resuming at 1403 / Reprise à 1403

790 THE CHAIRPERSON: Order please, ladies and gentlemen.

791 We will return to our proceeding now, the portion where we are providing an opportunity for the public to comment on the issues before us.

792 I believe we have about seven or eight more people who had registered to call in, Mr. Secretary.

793 MR. SPENCER: We have eight people left who are registered. We have eight --

794 THE CHAIRPERSON: Eight people.

795 MR. SPENCER: -- people, yes.

796 THE CHAIRPERSON: Just to give the folks in the room a bit of a heads up as to where we will go through the afternoon, we will hear from the eight people who have called in, or however many we have.

797 Then we will take a short break and we will turn to the first panel, which will be the company's Panel 1, and the first party to cross-examine, which will be ARC.

798 With that, Mr. Secretary, we will turn to the next person calling in.

799 M. SPENCER: Merci, monsieur le président.

800 La prochaine personne est M. Montreuil de Charlesbourg, Québec.

PRÉSENTATION / PRESENTATION

801 M. MONTREUIL: Bonjour, monsieur le président. Bonjour, mesdames et messieurs les membres du Conseil.

802 J'aimerais presser deux points. Premièrement, je ne reprendrai pas en détail, évidemment, le mémoire que j'ai fait parvenir au Conseil étant donné que je pense que le Conseil a eu l'opportunité de le lire ou d'en prendre connaissance, de même que je ne poserai pas non plus de diagnostic sur la qualité du service de Bell Canada car je pense que tout le monde peut être d'accord que le service au niveau de la qualité technique de Bell Canada est pour ainsi dire impeccable.

803 La question que j'ai soulevée porte spécifiquement sur la question de l'augmentation du tarif du service de base et sur les conséquences pratiques qui en découlent. Si je me permets de faire une historique c'est pour comprendre la problématique. Lorsque vers la fin des années 80 Bell Canada était une entreprise très prospère il faut se rappeler qu'à cette époque Bell Canada était une espèce de compagnie de portefeuilles qui avait à peu près une quarantaine de compagnies ou de filiales dont la plus connue était, évidemment, Nortel.

804 Lorsque Bell Canada a procédé à sa restructuration, à la fin des années 80 et début des années 90, qu'est-ce qui est apparu à ce moment-là? C'est que Bell Canada la riche est devenue d'une certaine manière Bell Canada la pauvre parce qu'il y a eu création d'un nouvel holding qu'on connaît sous le nom de Entreprise Bell Canada, ou Bell Canada Enterprise, selon le terme qu'on veut utiliser, qui maintenant possède l'ensemble des filiales incluant, entre autres, Bell Canada ce qui a fait en sorte que Bell Canada en pratique est devenue une compagnie qui n'avait plus que d'autres ressources que les profits ou les revenus générés par le service téléphonique.

805 A partir du moment où au début des années 90 le Conseil a pris comme décision de déréglementer l'industrie des télécommunications, l'impact majeur a été de faire en sorte que ce qui assurait d'une certaine manière les revenus de Bell Canada, à savoir entre autres le service de base sur lequel Bell Canada avait une exclusivité territoriale et les revenus de l'interurbain, on a assisté surtout à une baisse énorme des revenus provenant de l'interurbain.

806 Comment? Parce que, évidemment, à partir du moment où le Conseil a ouvert la porte de la déréglementation au niveau de l'interurbain, les grandes compagnies étrangères, ne serait-ce que penser qu'à AT&T et d'autres, se sont lancées sur le marché canadien et sont allées chercher évidemment les plus gros clients, ceux qui avaient les plus gros volumes, ce qui a, par conséquent, privé Bell Canada d'un revenu quand même relativement important.

807 Comme Bell Canada n'avait plus le profits de ces filiales, évidement -- et comme moi je l'avais prévu dans le temps -- le coût de base a plus que doublé depuis le début des années 90. Si on regarde la demande que Bell Canada fait présentement au Conseil c'est une demande qui vise à continuer à augmenter le tarif de base alors que pourtant le téléphone devrait être considéré comme un service essentiel et devrait être un petit plus réglementé sur ce point.

808 Je suis d'accord que si on soulève la question plus en profondeur, qu'on pose la question sur les revenus de Bell, à partir du moment où le Conseil de par sa décision du début des années 90 a ouvert la porte à la déréglementation, le Conseil se trouve en même temps à avoir coupé à Bell une partie de ses revenus qui pouvaient provenir des entreprises pour renvoyer le fardeau principalement sur les services locaux, qu'ils soient d'un niveau résidentiel ou de niveau commercial.

809 Donc mon commentaire, entre autres, que je portais et sur lequel je me posais des questions, c'est à quoi servait la politique du Conseil si ce n'est que de forcer d'une certaine manière Bell à demander sans cesse de nouvelles hausses de tarif? Et c'est là qu'on se trouve à poser le noeud du problème. Est-ce que la politique du Conseil n'a pas eu comme effet de faire en sorte que Bell Canada soit maintenant obligée de facturer le service de base sans cesse à un niveau de plus en plus élevé pour faire en sorte d'assurer en quelque sorte la pérennité, si on veut, l'existence de ce service de base.

810 C'est là que je trouve déplorable -- et évidemment maintenant Bell Canada a beau jeu de dire au Conseil, "Vous savez, depuis votre politique de déréglementation nous n'avons plus le choix, nous devons sans cesse refacturer de plus en plus cher aux clients". Bon.

811 J'avais également mentionné dans ma lettre deux autres points en particulier. Un des points étaient sur le fait -- ç'a été repris d'ailleurs dans les émissions La Facture et J+E -- qu'en permettant également la déréglementation au niveau local on a eu comme impact certains secteurs résidentiels mais situés en banlieue, des fois en banlieue éloignée d'une grande ville, ne sont pas desservis par Bell Canada parce que Bell dit, "Je ne suis plus obligée de vous desservir. Vous pouvez vous procurer votre service auprès de n'importe quel fournisseur", mais aucun autre fournisseur n'est intéressé à desservir une dizaine de maisons au bout d'un développement résidentiel.

812 Donc cela a comme impact que Bell Canada n'est plus obligée de développer ces secteurs périphériques. Notez bien que dans mon cas la question ne se pose pas. Je suis en plein centre-ville, mais je trouve ça déplorable. J'ai encore trouvé encore davantage déplorable lorsque la représentante de Bell Canada qui a donné son entrevue sur les ondes de la télévision a dit, "Bien écoutez, le service téléphonique n'est pas essentiel dont les gens peuvent s'en passer". Ça c'est une notion que je trouve déplorable.

813 Je considère personnellement qu'on est rendus quand même au 21^e siècle, que le service téléphonique est un service essentiel que ce soit pour rejoindre les services d'urgence comme le 911, donc pour la police ou pour les pompiers, et également pour les ambulances et autres choses. Je pense que cette notion-là de services publics doit faire partie de toute décision que le Conseil aura à faire, à rendre au cours des prochaines semaines ou des prochains mois.

814 C'est là que d'une certaine manière je me trouve à reposer la question au Conseil : Est-ce que la politique qui est actuellement celle du Conseil à savoir de permettre une déréglementation que je pourrais qualifier de tous azimuts n'a pas pour effet de dé-responsabiliser Bell Canada d'un côté face à son obligation de services publics, et de l'autre côté permettre en même temps à Bell de dire, "Vous m'avez coupé ma principale source de revenu qu'est l'interurbain" et à ce moment-là d'obliger Bell Canada à se présenter devant le Conseil en disant, "Vous m'avez tellement coupé les sources de revenus que je suis obligé de venir taxer les personnes les plus démunies en augmentant les tarifs".

815 Vous pourrez également, si vous constatez ce dont j'ai parlé dans ma lettre, deux autres points que j'avais soulevés, à savoir d'un côté le salaire du président et le congé de Mme Massé pour le recours à la sous-traitance massive au niveau des téléphonistes et des employés de réparation.

816 Évidemment on va me répondre tout de suite -- et ça je sais que Bell Canada va me le reprocher -- que M. Monti n'est pas seulement le président de Bell Canada. Il est plutôt président de l'Entreprise Bell Canada. Mais c'est toute la question des filiales que j'ai exposée tantôt. Mais ce que M. et Mme tout le monde retient c'est qu'un président qui a un salaire -- tous revenus confondus, que ce soit salaire, honoraires, primes, présence au Conseil d'administration ou gains sur actions, tout ce que vous voulez -- de 17 millions et cette années c'était de 47 millions.

817 Moi je trouve ça déplorable pour des gens qui ne peuvent pas se payer le service téléphonique au tarif minimum qui existe.

818 Le deuxième point, c'était comment au nom du service public et au nom de cette même rentabilité financière on a d'un seul coup mis de côté des milliers de téléphonistes et de techniciens en réparation pour leur dire, "Formez-vous des filiales ou allez travailler dans des filiales à salaire moindre parce que Bell Canada n'a plus les moyens de vous payer tout ça évidemment à cause de la décision du CRTC qui nous a coupé les revenus provenant de l'interurbain".

819 Je trouve qu'il y a une situation que je pourrais qualifier de malsaine, malsaine dans le sens que le CRTC renvoit la balle à Bell Canada en disant, "Faites le mieux que vous pouvez", et Bell Canada dit, "Avec les revenus que vous nous avez coupés il faut qu'on charge ou qu'on facture davantage nos clients".

820 C'est là que mon intervention se veut en disant ne serait-il pas temps que Bell Canada se repose des questions sur la politique qui a été adoptée pour faire en sorte que la demande de Bell Canada ne soit pas ou ne passe pas automatiquement. D'ailleurs Bell Canada, dans sa demande d'augmentation de tarif, précise que ça ne devrait peut-être pas dépasser, peut-être pas dépasser le taux d'inflation, mais que dans certains cas ça pourrait le dépasser.

821 Je me pose des questions à ce moment-là sur la notion de services publics et sur le contrôle que le Conseil devrait exercer sur Bell Canada.

822 C'est pour ça, monsieur le président, mesdames et messieurs les membres du Conseil, que je pense que le Conseil devrait sérieusement remettre en cause les politiques actuellement adoptées et regarder la question du téléphone comme était un service public et que vous devriez purement et simplement prendre les mesures nécessaires pour faire en sorte que la demande qui est faite devant vous ne soit pas acceptée telle quelle.

823 C'est là qui est toute la problématique que je soulève et que je pense que le Conseil devrait s'asseoir et se poser la question : Est-ce que la demande de Bell Canada est non seulement justifiée selon les circonstances, mais est-ce que la politique du Conseil est actuellement la politique la plus appropriée compte tenu de l'accessibilité du service téléphonique à tout le monde.

824 C'est tout ce que j'avais à dire. Je remercie le Conseil pour l'attention qui m'a été accordée.

825 LE PRÉSIDENT: Merci, monsieur Montreuil.

826 M. MONTREUIL: Je vous remercie infiniment.

827 MR. SPENCER: Mr. Chairman, we have Mr. Charles Cruden, Volunteer of Issues Committee of Manitoba Society of Seniors on line.

828 THE CHAIRPERSON: Go ahead, Mr. Cruden.

PRESENTATION / PRÉSENTATION

829 MR. CRUDEN: My name is Charles Cruden and I am a Manitoba Society of Seniors Issue Committee volunteer. MSOS wishes to take this opportunity to thank the CRTC for the opportunity to participate in this teleconferencing on the price cap review that is now being heard.

830 I will keep this message short as I, like a number of our people that MSOS represents, am as short as individuals' finances are short of funds to maintain basic telephone service. All Manitobans have been seeing significant increases in their basic telephone expenses in recent years. Manitoba's MTS residential customers have seen basic telephone costs increase far greater than increases in the cost of living.

831 To support this statement, Statistics Canada produces information that verifies that from 1992 to 1999 average weekly earnings in Manitoba increased 11.1 per cent and telephone service between 1992 and 2001 increased 29.5 per cent, a percentage increase that is larger than any other Canadian province.

832 To be blunt, the cost of basic telephone service in Manitoba has far exceeded income increments. Many 55+ Manitobans have expressed their concern for the ability to continue to afford their basic residential telephone, a household item that they consider a required necessity in today's world for health and personal safety requirements.

833 For many pensioners and other Manitobans on fixed and low incomes, the thought of having to consider a monthly 30-dollar basic expense for telephone is devastating. Many are put in the position of having to choose between necessities of life such as food, medication, clothing, et cetera, and having a telephone in their residence.

834 The justification of comparable or higher costs to rural customers has to be questioned in view of the lack of comparable services available to urban customers if for no other reasons, one, the difference in the number of potential calls that can be made from urban telephones without long distances charges.

835 Two, costly daytime long distance rates that are forced on rural people to medical and other facilities in areas outside of their immediate calling area due to hours that these necessary facilities are available to receive calls.

836 Three, competitive Internet servers, available in urban areas that is not available in rural areas without incurring long distance expense.

837 Four, availability of service personnel in rural areas in the event of a problem with an individual's telephone service.

838 Those are only four points that question comparable service for comparable costs. If and when all Manitobans have comparable and available high quality of service, it is reasonable that equality in cost of basic service should be considered.

839 Manitobans have little or no opportunity for a competitive market from which to obtain their basic residential telephone service. MTS is it. Without competition, there is no opportunity to question what the actual cost of a basic telephone is -- MTS, as it is, $30 to $35.

840 Manitobans are forced to accept the statement, but it does not stop them from questioning the amount. Existing telephone lines to many parts of Manitoba have been in place for many years and hopefully will be there for many more years to come, both minimal and maintenance expense.

841 MTS prior to privatization contributed considerably to Manitoba, has continued to realize substantial profits since privatization.

842 Competition in the long distance market has to figure in driving down the cost of this service, but at what cost? Non-competitive basic residential telephone expense has been an upward runaway escalator. Without basic telephone service, the opportunity for many of today's extras, such as Internet availability, answering service, call waiting, call forwarding, and other services, that produce additional revenue to MTS and other telecoms would not exist.

843 The profits to MTS in the years since privatization have certainly been a wall about the profits deemed by the CRTC to be reasonable. MTS has been in a position to expand its opportunities and recently we read in the Winnipeg Free Press that they are planning on offering a full range of television channels to Manitobans that will be in direct competition to the cable companies.

844 In today's competitive world, it is wonderful to see this success and expansion of MTS services, but how much is at the expense of the non-competitive residential telephone customers' basic monthly telephone cost?

845 Basic residential telephone rates should be affordable as this is a service that is not considered a luxury today. It is a necessity. Possibly it is time to let long distance calling and other available options be the expense that residential customers can decide as to whether they want or can afford. Price caps of 10 per cent that were supposedly in effect in the past have not been adhered to in the case of MTS in the past few years.

846 The Manitoba Society of Seniors respectfully request that the CRTC Commissioners would establish and maintain price caps for residential basic telephone service that are reasonable and sufficient to ensure the availability of successful viable telecom service in Manitoba, but also ensures the affordability to all residential consumers that require their service in their residence.

847 Again, on behalf of the Manitoba Society of Seniors, I thank you for this opportunity and time given to deliver this message.

848 THE CHAIRPERSON: Thank you, Mr. Cruden.

849 MR. CRUDEN: Okay. Thank you.

850 MR. SPENCER: Mr. President, we have Evelyn Mohr form Vancouver on line.

851 THE CHAIRPERSON: Ms Mohr?

852 MS MOHR: Hello.

853 THE CHAIRPERSON: Yes, Mr. Mohr, are you there?

854 MS MOHR: Yes.

855 THE CHAIRPERSON: Please proceed.

PRESENTATION / PRÉSENTATION

856 MS MOHR: Yes. Actually I am really outraged with this proposal that Telus has presented. That they should expect their existing customers to pay for new customers so that they can make new money, my opinion, the whole idea of having a business is when you make money, you invest that money in new businesses.

857 Anyway, my next point is it is going to cause a real hardship on low income and fixed income families, not to mention the thousands and thousands of people that are being laid off because of terrorist attacks, their lives and all this kind of thing.

858 Let me see now. I'm getting a little bit -- okay. Another thing I would like to mention is -- oh, gosh, where am I here now? I'm getting really nervous.

859 The cost to the customers is kind of outrageous. I mean $3 to $35 per month per year. They have the opportunity to increase rates -- increase the cost at any time. A lot of people just can't afford this. They can barely pay for their own services, never mind paying for other services.

860 I am sure that these people that are living in remote areas have weighed the pros and cons. There are some services they are going to be without, not to mention that if they do need telephone, the new technology with cell phones which I am sure most people have but a lot of poor people can't afford this thing.

861 Another point is if you go shopping at Zellers of Safeway or something and all of a sudden on your bill you are wondering what that is. You ask and they say "Well, we want to build a new store in Timbuktu and we want our customers to pay for it", I think it's pretty outrageous which actually a big corporation like Telus is doing to their loyal customers. Of course, we don't have a choice, do we, to have our telephone communications with.

862 Another thing is the world is in a crisis right now. A lot of people are mourning with loss of friends and family. I think that a big corporation like Telus should be trying to lessen the burden on people instead of robbing them blind.

863 Another thing -- let me see now. The world is in a crisis. We know there may be threats of war. People are upset. This is going to cause a great hardship to people. I think it would be really a crime against humanity if the CRTC approves such an outrageous proposal as this.

864 I think that's about all I have to say.

865 THE CHAIRPERSON: Okay. Thank you very much, Ms Mohr.

866 MS MOHR: Thank you. Bye.

867 MR. SPENCER: Mr. Chairman, we have Mr. Bob Allen, ABC Communications, from Vancouver.

868 THE CHAIRPERSON: Good afternoon, Mr. Allen, or I guess it's still morning where you are. Mr. Allen?

869 MR. ALLEN: Hello. How are you?

870 THE CHAIRPERSON: Good. Go ahead.

PRESENTATION / PRÉSENTATION

871 MR. ALLEN: All right. Hello, everyone. I would like to speak on the issue regarding the price cap review. My area of concern is the cost of residential business services and residential and business local loop services in cities that are lacking any competition in this market.

872 The cities that ABC operates in primarily that are affected by these situations are in the interior of B.C. Two cities that specifically come to mind are Quesnel and Williams Lake, each a city of about 25,000.

873 As everyone is probably aware, our local loop prices have been rising while local loop prices fall in the areas of competition. One of the barriers to deployment in that area is the poor business case for a small company such as ourselves to enter that market in the rural areas.

874 I would like to give just a short background on ABC Communications to add to the perspective of our role in this part of the industry.

