ARCHIVED -  Transcript - Hull, Quebec - 26 March 2004

Expedited procedure for resolving competitive issues /

Procédure accélérée de règlement des questions de concurrence

HELD AT: TENUE À:

Salon Réal Therrien Salon Réal Therrien

7th floor, Central Building 7^e étage, l'édifice central

Les Terrasses de la Chaudière Les Terrasses de la Chaudière

1 Promenade du Portage 1, promenade du Portage

Gatineau, Quebec Gatineua (Québec)

March 26, 2004 Le 26 mars 2004

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:

David Colville Vice-Chairman,

Telecommunications /

Vice-président des

télécommunications

Stuart Langford Commissioner / Conseiller

Ronald Williams Regional Commissioner

(Alberta and Northwest

Territories) /

Conseiller régional

(Alberta / Territoires du

Nord-ouest)

ALSO PRESENT / AUSSI PRÉSENTS:

Stephen Millington Legal Counsel

Lynne Fancy Telecom Staff Team Leader

Shirley Soehn Executive Director, Telecom

Scott Hutton Acting Director General,

Competition, Costing and

Tariffs

Paul Godin Director, Competition,

Implementation and Technology

Allen Rosenzveig General Counsel, Telecom

HELD AT: TENUE À:

Salon Réal Therrien Salon Réal Therrien

7th floor, Central Building 7^e étage, l'édifice central

Les Terrasses de la Chaudière Les Terrasses de la Chaudière

1 Promenade du Portage 1, promenade du Portage

Gatineau, Quebec Gatineua (Québec)

March 26, 2004 Le 26 mars 2004

PAGE / PARA NO.

Opening Remarks by the Chairperson / 1 / 1

Remarques d'ouverture par le président

HEARING #1 / AUDIENCE n^o 1:

Applicant: Rogers Communications Inc. /

Call-Net Enterprises

Respondent: Bell Canada

Regarding: Possible violation of bundling

safeguards

File No.: 8661-R2-200317679

OPENING REMARKS BY / REMARQUES D'OUVERTURE PAR

Rogers/Call-Net 9 / 36

Bell Canada 17 / 73

QUESTIONS BY / INTERROGATOIRE PAR

The Commission 23 / 105

Rogers / Call-Net 56 / 294

CLOSING REMARKS BY / REMARQUES DE FERMETURE PAR

Rogers/Call-Net 74 / 430

Bell Canada 76 / 442

PAGE / PARA NO.

HEARING #2 / AUDIENCE n^o 2:

Applicant: Shaw Cablesystems G.P.

Respondent: TELUS Communications Inc.

Regarding: Internet promotions and bundles

File No.: 8622-S9-200312710

OPENING REMARKS BY / REMARQUES D'OUVERTURE PAR

The Chairperson 79 / 457

Shaw Cablesystems 80 / 467

TELUS Communications 89 / 502

QUESTIONS BY / INTERROGATOIRE PAR

The Commission 99 / 557

Shaw Cablesystems 120 / 693

The Commission 126 / 736

CLOSING REMARKS BY / REMARQUES DE FERMETURE PAR

TELUS Communications 136 / 817

PAGE / PARA NO.

HEARING #3 / AUDIENCE n^o 3:

Applicant: Cybersurf Corp.

Respondent: Shaw Cablesystems G.P.

Regarding: Enforcement of Telecom Decision

CRTC 2003-87

File No.: 8622-C122-200400656

OPENING REMARKS BY / REMARQUES D'OUVERTURE PAR

The Chairperson 141 / 844

Cybersurf Corp. 142 / 849

Shaw Cablesystems 149 / 885

QUESTIONS BY / INTERROGATOIRE PAR

The Commission 158 / 933

Cybersurf Corp. 215 / 1328

Shaw Cablesystems 223 / 1397

The Commission 230 / 1448

CLOSING REMARKS BY / REMARQUES DE FERMETURE PAR

Cybersurf Corp. 237 / 1504

Shaw Cablesystems 241 / 1524

Gatineau, Quebec / Gatineau (Québec)

--- Upon commencing on Friday, March 26, 2004

at 0855 / L'audience débute le vendredi

26 mars 2004 à 0855

OPENING REMARKS BY THE CHAIRPERSON /

REMARQUES D'OUVERTURE PAR LE PRÉSIDENT

1 THE CHAIRPERSON: Good morning, everyone.

2 I guess we are a little bit ahead of the schedule we had set out, but it seems like everybody is here anyways. So we may as well get started.

3 I guess I am guilty of this too, but I find it interesting looking around the table everyone, including most of the ladies, all of the ladies, I guess, have dark suits on. It's seems kind of ominous -- like you have been all called to the principal's office here today.

--- Laughter / Rires

4 THE CHAIRPERSON: For the record, my name is David Colville and I am the Vice-Chairman, Telecommunications of the CRTC and Commissioner for the Atlantic Region. I will be chairing this public hearing today.

5 My colleagues with me are Stewart Langford and Ron Williams.

6 Over the course of this hearing, we will be assisted by a number of Commission staff. Our Legal Counsel is Stephen Millington and Lynne Fancy, our Telecom Staff Team Leader. Shirley Soehn, I think everyone knows Shirley at the back, our Executive Director, Telecom; Scott Hutton beside Shirley, Acting Director General of Competition, Costing and Tariffs; Paul Godin, besides Scott, Director of Competition, Implementation and Technology, and Allan Rosenzveig on the other side of Shirley, General Counsel, Telecom.

7 My notes say don't hesitate to contact Steve if you have any procedural questions, but I would say don't hesitate to contact any of the staff if you have any questions or concerns over the procedural aspects of the hearing.

8 The purpose of this oral hearing is to adjudicate three Part VII applications. First, possible violation of bundling safeguards, in which case the applicants, Rogers Communications and Call-Net Enterprises and the respondent is Bell Canada. In this hearing the Commission will adjudicate the issue of whether Bell Canada violated the Commission's bundling rules by making the availability of bundles comprised of foreborne services contingent on customers having local service from Bell Canada.

9 Second, Internet promotions and bundles. In this case the applicant, Shaw Cablesystems, the respondent, TELUS. In this hearing, the Commission will adjudicate whether TELUS violated the Commission's bundling rules when offering its student bundle as set our in paragraphs 4, 5 and 6 of the application.

10 The remaining issues in the application in paragraphs 1, 2 and 3 will be adjudicated by the Commission through its normal process.

11 Third, enforcement of telecom decision CRTC 2003-87, in which case the applicant is Cybersurf and the respondent, Shaw Cablesystems. In this hearing, the Commission will adjudicate the issue of whether Shaw has complied with the condition that it makes its higher-speed Internet service available for resale until it provides third-party access under approved tariffs.

12 Now, in order to provide expedited decisions on certain competitive issues, the Commission has established this expedited process.

13 I guess it's fair to say that we have been criticized somewhat, and I suppose that criticism is, to some extent, fair. I mean to the extent the criticism is directed at us, I guess is, to some extent, fair, although I think it's probably fair to say that, as with a lot of issues that come in front of us, parties, from time to time, may use the process to drag issues out a bit as well and we are conscious of the fact that some of these proceedings have dragged on for quite a long time. We are cognisant also of the particular concern that in a competitive world not addressing these kinds of issues quickly can be important for both parties in a dispute.

14 So, in an effort to speed up dealing with these processes, we have decided to try to use what we characterize as this expedited process that we are commencing here today.

15 I guess while it's fair to say the files before us have been around for a few months, and we sort of took a look at the files and tried to decide which of those Part VIIs we have in front of us might be best suited to this sort of a process.

16 We would hope that in the future, as these kinds of disputes come before us, and to the extent that they may well fit the sort of nature of this process, that we would be able to deal with them much faster after they have even just arrived in the door. Some of these have been around, as I say, for a number of months.

17 We hope to do and continue this process on a fairly regular basis, probably once a month, but probably no more frequently than once a month, although, from time to time, if there aren't any in front of us we may not have one. For example, we may not have one next month.

18 Typically there will be three Commissioners and the Commissioners will sort of change from time to time. So there will be three Commissioners who will hear these for a couple of months and then there will be a new panel for the next few months, and so on.

19 So the process announced in Telecom Circular CRTC 2004-2 will include a series of brief, oral hearings to deal with those issues on an accelerated basis. Today is the first of these and we will today consider the three Part VII applications I have just mentioned.

20 We intend to issue brief written decisions within a few days of the hearing. So, again, we hope that that will speed up the process as well. It will be short decisions which we hope to get out very soon after the hearing.

21 Before we begin, I would like to say a few words about the administration of the hearings. There is a verbatim transcript of the hearing being taken by the court reporter.

22 In order to ensure that the court reporter is able to produce an accurate transcript, please make sure your microphone is on and our usual admonition is to please make sure all your cellphones and pagers are turned off.

23 As indicated in the Commission's Organization and Conduct Letter of March 22nd, we plan to consider three applications, the first from 9:00 to 11:00; the second from 11:30 to 1:30; and the third from 2:00 to 4:00. These times are approximate and while my note says here we intend to sit later, if necessary, we also intend to adjourn earlier, if possible.

24 Parties should keep themselves informed of the progress of the proceeding in that respect because we may well finish earlier, I would hope, so that they will be ready to proceed with their own matter if it concludes earlier than forecast.

25 As can be seen from the agenda, we will take a half-hour break between each hearing.

26 Due to the expedited nature of these hearings, intervenors and the general public will not participate in the oral phase, although several people have called me and said can spectators sit in and, to the extent there is room, people are welcome to come in and observe.

27 Having said that, the proceedings are being webcast so people can sit in their office and, no doubt, there are some out there in Internet land listening to us right now.

28 The entire record, including intervenors' written submissions, will be carefully considered by the Commission in making its determination. So, while just the parties will be speaking, any written interventions will be considered.

29 These hearings are less formal, my note says -- I guess you can judge that by the time the day ends -- than traditional telecom hearings and much narrower in scope. The parties will be asked to introduce the members of their respective teams. The applicant, followed by the respondent, will have ten minutes each for opening remarks. Following these remarks, the parties will be questioned on matters related to the applications, first by the Commission, followed by the applicants and then the respondents and ending with the Commission's final questions.

30 The Commission will not entertain written final argument. Rather, parties will have ten minutes at the end of the hearing of their item to make final oral submissions.

31 We hope everybody will cooperate in helping to make this expedited process efficient and effective. I encourage you to make your comments brief and to the point and to focus on the specific issue in front of us. It will be my job to try and make sure that that is accomplished.

32 The Notice of Public Hearing letter indicated that the parties must file all documents with the Commission and serve on the other parties prior to the hearing. So in that respect we are not inclined to accept any additional documents at this hearing.

33 We will now begin with the first item on the agenda which is an application by Rogers Communications and Call-Net Enterprise alleging a breach of the Commission's bundling rules by Bell Canada.

34 We will begin with opening remarks by the applicants who will have ten minutes to make their presentation.

35 Before beginning their remarks, I would ask the applicants to introduce the members of their team.

OPENING REMARKS BY ROGERS COMMUNICATIONS AND CALL-NET ENTERPRISES / REMARQUES D'OUVERTURE PAR ROGERS COMMUNICATIONS ET CALL-NET ENTERPRISES

36 MR. ENGLEHART: Thank you, Mr. Chairman.

37 I am Ken Englehart, the Vice-President, Regulatory, for Rogers Communications. With me today are Dave Watt, Vice-President, Business Economics for Rogers, and Randal Helsdon, the Manager of Strategy Planning for Rogers.

38 I will ask Jean Brazeau to introduce the Call-Net Group.

39 MR. BRAZEAU: Good morning, Mr. Chairman.

40 With me today from Call-Net is Alexander Adeyinka, who is our Director and Regulatory Counsel. I have Ian Pattinson and he is Vice-President, Consumer Services. On his right is Neil Titterell and he is Manager of Consumer Services.

41 Thank you.

42 MR. ENGLEHART: Mr. Vice-Chairman and Commissioners. In September of last year, Bell Canada began selling a number of bundles. The advertisements and brochures for these bundles did not say that Bell primarily exchange service was included.

43 However, the customer service representatives, or CSRs, receiving the calls in response to these advertisements would generally not sell the bundle unless the customer subscribed to Bell for primary exchange service.

44 Bell was, therefore, bundling regulated and competitive telecommunications services together in violation of the Commission's rules.

45 Bell argues that because the ads in brochures did not say that Bell primary exchange service was a requirement, that no violation of the rules has taken place. This is not correct.

46 If CSRs will not sell the bundles to customers that do not have Bell primary exchange service, then primary exchange service is part of the bundle.

47 Bell also argues that mistakes will happen, that no one is perfect and that they cannot be held responsible for the actions of a few rogue call centre employees.

48 However, this was not the action of a few rogue call centre employees. Of the test calls identified by Rogers and Call-Net, six out of seven refused to provide the bundle to non-Bell local customers.

49 Bell has not said anywhere in the very lengthy record how many CSRs gave the wrong answer before the first complaint. However, they did say that after a massive retraining effort, 40 per cent of the CSRs still refused to provide a bundle to a non-Bell local customer.

50 These calls were made -- and I am referring here to Bell CRTC-4, page 2 -- on December 2nd and 3rd. Now, we know from Bell CRTC-7, Attachment 2, page 1, that on November 26, 2003, six days before this call survey and one day after Rogers and Call-Net's complaint, the following message was sent to the CSRs, and I am quoting:

"The bundle from Bell sales have been an overwhelming success. As a result our competitors have filed an injunction with the CRTC against the bundle from Bell. Through mystery shopping our competitors have documented several situations where they have been told that they must have Bell local service in order to get the bundle. Customers must still pick Bell for long distance in order to qualify for the bundle from Bell. Do not confuse this with Bell local service. To help prove to the CRTC that local service is not a requirement for the bundle from Bell, we will be conducting a mystery shopping program through a third-party organization".

51 If 40 per cent of the CSRs still gave the wrong answer after this message, imagine how many gave the wrong answer before.

52 Indeed, reading the material provided by Bell to its CSRs prior to October 6, 2003, it is hard to see how the CSRs could have given any other answer. Nowhere in these rather lengthy documents is there a simple statement such as, "Customers that do not have Bell for local telephone service are eligible for Bell bundles". A simple statement like that would have made this entire proceeding unnecessary.

53 Attachment 2 to Bell CRTC-2 is the presentation made to the CSRs. Page 17 of this document states that, and I am quoting:

"Customers who wish to subscribe to a bundle from Bell must:

be a consumer PIC Bell customer".

54 Attachment 1 is a facilitator guide used by the people who train the CSRs. It states on page 16, quoting again:

"In order to get the bundle, customer must:

consumer with wireline".

55 So neither of these statements say that non-Bell local customers are eligible for the bundle. To the extent that they say anything, they say that you must be with Bell.

56 Whether Bell acted deliberately, recklessly or merely negligently, the answer is the same. CSRs were told that Bell local service was a prerequisite in order to obtain a bundle and the CSRs did what they were told.

57 Let me also say a bit about the relationship of the one bill service to the bundles which is also a bit troubling.

58 At Bell CRTC-1, page 4 of 8, under the heading "No Price or Service Dependency", Bell states as follows:

"The four consumer service bundles are offered independently from the consolidated billing method known as one bill. Each bundle may be selected and terminated separately from one bill".

And the sentence goes on.

59 However, the record indicates otherwise. The facilitator guide, which I mentioned was at Bell CRTC-2, Attachment 1, states at page 15:

"Emphasize must enrol in one bill - no exceptions - no way around it. If a customer does not want one bill, offer them à la carte offers".

60 The document does go on to carve out two exceptions, namely for PIC non-Bell for local service and Bell Mobility customers. However, Bell's statement at CRTC-1 that the bundle may be selected and terminated separately from one bill is just not correct.

61 Bell CRTC-1, page 6 of 8, states that a major system modification project was commenced in September 2003 to allow one bill to be provided to multisegment customers regardless of their local service provider.

62 They say that the project will be finished in mid-July 2004.

63 They go on to say:

"In the interim, the Bell companies have recently implemented a manual process that allows multi-segment customers without local service from Bell to receive one bill." (As read)

64 However, in the print advertisement that Bell is continuing to run this month for their bundles, the fine print continues to say:

"One Bill service is currently available to Bell Canada local phone service subscribers and may not include services from Bell Mobility." (As read)

65 So while one bill may be available to non-Bell local customers, they would not know this from Bell's ads.

66 Where does all this leave us?

67 The Commission must ensure that it's bundling rules are complied with. If Bell uses sales or marketing techniques to ensure that its primary exchange service is a prerequisite for receiving a bundle, the rules must be followed, even where the Bell advertisements do not state this or are ambiguous.

68 As stated in Rogers answer of January 8, 2004, the Commission should review all Bell bundles, including those where Bell claims that local is not included.

69 The Commission should review the sales, marketing and training materials for these bundles, to ensure that local service is not a prerequisite.

70 This will not be a difficult or onerous task. A simple statement in the Bell advertisement that states, "Customers that obtain local telephone service from providers other than Bell are eligible to receive these bundles" would make the matter very clear for customers and the CRTC. A similar statement in the CSRs training materials would also prevent these problems from occurring in the future. Thank you.

71 THE CHAIRPERSON: Thank you, Mr. Englehart.

72 Mr. Elder, do you want to introduce your team.

OPENING REMARKS BY BELL CANADA /

REMARQUES D'OUVERTURE PAR BELL CANADA

73 MR. ELDER: Sure. Thanks.

74 I am David Elder. I am Assistant General Counsel with Bell Canada. To my immediate right is David Inns, who is Vice-President of Consumer Markets. Assisting David, to his immediate right, is Carrie Sim, Product Manager, Consumer Markets. Next to Carrie is Patte Seaton, who is our Vice-President, Customer Care for Consumers Markets. At the far end of the table, assisting Patte, is Lori Scarfo, who is our Training Manager for Consumer Markets. To my left is Phil Rogers, our outside counsel.

75 Good morning, Mr. Chairman and Commissioners. Bell Canada is pleased to be able to respond to the allegations of Call-Net and Rogers in this new expedited oral hearing format. The company commends the Commission for its attempts to streamline the regulatory process through initiatives such as the expedited format for competitive dispute resolution. In keeping with this focused and streamlined process, I will attempt to be brief in my remarks.

76 This case is in fact quite straightforward. The applicants submit that the bundle from Bell, a bundle of forborne and non-telecom services is somehow tied to Bell local service and therefore requires tariff approval.

77 On the contrary, the record of this proceeding clearly demonstrates that the bundle from Bell is in no way tied to Bell local service and that the application is accordingly without foundation.

78 Let's look at the facts.

79 First, the bundle was expressly designed to be fully compliant with the Commission's bundling rules which only require tariff filing where a tariff element is present. In this regard, the company notes that:

80 (a) the bundle consists of only forborne and broadcast and therefore non-telecom services; and

81 (b) eligibility for the bundle is explicitly tied only to being a Bell long distance customer. Since the bundle neither includes a tariff service, nor is conditional upon taking any tariff service, no approval is required under Commission rules.

82 Second, Bell Canada has demonstrated good faith and due diligence in ensuring that the bundle is offered to the public as designed, that is in full compliance with the Commission's bundling rules.

83 Training and promotional material was drafted so as to communicate to both the public and company's employees that the bundle was available regardless of who a customer's local service provider might be.

84 Certainly some of the early material might have been better drafted, since it appears that in the initial days of offering the bundle, as revealed by the company's own monitoring, there were misunderstandings by some of our customer service representatives. In part, this was due to confusion surrounding the term "PIC" -- an acronym the Commission is quite familiar with, meaning "primary interexchange carrier" -- which turned out to be used by some company reps as a verb referring to the act of selecting carriers generally, both long distance and local.

85 However, the company did not direct its reps to give out inaccurate information, nor can it be said to have the negligent and ensuring the accuracy of the customer communication or in failing to act quickly when the issue was identified.

86 In fact, in the ordinary course of business the company spends considerable effort and incurs considerable expense to train, coach and monitor the performance of its sizeable team of some 3,000 customer service reps. We do this to ensure that customers are provided with accurate information about Bell products and services, including applicable rates, terms and conditions, regardless of whether these terms and conditions are present for business and regulatory reasons.

87 Accuracy of information is important to Bell Canada.

88 This iterative cycle of training, monitoring and coaching is ongoing at Bell. We are constantly fine-tuning our operational practices in order to improve accuracy, efficiency and customer satisfaction. This only makes business sense.

89 Whenever a business introduces new services or features, there are often operational adjustments to be made and the bundle was no exception.

90 What is important to note in the present case is that after detecting that customer rep errors respecting the bundle were not isolated to the few calls alleged by the applicant. The company took immediate steps to ensure that accurate information was being presented to customer and kept at it until accuracy was achieved.

91 I think it is also worthwhile to put the possible scope of this early misinformation into perspective. When you boil it all down, perhaps at the outside 30 local customers of competitors inquiring about the bundle last fall may have been provided with inaccurate information respecting bundle eligibility.

92 Finally, the proof, as they say, is in the pudding. For several months now the company's representatives have maintained a standard of over 95 per cent accuracy in identifying the qualifying criteria and conditions for the bundle. This performance has been verified by an independent polling firm. This is a level of accuracy that meets or exceeds the targets for all comparable quality of service indicators established by the Commission.

93 To hold the company to a standard of perfection, as has been suggested by Call-Net, would be patently unreasonable. Frankly, it is hypocritical for Call-Net to suggest this, given the performance of its own reps. As you know, our own mystery shopping found that 15 per cent of Call-Net reps incorrectly advised callers as to their ability, as Sprint local subscribers, to receive DSL and long distance service from another carrier.

94 Let's be clear about something else. This proceeding is not about the one bill billing platform. The fact that a single invoice was available to some customers that also subscribe to the bundle is simply a red herring. One bill is a billing method used for customers with multiple lines of business with Bell companies. It predates and is available quite independently of the bundle. In fact, it is currently used to bill many multi-segment customers who do not subscribe to the bundle.

95 Moreover, the company went to some expense to ensure that the bundle was available to all Bell long distance subscribers whether or not they could be accommodated on one bill.

96 To be clear, one bill is available today to all customers with more than one line of Bell business, regardless of whether they receive their local service from Bell.

97 In conclusion, the bundle is being offered in full compliance with regulatory rules. The record of this proceeding does little more than demonstrate that in the early days of offering the bundle some customer reps mistakenly provided inaccurate information, a circumstance not uncommon with new offerings in the telecommunications industry, or most other industries for that matter; a circumstance that the company took quick and sustained action to improve; and a circumstance that has since been remedied.

98 In light of all of this, Bell Canada submits that the application of Rogers and Call-Net should be rejected in its entirety.

99 Thank you for your attention. Our representatives are ready to take your questions.

100 THE CHAIRPERSON: Thank you, Mr. Elder.

101 Counsel.

102 MR. MILLINGTON: Thanks, Mr. Chairman.

103 THE CHAIRPERSON: By the way, just before counsel starts, while I said at the outset that this would be more informal than our usual hearings, we are actually going to follow the same sort of process, the Commission counsel will ask questions, then followed by the Commissioners.

104 Counsel.

QUESTIONS BY THE COMMISSION /

QUESTIONS PAR LA COMMISSION

105 MR. MILLINGTON: Thanks, Mr. Chairman.

106 I only have a couple of questions to start with. I will start also with the applicants.

107 My first question -- in fact my only question for the applicants at this time -- is whether since the filing of your interrog on March 8th you have conducted any other mystery shopping exercises with the Bell CSRs and what would be the results of those calls, if any?

108 MR. TITTERRELL: There hasn't been intensive --

109 THE CHAIRPERSON: Could you lean right into the microphone so we can make sure you are being well heard.

110 MR. TITTERRELL: There hasn't been intensive mystery shopping of the nature that is documented on this matrix.

111 MR. MILLINGTON: So essentially you have no new evidence on that point?

112 MR. TITTERRELL: No. I was waiting for direction that some of the initiatives mentioned by Bell had been implemented so that we could test their compliance after those dates.

113 MR. MILLINGTON: Okay. Fine. Thanks. My next questions are for Bell.

114 Assuming that Bell is going to continue to market regulated and non-regulated services together in various combinations of services, and these marketing initiatives will involve the use of CSRs to promote those bundles of services, what steps have you taken to ensure that the kind of material that is made available, the training material to be used with the CSRs, are going to be far more explicit so as to avoid what you have characterized as unintentional misinformation?

115 MR. INNS: I will answer that.

116 First of all, I would like to say we will not be marketing unregulated and regulated services together, because that is something that we obviously do not want to do in our marketing materials.

117 In terms of ongoing compliance and making sure that the reps are following the rules, we are implementing a process in which our training documents are going to be reviewed by a regulatory department to make sure that it is clear and in fact doesn't have any potential misunderstandings that could cause confusion from a regulatory perspective.

118 MR. MILLINGTON: In one of your responses to the interrogs you indicated that part of the problem with the misinformation was the fact that you sign on about 100 new CSRs a month. Obviously that is a considerable objective that you have to overcome.

119 What are you doing differently today than what you were doing in the past with respect to that number of new employees that have to be sufficiently trained on a fairly sophisticated area of the --

120 MS SEATON: The training that we have had since the fall were the first ones that have ever gone through that total training for all of the products and services, including ExpressVu, high-speed service and Mobility, so it was a learning for us to go through that process with new hires.

121 We are looking at a couple of different things. With the new hires coming on, we are actually considering just training them on the Bell core products, as well as maybe high-speed. Once we know that they understand that really well, then add a Mobility product; then once we know that they understand that really well, then add the third product. So the bundle would be introduced to new people gradually.

122 MR. INNS: I would just like to add also, one of the things we have introduced is a group within marketing that is going to be more focused on actually regulatory compliance in our channel.

123 One of the issues that we have is that the filings typically will go to the product that is responsible for any complaint that has come from a competitor. So a complaint around Internet would end up with Sympatico; a complaint around the bundles would end up in my bundle group and they will both actually channel compliance issues.

124 So now by setting up a kind of cross-channel group that is going to actually be monitoring and keeping track of the actual compliance within the channels, I think we are going to have much better comprehension of all of the regulatory issues that are affecting our CSRs and how to make sure that they are actually being compliant in their responses.

125 MR. MILLINGTON: Do you intend to continue using outside consultants to monitor the accuracy of the information being provided by the CSRs and is that going to be an embedded program that you plan to keep running for as long as you run these types of promotions?

126 MR. INNS: Yes. We would like to do it; the question is: How often? That is really what we are looking at.

127 It is expensive to continue to do the size and the amount of calling that we are currently doing, but we would like to actually use our existing quality assurance process, which is quite strong and covers a good sampling rate in our call centres and should be picking up any specific errors or non-compliance issues.

128 MR. MILLINGTON: Those are my questions. Thanks. We reserve the right to ask questions again at the end.

129 THE CHAIRPERSON: Commissioner Langford.

130 COMMISSIONER LANGFORD: Thank you. I didn't have too many questions.

131 I think I might start at the end. It's Ms Seaton, is it?

132 You indicated that you were bringing in a new system of training CSRs, in response to a question from counsel, and that you were kind of bringing them in gradually and that they would start with perhaps just local service and you add a bit of Internet and then a bit of long distance and a bit of Mobility.

