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VOICE OVER INTERNET PROTOCOL (VoIP) PUBLIC CONSULTATION/

CONSULTATION PUBLIQUE SUR LES SERVICES DE

COMMUNICATION VOCALE SUR PROTOCOLE INTERNET

HELD AT: TENUE À:

Conference Centre Centre de conférences

Outaouais Room Salle Outaouais

Portage IV Portage IV

140 Promenade du Portage 140, promenade du Portage

Gatineau, Quebec Gatineau (Québec)

September 23, 2004 Le 23 septembre 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:

Charles Dalfen Chairperson of the CRTC /

Le président du CRTC

Andrée Wylie Vice-chairperson /

Vice-présidente

David Colville Vice-chairperson /

Vice-présidente

Andrée Noël Commissioner / Conseillère

Ronald Williams Commissioner / Conseillier

Joan Pennefather Commissioner / Conseillère

Barbara Cram Commissioner / Conseillère

Jean-Marc Demers Commissioner / Conseillier

Stuart Langford Commissioner / Conseillier

ALSO PRESENT / AUSSI PRÉSENTS:

Marielle Girard Secretary / Secrétaire

Carolyn Pinsky Legal Counsel /

James Murdock Conseillers juridiques

Chris Seidl Commission Staff /

Gestionnaire

HELD AT: TENUE À:

Conference Centre Centre de conférences

Outaouais Room Salle Outaouais

Portage IV Portage IV

140 Promenade du Portage 140, promenade du Portage

Gatineau, Quebec Gatineau (Québec)

September 23, 2004 Le 23 septembre 2004

PAGE

PRESENTATION BY / PRÉSENTATION PAR:

Canadian Cable Television Association 685 / 4158

Rogers Communications Inc.

Cogeco Cable Canada Inc.

Quebecor Média Inc. 942 / 4433

FCI Broadband 986 / 4646

Xit Telecom Inc. 1009 / 4761

MCI 1036 / 4877

PAGE

REPLY BY / RÉPLIQUE PAR:

MCI 1055 / 4981

Xit Telecom Inc. 1057 / 4990

FCI Broadband 1060 / 5003

Canadian Cable Television Association 1062 / 5013

Rogers Communications Inc.

Cogeco Cable Canada Inc.

Cybersurf Corp. 1067 / 5043

Pulver.com 1077 / 5109

MTS Allstream Inc. 1081 / 5128

Call-Net Enterprises Inc. 1084 / 5152

Yak Communications Canada Inc. 1093 / 5204

Ontario 9-1-1 Advisory Board 1097 / 5219

Northwestel Inc. 1106 / 5245

TELUS Communications Inc. 1110 / 5256

The Companies 1142 / 5431

Comwave Telecom Inc. 1153 / 5491

Primus Telecommunications Canada Inc. 1160 / 5536

Gatineau, Quebec / Gatineau (Québec)

--- Upon resuming on Thursday, September 23, 2004

at 0900 / L'audience reprend le jeudi 23

septembre 2004, à 0900

4152 THE CHAIRPERSON: Order please.

4153 À l'ordre, s'il-vous-plaît.

4154 Good morning everyone.

4155 Bonjour tout le monde.

4156 Madame la secrétaire.

4157 THE SECRETARY: Good morning, Mr. Chair, and thank you. I will now call on the companies Canadian Cable Television Association, Rogers Communications Inc., Cogeco Cable Canada Inc. Please proceed with your 40 minute presentation.

PRESENTATION / PRÉSENTATION

4158 MR. HENNESSY: Thank you, Madam Secretary. Mr. Chairman, commissioners, we welcome the opportunity to be here today. Before I start I would just like to introduce our panel and note a name change from our initial records. We are now the Canadian Cable Telecommunications Association. We thought this would be a timely moment to change the name and, as you see on our submissions, a new logo.

4159 So, we welcome the opportunity to address the Commission today on the regulatory framework for voice over IP. I am Michael Hennessy, President of the new CCTA. With me today on our panel, on my left, is François Audet, Director of Telecommunications for Cogeco Cable Inc. and on my right, Ken Engelhart, Vice-President, Regulatory Affairs for Rogers Communications Inc. and Ken Stein, Senior VP, Corporate and Regulatory affairs with Shaw Communications Inc. and a member of the CCTA board.

4160 We also have available for questioning Michèle Beck, Vice President of Technology for CCTA; Suzanne Blackwell, our Vice-President, Telecommunications in Economics; Michel Messier, directly behind François, our Director of Regulatory Affairs for Telecommunications, Cogeco Cable Inc.; David Watt, who you all know, Vice-President, Business Economics for Rogers Communications Inc. And at the far table, starting at your right, Andrew Briggs, a consultant working for CCTA; Alexander Brock, Vice-President, Business Development for Rogers Communications Inc.; and Eric Carol, a technical consultant working with Rogers. Thank you, Mr. Chairman, that is the group.

4161 We have combined the time allocated by the Commission in order to address issues that we consider of critical importance to all members of the CCTA across the country. In this context, Mr. Engelhart will address the need for continued rate regulation of the ILECs' local VoIP service for as long as they retain market dominance.

4162 Mr. Audet will then discuss how the development of an IP to IP interconnection regime, piering, should be mandated in order to increase efficiency and lower costs of interconnection for all local service providers. He will also discuss issues respecting 911 and related social obligations. I will set out what we see as the key differences between internet based service and cable telephony, what we call digital phone service. And finally, Mr. Stein will discuss the importance of maintaining the existing rules for entrance in order to support incentives for facilities based entry, which we believe is the fundamental goal of this proceeding.

4163 I will now handover our presentation to Mr. Engelhart.

4164 MR. ENGELHART: Thanks, Michael. So the threshold issue in this proceeding is whether the Commission should regulate the ILECs when they offer VoIP services. Rogers, Shaw, Cogeco, the CCTA members support the Commission's preliminary view set out in public notice 2004-2, and that preliminary view is of course that ILEC local voice service is ILEC local voice service and it should be regulated regardless of the technology.

4165 A number of the critics of that view urge you to take the idea that you should regulate the facilities, but not regulate the applications. This is a scene we have heard from a number of parties that seems to be permeating a lot of people's evidence. In our view that type of characterization really represents a fundamental misunderstanding of the role of government in the marketplace, of the role of a regulatory agency like the Commission. So, let us sort of start from first principles and work our way through to where we should be. Obviously, sound public policy says governments should intervene in the marketplace only when there is a market failure. So, what is the market failure in this case? It is obviously the presence of a monopoly in the local telephone market, that is not a normal market when the incumbents have 97 percent of the customers.

4166 So, the need for rate regulation of monopolies is and has been for many many years protection of consumers and protection against anticompetitive conduct. So really, the fundamental issue for VoIP is, is it the same as ordinary telephone service or is it a close substitute? If either of those things is true, then it should be regulated just like we regulate telephone service. There has been some equivocation from a number of the parties about whether it is relevant, whether it is a close substitute or not. In our view that is the central question. That is very important, whether these things are substitutes.

4167 It certainly seems to me that the incumbents have been a little bit inconsistent in their answer to that question between this proceeding and the 2003-10 proceeding. That proceeding was looking at whether we should deregulate or lighten the load on the incumbents. In that proceeding they said, well Vonage and Primus and all these guys are coming out of the woodwork and it is huge competition for us and we are in big trouble and you should lighten the regulatory load on us. In this proceeding, where they are trying to get deregulation for these VoIP services, they are saying well they are really a different kettle of fish, they are really a different category, it is really a different type of thing.

4168 So, in order to answer the question is it a substitute or is it a compliment, you just have to look at why are customers buying these services, why are customers buying VoIP. So, let us look at the residential marketplace. I suppose we can think of two different types of VoIP services, what I call managed telephone services which is what TELUS calls access dependent, what Bell calls category three services, and we can contrast that to what I call internet telephone services, which is what TELUS calls access independent and Bell calls category two. So, for the managed services customers probably don't even know that it is VoIP. Rogers is planning to sell a managed telephone service and I would guess a lot of our customers wouldn't know or care what the transmission protocol is. It will look, act, feel, smell like a phone, they think it is a phone.

4169 So in our submission, those managed telephone services are not close substitutes for phone service, they are simply ordinary telephone services. There will be some new bells and whistles, you can store your voicemail on your computer and send it off in an email and things like that and we can talk to you about some of those neat bells and whistles. But, let us turn for a second to the internet telephone services or in the so-called access independent services. In our view, you know, it is a philosophical question whether you say those are home phone services with new features or whether they are a different service that is a very close substitute. Either way, the public policy rationale is the same and it seems that from the early evidence, because it is an early market, that people are buying these things as substitutes.

4170 We heard Primus say that most of their customers have the local area code, that suggests they are using it for their local calls and not as a way of bypassing LD or something. We have spoken to operators in the U.S. who have told us that where number portability is an option most customers port their local number, again strongly suggesting that these things are substitutes. I am also going to explain in a few minutes why these access independent phone services aren't so access independent when the incumbents offer them. And, as a result, when the incumbents offer them they are going to be even closer substitutes for local phone service because they are going to have more and more and more of the characteristics of local phone service.

4171 So, you can contrast all of that with the wireless phone market. In the wireless phone market 14 million Canadians have a mobile phone. There is 12 million households in Canada. So we have the same folks owning a mobile phone and owning a wire line phone and they are not substitutes, because only about 2 percent or less of the people who have bought those wireless phones have gotten rid of their wire line phone. So, people buy a mobile phone to use in the shopping mall or when they are at work or what have you, when they are on the road. People buy a VoIP phone to use in their home as a home phone.

4172 So, if you accept that characterization that it either is the same thing as a phone or a close substitute, then I would argue you need to regulate it. But then, let us as the question what if you don't? What if VoIP services are not regulated when the ILECs offer them? Again, coming back to my earlier point, there is two reasons for the regulation, one is to protect consumers, one is to prevent anticompetitive conduct. So, the incumbents say, well our primary exchange service is not going to be deregulated so we can't really harm consumers because if we try to charge too much for VoIP, people would just stick with the primary exchange service, and I think they have a point. So this isn't really about short-term harm to consumers, it is about anticompetitive conduct, which is what I call medium and longer term harm to consumers.

4173 The critical point if you don't regulate the incumbents is that it creates an opportunity for anticompetitive conduct. One thing they could very easily do and what I suspect they will do if they are deregulated, is they will sell their internet telephony service at a very low price in a bundle with DSL. The idea here would be that you would disrupt the fledgling VoIP market. You could kill it or disrupt it or slow it down before it really gets going. And, as an added bonus, with a bundle like that you could weaken cable's high speed service and indeed cable's telephone offer.

4174 So, why would they do that? That has sort of become a central question for this proceeding. What would the incentive be? You have heard evidence and you have heard testimony that it would be impossible for the incumbents to monopolize this new VoIP market, so why would they do it? Well, they wouldn't try to monopolize the VoIP service, they are doing it to hang onto their existing monopoly for as long as they can. They are doing it to prevent the emergence of new competitors who could threaten their incumbent telephone monopoly, and there is two reasons for that.

4175 Their current monopoly, first of all, spins off a lot of operating income. Probably between Bell and TELUS and the other ILECs the local service is pouring out $5 billion of operating income each year. That is a pretty big financial prize to try and hang onto. They have an incentive to want to keep that going for as long as possible. The second huge advantage of incumbency is that almost every home in Canada, and I am really talking here about the residential market, almost every home in Canada has a wire line telephone line coming into it and it is activated and the phone companies have a billing and marketing relationship with each and everyone of those homes, and they have that relationship which enables them to sell wireless and video and high speed and all sorts of things. They don't want to lose that connection with each home. They don't want to lose that relationship.

4176 So, the benefits of that incumbency, the profits from that monopoly are a valuable thing that they want to hang onto. They see VoIP competitors getting into business and they want to disrupt that market, they want to use anticompetitive conduct to prevent that market from getting off the ground so that those potential new entrants cannot threaten their incumbent monopoly. That is the danger, that is the fear that we have, which is the public policy rationale for how and why... the important thing is the incentive, why the phone companies would use anticompetitive conduct. So, what type of anticompetitive conduct could we expect? Once these things are deregulated, bundling, win back, predatory pricing, all of these things can... VoIP becomes a tool to use all of these techniques to prevent local telephone competition from starting.

4177 There has been some suggestion that well that is not very likely because there could be cross-Canada pricing. Well, let me suggest a cross-Canada price to you that would work very well. You could charge $20 for VoIP service whether it is in Victoria or in St. John's Newfoundland, but it only costs $1 if it is bundled with DSL. They only offer DSL in Alberta and B.C. in the case of TELUS, so it is a way that you could have a national uniform price but, because of bundling, you would end up with a much lower price in your incumbent territory where you offer DSL and that is precisely what I expect them to do if you deregulate.

4178 While we are on the topic of anticompetitive conduct, I think I am the only person of the witnesses that have appeared before you who remembers what happened when the wireless market started in Canada. The wireless market in Canada was not a success, because there were no safeguards against anticompetitive conduct. The wireless market in Canada was a success because there were safeguards against anticompetitive conduct. There was a no head start rule, there was structural separation, there were rules against bundling, there were rules against joint marketing. Those were the reasons that the wireless market in Canada became competitive, it was precisely because the regulatory authorities at the time, the Commission and Industry Canada, saw the potential for anticompetitive conduct and took steps to avoid it.

4179 Now, I mentioned before that we have to be very careful about this term "access independent" when it applies to the incumbent telephone company. It is very different when they offer an access independent service over their DSL line than when anyone else offers it. Just simply think about the internet connection that they would use to connect with the PSTN. Imagine, for example, TELUS offering so-called access independent telephone service over their DSL line in Calgary. You have a customer who uses this access independent telephone service to phone another customer in Calgary. So, that call goes through the DSL line, ends in a central office in Calgary and now it has to go into the PSTN in Calgary. Well, the internet in that case is about 100 feet of wire that TELUS runs to a PSTN gateway. I mean, I suppose in theory they could send it down to a network access point in Chicago, have it do a tour of the United States and then come right back to the same central office in Calgary, but they are not stupid, there is no reason why they would do that. They are major internet backbone providers, they have piering arrangements with anyone they want, they will pier with themselves.

4180 So, when a Vonage customer on that same DSL line makes a call to that same Calgary customer, their call makes a merry circuit through the public internet. But when the TELUS access independent customer does, their call travels a very different route, right into the PSTN, which has a huge difference on the quality of that call. The big problem with internet telephony is the internet and when the phone company offers the service they can cut the internet out of the equation. It is not just the technical characteristics of the call, it is all of the things that matter to residential customers.

4181 If you have internet telephony from Vonage or Yak and something goes wrong who do you blame? Do you blame Yak or do you blame the DSL provider? What if they can't agree on whose fault it is? Not a problem when TELUS offers both. When TELUS offers the telephone service and the DSL service you call TELUS... something wrong with my phone, you call the phone company. They will probably roll a truck and fix it. They could even install the thing for you. So, when you buy internet telephony and DSL from a phone company you are buying telephone service. When you buy DSL from the phone company and telephone service from Yak you are getting internet dial tone, it is quite a different thing. So to sum up, access dependent VoIP is a phone service, access independent is a close substitute and it probably isn't access independent. The Commission should not give the ILECs the tools they need to maintain their dominance in the local telephone market.

4182 MR. AUDET: Thank you, Ken. We also think there is a need to address the issue of interconnection between IP telephony service providers. With so many telecom service providers now looking at IP telephony it is becoming important that we develop IP interconnection arrangements that will foster sustainable facilities based competition in this arena. We also have a unique opportunity with IP telephony where new technology makes lower cost interconnection approaches possible, approaches which will enable us to escape the paradigms of the TDM world. In so doing we will face a few challenges. For one thing, without mutually agreeable arrangements between IP telephony service providers, by default the only other means of interconnection will be to do it through existing means through the ILECs thereby converting IP traffic to TDM and then back from TDM to IP, thus achieving a dual conversion which would be inappropriate, more costly and would degrade voice quality because of the added latency introduced by the double conversion.

4183 Another challenge we face is ILEC resistance to the establishment of such a default IP telephony interconnection model. As evidenced in their responses to the interrogatories and, furthermore, as we see in everyday life with their refusal to pier with any ISP that is smaller than them, so essentially it means with all. We have a very open piering policy both at Cogeco Cable and within the CCTA membership and we just do it because it makes sense for us to exchange internet traffic travelling between our systems for free. The fact that it is for free is the reward in itself. The people we have had a chance to discuss this on the ILEC side are Bell Canada and they have systematically refused to pier with us for traffic between our respective networks. So, we strongly support a Commission mandated default IP telephony interconnection model for all voice over IP service providers.

4184 There are a few key principles which will help devise such a model on a very effective basis. For one thing, we think the inspiration or the model it should be inspired from is existing interconnection between ISPs in the free piering model which has been successful in fostering a vibrant and competitive internet market in Canada. When we do this we do this with a very minimum number of points of interconnection, typically one or two per province. And again, we do it this way because this really is, for us, the lowest cost approach.

4185 We do this in third party locations. This is the only way that we can make sure that none of the parties to the traffic exchange hold the others to ransom in any way. On free piering, we do not measure traffic, there is no compensation arrangement and indeed, as I said earlier, the fact that it is free is its own reward. We are participating in the CISC Network Working Group, which has been mandated to look at IP interconnection, and we suggest that the Commission should mandate this group to look at the development of this interconnection framework on the basis of the four key principles we just discussed.

4186 We would also like to touch on social obligations, 911, 711 and privacy features have been designated as social obligations and have been mandated for PES service, both for ILECs and CLECs. And, as we agree that IP telephony is a substitute for PES, we see that the Commission has expressed a preliminary opinion that social obligations should be requirements for IP telephony and we agree with this, both with the substitutability of the service and with the imposition of the social obligations.

4187 To us, what this means is that we all agree on the outcome of the imposition of the social obligations, but we also realize that there may be a need for some flexibility in the methods or the means used to achieve the agreed desired end goals essentially to accommodate nuances in the technology. We note that most parties to these proceedings also have expressed support for requiring social obligations in the VoIP arena to the maximum extent practicable and Cogeco and CCTA members concur with this position.

4188 In particular, 911 service has demonstrated itself to be a very hot topic over the last few days. The challenges are a bit different, whether we are talking about fixed VoIP, fixed VoIP with foreign exchange numbers or nomadic VoIP services. In all cases, the two activities that need to take place are, firstly, to route the 911 call to the proper PSAP and, secondly, to have the benefit for the PSAP operator of the automatic location identifier pop up on his screen. The routing part is generally easy. The populating of the ALI database requires some integration work between our back offices and those of the supporting LECs and we are working very hard on this.

4189 Again, providing 911 service for fixed VoIP service is relatively straight forward and this will be available at the time we launch our services, certainly in the cases of those of us using, in particular, packet cables, off switches... certainly, at the very least, Shaw, Rogers and ourselves.

4190 In the case of foreign exchange numbers, some people have raised the issue. We think this problem can be solved by, in all cases, assigning local numbers to our customers. Those who wish to have the added functionality of a foreign exchange number can have this in addition to their local number. The foreign exchange number would then be a sort of a phantom number that automatically call forwards to the local number. Outgoing calls would be done under the local number and therefore would route automatically to the proper PSAP.

4191 So, the only issue remaining is what happens for nomadic service. Indeed, we agree that this seems to be an outstanding issue. We commit to continuing our work with the CISC 911 emergency service working group to resolve this. At the very least, we agree with other parties that we have to very precisely inform our customers, for the few that will use the nomadic service, of some of the risks inherent with this. We should have them commit to where they will be when they use 911 service and we should also work at the development of a longer term solution to be able to resolve the routing issue for these calls.

4192 Thank you very much.

4193 MR. HENNESSY: Thank you, François. Just before I hit the script, I would like to make one point because I think it applies to both my presentation and Mr. Stein's. And that is, that since 1978 the Commission has been on a track to introduce competition in telecommunications. In virtually every market now where it has introduced competition along with safeguards to kick start competition we have competition in some of the lowest prices in the world. We have one last monopoly to overcome, the Commission has rules in place in how to address that, you have put a framework in place that we strongly support, we are making our investments based on those rules and we fully expect to be strong competitors in there as long as people don't undermine a course that has probably made Canada the most competitive country in the world.

4194 So, now I have to do the technical stuff. Alright, VoIP services, as defined by the Commission, encompass a broad range of technical means for delivering voice VoIP packets. We consider it is important for the Commission to recognize the critical differences, as Mr. Engelhart pointed out, between our digital phone service that we plan to offer and the VoIP services that ride on the public internet. The cable industries develop packet cable specifications to ensure that voice services can be provided over our networks with the features and qualities that consumers expect today. Many cable companies entering the market are going to use this technology to deliver our service over managed networks rather than over the public internet. In effect, we are planning to enter the voice market providing service over managed facilities essentially similar to how LECs and ILECs provide service today.

4195 Internet telephony services, on the other hand, take advantage of the ubiquity of the public internet to transmit IP packets to virtually any location in the world. The quality of service depends, in some respect, on the transmission speed and the routing of the packets. The public internet can be very fast and very reliable and it can also, from time to time, be subject to congestion. However, the benefit here is that internet telephony subscribers benefit from substantial cost savings by routing their packets over the public internet with little or no investment in their own facilities. We don't take issue to that. We think our customers should have the ability to choose to subscribe to such internet telephony services.

4196 We do not, nor do we intend to, interfere with any of these services. In fact, not only are cable companies not blocking access to these internet services but, as you have heard, we are actually the companies of choice for suppliers like Vonage and Primus. The suppliers of choice and, as they said, suppliers with which they are having no problem. So, the very fact that our high speed internet is so popular with telephony providers demonstrates it is not necessary to add an additional layer of regulation on us just as we are about to enter the market.

4197 We note some parties have called for changes to a previous CRTC ruling that relieves the cable companies of the obligation to make TPIA available for the purposes of supporting telephony services. In our submission, it is not only inappropriate to conduct such a review of the tariff in this proceeding but, again, such change is unnecessary and could create circumstances in effect that amount to the unbundling of the cable companies networks. Contrary to the concerns of some parties, the current restrictions do not limit the ability of a TPIA customer to offer an end user an internet telephony service where the IP packets are transmitted over the public internet. To use the terminology of TELUS, an access independent VoIP service would not be effected for the very reason that the VoIP service is independent of the access obtained under the TPIA tariff.

4198 By contrast, removing the current restrictions could result in demands on cable companies to support an access dependant or managed telephony service. This is both beyond the intent and purpose of TPIA and would impose on us the same access obligations as the local telephony incumbents. We believe the restriction will be contrary to the Commission's established principles, both as set out in the local competition decision and as enunciated on numerous occasions with respect to TPIA. In decision 98-9, which addressed TPIA, the Commission was very explicit in its statements that its determinations did not alter the framework for local competition established in 97-8, and it is that framework that we are investing hundreds of millions of dollars under.

4199 The Commission reaffirmed this principle when it approved the TPIA tariffs of the four largest companies. In 2000-7, 2000-8, 2000-9 and I will quote, "The Commission stated higher speed access is available only to permit companies, other than a cable carrier, to offer higher speed retail internet service." The Commission went on specifically to identify IP based voice telephony service as one of the services that is not required to be supported. The reason for that is quite clear. We have no local telephony business, we are not incumbent. In provinces outside of some markets in Atlantic Canada the score right now in terms of market share is Telcos 97, cable nothing. You don't need incumbent regulation when you are not an incumbent.

4200 So, we think the removal of the restriction from TPIA would represent a significant change to the Commission's policy, would be a major reversal of the framework established for local competition in decision 97-8 to promote facilities based competition and would result in one class of local competitors and one class only from having to provide mandated access to its facilities notwithstanding the Commission's prior determinations that CLECs are under no such requirement. That has a huge impact on investment and I would like to hand it over to Mr. Stein to explain exactly why.

4201 MR. STEIN: Thank you. As Michael pointed out, over the past decade we have come a very long way in building the most advanced, the most competitive telecommunication system in the world. We have developed competition in long distance, we have developed a very competitive wireless system, we have had great success in rolling out high speed internet service with penetration rates that exceed any in the world. And, if I may relate it to another sector, we probably now have the most competitive television distribution system anywhere in the world. In a short time, direct to home satellite services has succeeded in securing 2.2 million subscribers across Canada, bringing to the smallest communities in Canada a range of television services equal to that of any major urban centre. And in such major urban centres such as Winnipeg, for example, every household has a choice of seven television providers, five legal and two illegal. But, I should note, only one local telephone service.

4202 The success in all the other areas has happened not just because we are a great industry, of course we are, and we have enjoyed tremendous support from our investors and from our employees. It is useful to note 95 percent of the employees at Shaw today were not here 10 years ago. Equally important, we have had a government and regulatory framework that focused on supporting investment, innovation and competition. This is not hype, this is fact. The government and the regulator did this by encouraging facilities based competition.

4203 Facilities based competition is crucial because it encourages investment, rewards those who take risks and ensures that the participants take a long-term view. That is why we are here today. We have invested billions in the system we have today. We will continue to do this because the environment encourages investment and commitment. Today we face the last bash in a monopoly, the local telephone service. We are committed to taking this on, but we need to have in place the same regulatory framework that has proven to be so successful over the past decade. This brings us to the request by some parties that the Commission mandate unbundled access to cable companies' facilities to support telephony services. We are strongly opposed to this request and urge the Commission to reject it outright.

4204 Mandating access to the digital telephone service that we plan to launch before it is even launched would undermine the goal of fostering facilities based competition with the minimum of regulation applied on a technology neutral basis. The prospect of cable companies offering digital telephony services using their existing networks has not just been anticipated but encouraged. Decision 97-8, which established the framework for local competition, set the stage for cable companies to enter the local telephony market using their own networks without any unbundled access obligations. This is a critical element of the Commission's overall policy to foster facilities based competition. Consistent with this policy, the Commission in decision 97-8 also established the principles for determining when to mandate unbundled access to ILEC facilities. Even for the ILEC, market power is only one of the factors that leads to mandating unbundled access. Facilities or services of the ILEC must qualify as essential, which requires that the service or facility is: one, monopoly controlled; two, is required by a CLEC as an input to provide services; and three, cannot economically or technically be duplicated by a CLEC.

4205 Equally important, the Commission determined that CLEC facilities would not be subject to mandatory unbundling requirements because these facilities would not qualify as essential facilities. This policy is also the underpinning for the restrictions in the cable companies third party internet access tariffs respecting IP based telephony services as was addressed by Mr. Hennessy.

4206 The regulatory framework governing competitive entry in a local voice telephony market has kept on a very consistent path. The Commission continues to remove the barriers to competitive entry while at the same time ensuring competitors have clear guidelines as to the scope of their obligations and entitlements. The Commission has consistently applied this framework and made repeated representations that the policies at the heart of this framework are and will continue to be followed. As a result, cable companies and other entrants have been able to make significant investments and decisions to enter with an understanding that the rules will not be changed in the middle of the game and these rules will continue to apply.

4207 Cable companies are responding to the incentives that the Commission deliberately established for facilities based entry. Shaw and Rogers have announced plans to deploy digital phone services based on substantial investments in their own facilities. Shaw's own investments will be close to $90 million to serve 200,000 customers, which is only about five percent of the existing residential market in Shaw's territory. This is, of course, on top of the hundreds of millions we have invested to date to build the system that makes this possible. The cable companies' decision to enter the market is a positive development for local competition, especially in the residential market.

4208 We agree with the Commission's preliminary views that the CLEC/ILEC framework established in its local competition decision should apply to VoIP based local services. This specifically includes the policy that CLECs are not mandated to provide access to their facilities for the provision of voice services. We remain on track to compete based on the expectation that the fundamental principles of the regulatory framework will continue to apply.

4209 MR. HENNESSY: So in closing, we think the Commission struck an appropriate balance in its preliminary views on the regulatory framework for VoIP services. And efforts by some to characterize VoIP as providing a radically different form of voice service are diversions from the obvious. First, in the residential market VoIP provides consumers with simply another method to have the same conversations with family and friends and businesses over the same type of phones with the same type of telephone numbers. The principle of technological neutrality suggests that a VoIP service provider should not be regulated any differently from any other service provider in the same class.