875 Our company is about ten years old, has sales about $4 million a year. We have ten years as a telephony terminal installer and provider and about five years as an ISP and about two years as a wireless broad band provider.

876 ABC Communications holds a large number of 3.5 gigahertz licences throughout the interior of B.C. in many of these towns and the 3.5 licensing mandate that gave us access to those licences included the hope that this would provide single line rural voice services in a wider area.

877 Now, that didn't really happen and there are some reasons why that didn't happen. As my point four, the people who are working on resolving this problem, I would like to point out some of the barriers to deployment in these secondary markets and how we can do something about it.

878 One of the reasons why there isn't any local exchange carriers in these smaller rural markets, it is seen to be a very capital intensive risky business for small companies to enter, particularly in small markets. We can see that very large companies with large financing have failed in the larger cities, so we would be reluctant to contemplate that we could survive in a classic business case of opening up our own central office switch and trying to compete against the incumbents.

879 We would frankly rather partner with the incumbents in these regions. We have no adequate access to low-cost lines provided to us by the incumbents. As some of you may be aware, there is a practical business line access method whereby a company can purchase five to ten trunks from the telephone company and then perhaps a block of three or four hundred telephone numbers and do that at a reasonable price and begin to sell business services.

880 However, there is no tariff that allows us to take products such as that and provide residential people with service that dovetails into our ability to carry the circuit out over the wireless portion of our network as voice-over accu-products, even though the technology is invented and is well advanced in Europe for these kind of products and they would in fact assist our case as a competitor in the broad band market.

881 We would suggest a simple matter of tariffing a product and making it available to small companies such as ourselves that would require the Telus, for example, in Quesnel to provide a local loop connectivity point for us so that we may bring the calls in from our subscribers, using voice-over IP, bring it to a gateway in our facilities and then transfer it through classic trunks to the local telephone exchange and thus effectively be able to provide phone service to the residential customers that are within the range of our transmitters.

882 We simply won't proceed in this direction. As a CLEC, we will simply wait for the problem to get worse or solve itself. We need something that makes this economically viable for us.

883 Even though we have the ability to complete the last mile circuit to the customer, we need a custom business model that will allow us to purchase circuits cost effectively and see ourself as safe to go ahead and finance the remaining portions of the gateways, the voice-over IP gateways and to enter into the contracts with the telephone company on the belief that we will have a business model that will in fact be financible and be viable.

884 That's a small thing to request from a few small companies working in the rural areas and it doesn't actually have to be a product that works for large centres where there is in fact competition and perhaps there is no need to force the incumbents or other CLECs to provide service, but in these small rural areas these products should be made available to us.

885 In terms of pricing for that, well, we would like to open discussions with anyone who was taking a serious look at this to determine what would be fair pricing and what would allow us to present this package at a fair price to residential subscribers. They don't really want to pay $50 a month for a business line any more than any other residential subscriber would want to pay, so we must find a way to bring this down to the $20 a month or $25 a month that is there on the table.

886 We would need perhaps $20 of that $25 a month to pay for our portion of the local loop, so we would be hoping that the access at the CO side would not end up costing us more than about $5 a subscriber.

887 Those are just some general numbers. We take an outreach program on the part of the CRTC to approach the smaller companies such as ABC Communications that are capable of doing this in the 3.5 market.

888 The 3.5 market is dynamically changing the way local loop access is provided in Europe. It certainly holds the best cost benefit ratio for providing people in rural areas now.

889 I should mention that it also provides broad band to the customers so we complete our goal of reaching the rural subscribers with voth the voice and broad band through these technologies. As I say, we are unable to reach CLEC status to add that into our broad band package.

890 A second point that I would like to raise regarding the cost of serving the rural subscribers is the difficulty in the general financing market. It will not finance small companies such as ABC Communications to go and build those networks. The money just simply isn't available from even the Business Development Bank -- will undertake such an undertaking.

891 It seemed to be non-viable. I think that that's the actual proof that we need to do something in terms of supporting the small rural broad band wireless companies, particularly the holders of the 3.5 licences which were fashioned to give those people an opportunity.

892 We need to do something to make things a little more viable for those small companies in order to generate more competition in the tier two, the small rural marketplace.

893 I think I would like to close off my comments at this point because while I realize this is a very large issue and there are many elements of it that I am not addressing here with my presentation, I would like to make a strong point towards emphasizing this as a key part of the solution (a) in developing viable small business competition in the rural markets and in terms of expanding the broad band reach to rural markets.

894 I would like to thank the CRTC for listening to my comments. I will close off that way.

895 Thank you very much.

896 THE CHAIRPERSON: Thank you, Mr. Allen. You didn't retire from AT&T a few years ago, did you?

897 MR. ALLEN: No, that was a different Bob Allen. I have been running a small business here in British Columbia for the last ten years in the marketplace. And we are the largest company in our region doing this sort of thing, and we think we have a very good feel for the challenges in the local market and we would very much like to talk to someone regarding the economics of the situation.

898 THE CHAIRPERSON: Well, thank you for your presentation.

899 MR. ALLEN: All right. Thank you very much for the time and we will also be submitting a written response outlining some more details on this.

900 THE CHAIRPERSON: Okay. Bye-bye.

901 MR. ALLEN: All right. Bye now.

902 MR. SPENCER: Mr. Chairman, for our last call of the day we have Mr. Scott Bleackley, Folkstone Design Inc. in Vancouver.

903 THE CHAIRPERSON: Hello, Mr. Bleackley. MR. BLEACKLEY: Good afternoon.

904 THE CHAIRPERSON: Please proceed.

PRESENTATION / PRÉSENTATION

905 MR. BLEACKLEY: Okay. Thank you very much.

906 I live on the sunshine coast of British Columbia but today I'm speaking to you from the Digital Divide Forum at the British Columbia Internet Association in Penticton.

907 I'm concerned that while the letter of high cost service area decision is being addressed, the spirit of the decision is not. I'm concerned about the quality, the cost and the medium term obsolescence in terms of the National Broadband Task Force recommendation of implementation of high cost service areas.

908 If technologies used in the Maya (ph) Valley and Hot Springs Cove of British Columbia are a benchmark used to determine inclusional communities in these proceedings under the terms of the high cost service area petition, I believe the cart has been put before the horse.

909 In submissions by TELUS, a term similar to lowest cost technology is used, however, a technology decision has been made which have been used to eliminate communities from these proceedings on the basis of the expense of a specific technology. Andersen Lake in B.C. is a specific example of one community that was excluded this way. New technologies are available that can address concerns of quality and medium term obsolescence.

910 I propose that rather than exclude it from these proceedings, all permanent residents in high cost service areas should be included at the maximum allowable rates. TELUS has suggested that being a provider of last resort to the use of subsidies would have the effect of significantly introducing competition. I suggest that these funds be held in trust relative to the specific community and be made available to any organization who can implement more forward-looking technologies which meets the requirement and spirit of the high cost service area decision. This approach may be appropriate to all high cost service areas.

911 For this approach to work, it should be incumbent upon the rest of ILEC to provide interconnect at the closest point of presence since rules that apply in built-up urban areas may prove unworkable in remote areas. This inclusive approach will have the affect of broadening innovation, encouraging competition and focusing on factors that enhance potential market growth.

912 Thank you for your attention.

913 THE CHAIRPERSON: Thank you, Mr. Bleackley.

914 So, Mr. Secretary, that includes all the calls we have for this afternoon?

915 MR. SPENCER: Yes.

916 THE CHAIRPERSON: There were a couple who were on our list but I guess we didn't --

917 MR. SPENCER: There was a Mr. Darrell Paul, number 5, and M. Luc Bruneau, number 10, that did not answer. Mr. Dave McConnell cancelled, number 17.

918 THE CHAIRPERSON: All right.

919 Well, if others call in, we will endeavour to try and pick them up as the proceeding goes on.

920 So with that then, that concludes for now this portion of our proceeding. I will just note that there was one other appearing intervenor who had requested to appear and we will endeavour to accommodate him on Wednesday.

921 So we will take a short break now and allow The Companies to have their first panel come forward and then we will proceed to the cross-examination of the first panel, and I believe the first panel is ARC, or the first party to cross-examine is ARC et al. So we will take a ten minute break.

--- Upon recessing at 1436 / Suspension à 1436

--- Upon resuming at 1450 / Reprise à 1450

922 THE CHAIRPERSON: Order, please.

923 We will turn to the next phase of our proceeding now which will include the presentation and cross-examination of the various panels. But before we do, are there any preliminary matters anyone wishes to bring to our attention before we commence?

924 Mr. Lowe.

925 MR. LOWE: Thank you, Mr. Chairman.

926 I did want to comment on the Commission's recent scoping ruling which is Decision 2001-618. I don't have any motion to make, Mr. Chairman, but I wanted to register our concerns. This ruling 618 suggests that the Commission may make significant changes to the classification of competitor services which are stated to be the same as essential services. Our concern is that this seems to open the door for setting the rates for these services in a manner which is different from that established in the local competition decision.

927 That decision, Mr. Chairman, set a finite list of essential and near essential facilities and priced them at a cost plus a mark up, and it took a two-year process to arrive at that decision in the local competition decision.

928 We see the implications of the ruling in 618 as significant, and if the Commission decides to expand the universe of essential facilities, near essential facilities, all lumped into a category of competitor services and applies a new costing rule, there is going to be consequential affects on retail rates. Our concern is that the level of retail rates will be unstable and the bottom could fall out of these retail prices entirely.

929 Now, competitor services are not another basket of prices that can be adjusted to reach a kind of revenue requirement number. The changes to the pricing of these services and the method of pricing these services runs through the entire suite of retail services, and not just in the utility segment either.

930 So we have the ruling now, and I am bound to say that if we had this ruling, if we knew this at the time that we filed our evidence, you would have before you a very different piece of evidence from TELUS. We would have approached the proceeding in a different fashion and we may have put before you the kind of evidence that you heard in the proceeding leading to the local competition decision, that kind of framework evidence.

931 So as matters now stand, on Friday -- the Friday before the hearing started -- we are told that the proposal to eliminate the market is in scope, and then last Wednesday we received the 4000 series of interrogatories, and 4200 raises the possibility of no mark up at all or a discount on retail rates, and mark ups of zero for essential and near essential facilities for competitor services. We see that as antithetical to the local competition decision.

932 Now, we did consider requesting an adjournment of the hearing, but we recognize that this would cause considerable inconvenience. We thought that, you know, everybody is here and you wouldn't be inclined to adjourn it in any event. So we propose to try to participate without prejudice and we just want to register our concern that the process may not give us an opportunity to put our full case before. We are going to be reevaluating the situation as the proceeding goes on.

933 Thank you, sir.

934 THE CHAIRPERSON: Thank you, Mr. Lowe. So we will consider that you have registered your concern. Let me just say that it's not the Commission's intention in this proceeding to redefine essential or near essential services.

935 MR. LOWE: Thank you, sir.

936 THE CHAIRPERSON: Thank you, Mr. Lowe.

937 Mr. Henry.

938 MS MOORE: Mr. Chairman, I apologize for interrupting, but I wonder if I might ask Mr. Lowe one question, please.

939 THE CHAIRPERSON: Counsel.

940 MS MOORE: Thank you.

941 Mr. Lowe, you say that you are making these comments without prejudice. I want to know if it is your position at this point that you may or may not need to call new evidence, because that is, of course, an option for you to consider. So I wonder if you will be advising the Commission on your intentions in that regard?

942 MR. LOWE: Yes, that is an option that we are looking at right now and as soon as I know I will advise the Commission.

943 MS MOORE: So we would ask you, before we begin your section, to have a position as to whether you would wish to call new evidence or not so that any concerns that you might have about prejudice would likely be resolved.

944 MR. LOWE: We will, before our witnesses on the stand, we will be speaking to you about our position on this. Definitely.

945 MS MOORE: Thank you. Thank you, Mr. Chairman.

946 THE CHAIRPERSON: Thank you, counsel.

947 Mr. Henry.

948 MR. HENRY: Yes, Mr. Chairman. We, in fact, have a similar concern.

949 In your letter of last Friday, you clarified a number of matters as to the scope of this proceeding and we appreciate your responsiveness to those requests, and, in fact, they coincided with a number of our views. But there is this one aspect of the ruling that remains of concern to us like TELUS.

950 In that letter, the Commission confirmed that the definition of essential service contained in Decision 987 and the current classification of current services as essential is not under consideration in this proceeding and you just repeated that yourself. We were very much encouraged by that ruling because that is the basis on which we have proceeded in this proceeding, and that is the basis on which we thought the public notice had defined the scope.

951 However, the Commission went on in the ruling to say that proposals respecting a treatment of ILEC services provided to competitors, including, for example, CallNet's proposal, their carrier services proposal, are within the scope.

952 Now, Mr. Chairman, what concerns us is the following.

953 The fundamental difference between essential and non-essential services is not how they are labelled. It's not how they are labelled at all. It's how they are priced. Essential services, as you know are priced at cost plus a specified mark up, while non-essential services are not constrained by these rules.

954 Now, some of the proposals filed in this proceeding and some of the scenarios that we just received in an interrogatory from the Commission last Tuesday night, I believe it was, contemplate the possibility of pricing non-essential services in a manner similar to or equivalent to, in fact, essential services. The trouble with these scenarios is that if adopted they would effectively amount to doing what the Commission said on Friday is not with the cost of the proceeding, effectively defining new services as essential services. This would, in effect, be doing through the front door what can't be done through the back door -- rather, the other way around -- doing through the back door what can't be done through the front door. You know what I mean.

--- Laughter / Rires

955 MR. HENRY: Mr. Chairman, The Companies have not filed evidence on whether any specific services that are currently treated as essential should now be classified or treated as essential. And had this been at issue from the beginning, they would have done so and I have no doubt we would have conducted ourselves differently.

956 As you will recall, the 9536 Local Competition Decision was a matter -- there was a matter of lengthy debate and evidence on what is and isn't essential services. To determine this properly you would have to look at each and every service and understand how they work and understand the substitutes and so on. Moreover, we would have also had to look closely at the impact of any of these types of proposals on our retail rate proposal because inevitably wholesale and retail prices are related.

957 So where are we? We find ourselves at this juncture with evidence filed by all parties and it's obvious that the Commission wishes to allow all these types of proposals to at least be explored. Yet, some of these proposals in our view are fundamentally at odds with the Commission's local competition framework and The Companies had not contemplated that they were in the scope from the outset. Again, your ruling of Friday seems to confirm that we were justified in that view.

958 Now, it's unfortunate, Mr. Chairman, in my many years of experience of practising before this Commission, I can't recall a single case where two sets of parties have come to a hearing with such a fundamentally different view as to what the hearing is about. They obviously have fundamentally different views on subjects in the proceeding, but here we disagree on what the hearing is about.

959 In saying this, I don't ascribe any sinister intentions to any party, but the facts are the facts and we are where we are. So as a result, I, like Mr. Lowe, feel compelled to point out to you that while we will participate fully in the proceeding, we do so without prejudice to our position under reserve of all our rights.

960 THE CHAIRPERSON: Thank you, Mr. Henry. Anyone else?

961 Mr. Koch.

962 MR. KOCH: I'm hesitant to jump in, Mr. Chairman, but that won't stop me as usual.

963 In terms of Mr. Henry's remarks, I think, with respect, he is trying to re-argue the debate that we have had in correspondence over the last few weeks, and which, in my client's view, was clearly settled by your decision of last Friday.

964 But in terms of where we are today obviously there are two parties before you who are agreeing to go ahead without prejudice to their rights. Commission counsel quite rightly asked, of course, what implications that had, that statement, for whether or not they intend to file evidence.

965 At an extreme end this sort of creates a concern for fairness to us at this stage. At the extreme end of course it would be even a concern for the fairness of requiring us to cross-examine panels when we will have further evidence being filed.

966 I will put that aside, though, and just indicate that I believe it is incumbent on these two parties as soon as possible to indicate whether or not they are going to file evidence and to, in fact, file it. Bell, to its credit -- or rather The Companies, to their credit, understood what was going on and filed rebuttal evidence which dealt, in my view, fully with the CallNet proposal.

967 It has also responded to the Commission's interrogatories with 14-page long answers filed today and it is to be credited for responding in that manner.

968 TELUS has chosen not to and puts before you a situation where, I saw in correspondence this morning, it says it may be two weeks in answering, in particular Interrogatory 4200 which asks squarely regarding their position on the CallNet, AT&T and RCI proposals.

969 I am prepared to proceed with cross-examination of their panels for the time being. My concern that is coming up -- and this is one of the reasons that I think we have to clarify the issue of what they intend to file and when they intend to file it -- is that a much greater unfairness would be caused by requiring, for instance, CallNet to call its panel if TELUS, for instance, still has more to file about CallNet's proposal at a later date.

970 So I just put that on the record as an issue that certainly has to be cleared up in light not only of cross-examination of the ILEC's panels, but also in terms of the timing of the cross-examination of CallNet's panel.

971 Thank you.

972 THE CHAIRPERSON: Thank you.

973 Anybody else? No?

974 I would just note that we haven't huddled on this, but from my perspective, as I indicated earlier and as I think we indicated in our decision, that it is not our intention to redefine what constitutes essential service or near essential service, either of those categories.

975 We did establish a pricing framework in the local competition decision, but I don't believe at the time we indicated that the prices were frozen. I note that one of the parties in this proceeding had suggested prior to this proceeding started and we will deal with that issue separately, that in fact there are costs related to essential services, in fact a change which presumably may result in the pricing of those essential services.

976 So clearly on the part of one party at least pricing of essential services can change if the costs have evidently changed. So presumably pricing can be flexible in any event.

977 So, as I indicated earlier and indicate now, it is certainly not our intention, as we indicated at the outset of this process, that the definition of what constitutes essential or near essential services would not be changed as a result of this, but pricing issues are clearly on the table as indicated in our decision of last Friday.

978 So with that I take the points that have been raised. We will accept those and continue on.

979 Mr. Henry.

980 MR. HENRY: If we are finished with that one, I do have a couple of just housekeeping items.

981 THE CHAIRPERSON: Sure. Go ahead.

982 MR. HENRY: Mr. Chairman, we filed this morning our opening statement on behalf of The Companies I represent and I think the Secretary has given that The Companies Exhibit No. 1.

983 MR. SPENCER: The opening statement for The Companies will be introduced as The Companies Exhibit No. 1.

EXHIBIT NO. THECOMPANIES-1: Document entitled "Opening Statement for Price Caps Proceedings Submitted by Aliant Telecom Inc., Bell Canada, MTS Communications Inc., and Saskatchewan Telecommunications (The Companies)

984 MR. HENRY: We were also asked to file interrogatory responses by 9:00 a.m. this morning, the ones we received last week.