133 How can you keep away from these trainees, or these people who are doing a limited job, questions about a more extensive offering? Does that make sense?

134 MS SEATON: Yes, it does make sense. Even though we launched the bundle initially, all of the reps were not trained from day one. That was a gradual process that took us almost to December. So if a rep actually gets a direct question from a customer about the bundle from Bell, they would transfer it to -- we have two queues of reps who are trained on absolutely everything. So they would transfer the customer to somebody who was absolutely fully trained.

135 COMMISSIONER LANGFORD: Can you sort of paint for me the room that these people work in?

136 When I call anybody these days for service, I get offered a menu and I get to push "1" for English and "2" for French, and then I get to push a selection of four other things and a selection of six others and a selection of seven others, and I listen to music, and eventually, if I am lucky and I have some food supplies with me and some water, I live long enough to talk to someone.

137 How do you make sure that the person who is shopping for a bundle -- you don't even know who this person is at this point. They are just pushing digital selections. They are on hold. They are listening to music. And eventually they get to speak to somebody.

138 How do you make sure that this person is speaking to someone who can answer their questions properly?

139 MS SEATON: The one thing that I will say we are really pleased about is the fact that you no longer have to press the buttons when you call Bell Canada. So we have put in speech recognition --

140 COMMISSIONER LANGFORD: That is Emily. Right?

141 MS SEATON: We have Emily. Emily is our all-purpose service rep.

142 If you actually called into 310-BELL and you talk to Emily and you told her I want the bundle, Emily will actually direct that call, depending on whether you are Ontario or Quebec, to two separate teams, one in each province, who are 100 per cent fully trained on the bundle. So you actually ask her for that.

143 If for whatever reason you don't want to talk to Emily and you end up in another one of our teams of reps who isn't trained, that is the time when they will want to transfer it to somebody who is fully trained.

144 COMMISSIONER LANGFORD: Who might it be transferred to? A supervisor?

145 MS SEATON: No. We have two teams. One we call a specialty team, and they would the ones who are 100 per cent trained on our one bill and all of our products and services. Then we have another team of people that are kind of moving experts. So if a customer was moving, that team also has been trained.

146 COMMISSIONER LANGFORD: If you get someone who is calling, who has just arrived in town and wants a Bell product but doesn't quite know what they want, they end up talking perhaps to one of the new people because obviously they want a phone of some sort, to start with. Why wouldn't this new rep say: "Can I sell you something else? How about Internet? How about long distance?"

147 When, somehow, do you magically know that it's getting beyond this rep? So you have a keen new service rep and you have a customer with a fat wallet who is ready to buy. How do you stop them?

148 MS SEATON: When I talked about the moving team, that handles new applicants to Bell as well as existing customers who are moving. Again, that is the experts.

149 The new hires we would put in our general mass market type queue, and they typically would not get a new customer or somebody who was moving.

150 COMMISSIONER LANGFORD: This is the new plan. This wasn't existing when these problems arose.

151 MS SEATON: This has been in place for quite a while. It was in place since last September when we did the launch.

152 COMMISSIONER LANGFORD: All right; thank you.

153 A question to you, Mr. Elder -- or you can field it off to anyone you want, obviously.

154 We heard from Mr. Englehart of Rogers that even after training, at least the first session of training, as much as 40 per cent may have made mistakes. Certainly before the training, Mr. Rogers and Mr. Brazeau's information on file tells us that six out of seven reps made mistakes. You said this morning that perhaps 30 mistakes all told took place.

155 Can you help me to try and rationalize those two numbers? They seem very far apart to me.

156 I am not talking about the difference between six and 30. I am talking about the difference between 40 per cent and 30, in the sense that when the applicants made their mystery calls, if I can call them that, six out of seven -- that is a high percentage -- said you had to take local. And Mr. Englehart tells us this morning that after training, still 40 per cent -- that is still a high percentage, I would argue, if it's accurate.

157 You are telling us today, Mr. Elder, that perhaps -- I think you said almost exactly, although we can check it. You said something like when you boil it all down, perhaps 30 customers might have been misled.

158 Can you help me try to rationalize those distant numbers?

159 MR. INNS: First of all, just to address the difference in the study or the calling that was done by the competitors, the six out of seven I think is a very different number than the statistically valid third party independent sampling that was done by Bell Canada.

160 I think we have to really understand what methodology was used in determining that six out seven. We have not really seen what kind of actual validity there is to the sampling or to the calling or how many true actual calls took place in that study.

161 To respond to your question that the 40 per cent error sounds high, that is a percentage of these mystery calls which in a lot of cases are actually hypothetical situations that are really being created, to tell you the truth.

162 From what we can look at is that the bundle from Bell is appealing to customers who have an affiliation with the Bell brand. That is what it has done right off the bat. A lot of the people who wanted the Bell bundle, especially at the beginning, were people just calling in who were customers of Mobility, ExpressVu and Sympatico, calling in to get their discounts on those services, saying: "Hey, I've got these three services. I want my discount."

163 So inherently the first people calling about the bundle were very heavily weighted toward Bell-affiliated customers. Obviously somebody who has left Bell for local service is not very likely to have that affinity to the Bell brand and doesn't have long distance with Bell also is very likely.

164 So to get to that number we made some simple assumptions, saying that if there are about 5,000 customers of our competition at the absolute highest amount we can figure that might have long distance with Bell -- which is very unlikely. But if there were 5,000 customers, our call-in rate on the bundle from our long distance base, which is a prerequisite for the bundle, is only about 0.5 per cent of our long distance base calling in for the bundle.

165 So that would equate to about 25 calls per month would be calling in from the competitor's local base. So 25 calls per month.

166 If you took our error rate at the maximum -- and that was only for a short period of time -- of 40 per cent error, that it is only ten customers per month that may have been misinformed that had local service with somebody else.

167 COMMISSIONER LANGFORD: Are you telling me -- you used the term "validity of sampling". So now I would like to test yours a little, although I am not a surveyor by any stretch of the imagination.

168 Are you telling us here this morning that you based your sampling on the notion that, with very few exceptions, only people who already had Bell long distance would call because it's a prerequisite?

169 MR. INNS: No. In our calling that we did, in our sample calling in our mystery shopping, we did not make that assumption. We used what we would assume would be a similar approach to the competitors. We just called in and asked, just completely random.

170 COMMISSIONER LANGFORD: Just the way they did. You have seen the transcripts.

171 MR. INNS: Yes, exactly.

172 The piece that I was saying -- I was answering about the LD portion: How did we arrive at this fact that we think at the outset it was about 30 customers that could have been misled? That is where I was talking about the fact that the long distance base -- the number of customers that would actually be interested in the bundle from Bell that do not have local service from Bell.

173 That is why I think a really important point to look at here is that in our quality assurance department we do do monitoring and we would pick up issues like this. We specifically designed the bundle to be available for customers who do not have Bell local service. We spent $1.7 million extra in IT development to ensure that it was available.

174 MR. ELDER: Maybe I can tie the pink ribbon on it. I think we are talking about two related things.

175 If I understand your first question about the six out of seven versus our 40 per cent, I think in part that is attributable to the size of the base.

176 If you look at the surveys that we had done, we were making 200 calls. So obviously when you make 200 calls versus seven, you are going to see some change in the percentage, just in terms of statistical validity.

177 I'm not a statistician either, but I understand that the larger the sample, generally speaking the more accurate the survey results. So that would be the first piece of it.

178 The second, just to follow up from what David said, what we were trying to do with the 30 customer number is just try to size the potential problem here. The reasoning is, as David said, only a small number of our competitors' local customers are likely to be our toll customers. We have taken a very generous estimate there.

179 Of those, only a small number of those, based on our experience, would call in to inquire about a bundle. Then when we apply to that our worst results in terms of accuracy, the actual number of competitors' local customers who may have called Bell to inquire about the bundle is a very small number. We estimate it may be about 30 over the time period we are talking about.

180 COMMISSIONER LANGFORD: But that's assumptions, not statistics, isn't it.

181 Basically what you are saying is, you are kind of taking us and saying: Well, don't look at actual calling in. Assume for a moment that basically only long distance subscribers to Bell would be interested in this bundle, because that's a prerequisite. And assume for a moment that most people who are with Call-Net or Sprint or somebody else wouldn't be our long distance customers. So based on those assumptions, it is going to be a very small number.

182 Is that the path you are leading me down?

183 MR. ELDER: No, it isn't, and I'm sorry if I --

184 COMMISSIONER LANGFORD: Well, it may just be my understanding, but that's what questions are all about.

185 MR. ELDER: We agree that the number we came up with is largely based on assumptions, and they are very conservative assumptions. We went out of our way to make them as conservative as we could. They certainly are assumptions; they are not statistics. The statistics that we have on the record stand. The statistics indicate what type of accuracy our reps were giving to people calling in, and we are not disputing that. It's our own evidence and it is before you.

186 All we were trying to do with the assumptions that we made is just to try and put the whole thing in perspective in terms of the actual number of customers that may have been turned away or may have done something harmful to competitors based on inaccurate information. That is all that that was trying to do.

187 MR. INNS: The confusion did arise. One of the things we were trying to figure out was: Why wouldn't we have picked up anything that was significant in our quality assurance monitoring? We would have picked this up, if it was a significant number of calls, in our quality assurance monitoring and it did not show up.

188 So what we figured was that the actual mystery calling volume is larger than the realistic call volume. Again, the mystery shopping calling is simulating a higher amount of calls that would be coming in than the actual true volume of customers that will call in.

189 Our estimates are that the mystery calling could be as much as four times the number of calls that would actually be coming in from these people. That's the point.

190 COMMISSIONER LANGFORD: I assume you have read the transcripts of the calls that were made by the competitors and they repeated questions. "Are you sure I have to be a local customer?" "Yes." "Are you absolutely positive?" "Yes."

191 What is your reaction to those transcripts? You have told us about all kinds of efforts here this morning to retrain. The record is filled with your statements on retraining and your best efforts. What is your reaction to those six transcripts?

192 MR. INNS: Frustration I think was the first thing. We focused that we could get it done if we continue to work on it.

193 The issue is that when we launch new products, it takes representatives some time to be able to handle exceptions. Until they have actually processed an order for a specific exception on a new product, it is very difficult for them to do it without getting their manager involved. I think that that is what happened. Sometimes they just assume they know how to do it or because of the confusion of how to get it done, they just actually put out some wrong information.

194 That's why it did take some time, and through the mystery calling we got it done.

195 MS SEATON: If I could add to that, we didn't realize right away that we had some confusion with the CRSs around the term "PIC Bell", in that anyone who has been with Bell for a little while would know that PIC Bell is all about long distance.

196 Once we realized that we had some staff who thought PIC was a very and not what it really meant, it was kind of like a dawning, like this is where the confusion is coming from. It is over the term "PIC Bell".

197 So now when you see it anywhere in our training material or our communications, because the reps are so used to the word "PIC", we are saying PIC Bell for long distance, PIC Bell for local.

198 COMMISSIONER LANGFORD: You said, Ms Seaton -- and I have just written down your quote: Anyone who has been with Bell for a little while. Those were the words that you just used.

199 In one of the six transcripts that I read on the record the CSR actually went to talk to a supervisor -- I assume supervisors would have been with Bell for a while -- and came back with exactly the same message: If you don't take local, you don't get the bundle.

200 So how can you explain that to us?

201 MS SEATON: Other than the manager may have been newer. Our managers haven't necessarily been around, all of them, for a long time.

202 Again, as David said, it was very frustrating because that should never have happened.

203 MR. INNS: I think you have to attribute it to human error and based on the fact that some of these people are potentially going to not take heed to the instructions that are being issued to them in a complicated telecommunications environment. It is going to take some time for it to soak in.

204 The point is that these are definitely the exceptions, and now we have 95 per cent, over 95 per cent, accuracy on the issue. I don't think you would find these cases happening any more.

205 COMMISSIONER LANGFORD: Without getting in the question of the standard of perfection -- I don't want to get into that today; I will leave that to the people who make their own arguments -- would you agree with the applicants that the six out of seven examples that they have documented and provided transcripts with break the rules, if that is all we had, the six documented transcripts that we have, that was the whole case -- and I am not saying it is. We have your cases.

206 Do those six documented transactions, conversations because they never turned out to be transactions, do they break the rules as you understand them?

207 Perhaps that is a question for Mr. Elder.

208 MR. INNS: I would say if we had an issue where there was for a sustained period of time 99 per cent of our reps answering a question incorrectly like that, that would be in violation.

209 COMMISSIONER LANGFORD: Let me put it this way. If you are driving down the road in a 60-kilometre an hour zone and you are doing 80 and you get picked up for speeding -- I don't want to get into an analysis of traffic law here -- I would doubt that it would be a defence to say, "Well, I usually drive 60. Ninety-five per cent of the time I drive 60, but today I was doing 80. Sorry".

210 So we won't try and prejudge how a case like that would come out in Magistrate's court, but today we have a situation where you are saying overall -- and I understand your argument; it's very clear.

211 What I want to focus on is the six. I want to understand from you what your analysis of the six cases are. Do those six cases, if that is all we had, are those six cases a breach each and together? Are they a breach of the bundling rules?

212 MR. ELDER: I don't think so and I think, with reference to your analogy, I think the difference is the bundling rules are applied to Bell Canada as a corporation. They don't apply individually necessarily to each and every employee. Certainly, Bell is responsible for the behaviour of its employees, and we don't deny that, but when you are looking at a large sort of multi-employee entity like Bell Canada, like Air Canada, like the the act of isolated employees do not necessarily amount to a breach if there was no directing mind telling them that that is what they had to do, and if there was no pattern of negligence in terms of allowing that to happen.

213 I think really what we are talking about here is the area of regulatory offenses, absolute liability, and I think the courts have been very clear that the defence to that type of offence is the due diligence offence. The due diligence defence recognizes that you may have some individual instances where somebody screws up, but on the whole if you have done what you need to do and if you have fixed it, that doesn't necessarily put you offside the law.

214 COMMISSIONER LANGFORD: But with respect, Mr. Elder, you are putting it in context again, and I asked you to take it out of context.

215 I said if that is all we got, those six transcripts, are they a breach of the bundling rules as we have sent them out?

216 MR. ELDER: I guess, Mr. Langford, I don't understand --

217 COMMISSIONER LANGFORD: That scenario --

218 M. ELDER:  -- how you can take it out of context.

219 I suppose if Bell Canada had seven subscribers and we got seven phone calls and we gave that response, then I would agree with you, but other than that I don't see how you can take it out of the context that we get 60,000 calls a day and have 30,000 plus employees.

220 COMMISSIONER LANGFORD: So you would agree that Bell Canada should be trying to stop that kind of behaviour that shows up in the transcripts, that that type of scenario, as is set out, must be stopped.

221 MR. ELDER: No question, and I think we did take a significant effort to try and fix it and have continued to do that.

222 COMMISSIONER LANGFORD: And it must be stopped because of the breach of the bundling rules.

223 MR. ELDER: Yes.

224 COMMISSIONER LANGFORD: Thank you.

225 THE CHAIRPERSON: I just have two questions actually.

226 I think Commissioner Williams might have one.

227 My understanding, and it may be wrong, is that Bell Regulatory -- and I presume gets passed on to the Bell sort of line people, if you will -- deliberately crafted and marketed these bundles to avoid having to file a tariff and to deliberately keep it separate from the local tariff service in order to avoid a) having to file a tariff, and, b) running a follow up with the Commission and deliberately structured them that way.

228 I am not being critical in saying that if that that was Bell's plan in crafting those bundles.

229 I mentioned this the other day to staff when we were discussing this. I worked for Bell 32 years ago in this city in a group called Market Support and we had a whole stack of binders in front of us when sales people called in and wanted to know what were the features of a particular service offered. We could open it up and there it was on the page, the description of the service, what its features were, what it could and couldn't do, and so on.

230 I don't know how you do it now. It's probably all on the computer, but I would have thought that with a service like this, particularly given the fact that Bell wanted to structure this in a way that didn't fun afoul of the Commission, and even reading the ads you can get that sense, coming from our perspective, that that is probably what was done here.

231 Why Bell wouldn't have said in its instruction to its SRs in big bold letters, "It is not a requirement to be a Bell local exchange customer to get this bundle", that simple, that pointing, that clear rather than have it ambiguous.

232 Why wouldn't you do that? In particular, why, since this had become a problem, hasn't Bell done that? It seems like there is all kinds of language around, but there is no very clear, in ten words or less, "It is not a requirement to be a Bell local exchange customer to get this bundle"?

233 MR. INNS: Thank you for the question, Mr. Chairman.

234 If you have the response to Interrogatory No. 7, and in the attachment there is a great example of this. It's Attachment 15, page 1 of 2.

235 THE CHAIRPERSON: I'm with you.

236 MR. INNS: Do you have that there? Interrogatory No. 7, Attachment 15, page 1 of 2.

237 THE CHAIRPERSON: Yes.

238 MR. INNS: If you look at the top in big bold letters:

"Bundles and customers who do not have Bell for local service. Can a customer who is not with Bell for local service have a bundle?".

239 The answer is in bold-face typed capitals:

"YES!".

240 If I could actually, while we are there, turn to Attachment 16, which should be very close, page 1 of 3. This is a letter from Maryanne Bell -- sorry, do you have that?

241 THE CHAIRPERSON: Yes. Before we go there, Mr. Inns, when was this documentation crafted?

242 MR. INNS: This documentation, the Attachment 15?

243 THE CHAIRPERSON: Yes.

244 MR. INNS: Attachment 15 was created on December 8th, approximately December 8th.

245 THE CHAIRPERSON: So this was not the date responding to --

246 MR. INNS: That was December 8th.

247 THE CHAIRPERSON: Well after these bundles were being offered in the marketplace.

248 I guess what I am getting at is when Bell crafted this bundle, crafted it knowing what the CRTC's rules were, crafted it in such a way as to avoid being a violation of the rules, why at that time, in the very initial instructions to the SRs wouldn't this be, "We do not want to run afoul of the CRTC or trigger all kinds of complaints from our competitors. Let's make it clear to the SRs it is not a requirement to be a Bell local exchange customer to get this bundle"?.

249 Why wouldn't you have done that at that stage?

250 MR. INNS: In fact, we did. It was not clear and we did not do as good of a job as we would have liked in the original documentation.

251 THE CHAIRPERSON: No, I know the language you used at the time and, in fact, it isn't clear and that is why I am asking why wouldn't you have made it that clear, given the concern to avoid regulatory problems?

252 MR. INNS: Go ahead.

253 MR. ELDER: I think the problem was we thought our material was very clear, that to get the bundle you need to be a toll subscriber and we didn't anticipate that people would add in additional eligibility requirements. I mean, it's difficult to anticipate when you are setting this up that someone is going to read into something an eligibility criteria that you never put there and you never intended to put there.

254 So it was only after it became apparent that reps were thinking for some reason that that was --

255 THE CHAIRPERSON: Mr. Elder, I find it hard to accept that you wouldn't anticipate when, in fact, the bundle was crafted in such a way as to avoid that linkage.

256 MR. ELDER: It was --

257 THE CHAIRPERSON: Why wouldn't you make it, since you had crafted to avoid the linkage, why wouldn't you make it abundantly clear to the SR that that linkage isn't required?

258 MR. ELDER: I guess hindsight is 20/20, but, in our view, saying to get the bundle you need to be a toll subscriber, we thought that that was adequate. We didn't think to say, "And you don't have to be a local subscriber and you don't have to take Smart Touch Service and you don't have to be left-handed".

259 I mean, it's difficult to anticipate what someone is going to add into something that you haven't instructed them to --

260 THE CHAIRPERSON: Well, I wouldn't have thought it was that difficult given the way the bundle was structured because it was clearly structured not to require it because you wanted to avoid having to file the tariff for it with the Commission, right?

261 MR. INNS: I would actually like to say I think an additional area that that has arisen was the fact that with one bill where, again for cost-savings reasons we are shifting a lot of our multi-product customers at Bell, those customers that have more than one bill product, and in our desire to get people to one bill, I think that is an additional area where confusion arose with the reps.

262 So it was not done maliciously or with intent. We did put the exceptions in. They didn't come out as clear as we want them to be and we tried to act quickly to fix it.

263 THE CHAIRPERSON: Ms Seaton, sorry, you were trying to jump in here.

264 MS SEATON: Yes, I am. Thank you.

265 The information that we have included in the submission, the earliest training leaders' guide, when you look at that in isolation of what would have occurred as we tried to launch the training, I mean, we would admit this is probably scant. However, we would have had sessions that would have been train the trainer sessions, verbal, face-to-face sessions. We did them by site to make sure that the message was clear. I mean, there was lots of conversation that went around this. It wasn't just sent to them and say, "Go ahead and train".

266 So when you understand that part of it, we were pretty clear with the staff, with the trainers, we thought, on what the requirements were. It really was all about long distance.

267 THE CHAIRPERSON: Yes, it was all about long distance, but I guess knowing the rules I would assume you have a better sense now that it would be more important to make it very clear if you want to avoid the regulatory problem that that bundle was crafted to avoid, was to make it clear what is not required to these SRs.

268 Let me ask a different question then. Are DSRs encouraged and/or compensated, bonussed, to upsell customers?

269 MS SEATON: Yes, they are.

270 THE CHAIRPERSON: And are they encouraged to, when identified, that customers may be customers of other service providers to win them back?

271 MR. INNS: Only if they are past the --

272 THE CHAIRPERSON: I think you have been violating the win-back rule.

--- Laughter / Rires

273 THE CHAIRPERSON: But let's assume it is past the timeframe. I assume DSRs would be encouraged to try and win them back even if it was a call like this where somebody --

274 MS SEATON: If they weren't a long distance customer of ours and they were interested in the bundle, we would definitely talk to them about long distance.

275 THE CHAIRPERSON: Or if they weren't a local customer.

276 MS SEATON: It doesn't matter if they are a local customer.

277 THE CHAIRPERSON: Some of the SRs didn't fully understand that, though, right?

278 MS SEATON: Today they do. They didn't at that time.

279 MR. INNS: I think some of that, the compensation that they would receive for selling a bundle is -- I am not even sure if there is one for a local win-back past the date, but the compensation for selling bundles is actually much larger. So I think that in the grand scheme of things, any aggressiveness around trying to do this would be out of the own volution that they work for Bell Canada and they are trying to be --

280 THE CHAIRPERSON: I guess what I am getting at is if it was not clear the connection was local, would an SR be incented to try and make a connection to get their bonus to win?

281 MR. INNS: And the answer is no because if they are losing a potential bundle sale, they would not do that. They make much more incentives by getting that bundle sale. So by turning down a customer for the bundle because they were a Sprint local customer, for example, it would not be in their best interest. It would not be.

282 THE CHAIRPERSON: So it's not in your interest to have this somewhat confusing.

283 MR. INNS: No, it isn't, as a matter of fact. I mean, again as the bundle manager and as the bundle executive, I would love to have more bundles going to any customer that we can possibly find, including Sprint local customers.

284 THE CHAIRPERSON: Those are all my questions.

285 Commissioner Williams, did you have a question?

286 COMMISSIONER WILLIAMS: My line of questioning is going to be in the same area of SR compensation and the incentives and the answers that you obtained --

287 MS SEATON: Can I just add something on the SR?

288 THE CHAIRPERSON: Sure.

289 COMMISSIONER WILLIAMS: Okay.

290 MS SEATON: We have what we would call a sales bonus plan and we would reward reps who exceeded self-targets. So about 45 per cent of the reps at the highest level would be included in the bonus plan. So not everybody gets something for selling. I just wanted to clear that.

291 COMMISSIONER WILLIAMS: Thank you. Anyway, the previous responses were adequate for my question. Thank you.

292 THE CHAIRPERSON: All right.

293 Mr. Englehart, do you have any questions?

QUESTIONS BY ROGERS/CALL-NET /

QUESTIONS PAR ROGERS/CALL-NET

294 MR. ENGLEHART: Yes.

295 THE CHAIRPERSON: You have 20 minutes.

296 MR. ENGLEHART: Thank you, sir.

297 I want to put a little clarity around this 40 per cent number that you got on your initial mystery calling.

298 That initial calling was conducted on December 2nd and 3rd. Is that right?

299 MR. INNS: Yes.

300 MR. ENGLEHART: And if we have a look at Bell CRTC-3, page 2 of 2, at the bottom it indicates that you conducted a fairly thorough retraining during early November. Is that correct?

301 MR. INNS: Yes.

302 MR. ENGLEHART: And in addition you sent out on November 26th the message which I read in my argument alerting people to the fact that the mystery calling would be coming. Is that correct?

303 MR. INNS: Yes.

304 MR. ENGLEHART: So the 40 per cent number came after the retraining, after the message reminding people of what answer they give and alerting them to the fact that mystery calling would be coming. It's reasonable to assume that before the retraining and before the message, the error rate would have been higher than 40 per cent. Right?

305 MR. INNS: Hypothetically speaking it could be, yes.

306 MR. ENGLEHART: Well, the retraining would have had some effect, wouldn't it?

307 MR. INNS: I would hope it would have had some effect.

308 MR. ENGLEHART: The memo would have had some effect, wouldn't it?

309 MR. INNS: Yes, but the timing of that question, of the calling that took place, the mystery calling that took place, was actually very tight to the time that this communication went out. So it's unclear exactly how many of the reps would have had it, soaked it in for a period of time, and have received any calls that they could have actually practised the response.

310 MR. ENGLEHART: The communication was dated November 26th.

311 MR. INNS: That's right.

312 MR. ENGLEHART: The calling was December 2nd and 3rd.

313 MR. INNS: That's right.

314 MR. ENGLEHART: And the retraining consisted of a two-hour face-to-face refresher training session with all managers and a 15-minute face-to-face huddle and a new section to a brochure which was sent out.

315 Those things would have reduced the error rate, wouldn't they?

316 MR. INNS: Yes.

317 MR. ENGLEHART: So you don't have any reason to think that the 86 per cent error rate that Rogers and Call-Net got on a very small sample would not have been duplicated on a large sample?

318 MR. INNS: No, we don't have evidence either way to say whether it was because it wasn't done in a statistically valid manner and I think the point is that before November 26th, we are saying there was absolutely some confusion. The training material wasn't as clear as we wanted it to be and it was actually at that time that we were in the process of fixing it.

319 So to take the results of December 2nd and 3rd alone I think is not fair or accurate to us in terms of the amount of time it takes to get 3,000 reps to understand exactly what are the requirements.

320 MR. ENGLEHART: Let's take a look at those initial training materials for a sec because in your answer to Bell CRTC-2, you state in the very last sentence:

"The materials clearly state that Bell Mobility customers...".