4210 Second, we are not seeking any regulation for entrants offering VoIP services other than the obligations that are already met by existing entrants under the CLEC rule. Imposing a new layer of regulation on any entrants would act as a disincentive to invest in competing facilities. And, at the end of the day, the goal must continue to be sustainable facilities based competition in the local market with a minimum of regulation applied on a technology neutral basis. This will provide benefits for consumers by providing more choice, competitors by providing consistent terms for entry and incumbents by helping to establish the conditions for subsequent deregulation. Thank you very much for your time and patience. We are open to questions from the Panel.

4211 THE CHAIRPERSON: Thank you very much, Mr. Hennessy. Gentlemen, we have a number of questions for you. But again, as I have said before, our failure to address a certain area doesn't represent either a lack of interest or anything else other than that your position is clear and you can assume that your written and oral submissions will be taken into account.

4212 I would like to address a number of questions to Mr. Engelhart on the issue of the need for VoIP regulation. As you know, it has been a position of TELUS in this proceeding that category two, as Bell refers to it or access independent VoIP service should be deregulated. We have Dr. Crandall's testimony that by the very nature of access to independent VoIP services there is no opportunity for TELUS or other Canadian incumbents to achieve market dominance in these services, they cannot leverage any market power that they may still retain in traditional PSTN services into access independent VoIP services because there is no room for such leverage.

4213 Your theory in response I take it is that the incentive is to maintain what you refer to as their monopoly or their dominant share of PES service spinning off some, as you put it, $5 billion of operating revenues, that the opportunity exists in creating a bundle in territory with a very low priced VoIP category two access independent service bundled with their own DSL. So theoretically, in your view I guess independent but in effect tied together by the bundle. Your third point I guess is that moreover that in that access independent service they would, in fact, discriminate in favour of their own messages by sending them directly into the PSTN or virtually directly rather than sending them through the internet.

4214 Is that a fair summary of your position?

4215 MR. ENGELHART: That is an excellent summary, yes.

4216 THE CHAIRPERSON: Okay, let us take the issues in reverse order. I guess on the issue of discrimination first, in respect of their own access independent service, we have heard from a number of the providers of VoIP services, we have put a number of questions to them about the issue of discrimination in respect of the voices messages of competitors versus their own. A number have expressed fears, we spoke to a number of the manufacturers of equipment who have indicated that the possibility is there, but that they hadn't seen any incidence of it, they talked about additional expense and so forth. I think we had one party, AT&T, that said they were looking in to an incident of this kind of discrimination. But by and large, it hadn't existed.

4217 There is fear, there is technical possibility is the evidence. In your view the condition proposed by Yak Communications deal with that so that in effect a provider of this kind of combined service, so to speak, would be under a condition not to let that kind of discrimination.

4218 MR. ENGELHART: I am not sure that it would at all. I think Yak and some of the other parties have been focusing their attention on what happens before the DSLAM, where the DSL circuit hits the box that it hits, that box is called a DSLAM. So, what Yak is saying is we don't think that TELUS should mess around with our packets or do anything mean to them. I don't think TELUS will and I am not suggesting that they will. Then Yak goes on to say they should not program that DSLAM so that the TELUS packets have any advantages when they are going over that DSL line. I haven't suggested in my remarks that TELUS will do that either.

4219 My point is what happens after it leaves the DSLAM and it goes into the internet? We all think of the public internet as one of those terrific clouds on those diagrams that our engineers draw but, of course, they are transmission facilities provided by transmission facility providers and in the case of TELUS, they are a major provider of internet backbone. So it is a simple matter once it leaves the DSLAM for TELUS to enter into a piering arrangement with themselves to pier into a PSTN gateway located in the very same central office as the DSLAM. I can't imagine them not doing that and I can't imagine how they could do anything other than send Yak's traffic into the public internet.

4220 So, I don't think the Yak safeguards deal with that issue, because I think the Yak safeguards are really dealing with the DSL service and the customer side of the DSLAM, if you will, and what I am talking about is on the internet side of the DSLAM.

4221 THE CHAIRPERSON: But surely, as you know well, the ancient rule against undue preference cuts both ways, preference or disadvantage and presumably a condition appropriately drafted would deal with that. I wouldn't have thought that Yak or anyone else was technologically focused such that it is only in a part of the call that they are concerned about, but that really they want the end result that you are fearful they might not get, which is that they not be disadvantaged or that TELUS not give itself a preference in the carriage of that signal through its system.

4222 So, it wasn't so much the Yak condition as specifically drafted, but a condition that would essentially be against an undue preference or advantage in that carriage through the route that I am speaking of. But you are saying that you don't think technically that is achievable?

4223 MR. ENGELHART: Well, I will take a quick stab at it and then I will turn it over to Michael. I suppose you could tell TELUS that all of their traffic has to go to the public internet and you will probably want to have another proceeding to define just what that means. And, you will have to tell them that their internet backbone facilities can't pier with anyone that would make that piering arrangement more favourable to any piering arrangement that anyone else has.

4224 I don't think it is possible, I don't think it is practical. It just doesn't seem possible to me that TELUS is going to send that traffic out into the public internet for a merry trip just to come back to the same central office. But I will let Michael take a stab at it.

4225 THE CHAIRPERSON: Just before you do that and, of course, we will hear from... I am even wondering whether a more generalized... You are taking it down the route of specificity and I am kind of thinking that one could if one went that route, by the general prohibition on undue preference or advantage, deal with that and leave incidents to be brought forward by competitors should they feel that they are being adversely treated or that TELUS or any other ILEC is giving itself an undue advantage. That is traditionally the way the Commission works rather than trying to spell out technological future possibilities, particularly when the evidence is such that it is very hard to get a grip on it.

4226 MR. ENGELHART: I think that is sort of a formula for disaster, because the competitors aren't going to know how TELUS is managing their internet backbones. The competitors are going to have suspicions about the type of service that they are getting compared to the TELUS one. Nobody knows how TELUS is going to manage their internet backbone and the complaints process and ferreting out the facts. And then, is it an undue preference? I mean, if I was a carrier I would say I haven't granted myself an undue preference, I have just efficiently routed my internet traffic. There is nothing wrong with efficient routing, there is no law against that.

4227 So, I think the kind of general prohibition that you are talking about would create a huge number of problems.

4228 THE CHAIRPERSON: But an unjust discrimination prohibition would certainly apply to differential treatment, which is really what we are talking about here.

4229 MR. ENGELHART: Well, for example, I believe... I don't know, I am sure some of my colleagues do... and this is kind of getting to the point that François was making in his introductory remarks, Bell and TELUS today exchange traffic in a piering relationship instead of sending it down to Chicago and connecting with the NAP there, they pier with each other. That saves time, money, really avoids the problem of the public internet with its latency and jitter and what have you. Is that a violation? Are they today engaged in an unjust preference because they have a piering relationship with each other? They have all sorts of piering relationships.

4230 I think you are going to get into a bit of a morass if you try and start defining piering relationships to be unjust arrangements and I am not sure it is going to be an easy way out of that morass.

4231 THE CHAIRPERSON: I have your point. I take it that Rogers.. I am not sure about the other cable companies, perhaps you can help me, is not intending to offer category two service, but is intending to offer category three using the categories as we defined, is that correct?

4232 MR. ENGELHART: It is. Although, Michael told me before we started that if I hog all the time and don't let him talk he is going to get mad at me and he did have a point to make before, so I will let him.

4233 MR. HENNESSY: Yes, let me just close on your point, because I think there is a way to address the concern about undue preference and it goes back to a point I made on behalf of the industry and it is a message we wanted to send on behalf of the industry that we do think that if you were to block or degrade the quality of service of an internet telephony provider that that would be contrary to 27-2. At the same time, the fact that a managed telephone service today may have a higher quality of service than something that rides freely on the internet is really, I think, a result of investment decisions and on the existing technology, which may be completely different tomorrow.

4234 On your second question, some of our companies... our largest companies are looking very packet based focused, but we already have one small, Wood Lake Cable out near Kelowna, that is purely SIP based and they are connecting through a reseller. So, it won't be a one size fits all. François can talk to the Cogeco model again, it is slightly different. But in general, I think it is fair to say, whether it is circuit switched as in the case of EastLink, or packed based and with TDM translation as in the case of Rogers, that all the large cable companies want to enter the business providing an invested in facilities based managed network similar to the telephone companies.

4235 COMMISSIONER LANGFORD: Excuse me, could I ask one question before you go onto your next point?

4236 THE CHAIRPERSON: I am not going onto a next point.

4237 COMMISSIONER LANGFORD: Okay, before you leave it?

4238 THE CHAIRPERSON: Sure.

4239 COMMISSIONER LANGFORD: Thanks.

4240 THE CHAIRPERSON: So I am not sure of the answer to the question... do any of your members, to your knowledge, intend to offer a category two service?

4241 MR. HENNESSY: You are talking access independent?

4242 THE CHAIRPERSON: The access independent.

4243 MR. HENNESSY: I like that terminology better than the Bell, you know, it is a bias we have in the cable industry. But--

4244 MR. ENGELHART: Not all of us.

4245 MR. HENNESSY: Not all of us. It only took us about 15 minutes for the veneer to start to peel. We would never be able to create a cartel in this business.

4246 No I think, clearly... we had our annual meetings yesterday in Toronto and telephony was on the subject and I would say that there are at least three models in variations on that that some people are very keen to enter on an access independent basis, some people want to make major investments in a managed basis, some people want to rely on CLECs to interconnect. So again, it is much more of a soft switch kind of basis. So, we will have people coming at this from all kinds of different directions.

4247 THE CHAIRPERSON: Thank you.

4248 So from the cable industry's point of view, would you have problems with accepting the kind of access condition that has been proposed, essentially, and not favouring or disadvantaging?

4249 MR. HENNESSY: I think as a condition, I think in terms of your framework, that to -- you know, when you say "don't favour or disadvantage", you get back to Mr. Engelhart's point. It's easy enough to say that, if we were to deliberately try to disadvantage somebody that's riding on our network, there would certainly be a prima facie case for the Commission to look at 27-2 abuse.

4250 But if we favour our own service -- and Mr. Stein, I think, would like to comment -- by putting a couple of hundred million dollars of investment in the ground to make a better service, then I think it would be a form of reverse discrimination to say that somebody that, you know, has basically chosen the low cost and freedom of the Internet, that we somehow have to deliver that to them.

4251 THE CHAIRPERSON: Well, we are talking access independent here. It's not about offering a service that is access dependent. You are now offering your cable modem service into which a VoIP service provider is having his customer plug in. So you are now, in effect, the carrier, from that point of view, and it is only in that capacity, and being open to all VoIP service providers that --

4252 MR. HENNESSY: Well, clearly -- I'm going to hand this off because I'm not sure whether I'm thinking, but just to answer your question the best I can -- and, again, we are being very categorical -- if a VoIP provider wants to access our customers over the Internet, we have no objection to that. So from the customer out.

4253 THE CHAIRPERSON: It's beyond objection, it's in effect. At that stage, would it be a legitimate complaint, on behalf of a VoIP competitor offering an access independent service to say, "Cable Company X gives itself its own access independent service, to the extent it's offering, a great route, the quality is great and we have been monitoring this and our quality seems to be not as good. We suspect that they may be..." --

4254 MR. HENNESSY: Okay. Yes, I understand what you are saying.

4255 THE CHAIRPERSON: So in that sense, I don't see how --

4256 MR. HENNESSY: Absolutely not. That is absolutely not a preference because, again, that depends on the investments we are making.

4257 Can I pass that to Mr. Stein, and then Mr. Engelhart?

4258 MR. STEIN: I think Michael just make the point I wanted to make, which is that right now, in terms of our high-speed Internet service, that any company that sells a related VoIP service on that gets treated exactly the same way as if we would do that.

4259 I think the point, though, when you asked about how the cable companies are planning to do this, we have a very defined plan that we have announced as to exactly what we are doing. What we are offering is a digital telephone service that's targeted at the incumbent. That's the objective.

4260 It's not, as some people have described it, an ancillary to the Internet service. The IP Protocol can be used in a myriad of ways. The danger for the Commission, or anyone, is if they start to establish regulatory rules based on the technology, the technology may change every six months.

4261 What we have to do is make sure that when we provide this service to our customers, that it -- you know, we are making deals with all the 9-1-1 agencies, we are making arrangements with Bell, with TELUS, hopefully with Allstream, et cetera, to put in place a system that, when a customer picks up a Shaw phone, is going to get absolutely the best possible service that they can get because that's the way that we are selling. That's our objective, in terms of trying to do this.

4262 At the moment, in terms of on the Internet side of the thing, people will have unfettered access to use that Internet system to provide those services. There's no doubt in our mind that that's going to happen.

4263 THE CHAIRPERSON: Right. But I guess there's an issue, then. To the extent that the boundary between whether you are offering an access dependent or access independent service blurs, given that you are unregulated in respect of either, unlike the ILECs, who, under the TELUS proposal, would be regulated on access dependent services but not access independent, the differentiation would be more clearly established and would be more easily established.

4264 In your case, I guess what you are saying is when somebody picks up a Shaw phone, the fact that it's access dependent or access independent is, from a regulatory point of view, at that point, fairly irrelevant. You don't need to file tariffs for either and does the customer even know that there's a differentiation.

4265 Therefore, you have, in that sense, what you are saying, I guess, is more leeway to capitalize on the investment that you have made in your high-speed access infrastructure.

4266 MR. STEIN: Well, I think we have look at it primarily from a consumer point of view. Our view would be that what we are offering is a service that is local, that is powered, that has access to all -- that has all of the services and features that they would be able to receive. We feel that's the way to compete.

4267 What we look at is that TELUS says, in the markets that we serve, 4 million lines, we have zero. What we want to make sure -- we think the framework that's now in place gives us a leg up on maybe getting 100,000 customers. So when we get those 100,000 customers, I mean, we want to make sure that, when the first day rolls out, the Calgary Herald is writing not that the phone didn't work or that somebody didn't get through to 9-1-1-, but that, basically, "Hey, this is a great service". So that's what we are totally focused on.

4268 Now, if somebody wants to have a Shaw customer and sell them a phone-related service, Primus, Vonage or whatever, and sell them a phone service on their terms and conditions, that's fine with us. No problem. But that's not what we are selling.

4269 What we are doing is we are focusing on TELUS and we are putting in place what we think will be the world's best digital telephone service, and that's what our objective is. And the current policy framework and regulations, in our view, allow that happen.

4270 THE CHAIRPERSON: Will you offer a service that will run on TELUS' lines? Will you tell your customers in Alberta, for example, "Well, you know, you can plug into your DSL. Our VoIP service will allow you to do that"?

4271 MR. STEIN: That's not currently the plan. We are working on arrangements, as a CLEC, with TELUS, and we also, of course, have a partnership with Bell.

4272 MR. ENGELHART: Chairman, if I could just jump in, because I think, despite the way it sounded for the last few minutes, we actually are agreeing with you, or should be agreeing with you.

4273 You started by talking about the Yak condition. So if I could sort of summarize those conditions, the first thing that Yak said was, "We don't want you, you know, hunting down our packets and harming them". And I think what we are all saying is, "Yeah, we are not going to do that". There's no blockage of anyone's packets.

4274 Yak then sort of went on to say, "You shouldn't be helping out your own packets, helping them to jump ahead of our packets..." -- I'm sure that Alexander is wincing as I say that because there's a more precise way of saying it, but that's the idea: don't help your own packets out.

4275 And then I think what Michael said to you is, "Well, we are in the managed telephone business". Shaw, Rogers and Cogico all plan to offer managed or Category 3 services and, therefore, we take exception to what Yak is saying because we are offering a better service.

4276 And then I think what you are suggesting, if I can summarize your question, you are saying, "Well, no, that Yak access condition wouldn't prevent a cable company from offering a managed telephone service". In the case of Rogers, it's not that their packets are going to jump ahead of our packets. There's a separate voice channel. There's one channel for voice and there's one channel for data. So our voice packets never do. It's not that they are jumping ahead of anyone else. They have their own line.

4277 So I think what you are saying is, no, the Yak condition wouldn't prevent a cable company from offering a Category 3. But what it would say is that when it offers a Category 2, that Category 2 service shouldn't get a helping hand over a competitive one.

4278 I can only speak for Rogers, but I think that's fair enough, but I would have huge reservations with the Yak conditions if it in any way prevented us from offering Category 3.

4279 THE CHAIRPERSON: Well, that wasn't the intent of question. I think you have got it.

4280 Commissioner Langford, I will be moving onto another point, so if you want to --

4281 COMMISSIONER LANGFORD: Thank you.

4282 I'm trying to, just before we leave it -- and we don't generally jump in on each on this, but it's kind of a shared effort, there's so many of you and so few of us, you know -- I'm trying to understand, Mr. Engelhart, the way you assume TELUS -- and I don't think you are painting a conspiracy theory, I take your point on that -- but the way you assume they will use what they call the DSLAM.

4283 What I'm trying to understand is exactly what they would have to do to differentiate between their customer calls coming out of the DSLAM, and therefore taking the short route, as you call it, into the system, and the competitor's customer call coming out of there and being routed to Chicago or Outer Mongolia, or wherever they might be routed.

4284 So what's involved in that is: is that economically feasible or is that a very expensive kind of hardware/software proposition to put together? That's what I'm trying to figure out.

4285 MR. ENGELHART: I will take a stab at it and I will ask Alexander or Michèle to jump in if I make any technical boo-boos. But I think it`s not really the DSLAM that`s what's involved here. I don't think they would need to do anything to their DSLAM. It's their router that comes after the DSLAM.

4286 So the thing comes out of the DSLAM and it goes into a router and the router sends it to "the Internet". And I suppose on all the network diagrams we have seen "the Internet" is that one friendly puffy cloud, and that's where it goes.

4287 But I think in the real world, it's not really true. You try to manage your Internet facilities to be efficient. And particularly in the case of TELUS and Bell, they are the dominant providers of those Internet backbone facilities, so they have all sorts of options that other people don't have.

4288 So, for example, Rogers, I don't even know if we have pairing arrangements, but just to take us as a hypothetical, I would imagine that if we were sending traffic down to the -- our high-speed customers had packets that were destined for Cogico, I would imagine that rather than sending them to Chicago, we would just simply send them to Cogico.

4289 François is nodding his head, so that's what we do. That router says, "Hey, where are these packets going? Because if they are going to Cogico, let's not bother sending them down to the big Internet and wasting all that time and money. Let's just send it straight to Cogico, because that's where they are going and it's quicker and easier", in the same way that, I would imagine, TELUS and Bell have peering arrangements.

4290 You would set up these peering arrangements whenever it makes sense. It's a simple matter of the router looking at the destination of those packets and sending it in the most efficient way possible, in exactly the same way that the public switch telephone network does that. The switch looks at where your telephone call is going and tries to send it in the most sensible, low-cost, efficient manner possible.

4291 So when the destination of those packets for a TELUS router is a PSTN gateway located a few feet away in the central office, why would they not send it straight there. It's a simple peering arrangement that any sensible Internet backbone provider would do.

4292 COMMISSIONER LANGFORD: And if I may, where does it make the differentiation between its packet and Vonage's packet or Primus' packet or your packet?

4293 MR. ENGELHART: At the router, as it looks at the destination. I think it has to do with the -- well, I may pause there and take a look at my colleagues to see if I have messed up so far.

4294 So far I'm good.

--- Laughter / Rires

4295 COMMISSIONER LANGFORD: So I think, for my purposes, we are at the nub of my inability to understand you. I understand the proposition and I understand what you are saying, but what I don't understand is what would be necessary beyond what they have now at the router stage and whether it would be economically feasible or technical feasible. What would be necessary to actually make the distinction between a TELUS packet and a Primus packet?

4296 MR. ENGELHART: I will let François jump in, but the answer is absolutely nothing would be necessary. They wouldn't have to add any new functionality. I'm saying that what I'm saying they will do is what they are doing today with their existing equipment.

4297 MR. AUDET: When an ILEC has a DSL network that carries voice, they will need at some point a trunking gateway, which is a device that converts Voice over IP packets to TDMs.

4298 Their DSLAM is, in the vast majority of cases, located in the same building as their classified switch, so it would make no sense for them to locate this trunking gateway in any other facility.

4299 So as the traffic comes out of the DSL network through a router, it is addressed to the IP address of that trunking gateway. So it will stay in-building.

4300 A third party, be they Vonage or Yak, may have located their trunking gateways elsewhere. Actually, they probably will to avoid having to pay for the relatively higher rent in that building. So based on the IP address of that packet, and, through whatever means that ILEC's network and, say, Yak's network have of meeting each other, which may be elsewhere in the same town or at NAP across the border, that is something that will vary from case to case. It's whatever their history is in connecting to each other, whoever they are using as Internet transit providers and the routes used by those third-party Internet transit providers.

4301 COMMISSIONER LANGFORD: Thank you. I don't expect you to turn me into an engineer in 10 minutes, but it was the economic aspect of this that I was wondering about. Because we did hear some evidence yesterday and the day before that it may just be not feasible and not be viable to do this. It was too complicated, it was too expensive. But if what you are telling is that it isn't, that's a piece of information that's helpful.

4302 Thanks, Mr. Chairman.

4303 MR. HENNESSY: Mr. Langford, if I could, just to be clear for the record, we don't think there is anything wrong in a case of a discriminatory sense with that kind of arrangements, it's just that if you are in territory where you have 97 per cent of the access lines, where you control the interconnection and where you control the Internet backbone, it's just not really possible to argue that you are access independent. That's our only point.

4304 COMMISSIONER LANGFORD: I appreciate that. And I'm not trying to paint a conspiracy theory or paint anybody black. I'm only reacting and trying to better understand the scenario that Mr. Engelhart painted for us earlier.

4305 MR. ENGELHART: If I could just add one more point before going back to the chair.

4306 I don't think we are saying anything different than what you heard a couple of days ago. People were talking to you a couple of days ago about the technical problems associated with programming that DSLAM to favour one packet over another and do those sorts of things.

4307 I'm saying I'm not accusing TELUS of doing any of that stuff, or planning to do any of that stuff. I'm just saying their Internet router will route packets in the normal way and that will give them a huge advantage.

4308 THE CHAIRPERSON: Thanks.

4309 Moving on to the next point, which is the point which you summarize on page 8 of your oral presentation, the cross-Canada pricing, $20 everywhere, but a dollar when bundled with DSL, and I'm not sure -- I would like you to follow that through, if you could.

4310 Right now service, high-speed DSL, is, say, I don't know, in the $45-$50 range per month. So you are saying that the bundle would now be, instead of $49, it would be $50 and you would get phone service, possibly additional long distance minutes and so on.

4311 Is that a fair -- that would be the bundle?

4312 MR. ENGELHART: Yes.

4313 THE CHAIRPERSON: Right. Do you think that would be sustainable over any period of time? Because instead of getting $22 a month for PES, they are getting a dollar, right, out of this proposition. We are talking about a market in which we have heard barriers to entry are extremely low, we are talking about competitors, often foreign competitors, who, in effect, can wait out "irrational behaviour" and then come back into the market at the time when rationality resumes.

4314 How do you see this kind of proposition achieving the goal that you say they would like to achieve, namely, preserving their PES market dominance -- you call it monopoly -- whatever word you want to use or explain? How do you see that working over any period of time?

4315 MR. ENGELHART: Well, I think your question is phrased correctly because they don't have to win in the VoIP market, they just have to keep their PES monopoly going as long as possible. So, for example, they could use the VoIP DSL bundle as sort of a win-back or save offer to try to, when a customer is thinking of leaving, they could switch them to that. It's not as good as if the customer had stayed with them for PES, but it deprives the VoIP competitors of a customer, keeps the billing relationship with the customer, keeps some revenues coming.

4316 The main point is to convince he new entrants before they have taken route that this is a bad business proposition, that they are going to lose money. Yes, as Professor Crandall said, Vonage may leave Canada, but they operate in a hundred countries around the world, that they could come back. That's okay if you are the incumbent monopoly. You have got them out for the time being and you don't have to ever raise those prices for the VoIP service, all you have to do is make sure that the VoIP competitor stays out so that you don't have anyone around to attack your PES monopoly.

4317 So, sure, if you are a monopolist, it would be best if these competitors weren't there at all, but if they are there your best bet is to manage the transition to VoIP, make sure that you are a big VoIP provider, that you have still got a relationship with the customer and that, through bundling, you keep those customers buying as many of your existing services as possible.

4318 It's a bit like -- the question was raised about the $5 Bell bundle. If you sort of know that long distance is going to eventually have low prices, why not bring in a bundle with an incredibly low cost? I mean, the Bell bundle is $5 for 1,000 minutes. That's half a cent a minute. The biggest banks, the biggest business customers in Canada do not get rates that even approach that and those rates are available to residential customers.

4319 So what Bell is saying is, "We are going to manage that transition, we are going to keep the customers with ourselves and we are going to bundle it with other services so that we can hang onto as much as we can hang onto for as long as possible".

4320 I think that's a bit analogous, so what I foresee going on in the VoIP market with deregulation.

4321 THE CHAIRPERSON: What would be the cable industry's reaction to that kind of bundle?

4322 MR. ENGELHART: Well, I mean, I think the problem with it is anybody who is thinking of trying something new, be it a cable phone line or something new, would be attracted to that really cheap telephone line from TELUS because it would be seen as a telephone line, as I described. If you get DSL from TELUS and Internet telephony from Yak, you have got an Internet dial tone, but if you get both from TELUS, it's a phone line. It's a phone service. It's offered by the good old phone company.

4323 I think people who are inclined to go to something different will buy that bundle instead and I think it will prove to be an enormous barrier, enormous obstacle, enormous hurdle for us entering the telephony business.

4324 MR. HENNESSY: Mr. Chairman, if I could just on that, in terms of the cable industry, as you know, we are not in the toll business right now. I think the fact that no competitor in the toll business or no CLEC has raised the issue of predatory pricing or filed a complaint, usually with the Competition Bureau or the Commission -- we certainly would if we were in that market now -- perhaps suggests, contrary to some of the evidence of witnesses like Dr. Crandall, that while classical economic theory may still be classical, the absence of virtually any competitors left in the toll market or in the local market that aren't affiliated with ILECs would suggest that type of anti-competitive behaviour is still an attractive proposition.

4325 THE CHAIRPERSON: Thank you very much. Those are my questions.

4326 Commissioner Colville.

4327 COMMISSIONER COLVILLE: Just one clarification, I guess, in the context of this access dependent and independent issue. I'm going back to the discussion that you had -- I guess perhaps more in your presentation, Mr. Engelhart.

4328 You gave the scenario with a call in Calgary that TELUS might offer on its DSL service, that you argue is effectively not independent at all, is really access dependent, and I take it -- would it be your view that, whether it's access dependent or independent, out of territory would be forborne consistent with our existing regulatory framework?

4329 MR. ENGELHART: Yes.

4330 COMMISSIONER COLVILLE: And then if it was in territory but not on their own network -- this may be somewhat hypothetical, I don't know -- let's say, for example, there was a part of their territory where they didn't have their DSL capability and they chose to use Shaw's network and offer a Vonage- or Yak-like service, how, in your view, would that fit into the regulatory framework?

4331 MR. ENGELHART: I think that in territory offered over the Shaw network should still be regulated. Now, I don't expect them to do a lot of that. I don't expect them to encourage people to go to the Shaw network.

4332 COMMISSIONER COLVILLE: That's why I said it's perhaps somewhat hypothetical.

4333 MR. STEIN: I will second that.

4334 COMMISSIONER COLVILLE: But nonetheless, you would argue it still should be?

4335 MR. ENGELHART: Yes. I can't paint you a scenario of what the anti-competitive evil would be. I have tried to come up with one. I don't know quite what it would be, why they would want to underprice people who are using Shaw.

4336 MR. HENNESSY: Can I try?

4337 I think that it goes back to the fundamental issue that if you are trying to maintain a customer relationship -- and again you go to the point that we are starting with 97 per cent of the local customers are customers of the telephone company -- if you are about to lose that customer because you are regulated in a certain field, then it's a way around, I think, the price cap regime and win-back rules, and everything else, as an alternative, to put that forward as a proposition, because the customer is still living in the same house, would still have the same telephone number. So you still get to keep the customer. And if you think about it, many of -- virtually all of the Shaw customers today that have cable modem service already subscribe to the local access of the telephone company. So I think there is a strategy there.