985 We were able to do that, with the exception of one, which is the company's CallNet 1007D and we hope to be in a position to file that tomorrow.

986 Lastly, just a scheduling item, Mr. Chairman.

987 You will recall that we had said that company-specific witnesses from Aliant and SaskTel and MTS Communications were available if needed.

988 Now, we have been advised a witness will be required for MTS. I think the cross-examining party is MKO. I understand no parties have any questions for Aliant or SaskTel, but Commission counsel may, depending on the answers from our main panel.

989 So what I would propose to do is, with your permission, have Mr. Bruckshaw join our Panel No. 2 from MTS and, subsequently, if it turns out after cross-examination and examination by Commission counsel of that panel, there is a need for a SaskTel or Aliant witness, then we would have them come up subsequently and sit as a panel. I would propose to do it after Panel 3, so we could call it Panel 3A, if that would sound acceptable to you.

990 THE CHAIRPERSON: It sounds satisfactory, Mr. Henry.

991 MR. HENRY: Okay.

992 One last thing. Dr. Taylor is only available this week and I am hoping with the schedule we will be able to get him up and down this week. If, as the week progresses, that gets a little difficult, we might suggest shifting parties. So I would like to put parties on notice that they should be ready for Mr. Taylor -- Dr. Taylor this week. I would propose to have him up there to testify to both his evidence in-chief and his rebuttal evidence.

993 THE CHAIRPERSON: Okay. Thank you, Mr. Henry.

994 MR. HENRY: Thank you.

995 THE CHAIRPERSON: Now if you will introduce your panel and swear or affirm them. We will do that, as the case may be.

996 MR. HENRY: Certainly, Mr. Chairman.

997 I am pleased to introduce the first panel appearing on behalf of Aliant Telecom, Bell Canada, MTS Communications and SaskTel, known by the catchy moniker of "The Companies".

998 The subject matter to be covered by this panel is the overall context of our proposal, earnings sharing and a capital market perspective.

999 Sitting at the table, closest to you is Mr. Richard S. Talbot, who is Global Telecommunications Service Analyst with RBC Dominion Securities. Mr. Talbot is well-known in the industry. He is assisted in the back row by Mr. Jean-Marc Bougie, Associate.

1000 Sitting in the middle is Mr. Peter J. Nicholson, who is currently Chief Strategy Officer for BCE Inc. He is assisted in the back row by Mr. Bruce Kirby, Director of Corporate Strategy.

1001 Furthest from you is Mr. Robert F. Farmer. Bob is Vice-President, Reg Matters for Bell Canada. He will be familiar to many of the Panel Members, having appeared in several past proceedings, including the last price cap proceeding. He is assisted in the back row by Ms Judy Bodnar, Director of Regulatory Coordination.

1002 Mr. Chairman, the CVs of the company representatives were provided in an attachment to a letter from The Companies dated 20 September. Mr. Talbot's was provided in response to an interrogatory of The Companies, Calgary -- 26 June 01 -- 51.

1003 Perhaps the witnesses could be sworn in.

1004 MR. SPENCER: Yes. Thank you.

SWORN: PETER J. NICHOLSON

SWORN: ROBERT F. FARMER

SWORN: RICHARD S. TALBOT

1005 MR. SPENCER: Thank you.

EXAMINATION

1006 MR. HENRY: Mr. Nicholson and Mr. Farmer, your qualifications are set out in the attachment to The Companies letter of 20 September and they are correct to the best of your knowledge?

1007 MR. FARMER: That is correct.

1008 MR. NICHOLSON: Yes.

1009 MR. HENRY: And you are responsible for sections 2 and 4 of The Companies evidence dated 31 May 2001. Is that correct?

1010 MR. NICHOLSON: Yes.

1011 MR. HENRY: You are also responsible for those interrogatory responses set out in Attachment 2 to The Companies letter of 20 of September that are related to that evidence?

1012 MR. FARMER: Yes.

1013 MR. NICHOLSON: That's right.

1014 MR. HENRY: Is that evidence and those interrogatories correct to the best of your knowledge and belief?

1015 MR. FARMER: They are.

1016 MR. NICHOLSON: Yes.

1017 MR. HENRY: Mr. Talbot, your qualifications are as set out in the response to Calgary 51. Is that correct?

1018 MR. TALBOT: That is correct.

1019 MR. HENRY: You are responsible for section 3 of The Companies evidence dated 31 May as well as those interrogatory responses set out in Attachment 2 to The Companies 20 September letter that are related to that evidence?

1020 MR. TALBOT: That is correct.

1021 MR. HENRY: Is that evidence and those interrogatory responses true to the best of your knowledge and belief?

1022 MR. TALBOT: It is.

1023 MR. HENRY: Have there been any developments since the filing of that evidence and those responses that would affect your testimony?

1024 MR. TALBOT: Perhaps nothing to affect the testimony, only to provide a routine update of the performance in the capital market since the end of May, if I can make a few comments?

1025 MR. HENRY: Certainly.

1026 MR. TALBOT: First of all, in terms of the four main metrics that we would be looking at, the first would be the performance of equity prices; the second would be any changes in credit ratings; the third would be the impact of widening spreads or changes in the spread levels for fixed income securities; and fourthly, an overall comment on the economy, very briefly I might add.

1027 First, in terms of share prices since the end of May, May 31, the S&P 500 has fallen 18.5 per cent, the MSCI Global Telecom Index has fallen 16.8 per cent, and the average for the Canadian Telecom sector has fallen by 30 per cent. That includes a balance of new entrants as well as the incumbents.

1028 Second, in terms of credit ratings, in terms of Standard & Poors changes, Bell South has fallen from a double A-minus to single A-plus. France Telecom from single A-minus to triple B-plus and KPN from triple B-plus to triple B-minus, which is no longer considered investment grade.

1029 Third, in terms of the composite, we provided a chart in our original evidence showing the spreads of 10-year triple B-plus and single A-rated bonds. The spread on the triple B bonds at the end of May was 230 basis points over the 10-year sovereign. That has now increased by 52 basis points to 282. For single A bonds it has increased by 46 basis points from 167 to 213 over.

1030 Finally, with respect to the overall economy, we have obviously had a very unfortunate event three weeks ago, but that has now confirmed, I think in most people's minds within the capital markets, that not only is the U.S. economy in recession, but also that Canada is in recession and that a recovery is likely to take longer than we would have originally thought.

1031 That is my update.

1032 MR. HENRY: Thank you, Mr. Chairman.

1033 The witnesses are now available for cross-examination.

1034 THE CHAIRPERSON: Thank you, Mr. Henry.

1035 Welcome to our proceeding, gentlemen.

1036 We will turn to the first party to cross-examine, which would be ARC et al and Ms Lawson.

--- Pause

1037 MS LAWSON: Thank you, Mr. Chairman.

1038 Good afternoon, Commissioners.

EXAMINATION

1039 MS LAWSON: Good afternoon, Mr. Nicholson, Mr. Farmer, Mr. Talbot.

1040 I would like to start by turning to your evidence, section 2, paragraph 2-18.

1041 You state there, Mr. Nicholson, that:

"The regulatory framework to be implemented next year should focus on addressing two key policy goals:

1) facilities-based competition; and

2) affordability of basic local service." (As read)

1042 Are there any other policy goals that the Commission should be focusing on in this proceeding?

1043 MR. NICHOLSON: In my view, yes. I think another important goal is to maintain an incentive for robust investment in this industry because it is a key infrastructure for the country and particularly the knowledge economy or the so-called information society.

1044 So we believe that investment, which continues notwithstanding the adverse conditions that Mr. Talbot just referred to, is an important objective for these hearings and for the country.

1045 MS LAWSON: Are there any other policy goals that the Commission should be focusing on in this proceeding?

1046 MR. NICHOLSON: No, I think that these are the basic ones. If you try to follow too many objectives, of course, you find you become overwhelmed by conflicts among them I think. The three that we put forward and that are included in the first page of our opening statement tables this morning are the three that we would advocate.

1047 MS LAWSON: What about the objective of ensuring that end-user rates are just and reasonable which is, as I'm sure you are aware, a requirement under section 27 of the Telecommunications Act?

1048 MR. NICHOLSON: Well, I guess if it is a requirement of the Act it has to be paid heed to.

1049 I am not sure what the distinction would be between just and reasonable as opposed to affordable and in support of other policy objectives. Perhaps I haven't had enough history in the regulatory practices of this industry to know whether there are some technical implications of this "just and reasonable" word, but on a commonsense definition I think the other three objectives cover it.

1050 MS LAWSON: So in your view it is not possible that you could have an affordable rate that was unreasonable?

1051 MR. NICHOLSON: I can't say that it is logically impossible, but within the context, I think, of the policy that is relevant here I think that affordability would clearly be one of the dimensions, but not the only one. Rates could be affordable by some definition and perhaps not just and reasonable because they fail to support other policy goals, for instance, leading to completion or supporting sufficiently robust investment.

1052 MS LAWSON: Are those the only factors, in your view, that are relevant in determining whether rates are just and reasonable?

1053 MR. NICHOLSON: Perhaps not. I don't want to speculate on what some others might be.

1054 I guess if I had the time to think about it I might come up with some others but, again, on a commonsense reading of the term I think those three are probably enough to span the space of just and reasonable. But if you wanted to suggest some other criteria --

1055 MS LAWSON: What about the need under price caps for rates to reflect underlying costs?

1056 MR. NICHOLSON: Well, I mean, that does lead you back into the direction of an earnings or a rate of return test, and my understanding is that price caps was really designed to get away from that for good and valid reasons that have been laid out by the Commission and by many others. I must say, it is a little hard to bring costs into the picture in most circumstances, except those that relate to essential services, without at the same time drawing yourself back into an earnings regulated system.

1057 MS LAWSON: Which the Commission, in your view, should by no means do?

1058 MR. NICHOLSON: Well, yes.

1059 MS LAWSON: So let me just get it straight then. In your view, as long as penetration rates of telephone service do not drop, and as long as we are encouraging competition, we can consider local rates, in your view, to be just and reasonable?

1060 MR. NICHOLSON: Well, it is not just penetration rates. I mean, that would be one measure of affordability. I mean, we could talk about the various dimensions of affordability. Penetration is clearly one of those.

1061 But I think we have indicated in our evidence that affordability vis-à-vis personal income, vis-à-vis other comparable international benchmarks, given rates of increases over time relative to prices generally in the economy, things like this are all part and parcel. So there are many ways in which one can look at affordability.

1062 I think that penetration is a very important one because it is kind of the bottom line, but one can always argue that for an essential service you are going to see high penetration and it doesn't directly prove that the rates are affordable.

1063 MS LAWSON: Well, let me put it another way. In your view the CRTC shouldn't care whether rates are 10 per cent above cost or 100 per cent above cost, because if they get too high competition presumably would be attracted in and would solve the problem. Is that correct?

1064 MR. NICHOLSON: Well, you have put it as well as I could.

1065 MS LAWSON: So as costs fall and as the gap between prices and costs increases the CRTC shouldn't worry, shouldn't care about it because competition will solve the problem?

1066 MR. NICHOLSON: As a generalization I think that that is the case.

1067 MS LAWSON: Mr. Nicholson, excuse me. What if competitor's costs are significantly higher than yours, let's say 50 per cent higher than yours, should prices in that case be at the level needed to attract entry or should they be at the level that reflects your costs?

1068 MR. NICHOLSON: This is the case where there is an exception to the purity of the principle, isn't there. We do have pricing rules for the essential and near essential services and we have conditions that relate to the competitiveness of the other kinds of inputs that competitors need to offer the service. So that issue is addressed, in a sense, indirectly through the pricing rules for competitor inputs.

1069 So, yes, in that sense, as those fall the competitors will have access to them for those things that they need to compete.

1070 MS LAWSON: I guess my question is: Taking into account essential services as defined and regulated by the CRTC, assuming that competitor's costs are still significantly higher than your costs, my question is: Should retail rates reflect the competitor's costs or your costs?

1071 MR. NICHOLSON: Well, I think I rejected the presumption in the beginning that the retail rates were going to be cost-based.

1072 What I agreed was that certain essential input costs could be cost-based, but not retail rates.

1073 MS LAWSON: Okay. Fair enough.

1074 Wouldn't Bell do best in the competitive market by holding its rates to a level just below the level that would make it economic for higher cost providers to enter?

1075 MR. NICHOLSON: In order to keep 100 per cent of the market. Is that what you are suggesting?

--- Pause

1076 MR. NICHOLSON: Well, I don't think in the practical cut and thrust in the day-to-day market you really look at things quite that way. The competitor costs are never that clear.

1077 We are really now talking in situations where there is competition, by the premise of your question, and -- so I just don't see the market behaving quite that way.

1078 I mean, there is no question that we like to have more market share than less market share. I would be less than candid if I didn't say that.

1079 MS LAWSON: Well, let's just assume, Mr. Nicholson, that your competitors are in fact higher cost than you and that rates are increased to a level that makes it economic for them to enter, and let's say they enter, wouldn't it then be in Bell's interest to lower its rates to a level that the higher cost competitors cannot match?

1080 MR. NICHOLSON: Yes. I mean, subject to the safeguards against predatory pricing, I mean, those things do happen.

1081 The counter to that is that an incumbent, because of the size of the incumbent's market share, by definition, tends to be reluctant to lower prices in a marketplace because the cost is the Delta lower price times our customer base and that is a big number. So we are, by instinct, reluctant to down price in any market.

1082 If you look at the history of the long distance market you will see that considerable reluctance to down price for the very reasons that I have given, but beyond a certain point of course you are going to do it as you bleed market share.

1083 So it is a balancing act between overall revenue loss and market share loss that the people who are responsible for marketing in the company and the sales force on the front line are dealing with every day.

1084 MS LAWSON: Would you agree, Mr. Nicholson, that if your costs are substantially lower than those of your competitors, competition will not be sustainable?

1085 MR. NICHOLSON: That would assume that the competitor's costs are fixed at that higher rate and if they are I guess you are right, almost tautologically.

1086 That is not the reality. The reality is that in markets where technology makes competition possible -- and this is certainly one of those -- competitor costs are not static. In fact, on the contrary, when the costs of technology are falling rapidly, as they are in this industry, competitors who tend to be able to acquire facilities of a more modern vintage are able to ride the cost curve down pretty rapidly. And there are other advantages too, I mean people learn to lower their costs.

1087 It is not a static thing is really the point I am trying to make, and especially not so when technology is dynamic.

1088 MS LAWSON: And it is your view that over the next four years, say, competitors costs will be no higher than your costs?

1089 MR. NICHOLSON: No, I wouldn't say that. I mean, that is too sweeping a statement. Some competitors may have lower costs than ours in certain segments of the market. I think that that is already the case.

1090 It is too complicated a question to answer in a sweeping way, but what I certainly will say, and this I believe firmly as an individual who spends a lot of time looking at trends in technology and the inroads of actual and potential new competitors who aren't coming from the conventional wireline telephone industry, that I see tremendous competitive threat all around us. We can get into that perhaps in more detail later, but certainly from the cable industry, from wireless and from other Internet-provided alternatives to voice and data telephony.

1091 These are forms of technology which inevitably are going to dramatically change the terms of competition in all communications markets.

1092 The only issue, in my view, is the timing and the extent and where it rolls out first, et cetera, et cetera, and one can reasonably differ on that.

1093 But as to the inevitability of what I call sort of the Internet wireless transformation genuinely transforming this industry, I think there can be no doubt.

1094 MS LAWSON: Am I right, Mr. Nicholson, that Bell considers facilities-based competition to be the single most important goal in this proceeding?

1095 MR. NICHOLSON: No. I suppose there are others on the panel, this and subsequent panels, that might have different views on that.

1096 I think that the three objectives that we have set out of affordability, facilities-based sustainable competition and a healthy climate for investment, I consider those to be all pretty much co-equal. I might have slight preference for the investment objective because that is the way I view the world from my optic, but I would liken it, I guess by analogy, to, you know, the lungs, the heart and the brain. They are different organs and some people think the brain is the most important, but you can't get along with the other two -- without the other two I should say.

1097 So I wouldn't want to draw a distinction and put them in order. I think they are different conceptually and in that sense somewhat incomparable.

1098 Personally, I think the investment objective is the most significant for the country as a whole.

1099 MS LAWSON: Okay. Taking those three objectives together then --

1100 MR. NICHOLSON:  Yes.

1101 MS LAWSON: -- do I understand correctly that in your view the achievement of them should over-ride the achievement of other policy goals set out in the Telecommunications Act and other CRTC documents and elsewhere?

1102 MR. NICHOLSON: Well, I'm not sure that I can answer that in a way that I wouldn't regret if I went and re-read the Act and saw all of the other goals, but as I said earlier, I think there is only so many objectives that any procedure that can support and seek to achieve.

1103 I think that the three that we have gotten -- I'm coming back to repeat myself -- are certainly relevant and adequate for this hearing. We are not trying to suggest to suggest to Parliament a redraft of the Telecom Act.

1104 MS LAWSON: Would you agree that another goal is the efficient provision of service, enhancing the efficiency of telephone service in Canada?

1105 MR. NICHOLSON: Yes. I am always in favour of that. I guess that would be a consequence in my view, so the goals of encouraging facilities, competition and even the investment objective because I think that both of those either create the drive for efficiency, which is one of the things that competition certainly does, or require increasing efficiency on the part of any company's operations, which is what the investment objective requires.

1106 I would still stick with those three and efficiency would fall out as a consequence, I think.

1107 MS LAWSON: I understand, but what, Mr. Nicholson, if in fact it costs more overall to have facilities-based competition in Canada? What if in fact competitor costs are higher than your costs? What if in fact elements of this industry are natural monopolies?

1108 MR. NICHOLSON: Yes.

1109 MS LAWSON: Then don't we have a conflict between the efficient provision of service and facilities-based competition?

1110 MR. NICHOLSON: We could have for a period of time but I guess that's an empirical question and maybe we will discuss that quite a bit more in this hearing.

1111 I come back to the point I made earlier that cost is a very dynamic thing, and especially so in this industry. While one form of facilities-based competition today might be inefficient in the sense that you mention, I am convinced that other forms will develop that are entirely efficient in the sense that their costs will be sufficient to sustain facilities-based competition.