321 MR. INNS: Sorry. Which page is that?

322 MR. ENGLEHART: Sorry, Mr. Inns.

323 MR. INNS: Which attachment?

324 MR. ENGLEHART: Bell CRTC-2, page 2 of 2 of the response.

325 MR. INNS: The response. Thank you.

326 MR. ENGLEHART: The very last sentence:

"The materials clearly state that Bell Mobility customers and customers with non-Bell local service were eligible to subscribe to the bundle, even though they could not at that time have their services billed on one bill." (As read)

327 I have to say, it really isn't clear to me. If you could have a look at Attachment 1, which was the trainer's guide, the facilitator's guide, on page -- I have two different Attachment 1s from you and the page numbers vary, but the last one I got it is page 16 and it shows "Eligibilities and Ineligibilities".

328 MR. INNS: Yes.

329 MR. ENGLEHART: Is there anywhere on that page of "Eligibilities and Ineligibilities" that it says that you can be a customer of another local provider?

330 MR. INNS: Yes.

331 MR. ENGLEHART: Where does it say it?

332 MR. INNS: Under "Exceptions permitted in ineligibilities". It says:

"PIC Bell, PIC non-Bell local."

333 MR. ENGLEHART: That is not on my page. I have --

334 MR. INNS; I think you are working off the original one which was sent in error.

335 MR. ENGLEHART: I have the second one. It is called page 16 of 16 but then the next page, page 17 of 17 it has "Eligibilities" on the left. It is Slide 17.

336 So you are looking down on "Ineligibilities".

337 MR. INNS: This is Attachment 1, Interrogatory 2, page 16 or 32.

338 MR. ENGLEHART: Got you.

339 MR. INNS: Yes. In the "Ineligibilities" you asked the question: Is there something there that says --

340 MR. ENGLEHART: Right.

341 MR. INNS: It is there.

342 MR. ELDER: The fourth bullet --

343 MR. ENGLEHART: Got you.

344 MR. ELDER:  -- there is a sub-bullet "Exceptions permitted".

345 MR. ENGLEHART: So the thing that tells people that you can be a Sprint local customer is an exception to the ineligibility requirement.

346 Is that right? That is how the CSR is going to figure that out?

347 MR. INNS: No. First of all, this is a facilitator's guide material so the CSR is being coached on the material. They are not necessarily reading this.

348 But on the previous page, page 15 of 32 -- although again we continually are going through this and saying it is not clear, which we are admitting it could have been written clearer and there is no question in our minds that we wish we had written this clearer -- but the exceptions are listed there on page 15 or 32. "PIC non-Bell for local service" again.

349 MR. ENGLEHART: That is an exception to getting one bill which itself is a requirement for -- it is not a requirement for the bundle.

350 So under "Ineligibilities" we have if you don't meet the one bill criteria you are ineligible, except there is an exception to that which is for Bell Mobility customers and PIC non-Bell local. So it is the exception to the exception of the ineligibility that lets you figure out that a Sprint customer could get the bundle?

351 MR. INNS: Again, these materials could have been written clearer, but the exception is listed there. It does say that it is an exception for one bill and for the bundle that a non-Bell local customer can get the bundle from Bell without have one bill, without having Bell local service. It is listed there, it is coached, it is stated to the reps using the facilitator's guide and the listing of exceptions.

352 MR. ENGLEHART: Well, let's take a look at Attachment 12, which is the presentation that was made to the CSRs themselves, not to their coaches.

353 There let's have a look at page 6 of 25. No, not 6. It is 17 and 18.

354 Is there anything there that would say to the CSRs that you could have Sprint for local?

355 MR. INNS: Again, this is listing the requirements, not necessarily -- there is nothing there that says that they can't be either. I mean, we haven't listed every single thing that could be a limitation.

356 Again, for the record, for the third time I think, we are saying this training material could have been a lot clearer and should have been and we wish we had. The problem is that we acted quickly and I think I have shown some of the following material that was very clear.

357 MR. ENGLEHART: Let's turn for a second to some of that following material.

358 I notice Ms Seaton said a moment ago, to a question, that for someone who has been around bell for a long time "PIC Bell" is all about long distance.

359 Is that right?

360 MR. INNS: That is what the turn technically means and has always meant.

361 MR. ENGLEHART: So if you use the word "PIC" in conjunction with local it is confusing?

362 Is that right?

363 MR. INNS: Not if you clarify "local" afterwards. The confusion is when you use the term "PIC" without clarifying now.

364 We had always in the past said "PIC" refers to: Oh, they have long distance with Bell if they are PIC Bell. But what has happened now is that a rep might say "Oh, they are PIC Bell for local" or "PIC Bell for long distance". As long as that clarification or the qualifier -- as long as that qualifier is on there it does resolve the confusion.

365 MR. ENGLEHART: Carry on.

366 MR. INNS: I was going to say, so in that training material you pointed out in those job aids where we do refer in that attachment to:

"...must be a consumer PIC Bell customer."

367 We actually think that was a primary source of some of the confusion that took place, because we didn't qualify what PIC we were referring to, PIC local or LD. That is, as we stated in the interrogatories, one of the problems that we think really caused some of the confusion with the representatives.

368 MR. ENGLEHART: So those of us in the business though, "PIC" stands for "primary interexchange carrier"; right?

369 MR. INNS: That's right.

370 MR. ENGLEHART: Don't you think it would be a lot clearer instead of saying "PIC local" just to say "you can be a non-Bell local customer", not use the word "PIC". Don't you think "PIC" adds an element of confusion into it?

371 MR. INNS: No. Unfortunately what has happened is that the customer service representatives have created their own language and I think it is actually less confusing to stick with what they have started to develop and are using in their terminology.

372 MR. ENGLEHART: You showed Commissioner Colville Attachment 15. That is something that goes to your third party CSR's.

373 Isn't that right?

374 MR. INNS: This is Attachment 15 in Interrogatory No. 7?

375 MR. ENGLEHART: Correct.

376 MR. INNS: That is correct.

377 MR. ENGLEHART: It says:

"Can a customer who is not with Bell for local service have a bundle?"

378 The answer is "Yes".

379 That is pretty clear, isn't it?

380 MR. INNS: Yes. Actually, if you turn to Attachment 16, which is right there as well, this is something that went to 310-BELL, so all of the internal reps from the Senior Vice-President of the Call Centre, who Patte reports to, Maryanne Bell. You can see in the bold underlined writing there another very clear statement about:

"Customer who do not use PIC Bell for their local service are eligible..."

381 In caps and bold:

"...for the bundle, but they must be PIC Bell for long distance." (As read)

382 Then you will see later in this document, which comes to the question of: Is there incentives for them to try to win back the local or to tie it to local, you will see in the last sentence of paragraph 4, the larger paragraph there:

"As is always the case in any of our products or services, employees cannot provide false or inaccurate information..."

383 I will just skip to the end of that sentence. I'm sorry, it's the second last sentence:

"...and they are subject to appropriate disciplinary action." (As read)

384 In which case these representatives would not be actually receiving any benefit in misdivisioning this, and in fact there were some disciplinary actions taken where people lost their jobs.

385 MR. ENGLEHART: Mr. Inns, you are burning through my 20 minutes so I have to return to the plan here.

386 Take a look, if you could, at Bell/CRTC-9.

387 Am I correct that the two attachments there are the latest and greatest guys that you use to train both the facilitators and the CSRs on these bundles?

388 MR. INNS: Interrogatory 9?

389 MR. ENGLEHART: Attachments 1 and 2.

390 MR. INNS: No. Actually, this is not the latest and greatest. This is December 15th. Again, we update these materials on a very regular basis.

391 MR. ENGLEHART: If we have a look at the question, Question 9, the question says:

"What ongoing processes has Bell put in place and will put in place to test the CSRs?" (As read)

392 The question before that:

"What ongoing processes has Bell put in place to ensure that it will provide accurate and timely information regarding Bell Canada's regulatory obligations in its training to its CSRs? (As read)

393 Then in your response you say that Attachments 1 and 2 are the latest. So you have, on page 3 or 3 in numbered paragraph 2, the first numbered paragraph 2:

"Increased rigour has been introduced regarding the specific product positioning from a regulatory perspective when training new hires. See the updated training material provided in Attachments 1 and 2." (As read)

394 This was sent out this month to the CRTC. Are you telling me that you didn't include the most up-to-date material?

395 MS SEATON: Actually, I have the most up-to-date material with me and it is dated, I believe, March 17th, so it would have occurred after that.

396 This is a dynamic document. We use this with all of our employees, even the ones that we hire. It isn't something that -- processes change, I mean there are all kinds of things that change.

397 MR. ENGLEHART: Let's look at the one we do have and you can show me whether it has changed.

398 If we have a look at Attachment 2, page 6 of 25. There you have "PIC non-Bell for local service".

399 Don't you run the risk that by using that word "PIC" it is confusing?

400 Wouldn't it be a lot simpler just to use the sentence that you used in Attachment 15 that you showed to the Chairman? Doesn't "PIC non-Bell for local service" just invite confusion?

401 MR. INNS: Again, I think the term "PIC", as long as it is clarified and qualified with the information that is there, "non-Bell for local service", it is very clear. When we mentioned that there was confusion, you will see in the attachment -- I'm not sure if you want me to go back there, but that was where it was unqualified.

402 So in Interrogatory No. 2, Attachment 2, page 17 of 21, you will see it says:

"Be a consumer PIC Bell customer."

403 So it was where we didn't clarify local or long distance as part of that qualifier on that statement that the confusion was arisen. This is the language our reps use, so we do not think that that is confusing at all.

404 MR. ENGLEHART: But you have found that your error rate is creeping up as new CSRs come and they are trained on these materials?

405 MR. INNS: No, that is not true. We have sustained the over 95 per cent performance for several months now, three months, and that would include 100 reps a month coming onboard.

406 MR. ENGLEHART: But the third mystery calling you were doing better than that?

407 MR. INNS: For that short sample that was performed there was a little bit better.

408 MR. ENGLEHART: I wonder if you could look at Attachment 1 to Bell-9, page 8 of 8.

409 THE CHAIRPERSON: You have about three minutes left, Mr. Englehart.

410 MR. INNS: I'm sorry, Interrogatory 9?

411 MR. ENGLEHART: Bell/CRTC-9, Attachment 1, page 8.

412 MR. INNS: Thank you. Yes.

413 MR. ENGLEHART: At the bottom of the page there is Scenario B. It says:

"Share the following possible scenarios with the participant.

....

Scenario B

Customer is coming back to Bell for local service." (As read)

414 The CSR is urged to say the following:

"Now is a great time to come back to Bell for your local service because we have our new bundle from Bell that can save you money on your Internet, cell and TV programming. First let me take care of your local service." (As read)

415 Aren't you telling the CSRs to tell people that if you come back to Bell for local you can save money on your Internet, cell and TV programming?

416 MR. INNS: No, not at all actually. I think it is very clear in Scenario A that we are trying to keep the conversation very separate. The benefit is on those other products.

417 In Scenario A we actually clearly go through an example where they are calling about the bundle and is not with Bell for local service and we do not mention anything about coming back to Bell for local service. We run through that scenario very clearly to make sure there isn't a tie-back.

418 MR. ENGLEHART: But in Scenario B it says:

"Now is a great time to come back to Bell for your local service because we have our new bundle that can save you money on your Internet, cell and TV programming." (As read)

419 Doesn't the word "because" mean that you save money on your Internet, cell and TV programming because you have Bell for local?

420 MR. INNS: No. I don't think that that is what the word "because" means. It's hard to say. I mean, it's not very clear exactly that we are trying to imply that the discounting on those products and services is some way tied to your local service.

421 Again, why would we have a scenario in which a customer does not need to have local service and can get the same discounts and the same information?

422 MS SEATON: If I can just add that we are trying to make the bundle sound like an exciting offer to the customer. He is calling us and asking us about coming back to Bell.

423 MR. ENGLEHART: Thank you, Mr. Chairman.

424 THE CHAIRPERSON: Thank you, Mr. Englehart.

425 Mr. Elder.

426 MR. ELDER: We don't have any questions, Mr. Chairman.

427 THE CHAIRPERSON: Thank you.

428 Counsel, no questions?

429 In that case, then, I will turn to you, Mr. Englehart, for your closing remarks.

CLOSING REMARKS BY ROGERS/CALL-NET /

REMARQUES DE FERMETURE PAR ROGERS/CALL-NET

430 MR. ENGLEHART: Thank you very much, Mr. Chairman

431 Bell has tried to argue that the failure of the CSRs to give the bundles to non-Bell local customers was due to the example or due to the actions of isolated employees.

432 I think the record is pretty clear that it's not. When you have an error rate of 40 per cent after a 15-minute huddle with every CSR, after a memo goes out to every CSR telling them that mystery calling will come, the error rate must have been much higher before.

433 We got an error rate of 86 per cent on an admittedly small sample, but that number is completely consistent with getting an error rate of 40 per cent after retraining.

434 I think the witnesses have admitted that the initial training materials were extremely unclear.

435 It wouldn't have taken much to make them clear and I think you have to say that Bell was at least reckless to the possibility that the CSRs would not be providing the service to -- not providing the bundles to non-Bell local customers.

436 This is a serious issue because more and more of these types of things will happen in the future and it gets very hard for competitors to try to monitor and keep track of all of these things to make sure that there is compliance.

437 The Commission has instituted telephone inspectors, which I think is a good approach to try to ensure that there is compliance for some of these programs. Our suggestion is that in the future when Bell is going to launch bundles, whether local is ostensibly in the bundle or not, they should file the materials with the Commission and the Commission should review the advertisements, the Commission should review the CSR training materials.

438 It just takes one sentence to make it clear. It just takes a sentence like we saw in Attachment 15 to make it clear. Oddly enough, that sentence still isn't in the current training materials, which continues to use the term "PIC non-Bell for local service" which I think is very confusing.

439 I think the Commission has an obligation to make sure that its rules are complied with and I think the easiest way of doing that is to review training and advertisement brochure materials to make sure that if local is indeed not a requirement that it says so.

440 THE CHAIRPERSON: Thank you, Mr. Englehart.

441 Mr. Elder.

CLOSING REMARKS BY BELL CANADA /

REMARQUES DE FERMETURE PAR BELL CANADA

442 MR. ELDER: That is an interesting proposal, Mr. Englehart.

443 You remember, these are bundles that consist entirely of forborne and non-telecom services. Mr. Englehart is essentially -- these are all things, the forborne services -- obviously the Commission looked at the market, the market power, all of the demand and supply factors, held a big proceeding to try to determine the state of competitiveness and they decided to forebear and they did it with particular -- some very minimal conditions.

444 Basically Mr. Englehart is now asking us to undo that and say: Even when you are talking only about forborne services, even when you are talking about non-telecom services that aren't even regulated under the Telecommunications Act, you have to file those with the Commission and they have to vet them somehow just in case there might be some tie into Bell local service.

445 I think this is an extraordinary proposal and an unprecedented, I think, incursion on the day-to-day business of the company in markets that are supposed to be forborne from regulation.

446 I would also say that Mr. Englehart's comments about the potential error rate before the 40 per cent figure we got is not evidence. It is pure speculation.

447 Mr. Englehart may still find the language saying "PIC non-Bell local", "PIC long distance" confusing, but we don't think our reps to. As has been clear in the testing that we have done, we continue to achieve over 95 per cent accuracy.

448 I think the record demonstrates this: We certainly have not told our reps that the bundle is only available where there is local service. We are certainly concerned about these inaccuracies and regret them and we are concerned on two fronts.

449 One, it is not our practice to mislead our customers. That is not good business and that is not what we want to do.

450 On top of that, we are obviously concerned to the extent that the behaviour of some of our reps could be putting the company at regulatory risk.

451 In summation, the bundle was designed to be regulatory compliant. We rolled it out in a way that we thought would ensure regulatory compliance. When it became apparent that we had problems there, we worked at it and kept working at it until we fixed it and it's now fixed.

452 Thank you, Mr. Chairman.

453 THE CHAIRPERSON: Thank you, Mr. Elder.

454 That concludes our hearing with respect to this particular issue. I thank you all for your participation and keeping to the point. This particular proceeding is adjourned.

455 We will take a break for half an hour and we will reconvene at 10 to 11:00.

--- Upon recessing at 1020 / Suspension à 1020

--- Upon resuming at 1050 / Reprise à 1050

456 THE CHAIRPERSON: I think we will proceed. It seems like everybody is here.

OPENING REMARKS / REMARQUES D'OUVERTURE

457 THE CHAIRPERSON: I am not going to go through the long -- well, it wasn't that long -- introduction as to why we are here in terms of the history of the expedited process and trying to more quickly deal with the number of issues in front of us.

458 For the record, my name is David Colville, Vice-Chair Telecom for the Commission. With me are Stuart Langford and Ron Williams, Steve Millington and Lynne Fancy. Steve is our counsel. I think you know Allan Rosenzveig, Shirley, Scott and Paul Godin at the back, who are assisting us in dealing with these issues.

459 We are providing an opportunity to hopefully, as we have used the term, expeditiously deal with a number of disputes.

460 In this case the applicant is Shaw Cablesystems and the respondent is TELUS. We will adjudicate whether TELUS violated the Commission's bundling rules when offering its student bundle, as set out in paragraphs 4, 5 and 6 of the application.

461 Just to give a sense of the process we will go through, we will give each party ten minutes for opening remarks and then we will have some questions by Commission counsel and perhaps by the Commissioners. Then we will provide each party 20 minutes to question the other and, if need be, some follow-up questions from the Commission. Then each has ten minutes for closing remarks.

462 We will be vigilant in keeping to that amount of time, more or less, and encourage you to keep the questions and the responses focused on the immediate issue at hand.

463 We do have a transcript. It is being recorded. Please turn the microphone on when you are speaking so we can make sure we have a good record for our proceeding.

464 Unless there are any questions on process, I will open it up.

465 Is it going to be Mr. Johnston or Mr. Stein?

466 Mr. Stein? You have ten minutes.

OPENING REMARKS BY SHAW CABLESYSTEMS G.P. /

REMARQUES D'OUVERTURE PAR SHAW CABLESYSTEMS G.P.

467 MR. STEIN: Thank you, Mr. Chairperson. We do, as well, look forward to this process.

468 I am Ken Stein, Senior Vice-President, Corporate and Regulatory Affairs for Shaw Communications Inc. With me today are, on my far right, Dale Butler, Director of Regulatory Affairs, Shaw Communications and Chris Johnston, our legal counsel.

469 As this matter primarily involves an interpretation of the CRTC's decisions as to what constitutes a "bundle" of services requiring prior tariff approval, I have asked Mr. Johnston to state our position.

470 MR. JOHNSTON: Thank you, Ken.

471 Mr. Chairman and Commissioners, this proceeding relates to a portion of the Part VII application Shaw filed on September 23, 2003 dealing with TELUS' Internet promotions and its student bundle offering. This hearing is confined to the latter issue respecting the package of services marketed on TELUS' Website at the time of the application as the "student bundle".

472 Shaw asks for an order declaring that in offering its student bundle without receiving prior tariff approval, TELUS breached the Commission's bundling rules and those sections of the Telecommunications Act requiring the filing and approval of a tariff for such an offering.

473 In our written submission of March 8th for this proceeding, we attached the description of the student bundle found on TELUS' Website. The description referred to the offering as a student bundle, and the first bullet under the heading stated:

"Bundle your services and save up to 19 per cent."

474 To qualify for the student bundle a customer was required to subscribe to TELUS' local exchange service. The additional services offered included high-speed Internet service, a choice of four personal call management services, a choice of a TELUS long distance plan and TELUS' Internet radio service.

475 While the description stated that Internet service and long distance plans were available on a stand-alone basis outside the TELUS student bundle, the description clearly implied that to achieve the advertised 19 per cent savings, a student must take all of the listed services except for a long distance plan.

476 TELUS' submission of March 8th indicates that the offering was terminated as of that date and that, in any event, the offering did not constitute a bundle as that term has been defined by the Commission, requiring the filing of a tariff. TELUS argues that the package of services offered consists of tariffed and non-tariffed items, each available on a stand-alone basis and that the offering, apart from certain billing errors, simply aggregated the individual rates for these services without any savings by virtue of a subscriber taking the package as a whole.

477 We understand that TELUS' position is that the 19 per cent savings referred to in the Website promotion was attributable to its residential value bundle, a tariff for which was approved under Telecom Orders 2003-257 and 317.

478 Shaw accepts that this promotion has now been withdrawn although TELUS has advised that three customers continue to subscribe to the student bundle. We also note that in place of the student bundle, TELUS is now marketing a package of services it calls "smart bundle", which we believe raises similar issues.

479 Assuming that TELUS' position on the matter is accurate, namely that the student bundle simply did the math by aggregating the prices of services without any special discount for taking the package of services as a whole, did the offering as promoted amount to a bundle requiring the filing and approval of a tariff?

480 Put another way, does a package of services requiring subscription to an ILEX local exchange service and consisting of a tariff-approved bundle of services, together with other services forborne from regulation and promoted as a bundle with savings to the subscriber, require prior CRTC approval?

481 We believe such an offering does require approval based on the definitions contained in the CRTC's decisions.

482 In our written submissions we have quoted the Commission's definition of bundling from Decision 98-4, confirmed in subsequent decisions. The definition includes the following alternatives:

483 First, situations where different services or service elements are offered under a rate structure which may be a single rate, a set of rates for various service elements, and/or rates for one or more service elements which are dependent on the usage of other services.

484 Second, situations where there may be separate rate elements for each service element but a number of service elements are aggregated for the purpose of applying volume discounts where the discount available is greater than it would be were the service elements not aggregated.

485 The description indicates, therefore, that to qualify as a bundle the package of services may include a volume discount or be simply the grouping of different services under a rate structure.

486 In this instance, the student bundle includes five services offered under a rate structure and are dependent on the use of TELUS' local phone service. The student bundle, we submit, clearly fits the CRTC's definition.

487 In Telecom Decision 2002-58 involving a complaint by GT Group Telecom against Bell Canada for non-compliance of the bundling rules, the Commission stated in paragraph 14 that:

"The main thrust of the bundling rules is that all bundled services that include a tariffed service component must receive prior Commission approval."

488 Clearly, then, whether or not there is a volume discount involved, or the rate is dependent on the usage of other services, if the package of bundled services includes a tariff service component, it must receive prior approval.

489 As stated in Telecom Decision 97-8, paragraph 220:

"The Stentor companies should not be prevented from bundling forborne services with ILEC local exchange services. However, when a forborne service is included in a new bundled service, its Phase II costs must be filed as part of the imputation test and the rates for the bundled services are to be filed for approval by the Commission."

490 In this case, the student bundle includes both local exchange and forborne services, and Shaw submits the requirement stated in Decision 97-8 applies.

491 In its March 8th submission, TELUS states its understanding that the tariff requirement applies only to bundles that offer a discount or are conditional on the use of a tariffed service. In fact, the student bundle, as promoted by TELUS, did purport to offer a discount and was conditional on the use of a tariffed service.

492 TELUS relies on the Commission's decision in 2003-49 involving an application by Call-Net Enterprises Inc. As one of the arguments, Call-Net submitted that the ILEC's practice of limiting DSL Internet service only to their respective local exchange customers constituted a bundle since the two were tied. The ILECs argued that their retail DSL Internet service was not dependent or conditional on the price of their primary exchange service and they did not offer any discount, rebate or other inducement to persuade the customer to purchase both services.

493 After quoting the basic definition of bundling in December 98-4 referred to above, the Commission found that the Internet and primary exchange services were not being offered under a single rate structure and no financial benefits were available to customers for subscribing to both services.

494 The Commission found therefore that the provision of retail Internet services and primary exchange services by the ILECs do not require tariff approval.

495 In other words, the services were not offered as a bundle under a single rate structure or with a discount available for taking the package.

496 In this case, there are a variety of services offered and referred to as a bundle. There is a rate structure encompassing all the services offered, and according to the promotion there was a savings of up to 19 per cent available through subscription to the bundle. Clearly, then, in our submission the student bundle met the Commission's definition and required prior tariff approval.

497 The Commission has repeatedly emphasized and enforced the importance of its bundling rules to ensure that ILECs with their pervasive local exchange services do not offer bundles whose pricing diminishes or forecloses competition. The cable industry has also repeatedly recognized the importance of strict enforcement of the bundling rules as a precondition to its entry into local telephony.

498 Shaw urges the Commission to adhere to its strict interpretation and application of these rules to ensure that the pricing of packages of services offered in the way TELUS has in its student bundle are at least meeting their Phase II costs. To allow ILECs to characterize an offering such as the student bundle as simply a joint marketing of services not requiring tariff approval in our view opens the door to abuse of the bundling rules and avoidance of the regulatory scrutiny intended by the Commission to ensure that bundles offered by the dominant carriers do not result in anti-competitive pricing and undue disadvantage to competitors.

499 Thank you.

500 THE CHAIRPERSON: Thank you, Mr. Johnston.

501 Mr. Grieve, would you like to introduce your colleagues?

OPENING REMARKS BY TELUS COMMUNICATIONS INC. /

REMARQUES D'OUVERTURE PAR TELUS COMMUNICATIONS INC.

502 MR. GRIEVE: Thank you, Mr. Chair.

503 To my left is Anne Bowen, Director of Consumer Marketing; and to her left is Kevin Doyle, Director of Regulatory Services.

504 I will ask Kevin to give the opening statement for TELUS.

505 MR. DOYLE: Good morning, Mr. Chairman and Panel.

506 We have just heard from Mr. Johnston as to why Shaw believes TELUS' Web-based promotion, the student bundle, contravenes the Commission's bundling rules as Shaw understands them. For the next nine minutes I am going to take the time to walk you through the promotion itself and the applicable tariffs, and from that we will demonstrate how this marketing initiative complies fully with the Commission's existing bundling rules.

507 We will then respond to what amounts to, in our view, Shaw's attempt to redefine what constitutes bundling, effectively modifying or changing the existing rules.

508 I would like to start with the tariff. I understand we have this passed out, for the convenience of having it in front of you.

509 This is Item 302 of TCI's General Tariff. It is the residence value bundle that has been referred to repeatedly in TCI's submissions and in our interrogatory responses.

510 Yet Shaw, even in its March 8th submission, tries to ignore, or I would characterize distract the Commission away from this tariff, stating simply that it "does not address the student bundle at issue".

511 TELUS takes a very different view.

512 I would ask the Panel to refer to the service description, Item 302.1. It starts with a sentence stating that you have to be a customer of TELUS' local exchange service to qualify for this bundle.

513 The second sentence states:

"Different rates apply depending on whether the company is the customer's primary interexchange carrier or TCI is the customer's PIC and the customer subscribes to TELUS' Internet or TELUS Mobility ... cellular service, in which case either a fourth feature from the list below may be added or one of --" (As read)

514 And then there is a list of five additional call management services that are also available.

515 I would ask you, as well -- if we could still stay with the tariff a moment longer -- to turn to page 3 of that tariff, item 302.3, under Rates, and if you would refer please to the table with the header "LEC" and "PIC" and "TELUS' Internet", you will see there a rate of $15.95 per month for four personal call management service features.