4338 MR. STEIN: Can I just comment on that?

4339 I don't want to describe the kind of ways in which we think TELUS might use an unregulated VoIP service to compete against us because I might them some ideas they might actually use. So I don't want to do that. But the basic thing is that in a customer's mind, a service, that is a local phone service, offered by TELUS is a TELUS phone service.

4340 I would think that would be exactly the way they would try to bundle it and try to retain their customers and, not only that, use it in terms of trying to take away high-speed Internet customers from Shaw, as well. So it would be, from a marketing point of view, maybe not an economic theory. It may not be a practical thing to do, but certainly from a marketing point of view it would be a pretty smart thing to do.

4341 The company has already indicated in various forms that it plans to do things to react that are exactly along those lines. It does have packages now out there -- on which we have filed -- which do significantly offer their Internet package at below cost, and for periods of time which we think are more than promotional.

4342 So there is a range of activities which desperate people would follow. The problem in all this is that as you enter into a new market situation, which is the case for Shaw, what you need to have is regulatory simplicity in this. That is really crucially important.

4343 If we are going to get into all kinds of situations which are: well, maybe it's a Category 3 service or maybe it's a Category 2 service, when our engineers can't sort out whether it's a Category 2 or Category 3 service or how it is being managed, I can't imagine how the Commission is going to be able to do that.

4344 So I think the essential point to keep in our mind here is they have 4 million access lines out there and we have none. So what we want to do is use the current framework that's already in place, that already supports facilities-based competition, to be able to go in there. And for them to suggest that: oh, well, VoIP is just another adjunct to the Internet service and you really don't need to regulate it, I mean, I admire their chutzpah, but it really does not make any sense, in terms of trying to enter this market, from the Shaw point of view.

4345 Thank you.

4346 THE CHAIRPERSON: How did they translate "chutzpah"?

4347 Thank you very much. Thank you.

4348 Commissioner Cram.

4349 COMMISSIONER CRAM: Just moving on that, we heard a fair bit yesterday about how telephony is just one of the solutions that can be sold over the Internet. Surely it would be possible not only to sell VoIP over an ILEC, to sell VoIP over cable access.

4350 What else could they also sell as a software application or as a solution? Could they sell video over that?

4351 MR. ENGELHART: Absolutely. They could sell a video service over a cable high-speed line. There would be no reason. There would just be a web site and you would pay a fee and download the signal.

4352 COMMISSIONER CRAM: So they could sell the two out of the triple three on your access line?

4353 MR. HENNESSY: Well, let's be clear, they could sell an on-demand Internet-based video service.

4354 COMMISSIONER CRAM: Okay.

4355 MR. HENNESSY: They couldn't resell our plant to provide a licensed broadcast distribution service.

4356 COMMISSIONER CRAM: Okay.

4357 Thank you very much, Mr. Chair.

4358 THE CHAIRPERSON: Thank you very kindly.

4359 Counsel.

4360 MS PINSKY: Thank you.

4361 Just a few questions of clarification. First, just in response to your discussion this morning with the chairman and Commissioner Langford, I just wanted to clarify your response because, in the end, I thought I heard two different responses.

4362 In the end, I thought I heard Mr. Engelhart saying, with regard to access independent services, that cable companies wouldn't have a problem with a Yak-type condition for Category 3 services, given that it's a managed network. In that case it would be inappropriate.

4363 I thought earlier Mr. Hennessy had said that, even in the case of a Category 2, if cable companies wish to invest more money and to upgrade their networks to provide their customers with a better quality of service, that they should be in a position to do so.

4364 I just would ask if you could clarify that.

4365 MR. HENNESSY: Well, yes. What you said I said, I said, and so I think it depends on whether Mr. Engelhart disagrees with me. I took the position if you go out to discriminate in a fashion that you either block or degrade, that is prima facie wrong. I think it's important to make the case that if you look at the three largest companies here, plus EastLink, nobody is really going into the market on an access independent basis in any event, right, so 90 per cent of the subscribers I represent, that's not the model.

4366 But I don't think you want to put a condition, then, on smaller cable companies that suggests they can't manage their business. I mean, I guess if you think it through, if it's access independent, then one would assume that they are not really managing it. I think the smaller guys, in a real access independent situation, most of the time will be handing off service to a CLEC. That's really how it's going to work.

4367 So it's probably at the control of the CLEC as to where the packets then go. But I would object to that kind of condition.

4368 MS PINSKY: Thank you.

4369 And then just to follow up, in terms of the resale model versus the managed network model, in Cogico's written submission, Cogico stated:

"As long as the interconnection regime will not permit an economic entry into the local telephony market, the resale option will remain the only way in most cases to enter into and to be competitive in the local market on a sustainable basis." (As read)

4370 I heard this morning that Cogico, like Rogers, would intend to enter the market on a managed network basis, presumably more of an access dependent basis.

4371 I was wondering if you could -- my first question is: has the Commission's decision relating a network interconnection had an impact on Cogico's position with respect to -- that I have just stated in its written submission with respect to the resale model?

4372 MR. AUDET: I think we have to clarify one point here. I think oftentimes when you hear a CLEC talking about resale, you think of somebody like, for instance, Sprint, who is a full-fledged CLEC, but they have to lease lines from Bell, so they are a reseller of the local access.

4373 We are completely the inverse of that. We have our own last mile, if you will, to the customer, and that's a managed network, indeed, but we are not going at it as a CLEC in the method of interconnection to the public switch telephone network.

4374 Rather, after very extensive economic analysis, we have found that there are two alternatives that are much more advantageous to us, in the very vast majority of our markets, if not all of our markets, because of the sizes of our market and those are an arrangement with the CLEC. Something that yields about the same economics is what Bell submitted as proposed Tariff Notice 68-12, which, incidentally, we certainly hope the Commission will look upon favourably because this is something that will be of great use to us.

4375 Have I answered your question, Ma'am?

4376 MS PINSKY: Perhaps, but I think I would need some further clarification.

4377 With respect to not becoming a CLEC, then, on the one hand, you are stating that you would operate a managed network, based on your own, of course, last-mile facilities that you own and operate.

4378 What I'm not getting is how would that cable company be operating as a reseller?

4379 MR. AUDET: I think if we connect through a CLEC to the PSTN rather than being a CLEC ourselves, I think by virtue of the definitions of the term, you would view us as a reseller.

4380 MS PINSKY: Well, actually, we view resellers as entities that do not own or operate transmission support.

4381 MR. STEIN: Well, the model we use, from the Shaw point of view, we will be using both models. We are a CLEC, we will meet those obligations, and we will also have, in terms of our Bell West agreement, we will be doing it in a different fashion, where we will be depending on them to do those things. Yet, from a customer point of view, the obligations that we undertake will be the same. So that's the model that we will be using, which will vary in terms of the markets that we are serving.

4382 MS PINSKY: Okay. So just to summarize, then, it's your position that you wouldn't be a CLEC because you would not have CLEC interconnection arrangements?

4383 MR. AUDET: That's correct, Ma'am.

4384 MS PINSKY: I would also like to clarify your response of the CCTA, which was made in response to an interrogatory posted by the Companies-14 that relates to eligibility to receive contribution.

4385 The CCTA stated:

"...that where the VoIP service is provided by a LEC, then access to the subsidy should be permitted...and that this would encompass both Category 2 and Category 3 services."

4386 I was wondering if you could comment on: given that current eligibility is based on the provision of both the access and the local, why would you think it would be appropriate to provide, in the case of Category 2 services and in the case where the provider is not providing the access portion, why they should be eligible to receive contributions?

4387 MR. HENNESSY: Let me demonstrate, while I have the brain trust behind me, by passing that question back to Suzanne Blackwell, our director of Telecommunications.

4388 MS BLACKWELL: Thank you, Michael.

4389 In responding to that interrogatory, we took the approach that if a V over IP service provider was operating as a CLEC, they have met certain obligations and the Commission had struck a balance between the obligations and privileges of CLECs, and included in that is the ability to receive contribution in high-cost serving areas. That was not written in the context of: what if there is a Voice over IP provider who is access independent or access dependent?

4390 I think we have seen a lot of discussion in the record as to the ability of an access independent Voice over IP operator to actually fulfil all the CLEC obligations. That may, in fact, not be possible. But that's something we will see in the fullness of time, in terms of how the market evolved.

4391 I think if you see an access dependent, as to return all of your calls, or a Category 3, as our cable members have described today, that is more likely to be an offering that will fulfil all the CLEC obligations, and therefore be eligible for contribution.

4392 Does that help?

4393 MS PINSKY: Thank you.

4394 I would also like to clarify an issue that was discussed this morning, as well as, of course, in your responses to your interrogatories, in relation to the cable companies' third-party Internet access service.

4395 As I heard you this morning -- actually, perhaps I will just refer to your response in the interrogatory.

4396 The CCTA stated, with regard to TPIA service:

"The restriction may not, however, limit the ability of a TPIA customer to separately offer its end users a service that allows voice calls to be transmitted over the public Internet. In such circumstances the TPIA service would be used to offer retail Internet services." (As read)

4397 This morning you stated, as well, that, to the extent that the voice telephony service would travel over the Internet, it would not be restricted. And I first wanted to clarify whether that included voice telephony services travelling over the Internet that have connectivity with the PSTN.

4398 MR. HENNESSY: Let me start again from the point that we are not suggesting that you remove the restriction.

4399 We are suggesting that today, as you pointed out in your first part, that it is possible -- it's acceptable for a customer of TPIA service to also separately offer a Voice over IP service. But we are very categorical that if you remove the restriction on the use of the broadband facilities to provide telephone service -- and you really can't distinguish between Internet and traditional CLEC service, circuit-switched services -- and you would put the cable companies in a position of unbundling, even though they are not incumbents or have no market power, you would be discriminating, I think, against us relative to any other CLEC in the market and forcing us in the position of providing a managed telephone service, either Internet-based or circuit-switch based, to other CLECs.

4400 Before we have even entered the market as a telephone company, we would be burden with the responsibility to ensure that other people's telephone service works well.

4401 I mean, I think our job starting out is going to be tough enough to learn the telephone business, without being saddled by those additional burdens. That's our concern about the need to retain the restriction.

4402 I'm not sure if Mr. Engelhart --

4403 MR. ENGELHART: I would just add that I think the answer to your question is, yes, that there is no problem with a third-party Internet access ISP that has a Vonage-type services that does have a PSTN access somewhere down the line.

4404 MS PINSKY: Thank you.

4405 MR. MURDOCK: Mr. Engelhart, I do have a follow-up question for you.

4406 Earlier in your submission you referred to wireless in the structural safeguards that the Commission imposed. I believe your comment was that, due to those safeguards, that's why the wireless industry is a success.

4407 TELUS, in their written submission, in June, section 5.3, part of that submission is called the Wireless Analogy and part of that argument says that wireless uses NANP numbers, the last subscriber to make or receive calls from the PSTN, and they also have -- access independent VoIP services have mobility features similar to wireless.

4408 You also said that in the VoIP services context, the primary concern from an economic regulation perspective is the possibility for anti competitive conduct similar to the concerns in the wireless industry.

4409 I was just wondering, in your view, are there safeguards outside of RAID Regulation which you see being effective in the VoIP services context, other than RAID Regulation?

4410 MR. ENGELHART: Well, I think there is a sort of a whole package of safeguards that the Commission has today that go along with RAID Regulation. So, the prohibition against promotion, the wind-bag rules, the bundling, the current bundling rules and perhaps upon the conclusion of 2003-10 new bundling rules, so I think there is a whole package of safeguards that drives along with RAID Regulation which are very important.

4411 MS PINSKY: All right. I wanted to ask whether in the situation where the cable company is providing a managed VoIP service, would a competitor Internet access provider still in a position to obtain TPIA so that that competitor could offer your subscribers Internet access?

4412 MR. HENNESSY: In retail Internet service.

4413 MS PINSKY: Yes.

4414 MR. HENNESSY: Under the... yes.

4415 MS PINSKY: Those are my questions, Mr. Chairman.

4416 THE CHAIRPERSON: Just one follow-up. I was going to ask you to comment on the final paragraphs on the comment submission, but you did address and we discussed the non discriminatory access point and the bundle access point that they have raised. The only one remaining and it flows from your discussion with counsel just now. They said that you should have to register as CLECs and comply with the regime governing CLECs in the same way as COMA and other local exchange carriers. Do you have a comment? I take it your position is that you intend to comply with the regime, but some of your members may not want to register as CLECs. Is that correct?

4417 MR. HENNESSY: Sorry, I thought I had pushed the button there. Yes, in general, I think everybody has been registering as CLECs that is coming into the market on a facilities basis.

4418 THE CHAIRPERSON: Well, I think the discussion with COGECO pointed to...

4419 MR. HENNESSY: Okay. Let me just...

4420 THE CHAIRPERSON: Their theory was that they were going to operate as a reseller. Now, does that... perhaps Mr. Audet, you can clarify. Would you say that you were going to comply with the regime governing CLECs, but that you didn't think you needed to register or have I got your position wrong?

4421 MR. AUDET: I think... no, it's not that we have a preference for being considered a reseller versus a CLECs, but it's just if we interconnect through a CLECs, and the benefit of that is essentially rather than duplicating the facilities that these people have painfully built in small markets, to be a welcome customer there that has, you know, some leverage existing facilities and improve the returns on those and achieve more predictable cost for ourselves so it suits everybody. So, for one thing, I think there is nothing wrong in that approach, but I think as we do that, it's actually you would view us as a reseller rather than as a CLECs. The fact that we would be attaching to a CLECs network and, therefore, not touching the ILEC directly, I think that's what you call a reseller.

4422 THE CHAIRPERSON: But leaving aside the issue as counsel mentioned of the ownership and operation of transmission facilities, which is usually the turning point on that, do you see any obligation of the CLECs that you would not be undertaking, in virtue of that step?

4423 MR. AUDET: No. Because there is, you know, every CLECs has been very insistent on this, that there are in the regulations some CLECs obligations that they must flow through to their resellers. So, we would be... everything that is an obligation, a flow through obligation to a reseller, we would abide by. And are there anyone in particular that...

4424 THE CHAIRPERSON: That wasn't my question. No, no. I was wondering whether you saw it from your point of view whether that status was conferring on you the ability to not discharge any obligation.

4425 MR. AUDET: No. We realize that we have to support the framework and to be good citizens.

4426 THE CHAIRPERSON: The number of parties suggested that they wanted to be treated, they wanted to have some of the rights of CLECs and yet, in discussions yesterday, such as the ability to get numbers directly rather than have to go through a SELEX, but I assume that in your arrangement that is isn't an issue.

4427 MR. AUDET: Yes. We haven't seen an issue with that because, of course, the SELEX that we have been talking to are willing to support a functionality such as LNP on our behalf and to assign ported numbers as VID on the T1PIR serving us. So, numbering has not actually been an issue.

4428 Would there be a benefit for us in being able to obtain numbers directly? We would actually have to have them assigned to the SELEX switch for them then to be able to, in turn, assign them as VID to us. I am not sure there is a benefit there. If there were, I am assuming this is something we would be able to address later on as the need evolves.

4429 THE CHAIRPERSON: Thank you.

4430 Those are our questions. Thank you very much. Madame la secrétaire.

4431 LA SECRÉTAIRE : Merci, monsieur le président.

4432 Nous allons maintenant poursuivre avec la Comparution numéro 30 de Quebecor Média Inc. Bonjour, messieurs; s'il vous plaît. À l'ordre. Vous devez vous présenter, s'il vous plaît et vous disposez de 20 minutes pour votre présentation.

PRÉSENTATION / PRESENTATION

4433 M. GOUIN : Monsieur le président, monsieur le vice-président en Télécommunications, membres et personnel du Conseil, mesdames et messieurs.

4434 Mon nom est Serge Gouin et je suis président et chef de la direction de Quebecor Média. Avec mon équipe, je représente aujourd'hui deux filiales de Quebecor Média : le câblodistributeur Vidéotron et l'entreprise de services locaux concurrents, Vidéotron Telecom.

4435 Les personnes qui m'accompagnent sont, à ma droite, Robert Dépatie, président et chef de la direction de Vidéotron; à ma gauche, André Gascon, vice-président Informatique chez Vidéotron et chef de projet pour le lancement de la téléphonie locale; derrière moi, Édouard Trépanier, vice-président Affaires réglementaires et Dennis Béland, directeur Affaires réglementaires et télécommunications, tous deux de Quebecor Média.

4436 Nous sommes venus vous livrer un message très simple : le cadre réglementaire actuel de la téléphonie locale est judicieux. Il favorise la concurrence entre entreprises qui exploitent leurs installations et ne s'appuient pas sur une technologie spécifique, mais il tient compte du fait que des restrictions doivent être imposées à l'entreprise titulaire dominante pour développer une concurrence saine et durable.

4437 Ce cadre réglementaire judicieux, il est présentement attaqué de la gauche et de la droite. D'une part, Bell Canada cherche à vous convaincre que la technologie voix sur protocole Internet (« VoIP ») volatise soudainement son pouvoir de marché et vise le retrait des garanties réglementaires qui sont gages d'une concurrence durable. D'autre part, les pique-assiettes écumeurs de marché qui ne sont pas dotés d'installations veulent qu'on ne leur impose aucune obligation et invoquent l'univers magique de l'Internet pour leur permettre d'utiliser sans compensation les réseaux que d'autres ont payés.

4438 Le Conseil peut et doit résister aux attaques de ces deux groupes intéressés et défendre le cadre réglementaire bâti pour stimuler une vraie concurrence viable. Ce qui compte, c'est le service public et non pas la technologie. Bell est dominante dans le marché du service local et elle le demeurera, dominante, même si elle change de technologie.

4439 Les pique-assiettes écumeurs de marchés qui tentent de camoufler le fait qu'ils offrent un service de téléphonie locale doivent se soumettre aux mêmes règles que les autres concurrents.

4440 En bout de piste, si le Conseil maintient le cadre réglementaire en place et contrôle la dominance de Bell, les concurrents qui exploitent les installations comme Quebecor Média pourront, dans un avenir rapproché, livrer la concurrence très attendue aux bénéfices des Canadiens.

4441 Let's take the time to review the core elements of the Commission's local competition vision as expressed in Telecom Decision 97-8. These core elements were then and remain to this day the following: One, the true facilities-based competition, that is to say the provision of services over competing physical access networks is most likely to procure meaningful benefits to the public. Second, that the benefits competition should not be limited to large business customers, but should also extend to residential customers throughout urban and rural Canada. Third, that the local competition framework should be technology-neutral, which is to say it should embrace innovative technologies, provided those who adopt these new technologies are prepared to embrace the regulatory responsibilities and lastly, that regulatory safeguards on local telephone incumbents should remain in place until it can be factually demonstrated that the incumbents have lost their market power.

4442 Quebecor Media's local telephony project is in complete alignment with this vision. Fist, we intend to provide local telephony services over our own access facilities. Second, we intend to rapidly extend service availability to residential and small business customers across virtually our entire interconnected digital network footprint which currently encompasses some 2.5 million household throughout urban and rural Quebec. Third, we will employ an innovative IP-based technology without requesting any special considerations or derogations from established regulatory responsibilities. And fourth, we view our ability to move forward with this project as heavily contingent on the Commission's willingness to apply effective safeguards against abuser practices on the part of the dominant local telephone incumbent.

4443 In short, we are saying that the Commission's existing local competition policy framework as set out in Decision 97-8 is a good and proper one and with the investments now being undertaken by Quebecor Média and other facilities-based providers, the Commission's vision is about to be fulfilled.

4444 As I mentioned earlier, there are certain parties to this proceeding who do not share the Commission's vision. These parties have seized upon the emergence of VoIP technologies as a convenient vehicle promoting their own self-serving regulatory agendas, agendas which we submit are hostile to the founding principles of Decision 97-8.

4445 Let's first look at Bell Canada. One would have had to be vacationing on a distant Pacific Island for the past several months not to have heard the persistent drum beat of Bell's claim to have lost its dominance in the local telephony market. Not a speaker's forum nor a regulatory proceeding has been spared. Bell's supporting arguments and packaging have shown themselves to be quite malleable. For example, we have heard about the need for "symmetrical regulatory framework" between telcos and cablecos, ignoring of course asymmetries between the two most notably the dramatic asymmetry in financial resources and market power.

4446 We have also heard about the migration of local wireline minutes to wireless, ignoring of course that only a tiny fraction of local wireline subscribers have migrated to wireless and abandoned wireline. Indeed, Bell's local residential service revenues, the true foundation of Bell's dominance have continued to grow throughout this alleged period or hardship.

4447 When talking about VoIP, Bell even seems willing to contradict itself. First, they argue that VoIP local services are functioning different from traditional local services and, therefore, must be deregulated when provided by Bell. Next, they argue that VoIP local services occupy the same market space as traditional local services and, therefore, traditional local services must also be deregulated when provided by Bell.

4448 We refer here to the local forbearance application filed recently by Bell's subsidiary alliance.

4449 The arguments shift, but the bottom-line objective always remains the same, in a complete deregulation of all services provided by Bell. Bell's approach is so persistent that one is forced to ask, what do they really want from deregulation? Are they looking for the power to increase prices in captive markets? To decrease prices in competitive markets? To flood the market with bundled offers that no other company has the scale or scope to match? Our response is, all of the above. And in effect, what Bell seeks is the flexibility to use its massive resources to kill competition and thereby, to extend its dominance across the broader communications industry.

4450 From Quebecor Media's perspective, this threat of extended dominance is not an idle threat. Bell has developed over the years a remarkable ability to seize every available opportunity to circumvent the regulatory safeguards that apply to it, then mask the reality of its dominance by flooding all possible audiences with a kinder, gentler virtual image of itself.

4451 The Bell Nexxin experience comes prominently to mind. All too often this strategy has worked well for Bell. This time we believe the stakes are too high. We at Quebecor Média are encouraged by the proposals put forward as part of Public Notice 2003-10 to strengthen the regulatory safeguards against abusive incumbent bundling practices and below-cost pricing practices.

4452 These new measures will help to give at least a fighting chance for sustainable competition to take hold in Canada, but they will not be enough. The Commission must remain ever vigilant in protecting against new abuses and new mechanisms invented by Bell to perpetuate its dominance.

4453 Bell's recent multi-service bundled offering which includes a thousand long distance minutes a month for under $5 under a two-year contract is the latest case in point. Only a company of Bell's financial size and scope could possibly contemplate such an uneconomic price point.

4454 Furthermore, because incumbent provision of local and long distance services are so tightly integrated in customers' minds, Bell has effectively found an indirect way, and I would say a very smart way, to offer a heavily discounted local service bundle, something which it cannot do directly.

4455 This one action on the part of Bell has destroyed the business case for residential long distance competition in Bell's territory and has chopped tens of millions of dollars off of Quebecor Média's local telephony business case. That might be small change to Bell, but it's not to us.

4456 At the end of the day, the true portrait of Bell's dominance lies in hard financial and markets statistics. These statistics are well-known, but I believe they bear repeating for the record.

4457 In 2003, Bell Canada and its subsidiaries had total operating revenues more than 20 times those of Vidéotron, Bell's earnings before interest, taxes, depreciation, amortization (EBITDA), stood at more than 23 times Vidéotron's level. We are talking about $7.1 billion of operating income versus $305 million for Vidéotron.

4458 Focusing more precisely on the residential telephone sector, in 2002 the incumbent share, including Bell, of residential local line in Canada stood at 98.6 per cent while their share of local residential revenues stood even higher, at 98.9 per cent. In other words, almost six years after the introduction of local competition, the market share of new entrance into the residential markets stood at a little more than one per cent.

4459 In dramatic contrast, as of the end of 2003, Bell through its Bell ExpressVu subsidiary had succeeded in capturing an estimated 36 per cent market share in the provision of digital broadcast distribution services in Canada, for a total of 1.4 million subscribers.

4460 Which Canadian corporation other than Bell could afford to risk over $1 billion in a relatively short period of time to secure such a large market share.

4461 Clearly, the financial playing field in Canadian communications is far from level and the results in the marketplace are far from "symmetric".

4462 Bell has succeeded in making real and deep inroads into broadcast distribution, financed by profits from its local telephone near-monopoly, as permitted under the current regulatory regime.

4463 Yet the only evidence Bell can assemble to justify its call for local telephone deregulation is a collection of speculative opinions on the future impact of VoIP technologies.

4464 Regulatory decisions, however, must not be based on speculation, but on facts. Regulations represent the very parameters within which a business can start and then can evolve.

4465 Were the Commission to prematurely deregulate the local telephone incumbents, based on a little more than speculative and fantastic assertions about the impact of VoIP technologies, this would, in our opinion, deal a fatal blow to the prospect of sustainable local competition in Canada.

4466 We respectfully urge the Commission to reject the Bell agenda, to hold the line on local market forbearance and to examine the issue of forbearance only when there is meaningful evidence on which to do so.

4467 Let's turn now to the access-independent VoIP providers. Several of these providers are active participants in the current proceeding and collectively they have assembled an impressive list of desired derogations from the Commission's existing local competition policy framework in areas such as 911 service quality and fees and the payment of contribution.

4468 In attempting to justify these derogations, several of the access-independent VoIP providers have attempted to cloak themselves in the mantle of "Internet freedom". Regulate them, the argument goes, and you consign our society to the cyber backwaters.

4469 Interestingly, however, these players have no inhibitions about calling for mandated access to the productive capital investments of others without compensation, a policy not historically known to stimulate innovation and economic growth.

4470 Quebecor Média finds such demands frankly outrageous and we are at a loss to see how they could possibly be consistent with the Commission's long-standing policy of encouraging facilities-based competition.

4471 The access-independent VoIP providers say they just want to be free. It appears to us they just want a free ride. Thankfully, the Commission has readily available tools for controlling these abuses and ensuring compliance with its regulatory framework. It is the allocation of telephone numbers, a scarce public resource which access-independent VoIP providers can only obtain from Local Exchange Carriers under direct Commission's jurisdiction.

4472 If the activities of access-independent VoIP providers are not consistent with or in compliance with the Commission's local competition policy framework, then we submit they should be denied access to telephone numbers.

4473 This will help to ensure that facilities-based competitors are not disadvantaged in their efforts to bring true and fair local competition to Canadians.

4474 Mr. Chairman, if I may be allowed to sum up, my team and I are here to tell you that the Commission's existing framework for local competition is fundamentally sound. It is facilities-based, it is technology-neutral and it recognizes that incumbent dominance has to be contained. It requires no modification to accommodate the IP telephony offering of Quebecor Média.

4475 Indeed, through the efforts of facilities-based competitors like us, this framework is on the verge of delivering the sweeping consumer benefits it was designed to deliver.

4476 Your challenge as a regulatory body is not to invent a new framework, but rather to protect the existing framework from those who seek to undermine it. And make no mistake about it, your framework is under attack. It is under attack from Bell Canada who would have us believe that the emergence of VoIP has magically evaporated its overwhelming market power in local telephony, but whose real objective is to secure the pricing and bundling powers necessary to kill competition and is under attack from access-independent VoIP providers who would have us believe that the path to local telephone competition in Canada consists over leaving them of their regulatory obligations and granting them the right to free-ride on the network investments of others.

4477 We respectfully urge you to resist these pressures and to reaffirm the wisdom of the rules you established in Decision 97-8. If you hold the line, we can deliver the goods. And in so doing, we firmly believe that Quebeckers and all Canadians will reap the sweeping benefits of true local competition.

4478 Merci de votre écoute et mes collègues et moi sommes prêts à répondre à vos questions, du moment qu'elles ne sont pas trop techniques.

4479 LE PRÉSIDENT : Merci bien, monsieur Gouin. On va prendre une pause café maintenant et on continuera avec les questions dans 15 minutes.

4480 We will resume at 1120.

--- Upon recessing at 1107 / Suspension à 1107

--- Upon resuming at 1125 / Reprise à 1125

4481 THE CHAIRPERSON: Order, please. À l'ordre, s'il vous plaît. We will begin the questioning. Madame Noël.

4482 CONSEILLÈRE NOËL : Alors, bonjour, messieurs; monsieur Gouin, monsieur Dépatie, monsieur Gaston et les gens de l'arrière-banc, messieurs Trépanier et Béland.