1112 It's also the case that the essential and near-essential pricing and all of the other rules that surround the access by competitors of our facilities do give competitors many of the benefits of the scale of the incumbent network because these facilities are made available at prices that reflect our costs.

1113 In that sense, it shouldn't be the case that the incumbent's facilities, even in a wire line case, in many situations are permanently, fundamentally and forever going to be inefficient because those costs are too high.

1114 MS LAWSON: Basically, Mr. Nicholson, you are asking this Commission to limit, narrow the objectives and goals that it is pursuing in this proceeding based on your vision of how technology and costs in the local telecom industry will develop over the next four years.

1115 MR. NICHOLSON: No. I don't think I am trying to limit the objectives that we are attempting to achieve. I mean as I read the public notice, I think the three objectives that I mentioned are three of the four.

1116 I think the other one was simplicity, a simple formula. Well, we have attempted in our proposals to meet that one. I think our objectives are consistent with those that the public notice set forth.

1117 As for asking the Commission to accept my vision about the technology, et cetera, well, that's -- I think I am entitled to put forward the view. Whether the Commission accepts it or not is their business.

1118 MS LAWSON: My point though is that your recommendation regarding policy goals rests on your assumption about what's going to happen in this market over the next four years.

1119 MR. NICHOLSON: Yes. In general terms that's true. One can argue a lot about the specifics, but I certainly do think that the trend in this industry is going to be to make new forms and even the old forms of competition more and more viable.

1120 We will say this again and again, but I guess I don't accept an implicit premise perhaps that competition isn't already advancing significantly and more or less along the pattern that one would have expected, but that's perhaps a later stage of the cross-examination.

1121 MS LAWSON: Could we turn now to paragraph 4-1 of your submission.

1122 MR. NICHOLSON: Yes.

1123 MS LAWSON: Now, beginning in the fourth line of that paragraph, you state:

"It is the company's submission that in order to best enable the achievement of policy goals and foster the development of competition in all markets, the regulatory regime must continue to focus on prices only and earnings should play no role. Only by focusing on price levels can the regulator assess whether the objectives of the regime are being met, e.g. are prices affordable and are they conducive to the development of local competition." (As read)

1124 Now, clearly this statement rests on the assumption that the only objectives of the regime are the ones that you have stated, the three you have stated. Correct?

1125 MR. NICHOLSON: That's right.

1126 MS LAWSON: Would you agree that if the Commission decides that in fact there are other objectives in addition to the ones you have stated that it may need other assessment tools besides prices?

1127 MR. NICHOLSON: Yes. Well, I can't deny that that could be true.

1128 MS LAWSON: And if, for example, another objective is fairness amongst the different stakeholders in this proceeding, the Commission would have to look at the relative effect of the regime on each of these stakeholders, the relative benefits that each is reaping or can be expected to reap.

1129 MR. NICHOLSON: Yes. I guess that obviously will depend on a definition of what we mean by fair. Perhaps that's a little bit tougher to pin down than affordability and facilities-based competition, et cetera, but in principle, sure.

1130 MS LAWSON: And if the Commission does determine that fairness, in particular between shareholders and ratepayers, is an objective of the price cap regime, what in your view should it look at to assess whether the outcome has been fair?

1131 MR. NICHOLSON: I'm not sure that I can answer that right now. I would have to think more than I guess I am able to as I sit here about what the criteria that would define fairness might be.

1132 Personally, I think that one tremendously important dimension of fairness is affordability in the face of provision of a service that's essential and for which there are very few competitive alternatives.

1133 It would be unfair if we didn't consider affordability and that's affordability in a dynamic context, not just in point of time but what's the trend likely to be.

1134 Beyond that, I am not sure what other dimensions of fairness you would want to consider.

1135 MS LAWSON: Do you think, Mr. Nicholson, that in the past, before price cap regulation, the Commission used a form of regulation that is still in practice in other jurisdictions called rate base, rate of return regulation.

1136 MR. NICHOLSON: Right.

1137 MS LAWSON: Under that form of regulation, fairness was assessed largely through shareholder earnings. Is that correct?

1138 MR. NICHOLSON: Yes.

1139 MS LAWSON: Has our notion of fairness -- just in general -- has our notion of fairness changed over the past few years?

1140 MR. NICHOLSON: I don't know. Perhaps not, but let me put it this way. A rate based approach to utility pricing for essential services is going to be required as long as for technological primarily, possibly other reasons, that service really has no effective alternative. I mean this is the natural monopoly idea.

1141 So fairness in that circumstance did require something like a rate of return, I mean sort of fairness and practicality required that. What's happened and why competition has been contemplated by virtually every regulatory regime in the world is fundamentally for technological reasons.

1142 It's no longer the case that this is a natural monopoly. There are ways which we have seen in one service after another to bring in competition. The great thing about competition is that it does tend to bring out the best in the competitors and it puts the customers really in charge.

1143 They are the ones who will reward those suppliers that treat them fairly, if I could reintroduce that term, and punish those who don't. I mean we do come back here to a pretty powerful principle, that the invisible hand of the market is really a superior regulator to, with all due respect to the Commission, to any particular group of individuals.

1144 I mean no one can possibly take account of the nuances of customers' wishes and the situation of different individuals. You need the imagination and the dynamism of a bunch of entrepreneurs in the marketplace slugging it out, in addition to which you will not get the benefits of this technological wave that we happen to be riding at this particular epoch of time if you have got a rate based -- I shouldn't say you couldn't possibly, but it's much less likely that you will.

1145 In that sense, the way in which our approach to fairness manifests itself has changed. It has changed from an ROR, rate of return, to relying as much as we can, as quickly as we can, on competition. One of the objectives, therefore, of this hearing is to try and further the conditions that will continue to enable competition to develop more broadly.

1146 MS LAWSON: And, Mr. Nicholson, you would agree we are in a transition right now to a fully competitive market.

1147 MR. NICHOLSON: Yes. Obviously, in respect of these local services.

1148 MS LAWSON: And you would agree that in a fully competitive market --

1149 MR. NICHOLSON: Yes.

1150 MS LAWSON: -- the invisible hand works to keep company profits down.

1151 MR. NICHOLSON: Yes. It does if there's sufficient competition. It tends to have that effect. I mean it --

1152 MS LAWSON: So when there's a fully competitive market, then we don't need to worry about regulating profits.

1153 MR. NICHOLSON: That's right.

1154 MS LAWSON: But when there's not a fully competitive market --

1155 MR. NICHOLSON: You have price caps.

1156 MS LAWSON: We have price caps. Now, you agreed with me, Mr. Nicholson, that when we were under rate-based rate of return regulation, we used shareholder earnings to measure fairness.

1157 MR. NICHOLSON: Yes.

1158 MS LAWSON: How does changing the form of regulation change our notions of fairness? I know you don't want the Commission to look at your earnings.

1159 MR. NICHOLSON: Right.

1160 MS LAWSON: And I know you have reasons for that and we don't need to go through them again. We have heard that already. I am separating the question.

1161 The notion of fairness for the ordinary person on the street, how does that change? They don't care whether it's price capped regulation or rate based rate of return regulation. They care that their rate is fair. How do they measure whether it's fair?

1162 MR. NICHOLSON: Right. Well, I think that they first of all care about whether it's affordable to them and do they feel that they are getting value for their money. I think that that's probably the way most of them perceive, most people out there. We could conduct polls to examine that.

1163 You have put the question well: Why has the concept of fairness changed? We are simply in search of a better system to control the behaviour of this industry. Part of the belief is that that system, which will be facilities-based competition, will produce fairer outcomes than a regulatory system can do.

1164 What's made this transition possible is primarily technology. We are trying to change our regulatory system to take advantage of that. As I said earlier, there isn't a change in a fundamental notion of fairness, but we do have to go through a transition period in order to get from rate of return to this nirvana of total competition.

1165 MS LAWSON: And it's your view that a price cap regime cannot support any earnings review, even when such review is conducted only periodically at the time of the price cap review?

1166 MR. NICHOLSON: Well, I think, of course, it can. There's no question about that, but then you get into the conflict with other objectives that we have. It could well happen that the conditions required to manage earnings down strongly will at the same time destroy the incentives to create the competitive market and so you will undermine the other objective, so there is a balance to be struck there.

1167 I would continue, of course, to come back to the affordability criterion as being the one that is most objective, probably relates most to what people out of the marketplace are expecting. Of course, it has to be affordability combined with reasonable quality of service and other things that are addressed in our proposal. It's not just the dollar amount. It's what are you getting for that dollar.

1168 MS. LAWSON: Could you pull out Interrogatory Response The Companies CRTC 302. It's where you were asked about the appropriateness of using the length of the price cap -- price regulation plan as the only self-correcting mechanism.

1169 MR. NICHOLSON: I think we only need one. What does it say?

1170 MS LAWSON: Now, you say there:

"The length of the price regulation plan serves as a self-correcting mechanism in that the setting of a date for a review of the plan reduces the risk associated with setting inappropriate plan parameters." (As read)

Now, I am having a little difficulty with this.

1171 Where is the self-correction there?

1172 MR. NICHOLSON: Well, self-correction may not be exactly the right word. I mean the "self" being referred to here, I think, is the process that we are going through right now. In other words, there is a mechanism to review.

1173 MS LAWSON: So what happens at the time of the review in order to correct and what are we correcting here?

1174 MR. NICHOLSON: Well, I think again you have to come back and take cognizance of, in our case today, this trio of principal objectives and allowing that the Commission might establish other objectives at some reviews in the future, at least the one we are in now is a good example where we are going to look at competition, we are going to look at affordability. I hope we are going to look at the implications of any decisions here for future investment in the industry. That is -- and as a result of that debate in cross-examination, the Commission has a chance to adjust the parameters.

1175 MS LAWSON: But there is no need in your view to correct for industry-wide, super and normal earnings?

1176 MR. NICHOLSON: Right. Well, I don't think so. But that is something obviously that can be on the table if the Commission decides it should be. It will always be a case of striking the right balance among what I'm sure would always be multiple objectives.

1177 I do say, and come back to this repeatedly, that earnings regulation is a pretty uncomfortable bedmate with competition. It also is a pretty uncomfortable bedmate with the drive for efficiency and robust investment. And providing that the affordability criterion is met, I guess I would worry less about it. Anyway, that is my view.

1178 MS LAWSON: Well, what I am hearing you saying here and the position of Bell in the written evidence is that as long as at the time of the review, now as we speak, the Commission finds that rates are affordable, that competition is growing, that there is adequate investment, that there is no need to correct anything, even if the ILEC earnings industry-wide are way above competitive norms.

1179 MR. NICHOLSON: I don't accept that they are way above competitive norms by the way. They are certainly above the --

1180 MS LAWSON: Well, I am just --

1181 MR. NICHOLSON: -- going-in rate of 11 per cent.

1182 MS LAWSON: Let's just treat it as a hypothetical then.

1183 MR. NICHOLSON: Yes. Okay. Look, there -- I mean one can't be too pure about this obviously. There is some level beyond which, I suppose the earnings might be so egregious that the Commission's attention would be drawn to them. I don't think that is the situation we are in now but I can't say that one couldn't imagine a circumstance like that.

1184 Probably if that happened, some of the other objectives would be compromised long before, whether it was affordability or the development of competition.

1185 So I think you have got through this three-way triangle, this iron triangle of objectives enough constraints to come to a wise decision. If you try to put an earnings objective on it, you are going to injure one of the other objectives. But I wouldn't say that as a matter of logic that it would be inconceivable that you shouldn't take a look at earnings but I don't think that we are near that situation today.

1186 MS LAWSON: Just finally on this point of self-correction, Mr. Nicholson, wouldn't you agree that normally when you are talking about time limited incentive regulation plans, the self-correction idea relates to the rebasing that is done at the time of the review? The rebasing of the rates to correct for whatever turned out to be wrong with the formula.

1187 MR. NICHOLSON: Well, maybe it's a correction. Maybe it's -- you wouldn't characterize it that way. It's to change the parameters in some positive way to further accelerate a process that is already going on. Sure that -- the point is that if you have got reasonably frequent opportunities to come back, you don't have to agonize quite as much about trying to be possessed of the wisdom of Solomon at every hearing because you will have a chance within the next four years or so to revisit with whatever set of objectives the Commission might deem proper at the time.

1188 MS LAWSON: Okay, Mr. Nicholson, can we just turn to page 14 of your submission. This is under the section heading "Principles for the Next Regulatory Regime" where you cite five principles and I'm looking at the third principle at the lower part of page 14.

1189 MR. NICHOLSON: Just hang on here.

1190 MS LAWSON: And that principle is that the Commission should target regulation to address policy goals of competition and affordability.

1191 MR. NICHOLSON: Right. Okay. I have got it now.

1192 MS LAWSON: Now, you state there:

"Regulatory intervention should be narrowly targeted to address the preeminent public policy objectives of affordability and competition. Thus where market forces are not yet sufficiently developed there must be flexibility to allow prices to move towards levels that will attract competitive entry subject to reasonable limits designed to ensure that prices for basic service remain affordable." (As read)

So you are talking about local residential service here. Right?

1193 MR. NICHOLSON: Yes. Primarily or even business services in some of the higher cost --

1194 MS LAWSON: As we have discussed already, the only constraint on those rates should be affordability, not any other measure of reasonableness or fairness?

1195 MR. NICHOLSON: Well, affordability and also balancing off the incentive for facilities-based competitive entry, whether by the existing players or by new technologies. And I would add, as I continuously do, the maintenance of good incentives for investment. Yes, but --

1196 MS LAWSON: Then you go on to say:

"Where market forces are significantly present, regulations should be limited to establishing competitive safeguards until the market can be considered fully competitive and suitable for forbearance. But in other case, regulation should no longer attempt to constrain retail prices based on the companies cost structures." (As read)

1197 MR. NICHOLSON: Yes.

1198 MS LAWSON: That is your belief?

1199 MR. NICHOLSON: Well, that is our position, yes, and it's my belief.

1200 MS LAWSON: Okay. Can we agree that the current price cap formula was designed so that prices overall for cap services would reflect target costs?

1201 MR. NICHOLSON: I wasn't part of that proceeding. I mean I'm not pleading that I haven't looked at the record. Bob, do you want to -- I'm just going to give the audience a chance to hear another voice here for a second.

1202 MR. FARMER: I would just put a nuance on it, Ms Lawson. I would say that under the current price cap plan it was certainly designed for the cap services. Prices would move as one would have expected costs to move. So it's not necessarily cost based but rather looking at the way the costs would have changed.

1203 MS LAWSON: Did we not begin the last -- the current price cap regime with a revenue requirement proceedings.

1204 MR. FARMER: Yes, in 1997, we had a proceeding.

1205 MS LAWSON: So wasn't the whole purpose to ensure that the going in rates were based on costs?

1206 MR. FARMER: That is obviously for the utility segment which is what we looked at at that time in terms of setting costs, yes. Not on a service-by-service basis but on a category generally.

1207 MS LAWSON: So while the direct link between actual costs and rates was lucent under price caps, there still remains a link, in particular, between target costs now and rates?

1208 MR. FARMER: Yes, I would agree that link is under the current plan.

1209 MS LAWSON: Would you agree that target costs were set under the current plan at a level so as to provide the incumbents with incentives to increase efficiencies and be more innovative and with a reasonable opportunity to earn a fair return on their utility segments?

1210 MR. FARMER: I would agree that those were three of the objectives that were behind the current rules that we are living with right now, yes.

1211 MS LAWSON: You would agree with me that, in fact, that is exactly the wording that we find in Decision 979, paragraph 10 to define the third of the four objectives that the Commission set out for price cap regulation?

1212 MR. FARMER: I don't have the wording but I'm sure you are not intending to mislead me here, Ms Lawson.

1213 MS LAWSON: Well, this is important because earlier in our discussion this afternoon, I believe Mr. Nicholson made a statement that the three statements that Bell has put forward in its opening statement reflect three of the four in the Commission's Decision 979, paragraph 10. I'm not sure that is the case. I'm looking at them right now, with the fourth being, in your words, the simplicity, ease and reduced regulatory burden. In fact, the third here reads:

"To provide incumbents with incentives to increase efficiencies and to be more innovative and with a reasonable opportunity to earn a fair return for the utility segments." (As read)

1214 MR. NICHOLSON: Yes. You can go at me again now.

1215 MS LAWSON: Well, are you saying that is the same thing as to sustain a climate that will foster continue robust investments so as to keep Canadian telecommunication services at the leading edge?

1216 MR. NICHOLSON: I mean it is not logically exactly equivalent, but I certainly think it has the flavour.

1217 MS LAWSON: But back to the exact wording of the Commission's third objective.

1218 MR. NICHOLSON: Sure. I'm with you here. I have got it in front of me.

1219 MS LAWSON: Okay. Is it your view that this is no longer an objective of price cap regulation?

1220 MR. NICHOLSON: Personally I don't believe that it needs to be given the weight it was when we were making the transition from the rate of return base to where we are today. It was -- I think, in my earlier comments I said that it would always be reasonable for the Commission to take a look, among other things, at returns if they wished and if they were genuinely egregious you might do something to adjust that in the process of balancing whatever objectives were at hand at the time.

1221 But I think much turns obviously on the definition or the interpretation of the words "reasonable opportunity and fair return" and I would submit that there is room for some judgment as to what that should be.

1222 I mean we have also got an opportunity to make less than what we would consider to be a fair return. I mean it's a two-sided risk here.

1223 MS LAWSON: Right. I guess I am just really confused about what your position is here. Are you saying that the CRTC now has no business ensuring that you and other ILECs have a reasonable opportunity to earn a fair return on your utility segments?

1224 MR. NICHOLSON: No, I wouldn't put it as starkly as that.

1225 MS LAWSON: So it continues to be an objective? The Commission still should be concerned about your returns?

1226 MR. NICHOLSON: I guess the way I put it, and I would continue to put it that way, is to focus really on the ultimate policy objective, which is to sustain strong investment in this critical national industry. To the extent that a fair return is part of that objective, sure. But I am very much focused on the outcome, which is maintaining a decent climate for investment.

1227 MS LAWSON: But it has no relevance, in your view, to fairness from the perspective of subscribers for example?

1228 MR. NICHOLSON: Well, it is a slightly more involved question. I mean I happen to believe, and I think it is true, that the ultimate purpose of investment is to bring to Canadians who use these services the benefits of state-of-the-art services on state-of-the-art technology. I mean investment isn't an abstract objective, it is to achieve a purpose and it happens to be a purpose that I think is a legitimate one in policy terms, I think. And I think that is part and parcel of fairness.