516 That is the Commission-approved bundle. You get a $15.95 per month rate for four PCMS features so long as you are with TELUS for your local service, you are PIC'd to TELUS and you subscribe to TELUS' Internet access services.

517 Now let's look at the description of the student bundle that Shaw printed out from TELUS' Web page. This is the attachment to their March 8th submission.

518 I am hoping that the Commission has that before them.

519 MR. STEIN: Do you have other copies?

520 MR. DOYLE: We only have these.

521 THE CHAIRPERSON: We have that.

522 MR. DOYLE: Mr. Chairman, I think when you look at that promotion the first thing you will notice is there is no single rate stated in this promotional material.

523 At the top of the page is the name "Student Bundle" and then there are the following bulleted statements:

"- Bundle your services and save up to 19%

- Residential phone line

- TELUS high speed Internet service

- Choice of 4 Personal Call Management Services

- Choice of TELUS Long Distance plan

- TELUS Internet Radio Service"

524 I will just clarify that TELUS Internet radio is free to the world at large. If you have TELUS Internet, you can type in a Website and you get TELUS Internet radio service.

525 Let's turn to the qualifications set out in the notes.

526 It states:

"The TELUS Student Bundle is available to residential customers who have TELUS as their local phone service provider. Bundle price varies by type and location of service and does not include TELUS Long Distance charges. Student Bundle savings are available without subscription to a TELUS Long Distance plan."

527 Of course, that would make sense in the context of the tariff, because you just have to be PIC'd to us. That doesn't mean you have to necessarily subscribe to one of our long distance plans, such as the "$20 You Are Away Plan".

528 Continuing with the notes:

"Calling Features are available in most areas. Prices for Calling Features and residential local service subject to change pending CRTC approval."

529 And finally:

"Internet service and long distance plan promotions are available on a standalone basis --"

530 I will stop there.

531 What does this mean? We would submit it means that whatever rate, promotional or otherwise, you are paying for the Internet service or LD, you can get those services at that same rate whether or not you order the student bundle or subscribe to personal call management services.

532 So having reviewed the tariff, or just reviewed the tariff in comparison to this promotion, you might agree -- I hope you would agree -- that this does a pretty good job of summarizing the qualifications and preconditions to qualify for the residence value bundle tariff.

533 If time permitted, I would walk you through the interog responses which set out the rates that are available for the separate elements. They show the $15.95 per month rate for the four PCMS features that were available.

534 It also sets out clearly that the Internet component was available at the same rate to anyone, if they had not subscribed to the student bundle. You could get that generally. At that time it was a promotional offering.

535 At this point we are left with the question: What part of the student bundle requires additional Commission approval?

536 What is the real issue here? Is it that we didn't use the title of the approved tariff when we were promoting these services? If we had simply replaced the name "student bundle" with "residence value bundle", would the alleged non-compliance have been cured?

537 TELUS submits that surely attaching a label to a promotion that includes a Commission-approved bundle does not give rise in and of itself to a bundling violation. If the customer had queries as to which of TCI's tariffs applied, a customer service rep can point them to the relevant tariff.

538 From Shaw's standpoint, then, what is the issue?

539 The conditional discounts applied to the PCMS features were consistent with or in accordance with the Commission-approved tariff for which an imputation had been filed.

540 Confronted with the fact that the customers could obtain, and did obtain, the long distance and Internet services at the same rates, whether or not they subscribed to the student bundle, and then confronted with the fact that the PCMS discounts are pursuant to an approved tariff, Shaw is forced to take this position that mere joint marketing of these various services in a single ad or a promotional campaign violates the bundling rules.

541 What may be surprising to the Commission is that in reference to what constitutes a bundle, both parties appear to point to the identical decisions and orders, and yet we come to completely different conclusions.

542 Shaw suggests that the offering of a tariffed and forborne service in the same advertisement, whether or not there are conditional discounts involved, constitutes a bundle, particularly if a total price is stated in the advertisement.

543 In its March 8th written brief, Shaw states, and I quote:

"Whether or not there are savings or discounts involved, that is an issue related to the imputation test and does not excuse TELUS from the requirement of prior tariff approval."

544 As to be expected, Panel, the company does not agree with Shaw's definition of bundling.

545 As explained in our March 26th submission, it has always been TELUS' understanding, based on the Commission's decisions and orders -- the wording is used there -- dating back to Decision 94-19, that tariffable bundles encompass arrangements or circumstances that offer a rate, a discount, some financial incentive, financial benefit, in relation to the combinations of services that necessarily includes a tariffed service.

546 If you can purchase the services on a stand-alone basis at the same rates, we would submit it is not a bundle.

547 Joint marketing those tariffed and forborne services in the same ad or promotion and/or offering the customer the convenience in an ad of totalling up the stand-alone prices and stating that total does not trigger application of the bundling rules.

548 I think it is important that we not lose sight of the facts in this particular case. The promotional material of the student bundle does not state a rate or a dollar amount.

549 The company submits that its understanding in this regard was confirmed as recently as July of last year when the Commission issued Decision 2003-49.

550 In that case the Commission stated:

"The Commission generally considers that bundling exists where a customer derives a financial benefit from acquiring more than one service from an ILEC that is greater than the benefit that would be available to the customer if the services were bought separately from the ILEC."

551 In light of this, the company respectfully submits that Shaw is attempting through this dispute process to redefine the bundling rules to undermine TELUS' ability to joint market and promote its tariffed and forborne services in packages or in advertisements.

552 Undoubtedly Shaw and other competitors would like to incumber TELUS in this manner. However, TELUS submits it is not only an inappropriate forum to review and vary these rules, but also that the requested modification to the rules would not serve the public interest and it is not in keeping with the purposes for which the bundling rules were issued or were created.

553 With that, Mr. Chairman and Panel, TELUS is confident that once you have reviewed the evidence and the submissions in this proceeding, that you will come to the conclusion that there has been no contravention of the existing bundling rules made out in this case.

554 Accordingly, we respectfully submit you should deny the relief requested by the applicant, and I would like to thank you for the opportunity to make these opening remarks.

555 THE CHAIRPERSON: Thank you, Mr. Doyle.

556 Counsel.

QUESTIONS BY THE COMMISSION /

QUESTIONS PAR LA COMMISSION

557 MR. MILLINGTON: Normally, I would ask questions first of the applicants and then follow them up with questions for the respondents. I don't actually have any questions for the applicants, so I will go directly to the respondents in this case itself.

558 The question I have is this: When we look at the -- we just want clarification actually on the terms and conditions associated with some of the services that are listed as a requirement in the tariff and we are provided in the student bundle.

559 We want to be sure we have learned clear from the material that we have to date that all of the terms and conditions, the rates, and so on, were exactly the same whether you took Internet, as an example, as a stand-alone product would be the same as what was required under the student bundle.

560 Specifically what is the monthly rate that the students sign up to, conditional on a year contract as it was in the -- we have two rates structures. I believe it was $24.95 if the Internet contract was on an annual basis as opposed to a $42 rate, approximately, for a month-to-month basis and we weren't sure whether that rate structure was applicable to the students in the student bundle.

561 MS BOWEN: The rates that were available to the students in this particular bundle were the same rates that applied to all customers who signed up for Internet at that time, and that rate was $16.95 for six months after which they migrated off of the promotional price onto the full appropriate Internet price for the service.

562 MR. MILLINGTON: And at that time they would have been required to sign up for a year contract in order to get the lower rate, or did they go --

563 MS BOWEN: No, they would get it directly. They could migrate off the next month and, in fact, some did.

564 MR. MILLINGTON: So when they migrated off, they migrated off to a pre-existing plan rate that was available in the general market.

--- Pause

565 MS BOWEN: They went right off the service. They were not contracted for a year. They could take the service per month at $16.95 and then leave.

566 MR. MILLINGTON: And that same offer was available on a stand-alone basis to the general public?

567 MS BOWEN: That's correct.

568 MR. MILLINGTON: Okay.

--- Pause

569 THE CHAIRPERSON: Thank you.

570 Commissioner Langford.

571 COMMISSIONER LANGFORD: Thank you.

572 My questions too are to TELUS. I will just direct them generally and get you folks to decide who wants to answer them.

573 I want to hone in on the 19 per cent, and I read your submissions, but I want to get clear on it. I especially want to get it clear this morning.

574 Where exactly does the 19 per cent saving come from?

575 MS BOWEN: The 19 per cent savings is a savings with a selection of PC services that would make up the value bundle price of $15.95 and it is the delta between selection of those services and the $15.95 price point.

576 COMMISSIONER LANGFORD: So, in other words, if you take the student bundle, you get the residential value bundle that is part of it, and inside of that bundle is the 19 per cent, or the possibility of getting as much as 19 per cent.

577 MS BOWEN: This offer was an attempt to explain to the customers the residential value bundle with the fourth feature. So the savings that were presented to the customer were the savings available on that value bundle offer.

578 COMMISSIONER LANGFORD: So it's a little like one of those Russian dolls where the first doll is the student bundle and then you take that one out and inside is a doll that looks like it, but it's the residential value bundle and all the pieces are in there.

579 I mean, there is no such thing then as a student bundle. Is that what you are telling us?

580 MS BOWEN: Student bundle was a name that we used to describe the value bundle to students. It was a marketing bundling term as opposed to the specific use of the residence value bundle tariff. It was designed to try and attract the attention of students at a time of year when it was very busy and difficult for them to make all the decisions required to purchase telecom services.

581 MR. DOYLE: Commissioner Langford, if I could just add to that?

582 The residences value bundle, if you review the tariff, it's quite a complex tariff, but it also has a number of permutations and configurations that would qualify as bundles. They set different rates there.

583 The student bundle was a promotional campaign that attempted to promote the services that would satisfy the pre-conditions to qualify for the $15.95 rate. We don't deny that. I think it's correct to say it included in the promotion, the residence value bundle, what the rate was for satisfying the requirements to get the four features at $15.95.

584 COMMISSIONER LANGFORD: Well, in a sense, only by including the residential value bundle, or describing it that way, does the student bundle not become a bundle under our terms. Is that what you are saying?

585 I mean, if you, in fact, were selling here for a saving of $19.95, local service, a choice of some optional services, Internet and whatever else is listed there for free or not, that would be a bundle.

586 Is what you are saying today that the reason it isn't a bundle, it's a marketing tool, is because included in this non-bundle is an existing bundle? Is that your point today?

587 MR. DOYLE: No, sir, and maybe I was not clear.

588 The tariff provides for three pre-conditions that need to be met to obtain this 15 per cent discount on PCMS. That is a Commission-approved bundle and that is a bundle. We don't deny it's a bundle; we just suggest it's a Commission-approved bundle.

589 All this promotion does is promote that bundle savings and along with it what services you need to obtain to qualify for the bundle. So in joint markets these services, they are the very pre-conditions you need to qualify for that bundle.

590 COMMISSIONER LANGFORD: So the student bundle is, in fact, a marketing tool for the residential value bundle.

591 MS BOWEN: It would be a very good description of it.

592 COMMISSIONER LANGFORD: Why wouldn't you just call it that? Why wouldn't you put an ad that says, "Hey, students! Welcome back to campus and you all come and get our residential value bundle"?

593 MR. DOYLE: I will let Anne supplement what I am about to say because I think you can bring more to it.

594 We don't refer necessarily to the residential value bundle. Our experience has found that, unfortunately, that tariff is too complex at times and it's not helpful to the customers.

595 What we have tried to do is package the services that meet those qualifications in a way that they would understand. You can understand in a print media or in a Web-based design, you are trying to hit the highlights of what the requirements are and when we look at what we promoted there, especially with the node that tries to layer in clarifications, we think we did a pretty good job of that.

596 But I will Anne talk about why we don't specifically use the residential value bundle in reference to everyone of our promotions.

597 MS BOWEN: When we promote our services to our customers we do attempt to put together the services in a way that makes sense to the customers and sometimes the use of the term "residential value bundle" to describe particular tariffs makes a lot of sense.

598 It has been around for a long time. Generally customers associate it with three services and in this particular case we were presenting four services to the customers and more conditions than they would normally expect to see. If you go to our Website, we do promote a value bundle.

599 So in this case we chose a marketing term, a bundle name, that was, in fact, the embodiment of the student bundle tariff -- sorry, the value bundle tariff, for this whole purpose of trying to differentiate a little bit and also encourage the customers to consider this particular direction.

600 COMMISSIONER LANGFORD: Mr. Doyle, when you say "We think we did a pretty good job", as you said a minute ago, it's my understanding from the record that you signed up eight people on this bundle and that all eight of them were billed incorrectly.

601 So it sounds to me -- I mean, I am not trying to make you feel bad.

--- Laughter / Rires

602 COMMISSIONER LANGFORD: I am just stating the facts, as Joe Friday used to say, just he facts. I am not trying to encumber them with any editorial polish, but it sounds to me like you didn't.

603 What happened here?3

604 MR. DOYLE: Well, sir, I would like to clarify my comments.

605 My reference to a pretty good job, I most certainly would not attribute to the marketability or our approach to marketing and certainly our billing.

606 However, sir, I think what I was talking about there is that it does a good job of attempting to summarize a complex tariff. That is my reference to a good job. I certainly would not say this bundle was a huge success or this marketing promotion was a huge success or that our billing record in this case was anything to be proud of.

607 I just want to clarify. When I was talking about a good job it's in reference to a very complex tariff setting out "Here are the requirements of that tariff".

608 COMMISSIONER LANGFORD: And earlier you said Shaw is attempting to redefine the rules, the bundling rules.

609 I wonder if maybe what they are attempting to do is to clarify them a little, and whether you might agree that, though in your opinion this bundle offer does a pretty good job in a crowd like this, that the track record of it seems to indicate that there was confusion.

610 I wonder whether on a going-forward basis, whether using the term "bundle" when it isn't a bundle is, in your opinion, a good idea from now on?3

611 MR. DOYLE: There are several parts to your question.

612 With respect to Shaw attempting to redefine the bundling rules, I won't propose to go through the decisions, unless you would like --

613 COMMISSIONER LANGFORD: Well, we have all been through them. We made some of them.3

614 MR. DOYLE: Yes, sir.

615 In attempting to provide clarification -- now I have lost my train of thoughts, sir. Let me just think about what I was going to say.

616 Where was I? Help me.

617 COMMISSIONER LANGFORD: Well, it's the last part of the question that interests me about on a going-forward basis, whether it's prudent to start calling things "bundles" that you are later going to want to sit in front of us and say aeronaut bundles.3

618 MR. DOYLE: Well, sir, I think, and I will let Anne again sort of enhance what I am saying, bring her marketing perspective.

619 The word "bundling" to the consumer does not have the very precise definition that it means in the regulatory context.

620 I can tell you that I have a team that provides regulatory advice and it's sort of like two years into their work. They finally understand all the rules. I don't suggest that it's overly complex, but it is a difficult thing to understand.

621 We use bundling packaging interchangeably and from a marketing perspective it does not have the same connotation and we don't want to start confining ourselves to something.

622 The only person who appears to be confused here, sir, is -- there not customer complaints. We don't have a record that the customers were confused by the use of this term.

623 We would submit that the note is fairly clear that the items can be gotten on the same rates as a stand-alone basis.

624 But I know Anne has some thoughts about the use of the word "bundling".

625 MS BOWEN: I think customer research and lots of conversations with customers suggest that customers see bundles as a broad base of products and services that a supplier with diligence brings together to them to make sense.

626 What they are looking for is clarity with respect to all the products and services that are offered. So we do try to do that.

627 But in order to do that, you very often have to put them in terms for that particular group of customers that they understand. So we have used student bundle in this case. We could have used fall cleaning or time to get back --3

628 MR. DOYLE: A package.

629 MS BOWEN: A package. We could have used the term "package" and I think in the industry they are used somewhat interchangeably. I don't think there are strict idlings around that.

630 But the important thing is that when we do include the tariff component of a bundle, that they are presented and billed correctly to the customers and that is how we have co-marketed many of our products together.

631 COMMISSIONER LANGFORD: One final question.

632 If you take a package of services which includes a bundle, a tariff bundle, does it become a fortiori, or necessarily, another bundle? Do you, in fact, fall within the final test which says you are getting a group of services, package, conglomeration, whatever you want to call it, and you are getting a financial savings by taking the group rather than taking them separately?

633 Does it correct the problem to say, "Well, hidden in the group, unbeknownst to anyone, is a bundle"? Because really what the customer is getting here, it would seem to me, is not working from the bottom. To me, they don't think they are getting Internet radio service, long distance, high-speed Internet and, taking bullets 2 and 4, the residential value bundle and thereby saving up to 19 per cent.

634 They think they are getting exactly what you tell them they are getting. they think they are getting a non-bundled residential value bundle package, plus that other stuff.

635 I just wonder whether, in fact, when you start to tear apart existing tariff bundles for purposes of advertising and then restructure them for purposes of avoiding the bundling rules, whether, in fact, you don't break the rules.

636 That is pretty complicated, but I could try it again, if you would like, if you don't get where I am coming from.3

637 MR. DOYLE: Well, sir --

638 COMMISSIONER LANGFORD: You don't say in here, you don't say, "Take Internet radio, long distance, high-speed Internet and our residential value bundle and save up to 19 per cent". You don't say that. You create, in the way you word it, whether you create it in law, that is another question we can get to later, but you create in the way you word it and the way you list it something that looks suspiciously like a brand new bundle.

639 I just wonder whether that is appropriate.3

640 MR. DOYLE: Commissioner Langford, I think you have asked two questions. If I could try to see if I --

641 COMMISSIONER LANGFORD: I could have asked 15, I am not entirely sure, but do your best with it.3

642 MR. DOYLE: At the risk of me losing my train again, I think, and you can correct me if I am wrong, if it's fair. What you are asking is in one question is the putting services together, packaging, if one of those packaged elements is a Commission bundle itself, or represents a discount that is buried in the Commission bundled -- I wouldn't say "buried", in a Commission bundle -- if I put those together, does that, at law, or does that, according to the rules, or should it -- I don't know if in this proceeding we should talk about "should it" -- it's probably does it contravene the existing rules?

643 I am going to attempt to answer that question.

644 I think then your second question, sir, is: Does the way this was promoted, the ad itself, suggest or lead an inference in some way that makes the customer think he must get all that to get that?

645 Is that a fair characterization?

646 COMMISSIONER LANGFORD: I think it is, yes.3

647 MR. DOYLE: I am going to let Anne talk to the second and I will try the first because you are asking a question. The first one is at law.

648 In our view, the bundling rules are quite clear on the packaging distinction. If there is no discount connecting these two, then we are free to promote in joint market these services.

649 Keep in mind that, of course, all the ILECs -- there is no restriction on jointly marketing out foreborne and tariff services. So there is no -- if we can offer these -- if you can get those on a stand-alone basis, it does not trigger application of the bundling rules, and we point to Decision 2003-49 to make that case, but we would also go right back to 1994-19 or even 98-4.

650 When you even look at the words "rate structure", sir, and I think that is used a lot by Shaw and it appears in the clarification added in 98-4.

651 When you think about a structure, we looked at that as a team, as a group and, no disrespect intended, but we sort of asked, "What is a rate structure?". In our mind a structure then must be built on a component. It must have some dependency on the component. That is how we looked at this and said, "Okay, a rate structure means there is a conditionality about these rates or about the component".

652 In this particular case, the tariffs tell us that you have to have TELUS Internet, you have to have local exchange.

653 I think the issue is, for Shaw, we were offering a discount or a promotional rate across the board. They are somehow trying to say: Was that part of the bundle?

654 From our perspective, the fact that that was not in any way conditional but you had to get this full package, it severs the link. So therefore it is not a bundle according to the current rules.

655 To your second question, I'm going to let Anne address whether this ad itself with the lengthy note, which we note is not mice print -- and I can tell you that I personally reviewed that note before it went out. We thought this was doing the right job, but I will let Anne address that point.

656 MS BOWEN: With respect to the question I think you are asking, whether it is somewhat misleading I think, there is every expectation that customers who ordered this would in fact receive a call back from a customer service representative.

657 It does specify that they should expect to hear back. So if there were questions at all about the pricing around what was included and what was not included, they could have been addressed there and, in the ads themselves directing customers, students, to the student Website. We also left the number of a call-in centre so that they could call in and clarify the prices.

658 With respect to your comments about how you present this to the customers, we specifically did not include the promotional price for Internet. We prefer, with our brand, to only advertise the long-term savings. Internet prices can vary; long distance packages are very specific to customer needs. In a volatile long distance market it would be difficult to determine what the base for savings would be.

659 So we do try to look at the long-term savings and we did try to specify all the conditions under which this particular offer was being made.

660 COMMISSIONER LANGFORD: Finally, Mr. Doyle -- I did say "finally" before but you twigged one small point and I apologize, I have one other question.

661 I appreciate that, as we old-timers say, one swallow does not make a spring, but in your response to me you put a lot of emphasis, I thought, on the notion that there was no additional saving in the sense of the up to 19 per cent came through the residential value and that was a registered tariff bundle.

662 What about the $5.00 credit that at least one lucky student thinks he may have gotten? I gather you are going to go back and look at those bills again.

663 MR. DOYLE: Again we will work as a tag team here.

664 I think in our March 8th submission there is no doubt there are billing errors. There are clearly billing errors which we were working to subsequently rectify. I believe under the heading in our March 8th submission I think we call it "a billing error does not a bundle make".

665 COMMISSIONER LANGFORD: "Bungle" or "bundle"?

666 MR. DOYLE: Yes, sir.

--- Laughter / Rires

667 MR. DOYLE: There was no intent on the part of the company to make such an offer. That is why we feel quite entitled to go back and claw back that discount. That was not part of our offer -- or that apparent billing error.

668 So I hope that addresses your question.

669 Anne, I think you can talk to some of the billing errors and how they have been rectified.

670 MS BOWEN: Customers who are eligible for Internet special promotional prices are not eligible for any other discounts that may exist on permanent Internet offers. Those were billing errors.

671 COMMISSIONER LANGFORD: You are still going to go after those poor kids for the $5.00?

672 MS BOWEN: Actually, that customer was over-billed on their PCMS services, so we have --

673 COMMISSIONER LANGFORD: You have the money already, it is just a matter of rejigging it.

674 MS BOWEN: All of the customers have been contacted and, under the direction of a senior billing manager, they are being corrected. That is the harm that was done.

675 COMMISSIONER LANGFORD: We get accused of chasing the small companies. I don't understand it.

676 Those are my questions, Mr. Chairman.

677 THE CHAIRPERSON: Commissioner Williams.

678 COMMISSIONER WILLIAMS: Is it true that five of these eight customers were in fact over billed?

679 MS BOWEN: That is correct.

680 COMMISSIONER WILLIAMS: Thank you.

681 MR. DOYLE: If I could just add, just to that question, just so it's clear to possibly even the audience, the five over billed just demonstrates that this was directionally opposite to what one would expect if we were using the billing errors as a way to entice customers with discounts. I just want to make that absolutely clear.

682 THE CHAIRPERSON: I'm not sure you would want to pursue what it demonstrates.

--- Laughter / Rires

683 THE CHAIRPERSON: I have a question actually for Shaw in terms of this notion of understanding the bundle.

684 If we have five items, (a), (b), (c), (d) and (e), and (a) is the tariff item, and I have an approved bundle with some discount which includes (b) and (c), so I have a tariff for a bundle that includes (a), (b) and (c), and I package it with (d) and (e) with no additional savings from what the stand-alone price of (d) and/or (e) would be, is it Shaw's position that that is a bundle for regulatory purposes?

685 MR. JOHNSTON: Yes, it is. We come to that conclusion by, again, the basic definition under 98-4 has two prongs to it.

686 One is an offering of services under a rate structure.

687 Another prong is an offering of services that involves, bihaviating(ph) them, a discount.

688 We think in your example, in this particular instance, it falls under that first leg of the definition.

689 THE CHAIRPERSON: So it is your position if there is no further discount it is still a bundle for regulatory purposes?

690 MR. JOHNSTON: Yes.

691 THE CHAIRPERSON: Thank you.

692 Now I will provide Shaw with an opportunity to ask any questions. You have 20 minutes.

QUESTIONS BY SHAW CABLESYSTEMS /

QUESTIONS PAR SHAW CABLESYSTEMS

693 MR. JOHNSTON: I certainly won't need that. I just have one or two.

694 The first relates to, Mr. Doyle, I think I heard you say -- but I probably misheard -- that really what the student bundle is is your residential value bundle.

695 Was that the position you were taking?

696 MR. DOYLE: I hope that wasn't the position I was taking or that I said that. That is not what I intended to say.

697 MR. JOHNSTON: Okay.

698 MR. DOYLE: A component of this promotion, of the services that are being promoted, is the discounts that are available in the -- to PCMS features that are available under the terms and conditions of the res value bundle, and also being promoted are the services that you happen to have to need to qualify for those discounts.

699 MR. JOHNSTON: Right. But there is no question that the bundle includes other elements, other services than the personal call management service?

700 MR. DOYLE: Sir, I don't want to get into semantics, and I'm sure you don't either.

701 You say "Does it include". I think it has conditions. This is a condition of this bundle, that you have to have Internet, long distance and local exchange service. It is a condition.

702 We can get into the debate of: Does it include in the bundle the local exchange services? I would suggest it does not, because we certainly -- that is just our position, it does not include it when it is just a mere condition.

703 I think it is relevant for imputation test purposes that particular answer I gave.

704 But sir, no doubt there are conditions here that you have to have local exchange service and you have to have long distance. If you wish to characterize that as that the bundle includes local exchange and the PCMS discount, I won't debate with you. I still say that there are just conditions of qualifying for that particular discount in a Commission-approved tariff.

705 MR. JOHNSTON: One of them being that you must be a TELUS local exchange subscriber?

706 MR. DOYLE: I won't deny that. It is clearly in the tariff, sir.

707 MR. JOHNSTON: Okay. The other thing I was trying to understand, Ms Bowen, was -- this is the 19 per cent saving.

708 I thought I heard you say that there is a -- maybe I got my numbers mixed up -- a 15 per cent saving in the residential value bundle?

709 MS BOWEN: I think I referred to the price point of the value bundle, which in this particular case is $16.95.

710 MR. JOHNSTON: Okay. So if I understand you, the entire 19 per cent savings referred to in the ad is attributable solely to the residential value bundle?

711 MS BOWEN: That is correct, for this particular selection of services and requirements.

712 MR. JOHNSTON: Okay. One other thing that I didn't understand, Mr. Doyle, in your opening remarks is that you said the description -- let's refer to just a little part of the description.

713 MR. DOYLE: Are you in the tariff?

714 MR. JOHNSTON: No, I am in the ad itself.

715 MR. DOYLE: Okay.

--- Pause

716 MR. DOYLE: This is the attachment to your March 8th.

717 MR. JOHNSTON: Yes, the ad as it appeared on the Internet.

718 Just looking at the middle:

"Calling features are available in most areas. Prices for calling features and residential local service subject to change pending CRTC approval. Internet services and long distance planned promotions are available on a stand-alone basis outside of the TELUS student bundle." (As read)

719 You said that they are available at the same price. There is no price differential. I believe that is what you said when you were referring to this.