4483 Monsieur... vous étiez en forme ce matin, monsieur Gouin? Vous avez mangé un petit steak de lion avec vos oeufs?

4484 M. GOUIN : Ah! on l'a mangé plus tôt, avant de l'écrire.

4485 CONSEILLÈRE NOËL : Vous l'aviez mangé plus tôt?

4486 M. GOUIN : Avant de l'écrire.

4487 CONSEILLÈRE NOËL : J'ai pris note de ce que vous appelez les « pique-assiettes écumeurs ». Pouvez-vous, les écumeurs de marché et les pique-assiettes écumeurs de marché, nous les définir un petit peu plus? Vous faites référence à tous ceux qui ne sont pas... est-ce que vous faites référence à tous ceux qui n'ont pas de...

4488 M. GOUIN : Oui. Ceux qui ne sont pas facilities-based.

4489 CONSEILLÈRE NOËL : Okay.

4490 M. GOUIN : Yak, Primus, Vonage de ce monde.

4491 M. GOUIN : Et T&T et compagnie?

4492 M. GOUIN : Oui, madame.

4493 CONSEILLÈRE NOËL : Alors, on va parler de votre réseau pour commencer. J'ai pas beaucoup de questions. J'en ai quelques-unes qui vont porter sur vos facilités et d'autres qui vont porter sur les services qu'on a qualifiés tout le long de cette semaine, de services sociaux.

4494 Alors, au moment où vous seriez en mesure d'offrir un service de Voix sur IP, parce que c'est cela que vous allez nous offrir, un service de Voix sur IP, d'après votre présentation de ce matin, qui va être disponible, je suppose, sur votre réseau à haute vitesse, est-ce que vous serez en mesure encore d'offrir... que votre service sera disponible d'offrir un accès Internet? Un accès Internet, ça a des tiers, TPIE auquel on fait référence quand on utilise l'acronyme anglais et qui permettrait à un client, par exemple, de souscrire à votre service de Voix sur IP, tout en utilisant l'accès Internet haute vitesse d'un autre fournisseur?

4495 M. DÉPATIE : Oui. La réponse est oui.

4496 CONSEILLÈRE NOËL : La réponse, c'est oui. Est-ce que ça implique, par exemple, des modifications à votre service TPIA?

4497 M. DÉPATIE : Non. On peut offrir, nous, via notre service actuel, via notre Modem un service téléphonique et l'utilisateur pourrait utiliser...

4498 CONSEILLÈRE NOËL : Mais si accès Internet est fourni par un autre fournisseur?

4499 M. DÉPATIE : Il n'y aurait pas de problème?

4500 M. DÉPATIE : Non.

4501 CONSEILLÈRE NOËL : D'accord. Maintenant, quand on regarde les réponses que vous avez données à la question... je vais vous donner la référence, c'est QMI.CRTC 16 juillet 04-5, où on demandait si... ou Primus en fait a soulevé dans son exposé du 18 juin la question suivante puis, là, je vous cite :

"One other example of an obstacle to competitors' use of the cable companies networks relates to the restrictions contained in the TPIA tariff on the use of VoIP services. In terms and rates approved for large cable carriers, higher speed access service, Order CRTC 2000-781, the Commission explicitly states that higher speed retail Internet service does not include Internet Protocol based voice telephony service."

4502 Et Primus continue en disant qu'on devrait éliminer la restriction qui apparaît à l'Ordonnance 2000-789. Dans votre réponse, vous dites :

"Cable companies like QMI are undertaking considerable incremental investments and absorbing considerable incremental business risk to equip their hybrid fibre optic coaxial cable networks to support quality local telephony services."

4503 QMI, vous me pardonnerez d'utiliser ça en français :

"QMI is of the view that it would be counter-productive and, indeed, detrimental to the Commission's long-standing policy of encouraging facilities-based competition in telecommunications to force the carriers making these investments to turn around and offer up the resulting benefits to third parties on mandated terms.

4504 Pouvez-vous élaborer là-dessus? J'aimerais comprendre un petit peu plus votre position. Alors, ce que vous voulez dire, c'est qu'aucun de vos écumeurs, pique-assiettes écumeurs de marché ne devrait pouvoir utiliser votre réseau pour ensuite connecter au réseau public. Est-ce que j'ai bien compris?

4505 M. GOUIN : Oui, vous avez bien compris. Le principe, c'est qu'on nous demande de mettre sur pied les installations techniques requises pour fournir un service équivalent ou meilleur à celui qui est offert par Bell, ce qu'on fait.

4506 En plus, ce qu'on oublie de mentionner toujours, ce sont les coûts de mise en marché de ces services-là qui peuvent être aussi importants que les coûts technologiques. Et comme entreprise, nous, on va faire les deux investissements vous savez, des investissements considérables, et tout ce qu'on demande au Conseil, c'est, laissez-nous un cadre réglementaire qui nous permette de rentabiliser ces investissements-là, non pas seulement dans le hardware et le software, mais aussi dans la mise en marché et tous les procédés administratifs requis pour supporter une telle business. C'est ça notre point de vue. Maintenant, peut-être que mes collègues en arrière ont d'autres choses à ajouter.

4507 M. DÉPATIE : Peut-être Édouard.

4508 M. TRÉPANIER : Bien, c'est un point de vue affaires, je pense que c'est exactement ce que mon président vient de dire, mais d'un point de vue réglementaire. Le Conseil, depuis qu'il a établi sa politique de la concurrence à partir même du rapport sur la concurrence de 1995, de la politique du gouvernement qui en a suivi et de toute les décisions de télécommunications qui ont suivi cette politique-là du gouvernement et du Conseil, ça a toujours été basé sur le fait qu'on devait à un moment donné arriver à faire concurrence au ILEC avec des installations, de façon à ce que la concurrence soit là 10 ans plus tard.

4509 Alors, c'est dans ce sens-là que la réponse que vient de donner mon président est la meilleure réponse.

4510 CONSEILLÈRE NOËL : Mais est-ce que... est-ce que vous devriez avoir, à ce moment-là, un traitement différent des ESLT, dans le sens où elles seraient obligées de fournir l'accès et, vous, vous n'auriez pas à le faire? ILEC en bon français?

4511 M. GASCON : Effectivement, puisqu'on parle ici de réglementation qui s'applique aux entreprises titulaires et nous n'avons aucun abonné, aucun client à l'heure actuelle en téléphonie et ils sont les dominants et, effectivement, ça devrait être différent et l'accès devrait être imposé sur les réseaux des entreprises titulaires et non pas sur les réseaux de distribution par câble.

4512 CONSEILLÈRE NOËL : Je vous remercie. Alors, est-ce que je dois comprendre que vous allez demander un statut de... ou vous avez déjà le statut d'une NLFC ou CLIC.

4513 M. GASCON : C'est une compagnie soeur.

4514 M. GOUIN : Ça, on le comprend, oui.

4515 CONSEILLÈRE NOËL : Maintenant, je voudrais vous poser quelques questions. Vous avez mentionné dans votre texte ce matin, j'essaie de retrouver où, j'ai mis des petits papiers jaunes, la page 3 :

"Third, we will employ an innovative new IP based-technology without requesting any special considerations or derogations from established regulatory responsibilities."

4516 Est-ce que je dois comprendre par là que votre plate-forme de software va vous permettre d'offrir le service 911 ou 911 amélioré, le respect de la vie privée, les garanties pour le respect de la vie privée, et caetera, et caetera, dès le moment où vous allez offrir le service à des abonnés éventuels?

4517 M. GASCON : Effectivement, notre service de voix sur IP rencontrera l'ensemble des exigences du CRTC en matière de vie privée, test 11, et caetera.

4518 CONSEILLÈRE NOËL : Même si on parle d'un service mobile?

4519 M. GASCON : Notre service est désigné pour être un service fixe et non pas un service mobile.

4520 CONSEILLÈRE NOËL : Vous offrirez seulement un service fixe et non pas un service mobile. Dans l'éventualité où vous offrirez un service mobile, est-ce que vous avez des pistes de solution ou s'il n'y a pas de... vous n'avez pas du tout l'intention d'offrir un service mobile? Supposons que, moi, qui voyage continuellement, j'ai votre service de téléphonie sur IP sur mon super merveilleux ordinateur portable puis je m'en viens ici à Ottawa puis je suis mal à l'hôtel, je fais 911, il m'arrive quoi?

4521 M. DÉPATIE : Le plan d'affaires qu'on a déposé, nous autres, comme André l'a dit, c'est un plan d'affaires basé sur une ligne fixe, c'est un service local. Donc, on a même pas élucidé la possibilité au moment où on se parle, d'offrir le service mobile, comme vous identifiez. Donc, ce n'est pas dans nos plans au moment où on se parle.

4522 M. GOUIN : Je vous suggérerais d'appeler « 0 » à l'hôtel pour qu'ils s'occupent de vous.

4523 CONSEILLÈRE NOËL : Oui, mais là on met une interface entre moi et la personne qui va me répondre.

4524 M. GOUIN : Non, mais c'est pas un plan d'affaires qu'on a regardé. Nous, ce dont...

4525 CONSEILLÈRE NOËL : Vous n'avez pas considéré la possibilité.

4526 M. GOUIN : On n'a pas considéré ça du tout, ce n'est pas... ce n'est pas notre priorité...

4527 CONSEILLÈRE NOËL : ... d'offrir un service mobile.

4528 M. GOUIN : Non. Quand on le considérera, si jamais on le considère, à ce moment-là, on regardera les implications comme on les a regardées pour le fixe, puis on s'assurera de regarder toutes les exigences.

4529 CONSEILLÈRE NOËL : En parlant de fixe, on va parler de ce qu'on appelle en anglais "FX", foreign exchange, ça non plus ça ne fait pas partie de votre plan d'affaires?

4530 M. GOUIN : Vous parlez de service longue distance?

4531 CONSEILLÈRE NOËL : De service avec un code régional d'une autre région, un numéro étranger?

4532 M. GASCON : En fait, on va respecter toutes les règles au niveau des circonscriptions telles qu'établies par le CRTC. Donc, on ne fera pas des numéros de téléphone à un client résidentiel qui ne correspond pas à sa circonscription.

4533 CONSEILLÈRE NOËL : Pas à la zone de...

4534 M. GASCON : Exact.

4535 CONSEILLÈRE NOËL : D'accord. Maintenant, vous avez entendu les agences d'urgence 911, celles de l'Ontario, celles du Québec, la Ville de Calgary, et ces gens-là sont d'avis qu'on devrait carrément ordonner aux entreprises de ne pas fournir de services ou l'accès aux fournisseurs de service qui ne rencontrent pas toutes les exigences sociales. Bien, enfin, ils sont plus concernés par la sécurité, notamment le 911, et le 911 amélioré. Qu'est-ce que vous pensez de leur position?

4536 M. BÉLAND : Ce qui nous inquiète, c'est la possibilité qu'il y aura des joueurs dans le marché local des télécommunications puis on considère que ces joueurs-là feront partie du marché local des télécommunications qui essaieraient d'éviter leurs obligations.

4537 On se comprend qu'il y aurait peut-être des questions d'ordre technique qui doivent être étudiées et améliorées et ça serait étudié au site, mais ce qu'on trouverait complètement inacceptable, ça serait cette notion que quelques-uns de ces intervenants ont véhiculé qu'on pourrait l'essayer peut-être au marché, de déterminer qui va offrir un service 911 de quelle qualité.

4538 Pour nous, on considère déjà que ce sont des joueurs qui n'ont pas investi dans les installations, déjà c'est un énorme avantage qu'ils ont. En plus, de demander à éviter leurs obligations sociales, on trouve ça inacceptable.

4539 CONSEILLÈRE NOËL : Maintenant, si on passe à quelque chose de tout à fait différent. Je passe un petit peu du coq-à l'âne, mais vous avez parlé abondamment d'une ESLC qui oeuvre au Québec, en Ontario et par le biais de filiales dans les Maritimes, mais vous n'avez pas parlé de l'autre qui est à l'autre bout du pays et qui a offert une espèce de solution différente aussi, où on parle d'accès découplé et de la possibilité d'offrir le service de voix sur Protocole Internet non réglementé en autant que l'accès soit découplé. Je parle ici de la position de Telus. Est-ce que vous avez des commentaires à nous faire là-dessus?

4540 M. GOUIN : Je pense que je comprends que le Conseil a des façons de définir les niveaux de service. Pour nous, ce sont des jeux de mots, ce sont des occasions que vous pourriez donner au service local de trouver des débouchés pour se servir de son monopole pour, encore là, s'assurer qu'il minimise la concurrence. Pour nous, je pense que les gens avant nous du CCTA ont bien fait le point que, indépendamment du niveau de service que vous définissez, que ce soit celui-là ou l'autre qui serait facilities-based, pour l'abonné, pour le consommateur, c'est le même service. C'est indépendant de la façon dont le service est livré technologiquement.

4541 Pour la compagnie de téléphone, évidemment, c'est une opportunité, si on dérèglemente cette partie-là du service, de se servir de sa dominance totale du marché local pour arriver à faire des bundles qui seront.. qu'il sera impossible aux concurrents de concurrencer. Et donc, je pense qu'il faut faire attention de ne pas définir ces services-là de façon à ouvrir une porte parce que c'est certain que nos concurrents sont des gens très intelligents, je ne les sous-estime pas, ils sont très imaginatifs et dès qu'ils voient la porte entrouverte, ils vont s'en servir pour sortir des packages qui sont au-delà de toute concurrence et je ne les blâme pas, je ne leur dis pas que ce n'est pas des bons hommes d'affaires, c'est des bons hommes d'affaires, ils font ce qu'ils devraient faire pour leur entreprise, mais ils n'accompliront pas comme ça l'objectif du Conseil qui est de voir à l'établissement d'une concurrence durable dans le domaine du service local.

4542 CONSEILLÈRE NOËL : En parlant de bundle, monsieur Gouin, vous mentionnez quelque part que la nouvelle offre de Bell avec les interurbains à 5,00 $ -- page 6, merci -- avec les interurbains à 5,00 $, va miner le marché de l'interurbain au Québec, mais surtout has chopped tens of millions of dollars of Quebecor Média local telephony business case.

4543 M. GOUIN : Il n'a pas seulement mis en danger; il a tué la business et j'aimerais que monsieur Dépatie vous en parle.

4544 M. DÉPATIE : Écoutez; on a bâti, évidemment, un plan d'affaires auprès du Conseil d'administration qui tenait compte de l'interurbain, des longues distances, évidemment, et c'est de là que monsieur Gouin dit que ça nous a, lorsqu'on prend notre plan en considération, perdu des millions de dollars.

4545 Mais le point qui est le plus important aussi, c'est que je viens du domaine de l'alimentation, moi, qui est quand même un marché extrêmement concurrentiel et je n'ai jamais vu de ma vie un joueur aussi dominant que Bell Canada.

4546 Par exemple, le bundle, dans l'espace d'un an on a vu des offres ou des forfaits bundle avec des rabais jusqu'à 20,00 $. Par la suite, ils ont décidé... par mois. Par la suite, ils ont décidé, bien, on va offrir les interurbains 100 minutes gratuit.

4547 Par la suite, on va offrir des interurbains 100 minutes gratuit, mais aussi on va mettre des contrats de 24 mois avec des meilleurs escomptes et, pour les garder, avec des pénalités. Et finalement, tout récemment, comme vous le savez fort bien, comme Serge l'a dit aussi, le fameux forfait 1000 minutes à 5 $.

4548 Donc, tout ça fait que déjà là, sans même avoir changé les règlements, ils montrent clairement ce qu'ils sont prêts à faire. Donc, imaginez-vous ce qu'ils peuvent faire, c'est ce qu'on veut dire, dans un domaine qui devient dérèglementé.

4549 Dans l'oeil du consommateur, quand il a son service interurbain de Bell, pour lui il faut qu'il garde le service de base. Ça fait que, nous, ce qu'on voit, c'est qu'ils ont fait signer, mais je ne sais pas à combien de personnes, le Conseil pourrait seulement vérifier, ils ont fait signer un paquet de consommateurs, des contrats de deux ans. Donc, ils ont sécurisé une partie du marché. Avant même qu'on commence à faire la première publicité, qu'on annonce qu'on va lancer le service, ils sont déjà en poste pour essayer de contrôler le marché.

4550 CONSEILLÈRE NOËL : Mais vous dites que votre plan d'affaires était basé sur l'interurbain. Est-ce que...

4551 M. GOUIN : Non, non, il y avait une partie des revenus de la rentabilité venait de l'interurbain, mais, là, c'est disparu.

4552 CONSEILLÈRE NOËL : Oui. Bien, c'est ce que je voudrais comprendre parce que quand on voit tous ceux qui nous ont parlé de la Voix sur IP, c'était la merveille et c'est que les appels interurbains n'existaient plus, qu'on faisait des économies substantielles parce que tous les appels pratiquement étaient devenus des appels locaux. Alors, expliquez-moi donc.

4553 M. DÉPATIE : Okay. C'est juste qu'il faut faire attention. Nous, on est... encore une fois on l'a dit tout à l'heure, un appareil, une ligne téléphonique fixe. Il y avait toujours un modèle payant, qui n'était pas aussi payant. Ce que ça changeait, c'était les paramètres. Ce n'était plus à la minute, ça pouvait être un forfait, qui nous permettait de réduire les coûts d'interurbains, mais il y avait quand même un revenu et, là, on voit que le revenu est diminué.

4554 Évidemment, les revenus étaient moindres que le modèle d'affaires existant auprès de noter concurrence, mais il était quand même là. Avec ce qu'on vient de voir là, c'est au-delà de ce qu'on avait planifié, c'est vraiment incroyable la baisse.

4555 CONSEILLÈRE NOËL : Ça c'était un forfait qui était offert si vous offriez d'autres services avec ça, d'autres services qui ne sont pas réglementés?

4556 M. DÉPATIE : Dans notre cas à nous, non.

4557 CONSEILLÈRE NOËL : Non, non, non. Je parle du service du forfait que Bell a offert?

4558 M. DÉPATIE : Oui, c'est avec deux services, mais tous nos... en tout cas, écoutez, nous on sait fort bien qu'il y a encore une association qui fait que lorsque tu as deux forfaits Bell et tu donnes un package de 1 000 minutes, si tu amènes cette même association-là, comme Serge le dit si bien, ils se sentent comme obligés de rester à la ligne locale, malgré que ce n'est pas une obligation, mais il y a ce phénomène-là. Écoutez, 99 pour cent de pénétration, 96.7 pour cent si les chiffres sont exacts de part dans le marché, c'est assez dominant, merci.

4559 CONSEILLÈRE NOËL : Moi, monsieur le président, je n'ai pas d'autres questions. Je vous cède la parole.

4560 LE PRÉSIDENT : Merci. Vous dites, bien sûr, que c'est un moyen indirect. Ce n'est pas un moyen direct parce que vous ne dites pas que le bundle n'est pas légal, mais c'est sûrement psychologiquement si on a le service local.

4561 M. DÉPATIE : Absolument.

4562 LE PRÉSIDENT : L'abonné prend aussi le service local.

4563 M. DÉPATIE : C'est un moyen indirect et donc, qui sécurise déjà. On sait que la loyauté, on les a vues les statistiques, lorsque tu as deux produits ou plus envers une compagnie, elle est plus grande. Donc, si un jour il y a une déréglementation, ce serait assez facile étant donné la base de données de notre concurrent d'arriver puis solidifier encore plus cette dominance-là, compte tenu qu'ils ont déjà eu leur fameux 1000 minutes d'offert à 5 $, donc pour nous c'est une grande menace.

4564 M. GOUIN : C'est une approche créative pour sécuriser leur service de base alors qu'il est totalement réglementé. C'est ça.

4565 LE PRÉSIDENT : Merci. Madame Wylie.

4566 CONSEILLÈRE WYLIE : Vous, ce que vous proposez au consommateur, selon ce que vous nous dites est un service qui serait identique au service filaire offert par Bell Canada, sauf en utilisant la technologie PACE?

4567 M. DÉPATIE : Oui. Nous autres, ce qui a été proposé en plus d'avoir investi, comme vous le savez, des centaines de millions de dollars dans notre réseau, nous, on planifie d'investir environ $80 millions de dollars sur une période de quatre ans, sans compter les coûts d'acquisition, pour offrir vraiment un produit de grande qualité : ligne principale qui passe par la COCHIPE.

4568 CONSEILLÈRE WYLIE : Est-ce que vous avez des commentaires... vous avez sans doute lu les documents ou participé, je ne sais pas si vous étiez ici aujourd'hui, mais si vous avez des commentaires à faire sur les arguments de Bell et de Telus et de plusieurs des participants que le service qu'eux vont offrir va être différent de leur service filaire ou de celui que vous dites qui sera identique, des commentaires sur cette différenciation-là qu'ils vous font dans leurs arguments pour donner une... justement pour avancer l'argument que ce n'est pas le service PES en anglais ou le service filaire de premier échange.

4569 Quels sont vos commentaires parce que je ne pense pas qu'on vous a entendu là-dessus ce matin sur cette différence qu'ils font entre les deux? Parce que si je vous ai bien compris, le vôtre, vous revendiquez que ce sera un service téléphonique justement qui remplacerait ce qui est offert par les compagnies de téléphone en ce moment.

4570 M. DÉPATIE : Je vais parler deux minutes parce que c'est à Serge et Dennis. Écoutez, notre service, évidemment, ça va être un service en terme de qualité. Les options traditionnelles, les implications sociales, certains services identiques.

4571 Évidemment, on sait que la téléphonie IP peut nous permettre d'offrir des services qui diffèrent dans l'avenir, tels que la vidéo conférence, ces choses-là, ça on n'exclut pas ça.

4572 M. GOUIN : C'est ça, c'est le point que je voulais faire, c'est justement ça. Les gens, de la façon qu'on va vendre au consommateur, ça va être d'abord de vendre le service local, ensuite de ça, on essaiera sûrement de les inviter à consommer d'autres services que la technologie va permettre, mais la base, ça va être le service de téléphone résidentiel comme on le connaît aujourd'hui. Dennis a d'autres points qu'il veut ajouter.

4573 M. BÉLAND : Oui. Étant la personne qui est présent depuis deux jours et ayant écouté les arguments des autres intervenants, à mon avis, cette distinction que Bell, notamment, mais Telus aussi, essaie de tracer entre la qualité des services, appelons "access-independent VoIP" et les services traditionnels, pour moi ça goûte plus d'une tactique qu'un argument de substance.

4574 Moi, ce que je vois là-dedans, c'est en essayant de vous convaincre qu'il y a une distinction de qualité importante entre ces services-là et les services traditionnels, c'est leur façon de, par la suite, essayer de vous convaincre de dérèglementer d'abord les autres fournisseurs de access-independent voice puis, ensuite, eux autres mêmes quand ils offrent un service d'access-independent VoIP, puis c'est ça l'objectif.

4575 Puis comme j'ai dit, on considère que c'est plus une tactique qu'un argument de substance. Le vrai objectif, c'est de permettre à Bell notamment d'ouvrir la porte à pouvoir offrir un service local de télécommunications qui n'est pas réglementé. C'est ça le but ultime de toute cette argumentation de la part de Bell, ce qu'on trouve un résultat qu'on trouverait extrêmement inquiétant, d'abord parce que ça ouvre la porte à ses possibilités d'avoir une ligne complètement dérèglementée et probablement non économique à moyen et court termes, mais deuxièmement, pour poursuivre un peu la discussion des compagnies de câble avant nous, on n'est même pas convaincu qu'il y a une distinction réelle entre ce qu'un ILEC appellerait un service access-independent et un service access-dependent.

4576 Donc, finalement, pour résumer, nous croyons que c'est un artifice qui pourrait bien avoir des conséquences bien néfastes pour le marché.

4577 CONSEILLÈRE WYLIE : Puisque vous utilisez les termes utilisés par Telus, si je comprends bien, vos commentaires sont applicables à la position de Telus aussi bien qu'à celle de Bell parce que vous n'avez mentionné nulle part Telus, même s'ils sont vraiment dans votre marché?

4578 M. BÉLAND : Mais la question précise d'un ILEC qui offre un service access-independent en dehors de son territoire, ce n'est pas une question qui nous préoccupe. On ne cherche pas à réglementer un tel service.

4579 Notre préoccupation, c'est vraiment l'offre d'un service de VoIP access-independent par un ILEC dans son territoire. On trouve que ça ouvrirait la porte à énormément de gaming et d'abus.

4580 CONSEILLÈRE WYLIE : Vous n'avez pas d'objection à ce qu'ils ne soient pas réglementés en Ontario?

4581 M. BÉLAND : Vous parlez de Telus ou de Bell?

4582 M. GOUIN : Non, non. Le même point s'applique. Ils sont localisés en Ontario. Nous, on n'est pas présent là, mais ce serait la même chose pour nos collègues de l'industrie de câblodiffusion là-bas, le même concept.

4583 M. DÉPATIE : Si vous me permettez, juste ce qu'on dit, c'est que la réglementation actuelle qui dit que le joueur dominant est réglementé. C'est ce qu'on dit. Donc, c'est pour ça qu'un joueur de l'ouest canadien, il vient au Québec, qui n'est pas le joueur dominant sous les règlements actuels, oui, il aurait le droit et vice versa.

4584 CONSEILLÈRE WYLIE : Merci, messieurs. Merci, monsieur le président.

4585 LE PRÉSIDENT : Merci. Monsieur le conseiller Demers.

4586 CONSEILLER DEMERS : Merci, monsieur le président. Bonjour, monsieur Gouin, messieurs. Votre projet vise à couvrir tout le Québec où vous êtes présents?

4587 M. GOUIN : Oui, oui.

4588 CONSEILLER DEMERS : Vos investissements ont été répartis de cette façon-là?

4589 M. GOUIN : Oui.

4590 CONSEILLER DEMERS : Donc, si vous lancez votre projet, quand vous le lancerez, vous le lancerez pour tous les québécois devant lesquels vous passez?

4591 M. DÉPATIE : Notre plan d'affaires, évidemment, et on l'a annoncé publiquement, c'est de le faire de façon progressive au cours du premier semestre de 2005 qui devrait couvrir l'ensemble du territoire de Vidéotron.

4592 M. GOUIN : Donc, ce n'est pas l'ensemble du Québec parce qu'on n'a pas tout le territoire au Québec.

4593 M. DÉPATIE : C'est 80 pour cent environ du Québec.

4594 CONSEILLER DEMERS : D'accord. Il peut y avoir des exceptions, mais ce n'est pas des centaines de personnes ou des milliers de personnes qui n'auraient pas accès?

4595 M. DÉPATIE : Écoutez; on croit couvrir... notre réseau bi-directionnel couvre 97 pour cent du territoire, donc on sait que ça prend la bi-directionnalité, donc environ 97 pour cent de notre territoire, environ. De 95 à 97 pour cent de notre territoire, lorsqu'on va faire le lancement devrait avoir accès à la téléphonie.

4596 CONSEILLER DEMERS : Et ce 97 pour cent, est-ce que c'est toujours la même chose? Il y a un peu de rural ou moins urbain chez qui vous êtes moins techniquement avancé?

4597 M. DÉPATIE : Il y a... oui, la majorité est urbain et donc, oui, même ce serait environ le même mix, si vous me permettez l'expression, actuel qu'on a, qu'on couvre, qui couvre notre territoire d'une façon uniforme et égale, que ce soit rural ou urbain. Il n'y aurait pas de différenciation. Ça va être exactement sous notre réseau bi-directionnel, tel qu'il existe aujourd'hui.

4598 M. GOUIN : J'ajouterais peut-être pour clarifier, si tu permets Robert.

4599 M. DÉPATIE : Oui, absolument.

4600 M. GOUIN : Il y a simplement les réseaux qui sont surtout éloignés. Je ne pense pas qu'on doit voir ça en terme de rural ou urbain. Il y a des réseaux ruraux qui sont moins éloignés et qui sont interconnectés, mais l y a des réseaux éloignés qui ne sont pas interconnectés. On pense, par exemple, à Chibougamau et dans ce réseau-là, on n'offrirait pas la téléphonie pour le moment.