1229 But I come back again to this balance among objectives and I guess I am taking the position here that the fairness objective is primarily going to be achieved through affordability, but the encouragement of competition is also important for the reasons that we have said, because I think a competitive market will produce -- will better produce "fair" results -- putting "fair" in quotes.

1230 And for the reasons I have just given I think robust investment in this industry will, in the end, be much fairer to Canadian consumers and to Canadian business who are going to have to have world-class infrastructure to compete.

1231 MS LAWSON: A competitive market if and when we --

1232 MR. NICHOLSON: Yes. Oh, of course. Absolutely. So it is important to bear in mind in this proceeding what is likely to be required to produce that competitive market in a sustainable way.

1233 MS LAWSON: So, Mr. Nicholson, should the new price cap regime be designed so that incumbents will have a virtual guarantee rather than a reasonable opportunity of earning a return on the utility segments that is in excess of what the Commission would consider a fair return?

1234 MR. NICHOLSON: A virtual guarantee, no. I think that is going too far.

1235 MS LAWSON: It should have a --

1236 MR. NICHOLSON: I can't imagine really how that could be offered, but I wouldn't argue for that, no.

1237 MS LAWSON: One final question in this line of questioning, Mr. Nicholson.

1238 Does Bell think that the cost of capped services will be increasing over the term of the next regime?

1239 MR. NICHOLSON: The cost of capped.

1240 Bob, do you --

1241 This is my Bell expert.

1242 MR. FARMER: I'm not really too sure how to answer that, to be honest, Ms Lawson.

1243 I suppose what we have seen over time is a gradual decline in costs. I wouldn't expect going into the future that we would see a change in that trend, but it is rather difficult for me to say.

1244 I suppose as new technologies come along they save you costs, but there is also buttonhooks involved with them so there will be some ups and downs.

1245 MR. FARMER: Thanks, Mr. Farmer.

1246 MS LAWSON: Mr. Colville, Commissioner, I have probably more than an hour left of cross-examination. Are we planning to take a break, sir?

1247 THE CHAIRPERSON: Well, I was planning to take a break this afternoon. I'm not holding you to this, but you had originally indicated about an hour, so I was assuming you were probably going to be about another 10 minutes or 15 minutes or so. Assuming you were --

1248 MS LAWSON: I'm sorry. When I --

1249 THE CHAIRPERSON: -- I was going to take the break between you and the next party.

1250 MS LAWSON: I guess there was a miscommunication. I have revised my estimate this morning upward substantially, to two hours. I'm sorry that didn't get through to you.

1251 THE CHAIRPERSON: So you are suggesting you about to change your line of cross and this might be a good time for a break?

1252 MS LAWSON: If we were to take a break, this would be a good time, Mr. Chairman.

1253 THE CHAIRPERSON: Okay. I was planning to take a break this afternoon, so we will do it now then.

1254 We will take a break for 15 minutes.

--- Upon recessing at 1605 / Suspension à 1605

--- Upon resuming at 1620 / Reprise à 1620

1255 THE CHAIRPERSON: Order, please.

1256 Just before we return to the cross-examination by Ms Lawson of The Companies Panel 1, I would just like to indicate that with respect to the issue that Mr. Lowe and Mr. Henry raised, to promote certainty for all the parties the Commission requires that both Bell and TELUS indicate whether and when they intend to file any new evidence for the matters which they raised earlier this afternoon. I would propose that they indicate their intentions by the end of the day Tuesday, tomorrow, and that is whether they intend to file new evidence and when.

1257 MR. LOWE: Thank you, sir.

1258 MR. HENRY: Thank you.

1259 THE CHAIRPERSON: Any other matters?

1260 Ms Lawson.

1261 MS LAWSON: Thank you, Mr. Chairman.

1262 Mr. Nicholson, could you pull up an interrogatory response, The Companies/ARC et al 100.

1263 MR. NICHOLSON: Okay.

1264 MS LAWSON: In this interrogatory we asked you in Part A if you agreed with the Commission that the new price cap regime should balance the interests of the three main stakeholder groups and if you disagreed we asked you to explain.

1265 Now, when I look at the response to your question, you have explained a lot. So I take it that you disagree?

1266 MR. NICHOLSON: What did we explain here?

--- Pause

1267 MR. NICHOLSON: Well, I would be surprised if we disagreed with balance, but I'm just look at what it says.

--- Pause

1268 MR. NICHOLSON: Well, I don't want to take the time to reread it all, but I can't imagine that this response suggests that we disagree with the concept of balance.

1269 MS LAWSON: So actually you agree?

1270 MR. NICHOLSON: Yes.

1271 MS LAWSON: The answer to that question in "A" is a yes?

1272 MR. NICHOLSON: Yes.

1273 MS LAWSON: Okay. Thank you.

1274 Now, the key benefit for consumers from your proposal, as I understand it, is a more competitive environment. That is what I see in the second paragraph of your response to this interrogatory.

1275 MR. NICHOLSON: Yes. Well, I will just put things in my own words.

1276 Certainly that is one of the benefits. I think continued affordability is another benefit and I think the benefit of investment in new services and improved technologies, network technologies, et cetera, these are also benefits, in fact extremely important benefits.

1277 MS LAWSON: Right. But just for the moment just focusing on competition --

1278 MR. NICHOLSON: Yes.

1279 MS LAWSON: -- do competitors agree with you, that your proposal allows for a more competitive environment to emerge?

1280 MR. NICHOLSON: Well, you will have to ask them. I think that they would -- at least some of them would obviously go further, but certainly there are aspects of our proposal that they fully support as enhancing the competitive environment that they will be facing. They want more, that is not surprising.

1281 MS LAWSON: Later on in that paragraph you say:

"The reason why a competitive environment would be so beneficial to consumers is that it would trigger market dynamics that would expand market opportunities through innovative high quality services, more cost-efficient operations and lower prices." (As read)

1282 MR. NICHOLSON: Yes.

1283 MS LAWSON: I take it, then, the idea you are proposing here is that we raise prices in order to lower prices?

1284 MR. NICHOLSON: Yes. I have sometimes put it that way myself.

1285 You have to establish an environment in which competitive investment is attractive in the first place and once it is in place a different dynamic takes place. As technology improves and competitors learn more about the marketplace. The consequences in markets where it is possible to have costs below revenue so there are positive margins, eventually prices do get driven down.

1286 MS LAWSON: So you are --

1287 MR. NICHOLSON: But it is not only prices, I should say. There are many other aspects of competition that are beneficial.

1288 MS LAWSON: Right. But we are just focusing on the prices thing right now.

1289 MR. NICHOLSON: Yes, I understand. Okay, I will leave you with that, then.

1290 MS LAWSON: When you say, though, you expect it to lead to lower prices ultimately, are you saying lower prices across the board or can I take it from what you just stated that you would expect prices to end up being lowered in some markets but not in others?

1291 MR. NICHOLSON: I don't know what I would expect, but certainly there is going to be variation prices. They are going to always be determined in relation to the value of the services. So as new services are introduced, they carry with both values and costs that can cause prices to be higher but relative to the quality of service --

1292 MS LAWSON: But I'm just trying to --

1293 MR. NICHOLSON: -- not higher.

1294 MS LAWSON: I'm just trying to clarify here when you say that you expect competition to trigger lower prices, that that would be in some markets, not in all, that we would end up with some higher prices and some lower prices, most likely.

1295 MR. NICHOLSON: Hard to say. I mean generally speaking the effect is to lower prices on average, but sure there are going to be variations and for dozens of reasons.

1296 MS LAWSON: Mr. Nicholson, why not let competition develop at the price levels that we ultimately expect to prevail?

1297 MR. NICHOLSON: Well, we don't know what those prices levels are going to be, so that is the first practical reason why not.

1298 The second reason is that you will -- with margins that are insufficient you are not going to attract competitors in the first place to get a foothold. I mean, the analogy might be that sort of starting friction is greater than rolling friction. Sometimes you have to push a boulder pretty hard to get it going and then it starts to roll.

1299 MS LAWSON: If you are saying we need to raise prices and then you are saying, though, we don't know what the ultimate prevailing price in a competitive market would be, how can you then say that the ultimate result will be lower prices? Do we know that the ultimate result will be lower prices or do we not know?

1300 MR. NICHOLSON: I think that the vast collected empirical experience of human beings engaged in market economics suggests that the prices relative to the services being delivered tend to drop under competition because competition -- there are lots of reasons for that and one of them is that competitors are always looking for the better mousetrap. They innovate on technology, they innovate in the marketing, they find dozens and dozens of ways in which to gain an advantage in the market. One of the consequences of that is typically that the prices relative to the quality of the service being offered does tend to fall over time in response to ingenuity and technology.

1301 MS LAWSON: Would you agree, Mr. Nicholson, that if an outcome of competition in the long term is lower prices, high prices in the interim is just going to lead to entry by companies who cannot survive once rates fall?

1302 MR. NICHOLSON: Well, I don't -- I mean, I suppose if one were to create completely artificial situations like that, that is possible. Certainly in our proposal we are not talking about price increases that would produce that kind of behaviour, I don't think. We are really talking about a freeze in real terms in prices.

1303 MS LAWSON: Turning to Part C of this question, here we asked you to quantify the financial benefits to each stakeholder group under your proposal.

1304 You don't seem to have even attempted to do so, instead I see in the response basically a statement that it is impossible to quantify benefits under competition.

1305 But I would like to clarify now, if I could, with you, if there are any measurable financial benefits that consumers would be guaranteed under your proposal during the term of the proposal.

1306 So looking at rates, you are not proposing any rate decreases in this proposal for residential customers, are you? We are just looking at increases.

1307 MR. NICHOLSON: Well, we are looking at constant real rates, yes, on average.

1308 MS LAWSON: In urban areas and --

1309 MR. NICHOLSON: Yes, and -- well, not just in urban areas, but in other than the so-called high cost areas and, at most, $2.00 a month per year in the high cost areas.

1310 MS LAWSON: And nominal increases everywhere?

1311 MR. NICHOLSON: Yes.

1312 MS LAWSON: So there is no financial benefit there in rates from the consumer perspective? I'm just looking at rates.

1313 MR. NICHOLSON: Yes, just looking at rates. Well, I mean, you are --

1314 MS LAWSON: Okay. Now let's turn, then --

1315 MR. NICHOLSON: Arithmetically I guess I would have to agree with that.

1316 MS LAWSON: Let's turn to competition now, because you do, in all due respect, refer to competition as an important benefit for residential customers but note that those benefits can't be quantified.

1317 That is because they are too ephemeral, too indirect? Am I correct?

1318 MR. NICHOLSON: Pardon?

1319 MS LAWSON: The reason you can't quantify the benefits of competition for residential subscribers is that they are too ephemeral or too indirect?

1320 MR. NICHOLSON: Well, I don't know indirect or ephemeral. I wouldn't describe it that way.

1321 What is difficult to do is to predict what the dynamic of competitive entry will be. We know that reducing prices significantly cannot encourage competitive entry and the competitors that are going -- that I think will enter in the consumer market, in the residence market, will not only be possibly some of the existing competitors here at this hearing but, as I said earlier, a number of new technologies, whether it is cable, wireless, Internet, and what is impossible in fact is to predict when and to what degree competition is going to develop in the residential sector of the market band by band. No, we can't do that. No one could do that.

1322 MS LAWSON: So even if you could quantify the benefits of competition for residential subscribers, should it occur, you can't guarantee that those benefits would be realized over the next four years. Correct?

1323 MR. NICHOLSON: No. I mean, I think -- no. Well, I mean, there are no guarantees in life.

1324 I think what I can say is that the probabilities of competition developing are certainly greater with our proposal than with one that forced prices in the other direction.

1325 MS LAWSON: Would you agree, Mr. Nicholson, that competition affects different types of subscribers differently?

1326 MR. NICHOLSON: Yes.

1327 MS LAWSON: Now, can we turn to an exhibit that I filed, it is just your bill insert to subscribers which I photocopies on a single sheet of paper.

1328 MR. NICHOLSON: I guess it came to us on two sheets.

1329 MS LAWSON: Two sheets, I'm sorry.

1330 MR. NICHOLSON: Yes. Yes. I have it.

1331 MS LAWSON: Some people may have a double-sided sheet.

--- Pause

1332 MS LAWSON: This exhibit, as I said, is a copy of your bill insert. The front sheet shows, on the right-hand side, the front panel of the bill insert. It is entitled "CRTC Reviewing Rules for Local Telephone Services Prices."

1333 MR. NICHOLSON: Yes.

1334 MS LAWSON: You first introduce the fact of this proceeding and you say at the end of that first paragraph:

"...Bell Canada has filed proposals with the CRTC that are intended to:"

1335 The first bullet:

"Ensure that competition is maintained and encouraged in Canada's healthy, competitive telecommunications market".

1336 MR. NICHOLSON: Yes.

1337 MS LAWSON: Now, I find that an interesting statement in light of current market realities, for my constituents at least. Are you not referring to the local telecommunications market here?

1338 MR. NICHOLSON: Well, I mean certainly in part, yes.

1339 MS LAWSON: Would you agree with me that the local telecommunications market is not in fact a healthy, competitive one at the current time?

1340 MR. NICHOLSON: Well, I mean what we are talking about there is, I think, a little broader. We are talking about the telecommunications market overall. I mean, we didn't specify just local.

1341 Absolutely the telecommunications market overall I would describe as healthy and competitive. We have never shrunk from acknowledging that there are aspects of the market that this hearing is considering where competition still hasn't developed adequately, but there are other parts of this market where it certainly has.

1342 It is a question of the time to roll out competition and it is a question of the time to roll out competition and it is going first in those areas where, as we say in our opening statement, the cream is thickest. That is not surprising.

1343 MS LAWSON: But this proceeding is about the local market and your bill insert was about this proceeding.

1344 MR. NICHOLSON: Yes.

1345 MS LAWSON: But this statement you are saying was not just about the local telecom --

1346 MR. NICHOLSON: No. What we are saying there is that we want to ensure that competition is maintained and encouraged. The implication there is that we are going to advance the competitive agenda.

1347 MS LAWSON: Mr. Nicholson, is it fair to say that Bell and other incumbents have responded to competition in both the local and long distance markets by becoming aggressive competitors?

1348 MR. NICHOLSON: Yes, I think that is a fair statement.

1349 MS LAWSON: You have sought to retain as much market share as you can. You have responded to your competitors by -- particular in the toll market, by meeting their prices and bettering them?

1350 MR. NICHOLSON: I wouldn't say that we have sought to retain as much market share as we possibly could have because we clearly gave up 40 points overall and 50 points a share in the business market. So that doesn't say that we fought to retain every point.

1351 As I said earlier, it is a trade-off between what you are prepared to give up in share as to what you are prepared to give up in price. We are always trying to strike that balance.

1352 MS LAWSON: Would you say, though, that you have been a successful competitor in the circumstances?

1353 MR. NICHOLSON: In the circumstances, yes.

1354 MS LAWSON: In the local market won't you do everything you can to retain market share?

1355 MR. NICHOLSON: No, the same condition applies that it is always going to be a dynamic judgment as between defending share through cutting prices for instance or letting competitors take some share and maintaining more remedy.

1356 MS LAWSON: Fair enough.

1357 MR. NICHOLSON: It is not as simple as that.

1358 MS LAWSON: But you would agree, though, that competitors will have to underprice you in order to gain market share, as they do in the local business market now?

1359 MR. NICHOLSON: Usually that is the case, but no, it doesn't necessarily have to be the case because the nature of telecom services are pretty complex and there are qualitative distinctions to be drawn. So you can get -- you can be losing market share because a competitor is offering a superior quality of service in some respects, maybe even priced a little higher. So I can't cite you an example of that, but I'm sure they exist.

1360 So quality and other dimensions of the service package are extremely important, and I guess especially so in the business market where the service is more complex.

1361 MS LAWSON: But doesn't Bell complete on those terms as well?

1362 MR. NICHOLSON: Well, we do, but I'm saying we can't guarantee that price is the only factor that comes into play there. That is all I'm saying.

1363 MS LAWSON: Right. Okay.

1364 Would you agree, though, that in the local market there is a possibility here of a price war, the way we have seen it in the --

1365 MR. NICHOLSON: In the long distance.

1366 MS LAWSON: -- long distance market. Yes, which ends up being won by the party with the deepest pockets.

1367 MR. NICHOLSON: Well, I don't think we won the long -- I don't know what we mean by winning the long distance fight. We in fact --

1368 MS LAWSON: I am referring to the local market, the possibility.

1369 MR. NICHOLSON: No, no, but let's go back. I think the good example is long distance because that is one that we have seen the dynamic play out in and it is not so speculative.

1370 I think we have competed hard, but we have lost 50 per cent of the business market to players which collectively are quite a bit smaller than we are and weren't starting with any of the advantages of incumbency.

1371 So, you know, we bruised each other a fair bit in that battle, but I wouldn't say that we used our might in some sense to vanquish the competitors. If that was our claim I don't think the numbers show that we were very successful.

1372 MS LAWSON: Is it your view, Mr. Nicholson, then, that the barriers to entry and the costs of entry to competitors in the local market are no greater than those in the long distance market?

1373 MR. NICHOLSON: I think that the LD market was easier to enter for some technological reasons. It simply was a lot easier to switch customers between providers. But even there it took doing away with all the extra dialling digits, et cetera, before it became very simple.

1374 So I think it is fair to admit that local facilities-based competition is tougher, it tends to be more capital intensive, more things have to happen to make it effective.

1375 MS LAWSON: So we can't really expect the same outcomes?

1376 MR. NICHOLSON: No, I wouldn't say that. All I'm saying is that the path of competition may be a -- probably is going to be a little different.

1377 MS LAWSON: Okay.

1378 Am I correct, Mr. Nicholson, that your main competitor in the local market now is TELUS?

1379 MR. NICHOLSON: No. No, I think --

1380 MS LAWSON: Who would you say your main competitor is?

1381 MR. NICHOLSON: I think AT&T certainly, CallNet, Group Telecom, obviously TELUS and -- I mean those are certainly the conventional competitors and I think it is fair to say that they are the main competitors in most components.

1382 But we also see the local market as incorporating Internet access for instance. In that respect, with respect to high speed access, the cable companies clearly are our number one competitors and in fact have a bigger market share than we have.

1383 We also consider that the wireless market is an extremely important market which is primarily local rather than long distance and there it is Rogers, it is also TELUS and it is also Microcell.