720 MR. DOYLE: Yes, sir, that is correct, that those plans and those promotional prices for LD and for Internet services are available outside of this bundle or outside of this arrangement, outside of the student bundle.

721 MR. JOHNSTON: Where in the description does it say at the same price is what is confusing me?

722 MS BOWEN: I think "promotion" means one thing, but we did say "stand-alone" and that implied to us that they were available on a stand-alone basis.

723 MR. JOHNSTON: "Stand-alone" means?

724 MS BOWEN: Means on its own. You can have whatever Internet price point exists at the time on its own, independent of this particular offer that we put in front of the students.

725 MR. DOYLE: Because surely, sir, it wouldn't be suggesting -- in our mind, it wouldn't be suggesting you can just get Internet service in LD if you don't subscribe to this promotion. Because surely that is obvious. People don't think "Oh, I can't get long distance service from TELUS unless I subscribe to this student bundle.

726 In the context of talking about on a stand-alone basis, we believe that they have communicated to the customer that the rates that we are trying to entice you with are on the long distance and the Internet. Those are available outside the student bundle. I think that is pretty clear actually.

727 MR. JOHNSTON: Those two services were available.

728 MR. DOYLE: Both services at those rates. Internet service and long distance plan promotions are available on a stand-alone basis outside the TELUS student bundle.

729 MR. JOHNSTON: Pardon my denseness on this, but how would one reading that conclude that it is at the same price as one would pay for it if it were included in the bundle?

730 MS BOWEN: I think two words clarify it. One, it is a promotion -- Internet was a promotion available to all -- and stand-alone. They were available on a stand-alone basis at a promotional price to all customers.

731 MR. JOHNSTON: Okay. Those are my questions, Mr. Chairman.

732 THE CHAIRPERSON: Thank you, Mr. Johnston.

733 Mr. Doyle or Mr. Grieve, you have 20 minutes.

734 MR. DOYLE: We won't have any questions for Shaw, sir.

735 THE CHAIRPERSON: Okay. Counsel, any further questions?

QUESTIONS BY THE COMMISSION /

QUESTIONS PAR LA COMMISSION

736 MR. MILLINGTON: I would like to clarify the previous discussions around Internet because I'm a little confused. as to exactly how the offer was made, both as a mass market offer and as in conjunction with the residential value package which then became the overall student bundle.

737 I understand, I think, that there was a promotional price for new subscribers to the Internet.

738 Is that correct?

739 MS BOWEN: That's correct.

740 MR. MILLINGTON: That is the $16.95 a month?

741 MS BOWEN: That's correct.

742 MR. MILLINGTON: That applied to a six-month initial period of subscription?

743 MS BOWEN: That's correct.

744 MR. MILLINGTON: Following that, you go back to the standard rate of $24.95 a month.

745 Is that correct?

746 MS BOWEN: $24.95, which I think we filed in our interrog --

747 MR. MILLINGTON: Yes, that's right.

748 MS BOWEN:  -- is another promotional price point.

749 MR. MILLINGTON: That is another promotional price?

750 MS BOWEN: Our Internet prices --

751 MR. MILLINGTON: Maybe it would be simpler if you would just speak to how it would work.

752 I am a student and I arrive on campus and I see this promotion and I sign up for it. Take me through how I migrate through the various promotional pricing steps, only with respect to Internet. Then I am going to ask you to do exactly the same thing, I am just out in the mass market, I am not a student, I am an old guy like me and I'm calling up for Internet from TELUS.

753 MR. DOYLE: If I could just clarify something for Anne, and I think for ourselves, it has to be a time-specific sort of moving through, because there were certain promotional prices available in this time period that were then not available in the next time period. So you might start at the $16.95 rate, but then if you had maybe started two months later you would get the $24.95 rate.

754 I think that unfortunately there is some confusion maybe that appears in our interrogs because one of them was talking about what are the rates available now, today, and at that time the $16.95 promotional rate for people who were starting was no longer available.

755 Let's just take a time-specific. We will assume we are in the period where $16.95 was available as a promotion and walk through it that way.

756 MS BOWEN: So for a student that signed up for Internet, they have signed up for the entire offer that was presented to them. Is that...?

757 MR. MILLINGTON: Yes.

758 MS BOWEN: The student would receive the $16.95 price point available for Internet. If they had the long distance plan as well, or at least were PIC'd to TELUS, they would pick a long distance plan and the price point for that long distance plan would come into effect.

759 If they chose the value bundle offer that was here, they would receive the savings available on that plan immediately.

760 MR. MILLINGTON: You say "that plan". Which plan are you referring to now?

761 MS BOWEN: I am referring to the residence value bundle with four features.

762 MR. MILLINGTON: Right.

763 MS BOWEN: Those conditions would remain in effect.

764 Did I miss anything? And they would have a residence local line of course with no discount.

765 Those conditions would remain in effect until the end of the promotional period, at which time --

766 MR. MILLINGTON: That is the promotional period of the Internet?

767 MS BOWEN: For the Internet. That is correct.

768 At the end of the Internet promotional period those customers would be migrated to higher price points, non-promotional prices.

769 MR. DOYLE: No, sir. Mr. Langford(sic) is asking, I think, a question for everything and it is just referring to the Internet at that point in time. They would move off the promotional rate and go to what is the non-promotional rate.

770 MS BOWEN: At that point you are not a student or any other subsegment, you are just an Internet customer with our Internet pricing.

771 MR. MILLINGTON: You would follow through exactly the same migration steps with somebody who is just buying the TELUS Internet service on its own on a stand-alone basis. You would start with a $16.95 a month plan. At the end of that six-month period you would migrate to the regular rate as it applied at that particular point in time?

772 MS BOWEN: That is correct.

773 MR. MILLINGTON: Okay. In any other respect were the terms and conditions associated with the Internet different as it related to the offer that was made with a residential package for students or what was available at the same period of time in the mass market?

774 MS BOWEN: No, the conditions were the same.

775 MR. MILLINGTON: Thank you.

776 THE CHAIRPERSON: Thank you, counsel.

777 MR. ROSENZVEIG: Mr. Chairman, I have one small follow-up, if I can, on those questions?

778 THE CHAIRPERSON: I will think about that.

779 MR. ROSENZVEIG: Okay. Go ahead and think. I'm waiting for deliberation.

--- Laughter / Rires

780 THE CHAIRPERSON: Counsel Rosenzveig.

781 MR. ROSENZVEIG: Thank you, sir.

782 At the relevant time when you were running the stand-alone promo for the Internet and you said whether you took it on a stand-alone or as part of the student bundle was $16.95 a month during the course of that stand-alone promotion, if I took it on a stand-alone basis at $16.95 a month, and a month later or two months later I decided to quit taking Internet, would I still have been billed $16.95 or would you ask me for more money at that point for those past months?

783 I take the Internet stand-alone at $16.95. A month later I say "Ah, I think I don't want the Internet any more from you". What are the consequences in those circumstances?

784 MS BOWEN: Just to clarify your question, but you did take the residential value still?

785 MR. ROSENZVEIG: No, I am a stand-alone Internet. "Thanks for your promo, I want it at $16.95, just the Internet. Thank you." A month later, "No thank you. I am going to disconnect the Internet".

786 MS BOWEN: I believe that is called churn.

787 MR. ROSENZVEIG: Yes. And what happens? Am I free to leave after $16.95 or is there some commitment of time when I take it on a stand-alone basis to get that rate?

788 MS BOWEN: We would not retroactively bill you a higher price for your Internet.

789 MR. ROSENZVEIG: So the promo did not require me to take it for any particular period of time to get it at $16.95? This is a stand-alone.

790 MS BOWEN: It is a stand-alone price for the Internet service.

791 MR. ROSENZVEIG: Regardless of how long I take it for? There is no minimum commitment of time to qualify for the stand-alone at $16.95?

792 MS BOWEN: That is correct.

793 MR. ROSENZVEIG: Thank you.

794 THE CHAIRPERSON: Okay. I think those are all our questions.

795 Now I will provide an opportunity for closing remarks. You each have 10 minutes.

796 Mr. Johnston or Mr. Stein, you can go first.

CLOSING REMARKS BY SHAW CABLESYSTEMS /

REMARQUES DE FERMETURE PAR SHAW CABLESYSTEMS

797 MR. JOHNSTON: Mr. Chairman, in giving the example you did you summed up our position.

798 Our position has been consistent through our written submissions --

799 THE CHAIRPERSON: To correct, I didn't sum up, I just asked a question.

800 MR. JOHNSTON: All right.

--- Laughter / Rires

801 MR. JOHNSTON: Let me rephrase that to say that the example that you gave and the question you asked me and the affirmative response I gave represented our position that there are two aspects to the definition of the bundle.

802 One is the offering of a group of services under a rate structure. That seems to be clearly an alternative in the definition.

803 The other is offering a group of services, the taking of which results in a discount.

804 In my view, the student bundle that was offered is in that first category. One might say, "Well, if the prices are the same as they would be on a stand-alone basis, what is the problem?"

805 Well, it seems to me the problem is what we have encountered here, is the confusion of offering a group of services in which a saving is promoted as savings, within which there is something called a residential value, but no indication in the advertisement that that is where the saving exclusively lies.

806 That kind of confusion is best addressed, it seems to me, by the filing of a tariff for that bundle so that the Commission can ask the very same questions that they asked in the interrogatories: How are you pricing these? The prices, are they equivalent to what they would be if they were on a stand-alone basis?, and so on.

807 I come back to the reason for a close scrutiny of bundling for dominant carriers with the local exchange services is to ensure that they are not packaging services in a way that results in any competitive pricing.

808 I think the Commission's decision definition is very helpful in its two aspects.

809 The aspect that we feel this bundle falls under, that interpretation should pertain so that the kind of regulatory check that was undertaken in this case through the interrogatory process can be done.

810 Those are my remarks.

811 Mr. Stein?

812 MR. STEIN: From our point of view, TELUS is essentially saying that the student bundle is not really a bundle. We would submit that in situations involving forborne and tariffed services, especially as we move into a competitive environment where we are going to be competing on a number of fronts involving all ranges of services, what is really important, both in terms of competition and in terms of consumers, is clarity. And even their billing department got confused.

813 So it may seem like a small issue involving only eight students, but it is a very important issue to us, as we move forward in terms of the introduction of new services, to ensure that what is considered to be tariffed services are actually tariffed services and that the offerings that are out there are clear to both the competitors and the consumers.

814 Thank you.

815 THE CHAIRPERSON: Thank you, Mr. Stein.

816 Mr. Grieve and Mr. Doyle, you have ten minutes.

CLOSING REMARKS BY TELUS COMMUNICATIONS INC. /

REMARQUES DE FERMETURE PAR TELUS COMMUNICATIONS INC.

817 MR. DOYLE: Thank you, sir. I don't expect that I will take my full ten minutes, for once.

818 Sir, Shaw even in its closing remarks appears to have two arguments on the go, and that is either that this is a bundle caught by the existing rules, and therefore it violates the existing rules -- and that' one; or second, there is confusion and the Commission should do something about that: about confusion generally, these types of advertisements.

819 In fact, I believe that Mr. Johnston recommended that the Commission should give close scrutiny to the bundling rules to address this type of situation.

820 To that point I would highlight to the Commission that this is not an R&V of the bundling rules. We are not here to look at should we change the bundling rules. I just want to be clear that we are responding to an accusation, which comes daily it seems for us, about non-compliance with the existing rules.

821 So I am going to focus my attention on the existing rules.

822 Mr. Johnston has pointed out -- and I believe he is referring to either 98-4 or 94-19. He had two different scenarios that qualified as a bundle. One was a rate structure, and the second one was the aggregation of services. I believe that is what he said.

823 He definitely pointed out that in this case the problem is the aggregation of services -- sorry, services to get a financial benefit and aggregation for a volume discount.

824 We would submit, sir and Panel, that it is clear from the interrogatory evidence and from the submissions that the rate for Internet, the financial benefit, if you can characterize that, from the going normal rate is not conditional. It is not an aggregation volume discount. It is available to you, whether or not you get it. So it is impossible to characterize that as an aggregation discount.

825 I think Mr. Stein's comments are interesting and somewhat instructive here. They express a concern when the ILECs start promoting or advertising forborne and tariffed services and that they should be more clear.

826 Again, I would suggest this goes to possibly an issue of whether we do need to revisit the bundling rules or not. But again I believe this would be characterized as an argument that goes to an R&V of the existing rules.

827 I think the concern here for Shaw, and I think it is fairly evident, is that we are joint marketing forborne and tariffed services, which we are entirely permitted to do. My God, that's the meat and potatoes of our marketing department: to try and show our services. Here are possible combinations that may interest you in these certain scenarios.

828 In this case, hey, students are coming back to school. Let's think of what are the kinds of things they might want.

829 There is nothing anti-competitive or in contravention with the rules or requirements in TELUS promoting this tariffed bundle along with the forborne services that one needs to subscribe to to qualify for the bundle.

830 In fact, I would suggest to you that it might be misleading had we not emphasized or tried to promote: Here are the preconditions that you need to satisfy. You might want to look at our long distance services. You might want to look at our Internet access services because that's a condition to get this particular savings.

831 Surely there is no reason that TELUS can't in this joint marketing initiative promote forborne services at rates that are generally available to customers on a stand-alone basis. This is what competition is all about.

832 So long as the forborne rates are not conditional on the customers subscribing to TCI tariffed services -- and tariffed services includes all our tariffs; the residential value bundle is a tariff -- then those rates are not part of the bundle. If the rate isn't conditional itself, you can get that rate on a stand-alone basis, that rate, that aspect of that offering is not part of the bundle.

833 TELUS submits that Shaw is asking the Commission to read into the conditions of service that not only must the customer subscribe to Internet and/or LD, but also that TELUS must restrict the customer to paying rates for those services that are higher than the rates that would generally be available to the customer on a stand-alone basis.

834 Clearly the tariff does not require us to do that.

835 The evidence demonstrates that the $16.95 rate for Internet was a promotional rate available and in fact sold to the public at large for people who do not subscribe to the student bundle. People may not even have been aware of the student bundle or didn't subscribe to PCMS features.

836 Our interrogatory responses confirm that persons who did not order the student bundle and/or who did not subscribe to the PCMS services got that same rate.

837 For these reasons, we submit that there has been no violation of the bundling rules, the existing rules made out in this case. Accordingly, we respectfully submit that you should deny the relief requested by the applicant in its subparagraphs (iv), (v) and (vi) of their prayer for relief.

838 Again, I thank you for the opportunity to make these closing remarks.

839 THE CHAIRPERSON: Thank you, Mr. Doyle.

840 That concludes the oral part of this issue. We will consider what we have heard, plus the other evidence on the record, and render our decision accordingly.

841 We will now take a break until 12:30, at which point we will hear the final issue for today, which is the Shaw/Cybersurf dispute.

842 We will break until 12:30, at which point we will hear that dispute.

--- Upon recessing at 1200 / Suspension à 12 h 00

--- Upon resuming at 1230 / Reprise à 12 h 30

843 THE CHAIRPERSON: I think we are all ready. Good afternoon, everyone.

OPENING REMARKS / REMARQUES D'OUVERTURE

844 THE CHAIRPERSON: We will now move to the third item that we are considering today in our expedited process. I think I have seen most of the faces around the room this morning, so I think by now everyone knows the drill.

845 We will now consider an issue regarding the enforcement of Telecom Decision CRTC 2003-87, in which case the applicant is Cybersurf and the respondent is Shaw Cablesystems.

846 In this hearing the Commission will adjudicate the issue of whether Shaw has complied with the condition that it make its higher speed Internet service available for resale until it provides third party Internet access under approved tariffs.

847 As in the earlier proceedings, we will provide an opportunity for each party to make opening remarks, for a maximum of ten minutes each, and then we will open it up to questions.

848 Mr. Tacit, you are representing Cybersurf. Perhaps you could introduce your colleagues.

OPENING REMARKS BY CYBERSURF CORP. /

REMARQUES D'OUVERTURE PAR CYBERSURF CORP.

849 MR. TACIT: Thank you very much, Mr. Chairman. We are very pleased to be here today.

850 Sitting to my right is Mr. Marcel Mercia, Corporate Operations Manager of Cybersurf. To his right is Mr. Mont Ransome, Project Manager with Cybersurf. And to his right is Mr. Kevin Kajorinne, Manager, Internet Operations.

851 To my left is Alison Dewar, co-counsel. And you know me, Chris Tacit.

852 THE CHAIRPERSON: You have ten minutes.

853 MR. TACIT: Thank you very much, Mr. Chairman.

854 This case is essentially about two issues. One is whether Shaw is in fact technically ready to provide TPIA services in accordance with Commission decisions and approved tariff. If the answer to that is no, then whether it has complied with Decision 2003-87 and what is really required in order for that compliance to take place since it has not to date.

855 My submission is that it is clear from Shaw's own responses to interrogatories in this proceeding that Shaw cannot provide TPIA technically at this point.

856 For example, if one looks at the first page to their answer to response 1(a), (b) and (c), the engineering processes, they have yet to decide where in their network and how they are going to route IP addresses. And depending on the options, which they call Options 1, 2 or 3, for doing that, there may be substantially more work to be done.

857 It is clear that, as of today, they are not able to provide the service.

858 Having said that, then the question turns to: How is it that the Commission can enforce its decision?

859 In our view, there needs to be a fairly precise and specific approach to this.

860 Shaw's approach to resale under the terms of Decision 2003-87, in our submission, has been one of great reluctance. In fact, their earliest position right after the decision was rendered was that they would not even provide resale in those areas where they had no immediate plans to roll out TPIA.

861 It was only on March 8th that they modified that position with regard to those areas.

862 For some time since December 23rd, Cybersurf has attempted to obtain a copy of an agreement that Shaw insisted was necessary in order to provide its higher speed Internet services for resale. Despite a couple of attempts to do that, it was only really on March 16th that a copy of that agreement was obtained.

863 An examination of that agreement revealed that the language in it in some cases is in direct contravention of the decision -- for example, with regard to the definition of the services to be resold, pricing for modems, et cetera -- and in other cases the terms and conditions proposed are a lot more onerous than even the terms and conditions that Shaw has proposed for TPIA, which involve physical interconnection and hence more issues and greater concern for Shaw with regard to protecting its network.

864 The problem for Cybersurf is how to make sure that this issue comes to a final resolution in a timely manner and in a manner in which Shaw has no choice but to comply with the Commission's decision.

865 We suggest that the approach for that is, first of all, to make certain things that in our view should be obvious about the decision perhaps a little more explicit, such as for example that the Commission, when it says "higher speed Internet service", means what it has always meant by that, which is a service that is provided at a transmission rate of 64 kilobits per second or greater; that in pricing modems, they have to not fix the price in the agreement but instead provide pricing in accordance with paragraph 44 of the decision.

866 Shaw has raised the concern that it can't just provide the resale service according to the bare terms of the decision because there are a whole bunch of issues about potential harm to the company and the network, and hence they insist on some forms of additional terms and conditions.

867 Leaving aside the fact that they never argued that in the original proceeding leading to Decision 2003-87, which in our view ought to disentitle them on its face from any further relief in this area, the delay in providing the agreement and the nature of the agreement when it was finally provided would, in our view, completely justify the Commission saying no, just comply with the decision.

868 However, at the same time, Cybersurf is quite willing to be reasonable, and we would suggest that if the Commission is inclined to provide some form of relief to protect Shaw's interests and networks, the most expeditious course for doing that would be in fact to apply the existing TPIA service tariff that has already been approved by the Commission in a slightly modified form to make it applicable to resale.

869 That should provide sufficient protection with respect to all of the issues that I think are of concern to Shaw.

870 The reason I suggest that as an option is because we just can't afford the delay of having to go through yet another round of either so-called negotiations or another process for determining whether this reseller agreement is reasonable or not, or whether eventual tariffs proposed by Shaw are reasonable or not.

871 What Cybersurf needs, after a year of fighting this battle, is a solution that is fair and reasonable to both parties. We think that that approach would be one that would be fair and reasonable.

872 We have actually brought with us a sample order that shows the kinds of changes that could be made to the TPIA service tariff. If the Commission is interested in that, it is available and we would be happy to provide it.

873 The other thing that I wanted to mention briefly is that the nature of changes that we would propose to the TPIA tariff are not very expensive. They are mainly housekeeping, changing the definition of TPIA to the higher speed Internet service; deleting provisions that don't apply because they relate to points of interconnection or interconnection or that apply to specific term of the agreement.

874 In this case, we are not going to have fixed terms for resale; rather, resale is supposed to end once they are TPIA compliant.

875 That brings us to the other very significant issue, which is: How do we know compliance when we see it?

876 In that regard, what we suggest is a test that Shaw must be able to provide an actual viable and sustainable TPIA service to Cybersurf throughout a serving area; that Cybersurf subscribes to the service throughout that area and Cybersurf can employ that service to provide its higher speed Internet service to 100 real end users for one month in a situation where that doesn't result in Cybersurf having to provide any en masse credits for any service interruptions resulting from issues relating to TPIA service.

877 In other words, it is a test that is meant to be very practical.

878 In terms of what a serving area is, this is another area where we would ask that the Commission define it fairly precisely. It turns out that Shaw can provide its own higher speed Internet service throughout all of its territory from basically six cable headends, or at least the vast majority of its territory. Those are located in Victoria, Vancouver, Calgary, Edmonton, Saskatoon and Winnipeg.

879 We would define a serving area as the maximum geographic area that can be served by any one of those.

880 THE CHAIRPERSON: You have one minute, Mr. Tacit.

881 MR. TACIT: Actually, I'm done.

882 THE CHAIRPERSON: Thank you very much.

883 We will go over to Shaw. I see your defence is larger than your offence, Mr. Stein.

884 MR. STEIN: As long as we are not offensive.

OPENING REMARKS BY SHAW CABLESYSTEMS G.P. /

REMARQUES D'OUVERTURE PAR SHAW CABLESYSTEMS G.P.

885 MR. SHAW: Thank you, Mr. Chairman and Commissioners.

886 Good afternoon. I am Ken Stein, Senior Vice-President, Corporate and Regulatory Affairs for Shaw Communications.

887 With me today, starting on my left, is Richard Hannah. He is the Director, Architecture and Development in our Information Technology Department of Shaw Communications. He is responsible for all Business Systems software that is required to implement TPIA and resale.

888 On my left is Dennis Steiger, who is our Director of Internet Engineering for Shaw Cable, whose major claim to fame is he saved us from the at-home tabacle.

889 On my right is Chris Johnston, our Corporate Counsel, and to my furthest right, Dale Butler, our Director of Regulatory Affairs for Shaw Communications.

890 Shaw first launched its Internet access service in 1995 and in these past years has constructed one of the world's most robust, technically advance, and successful Internet access networks.

891 The company has invested hundreds of millions of dollars to create a high speed Internet service to hundreds of communities from Victoria to Thunder Bay, and over 95 per cent of our cable customers now have access to our high speed Internet service.

892 We launched, for example, high speed Internet service to customers in Marathon, Northern Ontario, some eight months ago, far ahead of the incumbent telephone company's high speed DSL service offering.

893 We are particularly proud of the services we offer in the small communities that we serve. Many of our smaller systems have penetration rates greater than large American cities. Forth McMurray, for example, has a higher cable Internet penetration percentage than San Francisco, California.

894 Other achievements that we have seen are Shaw seaminglessly migrated our customers when our U.S.-based back home provider at-home collapsed several years ago.

895 I should note that Shaw made this transition, in our view and in the view of others, better than any other at-home cable partner.

896 Our Internet backbone network spans both the United States and Canada, from San Jose to New York City and Vancouver to Toronto, providing our customers with a level of redundancy and service protection unparalleled among North American ISPs.

897 We successfully repel hundreds of denial service attacks each day against our system and our customers. We literally prevent millions of Spam messages reaching our customers and other Internet users each week.

898 We are not migrating our systems from the proprietary technologies that were necessary to build a system to the most advanced DOCSIS version available, DOCSIS 2.0. As we will indicate later, this transition has come at significant cost to Shaw.

899 Our Internet rates are 30 to 35 per cent lower than most DSL or cable high speed Internet service rates in the United States.

900 We have 24-hour, seven-day service and technical support and we still make housecalls to everyone of our nearly one million customers.

901 We have accomplished all this because Shaw has been able to focus its technical and human skills on developing our network and serving our customers.

902 If Shaw must shift its resources away from network development and customer service to other externally mandated undertakings, then Shaw may not be able to sustain this remarkable Internet growth.

903 As our written submissions on this matter state, Shaw considers the application by Cybersurf to be premature and unnecessary. Shaw contends that it is compliant with Decision 2003-87.

904 And now I will ask Dale Butler to continue.

905 MR. BUTLER: Thank you.

906 The Decision 2003-87 requires Shaw to make its retail Internet service available to Cybersurf for resale until Shaw provides TPIA under approved tariffs.

907 We believe we have met that condition, at least with respect to our systems in Calgary, Vancouver and Winnipeg.

908 Shaw obtained approval of a special facility's tariff, TPIA A tariff, under Telecom Order 2003-64 in February, 2003. It has rolled out a DOCSIS 2 platform in Calgary, Vancouver, and very soon in Winnipeg, at a total cost to date of approximately $6.5 million and is ready now to provide TPIA to Cybersurf in those cities. A TPIA Agreement has been entered into between Shaw and Cybersurf.

909 Cybersurf has submitted an application for the three cities and Shaw has provided an initial report describing the point of interconnection and construction costs.

910 The question at issue is at what point is TPIA available to the extent that resale is not required as a proxy? In our view, TPIA is available in the three centres by virtue of the steps undertaken by Shaw.

911 We see an analogy in the ILEC co-location context involving service ordering intervals of lengths similar to those applicable in the provision of TPIAs.

912 Once an ILEC, upon application from a third party, embarks on the process of providing the necessary facilities for co-location under a tariff and in accordance with specified ordering intervals, the ILEC can be said to be providing the service.

913 The same situation arises in the deployment of local telephone service by CLECs The incumbent telephone companies provide and charge for services that are necessary for interconnection well before the CLEC customer places the first telephone call. In other words, providing the service can be seen as a continuum and not simply an end point.

914 Shaw vigorously disagrees with any suggestion that the availability of a TPIA service should be termined, as has been suggested by the agreement of the competing ISP.

915 As well, it makes little practical sense to require resale in Calgary, Vancouver and Winnipeg, given the relatively short time required to reach the end point.

916 We do not believe Decision 2003-87 intends that Shaw offer resale in that circumstance. If a decision were so applied, it would mean both Shaw and Cybersurf would be required to take steps necessary to offer resale in these centres for a brief period of time, after which the resale customers would be converted to a separate TPIA regime.

917 With respect to those systems where DOCSIS has not yet been rolled out, Shaw will offer resale to Cybersurf as soon as a resale agreement has been signed and the very steps outlined in both Shaw's and Cybersurf's responses to the Commission's interrogatories have been completed.