4601 M. DÉPATIE : Qui est le trois pour cent que je parlais tout à l'heure. C'est ça.

4602 CONSEILLER DEMERS : Merci. Merci, monsieur le président.

4603 LE PRÉSIDENT : Merci. Madame la conseillère Cram.

4604 CONSEILLÈRE CRAM: Je ne pense pas que je vais parler en français parce que je vais parler mauvais. Vous avez parlé des autres plans d'affaires et le plan de Bell de 5 $ pour 24 mois.

4605 I would like you to sort of give me some ideas, some numbers. If, let's say, your plan was at you would make a profit of $10 before the Bell $5 plan, how much has that reduced your profit from $10 as a result of? What percentage has your profit been reduced by, as a result of the Bell $5 plan? Quel pourcentage?

4606 M. GOUIN : We don't have the exact percentage, but we're talking about tens of millions of dollars over a five-year period and it's... ten years, I'm sorry. It's over $50 millions that's left...

4607 M. DÉPATIE : So, it's based on a business plan so, obviously...

4608 CONSEILLÈRE CRAM: Yes, but as a percentage of profits, could you figure, you can't give me a number on that?

4609 M. GOUIN : We could send it back to you if you want.

4610 C. CRAM: Yes, because my next number is how would your business plan change if we forbore on access-independent?

4611 M. DÉPATIE : Well, look, what I will be able to tell you is my business plan, our business plan that we presented to the Board was based on the existing framework which, based on facilities-based, based on technology-neutral and based that we recognize the incumbent is dominant. All this was taken into consideration. Actually, it was the number one reason, one of the reasons that we've thought that we had a chance to make it profitable because when you launch a new business and invest over $100 millions, it doesn't come profitable the first year.

4612 So, if we allow those players to become deregulated, I apologize, we feel that actually we don't have a business case. That could threaten our business, period.

4613 MR. GOUIN: We have done that before. When I was appointed trustee, when Quebecor bought Vidéotron, they had a plan to launch IP telephony, and I looked at it but it didn't make sense. The technology wasn't there, the economics were not there, and I regretfully came to see the acting chairman in those days to inform him that we had to withdraw from the business.

4614 If you were to change the regulatory setting in a meaningful way, we would have to reconsider. There is no point in jumping into an empty pool. We would look at what position that leaves us in and decide whether or not we would go forward.

4615 COMMISSIONER CRAM: But when you say "material way", I need an idea of what material would mean.

4616 If we deregulated what TELUS calls access independent -- and I heard you about gaming -- would that be a material way?

4617 MR. GOUIN: I will answer you this way. If Bell was allowed to have a deregulated local service, I think it would be disaster for us. I don't know what the percentage impact would be, but I would certainly relook the whole thing and maybe cancel it.

4618 I think that Bell has such a big advantage over us that if you give them another tool to prevent competition, they will use it, and we are not going to fight a hopeless battle. There is no point in throwing money down the drain.

4619 The incumbent, again, is what concerns us. If the incumbent is given the freedom to use all of his resources to prevent competition, we will have to reconsider our plan.

4620 COMMISSIONER CRAM: But the problem is, you have already spent a lot of money building the pool.

4621 MR. GOUIN: No. We have spent a lot of money building systems. We are in the process of spending now to prepare for the launch, but we still can say stop.

4622 MR. DÉPATIE: Yes, it is over four years, and then we have a cost of $2.50 per customer. So all of this put together -- it's never too late to stop.

4623 COMMISSIONER CRAM: Thank you very much.

4624 THE CHAIRPERSON: Thank you.

4625 Madame la Conseillère.

4626 CONSEILLÈRE NOËL : Juste une petite question additionnelle suite aux questions de monsieur Demers.

4627 Est-ce que vous êtes interconnectés avec d'autres petits câblos qui ne sont pas des filiales de Vidéotron, qui sont indépendants ?

4628 M. GOIN : Édouard.

4629 M. TRÉPANIER : Oui, effectivement.

4630 Si on pense, par exemple à la Coopérative de l'arrière pays.

4631 CONSEILLÈRE NOËL : J'avais cela en tête, justement.

4632 Est-ce que ces gens-là pourraient avoir des ententes avec vous pour bénéficier de vos services ou si c'est prématuré ?

4633 M. DÉPATIE : Pas que c'est prématuré. Tout est possible, mais prématuré. On ne s'est pas arrêté à cela non plus.

4634 M. TRÉPANIER : J'ajouterais que, dans d'autres produits, on a des ententes.

4635 CONSEILLÈRE NOËL : C'est ce que je voulais savoir.

4636 Mais, est-ce que c'est techniquement faisable éventuellement si jamais vous vouliez étendre votre service de téléphonie sur IP à des régions qui ne sont pas dans votre territoire de desserte?

4637 Est-ce que c'est techniquement faisable de vous interconnecter avec, par exemple, la Coopérative de l'arrière pays, qui sert l'arrière de la Ville de Québec en fait ?

4638 M. DÉPATIE : André.

4639 M. GASCON : Oui. Bien sûr, cela dépend de l'état du réseau de chacune de ces entreprises-là. Donc, si elles ont des réseaux bi-directionnels avec un certain nombre d'investissements, effectivement, c'est possible.

4640 CONSEILLÈRE NOËL : Je vous remercie.

4641 Moi, je n'ai plus d'autre question.

4642 LE PRÉSIDENT : Merci bien, merci bien, messieurs, pour votre présentation.

4643 Madame la Secrétaire.

4644 THE SECRETARY: Thank you, Mr. Chairman.

4645 I will now call on FCI Broadband to make its presentation.

PRESENTATION / PRÉSENTATION

4646 MR. DI GIOACCHINO: Thank you, Mr. Chairman. Allow me to introduce our panel. To my extreme left is Greg Van Knoughnett, our legal counsel. To my immediate left is Jay Gowans, our chief engineer. I am Carlo Di Gioacchino, Vice President at FCI Broadband. To my right is Kelly Collins of our legal and regulatory office.

4647 Thank you for the opportunity to speak here today. Please permit me to begin by providing the Commission with some background about FCI Broadband.

4648 Following Decision 97-8, FCI Broadband was among the first CLECs to offer competitive local exchange services in Canada.

4649 FCI Broadband commenced business in 1998 as Futureway Communications. We delivered telephone services to our first customer in September 1999.

4650 We believe that we have made a significant contribution to the evolution of competition in Canada. FCI Broadband pioneered new models of facilities-based competition. We were, in our early years, the key player in the deployment of fibre optics to the home.

4651 It may be of some interest to the Commission that we were the only player to actually undertake the thrust of the Beacon initiative, proposed by Bell Canada and the other ILECs as the most robust future for telecommunications in Canada.

4652 Fibre optics in "the last mile" allowed us to achieve more rapid deployment of broadband than was achieved in any other LEC service territory. We were deploying fibre to the home in 1999, when the ILECs were still promoting dial-up.

4653 We have continuously maintained and enhanced our high quality of service, gaining new customers not only through the growth in our existing service territory, but also through expansion into new territory, commercial and residential alike.

4654 We have tried to make our neighbourhoods more pleasing to the eye by eliminating street furniture. We have an established base of flush-to-grade utility cabinets. The green and brown cable TV and telephone boxes that you used to see in new subdivisions are gone from our serving territory.

4655 Municipalities are very pleased with our newest initiative. We have helped design elegant streetlights that accommodate both the telco and the cableco utilities in a single cabinet that simply forms the base of the light pole.

4656 We even offer service through a provision of our general tariff that permits LECs to lease unbundled local loops in order to provide residential telephone services to that LEC's customers.

4657 In addition, we also resell to other service providers operating in our territory, quite the opposite of the traditional model for a new entrant. No other carrier in Canada has a comparable story to tell.

4658 We hope to continue to participate vigorously in Commission proceedings. We believe that we can assist the Commission by bringing a perspective that is unique. Our belief is that some of our insight can lead to a stronger telecommunications scene in Canada.

4659 FCI Broadband currently offers a robust combination of voice and data services over fibre optics and copper to serve the growing needs of business and residential customers. We offer these services primarily over our own state of the art network.

4660 FCI Broadband successfully fulfils the CRTC's vision in 97-8 as a facilities-based carrier, in competition with the entrenched and, at times, frankly overwhelming market positions of the ILECs and cablecos.

4661 Our interest in this proceeding is to ensure that the Commission does not stray from two key dimensions to the telecommunications future it set out in Decision 97-8 -- first, its vision of Canadian investment, and second, its commitment to high quality telephone service.

4662 The telecommunications industry achieved explosive growth in 1999 and into the year 2000. The ensuing meltdown of many new entrants in the telecom industry resulted in consumer panic and a flight to safety, back into the arms of the ILECs for their telecommunications services.

4663 As the Commission is aware, many new entrants failed to survive the fallout of the telecommunications meltdown in 2001. Yet the Commission may be less aware that the consequences of that meltdown are still felt today by those competitors who are alive.

4664 In fact, the demise of each and every CLEC during that period led to a dramatic increase in customer resistance to any of the remaining CLECs, including FCI Broadband. Customers are just starting to gain enough confidence to consider offering their business to one of the surviving competitors -- only now, nearly four years later.

4665 This, of course, has resulted in ongoing barriers for competitors such as FCI Broadband.

4666 Investors and bankers, courted for investment capital, have also demonstrated their reticence to support new telecommunications firms. Their reluctance to provide equity financing or even to provide debt capital often translates into a hefty price tag of prohibitive conditional obstacles.

4667 Decision 97-8 still stands as the overarching vision of the Commission for the growth of a competitive model for local telephony in Canada. We submit that it is the case today, just as it was in 1997, that it is not the growth of resellers, but rather the growth of facilities-based competitors that lies at the heart of a strong telecommunications industry.

4668 It is important for the Commission to address the need for a healthy competitive environment for all customers, not simply those who subscribe to high-speed Internet. With the introduction of VoIP comes the potential for very significant market share erosion of the traditional service providers.

4669 They may easily be displaced by resellers of VoIP services, who will enjoy truly extraordinary ease of entry and ease of exit. These players are not required to have any investment in or commitment to Canada or to Canadian customers. Resellers may not share the same sense as do the Commission and the traditional service providers of the importance of consumer protection principles set out in 97-8.

4670 The enormous market power of the incumbents makes it clear that local voice service offered by the incumbents must be regulated for the foreseeable future. The technology by which primary exchange service is delivered to the customer will in no way diminish the market power of the incumbent.

4671 Accordingly, FCI Broadband strongly supports the Commission's preliminary views set out in Telecom Public Notice 2004-2. The rules for the ILECs are in place today and should remain, regardless of the type of technology used to carry the traffic.

4672 Technological neutrality has been a key pillar of the Commission's regulatory principles for many years, and with good reason. No case could demonstrate more dramatically than the current proceeding the wisdom of a policy of technological neutrality.

4673 A great deal of evidence has been placed on the record before the Commission that strongly indicates that VoIP is indeed the future of telephony.

4674 We submit that the Commission in this proceeding should assume that the penetration rate of VoIP services in Canada may indeed be very significant. The rules that the Commission puts in place in its decision should flow from that assumption.

4675 With VoIP technology, not only the ILECs, but also the cable companies, and soon the hydro companies, may achieve significant market power. It is key to the future health of the facilities-based telecommunications industry in Canada that the Commission introduce measures that ensure fair competitive practices.

4676 The Commission should of course encourage low-cost providers. What the Commission must guard against is pricing that is below cost.

4677 The development of VoIP technology accords incentives to the ILECs and cable companies to offer voice services at extremely low rates. Indeed, in the absence of regulatory constraints, they may well offer VoIP at prices that are below cost, simply by bundling VoIP with their utility services. These players could thereby easily succeed in wiping out all other competitors, simply because of the ubiquitous nature of their utility infrastructure.

4678 We submit that the ILECs, as well as the cablecos that offer VoIP in territory, should be required to file proposed tariffs for their service offerings for the approval of the Commission. The tariff process constitutes the best way yet devised to ensure that services are not priced below cost.

4679 At the very least, these players will significantly increase the competitive pressures on the CLECs at a time of significant financial weakness.

4680 As a result, service bundle pricing rules are crucial for both ILECs and cablecos. Such rules are essential in order to ensure that there continues to be a fair opportunity for the CLEC service industry to flourish.

4681 We strongly support the principle, first established by the Commission in Decision 94-19, that a tariff filing is required for any service bundle that includes a tariffed service. We support the strengthening of this safeguard through the process commenced by Public Notice 2003-10.

4682 Cablecos are very much in an analogous position to the ILECs because they have a facility that comes into virtually every home and business. We strongly support the views of Bell Canada and others that the time has come for symmetrical regulation for cablecos and ILECs. Surely it is only an accident of history that can explain why the rules for these two service providers are so very different today.

4683 The Commission in 97-8 imposed obligations upon resellers of circuit-switched services that fall far short of those that are imposed upon CLECs. This aspect of Decision 97-8 made sense, but only in the context of relatively low penetration rates for such resellers.

4684 This assumption does not hold true, in our view, for VoIP services. We believe that VoIP services will be here for the long term, with high penetration rates. In this context, it is important for the Commission to re-evaluate the obligations that should be met by this new category of service providers.

4685 Resellers that provide VoIP service offerings should be viewed as intermediate creatures, with rights and obligations that are midway between those that currently apply to CLECs and those that currently apply to resellers of circuit-switched services.

4686 In FCI Broadband's submission, many of the obligations reserved in Decision 97-8 for CLECs should be applied to resellers who offer VoIP services. We advocate that the Commission carefully assess, on a case-by-case basis, the obligations that currently apply only to facilities-based carriers. Resellers who offer VoIP services should meet many of these same obligations.

4687 Equal access and number portability have become touchstones of a healthy competitive environment in Canada. The Commission should specify that all VoIP service providers offer equal access and number portability.

4688 Analogously, we advocate a careful reassessment of appropriate consumer safeguards to be imposed on providers of VoIP service offerings. Quality of Service standards constitute a good example. There may come a time when competitive forces fully remove the need for Commission prescription of such standards, but it seems perfectly clear that the time has not yet arrived.

4689 Rather, we advocate the development and enforcement of a few key Quality of Service standards for VoIP service providers. Of course, a sunset clause could be built into such requirements. A review could be undertaken periodically by the Commission in order to determine whether competitive forces have emerged that are sufficiently robust, rendering such standards unnecessary.

4690 FCI Broadband advocates that the Commission impose a requirement for reliable back-up power upon VoIP providers. It seems quite unlikely that either business or residential customers are aware that reliance upon VoIP telephony fails to provide the emergency lifeline that Canadians have come to expect as a hallmark of their telephone service. To permit customers merely to contract out of back-up power is surely not in the public interest, nor consistent with past Commission decisions on such matters of public safety.

4691 One of the most important social issues in this proceeding is the issue of the safety net provided by 9-1-1 services.

4692 FCI Broadband is concerned that it may not prove to be a helpful solution merely to impose a requirement that adequate 9-1-1 services be offered, as the Commission has suggested, "as soon as practicable". The history of seeking such improvements over the years to networks regulated by the Commission suggests that where, as here, the industry has an incentive to delay implementation, the Commission may find it exceedingly difficult to achieve compliance.

4693 Accordingly, it is FCI Broadband's view that when offering VoIP services the service provider must be in a position to offer adequate 9-1-1 and E-9-1-1 services immediately or by a specific Commission-imposed deadline.

4694 Analogously, message relay service for the hearing impaired should clearly be a requirement for the offering of VoIP services. It is not apparent to FCI Broadband why there should be any delay in the imposition of this requirement on VoIP service providers.

4695 Privacy is a public policy concern that is rapidly becoming of great importance to the vast majority of Canadians. The privacy safeguards of call blocking, call trace and similar software features have greatly improved telephony in recent years, especially for those who are most at risk.

4696 It would be unfortunate to witness a rollback of these gains. These privacy safeguards should clearly be obligations of the providers of VoIP services.

4697 In conclusion, we strongly advocate that the Commission establish a clear and complete set of rules for VoIP service providers. We ask that the Commission provide the correct incentives to all competitors in the Canadian telecommunications industry.

4698 The telecommunications infrastructure of a nation is a key determinant of economic growth, and one of a handful of crucial issues for attracting foreign and domestic capital investment. As well, many of the regulatory requirements upon carriers that have been developed over the decades by the Commission today constitute key pillars of the social infrastructure of Canada.

4699 We therefore advocate that the Commission preserve and enhance the protection accorded to all consumers of telecommunications services. The Commission has worked too hard over the years to establish an environment second to none. It should not be allowed to slip away.

4700 Thank you.

4701 THE CHAIRPERSON: Thank you.

4702 Commissioner Pennefather.

4703 COMMISSIONER PENNEFATHER: Thank you, Mr. Chairman.

4704 Good afternoon, and thank you for your presentation. It is very complete, as are your written comments. I just have a couple of clarifications.

4705 I would like to go to this afternoon's presentation at paragraph 44. You talk about a specific Commission-imposed deadline for 9-1-1 and E-9-1-1 services. Could you give us a sense of what you think that deadline might be and, in so doing, explain if you feel there is the same deadline for both fixed and nomadic voice services?

4706 MR. GOWANS: Good question.

4707 We put together a paper for the Emergency Services Working Group back on July 9th, and that contribution is labelled as ESCO0187. I think we attached it to our submission.

4708 Many of the things in there have already been said today, so perhaps I will summarize some of the key points.

4709 First of all, there are levels of 9-1-1. We talk about having equivalent services of 9-1-1 today, and that is probably not going to happen for some time. However, there are many things we can do to deal with the issue we have at hand today in 9-1-1.

4710 First and foremost, we feel that we need to identify who is doing this. Currently, with traditional resellers of service, we know where they are, we can put them in the 9-1-1 database, the ILEC database, and we do that. With VoIP suppliers, we don't know what they do with the lines.

4711 We are currently a provider of the on-ramp to the PSTN for VoIP providers, and we give them a block of numbers, and then we give them a PRI, and we don't really know what they are doing with it unless they tell us.

4712 For our part, we encourage them to tell us, and if they do we will put it in the ILEC database so that, at least in-territory, the people there have some level of solution. Admittedly it is not perfect, but it is something -- better than nothing.

4713 The second thing we feel is extremely important, as has been stated throughout these proceedings, is full disclosure. Walking, talking and smiling like a duck is great, but under conditions this duck sinks, and people should know when they buy it, purchase it or play with it, that under AC power conditions it will fail, and then they are knowledgeable and they can make that decision.

4714 It is the same with the deficiencies of 9-1-1. They should be given right upfront.

4715 We believe that 9-1-1 solutions are available. Some have been listed today by other parties -- the ability to send it to a third party alarm company, who can then forward the call. Again, it is not perfect, but credit should be given to the people who are trying to do something.

4716 Other people are forcing registration. When you sign up you have to put your address in. We think that is good.

4717 As I stated a second ago, FCI will provide the information to the ILEC database if the VoIP provider gives us the information to put in there, and we have no method to force them to do that. They are under no obligation to do it, and we think that should change.

4718 These are short term things that could be implemented relatively quickly and, to some degree, they would help with the problem.

4719 In the medium term, there are changes that could be made to the PSAPs. Today, if a cell call comes in, it is clearly identified as a cell call, and the operator of the PSAP can make the determination that "I need to verbally get an answer to this person. I don't know where they are going to be."

4720 We can end that class of service, put it down as the VoIP bill. They would have to make the changes, but we can deliver the message to them. In the medium term they could undertake that.

4721 They could also undertake to build a national ALI database. Right now they are very regional, and that creates problems.

4722 With VoIP, because it could be in any province at any time, or anywhere in the world, we really need a national database. In the mid-term, within a year or two, that probably could be done.

4723 With regard to mobility, that continues to be a technical and administrative problem. There are hundreds of millions of IP devices out there, and networks, and to locate someone via their IP address or their Mac address, you would have to have a list which is constantly, in real-time, being updated. It is a huge logistical issue.

4724 In time, other solutions may come around for that, but we foresee that in the two, three four year range.

4725 COMMISSIONER PENNEFATHER: Thank you. The report you are referring to, which was submitted with the response to interrogatories -- is that the same report you are talking about?

4726 MR. GOWANS: I believe so. It was with our submission, yes.

4727 COMMISSIONER PENNEFATHER: In that report, as I see it, there is reference to 9-1-1, not E-9-1-1, so I am assuming that you are discussing 9-1-1, not E-9-1-1.

4728 MR. GOWANS: We are discussing both. Where you can get E-9-1-1, obviously it is much better.

4729 COMMISSIONER PENNEFATHER: In the next paragraph you talk about message relay service, and you don't see any delay in the imposition of its requirement.

4730 Are you still of that opinion? Is there any technical reason that you know of why there should not be immediate implementation of MRS with VoIP?

4731 MR. GOWANS: We don't see any technical obstacle to every VoIP service provider having this as part of their product and service portfolio immediately.

4732 COMMISSIONER PENNEFATHER: I take it that you have been here through the discussions, and obviously have read all of the material and the input, comments and responses to interrogatories. I would be interested in your comments on the proposed definition breakdown of VoIP services -- access dependent, access independent. Do you see any differences with those two concepts, as posed? I guess we could expand that to the categorization of services presented by Bell Canada.

4733 Do you see any difference in terms of the approach to bundling or when these services are offered jointly with high-speed Internet access? Is there any difference in looking at that matter when it comes to access dependent versus access independent services?

4734 MR. DI GIOACCHINO: Thank you for the question. Regardless of how the ILECs define their potential VoIP services, it is clearly our view that, regardless of how an ILEC delivers a service within their operating territories, they still are the dominant market player within that territory.

4735 For instance, you can imagine an example where a TELUS VoIP service is delivered to a residential customer in Calgary on Shaw's cable plant. In that customer's mind they are still getting TELUS. TELUS is the dominant carrier in that territory. They still have the dominant market position.

4736 Our view is that in-territory services should be regulated. The rules are there today.

4737 Once TELUS -- as they have in the past, and continue to do -- moves out of their territory into eastern Canada, then they should be subject to the CLEC rules.

4738 It is very clear to us that the market domination does not diminish because of the technology the ILEC will use to deliver the service.

4739 Quite frankly, they could use their own facilities, they could use Shaw's facilities, they could use a string and a can. It doesn't matter, the customer is buying TELUS. That is ultimately what is the biggest obstacle to us. It is their dominant market position in their territory.

4740 COMMISSIONER PENNEFATHER: As was discussed earlier, theoretically, in a situation where TELUS would in fact, in theory, offer a service independent of its own access systems -- its own DSL -- do you see any difference there?

4741 What do you think in that situation?

4742 MR. DI GIOACCHINO: If TELUS is offering their VoIP service on an independent network, not on their own network, but they are offering it in-territory, then TELUS is the dominant market player in their territory.

4743 Two examples: TELUS offering a VoIP service on Shaw's network in Calgary should be regulated. TELUS offering their VoIP service on Rogers' network in Toronto should not be regulated.

4744 The ILEC and the CLEC rules are in place. We agree with the Commission's preliminary position on this.

4745 We don't care about the technology. This should not be a technology discussion. It is really regulation of the dominant market players, not regulation of the technology.

4746 Customers don't care. We deployed fibre optics to the home for many years to our customers, thinking that customers would care that their service was being delivered on fibre optics. Quite frankly, they don't care. They just want to be able to pick up their telephone, get a dial tone and call for a pizza. That's what they care about.

4747 COMMISSIONER PENNEFATHER: Would they care about change if the phone offered other services as well?

4748 In other words, one of the advantages which you said VoIP will replace is the future of telephony, and the penetration rate may be, indeed, very significant. By its nature, VoIP telephony is the same in terms of VoIP, but there may be bells and whistles that are added. Would that change the consumer's attitude?

4749 MR. DI GIOACCHINO: In our minds, those are features that are making local telephone service more valuable, and we think those features should be available to Canadians.

4750 However, again, it is the dominant market player that needs to be regulated, because the dominant market player is not the only company that will be able to deliver those features. Other competitors will be able to deliver those features as well.

4751 I see that as just a vertical addition to basic exchange service, not a different service in and of itself.

4752 COMMISSIONER PENNEFATHER: You still see it as the duck, but carrying a few fancier feathers with it.

4753 MR. DI GIOACCHINO: Absolutely. Prettier features.

4754 COMMISSIONER PENNEFATHER: Thank you.

4755 Those are my questions, Mr. Chairman.

4756 THE CHAIRPERSON: Thank you very much.

4757 Madam Secretary.

4758 THE SECRETARY: Thank you, Mr. Chairman.

4759 Nous allons maintenant poursuivre avec la compagnie Xit telecom inc.

4760 Mr. Ménard, s'il-vous-plaît.

PRÉSENTATION / PRESENTATION

4761 MR. MÉNARD: Messieurs et mesdames les Commissaires, mon nom est François Ménard. Ma profession est celle de chargé de projet dans une firme de génie conseil qui se nomme Xit télécom inc.

4762 I am here to represent the interests of Xit telecom, a consulting engineering firm of close to 30 employees, of which I am now a partner. Through this company we manage hundreds of kilometres of customer-owned dark fibre networks.

4763 The reason we have requested an opportunity to come to this consultation is because the future regulatory treatment of VoIP will be affecting our operations.

4764 In the paper process leading up to this public consultation we principally had the following three objectives. The first objective was to document the public record with evidence of the extent to which the incumbent LECs and cable carriers would not be prepared to discuss the consequences on the rest of the industry of the forbearance of their VoIP services.

4765 The second objective was to take a formal position on all of the 13 obligations and explain our view of their relevance in the context of VoIP.

4766 The third objective was to convey our hope that the Commission would in its decision principally focus its attention on determining the policy issues that should be passed on to CISC for rapid consensus establishment and mandatory implementation.

4767 However, the ILECs, during this public consultation, have invested an incredible amount of effort depicting Voice over IP as a disruptive technology justifying forbearance. We feel compelled to address the arguments that the ILECs and cable carriers have utilized to refute the requirements that are imposed on them by previous Commission rulings, namely -- and I emphasize -- Decision 96-1, Orders 99-592 and 2000-553, which would all need to be varied in order for them to be allowed to introduce VoIP services without first seeking Commission approval, granting third party access to their underlying facilities that would be used by them to provide their services.

4768 We know that the ILECs currently provide certainly WAN services and retail IS services below cost in order to protect their customer base. If voice is provided atop of these facilities, it would indeed be illegal. Unfortunately, the grounds for intervention before the Commission are more difficult with services which are the subject of very complex forbearance orders.

4769 For instance, conditions of forbearance that were assigned in Orders 99-592 and 2000-553 have yet to be fully implemented by the Commission. Tariffs for accessing ILECs and cable carriers' infrastructure are, indeed, not available.

4770 ILECs are commercializing their WANs with the full knowledge that their customers are using these WANs to disconnect phone lines. They are even bidding on the commissioning and supplying of Voice over IP equipment, that certain municipalities are going to RFP for, supplying WAN and saying, "I can't really sell you a phone line, but I can sure sell you a WAN and then sell you Voice over IP gear and run it for you."

4771 In our view, this is a material breach of the permissible grounds of forbearance under Order 2000-553, yet this has not stopped the Commission from granting interim approval to what we deem is a completely flawed concept presented as "Voice Access Path" in Bell Canada's proposed TN6813.

4772 We also know that Bell Canada has filed its MIPT service with a proposed mark-up of 16.72 per cent. Obviously, this is sending a message to the market that the ILECs will not be seeking to derive their profits from managed VoIP services, but through the provision of access facilities and other non-telecom services.

4773 ILECs have been depicting access independent VoIP services as excluding the facilities from the first central office. Access independent VoIP services, as defined by the ILECs, also include regulated facilities between end-offices in a given Decision 2004-46 larger interconnection region. Decision 2004-46 redefines the geographic scope of a local telephone service, which should no longer be referenced as a PES because there is no longer an exchange, there is an LIR. So it should be called a local telephone service.

4774 The facilities which are used as the on-ramp and the off-ramp to the other party being called are part of the cost structure which should be utilized to derive the VoIP service rates.

4775 Access independent VoIP services, as defined by the ILECs, are not services. They shouldn't be regulated as services. They are simply not services. They are only a subset of a local telephone service.