1384 So no, I think that the market is complex so we have to talk about different segments.

1385 But certainly there are lots of local components of the market where we are facing lots of competition other than the CallNet, TELUS and GT and AT&T.

1386 MS LAWSON: In terms of a single corporate entity, though, if you had to identify your single greatest competitive threat right now in the local market, who would that be?

1387 MR. NICHOLSON: I don't think I could really answer that question fairly. I'm not trying to be evasive here.

1388 Certainly if you talk to the people who are in the marketplace in the company you will get different answers depending on who you talk to because they are facing different competitors in different segments.

1389 Overall I wouldn't -- I really wouldn't think it would be fair and I really couldn't, from an analytical or empirical point of view, say that it is "X" rather than "Y".

1390 MS LAWSON: Okay, that is fair enough. Let's move on, then.

1391 A theme throughout your evidence here is that rate increases will encourage competition. Correct?

1392 MR. NICHOLSON: Yes. Certainly we think that that is true and the converse also, that rate decrease can't help but discourage it, yes.

1393 MS LAWSON: Do you think that rate increases to residential -- I'm just talking about the residential local market here -- are needed to attract competition in major markets like Toronto and Montreal?

1394 MR. NICHOLSON: Needed to attract competition.

1395 Well, I come back to put it the other way, that rate decreases can only discourage competitive entry. I think in some parts of the territory competition could be attracted under the existing circumstances and I think it will be.

1396 MS LAWSON: That would be in the most densely populated --

1397 MR. NICHOLSON: In the more densely populated bands, but it involves a substantial portion of our customer base, yes.

1398 MS LAWSON: Would you agree that residents in Toronto, then -- well, I guess you have already agreed, they are more likely to see competitive options than residents in, say, Peterborough, Ontario or northern Ontario, rural areas?

1399 MR. NICHOLSON: Yes. I think competition naturally tends to spread from those areas where potential margins are highest to those where they are less high and it is a matter of the time evolution. I mean capital is always limited so competitors are going to go put their next dollar where the best return is. And we have never disputed the fact that competition can't take place instantly, it is a dynamic process.

1400 MS LAWSON: Okay. I just want to understand how competition is likely to roll out under your proposal.

1401 MR. NICHOLSON: Right.

1402 MS LAWSON: So let's just focus on the high-cost -- the non-high-cost areas, because I think we agree that is where we are going to see it probably in the next few years.

1403 You are proposing, as you have said, to have the flexibility to increase residential rates in the urban areas or the non-high-cost areas by the rate of inflation --

1404 MR. NICHOLSON: Yes.

1405 MS LAWSON: And on top of that you would agree not to increase any particular individual rate --

1406 MR. NICHOLSON: Right.

1407 MS LAWSON: -- by more than 10 per cent a year.

1408 MR. NICHOLSON: Right.

1409 MS LAWSON: Now, looking at these non-high cost areas only, would you agree that it would be in the company's best interest to increase rates in the less densely populated areas by more than inflation, but not to increase rates in areas where competitors are most likely to enter?

1410 MR. NICHOLSON: Well, that will depend on circumstances. There is no question that there is some interplay there.

1411 MS LAWSON: Okay. So in fact under your proposal, wouldn't it be possible for you to lower rates in cities where competitors are entering, perhaps a special discount to price-sensitive customers while at the same time offsetting that lost revenue through rate increases elsewhere in non-high cost areas?

1412 MR. NICHOLSON: Yes. That's possible.

1413 MS LAWSON: So the pricing flexibility you are proposing actually gives you the right to respond to competitive offers with no net revenue loss as long as the competitors continue to target their entry in the more densely populated areas.

1414 MR. NICHOLSON: Well, I mean I can't say there would be no revenue loss obviously.

1415 MS LAWSON: I'm saying you could structure it that way.

1416 MR. NICHOLSON: It's far more custom -- well, maybe. I don't know. It depends on the way the numbers work out.

1417 MR. FARMER: I just wanted to add a thought on that, Ms Lawson. I know we tend to think of, because we are talking local competition, we think of areas that have more competition in the local market and compare them with areas that have less competition in the local market, but of course we are talking about groups of customers.

1418 Though it's true certainly some areas don't have as much local competition as others, and that will play out over time as Mr. Nicholson indicated, there is competition in quite a number of other services. That we also have to take into account.

1419 We are not out to in any way abuse or maltreat our customers by saying "Well, best to jack up the prices over there so we can lower them over here". The point is we have a number of markets that we have to be considering at the same time and we take all those considerations into account.

1420 MS LAWSON: I understand, but you do agree with me, Mr. Farmer, that widespread facilities-based entry by CLECs throughout your non-high cost areas is unlikely. I mean we are going to be seeing targeted entry or cream skimming type

activities.

1421 MR. FARMER: I would say in the short period of time.

1422 MS LAWSON: Over the term we are talking about here, the next four years.

1423 MR. NICHOLSON: Well, let me make a comment on that. Let's get down to cases. A very interesting case is East Link, a Nova Scotia based cable company which I believe now has about -- well, somewhat more than 13,000 customers.

1424 Interestingly enough, they are not only active in Halifax, but also in Truro, Bridgewater, maybe other areas and areas surrounding those. I happen to know the geography in Nova Scotia pretty well, having been there, brought up there.

1425 That I think is an example of what is going to be possible. It indicates that even facilities-based local residential competition can be expected to show up in some pretty surprising places over the next two or three years, given that we have already got a very vigorous competitor in Nova Scotia and including in parts of Nova Scotia that are certainly small town and even semi-rural.

1426 MS LAWSON: Well, my point, gentlemen, though is just that. It's that your proposal gives you the possibility of targeting price reductions in those areas that the competitors enter and funding those decreases through increases in other areas where competitors have not entered.

1427 That's the only point I am trying to make and have you acknowledge.

1428 MR. NICHOLSON: In the marketplace there's some flexibility, but I come back to the point I made earlier that there is considerable practical constraints on a profit-maximizing company to downprice in areas of high customer density because you lose a lot of revenue when you do that. It's multiplied by the number of customers.

1429 I should say that if there is any, if I could call it price rebalancing to meet a constraint, an overall basket constraint in price caps, the effect of that is to increase prices in the areas where hitherto competitive entry was least likely and by putting prices up in those areas then you are going to attract entry more likely than if they stayed where they were.

1430 There are some self-correcting mechanisms, if I could put it that way, that sort of rebalancing.

1431 THE CHAIRPERSON: Excuse me, Mr. Nicholson. Could I get you to just back up from your microphone a little bit.

1432 MR. NICHOLSON: Sorry.

1433 THE CHAIRPERSON: It's kind of booming here every once in a while. Thanks.

1434 MR. NICHOLSON: Well, that's easier for me.

1435 MS LAWSON: I would like to move on to another topic right now which I know involves Aliant. I'm not sure to what extent it involves the other companies represented at the table.

1436 I understand, and we were told this morning by the first presenter, that at least some of the companies have been arguing in the media and to the public that local rates in rural areas at least need to increase in order to offset contribution revenues in 2002. Is that correct?

1437 MR. FARMER: I can't say Bell Canada has not argued that. Perhaps you are asking me a question as to whether Aliant has argued that. I don't honestly know. I will tell you that --

1438 MS LAWSON: We had evidence this morning that Aliant is making that argument.

1439 MR. FARMER: I was just about to comment that in listening to some of the commenters this morning that one could take that interpretation, but I don't know whether that has been argued by Aliant or any other party in this proceeding.

1440 MS LAWSON: Well, I guess taking that evidence as truthful, can we agree that statements to that effect have been made?

1441 MR. FARMER: We can't agree that statements to that effect have been made. I will agree that that is a reasonable interpretation of what we both heard this morning, but I don't know if that is a reasonable interpretation of what has been said. I just can't take it any further than that.

1442 MS LAWSON: Okay. I take it that it is not Bell's position.

1443 MR. FARMER: No. It's not Bell's position.

1444 MS LAWSON: Is it Aliant's position?

1445 MR. FARMER: I don't know. That's really the gist of what I just finished saying.

1446 MS LAWSON: Gentlemen, looking back to your proposal at paragraph 2-40, you summarize your proposal for resident services and non-high cost serving areas by saying:

"Price increases would be limited to the rate of inflation, that is no real price increases for the term of the plan." (As read)

1447 You have stated that here today. Now, do you have the public notice with you there, public notice 2001-37?

1448 MR. NICHOLSON: We do.

1449 MS LAWSON: Could you pull it up and turn to paragraph 15, please?

1450 MR. NICHOLSON: Yes.

1451 MS LAWSON: Now, paragraph 15 reads:

"Should any company propose rate increases to be effective at the outset of the next price regulation regime, other than rate increases that reduce the subsidy requirement in high cost serving areas, it is to file along with its other evidence the evidence normally filed as part of an application pursuant to Part III of the CRTC Telecom Rules of Procedure, but confined to its utility segment."

(As read)

1452 The Companies have not filed revenue requirement applications in this proceeding. Correct?

1453 MR. FARMER: That's right.

1454 MS LAWSON: Yet you are proposing rate increases of up to the rate of inflation for non-high cost areas over the course of the next regime. Correct?

1455 MR. FARMER: Over the course of the next regime, that is correct. We are asking -- we are requesting flexibility over that time period.

1456 MS LAWSON: And Aliant is proposing significant increases to non-high cost service area rates in three of its four territories above and beyond the rate of inflation in the year 2002. Correct?

1457 MR. FARMER: One can argue about the use of the term significant, I suppose, but certainly they have proposed in the first year that the flexibility would be able to go to a $25 price and then some smaller increases over the remaining years.

1458 MS LAWSON: But none of the companies are providing any cost justification for these inflationary and beyond inflationary increases.

1459 MR. FARMER: That's also correct. I mean we have obviously discussed at some length and have already spent a good deal of paper talking about the various objectives that we are trying to meet which are not cost based in the sense that you mean here.

1460 MS LAWSON: But in your view there is no need to justify them, the revenue requirement application in this case because you are not proposing that the increases be effective until after the outset of the new regime. Correct?

1461 MR. FARMER: That's correct.

1462 MS LAWSON: So you are in technical compliance with the public notice.

1463 MR. FARMER: No. Interesting emphasis that you put on the word "technical". I wouldn't say it is technical. I would say that we are in compliance with the public notice.

1464 MS LAWSON: You think you are complying with the spirit of the public notice.

1465 MR. FARMER: I absolutely do. I believe the spirit of paragraph 13 was meant to address what we had done four years ago which was initially going into the price cap period. As we discussed earlier, there was a resetting of prices to set them at a given rate of return.

1466 We went into that price cap period. We are obviously past the earnings issue at this stage, but I believe that -- my interpretation of paragraph 13 was intended to say "If you wanted to take an approach as we had taken five years ago when we started our price caps, then this is what will be required".

1467 MS LAWSON: Mr. Farmer, does it make sense to you that cost justification is required for rate increases that are implemented January 1, 2002, but not for the very same rate increases as long as they are implemented, say, February 1, 2002?

1468 MR. FARMER: Well, you know, that's a judgment I am going to have to leave to the Commission on this one. I go by the words that I see in the public notice. I don't see any contradiction with our proposals and this public notice. I guess it's open to other parties to make arguments to the contrary.

1469 MS LAWSON: And you would agree, Mr. Farmer, that in the past under the base rate of return regulation, inflationary increases were not automatic. You had to file Part III applications.

1470 MR. FARMER: Certainly. I mean we are talking about the era before 1998. We had a test that we had to meet which was one based on revenues and costs in allowed earnings.

1471 MS LAWSON: And you have also indicated in your evidence today that costs of primary exchange service are falling. It's not as if the costs of basic residential telephone company to you are increasing at the rate of inflation.

1472 MR. FARMER: Well, I had intended my answer as a broader discussion of costs in the utilities segment all together. Now, if you had asked me the question specifically about basic residential service, I'm not sure that I would have given you a different answer.

1473 I mean I simply don't have a projection of where costs are going to go over the next number of years. If you followed any of the debate about cost for basic residential service, you will have noted, I'm sure, that it has been a very heated discussion since last April.

1474 MS LAWSON: Okay. We won't go down that road, Mr. Farmer. I will move on to the issue of the rate proposals and specific allegations you are making about rates in Canada in your evidence.

1475 Mr. Nicholson, as we have already stated, your proposal involves residential rate increases, some at the rate of inflation only, others by much more. Now, in deciding whether to propose residential rate increases in this proceeding, did you consider the level of increase in rates for basic essential telephone service that your residential customers had already been subjected to over the past several years?

1476 MR. NICHOLSON: Well, I mean we were aware of those and we were aware of them relative to indices of affordability.

1477 MS LAWSON: Did you consider the relative increases that they have enjoyed in terms of their incomes over the same period?

1478 MR. NICHOLSON: Yes. I mean I have looked at income statistics. I have.

1479 MS LAWSON: Well, let me refer to an exhibit that I have passed around. It's a one page document, double-sided, entitled "Per cent change in prices, incomes and local phone rates over time".

1480 MR. NICHOLSON: Yes. I have got the front page of it here.

1481 MS LAWSON: Now, I wasn't expecting to be questioning you on this today. I thought I was going to be on tomorrow and you would have had time to review this overnight. I'm sorry that you haven't.

1482 MR. NICHOLSON: Okay. Well --

1483 MS LAWSON: I wonder if you could tell me right off the bat if you notice anything inaccurate in your view in these figures or whether you could agree to them subject to check. I have provided the background for the U.S. figures on the opposite side of the exhibit.

1484 MR. NICHOLSON: Right. Okay. Well, I wouldn't have any basis for assuming that you didn't correctly report the numbers. I mean subject to check, I think whenever you look at percentage changes, the beginning and ending points are pretty important. That's what I always do when I look at percentages. It matters a lot where you start.

1485 MS LAWSON: Okay. But would you -- you would agree subject to check that these figures are accurate?

1486 MR. NICHOLSON: Well, I have no basis for assuming they are not, no.

1487 MS LAWSON: Okay. Would you agree then that the rate of increase of Bell's average residential local phone rates since 1993, which was unfortunately the only date we could find, we would have used 1992 if we had it, is a striking 109 per cent? Many times that of the general consumer price index. Many times that of average household incomes and especially of welfare incomes, which, as you can see, have declined in Ontario and Quebec. They are only available by province.

1488 MR. NICHOLSON: Right. Well, yes, I see what you are saying. The interpretation though that you would have to put on those numbers is a little bit more involved. What has been going on, obviously, is a substantial rebalancing of the pricing structure within the telecom industry, particularly as between long distance and local in the first instance and now even some rebalancing at the local -- within the local.

1489 But that largely explains the number you are seeing there and it probably explains the much lower number in the U.S. where the long distance competition was introduced earlier.

1490 The point that I would like to put on the record here and it's because I think -- it certainly struck me, was the table, Table 5.1 in the Commission's State of Competition Report that showed the total impact on typical customers with a typical mix of service when you combined what happened in long distance with what has happened to local rates between 1995 and 2000, both urban and rural. So there is quite a bit of -- and also stated by province.

1491 I'm sure the Commissioners of course are familiar with this table, but just for those in the room, what it shows is that in no province and in no urban or rural area do we find a situation where under this scenario of a fairly typical customer basket, do we find that the customers were not better off in terms of their total telecom basket by typically $100, $200, $300 dollars per year over that five-year period.

1492 MS LAWSON: Mr. Nicholson, I --

1493 MR. NICHOLSON: So, you know, that -- well, the relevance of that is pretty obvious. I mean sure we have seen half the equation. There is another half of the equation and when you put "X + Y" together, you get a consumer benefit in every province in the rural areas and in the urban areas.

1494 MS LAWSON: That is right. That is why I included in the TPI in this exhibit, which stands for "Telephone Price Index," 13.1 per cent which is Statistics Canada's index of local and long distance rates together.

1495 MR. NICHOLSON: And that is pretty low when you compound it over either years.

1496 MS LAWSON: Right. But I expected that you would bring up Table 5.1 and I'm not surprised that you have, and since you have then I suppose we need to address it.

1497 Looking at that page 44 of the CRTC report, which, Mr. Chairman or Commission counsel, perhaps you could tell me it's sitting around in the public exam room. Is it being placed by the Commission on the record of this proceeding?

1498 THE CHAIRPERSON: I think at least Table 5 just go on the record.

1499 MS LAWSON: Perhaps we could put the entire page 44 on the record, please.

1500 If we look above Table 5.1, Mr. Nicholson, we see --

1501 MR. NICHOLSON: Unfortunately I have got a version off the Internet. So I'm --

1502 MS LAWSON: Okay. Well, then I am looking at the explanation surrounding this --

1503 MR. NICHOLSON: Okay.

1504 MS LAWSON: -- which states that an assumption was made. There is a footnote here --

1505 MR. NICHOLSON: Yes.

1506 MS LAWSON: -- to the table, okay.

"In order to come up with these figures an assumption of 125 billed minutes of domestic long distance per month using blended peak/off peak pricing information was used. This is approximately equal to the National Residential Average." (As read)

1507 MR. NICHOLSON: Yes.

1508 MS LAWSON: Correct?

1509 MR. NICHOLSON: Yes.

1510 MS LAWSON: So this is a mean average. An average where you just add it all up and divide it by the number of people. Correct?

1511 MR. NICHOLSON: Maybe it's a median. Maybe it's a mean. I don't think it's a mode.

1512 MS LAWSON: Can we agree, subject to check, that it is a mean?

1513 MR. NICHOLSON: Sure.

1514 MS LAWSON: That people usually use the term "average" to mean "mean" --

1515 MR. NICHOLSON: Okay.

1516 MS LAWSON: -- unless they state otherwise?

1517 MR. NICHOLSON: No, no, I'm being facetious here. Yes.

1518 MS LAWSON: And that, in fact, with the information that Bell has about calling this, it's clearing a mean, not a median?

1519 MR. NICHOLSON: Well, that I think we would have to check.

1520 MS LAWSON: Okay. Let's check it then. Can you please pull up The Companies ARC et al 204. If you turn to page 3 --

1521 MR. NICHOLSON: Right.

1522 MS LAWSON: -- Bell has provided us with a table there of average long distance minutes divided into domestic, Canada, U.S. and international. Do you agree that -- and that is -- those figures are for one month.

1523 MR. NICHOLSON: So that is the 120.6 if I have read it correctly --

1524 MS LAWSON: Well, let's just run --

1525 MR. NICHOLSON: -- plus the 40 of Canada, U.S. --

1526 MS LAWSON: Let's run through it to make sure we understand it. Okay.

1527 MR. NICHOLSON: Right.

1528 MS LAWSON: The figures that have been provided here, if we look at domestic long distance, we see that over 30 per cent of customers -- over 30 per cent of Bell's residential customers make no domestic long distance calls in a given month.