918 A resale agreement has been provided to Cybersurf and we anticipate that the various training requirements for Cybersurf to use and support Shaw's network, as well as agreement on various protocols for service orders, installation, customer transfers, billing procedures, troubleshooting, and the like, can be completed in a two-month period.

919 Completion of these steps is necessary in order that the conditions laid down by the Commission in Decision 2003-87 are successfully met, namely:

provision of resale service with characteristics identical to Shaw's regular service in all respects;

provision of the service in such a manner that Cybersurf can resale the service as its own branded service, providing Cybersurf with the ability to build its end-user customers; and finally

provisioning of Shaw's proprietary modems for new resale customers in systems where DOCSIS is not available.

920 All of this must be done, however, as seamlessly as possible, with adequate processes in place to ensure that Shaw's network service is not interrupted or degraded.

921 Further, as the Commission decision indicates, once a system is TPIA ready, then the resaler must convert to TPIA in a manner that maintains the integrity of Shaw's systems which are of a very high technical quality.

922 Cybersurf has requested an order from the Commission requiring resale before a resale agreement is entered into between the parties. This is an untenable position.

923 As noted in our letter of March 24th in response to this request, there are a variety of manners, such as respective liabilities arising out of the usage of Shaw's network, insurance protection, repair obligations, termination rights, obligation of end users, and so on, which define the rights and obligations of the parties and ensure that the integrity of Shaw's network is maintained.

924 It is essential that these matters be settled and committed to a written agreement before Cybersurf is permitted access to Shaw's network.

925 Finally, we are asking that the 25 per cent discount from the lowest retail rate Shaw charges to a cable customer, as provided for in the decision, be applied on a customer-specific basis.

926 As the Commission is aware, Shaw currently offers a six-month promotional rate which is a significantly discounted rate from its regular rate. For a new customer, Shaw's lowest rate across its serving territory would be that discounted rate. After six months, however, the lowest rate for that customer would be the regular, undiscounted rate.

927 We have argued in our written submission that the 25 per cent discount required in the decision should be applied at each of these levels as it pertains to an individual customer.

928 Thus, if Cybersurf obtained a new resale customer, Shaw's monthly charge to Cybersurf would be 75 per cent of its promotional rate for a period of six months. Thereafter the discount would apply to Shaw's regular rate.

929 To interpret the decision as requiring a discount for an indefinite duration from an artificially low rate intended only for a short promotional period would, in our view, have the effect of subsiding an ISP's entry into resale while hamstringing Shaw's ability to offer its service at a rate that recover Shaw's costs and earns a return. We do not believe that was the intent of the Commission in imposing the 25 per cent discount on Shaw's lowest monthly rate.

930 In summary, therefore, pursuant to the Commission's decision, Shaw is prepared to offer resale to Cybersurf in systems where TPIA is not available as yet, subject to the parties concluding a written resale agreement and completing the other steps identified in the response to the interrogatories.

931 With respect to those systems technically ready for TPIA, we believe the Commission's decision was not intended to require in that circumstance that Shaw also provide resale to Cybersurf or any other ISP for the short period involved.

932 Thank you.

QUESTIONS BY THE COMMISSION /

QUESTIONS PAR LA COMMISSION

933 THE CHAIRPERSON: Thank you, Mr. Butler and Mr. Stein.

934 By the way, just a comment. I made a joke about defense being larger than the offense, but I would just like to comment.

935 It's not just with the two parties here, but with the other two proceedings. We are encouraged by the fact that parties have brought people to the table today who can speak to the issues, and so on. I mean, you always run into the fear with this of, "Oh, I can't answer that question because so and so is back home", whatever. So I didn't want to imply that the slight is to numbers. The issue for us is to bring the people who can reach the issues. So we thank you for that.

936 Counsel.

937 MR. MILLINGTON: Thank you, Mr. Chairman.

938 I will start first with the applicant.

939 We have heard from you in terms of your definition of compliance as being actual viable service, a number of real subs online and connected and providing uninterrupted services as a definitional point for actual compliance with -- and referred from Mr. Butler that the implementation is a process that takes place over a continuum and there is a period of time and as you move forward -- and I hope I am paraphrasing you correctly -- there are steps that take place over time and it is a continuum. In some cities you are further along that continuum than in others, which was the argument not to introduce resale when you are very close to the end of that continuum.

940 Is it your interpretation then that to be in compliance in terms of offering TPIA you have to be at the end of that continuum, at that end point? Is that your definition?

941 MR. TACIT: That is our submission and the reason for that is very straight forward, that up until now it has been impossible to get cooperation in compliance and I think Cybersurf believes that is the only way it will happen, is if there is a hard test because we have already had the situation where they said they were working towards TPIA; then it went into a hiatus for a lengthy period.

942 These interrogatory responses demonstrate there are a whole bunch of issues for them to solve in terms of running a DOCSIS network, running it in parallel with their own propriety network, adding TPIA to it and consequently there is a lot that could go wrong, even with the best of state.

943 Given the delay and the obstruction and how long it has taken to get things, lack of responses, and so on, it just seems more reasonable that in this case, whatever other cases may be, that the test be a hard one when it's actually a viable service.

944 MR. MILLINGTON: Okay.

945 Now, moving to resale, we have had a series of letters and correspondence and filings, and so on, on this file, but as of the last letter that we received from you, which is I think your January --

946 MR. TACIT: January 23rd.

947 MR. MILLINGTON: Well, the one that I am looking at is actually the one that says that the two cities that you are most interested in are Calgary and Vancouver.

948 Are those still the two cities that you are most interested in for resale?

949 MR. MERCIA: We made that statement because Shaw had indicated that they were not going to provide resale because they had TPIA sort of happening in Vancouver and Calgary. So we said that we wanted resale in Vancouver and in Calgary in context to that situation.

950 Our initial application to Shaw for the service area was all six interconnections that would cover all of Shaw's network.

951 So when we made the statement about wanting resale in Calgary and Vancouver it's because they explicitly said Vancouver and Calgary were not accessible by resale because they were planning TPIA.

952 MR. MILLINGTON: So if it were the conclusion of the Commission that TPIA is not available and resale must be made available as a consequence, your position would be you would want all six cities non prioritized.

953 MR. MERCIA: We would want all six cities non prioritized.

954 MR. MILLINGTON: Okay.

955 Now, in your response to our interrogatory, you set out in I think Interrogatory 3 on page 3 of 4, and in response to our Interrogatory D, list all the stuff that Cybersurf is required to complete before Cybersurf can begin to sell Shaw's high speed Internet service to serve customers. Indeed through E you list five steps.

956 I would be interested in knowing --

957 THE CHAIRPERSON: I think they are still trying to find that.

--- Pause

958 MR. MILLINGTON: So that is your interrog response to us dated February 25th, No. 3. It's page 3 of 4. It's response D through E and it lists 1 through 5 as the steps.

959 Can you give us the timelines associated with these steps because you have indicated to us that you could do resale in one letter in a short time, and in other place it was two weeks, but I would like to see the exact hard dates with respect to each one of these steps so that you get to a defined period of time.

960 MR. MERCIA: The answer to that is, the reason the vagueness is a lot is dependent on Shaw and the Shaw's processes.

961 MR. MILLINGTON: Well, the problem with that response is that it doesn't lead to a very definitive timeline.

962 So assuming that you get things in a timely manner, just deal with what you have to do, whether the steps are consecutive or whether they can be done contemporaneously so that we can come up with a timeline that is dependent on you and not on Shaw.

963 MR. MERCIA: We are compliant with all of these criteria because we are currently engaging Rogers.

964 So our final processes complete, it would take us, say, a week to redo the offer for Shaw. A billing platform is already there. It would take a matter of days to reprogram it for Shaw's products. DOCSIS modem support, our help desks is already supporting DOCSIS-compliant modems for Rogers, our interaction with Rogers.

965 Internal process for escalation of end users and issues, we are already doing processes with Bell and Rogers.

966 So I would say that it would take two weeks for us to change our billing system and change our Websites in order to facilitate the sign-ups in the geographical areas that we would be reselling Shaw.

967 MR. MILLINGTON: So if I go over that schedule again, you have one week for item No. 1 which is the sign-up days. Is that two, three or five?

968 MR. MERCIA: Two days.

969 MR. MILLINGTON: Two days for the billing platform?

970 MR. MERCIA: Yes.

971 MR. MILLINGTON: DOCSIS modem support is complete.

972 MR. MERCIA: Yes.

973 MR. MILLINGTON: Internal processes for escalation and end-user issues and high speed networks --

974 MR. MERCIA: To be clear, it would depend on what they gave us, but considering if they were similar to Bell and Rogers, the systems are already in place for Cybersurf.

975 MR. MILLINGTON: So that you consider that complete as well.

976 MR. MERCIA: Complete.

977 MR. MILLINGTON: And then the last item is 5, sales procedures which you are talking about a Web date access and you are looking at two weeks, but you could start that immediately so that you would end up with -- I don't want to answer your question for you, but a two-week time period.

978 MR. MERCIA: Yes.

979 MR. MILLINGTON: If we turn the resale agreement, your position is that a resale agreement is not required, but say for the sake of argument that a resale agreement was required where some sort of formalized relationship, whether it took the form of an agreement or some other type of document, what would be the minimum elements that would need to be agreed to in order for you to become operational as a resaler?

980 MR. MERCIA: I think the resale agreement is mostly issues that protect Shaw, protect Shaw's network, those sorts of things.

981 We find that we already have an agreement with Shaw, the TPIA Agreement.

982 As Chris mentioned in his opening remarks, we find that those have already been vetted through the CRTC. They were introduced by Shaw. We find that those conditions are reasonable and we have no trouble accepting those terms.

983 The terms that Shaw spelled out in the resale agreement that they just delivered are far more onerous than what has been vetted through the Commission.

984 MR. MILLINGTON: So does the TPIA arrangement that currently exist, does that have a sufficient degree of specificity to deal with all the operational and procedural requirements in order to actually operate and deliver the service?

985 MR. TACIT: Maybe I can help in part, largely because I have been doing sort of the interpretational aspect of the agreement and the tariff.

986 I think it would be possible to work with either document, either the TPIA Service Agreement or the TPIA Service Tariff. I think both of them largely cover the same laundry list of issues.

987 The only thing that I found when I looked at the TPIA Service Agreement that wasn't addressed as a subject matter in the TPIA Service Tariff was insurance.

988 We would have no problems importing the identical provision that is in the TPIA Service Agreement if we wanted to use the kind of model we suggested, which is the tariff-based one.

989 The other one was, there is more specificity around nondisclosure than there is in the tariff itself.

990 But except for that, the same subject matter is covered. It is just that the TPIA Service Agreement tends to go a little bit further in a lot of issues.

991 In some cases, also in contravention of Commission orders but we kind of went with it because, again, we wanted to get on with the service, always with the thought in mind that at the end of the day Commission orders override agreements that may be in violation, but at the same time we wouldn't want to perpetuate that. So there is a bit of a cautionary note there.

992 Which is why we picked the tariff as the starting point. We think it is cleaner, fewer changes to it than you would have to make to the service agreement. I kind of tried both out.

993 So in terms of being expeditious, I think it would be a simpler way to do it, but we would have no problems incorporated the nondisclosure insurance provision of the TPIA Service Agreement on top of that, again stressing that we would want to see all of that in an order as opposed to asking Shaw to write it again, because we have been there and done that.

994 MR. MERCIA: I just wanted to add with that, I concur with Chris. I think that the tariff provides more protection for us from the tariff agreement. There is the access to facilities, the unprejudicial treatment that is in the tariff that isn't in the agreement. So given a choice, we would prefer to work off the tariff.

995 MR. MILLINGTON: Would you prefer either of those two documents over existing resale agreements you have with other carriers or cable cos?

996 MR. MERCIA: I would find that the agreement we have with Rogers is from the tariff, so it would be essentially identical. The agreements we have will Bell and with Call-Net would be industry standards. They would be in line with what is spelled out in the tariff more so than what is spelled out in the resale agreements, pointedly, the condition for deposits and for credit. We found their resale agreement was far more onerous than anything we face in the industry through private for negotiation.

997 MR. MILLINGTON: Thank you. I have a couple of questions for Shaw as well. I would like to start with the same point.

998 Was I correct in paraphrasing your description of implementation of TPIA as being -- or providing TPIA as being an implementation that exists over a period of time and actually operates like a continuum and at some point you are closer to the beginning and at other points you are closer to the end?

999 MR. BUTLER: I think that is a correct characterization, yes.

1000 MR. MILLINGTON: You also were asked by us to file -- or in an interrogatory -- the steps that you would see as necessary in order to provide resale. It is set out in your question 2(a). I'm not sure that you numbered them exactly the same way, but it is question 2(a), which is:

"List all the steps that Shaw is required to complete before Cybersurf can resell Shaw's high speed retail Internet service to service customers." (As read)

1001 I have a fax copy. It is page 1 of -- I'm not sure it is numbered.

1002 Do you have it?

1003 MR. BUTLER: Yes, 2(a), (b) and (c)?

1004 MR. MILLINGTON: That's right.

1005 MR. BUTLER: Yes.

1006 MR. MILLINGTON: The first box in that chart is "reseller agreement completed". Right?

1007 MR. BUTLER: That is correct.

1008 MR. MILLINGTON: So your starting point assumes that a reseller agreement has been negotiated and is finalized and the parties are happy?

1009 MR. JOHNSTON: No. I think if you look at the next box (off mic...)

1010 THE CHAIRPERSON: Can you put your microphone on, please?

1011 MR. JOHNSTON: Really that should say "draft", "the drafting of the agreement has been completed".

1012 MR. MILLINGTON: So the first one should say "drafting" as opposed to "reseller agreement"?

1013 MR. JOHNSTON: Our agreement has been completed. It has not yet been signed, which is the next box.

1014 MR. MILLINGTON: Okay. Fair enough. Your starting point, though, is a signed reseller agreement at some point in March.

1015 Is that correct?

1016 MR. JOHNSTON: Yes. That's right.

1017 MR. MILLINGTON: Starting with the training staff, which I believe is the first step, through to the last step, "deployment of service and commencement", you started March 2004 and you end up in May, late May of 2004, which is a two-month, give or take, time line.

1018 Could you break down -- is this, first of all, a complete list of tasks that are necessary for you to move from Point A to Point B, Point B being the ability for Cybersurf to resell Shaw's high speed Internet? Is there anything that is missing here?

1019 MR. JOHNSTON: I think the best person to answer that is Mr. Hannah.

1020 MR. HANNAH: Yes. I wouldn't say it is a complete list. It is the high-level list of what has to be completed.

1021 What we need to do for Cybersurf is to create a separate and secure database for their customers. When we create that database there are about 50 configurations that have to take place to set that database up. As well, that includes network note information and rate code and service code information, which we have detailed.

1022 Overall this is high-level, but it is about a two-month process for us to set that up because of the number of configurations that have to be set up.

1023 MR. MILLINGTON: Okay. So in terms of these steps, must they all be completed as they are kind of laid out here sequentially or can any of them be done together or ahead of others? Is this a hard list of steps and one must be complete before the next one is started?

1024 MR. HANNAH: Some of these are concurrent activities. The first activity "develop to code branches as per design" would be a Step 1 on its own, that is the setting up of the database.

1025 Then the network note information, rate and product code information, could be concurrent activities, leading us to a point where we felt that we were ready to enter into the testing and quality assurance phase.

1026 MR. MILLINGTON: Then let's start with the -- we seem to be starting with the establishment of the database, which is I think what you called Step 1.

1027 Let's say you have your signed reseller agreement in the box above, how much time does it actually take to do that?

1028 MR. HANNAH: To actually set up the database would take about five working days.

1029 MR. MILLINGTON: Concurrently you can do the load network node -- I'm reading this. I really don't understand what it means -- "the load network node" -- in fact I am having trouble reading it -- "information from corresponding cable branches".

1030 How long would that take?

1031 MR. HANNAH: That step, plus the rate code and product code, which we stated could be done concurrently, would take about 20 to 30 days.

1032 MR. MILLINGTON: Of which that is an overlapping period of five days with Step 1. Right?

1033 MR. HANNAH: Step 1 is the first -- is on its own and then an additional 20 to 30 days.

1034 MR. MILLINGTON: You can start this one on the same day as Step 1?

1035 MR. HANNAH: No. Step 1 would be on its own, five days.

1036 MR. MILLINGTON: It would have to be complete?

1037 MR. HANNAH: Yes.

1038 MR. MILLINGTON: So they are kind of consecutive then?

1039 MR. HANNAH: Step 1 is consecutive to Steps 2 and 3, but 2 and 3 can be concurrent.

1040 MR. MILLINGTON: Okay. The third step is "input of rate and product code". That can be done at the same time as Step 2?

1041 MR. HANNAH: Yes.

1042 MR. MILLINGTON: That is within the 28 to 30 days. Okay.

1043 Then Step 4?

1044 MR. HANNAH: Step 4 would be a standalone step after we have reached a completion time of feeling that the system is ready, and then we would enter a quality assurance and testing phase.

1045 MR. MILLINGTON: So this is where basically the -- excuse my lay approach to this, but this is where it is all set up and running and all you are doing is testing it to make sure that it runs properly?

1046 MR. HANNAH: Correct.

1047 MR. MILLINGTON: In an ideal test environment you would like to run that testing for what period of time?

1048 MR. HANNAH: I would think probably about 10 days. That would be with Cybersurf as well, actually testing to make sure what we have configured works with their needs.

1049 MR. MILLINGTON: If Cybersurf said five, fine, you could live with five. So it is a testing that is really to the benefit of them because it is their customers that would ultimately be at risk as opposed to yours?

1050 MR. HANNAH: Correct.

1051 MR. MILLINGTON: So if they said five is good, you would be okay, so that the 10 could go to 5?

1052 MR. HANNAH: Yes. Typically we would work with, Cybersurf in this case, and agree to the time frame that was appropriate and acceptable.

1053 MR. MILLINGTON: Okay. Could you tell me about product capability, confirming product capability, and the time with that?

1054 MR. HANNAH: That is production capability. That is again with Cybersurf to make sure through out testing phase that we confirm that it is workable to both parties' satisfaction.

1055 MR. MILLINGTON: I'm not sure I understand that.

1056 MR. HANNAH: Are you referring to the second to the last?

1057 MR. MILLINGTON: Exactly what you are doing when you are confirming product capability.

1058 MR. HANNAH: It is closely aligned with the testing and quality assurance phase, that last step to confirm that everything is working to both parties' satisfaction.

1059 MR. MILLINGTON: Because it sounds like testing.

1060 MR. HANNAH: Yes.

1061 MR. MILLINGTON: I thought we did testing in the step above, in the Step 4.

1062 MR. HANNAH: It would be the final steps. You go through a testing phase to test all the areas that we wanted to test and then the production capability would be at the very last step to ensure that everything works end-to-end.

1063 MR. MILLINGTON: How much time do you think you need for that?

1064 MR. HANNAH: Again, that would be an agreement of both parties and what we felt was appropriate, but probably a matter of days, one to two days.

1065 MR. MILLINGTON: Okay, great. Then, finally, "deployment and service commencement".

1066 That just sounds to me like the end and there is nothing to do there. Right?

1067 MR. HANNAH: Start date, yes.

1068 MR. MILLINGTON: I didn't major in math, but I will try to add this up. I have 30 days as a time line and then approximately five days at the front, so that is 35 days; and then 10 days of testing, that would be 45 days; and maybe a day or so at the end. So we are a little bit under two months I guess. But I suppose you are using working days as opposed to calendar days. So that is how you get to your two months. Okay.

1069 I want to move to the agreement.

1070 You have made it a requirement at the beginning of this process that the reseller agreement has to be put in place and that is the start point. Nothing can begin until that happens.

1071 I'm wondering about why you think an agreement is an absolute necessity to be in place before you can start to allow the resale? I mean, it would be nice, predictability and all those good things, but why is it an absolute necessity?

1072 MR. JOHNSTON: Let me try that. I look at I guess from a lawyer's point of view that Shaw will be undertaking an expensive process and committing resources to it before there is an agreement between the parties as to how the process ultimately is going to work.

1073 As a lawyer, I would not want a client to engage in an activity requiring the expansion of resources and potential liabilities without a detailed agreement in place. It is standard business practice.

1074 MR. MILLINGTON: That is a general answer and I understand that completely, but can you give me some real hard specifics of the perils that your client could face by offering resale without an agreement?

1075 MR. JOHNSTON: For example, in the testing phase there may be certain liabilities, certain things that occur that they want to make sure that they are properly covered for. Who is responsibility is it? Is the party properly insured against that sort of eventuality? That is one example.

1076 MR. MILLINGTON: Have you turned your mind to a list of minimum requirements? We are not entertaining a review of the agreement that has been sent over in the last few days, but have you distilled down a list of conditions or elements that would have to be present in order to address, for example, the liability issue that you have just mentioned in terms of resale, a minimum set of requirements, something less than a fully negotiated, comprehensive resale agreement but something that would be sufficient to allow the process to go forward?

1077 MR. JOHNSTON: Something like a term sheet you mean?

1078 MR. MILLINGTON: Call it what you like.

1079 MR. JOHNSTON: No, we haven't thought about that.

1080 MR. MILLINGTON: Would that --

1081 MR. JOHNSTON: Excuse me. Mr. Tacit's suggestion today is interesting, but it is brand new to us and to assess it we would have to compare the TPIA agreement with the resale agreement we proposed.

1082 MR. MILLINGTON: Yes. It is brand new to me too so I can't really comment on it either.

1083 But from a directional perspective, is that the kind of thing that might be a useful starting point, that given the fact that this is an approved agreement and that it has some legitimacy because it has been a negotiation and both parties have worked on putting it together and it has come through the Commission?

1084 MR. STEIN: I should point out that we do have resale agreements in place in smaller systems that are already in place, so there is no magic to what is involved in terms of doing it to protect both of our interests.

1085 I think some of the issues here involve: pricing is a particular issue; and in terms of the communities is also another particular issue; then, as well, what is a suitable understanding of a -- whether this is reflected in any agreement or not, but in terms of the context of the agreement what would be appropriate in terms of the TPIA, you know, our position that we do have TPIA in place in two markets and then into a third market, so therefore what is it that they are looking at in terms of which areas they want to offer resale in.

1086 Those areas have not -- although we attempted to come to some discussion on that, they haven't come to any completion.

1087 So that puts a context over the agreement itself. It is sort of like trying to sign an agreement on buying a house when we haven't figured out which house to buy yet.

1088 MR. MILLINGTON: It is interesting that you raise the resale agreements that you have with other resellers, as Cybersurf also is in the similar situation with other suppliers to them.

1089 I am reluctant to ask the question but I'm going to do it anyway: Your resale agreements that you have in place today, is there one or do you have various versions of the agreement?

1090 MR. BUTLER: We have two resale agreements in place and I would characterize them as substantially the same. As I said, there are some differences. We had signed an agreement with an ISP and then signed one later, a number of months ago. As I said, I can't verbatim say, but I would say they are substantially the same and substantially similar to this.

1091 MR. MILLINGTON: One of the ones you are talking about is the high speed plus in Victoria?

1092 MR. BUTLER: No. No. These two ISP agreements are in Ontario.

1093 MR. MILLINGTON: High speed plus I thought was reselling Shaw in Victoria.

1094 MR. BUTLER: That was an agreement relationship entered into many, many years ago between Shaw FibreLink, which then evolved into Group Telecom, et cetera.

1095 I don't know the details on that because again it was a Shaw FibreLink issue, but I can tell you that we have the two in -- we found that the Ontario, even in small community Ontario, is an enormously aggressive ISP market and that is where we have our two current agreements.

1096 MR. MILLINGTON: Would you be prepared to sign the same agreement with Cybersurf today for resale that you have with these two existing Ontario ISPs?

1097 MR. BUTLER: Yes.

1098 MR. MILLINGTON: No changes to the terms and conditions, as is?

1099 MR. STEIN: Yes, in terms of the areas where we have proposed going for resale. The main issue, though, is those areas where we believe we have TPIA in place and what their position is and what they are asking for in those markets, because that involves significantly different sets of issues.

1100 MR. MILLINGTON: I understand that. This is all premised on a determination that TPIA is not available so therefore resale will have to be made available. I understand that.

1101 Is the agreement that was recently sent to Cybersurf essentially sort of a neutral parties taken out version of those two agreements that you signed in Ontario?

1102 MR. BUTLER: Yes. As I said, I can't speak to the exact wording, but I would certainly characterize them as substantially similar.

1103 MR. MILLINGTON: Okay. Thanks.

1104 THE CHAIRPERSON: Commissioner Langford.

1105 MR. MILLINGTON: Thank you very much.

1106 THE CHAIRPERSON: Thank you, counsel.

1107 Commissioner Langford.

1108 COMMISSIONER LANGFORD: A question to the parties from Cybersurf, if I may, and you can decide who will answer it.

1109 You have resale agreements you say with Rogers in Ontario. For the kind of time line that counsel was talking about earlier, how long did it take you from beginning until you were actually operational? How long did it take to do those, consummate the agreement and to put the operation in place?

1110 MR. MERCIA: We are not reselling Rogers. We have TPIA with Rogers.

1111 COMMISSIONER LANGFORD: Full TPIA.

1112 Are you reselling anywhere?

1113 MR. MERCIA: We are reselling Bell DSL.

1114 COMMISSIONER LANGFORD: I'm sorry. I confused those two.

1115 So in that situation how long did it take?

1116 MR. MERCIA: To resell, it took us a month.

1117 COMMISSIONER LANGFORD: A month?

1118 MR. MERCIA: Yes.

1119 COMMISSIONER LANGFORD: The time line you have heard here this afternoon, does that sound longish then?

1120 MR. MERCIA: It does sound long, considering that they are already doing resale, as they have indicated, with at least three other companies that we know of. It seems to me that the time line that they are giving is development of a new system specifically for us. I don't know why that it is. But it appears that they are already doing this.

1121 I don't know why this 45 days of development.

1122 COMMISSIONER LANGFORD: Is there anything about the way you would operate? You say you don't know why. Is there anything about the configuration of the way you operate?

1123 MR. MERCIA: It would be purely speculation on my part, but I would think it is because they are planning the migration to TPIA. So the time line you are seeing, based on their interrogatory responses, appears to me that they are building the billing system for TPIA so that after migration, migration of billing won't be necessary because they have already built the system.

1124 COMMISSIONER LANGFORD: You have heard Mr. Butler indicate -- and I don't like to put words in people's mouths so if I don't capture what you are saying correctly, please find the time to correct me -- that his interpretation I believe he said of the sort of TPIA versus resale situation is that Shaw at this point is technically able in certain areas to offer TPIA.

1125 MR. MERCIA: No, I completely disagree. We looked at their interrogatory responses, and we have done this with Rogers. It was a learning experience. We engaged Rogers around the same time as we engaged Shaw.

1126 We finally rolled out Rogers in an operational capacity where we could actually sell it after 13 months. It took five months of testing, which Shaw doesn't have built into the time line here.