4776 In arguing for the forbearance of access independent VoIP services, as defined, the ILECs are not only refuting the preliminary views of the Commission, they are using this argumentation to avoid taking a position on the consequences of forbearance and on the nature of the obligations that they should normally seek to have imposed on the cable carriers, if their strategy was not simply exploiting the alleged presence of asymmetry as an excuse to seek forbearance.

4777 We submit that it was surely not the Commission's facilities-based competition vision to let the ILECs dictate how competition should materialize and then see the ILECs unduly take advantage of their lower incremental costs to deploy ADSL2+ from their remotes in answer to the slightest amount of competition, clearly in an attempt to shut it down before it even materializes.

4778 Since there is currently no price floor on retail Internet service, and, admittedly, this is a big problem, competitors will only be certain about the risks of their investments in facilities once the price floors associated with ILEC VoIP services are computed from their embedded cost base in a given larger interconnection region. Again, these costs would include costs of transport between COs, switches, media gateways, and loops that are used as on-ramps and off-ramps to their existing conventional user base.

4779 We do not see how we will be able to extend our community network services, unless what is being offered to the customers becomes a bundle of voice and Internet, if not a triple play offering including video.

4780 We think that the forbearance of ILEC VoIP services would foreclose any potential for further facilities-based competition and would be inappropriate given their existing dominance of these services to allow them to leverage their self-provisioned facilities at the expense of the new competition.

4781 Our second point was to take a position on the 13 obligations in the preliminary views of the Commission in the PN. I will focus my presentation on emergency services. And I think that I do have a solution.

4782 We generally support the preliminary views of the Commission, with the exception that we take issue with the current cost structure associated with the provision of emergency services. We argue that emergency services are not part of the local telephone market and should be treated as a distinct service and subjected to different regulations and obligations.

4783 It would appear that European regulators are sharply focused on the public interest and are challenging whether market-based competitive incentives to switch to a less reliable network are in fact in the public interest.

4784 I am referring to the current European public consultation on VoIP, which is a reference paper.

4785 It is curious that under current price caps the functionality of a network capable of being operated in the case of a "Force Majeure" is considered to be affordable to consumers by the Commission, yet several consumers would be prepared to move to a cheaper service at the first opportunity provided to them.

4786 We have heard the PSAPs talk about the need to ensure that 9-1-1 obligations are met by all LECs and, indeed, by Voice over IP service providers as well. However, it will probably be the underlying DSL, DOCSIS or Internet peering platforms which will be at fault and responsible for the failure of a call to be relayed to a given PSAP, and when someone dies, someone will get sued, and it will probably not be the Voice over IP service provider. After a few people die, things will settle out and end-users will realize that they need to remain PES customers -- and I am emphasizing PES as not local telephone service -- for the sole purpose of being able to place 9-1-1 calls. The analog PSTN will be reduced to being a 9-1-1 network.

4787 We claim that the only pragmatic solution to this problem is to immediately begin, first, to consider emergency services as forming their own relevant product market; second, to judge the ILECs' dominance as part of that market, and derive the necessary unbundled network elements; and three, force the ILECs to file tariffs for 9-1-1 services that would extend all the way to the customers.

4788 We proposed in our comments that a new unbundled network element, called an unbundled loop with 9-1-1 service and DSL third party access, be tariffed as part of the processes of Bell Canada TN6633, TN6767, and TELUS TN72.

4789 Finally, we think that PSAPs should invest the resources to develop a position on whether Packetcable and fibre-to-the-home platforms are adequate to place 9-1-1 calls, given their shortcomings. We can appreciate that PSAPs do not want to deal with a dead battery being responsible for the death of a person. Unfortunately, the issue of dead batteries also applies to many ILEC remotes. We have had real ice storms in Quebec, and there is no telling whether we will have one this winter.

4790 Of course, it could be said that at minus 20 degrees Celsius you shouldn't be at home without heat, placing a 9-1-1 call, but that will have to be explained at another time.

4791 You heard earlier today the cable carriers trying to convince you that their battery powered Packetcable platform will be adequate to place 9-1-1 calls. Do the PSAPs agree? I am not sure. However, we think that they should be required to ensure that network location awareness is built into their networks. They should be required to do so because the cable modem can be moved to any one of their neighbour's homes, probably up to 2,000 homes away, and still function as if it were in their home. Effectively, a cable modem is a nomadic end-point. So if it has VoIP built into it, it is a nomadic Voice over IP terminal adapter.

4792 Internet-based VoIP carriers and CLECs that will be dealing with DSL and DOCSIS unbundled third party access loops will also want network location awareness to be conveyed through the third party access interfaces.

4793 Fortunately -- and I emphasize -- the technical details associated with the integration of location awareness and IP-enabled PSAPs have already been worked out in the NENA Phase III specifications.

4794 I should also say that the ILECs have sufficient funds, recovered through the current perception of fees for 9-1-1, to actually implement these specifications.

4795 We are of the opinion that the Commission should not mandate the provision of 9-1-1 services on Voice over IP service providers until these issues are resolved and the PSAPs have established clear expectations as to what is acceptable to them.

4796 Therefore, in conclusion on the emergency issues, we think that a transition to where an end-user would stop being a local exchange subscriber -- which has both telephone and emergency -- would then basically have two phone bills: local telephone service and 9-1-1 emergency services.

4797 Emergency power, I think, qualifies as the kind of facility that is not economic to duplicate.

4798 Indeed, the cable carriers would save a bundle of money if they didn't have to palm out really ugly and not very long-lasting battery back-ups on the telephone poles, just to provide a mere 8-hour battery back-up on their Packetcable platform.

4799 An access independent VoIP service, as defined by the ILECs, is not a service. It is not end-to-end. There is no off-ramp in that concept. So forbearance based on that being a service, in my view, is completely out of the question.

4800 Our third point -- and I think this should be the focus of this proceeding -- is on interconnection.

4801 Since Internet access is shifting from the status of being a byproduct of POTS and cable TV services of the incumbents to actually becoming their main bread and butter -- like every one of the incumbents, Internet access is now their bread and butter -- incumbents now have no right, in my view, to actually deny interconnection to protect their dominance.

4802 For example, it is well known that incumbents have exited some existing public peering points. Because of the fact that the market is not competitive, facilities-based carriers which are only locally present within a given LIR are denied the opportunity of peering using Internet Protocol on a bill-and-keep basis with the incumbents.

4803 We are of the view that the need to introduce bill-and-keep peering, not only for voice and 9-1-1, but extending to WAN, retail IS, DSL, Ethernet, VNA and so on, is anchored very deeply in the foundation of the scope of this public notice.

4804 The fact that the incumbent telcos and cable carriers currently refuse to engage in private peering within an LIR is causing unacceptable network inefficiencies and unduly forcing huge transit Internet bandwidth costs inside an LIR peer-to-peer application.

4805 Basically, if your kid is running Kazaa on his computer and trying to exchange traffic to somebody else who is behind an ILEC high-speed connection, then that ISP has to go and purchase transit Internet bandwidth, while in fact it could be locally interconnected with the ILEC. It wouldn't have to pay for transit Internet bandwidth, it would just be a local interconnection.

4806 In our view, peering at the LIR level in IP rather than TDM will pave the way for a time where competitors will no longer be obligated to purchase legacy telephone TDM equipment as the only remaining reason to interface with the ILECs, this at a time when the ILECs are finally making the shift from TDM to packet voice and away from ATM to IP.

4807 We pleaded on the record of Bell Canada TN6813 that there is no competitive supply of media gateway services, and the ILECs, if they are changing their networks internally to IP, are required to unbundle the media gateway as services. Bell Canada emphatically agreed on the record of PN6813 that this would be a regulated service.

4808 We believe that interconnection between Canadian carriers can be converted to IP in a matter of months, once the Commission issues clear policy directives to CISC. We submit that there is sufficient record in this public notice for the Commission to arrive at the conclusion that an SIP profile for VoIP and other services that are common to all Canadian carriers can be implemented and that CIRA can lead the way for the immediate implementation of ENUM services that would eliminate the requirements on the part of competitors to interface with the fragile and costly SS7 network of the ILECs. We are committed to work on the details of this transition in the CISC.

4809 Finally, if the Commission will allow, we have some questions for the Commission which we would appreciate the opportunity to ask before we prepare our reply comments.

4810 First, can forbearance of VoIP services offered by the ILECs in-territory be an outcome of this public notice, given its scope?

4811 Second, if forbearance is a potential outcome of this proceeding, has or will the Commission determine the level of actual or projected market share lost to the ILECs that would be used to warrant forbearance?

4812 Finally, has the Commission determined the legal merit of the statement of the ILECs that PSTN-to-Internet, Internet-to-PSTN, and Internet-to-Internet services which piggy-back on a retail broadband Internet connection, enabling the customer to make and receive calls to or from the PSTN and, typically, as well as to and from other broadband connected users, would be considered by the Commission, under the current framework, as retail Internet applications that have already been forborne?

4813 You have heard SaskTel say that it is not referring to Decision 2002-76 as being the reason for not introducing Webcall in Saskatchewan. You have heard them say instead that it was PN 2004-2 which has "chilled" them away from introducing this service in Saskatchewan. Why haven't they simply filed this service for approval?

4814 If the Commission does not agree with the ILECs, then we think that it should be prepared to say so in its decision, but in the meantime be ready to intervene and prevent ILECs from launching their VoIP services, so-called forborne access independent VoIP services, if such ever existed inside their territory without prior tariff approval.

4815 Thank you.

4816 THE CHAIRPERSON: Thank you, Mr. Ménard.

4817 The opportunity of asking you -- there, you have asked. I am sure these are issues that parties are going to wish to address in their reply comments, as are you.

4818 Commissioner Colville.

4819 COMMISSIONER COLVILLE: Thank you, Mr. Chairman.

4820 I am tempted to ask, could we go and discuss this over a Guinness or something?

--- Laughter / Rires

4821 I know you have participated in a lot of our proceedings, Mr. Ménard --

4822 MR. MÉNARD: This is just a pile of stuff that I found in this record.

4823 COMMISSIONER COLVILLE: I know. I also know that you are far more knowledgeable about all of the details of the network than I will ever be, so I will resist trying to get into a detailed discussion on some of the issues you raised in your brief or in your presentation here today. Although, as you know, we have some of our own staff experts who are aware of this and, on many of those issues, your position is clear.

4824 As you have noted, you will be prepared to, and I know you have in the past, participated in the various CISC task forces and working groups and so on.

4825 To the chairman's point on the three questions you ask, I suppose this could be a circular discussion, if you are saying that you want the answers before you give your reply. I guess we are hoping to be able to answer those questions, at least to some extent, in our final decision on this proceeding. So if it is going to wait for that to have a reply, then I guess we won't have a reply from you, because the decision will be out first. If you want to reply after the decision is out, that's fine.

--- Laughter / Rires

4826 I was thinking about your comment about 9-1-1, and I thought, given some of the discussion we have had over the past few days, and in particular today, about the possibility of the ILECs offering an access independent VoIP service bundled with some other services for $1, we could have the curious phenomenon that you could get your telephone service for $1, but E-9-1-1 would cost you $25, as opposed to today, where you buy your voice service for $25 and E-9-1-1 is 40 cents. I guess that remains to be seen.

4827 In any event, in the whole case of 9-1-1, the sense I have is that you are following the developments of that -- and a lot of that development was described to us last night by the folks from Nortel, in terms of the work with NENA and so on in the U.S. So I take it that you are hopeful and you expect that we will see network developments that will provide the solutions we need.

4828 We have had some of the parties say that the Commission shouldn't even be allowing these services to be marketed unless there is a solution. It is not clear to me what your view is on that, whether we should allow the services to be offered, even if the E-9-1-1 access is not as functional and desirable as it might be, and in the meantime work toward the optimum solution.

4829 What is your view on that?

4830 MR. MÉNARD: It could be said that I have had several years to think about, since I filed a patent in 1997 anticipating the situation we are all facing today, and the patent was granted in April 2004. Since I don't own it, I have no financial interest in it.

4831 But the issue is, if you have a terminal adapter that connects to a good old phone line and connects to your broadband connection, and that adapter can select dynamically, if 9-1-1 is dialled, to go out to the public switch telephone network, then the 9-1-1 service is effectively assured for somebody who gets a second-line VoIP service.

4832 I know that the Commission in the past has refrained from regulating services on the fact that it is the end-plus-one subscription of the subscriber for that service, because it is difficult to figure out if it is the first one or the end-plus-one subscription. But the fact is that, today, most of the schools to which we deploy dark fibre keep one phone line for 9-1-1. Why? Because there is no reliable means of sending the ambulance to the right place, even under the special facilities tariffs that you can buy from Bell to populate in any ALI database.

4833 Would you trust your non-network powered end-point to last for more than eight hours?

4834 It is a real requirement to network power end-points, and not on batteries. I am talking about on gas generators. You can just pour more gas into the gas generator and it keeps on humming for another day.

4835 The issue of how you ensure reliable 9-1-1 service, in my view, is purely a question of money. If you want to have competition -- and we ought to get real about it and de-couple the provision of emergency services from basic telephone service, when these two services are not, in fact, within the same given market. The 9-1-1 network -- and I have put interrogatories to all of the PSAPs, and they have, in unison, responded the same way: We are totally dependent on the ILECs to improve that system. We are not interested in bettering the business case of CLECs. That is not our business.

4836 I can appreciate that, but if we have to have competition, then 9-1-1 has to work, and if the only way you end up using your phone line is to place a 9-1-1 call, Bell is going to be around forever just to sell the 9-1-1 service.

4837 COMMISSIONER COLVILLE: I am sure that Mr. Sabia is hoping he is running a company that is going to be doing more than providing a 9-1-1 service for $25 a line.

--- Laughter / Rires

4838 I am curious about paragraph 22. You have said today, "We think that forbearance would foreclose any potential for further facilities-based competition and would be inappropriate." I would like to know how you arrive at that conclusion.

4839 And when you say that it would foreclose any potential, exactly what do you mean by that?

4840 MR. MÉNARD: As the Commission and the staff will appreciate, recently I have been using the terminology -- I am referring to facilities-based competition as the potential for further facilities-based entry, or whether the current regime is conducive to further facilities-based entry.

4841 Basically, what I am trying to find out is if the Commission is happy about a duopoly of broadband between ILECs and cablecos. And we are going to be stuck on copper until kingdom comes, for all of us -- or the municipalities, which are ready and have the money and the incentive to invest in fibre to the home, to keep some jobs home rather than jobs going to Asia, will forever be foreclosed from deploying new infrastructure simply because of pricing flexibility afforded to the ILECs and cablecos to under-price any competitive service offering and throw away any price floor out of the market.

4842 In my view, this is what I refer to as the forbearance of VoIP services.

4843 If there was such a thing as an access independent VoIP service, with which I emphatically disagree, because there is an off-ramp to it that needs to be costed, then the forbearance of such a service would basically be the exact same thing as what is going on right now and what we are living with day after day, which is that a schoolboard that contemplates building its own dark fibre network is faced with a WAN service competitive offering of the telephone company at half the price than the third party access rates for Ethernet, and then only that to be followed by that same schoolboard going to RFP for Voice over IP equipment and the ILECs bidding on the supply and management of that equipment.

4844 If that ends up not being providing a phone service, it's pretty close to it. I think it was the purpose of Order 2000-553 to prevent that from happening.

4845 COMMISSIONER COLVILLE: One of the things, though, that struck me in the discussion we have had with parties over the last three days is that largely, as you suggest, we have the two networks and even a lot of non-facilities-based new players -- new entrants -- proposing to ride on one or another of those networks.

4846 My question would be, even if we didn't forbear, even if we stick to our preliminary view, what is it that would incense operators to build new facilities and not have schoolboards, for example, simply buy the service from a Vonage or somebody else who is riding on one of the other networks?

4847 MR. MÉNARD: I think this is what QMI referred to as the "pique assiette" service providers.

4848 I think that what we have here with the Internet peering regime -- that we know today is a really flawed central system, where equals peer for free, but where the views of the incumbents of who is equal and entitled to peer for free with them is completely oligopolistic and completely unreasonable.

4849 I am speaking of a small Internet service provider who builds a wireless network in a given region -- and the Commission seems to be all for that, this concept of a local service provider for voice -- but suddenly for Internet access you have to be present on both the east coast and the west coast, and in Toronto, in order to peer with the ILECs.

4850 What we have here is actually a peering regime between telephone companies and cable carriers, which is based on their view of the incremental cost of running an Internet service provider business for as long as they keep the cash flowing in their coffers for their basic -- for their main service, the plain old telephone service, and the cable TV service.

4851 Take that business away from them and suddenly, boom, what is going to happen? We are going to see the same problems with Internet peering that CIX raised 10 years ago. There has to be a settlement rate for Internet peering.

4852 The fact is that the Yaks of the world, which have requested that an access condition be imposed on Voice over IP, are completely at odds with the fact that the Commission has forborne the retail IS market. In fact, what the Commission has said is that the underlying facilities ought to be available at tariff rates for those service providers that are dominant. And if you buy the tariffs for those underlying facilities, you get that unfettered pipe. You are not obliged to run Internet on it.

4853 I wonder why third party Internet access service from the cable carriers is referred to as such when the decisions actually speak of higher speed access services. It is supposed to be generalized, not just Internet.

4854 Those pipes are unfettered. As such, if you buy access under these conditions -- and I am including the requirement of cable carriers to actually file for tariff approval for Packetcable loops, as Decision 96-1 states. They are forborne on the retail level by 98-9, but 96-1 actually says that they have to file their loops for tariff approval, albeit for those that are competitors and non-affiliates that need to use them.

4855 If you buy those services, you buy that unfettered pipe. You don't need access specific conditions, and you don't actually need to review and vary a forbearance decision, saying suddenly that retail IS is forborne, but not really. There is section 27, which has an undue preference concept tied to it, and it doesn't stick.

4856 What sticks is actually relying on the current framework, as it currently works and is supposed to be implemented. I am not suggesting that there was any ill-intended -- I am thinking of that of the FCC, not of the CRTC -- but that there was any ill-intent not to enforce the current system. It is just that we reached that point and it needs to be done.

4857 Basically, we have -- what -- another five or six years of free space and support structures before the ILECs fill up their conduits and fill up their poles. If competitors do not hop on those poles and conduits, pretty soon the opportunity for building competitive infrastructure will go away.

4858 So we need to have the framework work, and VoIP is an anchor piece of that equation.

4859 COMMISSIONER COLVILLE: The last point. One of the key issues that has been discussed this week, whether it is TELUS' particular proposal or "the companies", Bell et all, is the notion of access dependent versus access independent. You have addressed that. In particular, you said today, at paragraph 15, that these access independent VoIP services, as defined by the ILECs, are not in fact services, they are only a subset of local telephone service. I believe you mentioned that again toward the end of your presentation.

4860 I would like your view on the issue of whether in fact the Commission, for regulatory purposes, could make a distinction between access dependent and access independent.

4861 MR. MÉNARD: Isn't that peer-to-peer telephony?

4862 Basically, the point is, if there is no off-ramp back to the PSTN, what do you have? You have an off-ramp back to a computer, and it is peer-to-peer telephony. It is PC-to-PC telephony, which everybody agrees should be forborne.

4863 It is when the other end of that network is a network of classified switches, separated by end-office and trunking facilities, which have just been declared by the Commission in Decision 2004-46 as the relevant unit of interconnection --

4864 Okay, Vidéotron disagreed. They said, "This is going to become all stranded investments if the new competitor doesn't have to build fibre to all of these end offices."

4865 The fact is, with this new 2004-46 framework, the ILECs are going to remain as dominant as they were before for all of these trunking facilities between the end offices. As such, these trunking facilities and media gateways and off-ramp loops have all costs, and all of these costs have to be relevant to TN6813, MIPT Bell, or the TELUS IP evolution service to which I just filed reply comments last night.

4866 COMMISSIONER COLVILLE: Would it be fair to say that, except for PT, it is your view that for the ILECs there is no distinction?

4867 MR. MÉNARD: Absolutely, and I think there is a mathematical proof to it.

4868 COMMISSIONER COLVILLE: Thank you, Mr. Ménard.

4869 Thank you, Mr. Chairman.

4870 THE CHAIRPERSON: Thank you very much, Mr. Ménard.

4871 We will now break for lunch. We have one more participant, MCI, and then we will proceed immediately into the second phase of comments, in reverse order.

4872 We will resume at 2:05 p.m. Nous reprendons à 14 h 05.

--- Upon recessing at 1305 / Suspension à 1305

--- Upon resuming at 1410 / Reprise à 1410

4873 THE CHAIRPERSON: Order, please. À l'ordre, s'il-vous-plaît.

4874 Madame la Secrétaire.

4875 THE SECRETARY: Thank you, Mr. Chairman.

4876 We will move on with MCI's 20-minute presentation.

PRESENTATION / PRÉSENTATION

4877 M. QUANCE : Monsieur le Président, membres de la Commission et conseillers, je m'appelle Robert Quance. Je suis vice-président, Développement des affaires à WorldCom Canada Ltée, qui porte le nom de marque de MCI Canada.

4878 J'ai avec moi aujourd'hui notre conseil régulatoire externe Kirsten Embree de la firme Fraser Milner Casgrain.

4879 Notre vice-président des Affaires légales et conseil général, John LaCalamita, n'a pas pu être ici aujourd'hui à cause d'une urgence personnelle. Donc, je prends sa place.

4880 Monsieur le Président, en tant qu'une des dernières parties, enfin le dernier participant, à présenter devant vous dans cette consultation, MCI Canada est sensible au fait que vous avez entendu plusieurs positions et arguments d'autres participants qui partagent notre opinion au sujet de VoIP.

4881 Pour cette raison, nous allons essayer d'être brefs et de terminer peut-être avant le 20 minutes alloué.

4882 J'aimerais souligner tout d'abord que nous sommes d'accord avec la détermination préliminaire de la Commission en ce qui concerne VoIP.

4883 Donc, nos commentaires se dirigent sur des questions d'implémentation des détails, mais en gros nous sommes d'accord avec la détermination préliminaire.

4884 I would like to begin by stating that we are very much in agreement with the Commission's preliminary findings on VoIP and that we will focus on some implementation questions and give you a chance to ask us some questions.

4885 We are very pleased to have this opportunity to appear before you. This is the first time that MCI Canada has attended a Commission hearing. We have been impressed thus far with the calibre of submissions and the conduct of the hearing, itself.

4886 On a very complex regulatory issue such as VoIP, we think that it's important for the Commission to hear from as broad across-section of the community as possible, which is one of the reasons why we are here today.

4887 Mr. Chairman, before turning to MCI Canada's specific submission in this proceeding, we thought you might be interested to hear a bit about the company, as this is our first appearance here.

4888 MCI Canada began domestic Internet operations in Canada in 1991, under the UUNet Canada brand name. At the time, it was the first commercial Internet access provider in Canada, offering retail Internet access services to the business market segment.

4889 Over the ensuing years, MCI Canada's operations grew to include an entire range of Internet services, including high-speed Internet access service, private line and frame relay services, web hosting, virtual private networks and wholesale Internet access services, such as Internet dial port and Internet transport services.

4890 We have also launched a long distance VoIP service in Canada, which is operated as part of our portfolio of business communication products.

4891 Although MCI is a subsidiary of MCI Inc. in the United States, we employ over 200 people in Canada, spread out among our four offices in Canada in Toronto, Montreal, Calgary and Vancouver.

4892 I would add that all product decisions are made in Canada, largely in Toronto and Montreal.

4893 Mr. Chairman, if there is one point that we would like you to take away from this proceeding it is that the incumbent telephone companies and cable companies have both the incentive and the opportunity to engage in significant anti-competitive conduct in the retail market for VoIP services because they own and control the underlying networks which are needed to provide those services.

4894 Until the underlying network layers of these two vast and ubiquitous broadband networks are properly unbundled and tariffed at Category 1 competitive service rates, there will be no meaningful or sustainable competition in the market for IP services.

4895 In our initial comments in this proceeding, we noted that the ILECs had introduced a number of new packet-based telecommunications services over the course of the last few years without ever having filed any tariffs for either the retail or wholesale network components of those services.

4896 The Commission has taken some steps to address these relatively blatant violations of the Telecommunications Act, but the fact of the matter is that we still do not have proper tariffs for an entire range of telephone company and cable company broadband access and transport services, including ADSL access service, Ethernet access service and TPIA services.

4897 Bell Canada's ADSL service is a case in point. Bell has an old and dated tariff or ADSL and this tariff does not reflect the ADSL access service that Bell Canada is actually offering the market on a non-tariff basis.

4898 The other ILECs offer this very same ADSL access capability in their retail Internet operations, but have never filed a tariff for any of the underlying network or service components.

4899 And despite the fact that the ILECs ADSL access networks virtually blanket their serving territories and cannot be economically or feasibly duplicated by competitors, their approach has always been the same: they either refuse to provide this underlying network capability to competitors or they use their dominance and control over their ADSL access network to charge rates that are far in excess of what the Commission generally mandates for essential and near-essential facilities.

4900 A similar problem exists with respect to Ethernet access services. After several years of providing these services on a non-tariff basis, Bell Canada and TELUS have finally filed wholesale tariffs for this service. But the prices do not reflect Category 1 competitor rates and we still haven't seen a tariff for the retail Ethernet access service that the ILECs continue to offer their end users on a non-tariff basis.

4901 Mr. Chairman and members of the Commission, we recognize that some of these tariffing issues are currently before the Commission in the context of other proceedings. However, we wanted to bring them to your attention because they are of direct relevance to the issues under consideration at this proceeding.

4902 In particular, they are relevant to the continuing need for competitors to gain access to the incumbent's local access and transport networks so that competitors can provide VoIP services and customer choice, both now and in the future, as the incumbents upgrade their networks from circuit-switched to packet-switched technologies.

4903 To put it in slightly different terms, it is not sufficient for TDM networks to be the sole focus of the Commission's network interconnection and unbundling initiatives. We must keep up with the technology.

4904 The ILECs have been carrying out massive upgrade programs to their local access and transport networks. Even though some of the switching in these networks may be based on packet technologies, their networks continue as vast and as ubiquitous as they were before. As a consequence, it will be many years before competitors can even come close to duplicating their sheer size and reach.

4905 We, therefore, urge the Commission to take whatever steps are necessary to ensure that the proper regulatory framework is established for IP network component and unbundling in order to foster competition in the entire range of IP services, including VoIP.

4906 The same principles hold true for the interconnection of IP networks. The Commission has long supported the principle that interconnection arrangements be both efficient and effective in order to maintain high levels of service quality and to ensure that carriers and other service providers exchange traffic in the most efficient manner possible.

4907 Now that the ILECs and the incumbent cable companies are upgrading their networks to incorporate IPs, there is a need to ensure that competitors can interconnect with these networks in the most efficient manner possible in order to exchange VoIP traffic.

4908 Put differently, competitors should not be forced to interconnect with other service providers using a set of Legacy interconnection arrangements that do not support VoIP and other IP applications. Interconnection arrangements must keep pace with the technological changes that are taking place in local access and transport networks.

4909 I now wish to address an issue that was raised in our comments of June 18th, but which has not received as much attention as we believe it deserves in this proceeding. This issue relates to the regulatory treatment of resellers.

4910 Some parties to this proceeding may be aware the regulatory framework for competition in the market for local telephony is different than the framework for competition in the long distance market. The market for long distance services, switched-base resellers enjoy the same rights of market entry as facilities-based Canadian carriers. However, in the market for local exchange services, switched-based resellers do not possess the same rights.

4911 Specifically, switched-based resellers cannot obtained unbundled local loops and colocation from the ILECs on the same terms and conditions as those extended by the ILECs to CLECs, nor do they have the same interconnection rights.

4912 MCI Canada believes that a number of circumstances have changed since the Commission first established the regulatory framework for local competition in 97-8. These changes warrant a reconsideration of the rules that apply to market entry by switch-based resellers.

4913 Despite the Commission's best efforts in 1997 to establish a framework for competition that would promote competitive entry in the local exchange market, most observers, including the Commission, have concluded that the state of competition in this market remains very weak.

4914 In addition, with many CLECs exiting the market in the last few years and still others merging or consolidating with ILECs, we believe that it would be timely for the Commission to consider whether other market entry models, such as those that are based on IP switching, might facilitate a greater degree of competition in the local exchange services market than that which currently exists.