1529 MR. FARMER: Well, that is correct. In a month.

1530 MS LAWSON: In a month. We are just looking at a given month.

1531 MR. FARMER: Or the month at least that we are using. That is correct.

1532 MS LAWSON: Yes. Just to clarify, we didn't ask you to provide the given month. That is all you could provide. Is that correct?

1533 MR. FARMER: Well, no, I imagine we could have provided other months. It is just that when we were responding to the interrogatory, we wanted to use a recent month. That is all.

1534 MS LAWSON: Well, we asked you what proportion of The Companies' residential customers would fall into different usage profiles and this is the response you gave us. So presumably you don't have a sort of three-month or a six month figure. It's just a one-month figure?

1535 MR. FARMER: I honestly can't say whether we do or we don't. I have certainly seen those in the past. I have seen them -- actually years ago I have seen averages over a number of months and clearly the number of customers who don't make any long distance calling over a long period of time drops drastically the longer the period.

1536 MS LAWSON: But you chose to just provide us with this one month. So that is all we have on the record and I am just looking at it right now and going through it. In that month we see 30 per cent made no calls. Overall the average, and that is a mean average, am I correct, Mr. Farmer?

1537 MR. FARMER: That is correct.

1538 MS LAWSON: The average number of minutes is 84.1 domestic but if you look only at the 69.8 that made calls, the average jumps up to 120.6. Correct?

1539 MR. FARMER: That is right.

1540 I'm wondering if maybe I didn't hear your question properly. The way I interpret this table is if you look at just the customers who make calling, they average 120, overall it's an average of 84.

1541 MS LAWSON: That is right.

1542 Would you agree that the data in this table shows that usage of long distance service is highly skewed?

1543 MR. FARMER: In a one-month period I would agree with that.

1544 MS LAWSON: And would you agree that even in a 12-month period it's highly skewed?

1545 MR. FARMER: Well, again, it's difficult for me to say that simply because I don't have the data. As I said, if we were to look at what we have called penetration rate over a long period of time, I imagine you would find quite a high number there probably. And the number I'm remembering, and I have to tell you it takes me back to 1987, if you can believe it, but I do recall the number and it was something like 95 per cent of customers over a six-month period would make use of long distance.

1546 Now, whether that is still accurate today, frankly I could expect given the pricing it would only have gone up.

1547 MS LAWSON: And that is just -- they could make just one call? That is make use?

1548 MR. FARMER: That is a possibility.

1549 MS LAWSON: So my question is, is not so much about those that don't and those that do, it's about usage generally. My question is, is it not true that even over a 12-month period, whatever period you choose, usage of toll service is highly skewed? That a few customers make very heavy use and many customers make light use?

1550 MR. FARMER: I don't wish to be difficult. I just have difficulty accepting the assertion. Not that I know that it's not right but I don't know that it is correct either and I just don't have the data to give a really good answer to you.

1551 MS LAWSON: Could you undertake to provide some data relevant to this? Perhaps some three-month, six-month figures, some figures of usage broken down by accounts --

1552 MR. FARMER: Yes.

1553 MS LAWSON: -- in order to eliminate this question?

1554 MR. FARMER: I suspect that we probably could get around any confidentiality concerns, but I'm sure we could provide something.

1555 MS LAWSON: Okay. Then let's work on that right now. Would you undertake to provide, first of all, the same data provided in this Interrogatory 204 for say a three-month period and a six-month period?

1556 MR. FARMER: I will certainly undertake to find it --

1557 MS LAWSON: If it's possible.

1558 MR. FARMER: -- to see if it's available and we will get back to you on that.

1559 MS LAWSON: And secondly, on the issue of the distribution of accounts by usage or expenditure, whatever you have got, can you provide us with data that would show the Commission how your residential accounts are distributed by usage and/or expenditure on long distance service?

1560 MR. FARMER: Again, I will certainly look into it. That would be more indicative of the skewness that we were talking about earlier.

1561 MS LAWSON: Thank you.

1562 MR. NICHOLSON: Just one point on the skewness.

1563 Even if you cut the long distance savings that are listed there with respect to this 125 minute mean in half, so instead of talking about 125 minutes you are talking about half that, 63 minutes, you would still find that the savings exceed the increases in local areas and in every single area. So there is quite -- the whole point of that is that this is really a very robust result and no one could ever say, in fact, for sure you will find individuals who had a negative number. But I would be very surprised if the vast majority didn't benefit from this.

1564 MS LAWSON: Well, Mr. Nicholson, you don't know that. You just would be surprised?

1565 MR. NICHOLSON: Yes, and it depends on what one's definition of "vast majority" is as well.

1566 MS LAWSON: You do know though, Mr. Nicholson, that there are many consumers out there who don't make significant use of long distance service?

1567 MR. NICHOLSON: Yes and by the way one of the reasons for that is that Canada has extraordinarily large extended area calling, so that in large parts of the country you can make what in most parts of the world would be an LD call, but in Canada it's a local call.

1568 MS LAWSON: But I take it you are not aware of any studies that would show the proportion of customers who make so little use of long distance that their local rate increases have overwhelmed their long distance?

1569 MR. NICHOLSON: Yes, I know. I know. What percentage of the total population would have had a negative sign in the table.

1570 MS LAWSON: Exactly.

1571 MR. NICHOLSON: No, I don't know that.

1572 MS LAWSON: We don't know that and the Commission doesn't know that.

1573 MR. NICHOLSON: This is kind of fresh numbers. I think probably should write a paper on it.

1574 MS LAWSON: But these numbers don't tell us that. You agree these numbers don't tell us?

1575 MR. NICHOLSON: No. These numbers deal with averages but the relevance of my point that even if you cut the long distance savings in half, you have still got positive numbers in both the urban and rural column for every province. That is an impressive result.

1576 MS LAWSON: But we don't know that half is the median, do we?

1577 MR. NICHOLSON: No, no, we don't.

1578 MS LAWSON: We don't know that.

1579 MR. NICHOLSON: But what we know for sure is that when you look at half the savings that are shown at the mean we pick up a lot more customers. That we do know. Precisely how many you pick up depends on the shape of the distribution and that we don't know.

1580 MS LAWSON: That is the undertaking that Mr. Farmer has agreed to give me and perhaps I could just add or clarify it.

1581 Mr. Farmer, what we are looking for is a median figure here. Ultimately what we want is a median usage and a median expenditure figure.

1582 MR. FARMER: I understand.

1583 MS LAWSON: Thanks. And on that --

1584 THE CHAIRPERSON: Ms Lawson.

1585 MS LAWSON: Yes.

1586 THE CHAIRPERSON: Ms Lawson, I would want to break for the day probably in about another ten minutes or before depending on where you are.

1587 MS LAWSON: I think I have more than ten minutes, Mr. Chairman, probably more like --

1588 THE CHAIRPERSON: Yes, I assumed that given your early comment.

1589 MS LAWSON: Well, probably just 15, 20 more. But I don't want to stretch it. So we could --

1590 THE CHAIRPERSON: Well, if you have only got 15 -- do you mean you have 15 minutes more and then you are finished?

1591 MS LAWSON: Yes.

1592 THE CHAIRPERSON: Okay. Go ahead.

1593 MS LAWSON: I think -- it's a guess.

1594 MR. NICHOLSON: It depends on us, doesn't it.

1595 MS LAWSON: It depends a lot --

1596 THE CHAIRPERSON: Presuming that you and Mr. Nicholson don't keep telling us what we all don't know.

--- Laughter / Rires

1597 MS LAWSON: Now, just to drive this point home, I have passed around another exhibit which is a web page of Oftel, the United Kingdom regulator, entitled "The Telephone Bill of a 'Typical' Residential Customer," and I would ask you to turn that up now, gentlemen.

1598 MR. NICHOLSON: Yes, there is two pieces to this. One has got this mean/mode.

1599 MS LAWSON: It's a two page exhibit that -- most people will have one page that is double-sided.

1600 MR. NICHOLSON: Yes, I have it.

1601 MS LAWSON: So Oftel does this analysis, the telephone bill of a typical residential customer and on that first page under "introduction" they say, "This note discusses the methodology used to estimate the telephone bill of a typical residential customer".

1602 The next paragraph, "The bill is defined as comprising all services which are commonly used by residential customers". Next paragraph, "The median bill is used as a proxy for the typical bill and is obtained from one in a hundred samples of residential phone bills. The median is likely to be more representative than the mean which will be skewed by a small number of very high usage customers".

1603 Then if we turn over the page, we see the section entitled "What is a typical residential bill?" They say, "There are various ways of defining a typical bill. The statistics most commonly used are the mean or average, the mode or most commonly occurring, and the median or the middle one if all bills were arranged in order of size". They the provide a figure which shows the relationship between the three measures.

1604 Would you agree, gentlemen, that in that figure we have in the vertical axis a number of customers and in the horizontal axis the expenditure? Would you agree?

1605 MR. NICHOLSON: Sorry. The horizontal axis is the size of the bill.

1606 MS LAWSON: Yes.

1607 MR. NICHOLSON: And the vertical is the number of people.

1608 MS LAWSON: So we see from this that the median -- there are many more people with lower bills than the average?

1609 MR. NICHOLSON: Yes.

1610 MS LAWSON: Now, Oftel goes on to explain, "A customer's quarterly bill comprises of a fixed rental together with call charges which vary with his or her usage".

1611 Now, would you agree to translate that into terms relevant to this proceeding: In Canada, a customer's monthly bill comprises monthly recurring local charges and toll charges which vary with his or her usage?

1612 MR. NICHOLSON: Yes.

1613 MS LAWSON: They say, "The distribution of residential bills is highly skewed as a small number of customers generate very high bills. Because of this the average bill...", that's the mean, "... bears only a limited resemblance to the bills of the majority of customers. Do you agree?

1614 MR. NICHOLSON: Well, given that particular distribution --

1615 MS LAWSON: And do you have any reason to think that the distribution is different in Canada from the U.K. with respect to usage?

1616 MR. NICHOLSON: Yes, I think there might be, but Bob --

1617 MR. FARMER: Well, just one observation I guess I can make. We do have in Canada packages which used to be fixed rate in that there was an upper limit on what people would pay. Recently those limits have been removed, I believe, but typically speaking we are looking at prices in the residential long distance -- if calling is in the right pattern that almost doesn't exceed $20. So international calling aside, it's not clear to me that you would have a distribution of the sort that's here. But again there is an empirical test we can put on that.

1618 MS LAWSON: And hopefully your undertaking will eliminate the situation.

1619 MR. FARMER: Presumably we would be able to figure that out.

1620 MR. NICHOLSON: The other thing that's hard to tell -- and I guess I would have to think about it a little bit harder -- is that you have measured local service in the U.K. and that might create quite a difference between the two distributions. But obviously I would have to sit and think about that.

1621 MS LAWSON: But as a statistical fact, you would agree with Oftel that the median bill does not suffer from problems of stability and is more typical than the average bill? Just as a statistical fact with usage-based service.

1622 MR. NICHOLSON: Well, I mean, we know that the bill is bounded below by zero and it's unbounded above. So there is some skewing in that direction. We do know that. I think the issue that is hard to tell is how close the mean is to the median. I mean, that distribution shows that it's quite a ways away and I wouldn't necessarily agree with that.

1623 Could I prove a theorem that says that for these kinds of distribution the mean is always greater than the median? That's where I would have to sit down and try and do.

1624 MS LAWSON: Where there is skewing of the mean like this, the mean is greater than the median.

1625 MR. NICHOLSON: Well, depending on what direction the skewing is. Let's not argue too much. What I can't accept is what the picture shows sort of intuitively that the mean is a lot bigger than the median. I think that that's going to depend a lot on the specifics of the distribution and I can think of reasons why the U.K. distribution is different.

1626 MS LAWSON: But you do agree that a median figure is the appropriate figure to use for a typical bill as opposed to the mean, where there is any skewing involved?

1627 MR. NICHOLSON: Okay. Well let's grant that.

1628 MS LAWSON: Thanks. Now, just back to the exhibit we started off with here which was to present change in prices, incomes and rates over time.

1629 You are not disagreeing that everyone, every local residential subscriber has borne the brunt of that 109 per cent increase while only some -- and maybe it's a majority, but only a proportion of the population have in fact experienced lower overall bills as a result of toll reductions.

1630 MR. NICHOLSON: I think that that's mathematically incorrect to state.

1631 MS LAWSON: Now, the last figure on this chart shows the average residential rate increase for local phone service in the United States for over the period 1992 to 2000 and the most recent rates that the FCC provides.

1632 Did that surprise you? I think you suggested that that didn't surprise you.

1633 MR. NICHOLSON: Well, did it surprise you, you have been --

1634 MS LAWSON: It's only 3.6 per cent.

1635 MR. NICHOLSON: It goes back before my time.

1636 MR. FARMER: Well, Mr. Nicholson is dating me here apparently. No, it doesn't surprise me. The local rate in the U.S., of course, when long distance competition was brought in they went into their period of rate rebalancing earlier than we did in Canada. So there have been relatively small changes through the period based on the average that you have given us here.

1637 MS LAWSON: And you would agree there have been no significant changes since 2000? So it's unlikely that the average residential rate for 2001 in the U.S. is going to be significantly different?

1638 MR. FARMER: I'm not aware of anything that would have made a significant change.

1639 MS LAWSON: Thank you.

1640 Now, moving back to your opening statement. Mr. Nicholson, on page 2, under "affordability", the second bullet, you state that:

"The prices in Canada both for basic residential and business service are close to the lowest in the world as measured by many studies".

1641 And then you refer to your appended charts which also appear at page 17 of your evidence.

1642 MR. NICHOLSON: Right.

1643 MS LAWSON: Those charts, I understand, were developed by Teligen, a company that you and some other incumbents commissioned to produce a report on comparative local rate levels.

1644 MR. NICHOLSON: Just a second. I'm obviously not looking at --

1645 MS LAWSON: Page 17 of your evidence.

1646 MR. NICHOLSON: Page 17? On my 17 I have the percentage of households with telephone service.

--- Pause

1647 MR. NICHOLSON: I know the chart. I obviously have a different numbering scheme here, but I know the chart. I have it now. This is called Table 3, I think.

1648 MS LAWSON: Table 3, that's right and there is a business chart and a residents chart.

1649 MR. NICHOLSON: Gotcha!

1650 MS LAWSON: And the point you are trying to make there is that Canadian rates are low internationally. Right?

1651 MR. NICHOLSON: Yes.

1652 MS LAWSON: And this is based on the report that you commissioned. Correct?

1653 MR. NICHOLSON: Yes.

1654 MS LAWSON: And the report focuses on the G-7 countries, I take it.

1655 MR. NICHOLSON: Right.

1656 MS LAWSON: Not the full --

1657 MR. NICHOLSON: I think it does primarily, plus Australia.

1658 MS LAWSON: The report is filed in this proceeding, by the way, and it's in response to an interrogatory we asked of you, No. 203.

1659 MR. NICHOLSON: Right.

1660 MS LAWSON: Now, Teligen does the work, I understand, for the OECD in price comparisons. Is that correct?

1661 MR. NICHOLSON: Yes.

1662 MS LAWSON: But they chose in this case, I guess, under your instructions to focus only on the G-7 countries.

1663 MR. NICHOLSON: Plus Australia, I see listed there.

1664 MS LAWSON: And Australia. So they picked out certain countries.

1665 MR. NICHOLSON: Right.

1666 MS LAWSON: And if you go to paragraph 12 of their report, they explain that. They say the study did not include the countries that normally ranked the highest in the OECD comparisons, notably the Scandinavian countries.

1667 Now, why would you have not just provided the Commission here with the OECD results? Why have this whole new report done when you already have on the public record the OECD results?

1668 MR. FARMER: Well, he was going to point out, he just mentioned it, we do have the OECD results as well on the record of the proceeding.

1669 It's a question of providing various pieces of data all of which we believe point to the same kind of general conclusion and that is that prices in Canada are really at very reasonable levels when you take them on a -- if you compare them to international standards. So for instance, you see for both residents and business the average price is lower than the -- at least the price in Canada is lower than the average price in the OECD countries.

1670 So we are just trying to show different ways of coming at the issue, but all leading to the same conclusion.

1671 MS LAWSON: But I am right, am I not, that this particular study removes -- I mean, they say it themselves, they remove countries that normally rank the highest. So they make it look even more so that Canada's rates are lower internationally than the general OECD report does.

1672 MR. FARMER: Well, again, I don't know that I would really accept that characterization. It presents that it presents and it's very clear as to what it's presenting. It says it compared Canadian prices to prices of other G-7 countries and Australia and these are the results.

1673 MS LAWSON: But if you did include all of the OECD countries we would see that, in fact, the OECD basket of residential services in Canada comes at a higher price than in Switzerland, Netherlands, Luxembourg, Finland, Norway, Denmark, Sweden, Korea and Iceland as well as the U.K.

1674 MR. FARMER: If you go to the OECD study that we filed in Calgary 5, you will find that Canada on residents, in what they call the domestic basket, ranks 11th out of 29 and the composite is almost the same, it's 10 out of 29. So it's in the upper portion.

1675 MS LAWSON: And that's 2000 rates, August 2000.

1676 FARMER: That's right.

1677 MS LAWSON: Now, just going back to your evidence. Actually, turning to Mr. Talbot's evidence. I thought that maybe I guess I can address some questions to you at this stage.

1678 Mr. Chairman, I'm in your hands. I'm hoping this won't take more than ten minutes. It could go 15.

1679 THE CHAIRPERSON: I don't want to restrict your cross today. It's just we have been here a long time. I mean, if you think you can do it in ten or 15 minutes, that's fine, but if --

1680 MS LAWSON: I think I can, sir. I would rather just get through it. Thanks.

1681 Okay. Mr. Talbot, if we turn to paragraph 3.4 of your evidence you state that:

"The following chart shows that Canadians consumers pay lower prices for a typical usage basket of telecom services than do consumers in the U.S."

1682 We turn over, we see the chart, and then in paragraph 3.5 you state:

"This demonstrates that there is room to increase prices in Canada and still be one of the lowest price service providers in North America".

1683 The chart comes from a recent Yankee Group report. Correct?

1684 MR. TALBOT: That's correct, yes.

1685 MS LAWSON: So you are relying on this Yankee Group study.

1686 Are you aware that the Yankee Group -- I guess you are aware that the Yankee Group used the exchange rate of $1.53 Canadian to the U.S. dollar to compare Canadian and U.S. rates.