1127 I think that is the most salient point. Even if their intention is to roll this out as quickly as possible, we don't believe they can.

1128 The other point is that 99.11 was an interim relationship to allow TPIA to happen. Shaw's position is that resale and TPIA can't happen in parallel. If we had engaged them in a resale agreement prior to TPIA, they would have to happen in parallel. We can't stop selling resale and start selling TPIA until TPIA is operational; otherwise we have a hole there where we can't sell because they are technically TPIA ready.

1129 COMMISSIONER LANGFORD: Assuming for a moment that I buy everything you are saying here, and that we buy everything that you are saying -- and I am speaking hypothetically here. But assuming for a moment that we do, for the sake of argument, are there any of the Shaw markets at this point, if I can call them that, into which you seek access that you would prefer not to have resale now; that you would prefer to hang on and negotiate a TPIA arrangement instead?

1130 Or would you prefer to have resale in all of them and then work toward TPIA in the fullness of time?

1131 MR. MERCIA: We would prefer to have resale and work toward TPIA, as I have indicated, because we believe that the TPIA time line is uncertain.

1132 COMMISSIONER LANGFORD: Thank you. Those are my questions.

1133 THE CHAIRPERSON: Commissioner Williams.

1134 COMMISSIONER WILLIAMS: To start with, a little background, Mr. Mercia.

1135 Tell me a bit about Cybersurf. Who are you owned by? Where are you located? How long have you been in business? What is the magnitude of your business in terms of customers, revenue? Just a bit of a background on Cybersurf.

1136 MR. MERCIA: For sure.

1137 THE CHAIRPERSON: Very short.

1138 MR. MERCIA: Okay. Cybersurf became a public company in 1996. Call-Net Carrier Services is a major shareholder with 5 per cent of the company. They sit on our board.

1139 We operate under the brand 3web, Cyberus, Comnet and Cybersurf. We are national, from St. John's, Newfoundland, to Victoria. We are in all the major Canadian city markets.

1140 COMMISSIONER WILLIAMS: What percentage of your business is resale as opposed to TPIA arrangement?

1141 MR. MERCIA: We just entered into resale with Bell. It is a small percentage. TPIA with Rogers, we only have three intersection points in Toronto. We are currently working on six other intersection points.

1142 COMMISSIONER WILLIAMS: Does Rogers give you access to all of its service area in all the markets that it serves as part of your agreement?

1143 MR. MERCIA: No. We have asked for specific markets, GTA and Ottawa, because we have substantial user bases there.

1144 COMMISSIONER WILLIAMS: In the Shaw case, by asking for six specific markets, will you be then possibly enjoying access to the majority of Shaw's market?

1145 MR. MERCIA: The reason we have a limited geographical footprint with Rogers is because we also have DSL with Bell for all of Ontario and Quebec. So we have a high-speed product to the peripheral market.

1146 In the case of Shaw, going west of Thunder Bay we don't. The only thing we are engaged in right now is with Shaw.

1147 COMMISSIONER WILLIAMS: Based on your experience with the other companies we have been talking about, does Cybersurf expect to attract new business, new customers new to the Internet experience? Or do they find their customers from existing service providers, like Shaw and other ISPs?

1148 MR. MERCIA: Cybersurf sells dial access primarily on a discounted basis. Our pricing model is about half of what the incumbents charge. We find we get a lot of new users. Our hope is to migrate those users onto high speed, because we think that is a natural progression of the market.

1149 Right now we are losing our subscriber base to Shaw in those markets, because as people migrate to high speed they are going off to Shaw, TELUS, MTS, Bell.

1150 COMMISSIONER WILLIAMS: In your projections, assuming you were to get the full access that you wish from Shaw in the current time frame, what percentage of your revenues would then come from former Shaw customers that moved over?

1151 MR. MERCIA: It would be hard for us to say. Right now, currently, I would say we have a very limited penetration with cable. But the vast majority of our cable customers are customers switching from Rogers.

1152 The reason for that, though, is that as we market to switch customers, because of the installation fees that Rogers levies it is cheaper for us to switch customers than it is to put on new customers because of the tariff for TPIA.

1153 So yes, we are targeting currently Rogers' customers.

1154 COMMISSIONER WILLIAMS: I think you said earlier that you would prefer a resale arrangement rather than a TPIA arrangement because of the uncertainty of the implementation time.

1155 Would that be correct?

1156 MR. MERCIA: No. Our end goal would be a facility-based TPIA agreement. We are asking for resale as a stopgap. We feel that if we have resale, Shaw will be more motivated to roll out TPIA in a timely manner.

1157 Our experience with Shaw has been since August of 2002 we are still not selling anything. We feel that the resale right now would be something as a stopgap until TPIA is available. We do prefer a facility-based sort of arrangement.

1158 COMMISSIONER WILLIAMS: I have one or two for Shaw.

1159 Mr. Stein, does Shaw welcome wholesale business opportunities like that could happen with Cybersurf?

1160 MR. STEIN: Yes, we think a number of arrangements are positive in terms of growing the business. I think that particularly the third party Internet access one is one we are very committed to.

1161 We have never felt that resale has been an answer to any of this, and we don't think it is consistent with either the Commission's policies or the government's policy. We recognize that it was put in place in order to provide a basis for access where TPIA wasn't possible. I think we really recognized that last year when our own assessments and the assessments of the CRTC's own studies indicated that proprietary systems were not amenable to TPIA.

1162 So as we moved from proprietary to a DOCSIS system, yes, we look forward to these kinds of arrangements.

1163 COMMISSIONER WILLIAMS: Thank you very much.

1164 I have no more questions, Mr. Chair.

1165 THE CHAIRPERSON: Thank you, Commissioner Williams.

1166 I am just trying to get a better understanding of your view of these time periods in some of the discussion that we have had here this afternoon, Mr. Stein.

1167 I think, Mr. Butler, it was part of your opening comments on page 3, down near the bottom, in the last full paragraph where you said if the decision were so it would mean both Shaw and Cybersurf would be required to take steps necessary to offer resale in these centres for -- and I emphasize the words -- a brief period, after which the resale customers would be converted to third party access.

1168 I guess I don't understand what "a brief period" is for you.

1169 MR. BUTLER: A brief period for us would be the two months that we outlined in our resale description in our answer to interrogatories.

1170 THE CHAIRPERSON: I would have understood from that paragraph that the "brief period" would be the period it took to get the TPIA.

1171 So how long will it take to get the TPIA? We have heard from Cybersurf that with Rogers it could be a year or more.

1172 MR. BUTLER: It's the difference between the four months getting to TPIA versus the two months in instituting resale.

1173 THE CHAIRPERSON: So you don't share the view of those who have had the experience of implementing TPIA that it could take as long as a year?

1174 MR. BUTLER: Certainly a lot of this work leading up to TPIA was initiated by our launch of DOCSIS in Vancouver in November. So in many respects a lot of the work associated with getting TPIA under way has been part and parcel of our DOCSIS launch in Vancouver and Calgary.

1175 I am optimistic that it won't take as long as Rogers has taken to implement their TPIA service.

1176 THE CHAIRPERSON: I am going to go back and forth here.

1177 Mr. Mercia, would you share that view?

1178 MR. MERCIA: When we engaged Rogers to do TPIA, many of the components they already had in anticipation of getting TPIA customers. Shaw doesn't have any of those.

1179 Rogers was already DOCSIS compliant. Rogers already had the CISC conceptual process for administration, the Web-based administration of ordering and cancelling. Shaw doesn't have any of that.

1180 When I look at Shaw's time line, their time line is mostly based on becoming DOCSIS compliant, not being TPIA ready. It is about upgrading their network so that they can do TPIA.

1181 It is interesting to note or if you look at this that they are planning to do a migration of their own customers, their own network, while they facilitate us. We think that their time lines are not realistic, and we also think there is a lot of risk there for things to go wrong, because they are doing something they have never done before.

1182 THE CHAIRPERSON: So notwithstanding the DOCSIS implementation, you think it would take longer than four months.

1183 MR. MERCIA: Absolutely.

1184 THE CHAIRPERSON: But it is your position --

1185 MR. STEIN: Can we respond to that?

1186 THE CHAIRPERSON: Yes, Mr. Stein.

1187 MR. STEIN: I will ask Dennis to talk to this as well, in terms of the effort we have done.

1188 To implement TPIA for Cybersurf, we have already spent 75 per cent of the money that we need to spend to do that. We have already put it into that position.

1189 We have also identified with Cybersurf the three things that they need to do, and in many cases we have now even waived that in terms of moving into a test procedure.

1190 We have one of the best engineered Internet systems anywhere, and we believe in our engineering department and our information systems people in being able to deliver this.

1191 I can't comment on the Rogers Cybersurf process and why it took 13 months. But I do find that the report that was done by Imagineering, that the Commission itself undertook, is very good. What it points out is that as in any normal engineering process, when something is available then there is a process whereby you then proceed to an implementation of that.

1192 We believe, for example, in Vancouver and Calgary -- we don't believe. We are DOCSIS 2.0 ready right now. That's the kind of modems we can roll out. That is the kind of system we can provide.

1193 That DOCSIS 2.0 platform is a superior platform to any other kind of DOCSIS platform that exists. It meets our business interest. It is the best platform for offering TPIA. It is also the best platform for offering voiceover Internet.

1194 That is the platform that we put in place, and we want to build on that. Our view is that we can meet that schedule.

1195 Our concern is that we don't see any incentive for Cybersurf to work with us if they go to resale. If they go to resale, then they don't have to supply modems. They don't have to supply the Internet addresses. They don't have to do any of those things, which are crucial in a partnership to make TPIA work.

1196 I believe in those markets that that is what has to be done.

1197 I would like to ask Dennis to talk to the time frame in order for us to do that. We haven't been sitting around. We have been going at this for some time in discussion with Cybersurf people for the past year.

1198 I would like Dennis to comment on that, if he could.

1199 MR. STEIGER: Thanks, Ken.

1200 To roll out TPIA, we have to make two major infrastructure changes. The first one is our automated IP address system. It has to be capable of providing addresses to TPIA customers.

1201 The second one is we have to replace our cable modem systems with a TPIA capable cable modem system.

1202 The second of those two we have addressed in Vancouver, Calgary and Winnipeg, and that represents about 75 per cent of the work that we had to do and the investment we had to make.

1203 This week we actually are in the process of converting Vancouver to a TPIA capable IP addressing system. So in Vancouver we are going to be probably on the order of 90 per cent ready to put the final touches on the network and implement TPIA.

1204 After that it is essentially a matter of Richard's team putting together the business systems in the time frame that he identified.

1205 So I would say we are almost 80 per cent, 90 per cent in Vancouver, and we will be there pretty close after that in Calgary.

1206 To summarize, we have done the majority of the work already.

1207 THE CHAIRPERSON: Would you like to respond to that?

1208 MR. MERCIA: Like I said, Shaw is basing being TPIA ready on being DOCSIS compliant. As I said, when we engaged Rogers, they were already DOCSIS compliant. So the 13 months started after they were already compliant.

1209 What they are not considering is that there are third parties that may hold this up. We have had delays from Bell because of interconnection problems. We have had to trench fibre into headends. There is a host of things that are reliant on third party vendors and carriers that they have no control over that they can't possibly speak to the time lines for.

1210 With Rogers we also encountered things in the production phase that we never envisioned. So we had to go back. Rogers had to do some redevelopment and we had to do retesting.

1211 So the testing phase of what we did with Rogers in rolling out ended up being extrapolated by at least two times by the time we were done.

1212 I don't believe that Shaw is even considering those issues and how long they could possibly take.

1213 THE CHAIRPERSON: Just to comment, Mr. Stein -- and maybe Mr. Mercier, you could comment more appropriately. I guess it would have been my view that when you say if we offer resale then there is no incentive to go over to third party access, I would have expected that any operator would rather be serving customers off their own network than somebody else's in the general sense.

1214 In this case, whether it is a short term or a longer term, we are getting to third party access in any event sooner or later. It is just a question of how much time it takes us to get there.

1215 I find it a bit interesting that when it comes to defining all of the steps it is going to take to provide resale, it is going to take us a horrendously long time, a lot of which is in spending money -- which, in the case of third party access you argue you spent about 75 per cent of the money.

1216 So the resale is going to take a long time to put in place, with all the steps you went through with counsel. But somehow or other the third party access, you are quite optimistic it can be done in an extremely short period of time, only slightly longer, I guess, than resale.

1217 I find it surprising that we are even here today, given that the decision went out on December 23rd. If indeed it was going to take as long as two months to get resale put in place, it should have been in place by the end of February. And here we are today and we haven't even started.

1218 MR. STEIN: Well, I think that fundamentally comes down to a disagreement about TPIA and resale and how we offer it.

1219 In our view, we are ready to offer TPIA in Vancouver, Calgary and Winnipeg, and that's how we ultimately think it is most efficient to proceed.

1220 THE CHAIRPERSON: Mr. Stein, you have just told us it is going to take four to five months to put it in place.

1221 MR. STEIN: We think that is appropriate. We think that is backed up by the report that the Commission itself undertook; that once you agree to do it with a party, the effort that it takes to do it properly, that's the time it takes to do it.

1222 THE CHAIRPERSON: If we accept that, then third party resale should be provided until such time as third party access is ready to go.

1223 MR. STEIN: We wouldn't agree with that, because we feel that resale can be provided, not pursuant to your order. Resale would have to be provided in those markets where we aren't TPIA ready at this point, but we feel in the markets where we are, that that is what we should be working toward.

1224 We have been working on that, in our view, since last summer. I think if there was a wrinkle in all this, it was that the conclusion we came to a year ago that providing TPIA on a proprietary system was not going to work out. That is not unusual in proprietary systems. But we went ahead with the proprietary system in the first place.

1225 We all prefer standards. Right? But if we wait around for standards -- we went through that experience with digital video compression. We waited and we waited and we waited until finally it just didn't happen.

1226 So finally with the Internet we changed our strategy and we basically said: Okay, we are going to develop it on our own. We invested heavily in Terayon and At Home and we went through all that stuff, and we were first off the mark.

1227 We have a lot of confidence as a company in our engineering and information systems people to be able to do this. We believe that we are TPIA ready in those markets, and that's what we want to work toward.

1228 THE CHAIRPERSON: Assuming coming out of this proceeding the Commission has a different view of the resale relative to third party access, that notwithstanding the fact -- and we laud you for taking the steps to get to DOCSIS 2.0. I agree with you about standards. I am sure the Commission would agree and that you are taking the steps to get to third party access.

1229 But notwithstanding that, you have to provide resale in the interval until you are able to actually have Cybersurf offering commercial service using third party access.

1230 I want to know from you what is a reasonable timeframe for us to expect for Cybersurf to be able to be offering customers service using resale as an interim step to get the third party access.

1231 MR. STEIN: We would hope the Commission wouldn't come to that decision, but if that was the case then we would have to go much more with Richard's schedule. It would be most at work that would be done in that sense.

1232 I mean, basically what we do is down tolls on the engineering side and just switch over the IS guys.

1233 THE CHAIRPERSON: You are saying the exact same people would be involved in the resale with third party --

1234 MR. STEIN: No, no. It's just that with resale it's much more information systems issue than it is an engineering issue.

1235 THE CHAIRPERSON: Right.

1236 So there really didn't need to be any down tools.

1237 MR. STEIN: Well, no, there would be because if they are going to be going resale in a market we are trying to deal TPIA, we are blown out $750,000 a day right now. Every day three quarters of a million dollars goes out into our plant and we have to pick our priorities as to where that money goes.

1238 How we roll out our systems is really a crucial decision right now in terms of other things that we have underway right now.

1239 THE CHAIRPERSON: So I would take it the worst case is that TPIA would take two months longer.

--- Pause

1240 THE CHAIRPERSON: Well, it would have to be.

1241 MR. STEIN: Yes, the worst case, yes.

1242 The only comment I would make is anecdotal which is the instructions from J.R. Shaw and Jim and Peter Bissonnette are make this work. We want TPIA to take place and we want to make it work. We have very clear direction on that and Peter Bissonnette, who is the ultimate allocator of the resources from the operations point of view, has dedicated a lot of time and effort, including having Dennis and Richard here today, to making sure that we are committed to making this happen.

1243 So that is the instruction that is in place is let's make this happen because it's better for our customers and it's better for the system that we make TPIA work, and we recognize this.

1244 We have all the confidence in the world in DOCSIS 2.0. We think it's a great standard. It has been a tremendous benefit in terms of the kinds of things, with some wrinkles that Dennis has had to deal with over the last couple of weeks in terms of benefits in Vancouver, but, you know, these are not simple engineering questions, that's true, they aren't, but if we can work together I am really confident that we can solve them and we can roll it out.

1245 THE CHAIRPERSON: And if, on the other hand, the Commission were to order you coming out of this proceeding to provide third-party access, provide resale, I'm sorry, that you would be able to provide it by early June. You are saying that the absolute shortest period of time is two months.

1246 MR. JOHNSTON: Mr. Chairman, I think perhaps Richard, as we have discussed this, there is scheduling involved here.

1247 If we are talking six communities, it means rolling out community by community. So it is, I think, unrealistic from what I have heard --

1248 THE CHAIRPERSON: Well, if we picked a community.

1249 MR. HANNAH: Yes, for resale, single community or serving areas, as referred to, would be the two-month timeframe and we have done resale before and we are confident that we know how long it takes. In fact, it took much longer to do resale the first time we did it and so Cybersurf is actually benefitting from our experience in rolling out resale. The two-month timeframe is doable for resale.

1250 Now, on TPIA we haven't done TPIA before, so that is why we have extended an additional two months that we feel it would take to roll out TPIA on the system side.

--- Pause

1251 THE CHAIRPERSON: I will just put out the question Commissioner Langford whispered in my ear then.

1252 So how much for each subsequent community? Are we talking about another two months after this first one? Is it two months to get one and then we start another two months and then we start another two months?

1253 MR. HANNAH: It wouldn't equate the two months per system, no.

1254 THE CHAIRPERSON: So what does it then become?

1255 MR. HANNAH: It would depend on which service area, serving areas they were proposing to enter, but we would suggest probably two to three weeks for each additional area.

1256 THE CHAIRPERSON: So once you have done one it's two to three weeks to get another done?

1257 MR. HANNAH: Yes.

1258 THE CHAIRPERSON: But you have already done several.

1259 MR. HANNAH: Yes, but --

1260 THE CHAIRPERSON: So it should not be two to three weeks.

1261 MR. HANNAH: Yes, two to three weeks to set up an additional server. What we have to do is --

1262 THE CHAIRPERSON: You have already done a couple. Not Cybersurf, but you have already done a couple. Why is it two months and not another two to three weeks if you already have experience in doing several?

1263 MR. HANNAH: For each area that Cybersurf would want to enter, we actually have to set up the home staff database for that area, including the node information that is required for each one of those homes. So it's not just a matter of creating a city and putting it into the database. We actually have to go through our home staff database and recreate each one of those homes with the node information that is required for engineering. So it does require additional time.

1264 THE CHAIRPERSON: I'm getting lost here.

1265 If we did Calgary and it took two months, could we now go to Vancouver and it will take two to three weeks?

1266 MR. HANNAH: Yes, that is what we are suggesting.

1267 THE CHAIRPERSON: Well, then why does it take more than two to three weeks in Calgary?

1268 MR. HANNAH: Because that would be our first set up of this database for Cybersurf that we are starting from scratch with the first database. After that we understand the requirement --

1269 THE CHAIRPERSON: It's one database that would then apply across all the systems.

1270 MR. HANNAH: Yes.

1271 THE CHAIRPERSON: That you simply add to for each additional city.

1272 MR. HANNAH: Correct.

1273 THE CHAIRPERSON: So the most critical element of all of this is setting up this initial database.

1274 MR. HANNAH: Initial database.

1275 THE CHAIRPERSON: Which is two months less two to three weeks. That is what takes all that time?

1276 MR. HANNAH: Yes.

1277 THE CHAIRPERSON: So it's five or six weeks to set up a database. After that it's two to three weeks for every community.

1278 MR. HANNAH: Yes. There is concurrent activities. If we were saying that the initial desire was to roll out into Calgary plus additional service areas, we can do some of those areas concurrently.

1279 THE CHAIRPERSON: So if we had started in January, we probably could have had all six communities done by the end of March or April.

1280 MR. STEIN: The only thing in that way is when you mention Calgary or Vancouver because I mean our basic view in those areas is that we would not go to resale, that what we would go to was TPIA.

1281 THE CHAIRPERSON: I'm assuming that we rule --

1282 MR. STEIN: Pardon?

1283 THE CHAIRPERSON:  -- that you have to do TPIA everywhere -- resale. Sorry, I keep saying that. Assuming the Commission rules -- I know what your desire is, but we may not have the same view.

1284 MR. STEIN: Right, okay.

1285 MR. HANNAH: To answer your question, the key first step in any software development project is understanding the requirements of the deliverables and the first step, review processes and procedures for Cybersurf, that is the first step before we can start. So we couldn't start in January without that information. I believe Cybersurf has said that will take them two weeks to put that together.

1286 THE CHAIRPERSON: Okay.

1287 I may have some more questions, but I think I will --

1288 MR. STEIN: Can I ask Dale to just comment on this?

1289 THE CHAIRPERSON: Sure.

1290 MR. BUTLER: I can maybe address the point, Commissioner. I dealt with the ISP that launched in Ontario and they were very small communities. I think one of the issues that Richard was addressing is the fact that in terms of two months for Calgary, we are dealing with communities of substantially different sizes. We have 12 hub sites equivalent to SAP servers in Calgary as opposed to, in this case, small Marathon, Ontario.

1291 So it took us from the moment this company signed in Ontario, it took us about two months to get in place.

1292 I think what Richard is underscoring is that Calgary is of a magnitude obviously bigger than Marathon. So there are some issues related to node sizes and hub sites in preparing the databases for subsequent deployment in equivalently larger cities; Vancouver, Winnipeg, Saskatoon, et cetera.

1293 THE CHAIRPERSON: I take your point on that, but in fact all the cities we are talking about here are considerably larger than the one you would have dealt with in Ontario, and yet, not withstanding that, it would be that the two-month plus then two three weeks for each one --

1294 MR. BUTLER: Yes, that is correct. I was simply indicating that we can take some of the lessons learned from dealing with this ISP in Ontario, but again resale may seem straightforward, but there are, as Richard indicated, database issues and node sizes and even deployment, getting enough inventory of our modems. Our ISP in Ontario use their own modems for the service.

1295 So there was a variety of issues that were perhaps unique to Ontario.

1296 THE CHAIRPERSON: I'm just about finished and then I will go over to you, Mr. Tacit.

1297 Picking up on this theme about the delay for TPIA, once we do the first one, which may have delayed TPIA for that community by as much as two months, the worst case delay for every subsequent community is two to three weeks. Right?

1298 MR. STEIGER: On the TPIA issue, we estimated it was going to be approximately four months to do the first community out in Calgary.

1299 THE CHAIRPERSON: You are only delaying the TPIA by an additional -- to the extent we have the down tools, to use Mr. Stein's term -- and that is going to vent away TPIA by some amount.

1300 I would gather the worst case away for each subsequent community is two to three weeks.

1301 MR. STEIGER: For TPIA?

1302 THE CHAIRPERSON: Yes, for TPIA because you spent some time doing resale.

1303 The worst case longer than the four months. Let's say I accept your view that it's four months. Now you have to do resale in that community, but you have already done it somewhere else. So now we are two to three weeks to do the resale, and if that is going to delay TPIA by some amount, it's now four months plus two to three weeks. Is that not right?

1304 MR. STEIGER: The build apart for TPIA would be an additional two months after we completed the first city.

1305 MR. JOHNSTON: I got confused I think as well when we were discussing this. There are two functions going on here. One is the systems, the high teeth function, and this is what Richard has been talking to.

1306 The other is the engineering and this is what Dennis is speaking to. They are two quite separate functions in rolling out TPIA.

1307 THE CHAIRPERSON: Third party access.

1308 MR. JOHNSTON: Yes, but for resale, it's ITs that is involved.

1309 THE CHAIRPERSON: And the significance of that is...?

1310 MR. JOHNSTON: Well, you can't say that because IT, the IT function would take another two or three weeks, that the engineering function is going to take two to three weeks too. It's an entirely different function.

1311 THE CHAIRPERSON: I understand it's an entirely different function, but as we agreed the engineering piece doesn't have to be done for third-party access.

1312 This is my problem. Let's assume we have done --

1313 MR. JOHNSTON: It doesn't have to be done for resale.

1314 THE CHAIRPERSON: No, I understand that.

1315 Let me go back and see if I can't bring this on the rail here. I appreciate I have confused it by mixing the terms here.

1316 Let's assume we have done resale in a city and you are working away on third-party access on all of these places and you are now required to provide resale in City B. You are working away on third-party access.

1317 I took it from an earlier comment that because you are working away on third-party access, it's going to somehow delay -- you are working on resale, I'm sorry. I'm doing it again.

1318 You are working away on resale on City B and somehow that is going to delay third-party access in City B.

1319 How much longer will it take to put third-party access in place in City B because you are working on resale in City D which apparently will only take two to three weeks?

1320 MR. STEIGER: I think I might be able to clear that confusion up.

1321 In the case of TPIA bills, the delay is actually on the network side. In the case of resale, the delay is associated with IS, our internal systems or business systems.

1322 So once we start working on any TPIA city, the network build we have to do there takes two months even though the resale effort there could only take two to three weeks. They are independent efforts.

1323 THE CHAIRPERSON: I understand that they are independent. So you could be doing that while the resale is going along. It doesn't jeopardize your work whatsoever. Right?

1324 MR. STEIGER: That's correct.

1325 MR. STEIN: As long as he has the cooperation of the person who wants to provide access.

1326 THE CHAIRPERSON: Right, understood.

1327 Mr. Tacit, you have 20 minutes.

QUESTIONS BY CYBERSURF / QUESTIONS PAR CYBERSURF

1328 MR. TACIT: Thank you. I am going to be briefer than that.

1329 I just want to clarify something relating to this database issue. Structurally, is the database that you are building for Cybersurf different from the database that you use with your existing resellers and, if so, why?

1330 MR. HANNAH: It is a separate database because, obviously, we would want a separate and secure database for Cybersurf's customers, segregated from any other reseller. So it is a starting-from-scratch database.

1331 MR. TACIT: I understand that, but that wasn't my question. My question was: Is the structure any different? Are the fields the same? Are the variables the same? Is it structurally the same?

1332 MR. HANNAH: Yes.

1333 MR. TACIT: So why does it take two months to build that?

1334 MR. HANNAH: Well, in the case of previous resellers, it took us 50 per cent more than that. We have experience in that area now, so it's only going to take us two months whereas previously it took us a lot longer than that. It's just configuration which takes time. Whether or not we have done it before or not it takes time each time.