4915 On top of these considerations, of course, is the fact that there is a serious doubt as to whether the Commission's restrictions on market entry by a switched-based reseller in the local exchange market are consistent with Canada's commitments under GATS, including those provisions of GATS that require Canada provide resellers with unrestricted rights of access to the voice telephone services market.

4916 So for all these reasons, we believe that it would be in the public interest for the Commission to lift the restriction which currently prevent resellers from obtaining the same access and interconnection rights and obligations as CLECs.

4917 Mr. Chairman, before wrapping up, we would like to lend our support to the many parties who have appeared before you to urge the Commission to resist any requests or attempts by the ILECs to relax the regulatory regime that currently applies to their local services.

4918 In our view, simply because the ILEC may choose to deliver voice services over a different or evolving technology platform does not make them any less dominant in the retail market for voice services or the wholesale markets for local access and transport facilities.

4919 At this juncture, deregulation in either of these markets would spell disaster for the fledgling industry of local competitors that have been trying to establish themselves in the market ever since it was opened to competition in 1998.

4920 Only the existence of real and sustainable competition in the local market, as opposed to the potential for such competition, would justify relaxation of the Commission's rules. At this juncture, this level of competition simply does not exist. In fact, as the Commission, itself, observed in the public notice that initiated this proceeding, "...regulations for local exchange services remains necessary given the weak state of competition in the local exchange services market."

4921 Mr. Chairman and members of the Commission, this concludes our presentation. We wish to thank you and the Commission staff for providing us with the opportunity to appear at this public consultation and to present our views. We look forward to your decision on the issues under consideration at this proceeding and we would be happy to answer any questions you may have.

4922 Thank you.

4923 THE CHAIRPERSON: Thank you.

4924 Commissioner Cram.

4925 COMMISSIONER CRAM: Thank you, Mr. Quance, Ms Embree.

4926 I, first, wanted to ask you -- I was going to ask you the short question, how do you feel about cable companies, because in paragraph 7, you talk about,

"...incumbent telephone companies and cable companies with the incentive and opportunity to engage in significant anti-competitive conduct...",

and you go on, and yet at the end I didn't see you referring to doing anything with the cable companies and you said you were in agreement with our preliminary view.

4927 So are you suggesting we do something other than what we have done to date with the cable companies?

4928 MR. QUANCE: It's a good observation. We are requesting tariffs for ILECs in territory. We are not requesting the same things for cable companies yet. We are asking for different things from the cable companies: unbundling of local access, the underlying local access and transport facilities, which we think are required. We think that will be sufficient to provide competition.

4929 The cable companies are today not dominant in the voice market, and I think that's the key --

4930 COMMISSIONER CRAM: No tier, yes.

4931 MR. QUANCE:  -- that's the key reason why we have not moved so far on the cable companies.

4932 COMMISSIONER CRAM: Having read your initial submission, and then again down to the resale issues, at paragraph 20 and 21 and 22, in that area, clearly, our policy has always been based on encouraging facilities-based competition.

4933 Are you now saying that the state of telecom is that we, essentially, have a choice between promoting facilities-based competition and promoting any competition at all? Is that what you are saying?

4934 MR. QUANCE: I would like to have three providers of fibre to every home and office in Canada today. Facilities-based competition is the end point that we would all like to reach.

4935 I don't think that has materialized and so, in consequence, we need to ensure that there is some form of competition, hence my emphasis on the requirement for unbundling of local -- the underlying local and transport facilities and the costing of those to resellers.

4936 It does not, in my mind, take away from the ideal of facilities-based competition. I think that has materialized in certain pockets, but not in a broad way that many of us had hoped.

4937 COMMISSIONER CRAM: Because I read you at paragraph 22 essentially saying that we should back off from, I guess you would call it, our preferential treatment of CLECs, facilities-based CLECs, in order to get competition.

4938 MR. QUANCE: I think we are saying open the door a little wider on who can get those rights, but also meet those obligations of CLECs. We all thought the CLEC market would be a little bit more robust, and it was at one point. Now that it has shrunk and it's in a different position, open the door a little wider to allow others to benefit from the pluses, and also meet that obligations that all CLECs today have to meet.

4939 So we are not suggesting any change of the rules in 97-8, just open the door a little wider to others.

4940 COMMISSIONER CRAM: To, essentially, non-facilities based CLECs?

4941 MR. QUANCE: That's correct.

4942 COMMISSIONER CRAM: I think I have it fairly clear about what you wanted, the privileges. What would be the obligations you were interested in?

4943 MR. QUANCE: Well, I have read that 97-8 several times and there's a long list of obligations.

4944 COMMISSIONER CRAM: Well, let's put it this way: are there any obligations you would not assume immediately?

4945 MR. QUANCE: No. I think the presumption is that we would meet all obligations that are currently imposed upon current CLECs.

4946 COMMISSIONER CRAM: You would agree that if in telephony -- if you received revenues in telephony subject to the $10-million exemption, any VoIP non-peer-to-peer telephony revenues would be contribution-eligible?

4947 MR. QUANCE: Absolutely.

4948 COMMISSIONER CRAM: Thank you.

4949 Thank you very much, Mr. Chair.

4950 THE CHAIRPERSON: Thank you.

4951 I guess to follow up on Commissioner Cram's question, I see your point about -- you say facilities-based competition hasn't developed to the extent that one would have liked and, therefore, one should open the door to the existing facilities-based networks in order to provide, essentially, non-facilities-based increased competition.

4952 How would that further the goal of facilities-based competition?

4953 MR. QUANCE: It would maintain a competitive position and alternate to the current monopolies in Canada. Perhaps at the expense of some facilities-based development, but I think at this point I would rather have some competition, even if not ideal, and have that reality today.

4954 MS EMBREE: If I can just add to what Robert said, I think that Decision 97-8 has some laudable objectives in promoting facilities-based competition. We haven't got as much facilities-based competition as we may want, and there may be a lot of reasons why that is the case. I think one of the lessons we have learned, though, over the past few years is that you do need to get a little bit of scale before you can actually start building.

4955 It's hard to build a network without any customers. So the idea is -- and it has been traditionally, at least in the long distance market -- that if you can allow some resale maybe those resellers would be able to get enough scale so that they can start building networks, like the third fibre to the home.

4956 THE CHAIRPERSON: I take that point. Do I hear a commitment to do that, to invest in facilities?

4957 MS EMBREE: Subject to the foreign ownership rule.

--- Laughter / Rires

4958 THE CHAIRPERSON: Touché.

--- Laughter / Rires

4959 MS EMBREE: It's not up to you, it's not up to you.

4960 THE CHAIRPERSON: Not our question, of course, but I take you point. But for that, you would be happy to invest.

4961 And structuring arrangements where, through minority, but substantial shareholding, has that been an approach that your company has adopted?

4962 MR. QUANCE: No. If there were a change in foreign ownership -- I mean, certainly five years ago I think there would have been a significant investment. Today, the situations are different, both south of the border and here. So it would be hard to comment on what kind of investment we would make, but it would certainly be greater than we are making today.

4963 THE CHAIRPERSON: Thank you.

4964 Counsel.

4965 MS PINSKY: Thank you, Mr. Chairman.

4966 I just wanted to follow up on a statement that you have made today and in your submissions that it's your view that incumbent telephone companies and cable companies have both the incentive and opportunity to engage in significant anti-competitive conduct in the retail market for VoIP services because they own and control the underlying networks.

4967 I was wondering if you could be more specific, in terms of the type of significant anti-competitive conduct that you are concerned about.

4968 MR. QUANCE: Well, as not an ILEC or a cable company, when we want to provide a solution to a customer, we have to get that last mile from somebody. In our case, there is really no choice. There is, effectively, a monopoly in that last mile.

4969 There are probably a dozen providers of DSL in Ottawa today, and I would bet what I have in my pocket that number one resells Bell, number two resells Bell, number three resells Bell.

4970 So you go down the list and they are all reselling Bell. There is no choice. And the ability to add onto that service, which they are pretty much given, an additional one or two services provides them an undue potential for cross-subsidization or abuse.

4971 We would like to see those underlying components provided, local and transport, at Category 1 rates, so as to prevent that kind of activity. We are, today, in discussions with Bell, with the largest ILEC, about DSL rates. We are in a terrible squeeze between their retail rates and what we are able to get from them at wholesale rates.

4972 We all know that the number of ISPs have shrunk. We were the first commercial ISP in Canada. It grew significantly and it has shrunk to the point when, in broadband services, an independent ISP has only one choice: resell Bell.

4973 Even I have heard CLECs that have access to dry copper are saying that's not financially viable, we are going to resell Bell, even if it provides raises in margins.

4974 So there is no choice. Maybe if the cable companies open their network there will be a second choice. I would still present that as a duopoly, and not a very attractive situation.

4975 MS PINSKY: Would you make any distinction with regard to whether the companies were providing VoIP services over another company's Internet access service, for example -- so-called access independent services?

4976 MR. QUANCE: Well, for an ILEC in territory, I think our position is clear: the issue is market dominance, not technologies. Though I don't see that being a natural incentive for them, I think there should be tariffed in territory regardless of the technology or whether they use some other provider for that underlying transport.

4977 MS PINSKY: Thank you very much. Those are all my questions.

4978 THE CHAIRPERSON: Thank you very much.

4979 Madam secretary.

4980 THE SECRETARY: We will now proceed with the final statement phase. We will start with MCI.

REPLY / RÉPLIQUE

4981 MR. QUANCE: I won't say it all again.

--- Laughter / Rires

4982 MR. QUANCE: I have waited three days to get to this point. I won't abuse my privilege here.

I will just make two points.

4983 One, we said at the beginning we agree with the Commission's preliminary findings, to a large degree. We are in a market where there is some very, very large players and some very small players. We think that the choices have to be made carefully. I think the preliminary determination is very much on the mark.

4984 The second point that I would make is we need unbundled and tariffed underlying access transport component at Category 1 rates. These are essential or near-essential facilities. Without that there will be a duopoly. Even the -- I call it -- myth of an access independent category is really a bit of a misleading term and it hides something a little bit more -- hides a harsher reality underneath.

4985 The access independent concept really means that we have given up the main piece of business to one of the incumbents. And if you will permit me an analogy, the ILEC -- and I might apply this to another, but I will apply it to the ILEC to begin -- is a steakhouse and they are selling steak. They have positioned it as being very generous, that you can bring your own sauce, you can bring your Yak sauce, you can bring you Comwave sauce, you can bring your MCI sauce, you can bring your Vonage sauce, but, really, you have no choice, the steak you have to buy from the steakhouse.

4986 While it sounds like: well, you are free to sell your sauce on my steak, I still got to buy your steak. I don't think that's a very balanced picture. I think you recognize that, but we want to make sure that is -- it's clear in our minds that that's a very unbalanced situation that needs to be watched.

4987 Thank you very much.

4988 THE CHAIRPERSON: Thank you.

4989 THE SECRETARY: We will be moving on with Xit telecom inc.

REPLY / RÉPLIQUE

4990 MR. MÉNARD: We, too, agree with the preliminary findings of the Commission, probably with one exception, which is the obligation to provide social services in this transition period between at time at which the rules of the framework are not fully implement and until the time as they will and until the time also as the PSAPs have all agreed on a common set of expectations as to say: what's the stand-by battery time that is considered to be reasonable?

4991 I have since concluded, in three years of trying to tackle the current competitive framework and trying to find a sweet spot in that industry, that colocation, 9-1-1 and support structures have been, say, the not-well-understood problems and the process leading up to 97-8.

4992 If it had been understood at that time, we would have ended up with much different unbundled network elements not requiring colocation, talking about the same kind of interface that exists between an ILEC remote and the central office being the unbundled point. That would have probably created a much different competitive landscape, including not -- created a huge telecom bubble that burst because people made all sorts of capital investments that they could not get any return on the investment on. This is exactly what's bound to happen again if interconnection does not transition to IP pretty soon.

4993 Why would a competitor go today and invest half a million dollars per OIR and TDM 2IP conversion equipment only to find out in six months or two years down the road that interconnection will effectively have moved to IP and that equipment becomes stranded?

4994 I think the issue is that insofar as 911 is concerned, it is its own relevant product market and it imposes de facto a new set of unbundled network elements that need to be tariffed and made available very soon; otherwise, all sorts of people will be making all sorts of weird investments and the whole thing is going to go poof pretty quick.

4995 The next issue becomes eliminating the price squeeze that competitors have been forced to endure for the last couple of years.

4996 First, it was an issue with grey regulations of permissible affiliate rules and not permissible affiliate rules. This was solved in 2002-76. Now we have some remnants of that decision which still continues and causes a situation where the Commission tolerates the provision of certain services in contravention of section 27.25 of the Act about dark fibre, about BSL and ethernets and the use of one's facility beyond their planned intended forborne use.

4997 I could give you numerous instances of services being provided in contravention of section 27.25 of the Act. That, in my view, is probably and should be the Commission's priority rather than tackle new potential regulatory framework or forbearance opportunities.

4998 I think key to this equation is this substitutability of dial-up IS and high-speed IS, creating what is called a confused single retail IS market. ISPs have been trying to tackle this issue for quite some time, and the Commission has always found that because you could get dial-up if the price for high-speed increased, then you could go back to dial-up.

4999 But of course this is modulated by the price gaps and potentially for under, say, the Aliant style of let's forbear a conventional telephone service in a certain exchange, which I agree the exchange and not the LIR should be the relevant unit of analyzing forbearance, we end up with a situation where we have the potential that the forbearance is not well managed, and we will end up with the same situation as before, which is the perpetuation of the dominance of the ILECs.

5000 Thank you.

5001 THE CHAIRPERSON: Thank you, Mr. Ménard.

5002 THE SECRETARY: Now we will move on with FCI Broadband.

REPLY / RÉPLIQUE

5003 MR. DI GIOACCHINO: Thank you, Mr. Chairman.

5004 Just a few brief points.

5005 The decision that comes out of the hearings of the last three days should consider that technological neutrality must be the overriding principle in your determinations.

5006 We advocate that social regulation should be applied to all and economic regulation for those that have or may have market powers.

5007 The ILECs and the cablecos must file tariffs for VoIP offerings and pricing must not be below cost. Contribution payments must be required of all VoIP service providers. 911 and MRS services must be mandatory, even only as interim solutions such as forced registration.

5008 ILECs must continue to be regulated in territory, regardless of the technology. Past forbearance on DSL and wireless markets were successful because there were no dominant players at the time that those markets became available. So we hope that you consider that.

5009 I would also like to congratulate the Panel on the stamina they have shown over the last three days. Based on today's questions, I would suggest, Vice-Chair Wylie, that the Panel has re-established their enthusiasm since 9 o'clock last night.

5010 Thank you very much.

5011 THE CHAIRPERSON: Thank you.

5012 THE SECRETARY: The next party will not make a final statement; that is, Quebecor Média inc. Therefore, we will be moving on with Canadian Cable Television Association: Rogers and Cogeco.

REPLY / RÉPLIQUE

5013 MR. HENNESSY: Chairman Dalfen, Commissioners, thank you for conducting this hearing and giving all parties here the opportunity to provide their views.

5014 I think many parties may not have fully appreciated how the Commission's regulatory regime has fostered facilities-based competition and why that system as it exists today should be maintained.

5015 Twenty years ago there was almost no competition in the communications sector in this country. Today there is vigorous facilities-based competition in long distance, wireless, Internet and broadcast distribution services.

5016 Facilities-based competition in local telephony has to remain the final objective, because only facilities-based competition provides lasting benefits to customers in the form of lower rates, better service and innovation, and that is the key to economic growth and investment.

5017 So now is the time to use the current regulatory framework to unleash the benefits of facilities-based competition in the local market. That framework, which has existed for a number of years now, has three main pillars.

5018 First, incumbent telephone companies must remain rate regulated and prevented from engaging in anti-competitive conduct until such time as sustainable competition truly exists.

5019 Second, new entrants need not be rate regulated or have any additional access obligations beyond those which already apply to all CLECs. This encourages new entrants to enter the market but providing them with the maximum ability to recoup their investment.

5020 Third, the Commission should ensure that networks interconnect efficiently.

5021 Many parties to this proceeding have urged you to change the first or second pillar by deregulating incumbent telcos or by imposing additional access obligations on cable companies. But because these pillars are technology-neutral, the advent of a new technology does not require you to change them.

5022 We are already seeing the emergence of Internet telephone service without any access requirement on the cable company.

5023 Bell Canada has stated that if the incumbents are not deregulated for VoIP services, Canadians will be harmed for generations to come. Don't be influenced by this self-serving and inflated hyperbole. The Canadian way of life will not be impaired if Bell Canada has to file tariffs for VoIP service until there is sustainable competition.

5024 Indeed, it is prematurely deregulating the incumbent telcos that will prevent sustainable local competition from becoming a reality, particularly in the residence market.

5025 TELUS, for its part, asked for deregulation only for what they call access independent VoIP services. They would have you believe that a VoIP service running on their DSL line, carried on their Internet backbone, sent to their PSTN and serviced and maintained by their technicians will be the same as a VoIP service offered by Vonage or Primus. It simply will not.

5026 It will be a telephone service that is totally transparent to its customer, and it has 95 to 97 per cent of those customers today.

5027 So we don't believe any general prohibition against discrimination enforced only by a complaints process is going to change this any time soon. Voice is voice and TELUS should not be deregulated for telephone service in its territory until sustainable competition is established.

5028 In effect, under their model, the only successful competitor to TELUS in its territory would be TELUS. That is not competition as any of us understand it. Competition has been a challenge in the local telephone market, but at least the rules are clear. And we are making significant investments under these rules. We have taken the risk of entering under this framework, and if we fail under this framework that is our problem, not yours.

5029 We are not asking you to make entry harder by prematurely deregulating the incumbent telcos or by imposing new obligations on cable that compromise that investment. The current framework encouraged our investment and we believe it will achieve the goal of sustainable facilities-based competition.

5030 Let me quote: Cable may actually finally provide a real facilities-based alternative to the telephone company. If that remains your priority, if that remains the goal, you are not going to get there by prematurely unbundling our networks and undermining our investments.

5031 Unbundling cable, which has no market share in virtually all telephone markets across this country, is indeed a strange response to ending the ILECs' monopoly.

5032 Thank you for your time.

5033 THE CHAIRPERSON: Thank you.

5034 Madam Secretary.

5035 THE SECRETARY: Thank you, Mr. Chairman.

5036 We will move on now with Alcatel Canada.

--- Pause

5037 THE SECRETARY: Is anyone here from Alcatel?

5038 The next item, Nortel Networks, have cancelled their opportunity for final statements.

5039 So we are moving to Telecommunications Workers Union.

--- Pause

5040 THE SECRETARY: AT&T will not make a final statement either.

5041 I am moving to Canadian Association of Internet Providers.

--- Pause

5042 THE SECRETARY: Next on the agenda is Cybersurf Corp.

REPLY / RÉPLIQUE

5043 MR. TACIT: Thank you very much for this opportunity.

5044 After listening to all of the participants in this proceeding, it is clear to us that there is a genuine difference between different types of Voice over Internet Protocol services, specifically the so-called access independent, or Category 2, and the access dependent, or Category 3-4 services.

5045 One of the biggest differences, and the one that I think makes it relevant for economic and regulatory treatment, different treatment, is the barriers to entry involved.

5046 Category 3 service is basically run, not on the Internet but on proprietary networks. The major cable companies have been very forthright in telling you that that is really what they intend to do. That is how they are going to manage the quality of service of their service offerings, and that sort of arrangement is one that cannot be readily replicated in the marketplace.

5047 For that reason, it is quite appropriate that Category 3-4 services be regulated according to traditional ILEC or CLEC regulation as the case may be, because those services really are substitutes for PES. In fact, that is the way the cable companies are positioning their whole business in that area.

5048 That is a different kettle of fish from the Category 2 services, which really is an Internet application, much like e-mail or web browsing that can run on virtually any high-speed Internet platform. In fact, we have the proof that there are numerous parties that have already availed themselves of that opportunity. There is no barrier to entry in that area presently.

5049 What we at Cybersurf are concerned with is to ensure that we don't end up with barriers to entry by virtue of the fact that we also happen to be ISPs. So we had the discussion about ensuring that the TPIA tariff restrictions and ADSL restrictions and all of those don't operate unfairly to single us out when the Vonage's of the world can still provide the Category 2 services.

5050 The major issues for us are really access and disciplining the conduct of dominant players.

5051 The access issue I have already mentioned, and it really involves ensuring that we have a clear path to and from the ramps to the PSTN, the on and off ramps, and that we can deliver our high-speed Internet services as contemplated by the Commission's ruling and that we can super overlay our Category 2 VoIP services on that, should we ever choose to offer those.

5052 We note in passing that there is a quantitative difference, however, between the unbundling that has taken place with regards to the ILEC networks which is not available from the cable companies. I guess that is for the Commission to decide what to do about that.

5053 So long as the Category 2 access remains unimpeded, we have nothing further to say about that at the present time.

5054 On the issue of leveraging market power into adjacent markets, if Mr. Engelhart's proposition is really correct that the ILECs could offer VoIP services for a dollar on top of their high-speed Internet offerings in order to retain dominance in Voice over IP, that is truly alarming.

5055 We submit that the Commission should apply the bundling rules to any package that includes a VoIP service for that reason, whether or not there is tariff forbearance for the Category 2 service involved.

5056 We are not of the view that forbearance is an all or nothing proposition. There is nothing to prevent the Commission from applying a bundling rule, even in a situation where a service isn't tariffed. It is up to the Commission to decide how far the forbearance should go.

5057 In that regard, we submit that the cable companies should be treated no differently, since even though they may be competing in broadcast distribution they are clearly dominant in that area.

5058 The proof of that is that nobody can still obtain resale of their broadcasting distribution services, and there is nothing to prevent them from selling their VoIP service for a dollar in order to leverage their market power and protect their dominance in the broadcasting distribution area.

5059 If we want to ensure that there isn't a duopoly, then we also encourage the Commission to look at the access issue to broadcast distribution signals carried by the cablecos. But we recognize that that is for another day.

5060 Thank you very much.

5061 THE CHAIRPERSON: Thank you very much.

5062 I know Commissioner Colville and you exchanged views on the notion of your bundle when you were referring to BDU bundles, and I think there is a similar issue here. Once you bring a regime into play that is not, as you say, technically tariffing but that in effect amounts to the same thing in the sense that I suppose a bundling regime would require prior approval in your view, would it not?

5063 MR. TACIT: Well, when a bundle is offered. We are saying that the bundling rule, whatever it is or however it is going to evolve as a result of the 2003-10 proceeding, whatever that rule is going to be, if the Commission really is concerned about that possibility, then there has to be some oversight. But that oversight should apply equally to the ILECs and the cable companies.

5064 THE CHAIRPERSON: My question is: Are you suggesting that that be a prior approval requirement or a rule in place that would be policed on a complaint-driven --

5065 MR. TACIT: Well, presently when there are tariffed and untariffed bundles, there is prior approval required.

5066 THE CHAIRPERSON: Correct.

5067 MR. TACIT: And they have to demonstrate the costing, and so on.

5068 THE CHAIRPERSON: But since you are creating a new animal, I am just asking you about that aspect of the animal.

5069 MR. TACIT: I would say I think the better view would be prior approval for that.

5070 THE CHAIRPERSON: Thank you.

5071 MR. MERCIA: If I could add something, we were just reading 98-9. In that ruling the Commission did determine that there was enough competition in broadcasting and that they forbore the cable companies from bundling with Internet access.

5072 However, they did put in a provision that said that the cable companies, until they could offer a facilities-based service, would have to demonstrate in their billing which each component of the service that they were bundling cost to the consumer.

5073 What we are saying basically is that if it isn't going to take the form of the traditional bundling rules like the ILECs currently have, there should be something in place to ensure that the market power that they do have in other aspects isn't used to steam-roll competitors in the Internet market or in the VoIP market.

5074 THE CHAIRPERSON: Thank you.

5075 Commissioner Cram.

5076 COMMISSIONER CRAM: Thank you.

5077 I just want to understand your understanding of access independent and access dependent. I believe you talked about your necessity of an off ramp to the PSTN.

5078 MR. TACIT: We agree that there is no truly access independent in the pure technical sense. I guess I was answering the question --

5079 COMMISSIONER CRAM: How do you define it, then, for the purposes of this proceeding?

5080 MR. TACIT: For the purposes of this proceeding I look at the market definition, and I see a big market definition distinction between Category 2 and Category 3-4, or access independent/access dependent as they are defined by the companies in TELUS; that being that the extent of unbundling and access to the Internet that exists today really means that there is no particular barrier to entry for anybody to provide a Category 2 service.

5081 So long as you can buy your local access to have a way of getting on and off the Internet and so long as you can get a high-speed service -- and those are both readily available -- there is really no economic or technical barrier. You don't have to spend millions and millions of dollars. You just need to write a software application, get a bit of equipment, and so on.

5082 It is different for Category 3-4 where you have a service that is dependent on a separate end-to-end network. That is hundreds of millions or billions worth of infrastructure. People are not going to be able replicate that readily.

5083 And you have the last mile too. That is a very different animal.

5084 That is why we say the VoIP proceeding in many ways is, I guess, about two things: (1) about the new applications; and (2) about ensuring that we don't mischaracterize the applications as traditional PES or fail to acknowledge that, for example, a Category 3-4 and what the cable companies seem to be doing really are PES.

5085 MR. MERCIA: I think one way we can define it is that we currently are doing TPIA and we have a single interface to the cable head.

5086 Rogers has the ability to route calls on its own network between hub sites, between cable heads or even between hub sites and COs, for instance. We don't. We have to aggregate everything back to the intersection point, to our network and then back, even if you are a next-door neighbour; where Rogers could go to the hub and back to the user.

5087 We think that that is the defining difference.

5088 COMMISSIONER CRAM: A single hub almost is Category 2. Is that really what you are talking about?

5089 MR. MERCIA: Rogers would be using entirely their own network where we would have to use their network and our network and possibly the Internet to deliver. They could just do it all native to their own network.

5090 So it truly is local exchange, where in our case it is not. We would have to aggregate to our POP site, to a single point, in order to route the call to its destination.

5091 COMMISSIONER CRAM: So your distinction between access independent and access dependent would be access independent you have your own hub and you use a combination of the public Internet and other carriers.

5092 MR. MERCIA: In our case, yes. But in a case like Vonage, they would be using our structure or Rogers. They have no network.

5093 COMMISSIONER CRAM: That's what I mean.

5094 MR. MERCIA: So in our case -- and I guess we are making this point. We don't want to be lumped in, because we are intersecting and we do have facilities, into a facility-based regime because the last mile is still controlled by the incumbent.

5095 As Mr. Engelhart said, TPIA is really IP-based phone delivery. What they are proposing to deliver is ostensibly local exchange over cable.

5096 COMMISSIONER CRAM: So based on that definition, an ILEC could not have an access independent VoIP.

5097 MR. MERCIA: I tend to agree with CCTA, that the main advantage that TELUS or Bell would have is that when they come off of the loop to the D-SLAM, they can go right to a router or right to PSTN. We can't do that. We would have to aggregate.

5098 I guess technically we could in the case of an ILEC. All the components are there. We could, as an independent, deliver a similar service to what the cablecos are doing on an ILEC platform.

5099 I think that is what their concern is: that if the ILECs do it, they are basically providing local telephony without any regulation.

5100 MR. TACIT: Just to clarify one further point on that, if for example we were able to or wanted to use the ILEC component to do an end-to-end service, that would be more of a Category 3-4 service. That would cease to become a pure Internet application.

5101 We would agree that it would be under those conditions that would attract CLEC regulation, or whatever, because we would be providing PES, not VoIP.

5102 So that is the big distinction.

5103 We could never do that under the present regime with the cable company, because they have not unbundled their network that way.

5104 COMMISSIONER CRAM: Thank you.

5105 THE CHAIRPERSON: Thank you very much, gentlemen.

5106 Madam Secretary.

5107 THE SECRETARY: Thank you, Mr. Chairman.

5108 We will now move on with the final statement of Pulver.com.

REPLY / RÉPLIQUE

5109 MR. ASKIN: Good afternoon, Commissioners.

5110 I am Jonathan Askin. I am the general counsel to Pulver.com, and I will promise to be very brief.

5111 I first want to apologize to the Commissioners in the event you thought that there was insufficient detail in of our comments or any of our responses. We are not here in Canada to tell you how to regulate telecom. That would obviously be presumptuous of us as folks from the United States.