1687 MR. TALBOT: That's correct, yes.

1688 MS LAWSON: Are you aware that the OECD and Teligen used a purchasing power parity adjustment to do these comparisons, that they think that is the appropriate way to do it?

1689 MR. TALBOT: It's a different study, obviously, prepared on a different basis, and yes, we are aware of that.

1690 MS LAWSON: And have you any idea of the difference that using the purchasing power parity would have made to the Yankee Group results?

1691 MR. TALBOT: I haven't completed a study of that, no.

1692 MS LAWSON: You would agree, however, that if you did use purchasing power parity, Canadian rates would appear much higher by an order of magnitude of 15 to 20 per cent?

1693 MR. TALBOT: No, I wouldn't know that offhand. I would have to do some work to come to that conclusion in that in fact is the case.

1694 MR. NICHOLSON: I think that that's true. I mean, that's roughly the number I just calculated here as you were speaking.

1695 MS LAWSON: Now, do you have any idea, Mr. Talbot, of what assumptions the Yankee Group made to come up with these calculations of rates?

1696 MR. TALBOT: I think there was probably an outline in the actual study which I think is filed as part of one of the interrogatories. I believe it was Calgary, but I don't know the number offhand.

1697 MS LAWSON: It's Calgary 3 and I think we should turn to that. It's The Companies Calgary 3 attachment.

1698 Now, page 2 of that study provides the methodology which they say is the same as that employed in the 1999 study and then if you turn over to page 3 we see the consumer usage profile service baskets that they used here to do the comparisons and they have three baskets they call "modest, typical and heavy user". Correct?

1699 MR. TALBOT: Yes.

1700 MS LAWSON: And we see in that chart that they assumed a thousand minutes of local usage for each of three baskets. Correct?

1701 MR. TALBOT: Yes.

1702 MS LAWSON: We see in that charge that they assumed a thousand minutes of local usage for each of those three baskets. Correct?

1703 MR. TALBOT: That's what it looks like to me. Yes.

1704 MS LAWSON: And would you agree that that assumption is important when you are comparing metered local service in the U.S. with flat rates in Canada?

1705 MR. TALBOT: Well, it's obviously complex. You have got to look at different routes and how far the calls are being made and so forth, but I would think that that's a fairly important assumption.

1706 MS LAWSON: And do you have any idea on what basis they made that assumption?

1707 MR. TALBOT: I'm afraid I haven't studied their methodology in great detail.

1708 MS LAWSON: As they say here -- all they say here about their methodology is it's the same as they used in 1999. Correct?

1709 MR. TALBOT: That is the gist of it.

1710 MS LAWSON: I am reading from the 1999 report which I am not sure whether it's on the record. I didn't find it on the record in this proceeding. In the 1999 report I am reading here, they state:

"We have assumed that all customers will use a thousand minutes of local service each month in order to make a fair comparison of the few U.S. cities that do have usage-based providers." (As read)

1711 That's all they say. Do you have any reason to doubt that there is any more information about how they came up with that assumption?

1712 MR. TALBOT: I have no more information. No.

1713 MS LAWSON: Are you aware that the one thousand minute assumption is twice the size of the assumption made by the FCC when it constructs similar comparisons?

1714 MR. TALBOT: I'm not aware of that. No. I think you would also have to take into account the overall calling area and so forth. I would reiterate it's not just a time equation, but also a distant equation you would need to take into account.

1715 MS LAWSON: So you are not aware that the FCC when it does these comparisons assumes charges associated with placing 100 five minute same zone business day calls.

1716 MR. FARMER: I wasn't aware of that. No.

1717 MS LAWSON: Okay. You would agree though, Mr. Talbot, that to the extent that this 1,000 minute assumption overstates actual usage, it exaggerates the use of metered service in the United States.

1718 MR. FARMER: I have just come back. I think I would need to do a more detailed review than I have had the time to look at this study to come to any kind of conclusion.

1719 MS LAWSON: I'm just asking to the extent that the 1,000 minutes overstate the actual minutes, then that will exaggerate the cost of metered service.

1720 MR. TALBOT: It would certainly be a factor you would have to look at. Yes.

1721 MS LAWSON: Mr. Talbot, would you agree or are you aware of whether the Yankee Group study includes any amount for installation fees?

1722 MR. TALBOT: It seems to focus mostly on the number of minutes. I don't see a reference to installation, but I could be corrected.

1723 MS LAWSON: It doesn't include. You agree with me it doesn't seem to include anything for installation.

1724 MR. TALBOT: Not at first glance. That's correct.

1725 MS LAWSON: And it also doesn't account for discount rates in the United States that are offered to eligible customers for basic local service and installation service. They are called lifeline and link-up programs and they are generally half price rates for certain classes of customers.

1726 MR. TALBOT: I would need to look at how they made the comparison also in Canada then to see what assumptions they made, but I will take your word for it.

1727 MS LAWSON: There is no indication that they have included those discount rates.

1728 MR. TALBOT: I will take your word for it.

1729 MS LAWSON: And if they had, you would agree that that would bring down the U.S. rate numbers.

1730 MR. TALBOT: And presumably if there was anything in the Canadian rates, it would also affect them, but obviously we don't know the magnitude.

1731 MS LAWSON: Are you aware of any such discount programs in Canada?

1732 MR. TALBOT: I believe that there are a number of discount programs, but you would obviously need to look at the different specifics of it and I don't have that information at my fingertips right now.

1733 MS LAWSON: Mr. Talbot, are you aware of the assumptions in this study regarding long distance usage of modest, typical and heavy users? Are you aware of how the Yankee Group came up with the figures that it did for each of these baskets for long distance usage?

1734 MR. TALBOT: I would say that in referencing to this study that we relied on the Yankee Group as being a well known reputable research firm and that their methodology would be one that is fairly logical and obviously representative of three different types of user groups.

1735 I'm afraid my focus has really been more on looking at the financial implications rather than doing a detailed analysis of their methodology.

1736 MS LAWSON: You would just assume that their methodology was good.

1737 MR. FARMER: If I could just make one observation. The 130 minutes for the typical user is very close to the 125 that was used in the CRTC studies as representing the average, so at least there is one anchor point for that.

1738 MR. TALBOT: And I would think the international and cross-border minutes are also fairly close, just eye-balling.

1739 MR. FARMER: Yes.

1740 MS LAWSON: Would you be surprised then -- I take it you would be surprised that they didn't base these, that they just pulled these numbers out of the air basically. Would that surprise you if you learned that?

1741 MR. TALBOT: That seems fairly consistent with the actual experience. While it might be a little bit of a surprise that they hadn't based it on anything, it seems to be fairly representative of what we actually see in practice.

1742 MS LAWSON: It does in your view. Okay. Would you agree that if you were to divide consumers into, say, quartiles based on usage, modest would be the lowest quartile, heavy would be the highest and then the typical user would be the median?

1743 MR. TALBOT: That would be logical.

1744 MS LAWSON: Okay. And by median, as we discussed, half of the customers would make less use than that person and half would make more. We have already been through this. We have no idea what the median long distance usage is in Canada. These 120 and 130 figures have nothing to do with median, do they?

1745 MR. TALBOT: Obviously we are waiting for further information on that.

1746 MS LAWSON: Yes. So they have nothing to do with typical. We have supposedly a typical user basket, but it bears no relationship to median.

1747 MR. TALBOT: A fair point based on what I know at this point, yes.

1748 MS LAWSON: And if we go back to the interrog response we were looking at a moment ago, which is The Companies ARC-204, and I'm sorry, I should have told you to keep that out.

1749 As we said, in a given month almost 30 per cent make no domestic calls, almost 80 per cent or over 80 per cent make no calls to the U.S. in a given month and close to 90 per cent make no international calls in a given month.

1750 You are agreeing with me that on the basis of these figures we can expect the median to be significantly lower than the main -- the average minutes provided in this chart.

1751 MR. TALBOT: Well, again, I think I would want to see the data before I come to that kind of conclusion. I would think that the general direction would be in agreement with what you are saying, but I would want to see about the significance.

1752 MS LAWSON: And wouldn't you also expect, particularly in the case of international long distance and also U.S. maybe just slightly to a lesser extent, there is going to be highly skewed usage, that we are going to see a few customers pulling out that average figure because of their very heavy usage.

1753 MR. TALBOT: There may be. You would have to look at the various calling plants.

1754 MS LAWSON: Okay. So we will rely on Bell to get us that information.

1755 Extrapolating from the data in this interrogatory response, would you agree with me that modest users in Canada are likely to make more in the range of zero to 20 minutes a month of domestic long distance calling and probably zero cross-border calls per month, if you are looking modest to lowest quartile?

1756 MR. TALBOT: I don't frankly know that I would have that information to make a call on that. It would certainly appear to be lower, but exactly within what range I think I really would hate to hazard a guess.

1757 MS LAWSON: Do you think that the Yankee Group's description of a modest user bears any relationship to the actual usage of, say, the lowest quartile of Canadians?

1758 MR. TALBOT: And those numbers being the 80 minutes of --

1759 MS LAWSON: Eighty minutes of long distance, 30 minutes of calling to the U.S. Do you think that that really represents the modest Canadian user of long distance, 80 minutes of long distance a month, 30 minutes of calling to the U.S.

1760 Isn't that more likely to be typical and, if anything, less than typical -- I mean more than the typical user would use in Canada?

1761 MR. TALBOT: Well, I think they are really trying to get at putting people into different baskets.

1762 MS LAWSON: Right, and they provide no --

1763 MR. TALBOT: On balance, it's -- I have no reason to think that it is very different from the kind of user that you have been talking about.

1764 MS LAWSON: Okay. So you accept the Yankee Group figures. You think that that is the likely profile of the modest user and that it's the likely profile, the typical user there in the Yankee Group report despite the fact that they haven't provided you with their methodology.

1765 You have no idea how they came up with those figures and they do not seem, you know, extrapolating from the little information we have, they don't seem to accord with it in terms of median usage and modest usage.

1766 MR. TALBOT: I have no reason to, you know, question the methodology that they have used. It would appear to be reasonable to me on the basis of what I have seen in terms of the assumptions that they have made.

1767 MS LAWSON: Okay. So you conclude from the Yankee Group study that Canadian rates are significantly higher than U.S. rates.

1768 MR. TALBOT: No. I conclude the other way, that they are lower.

1769 MS LAWSON: I'm sorry. That's your conclusion. You agree that this Yankee Group study picks out certain cities and just looks at those cities.

1770 MR. TALBOT: Well, I think what they have tried to do is to pick a representative cross-section across the country, both in Canada and the U.S. Obviously there are different markets with different tariffs, so they tried to put that in the context of a manageable study size.

1771 From that perspective, I would think it's a useful study.

1772 MS LAWSON: Do you think that a comparison of average local rates might enlighten us on this issue as well?

1773 MR. TALBOT: It might do, but I think you can get quite a variance in terms of the high and the low so, therefore, it's probably useful to have a look at some comparable size cities.

1774 MS LAWSON: When I look at your statement, Mr. Talbot, it's really average that you seem to be concerned about. I mean you make a sweeping statement here:

"Canadian consumers pay lower prices for a typical usage basket. Canadians enjoy low cost telephone service."

(As read)

1775 Would you agree that it might be helpful to look at average rates and compare them?

1776 MR. TALBOT: I think what the study does is to take a city in seven of the ten provinces which would seem to be fairly representative of what we have in Canada and four of the U.S. states from different areas of the country, so they could have added an average certainly.

1777 I think the variance in the Canadian cities is relatively small relative to what we see in the U.S., so that would indicate on average, you know, I would think it would be somewhere between $47 and $56 a month.

1778 MS LAWSON: Okay. Well, let me suggest that we look at averages right now before we close for the day and we are very close to closing for the day, Mr. Chairman.

1779 THE CHAIRPERSON: I hope so.

1780 MS LAWSON: I passed around another exhibit, a one page exhibit, which is entitled "Average monthly rate for basic residents exchange service in Canada". Would you agree, Mr. Farmer, with the Canadian rates provided there?

1781 MR. FARMER: I haven't done the arithmetic. I agree with the Bell Canada number though. It's the same number within a penny that I have.

1782 MS LAWSON: And are you familiar with public notice 2001-61?

1783 MR. FARMER: Related to the independent telephone companies?

1784 MS LAWSON: Yes.

1785 MR. FARMER: I know it's related to the independent telephone companies.

1786 MS LAWSON: All right. Are you aware I think in paragraph 11 of that public notice there is a reference to an average Canadian rate of $22.75 which looks like a reasonable average of the above figures.

1787 MR. FARMER: Don't get me wrong. I am perfectly willing to accept this, subject to change.

1788 MS LAWSON: Okay. Now, we have also provided the average monthly rate for basic residence exchange service in the United States which, as we have already seen in a prior exhibit, is calculated by the FCC on an annual basis and that is $18.21 U.S, the most recent figure being for the year 2000.

1789 No reason to dispute that?

1790 MR. FARMER: No.

1791 MS LAWSON: And you would also agree that if we apply the purchasing power parity adjustment as the OECD and Teligen do, then the one of these tiers, 1.25, which happens to be the one for June 2001 -- you can pick another one if you want -- but using 1.25 we come up with the same rate in Canadian dollars as the average Canadian figure.

1792 MR. FARMER: I'm sure your arithmetic is correct without having done it. I will tell you that, and this is the only reason I hesitate going forward on this one. I do have a calculation that we have done ourselves to put the average U.S. price in Canadian dollars using purchasing power parity and the number is somewhat different. This may not change your line in any way, but I will tell you the number that we have is $23.29.

1793 It starts from the same rate in the U.S. It's obviously using a slightly different version of the purchasing power parity number.

1794 MS LAWSON: As you have said already, there is no reason to think that U.S. rates have increased significantly over the past few months, several months.

1795 MR. FARMER: Well, again, I don't have any knowledge to that effect.

1796 MS LAWSON: But we do know that there have been some increases in Canadian rates since these figures and you are certainly proposing more.

1797 MR. FARMER: Well, actually I'm just thinking about that.

1798 MS LAWSON: There have been some increases in July 2001?

1799 MR. FARMER: I have a comparison here to the April 2001 rate in Bell. Just excuse me for a second.

--- Pause / Pause

1800 MR. FARMER: You may not be referring to Bell Canada. You may be referring to other companies.

1801 MS LAWSON: In any case, you accept these figures. In fact, you would agree with what this exhibit says which is that the average rate for basic residential local service in Canada is the same, you know, essentially the same, very reasonably comparable to that in the United States. There is no significant difference?

1802 MR. FARMER: Well, we can argue about significance. Using my number I have a slightly different version which would say that the Bell rate is about a dollar, a little bit less than a dollar than the U.S. in Canadian dollars purchasing power parity. Whether that is significant or not, is in the eye of the beholder.

1803 MS LAWSON: Just to tie up here, the Yankee Group study that we were discussing earlier, that was funded by Bell. Am I correct?

1804 MR. FARMER: Yes it was.

1805 MS LAWSON: Thank you very much, Mr. Chairman. Those are all my questions.

1806 THE CHAIRPERSON: Thank you, Ms Lawson.

1807 MR. HENRY: Mr. Chairman.

1808 THE CHAIRPERSON: Mr. Henry.

1809 MR. HENRY: Mr. Chairman, just one follow up if I could.

1810 Ms Lawson referred to a 1999 Yankee Group study. I wonder if she could provide a copy of that to us and perhaps file it.

1811 THE CHAIRPERSON: Well, in fact, I was going to suggest that given the fact that she referred to it perhaps we should be making that an exhibit.

1812 MS LAWSON: I will make copies and bring it in tomorrow morning, Mr. Chairman, as an exhibit and I'm sorry I didn't have those prepared.

1813 THE CHAIRPERSON: That is okay.

1814 So, Mr. Secretary, if we could have exhibit numbers for Ms Lawson's four exhibits which she presented.

1815 MR. SPENCER: Actually we have five exhibits for Ms Lawson.

1816 We have ARC et al Opening Statement, which will be Exhibit No. 1. Bell Billing Insert will be Exhibit No. 2. Percentage Change in Prices, Incomes and Local Phone Rates Over Time will become Exhibit 3. Oftel, "The Telephone Bill of a 'Typical' Residential Customer will be Exhibit No. 4. And the Average Monthly Rate for Basic Residential Exchange Services in Canada is Exhibit No. 5.

1817 Thank you, Mr. Chairman.

EXHIBIT NO. ARC-1: ARC et al Opening Statement

EXHIBIT NO. ARC-2: Bell Billing Insert

EXHIBIT NO. ARC-3: Percentage Change in Prices, Incomes and Local Phone Rates Over Time

EXHIBIT NO. ARC-4: Oftel, "The Telephone Bill of a 'Typical' Residential Customer

EXHIBIT NO. ARC-5: The Average Monthly Rate for Basic Residential Exchange Services in Canada

1818 THE CHAIRPERSON: Thank you.

1819 Mr. Farmer, I don't know whether I missed it but did you give an indication of when you would have the undertaking which you agreed to which was to provide the answer to ARC 204 for three months and six months?

1820 MR. FARMER: I didn't indicate the timing because I'm just not in a position to even estimate at this time. I will endeavour to at least find out the timing.

1821 THE CHAIRPERSON: That is fine.

1822 MR. SPENCER: I'm sorry, Mr. Chairman, I would like also to enter The Companies Exhibit No. 2 which is Mr. Robert Farmer's c.v., Mr. Richard Talbot's c.v. is Exhibit No. 3 and Mr. Peter J. Nicholson's c.v. is Exhibit No. 4.

1823 Thank you.

EXHIBIT NO. THECOMPANIES-2: Mr. Robert Farmer's c.v.

EXHIBIT NO. THECOMPANIES-3: Mr. Richard Talbot's c.v.

EXHIBIT NO. THECOMPANIES-4: Mr. Peter J. Nicholson's c.v.

1824 THE CHAIRPERSON: Thank you, Mr. Secretary.

1825 I believe that completes our work for the day. We will reconvene tomorrow morning at nine o'clock when I believe it is the City of Calgary, which would be next on the agenda.

1826 Thank you very much. We will see you tomorrow at nine.

--- Whereupon the hearing adjourned at 1802, to resume

on Tuesday, October 2, 2001 at 0900 / L'audience

est ajournée a 1802, pour reprendre le mardi

2 octobre 2001 à 0900

Date modified:

2001-10-01