1335 MR. TACIT: And your testimony is that that can't be shortened.

1336 MR. HANNAH: Right.

1337 MR. TACIT: One other question.

1338 I know that the agreement that you are talking about with the Victoria reseller you said was initially Shaw Fibrelink, but they are reselling your service now. So are you privy to those arrangements, to those agreements? Is it a Shaw agreement now or...?

1339 MR. BUTLER: I am not aware, Mr. Tacit, of the interrelationship where it currently stands. As I said, it was an arrangement reached between Shaw Fibrelink and the ISP in Victoria.

1340 MR. TACIT: But they are reselling Shaw Cable, so wouldn't Shaw Cable be involved in that?

1341 MR. BUTLER: They might well be. As I said, I am not aware of it. In a sense, I am not aware of the details of it.

1342 MR. TACIT: So you don't know how the arrangement is being done for billing, bulk billing, or any of that?

1343 MR. BUTLER: No.

1344 MR. TACIT: Back to you, Mr. Hannah.

1345 Is it possible instead of implementing resale by populating information at the nodes to do it at the cable head end? You are saying that you are populating information by node into the database. Is it plausible to just aggregate it all and not do it by node?

1346 MR. HANNAH: No. The engineering infrastructure requires the node information to know which modem to provision.

1347 MR. TACIT: Mr. Butler, you indicated that the resale agreement that you provided to Cybersurf is the same as the one that was used with the two previous situations in Ontario. Is that correct?

1348 MR. BUTLER: Yes, I characterized it as reasonably similar.

1349 MR. TACIT: Can you explain why you couldn't provide that immediately upon request on January 5th or 6th?

1350 MR. BUTLER: I indicated to Cybersurf on the -- the decision was issued on December 23rd. As you can appreciate it, I did not get back to the office until January 5th wherein I received an e-mail from Cybersurf indicating that they would like to discuss resale.

1351 I indicated to Cybersurf that in light of the decision, because there were issues in the decision that were new related to resale, that I would take 10 to 14 days to review the decision vis-à-vis the resale agreement and also we have to, of course, deal with our legal department on any agreement that is signed by Shaw.

1352 I received a letter the next day, on January 6th indicating from Cybersurf that they felt a resale agreement was not necessary, to sign a resale agreement was not necessary.

1353 Shortly thereafter we began a series of some 40-some e-mails and three meetings and letters between parties dealing with TPIA deployment and TPIA implementation issues.

1354 I did not provide the resale agreement upon request until it was asked again by Cybersurf in March, and provided it promptly to them in March.

1355 As I said, we volunteered to provide a resale agreement on January 4th with a 10 to 14-day review period in light of Decision 2003-87. We did not reply to that because on January 6th Cybersurf indicated that they felt that there was no need to sign a resale agreement with Shaw.

1356 MR. TACIT: Okay. But you also never responded to the letter, did you --

1357 MR. BUTLER: Shaw did not respond to the letter.

1358 MR. TACIT:  -- saying that you did believe that a resale agreement was required. You never responded by --

1359 MR. BUTLER: I indicated to Cybersurf that we felt signing of a resale agreement -- we would provide him with the agreement. My understanding is that when you write and you said that we would make one available that you would sign one, or at least review it.

1360 MR. TACIT: I'm sorry, I'm getting lost here. That is on January 6th, correct, or 5th actually.

1361 MR. BUTLER: January 5th.

1362 MR. TACIT: You said it would take two weeks, right? During that time we wrote to you and said let's not stop everything while you are looking for the agreement. We didn't say we don't want the agreement. In fact, as I recall the correspondence -- and we can look at it if you want, it said we will enter into an agreement but don't hold up the rest of the process.

1363 We never received a letter saying "Here is the agreement" and we didn't receive a letter saying you don't need the agreement, did we? You didn't receive a letter -- a response to that.

1364 Is that true?

1365 MR. BUTLER: Yes.

1366 MR. TACIT: Okay. Thank you.

1367 MR. BUTLER: But I will say this, we also held a meeting in that period of time between Cybersurf and Shaw at which time we indicated that we were willing to enter into TPIA discussions and as such, as we have indicated in our opening statement, we believe that TPIA was now available to Cybersurf in Vancouver and Calgary.

1368 MR. TACIT: I understand that. But you also refused to provide resale in the areas where TPIA wasn't being implemented.

1369 Is that correct?

1370 MR. BUTLER: We felt that offering TPIA relieved us of those obligations.

1371 MR. TACIT: And that goes to the specificity of the order that may be required.

1372 The other question I have, then, is when we did ask for the resale agreement on March 9th, you are agreeing with me that it wasn't provided until March 16th?

1373 MR. BUTLER: Yes.

1374 MR. TACIT: Thank you.

1375 Going back to the interpretation of the decision because, as you can appreciate, Cybersurf's interest here is to ensure that if there is an enforcement order it is going to be one that Shaw will follow, what is your view of what a higher speed Internet service is for the purpose of Decision 2003-87?

1376 MR. BUTLER: Maybe I could ask Dennis to describe what our high speed Internet service entails.

1377 MR. TACIT: It is a regulatory question, not an engineering one.

1378 In order to comply with the decision, what services do you believe that Shaw has to resell?

1379 MR. BUTLER: We have to resell our Internet access service, our retail Internet access service.

1380 MR. TACIT: That is anything above 64 kilobytes per second. Correct? It doesn't matter whether it is business, residential, light, SOHO. Correct?

1381 MR. BUTLER: No. I would not agree with your statement that includes business SOHO, et cetera.

1382 MR. BUTLER: Okay. Thank you for that clarification.

1383 Correct me if I'm wrong, but you obtained an interpretation from Commission staff indicating that the discount applicable under 2003-87 was to be applied by serving area, not by individual customer.

1384 Is that correct?

1385 MR. BUTLER: The interpretation in the non-binding staff opinion we got from the Commission was that the discount would be applied -- the 25 per cent would be applied on our promotional pricing over the entire length of the promotional period.

1386 MR. TACIT: But that it would be applied to all customers, not by individual customer basis. At least that is what you said in your reply to our enforcement.

1387 MR. BUTLER: Right, applied to all customers.

1388 MR. TACIT: You are seeking a change in that interpretation to customer-specific.

1389 Is that correct?

1390 MR. BUTLER: That is correct.

1391 MR. TACIT: Do you view that as a change in the decision?

1392 MR. JOHNSTON: Maybe I could answer that.

1393 No, we don't. We think the decision is open to that interpretation.

1394 MR. TACIT: Okay. I think those are all my questions, Mr. Chairman.

1395 THE CHAIRPERSON: Thank you, Mr. Tacit.

1396 Mr. Stein or Mr. Johnston, do you have questions for Cybersurf?

QUESTIONS BY SHAW CABLESYSTEMS /

QUESTIONS PAR SHAW CABLESYSTEMS

1397 MR. JOHNSTON: There is one area I would like to explore a little bit with Mr. Mercia and it is the length of time it has taken Cybersurf to fully implement TPIA with Rogers. I think you said it has been about 13 months.

1398 MR. MERCIA: Correct.

1399 MR. JOHNSTON: I think I read in the material that about eight months of that was used up in field testing?

1400 MR. MERCIA: Yes. As I indicated here, it was after testing began we realized that there were some holes in the process that had to go back. Rogers needed to do some redevelopment and we needed to re-look at some of the processes and procedures. We basically couldn't get TPIA customers working, the DHCP component working.

1401 MR. JOHNSTON: That took eight months to sort that out?

1402 MR. MERCIA: No, it took -- I can't tell you exactly, but the eight months you are refer to is testing, sorting that problem out and then testing again. So it took eight months from end to end, including the resolution, yes.

1403 MR. JOHNSTON: Why do you think that that period of time might be necessary in this case?

1404 MR. MERCIA: I'm not saying that it is -- that wasn't my point, that it was necessary and that it would take that long. My point is that there are issues that will arise that are outside of Shaw's control. We know this. I mean, we did this with Rogers. We believe Rogers acted in good faith. We were doing our best to get the service working. It was just outside of anyone's control.

1405 The same with third party vendors. Right now our intersection of some of the Rogers head-ends in Ottawa is delayed because we are waiting for Bell. So it is outside of my control, it is outside of Rogers control.

1406 MR. JOHNSTON: Are you seeking TPIA in Rogers Ottawa system?

1407 MR. MERCIA: Yes. We currently applied to finish GTA, so all Metro Toronto, and Ottawa, and then we are providing DSL through Bell for the rest of Ontario and Quebec.

1408 MR. JOHNSTON: Are you seeking resale in Ottawa from Rogers while TPIA is being implemented?

1409 MR. MERCIA: No.

1410 MR. JOHNSTON: No. How long do you expect it is going to take TPIA to be implemented in Ottawa?

1411 MR. MERCIA: With our current where we are in development and from past experience, we figure it is going to take another six weeks.

1412 MR. JOHNSTON: Six weeks?

1413 MR. MERCIA: Yes.

1414 MR. JOHNSTON: You don't anticipate, then, the kinds of problems that you had in Toronto?

1415 MR. MERCIA: No, because we have gone through these issues with Rogers before and that is where we are on the intersection time line. We are building into their cable-head now. A lot of the problems with the DHCP, we are hoping -- I mean, Rogers would be able to give you better testimony than I can what happens on their network, but we hope that the DHCP problems are resolved, we hope that the provisioning problems are resolved. These are all issues that we are going to have to face anew with Shaw.

1416 MR. JOHNSTON: But it doesn't sound like they are new problems. They are problems that you have experienced with Rogers and solved them?

1417 MR. MERCIA: Yes, with us and Rogers, not with us and Shaw. So they are new. We can't solve your DHCP problems. Only Shaw can solve them.

1418 In fact, what resolution Rogers put in to solve their problems we don't know. We don't know what they do on their network. We can see up to the router and past that we don't know what they do. So how they resolved it and why it took so long, I can't tell you because we weren't privy to it.

1419 MR. JOHNSTON: But there is no reason to think that because it took Rogers as long as it did it is going to take Shaw that long.

1420 MR. MERCIA: I think that is reasonable, but there is no reason to say it won't either.

1421 MR. JOHNSTON: Right. Okay. That's all I have.

1422 MR. STEIN: Just in terms of, again, a few questions.

1423 First is, on TPIA resale, do you have any other arrangements in place? You talked about the Rogers/Bell ones. Do you have any with TELUS, MTS, SaskTel?

1424 MR. MERCIA: We have engaged TELUS. The reason we went after Shaw, is that is what the point of your question is, is that Shaw's footprint matches ours, with the exception of Saskatchewan. We are not in Saskatchewan.

1425 If we were to engage the telcos to cover the same footprint, we would have to engage four of them to get the same coverage that we are getting with Shaw. Now, had we anticipated in August that it was going to take more than 18 months we may have taken that route, but we have invested the time and resources into the Shaw roll-out.

1426 MR. STEIN: I wasn't asking it in terms of going after Shaw. I hope that's not your intention. I was hoping that you would be helping us sell more Internet customers.

1427 But I was thinking more in the sense of learning experiences with, say for example TELUS, in terms of agreements or working with them. Because although they may not have the total footprint of western Canada they have a substantive portion of it.

1428 MR. MERCIA: We have initiated discussions with TELUS. We believe that -- we are in the negotiation stage. I can't speak to where it is going to go.

1429 Like I said, we have had discussions with them on and off since we engaged you.

1430 MS. STEIN: Is it TPIA or resale?

1431 MR. MERCIA: They have tariff components or resale and we are looking at both. With Bell, we engaged them on resale; with Rogers we did TPIA.

1432 MR. TACIT: Just one clarification. Telcos don't provide TPIA per se.

1433 MR. STEIN: No, I understand.

1434 MR. MERCIA: Just to answer that, what we are talking to TELUS about is facility-based reselling. We are talking to them about doing co-location in the COs, if that is your question.

1435 MR. STEIN: Okay. Secondly, your business plan involves how many customers in western Canada?

1436 MR. TACIT: I think we are treading on confidential information here which is beyond the scope of this proceeding.

1437 THE CHAIRPERSON: Even if it wasn't I'm not sure how relevant it is.

1438 MR. STEIN: I just want to know in terms of deployment, in terms of what work we would have to do in terms of the time schedules we have laid out, that's all. It may not be --

1439 MR. MERCIA: We provided you forecasts with our TPIA application.

1440 MR. STEIN: Right, yes. Okay. I will take it.

1441 Do you object to me sort of trying to understand what --

1442 MR. TACIT: If you have the forecasts you have the information. We don't need to air it here is the point.

1443 MR. STEIN: I understand that we are in a public forum and that it is on the public record. Maybe you don't have to give me specific numbers on this, but I was really trying to relate it to the fact that we have given schedules out and dates of implementation so it would be useful to know what your own roll-out plans were.

1444 If you don't want to talk about that, that's fine.

1445 MR. MERCIA: As I indicated, Ken, we have provided forecasts for each of the markets. We are happy to provide you forecasts with the ones we do resale with.

1446 THE CHAIRPERSON: That's it, Mr. Stein?

1447 MR. STEIN: Yes, thank you.

QUESTIONS BY THE COMMISSION /

QUESTIONS PAR LA COMMISSION

1448 THE CHAIRPERSON: Just a clarification for my benefit.

1449 When you mentioned about the situation with respect to Rogers in Ottawa, what is your expectation as to the total amount of time to have third party access with Rogers in Ottawa?

1450 MR. MERCIA: Six weeks.

1451 THE CHAIRPERSON: That is the total amount of time, six weeks?

1452 MR. MERCIA: Yes.

1453 THE CHAIRPERSON: Commissioner Langford.

1454 COMMISSIONER LANGFORD: This question may have been answered, but a lot of questions have been answered and rather than take a chance when I go through the transcript of finding it isn't there it is better to ask it twice I guess. This question is to you folks from Cybersurf.

1455 We have heard the time line that counsel has gone over very carefully with the party from Shaw. The Chairman has delved into that in a big way with Shaw. But I can't for the life of me pull out of my mind what your reaction to that actual time line is, whether you think it is too long or whether you think it is just about right. We are talking about two months essentially -- well, 45 days, which I think someone from Shaw said that translates in working days to about two months -- for resale.

1456 Can you give me some reaction to that, please?

1457 MR. MERCIA: Given their testimony on face value, it takes what it takes. I'm not in a position to say it shouldn't or it couldn't or whatever.

1458 I do want to say, though, we have been waiting since August 2002 for an agreement to sell high speed cable Internet.

1459 COMMISSIONER LANGFORD: I guess what I'm trying to say is, again speaking very hypothetically, if we were to make an order -- and this order, as you know, is going to come out of this process very quickly -- saying "45 days, way too long. Do it in 10 days. Do it in 20 days" or "45 days, that is pretty tight. Do it in 60 days."

1460 I'm trying to get a sense from you from your experience whether:

1461 1) 45 days seems realistic; and

1462 2) from your business plan and from what you feel you have invested in this process, whether you can live with 45 days or two months overall.

1463 MR. MERCIA: All I can speak from is experience and it took about that long to get the resale agreement going with Bell. So I don't think that is unreasonable.

1464 COMMISSIONER LANGFORD: Thank you very much.

1465 MR. TACIT: Just to clarify, what is that, is it 45, 60 or 10?

1466 MR. MERCIA: It was 30 days. Thirty days from Bell from start to finish.

1467 COMMISSIONER LANGFORD: Oh, excuse me. So you think 30 days.

1468 Does that turn out to be one calendar month or is that 30 business days and therefore it turns out to be more?

1469 MR. MERCIA: It was 30 calendar days.

1470 COMMISSIONER LANGFORD: Thirty calendar days. You think that would be much more reasonable, then, then the 45 days or two calendar months?

1471 MR. MERCIA: Yes.

1472 COMMISSIONER LANGFORD: Thank you.

1473 THE CHAIRPERSON: Counsel.

1474 MR. MILLINGTON: I just wanted to clarify a couple of small points.

1475 Mr. Stein, you said that 75 per cent of the money had been spent on TPIA to date?

1476 MR. STEIN: That's correct.

1477 MR. MILLINGTON: Would any of that money be lost if resale were imposed in the interim?

1478 MR. STEIN: It certainly wouldn't have been efficiently deployed.

1479 MR. MILLINGTON: Invested time value of money --

1480 MR. STEIN: What we would have to do -- well, yes, the return. We are investing in it to roll-out TPIA. So yes, if we have to implement resale in markets where we believe we are TPIA-ready, then the value of that investment is less than it would have been.

1481 MR. MILLINGTON: You also indicated a worry that you had about offering resale to Cybersurf would be that there would be no incentive for them to move ultimately to TPIA.

1482 I would have thought that under our existing decision that came out in December it is available to you to stop offering resale and force Cybersurf to move to TPIA once it becomes available.

1483 Is that not the case?

1484 MR. STEIN: Yes, but as we also indicated -- and Dennis and Richard can talk about that as well -- in terms of doing this -- and I think the other examples that were used by Cybersurf point to this -- it does require both parties to make the effort to do that, to achieve it.

1485 For example, and it is laid out in the Commission's own report that Imagineering produced, there are a number of significant steps where the parties have to work together in terms of testing, so that in terms of the modems, the IP addresses, their router cards. Those types of things have to be provided on a timely basis in order to meet the schedules, right.

1486 MR. MILLINGTON: Just to flog a dead horse, the applicants are here saying they have been trying to get TPIA in place since August of 2002 --

1487 MR. STEIN: So have we. So have we.

1488 MR. MILLINGTON: It seems that they have demonstrated some interest in Part VII applications, and so on, to get there. Why would they all of a sudden abandon the interest in TPIA at this advanced date?

1489 MR. STEIN: Because they said that? I thought I understood them to say they were interested in offering resale in Vancouver, Calgary --

1490 MR. MILLINGTON: But only until TPIA was available I thought. I never heard -- I'm sorry, but I may not have heard the same as you, but I have always heard -- and I will ask Mr. Mercia the question too -- I always thought that TPIA was the holy grail endpoint but that resale was an interim step to take them to TPIA such that they didn't lose their migration of customers off their system to other providers who can today offer high speed. So resale was not the end game for them but really just a bridging technology or bridging solution.

1491 MR. STEIN: I hope so.

1492 MR. MERCIA: As I indicated before, we prefer facility-based. We prefer TPIA also. Like I said at the onset, we are public company, it gives us sort of equity to say that we are operating this on our own network rather than a pure resale. There is more visibility for us in terms of support. It is also tariff price-based rather than market price-based. So TPIA affords a lot more protection for us.

1493 I know Shaw's argument is the costing, the costing, but our argument back, if you look through the series of our submission, is that the costing between what the Commission ordered in 2003-87 and what our actual costs are for TPIA are within cents. So there is no financial incentive to keep resale going beyond what it needs to go.

1494 MR. BUTLER: One quick point on that from the experience in this matter over the number of years.

1495 I think one point the Commission -- and it was illustrated by Mr. Tacit's questioning of me -- and that is concerning what constitutes the availability of TPIA. It has certainly been Shaw's position that we have developed this TPIA service over the last number of months. We have taken some steps. There has been a POI application, initial report.

1496 Cybersurf has put forward a position today as to what they believe constitutes the availability of TPIA service.

1497 All I am suggesting here is that my experience is that there does have to be a view as to what constitutes the availability of service and I think that would help the process.

1498 THE CHAIRPERSON: We will provide you with that view next Friday.

1499 MR. TACIT: Bet your life on that.

--- Laughter / Rires

1500 THE CHAIRPERSON: You can count on that.

1501 MR. TACIT: That will be clear.

1502 THE CHAIRPERSON: We will now turn to closing remarks.

1503 Cybersurf, Mr. Tacit.

CLOSING REMARKS BY CYBERSURF CORP. /

REMARQUES DE FERMETURE PAR CYBERSURF CORP.

1504 MR. TACIT: Thank you.

1505 I believe that this particular hearing has demonstrated that the process for getting Shaw's cooperation, whether it be for TPIA or resale, has been very difficult. There have been a lot of delays.

1506 Even in the face of clear Commission wording, prior decisions that interpret words like "higher speed Internet service", that talk about serving areas and so on, Shaw chooses to interpret the decisions or ignore elements of them to its own benefit.

1507 All that we would ask the Commission to do is please make sure that if some order is issued that provides for resale that it be sufficiently precise that indeed it doesn't leave any doubt in Shaw's mind as to what the real intent of the order is.

1508 I just want to cover very briefly what some of the key points for that would be from our perspective.

1509 One is to reiterate what the Commission has always said is higher speed Internet service, which is any Internet service having a transmission speed greater than 64 kilobits per second.

1510 We don't object to the exclusion that the Commission has taken away from that in its own decisions. That is part of the game, and that's fine. We understand that.

1511 Clarification that a Shaw serving area means the entire geographic area that can be served by each of those cable headends; that the discount applicable to Shaw's high speed Internet service, when it makes its service available, apply by serving area and not customer specific basis, which wouldn't make any sense from an economic standpoint if the intent of that decision is to provide some margin for Cybersurf to operate.

1512 Clarification that Shaw must comply with paragraphs 43 and 44 of the decision so as to actually provide its higher speed Internet service to Cybersurf for resale under the terms set out therein. In the case of Vancouver and Calgary, within very short time frames to be determined by the Commission; and in other cases within two weeks of a request being made.

1513 In fact, I would amend that to say, based on Mr. Hannah's testimony, that it would be whatever the short time frame the Commission agrees is appropriate for the first location and two weeks thereafter for any other location.

1514 Bearing in mind, too, that they can do this in parallel, it shouldn't be cumulative two-week periods.

1515 In terms of when does TPIA end, I think we have put forward a test. Whatever test the Commission does adopt, we would certainly ask that it be a hard implementation based test that is verifiable and not merely that some process has started. We have had processes start and stop and start and stop, and it doesn't go anywhere.

1516 We also specifically request that given the difficulties that we have had, that this Panel remain seized of the matter and that any further matters that arise either with respect to resale or TPIA, we could bring back in a hurry for resolution.

1517 I think, in light of the conduct, we would reiterate our request that the Commission makes its decision an order of the Federal Court to ensure that there really is an incentive for Shaw to follow it.

1518 If the Commission believes that additional terms are required to protect Shaw, as I said, the TPIA service tariff provides a very useful starting point. The possibility of adding insurance and non-disclosure elements from the current TPIA service agreement could supplement that.

1519 In the alternative, we could use the TPIA service agreement as a model, if necessary, although we believe the tariff-based approach is simpler. Whatever the approach is, again we would ask for precision if the Commission thinks that those terms are even necessary at all. And based on the history here, we don't believe that they are.

1520 As far as suggesting that we apologize for suggesting it at this late date, but did only receive Shaw's letter indicating its concern with our reseller agreement on the 24th and we have trying to fashion a creative way to address that concern.

1521 That's all I have to say. Thank you.

1522 THE CHAIRPERSON: Thank you, Mr. Tacit.

1523 Mr. Johnston or Mr. Stein, or both?

CLOSING REMARKS BY SHAW CABLESYSTEMS G.P. /

REMARQUES DE FERMETURE PAR SHAW CABLESYSTEMS G.P.

1524 MR. JOHNSTON: First, I would like to address the time lines that we have been discussing.

1525 Obviously with respect to TPIA there is a broad difference of opinion as to how fast that can be implemented. The interrogatory responses that were prepared by Shaw, as the Commission is aware, are very detailed. I know that they were worked on very carefully, line by line, with every consideration given to what was a realistic time frame for each one of those functions.

1526 I urge the Commission not to be unduly influenced by the experience that Cybersurf had with Rogers.

1527 Second, with respect to resale, we regard it as absolutely necessary that there be an agreement in place before resale commences, or before serious work on resale commences we have to have an agreement. Without a firm agreement covering all aspects of the relationship, I agree with Mr. Tacit, this Panel should remain seized of the matter, because I can assure you we will be back before you on many of these items. They should be settled and an agreement should be signed. It makes business sense, as it makes regulatory sense.

1528 I do have a good deal of reservation with respect to my friend -- almost resentment about the idea that an order of this Commission, to be enforceable --

1529 THE CHAIRPERSON: Sorry, I am not sure the microphone can pick you up.

1530 MR. JOHNSTON: I was saying that I have a good deal of -- and it's not putting it to strongly to say resentment about a suggestion that in order to enforce an order of this Commission, it needs to be registered with the Federal Court of Canada. I think it's insulting to Shaw and I think it is insulting to this Commission.

1531 I would urge you not to take that step.

1532 That's all I have, Mr. Chairman.

1533 THE CHAIRPERSON: Thank you, Mr. Johnston.

1534 I think that --

1535 MR. STEIN: No. I have some comments.

1536 THE CHAIRPERSON: Mr. Stein, sorry.

1537 MR. STEIN: I think, to put Chris Johnston's remarks in context, I should point out that we as a company, Shaw Communications, is very committed to TPIA. We did build a proprietary system. We did take the lead with Terayon and At Home to start leading it out, and we are very proud of the fact that we did that.

1538 We think that Cybersurf's counsel's maligning of Shaw's integrity and our ability to negotiate agreements is totally uncalled for and inappropriate.

1539 We have built a very strong Internet system. We have built a system that we have gone along with on a proprietary basis until we were ready to move to what we thought was a standard based system that would take us through the next number of years.

1540 We feel confident with DOCSIS 2.0 that we will be able to achieve that. We think it is going to be a phenomenal platform in terms of offering reliability, high speed on a consistent basis and voiceover Internet services to our customers.

1541 We believe that we are TPIA ready in Vancouver and Calgary, and will soon be in Winnipeg. We think that the steps that we have to go through are the normal engineering steps that have to be taken to implement this. And it has all been reinforced in Imagineering's study itself.

1542 I think that if there are any problems that this panel demonstrates, it does demonstrate that without the ability of Cybersurf and Shaw to work together, it doesn't matter what kinds of arrangements are going to be put in place, whether it is resale or whatever, it is not always easy to achieve common objectives unless one has common objectives.

1543 I think that is what we want to try to be able to achieve, and that is what we are committed to doing.

1544 THE CHAIRPERSON: I apologize for almost cutting you off there.

1545 I thank you both for your representations.

1546 Regardless of what the Commission decides in this in terms of the provision of resale, it is clear that for this to work these two parties have to work together. It would be the Commission's hope that you two parties, Cybersurf and Shaw, can get together and resolve these issues. If this is going to be successful, you are going to have to learn to work together and get along.

1547 Frankly, we don't want to be seized of this and I don't want to see you back here. I would hope that whatever decision we put out will be complied with and that the two parties will get together, get these issues resolved and get on with it. It would seem to us that it is in both of your interests that this get done.

1548 Perhaps that is enough said.

1549 With that, this will end the oral phase of this proceeding. As I said to those earlier, we would hope to have a decision out by the end of next week on all three matters.

1550 I want to thank all the parties. I know the others are not in the room now, but I think this has gone very well today. It has been a lot of work, particularly for our staff, but I know your staff as well, in order to prepare for this. For my part, I think it has gone quite well. I guess you will be the judge of that, depending on the decisions we render.

1551 Perhaps we will leave it at that.

1552 Thank you very much. This ends this proceeding.

--- Whereupon the hearing adjourned at 1440 /

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