5112 We are here to plead for the global IP community.

5113 I think you rightly point out that currently your rules do not apply to peer-to-peer services such as the current incarnations of Free World Dialup. We are quite concerned that any of the rules that you do impose on VoIP will have unintended consequences on the emerging Internet communications industry, and we are afraid for the world going down that slipper slope.

5114 So we are here. Our service is free, but we thought it was important enough for us to come and speak on behalf of the other Internet enthusiasts, the innovators and would-be entrepreneurs out there.

5115 I should tell you, I am a CLEC person. I was the past president and general counsel to the Association for the Facilities Based CLECs in the United States. I was also an FCC official and a consumer advocate before that.

5116 I spent seven years essentially banging my head against the wall trying to make the CLEC model functional. It was almost impossible to make our chief rivals competent wholesale providers. It was going to require -- and you know this as well as I do -- constant, eternal vigilance on the part of regulators to make it work.

5117 Finally now -- and this is why I joined Pulver.com -- we see a dramatic paradigm shift in the way competition, at least in the voice market, and ultimately in other IP-enabled services, can proceed. It doesn't require the same sort of constant oversight and micro-managing of the ILEC network, with the constant struggle of trying to come up with some parity solution between cable and the ILECs.

5118 I am hopeful that the VoIP community doesn't become essentially the road kill or collateral damage that I saw in the CLEC industry, at least in the United States.

5119 What I ask is that no harm be done at the application layer. We are trying to convince the United States at least to move to a layering model where obviously there is going to be some dominance at the physical layer. It is going to be impossible for there to be an infinite supply of last mile bottleneck facilities. But there certainly is an infinite supply of potential applications, be they VoIP or other IP-enabled applications.

5120 It is our hope that whatever you do here -- and we don't have a real stake in the fight over what happens at the physical layer, but we do have a stake to make sure that all consumers, be they Canadian or other consumers around the world, can reach the application of their choice.

5121 That means asking all regulators to adhere to the core principle that the consumer should be able to control its own communications experience. That may mean at times making sure that no one can dominate the consumer or use unfair market control or control over the bottleneck to ensure the consumer can reach the application of their choice. But it also means at the same time not to start regulating what goes on at the application level.

5122 I think that is all I need to say at this point. I am open to questions, if you have any.

5123 THE CHAIRPERSON: Thank you. We have no questions.

5124 MR. ASKIN: Thank you.

5125 THE CHAIRPERSON: Madam Secretary.

5126 THE SECRETARY: Thank you, Mr. Chairman.

5127 The next item on the agenda is MTS Allstream Inc.

REPLY / RÉPLIQUE

5128 MS GRIFFIN-MUIR: Thank you.

5129 Good afternoon, Mr. Chairman, Commissioners.

5130 IP-based technology provides an opportunity for something that has remained elusive thus far: real and sustainable competition in the local market.

5131 Key in harnessing this opportunity is establishing the regulatory framework. In our view, the Commission has got it right.

5132 The preliminary view that voice is voice and therefore a voice service, whether offered as VoIP or as traditional primary exchange service, should remain rate-regulated for the dominant provider in the dominant provider's territory. This is the correct view.

5133 Therefore, there should continue to be economic regulation as the dominant provider. The social obligations that exist today, such as 911 and MRS, should continue to exist, and VoIP should be contribution eligible.

5134 The notion put forward by Bello and TELUS that VoIP is somehow different from traditional voice service and that Category 2 or 4 or access independent services should be unregulated is both wrong and, in practice, unworkable.

5135 As the dominant voice provider and the No. 1 or No. 2 ISP in territory, the incumbent can engage in abuse of dominance to preempt or limit local competition.

5136 In addition to the fact that it would be very difficult to determine whether or not the VoIP offering is truly access independent, dominant providers like Bell, TELUS and MTS, would also be free to use pricing promotions and win back in an anti-competitive manner, or on a targeted basis to forestall or extinguish local voice competition.

5137 The harm to competition and to competitors would already have taken place by the time such practices came to light.

5138 The fact is that for the incumbent, there are not really any clear delineations between access dependent and access independent voice services. This creates an opportunity for incumbent network providers, telco and cableco, to confer preference upon themselves.

5139 While the possibility exists for them to degrade the service of resellers, the Commission should be more wary of the incumbent's ability to use this control to provide superior service to their own end customers and to limit competitor access.

5140 We have already heard examples of this.

5141 Bell and TELUS, through so-called Category 4 or access independent IP Centrex offers, require other potential access providers to meet self-specified Q of S standards. The cablecos openly admit their intent to do this, claiming that investment gives them this entitlement.

5142 These examples underscore the need for an open access infrastructure equally applicable to the broadband accesses of both the incumbent telephone companies and the incumbent cable companies.

5143 The ubiquity of these access infrastructures places the telcos and the cablecos on equal footing in the provision of underlying access facilities.

5144 The Commission must recognize that there is a distinction between dominance in the provision of voice services and dominance in the provision of underlying access facilities, particularly as voice, video and data services are delivered more and more through a single broadband access.

5145 Therefore, the regulatory framework should also include unbundled access for both the telcos and the cablecos.

5146 Thank you.

5147 THE CHAIRPERSON: Thank you.

5148 We have no questions. Your presentation was clear.

5149 Madam Secretary.

5150 THE SECRETARY: Thank you, Mr. Chairman.

5151 Next on the agenda is Call-Net Enterprises Inc.

REPLY / RÉPLIQUE

5152 MR. LINTON: Mr. Chairman, Members of the Commission, good afternoon.

5153 Before I start, I want to acknowledge and thank Vice-Chairman Colville and Executive Director Shirley Soehn for their commitment and effort during their time at the CRTC, as this will probably be their last public hearing on telecommunications before they are scheduled to leave the Commission.

5154 Over the last four years since I have been involved, they have been praised and scorned by the incumbents, the competitors and consumer groups -- which indicates they have probably done a pretty good job.

5155 Call-Net welcomes the entry of new players in the local voice market in Canada. More competitors and greater competition should eventually lead to a balanced market noted for innovation where regulatory oversight can be reduced.

5156 The Commission has and continues to direct and support the development of a competitive environment. VoIP is another important step, but it does not in itself equal competition.

5157 Competition is only proven by market share facts, and we all know what those facts are: the ILECs control 96 per cent of the local market, and we, being Sprint Canada, have most of the other 4 per cent.

5158 In the few minutes I have left, I would like to address just one or two issues that have been discussed in this proceeding.

5159 Call-Net's position is that VoIP is a substitute for, and essentially equal to, Primary Exchange service and since the ILECs have market power in the existing PES market, we believe this market power can be exercised in the VoIP market.

5160 Accordingly, we believe that the ILECs' VoIP services should be regulated.

5161 There have been many attempts to categorize VoIP services in this proceeding. Let me try one more time to simplify this.

5162 First, there is a VoIP service which includes the access facilities. This is referred to by TELUS as access dependent service. Everyone in this room, except Bel, agrees that this service should remain subject to the existing regulatory framework for PES: that is, a mere change in technology within the ILECs' network should not affect how the service is regulated.

5163 For the second type of VoIP service, access is provided independently of the acquisition of the VoIP service. It is this flavour of VoIP which gives rise to a lot of the difficult regulatory issues, and it is this service I would like to address.

5164 Both Bell and TELUS appear to be suggesting that if their retail VoIP service is provided independently of Internet access, then the service ought not to be subject to economic regulation. They even go so far as to classify such access-independent VoIP service as an "Internet Application".

5165 I would suggest that whether or not VoIP is an Internet application is irrelevant to the issues in front of the Commission. The important point is that VoIP is a voice service; that is, equivalent to Primary Exchange Service and should be regulated accordingly.

5166 Do not be fooled by these arguments. Bell and TELUS are not arguing this in order to sell VoIP service in each other's territories. Their strategy of access independence is to sell unregulated VoIP to their customers who subscribe to their own unregulated high-speed access service in their own monopoly territories.

5167 This creates a huge competitive advantage based on their market power and will thwart competition, not enhance it.

5168 Considering their virtual monopoly in local, the risks of leaving ILECs' VoIP unregulated are great and include:

5169 (1) ILECs will have the incentive, the opportunity and the ability to target CLECs' PES customers with unregulated and what we like to call strategically priced VoIP.

5170 (2) ILECs will potentially use VoIP to circumvent the bundling, winback and promotion rules that you have put in place.

5171 I would now like to turn to my friends in the cable industry.

5172 As with the ILECs, they too argue that since they have no market power in local services, their provision of VoIP services should also be unregulated.

5173 I would agree with that. However, the cablecos do have market power in the delivery of cable services. This is especially true in MDUs.

5174 Just as the ILECs can leverage their dominance in the PES market to gain undue advantage with respect to their VoIP service, the cablecos can leverage their dominance in cable television to gain undue advantage in marketing their VoIP services.

5175 For this reason, Call-Net agrees with Bell Canada that some of the regulatory requirements applicable to the ILECs should also be extended to the cable companies.

5176 Principally among these obligations are the requirements to provide non-discriminatory access to their networks at cost-based rates.

5177 As well, it is important that the cable companies' CLEC affiliates not obtain facilities or services from the cable companies at preferential rates.

5178 In conclusion, I think that the Commission got it right in their preliminary view, although some of the details will need to be addressed to reflect the different flavours of VoIP that you have heard here.

5179 I thank you for providing me the opportunity to address these issues.

5180 THE CHAIRPERSON: Thank you, Mr. Linton.

5181 First of all, I have to say that you are not assisting me in my campaign to extend Vice-Chairman Colville and Shirley Soehn's mandates by providing premature tributes to their departure.

5182 MR. LINTON: I will take all that back.

5183 THE CHAIRPERSON: Hopefully, you will have opportunities for such tributes in the distant future.

5184 I have two questions. You were not here yesterday, so I will put them to you and the ILECs will have an opportunity to replay later on.

5185 You say on the first page of you representation, at the bottom, where you are referencing the market power in the existing PES market, and you say:

"We believe that this market power can be exercised in the VoIP market."

5186 Could you elaborate?

5187 MR. LINTON: I think -- and it has been mentioned a number of times before -- that within their market they will be able to cross-subsidize services and use their market dominance to basically remonopolize the local service, which right now, as I said, there is only a 4 per cent share by competitors.

5188 The huge dominance they have and the very small incremental cost for them to develop VoIP would allow them, for not much money for them, to attack that small percentage of the market that they have lost over the last couple of years.

5189 THE CHAIRPERSON: So that by deregulating them in that sector, they are free of what? What rules would they be free of that you would worry about?

5190 MR. LINTON: I think it may be argued by them that they will be free from winback rules, for example; whereas now there is a 12-month winback window, they could start calling the customers that we migrate on Day One and offering them not a circuit switched alternative but a VoIP alternative, as an example.

5191 THE CHAIRPERSON: Thank you.

5192 My other question related to your reference to the cable companies. They have already been up in reply.

5193 Their position -- and they do have written reply comments if they care to add to whatever you say.

5194 You say that you believe that they should have the obligation to provide non-discriminatory access to the networks at cost-based rates. Their argument is that the 97-8 regime that was set up for local competition provided that CLECs, who were non-dominant, would not be regulated and would not be required to open their networks to that kind of unbundling; and that that should not change going forward just because we are going into a VoIP environment.

5195 By your logic, the VoIP environment doesn't represent a substantial change, so why would you have them unbundle their networks?

5196 MR. LINTON: I think the key is that this new service that they are going into is a Primary Exchange Service, so you have a basically unregulated group dominant in one area coming into a market that is regulated and regulated for very good reason.

5197 I think if we were talking about another Internet application and not primary voice, I wouldn't be making those arguments. But I think it is the nature of the application that they are getting into which makes myself and other people like to see them open that network up.

5198 THE CHAIRPERSON: As I hear their position, they are saying they will be offering an access-dependent telephone service under VoIP and, as such, would be a very small-sized competitor, starting off with a zero market share in that environment.

5199 So on that basis there would be no obligation; nor would that be a service available to VoIP service providers since it would be an access-dependent service.

5200 Then on the access-independent side, they would be providing high-speed access, so essentially an Internet connection.

5201 MR. LINTON: I think you have to look at the size of some of those organizations and in the territories, you know, we are in we compete against Rogers, which will probably tell you they have two million cable subscribers and a 70 percent penetration of all homes and, etc. So it is hard to argue that they don't have a dominant position even though they don't have a single telephone subscriber yet.

5202 THE CHAIRPERSON: Thank you very much. Madam Secretary.

5203 THE SECRETARY: Thank you, Mr. Chairman. I am now calling Yak Communications Canada Inc.

REPLY / RÉPLIQUE

5204 MR. ROVET: Good afternoon, Mr. Chairman and commissioners. In our closing remarks I would like to briefly touch on two issues. First, I would like to address the VoIP access condition that we have asked the Commission to impose on ILECs and cable companies. We have asked that the VoIP access condition prohibit the intentional degradation of independent VoIP provider service and also ensure that the ILECs and cable companies do not give their own service preferential treatment.

5205 The Commission has asked parties whether they have experienced any evidence of intentional service degradation. The Commission has framed this issue as whether this is just a theoretical possibility or a real opportunity. One point I should have mentioned yesterday is that there is a good reason why we have not yet seen this type of anti-competitive behaviour and that is because the cable companies and ILECs have not yet launched their own competing VoIP services, that is when we would expect to see this type of mischief. There is evidence that the technology is there to accomplish service degradation and that, along with the ILECs' incentives and history of anticompetitive behaviour, is enough of a reason for the Commission to impose a VoIP access condition.

5206 The flipside of this is that we are also saying that ILECs and Cable Cos should not be permitted to give their own services preferential treatment through packet prioritization and other quality of service enhancements. With respect to the ILECs, I take Mr. Engelhart's point that our focus has been on the customer side of the DSLAM and where the real opportunity for ILECs to give themselves preferential treatment may be on the other side of the DSLAM through superior internet piering arrangements.

5207 However, even in this scenario, the ILECs would still be making an operative decision to route their own VoIP traffic on a superior internet route, if you will. There is no reason why, for instance, a Yak VoIP packet cannot also be sent over the same route to Yak's media gateway and routers. The same rationale for a VoIP access condition would apply, undue preferential treatment.

5208 The cable companies have also drawn the distinction of a managed network versus VoIP over the public internet. They say that it is okay to put their own cable packets ahead of or even in a separate line from, for instance, SIP packets as their service is a managed network service. Our position is that the Commission should not accept this distinction in considering a VoIP access condition. When the cable companies offer a packet prioritisation feature we believe it should also be made available to independent VoIP providers on an unbundled basis pursuant to tariff. We therefore urge the Commission to impose a VoIP access condition on both cable companies and ILECs. This is something we advocated from the beginning and many other parties have endorsed this point.

5209 The second point I would also like to briefly touch on is the classification of VoIP services. Yak agrees with the Commission's preliminary position and regards its own VoIP product as a competing phone service. Some parties would have you believe that VoIP services are a retail internet application no different than email or instant messaging. The important distinction to remember is that to use internet applications I use my computer, keyboard and mouse. When I make a VoIP call I use a telephone, the very same telephone that was plugged into my wall jack eight years ago and now it is just plugged into an ATA.

5210 This hearing has rightly devoted a lot of time the issue of 911 and other social regulatory obligations. Perhaps this is the most telling reason why VoIP is a telephone service and not merely an internet application. Do we worry that instant message users have access to 911? The answer is clearly no. The fact that there is so much attention on social obligations means that VoIP is a different service and does justify the Commission treating it like voice telephony services. In particular, there is ample justification for treating VoIP services from ILECS in territory the same as other local voice services that they provide.

5211 Mr. Chairman and commissioners, on behalf of Yak I would like to thank you for hearing us and considering our position and issues.

5212 THE CHAIRPERSON: Thank you very much.

5213 LA SECRÉTAIRE : Merci, Monsieur le Président.

5214 La prochaine comparution, l'Union des municipalités du Québec.

5215 Next on the agenda l'Association des centres d'urgence 9-1-1 du Québec.

5216 The next item, GVRD, will not make a presentation, nor the City of Calgary.

5217 Therefore, the next item on the agenda is the Ontario 9-1-1 Advisory Board.

5218 THE CHAIRPERSON: We apparently short-changed you in your time yesterday, so if you need to take an extra few minutes for your reply we will be tolerant of that. Go ahead.

REPLY / RÉPLIQUE

5219 MR. GLEN: Thank you. Good afternoon, Mr. Chair and Commission members. Thank you for this opportunity to appear before you. I know that we were introduced during our brief appearance yesterday afternoon as representing the Ontario Advisory Board, but I would just like to add a little bit of information about Judy and myself.

5220 Judy Broomfield is the PSAP manager for the Toronto Police Service. This is the busiest PSAP in Canada and it handles over one million 911 calls per year. It is also the PSAP in Canada that first experiences any technological changes, telecommunication changes, basically any changes that occur whatsoever and it was Judy's 911 call takers that first experienced VoIP calls.

5221 In my position, I represent the Chiefs of Police in Ontario. In Ontario the Chiefs are responsible for providing PSAP services that account for approximately 99 percent of answering of all 911 calls.

5222 In conclusion, maintaining access to a fully functioning 911 system for the citizens of Ontario has been our only priority at these hearings. Nothing we have heard over the past three days has changed our position and, if anything, has only strengthened our resolve on this matter. The current deployment of VoIP services in traditional landline situations, especially in residential settings, has serious safety implications given the obvious lack of 911 functionality and in some cases no access whatsoever.

5223 We maintain that by allowing the initial deployment Canadian carriers have not satisfied their obligations under CRTC's decision 97-8. They continue to knowingly resell access to their services and local numbering pools with a clear understanding of the technical 911 limitations of the service being provided.

5224 Current alternatives offered by various VoIP providers will not provide the general public the safety features of existing 911 service. These alternatives have included third party call centres that, in our experience, do not train personnel to a standard that would allow them to answer emergency calls from the public. Comwave stated that it uses an alarm company call centre that we know is trained to receive alarms and simply pass that information to the appropriate agency, not in answering live emergency calls.

5225 The use of 10 digit backdoor numbers such as those employed by Vonage, this connects an emergency call to a non-emergency number that in some cases has been reported to send the caller to a number that is not staffed 24 hours per day or is not answered within an emergency centre. I guess the best suggestive alternative was simply as long as we can get the caller to some PSAP isn't that better than nothing. Our answer is no. None of these alternatives are safe for the citizens of Ontario and none would allow our PSAPs to carryout their mandated role of providing effective and efficient emergency response.

5226 Our first response to this issue is that based on the current situation the Commission should use its regulatory authority to order all Canadian LECs to cease and desist from reselling their services to ISPs who cannot meet existing 911 service standards and to order the removal of all unsafe VoIP services from the market. We see this as no different than any unsafe consumer product and that a recall has and could be ordered. However, if this is not an alternative, then the CISC Working Group could be a suitable venue for determining some workable alternatives, but this group requires specific directions and timelines. The groups is miles apart on alternatives as can be seen by those alternatives that have been suggested to date. This has put us as PSAP managers and representatives in a position of either accepting what we know are unsafe alternatives or being accused of being uncooperative.

5227 We believe that 911 is a vital service and a decision to have it or not cannot be left up to individual consumers. In my opinion, this is akin to letting someone buy a car without brakes because they only plan on driving uphill and wouldn't need them. It is too late when they crest that hill and start down the other side for them to realize that brakes might have been a good feature. A person in crisis will not remember or care that they decided 911 was not an important feature, they simply want it to work.

5228 Also, the lack of 911 cannot be buried in the middle of long and involved terms of service. Companies must not be allowed to rely on this to absolve them of their responsibility to provide this vital service. We do want to cooperate, we do want a solution, but not one that will negatively impact the safety of the citizens of Ontario. In Ontario we require a solution that provides current 911 functionality using our existing PERS platform.

5229 Until accurate VoIP addressing is developed PSAPs will be required to treat all VoIP information as unreliable. This will cause time delays and could ultimately lead to injury and/or death. The companies have stated that they envision providing VoIP 911 service but not of high quality. We find this most disturbing coming from the 911 platform providers and it only reinforces our support for the need to regulate the providing of 911 and E911 services.

5230 All emergency services expend great efforts to teach children from an early age when and how to use 911. Please don't add to this the requirement of trying to teach them that yes it looks like a regular phone, yes it is plugged in like a regular phone, but no it is not a regular phone and you need to find another way to call for help. Ontario's PSAPs area already handling VoIP calls on a daily basis, so this is not a future issue. It is a now issue and requires a speedy resolution, one that is measured in months, not years.

5231 Once again, we support the Commission's preliminary views. It is obvious to us from these hearings that all of you possess a high knowledge of 911 issues and are as anxious as we are to find a safe solution not only for the citizens of Ontario, but all of Canada. Thank you.

5232 THE CHAIRPERSON: Thank you very much. Commissioner Colville.

5233 COMMISSIONER COLVILLE: Good afternoon and thank you. I am getting a bit of a sense that we are probably at what appears to be perhaps a bit of an impasse at CISC in terms of resolving this issue, and I am reading between the lines here of your presentation just now and I get a bit of a sense of this. When you say in paragraph 18 on the third page of the statement you have just read, "We require a solution that provides current 911 functionality using the existing PERS platform." Is it your view that that is why you are not able to come to a solution because the parties on the other side either will not or cannot accommodate the existing PERS platform?

5234 MR. GLEN: I think the problem at the CISC was that we never even got to that point, because all we were discussing was some of these alternatives that I have listed today and read out to you and that things got so far off the tracks on those alternatives that we never even got to that point and I am not sure that at the table were people who could actually answer the question as to how they are going to interconnect through the current tandems that are in place in Ontario and also Quebec uses the same system. So, I think part of the problem was that we didn't have enough focus, enough direction, as well as not having a timeline as to when this needed to be in place to even get going. We never did get going. And if I could, sir, just on that, after sitting here at the hearing today, one of my concerns is how CISC will be managed in regards to how many participants will there be at the table. There was a limited number of participants at the last working group meeting in Montreal, but when we look at the number of applicants for the public notice that number just continues to grow. So, I have to say I am concerned about how you can put together a proper working committee that isn't so large that in itself it is not manageable.

5235 COMMISSIONER COLVILLE: If we go to paragraph 12, setting aside the timelines and there has been lots of debate about what might be appropriate. Well, I suppose that is probably not even fair to say, most people don't know what is an appropriate timeline it appears. But when you say specific directions, so you have something in mind now as to what those specific directions would be, what the nature of those directions would be?

5236 MR. GLEN: Well, I think your preliminary decision laid out what we believe are specific directions, is the providing of the 911 service as a requirement of providing VoIP service. I think maybe what is required beyond that is the wording that was in the preliminary decision is really open to interpretation and could get us into, you know, going years down the road and the problem is that we are dealing with this today.

5237 COMMISSIONER COLVILLE: Well, I thought that in here when you referred to specific directions you were referring to some direction beyond what we had in our preliminary view that we would be directing to CISC in order to get it moving along and get it beyond this impasse or apparent impasse. But you are not saying that?

5238 MR. GLEN: No, I think the specific direction is that 911 has to function and it has to function properly. I guess where the difference will certainly come at CISC is from a PSAP side we are looking at full functionality of what we have today in traditional landline technology and so I guess if there is direction to be given I am not the technical person that will, you know, that can say that all of these will work and all of these won't. Maybe not all of them will... I don't know that because I am not the technical.

5239 So our position today is that when your preliminary decision said 911 service we look at what we have today and what we have in traditional landline is a full suite of 911 features and functionality that we would like to retain.

5240 COMMISSIONER COLVILLE: Well, several parties have mentioned LNP or local number portability over the last week. I don't know all the technical issues that were required to get that done, but we just said just do it and it got done. So, maybe that's what we need here. Thank you very much.

5241 THE CHAIRPERSON: Thank you.

5242 THE SECRETARY: Thank you very much, Mr. Chairman. Next items on the agenda, number 10 and 11 were cancelled, therefore I am moving on with ARCH.

5243 Number 8 was also cancelled. We are moving on with number 7, B.C. Public Interest Advocacy Centre (BCOAPO et al.).

5244 Next item on the agenda, Northwestel Inc.

REPLY / RÉPLIQUE

5245 MR. FLAHERTY: Mr. Chairman, I would like to begin these short remarks by noting what is certainly evident to you, that you have a daunting task before you.

5246 For our part at Northwestel, we are carefully examining IP services and I want to emphasize that we welcome the advent of these new services, including voice over IP. To be realistic, voice over IP services are available to northerners today. There is nothing a company like Northwestel could do to stop them nor would we want to do so. The challenge for us collectively is to adapt to the new IP reality. The challenge for the Commission is to develop a regulatory regime which is practical and sensible as our society moves even further into the internet world. In this regard, Northern Canada represents something of a microcosm of the larger problem, though our case represents a much smaller market with much higher costs.

5247 The Commission has often heard the economists say there is no free lunch. This is true in telecommunications as in any other part of the economy. Which brings me to the critical issue of how do we devise a system that will continue to sustain a universal network in Northern Canada. Prior to 2001 long distance revenues in Northern Canada virtually subsidized all telecommunication services in the north. As recent as the late 1990s long distance rates were as high as .90 cents a minute. In 2001 northerners obtained access to long distance rates similar to the south though slightly higher. To enable this to occur the CRTC recognized that additional funds would be required to support the northern telecommunication system.

5248 The CRTC raised local access rates, established a relatively high but still subsidized carrier access tariffs of .07 cents per minute, and also put in place supplementary funding from the rest of Canada to support Northern Canada, $13.4 million on a preliminary basis in 2003.

5249 Compared to the rest of Canada the north has a very costly telecom network with very small volumes of traffic. Given the large distances and small population, the entire of which would fit in two SkyDome buildings, it is likely not economical or practical to duplicate infrastructure in the north. Given these realities the Commission has struck a fine but fragile balance between revenues garnered from Northwestel's customers and carriers who use the network and funds from the rest of Canada through supplementary funding. Throughout this proceeding there have been numerous discussions on the various forms of VoIP, categories one to four, or access dependent and access independent. Northwestel's concerns relate to all categories of VoIP, plus any future services that will use any part of the costs in northern network.

5250 It is easy for parties to refer to network diagrams of suspended or disconnected internet clouds, but these clouds allow one to forget that in the north internet services will, in virtually all cases, use many elements of Northwestel's network. If the northern telecommunication's network is to be sustained for the long-term as the network of last resort, the services using that network must contribute to the underlying cost of the network. If this does not occur and these new services continue to grow, ultimately the whole network will not be economically sustainable.

5251 With IP based services like VoIP there are incentives and opportunities under the current per minute contribution regime to bypass the .07 cent cap. We are certainly not suggesting that VoIP or IP services be stopped, they cannot and should not be. In these short remarks we will not attempt to redesign the contribution mechanism, we simply ask the Commission to continue its policy of ensuring that there are mechanisms in place to sustain the network of last resort in all 96 communities in Northern Canada by ensuring that all services that use the high cost network contribute to the underlying costs.

5252 That concludes our closing arguments. Thank you, Mr. Chairman and commissioners, for the opportunity to speak before you in this proceeding.

5253 THE CHAIRPERSON: Thank you very much, gentlemen. We will break now and resume in 15 minutes. Nous reprendrons à 16 h 10.

--- Upon recessing at 1555 / Suspension à 1555

--- Upon resuming at 1615 / Reprise à 1615

5254 THE CHAIRPERSON: Order please. À l'ordre s'il vous plait. Madam Secretary.

5255 THE SECRETARY: Thank you, Mr. Chairman. Next on the agenda for their final statement, TELUS Communications Inc. Please proceed.

REPLY / RÉPLIQUE

5256 MR. GRIEVE: Thank you, Madam Secretary, Mr. Chairman and Members of the Commission.

5257 TELUS will comprehensively address the issues raised over the course of this proceeding in our written reply comments, but in the short time allotted to us this afternoon I want to make some general comments and then discuss three specific issues to which I have been asked by the Panel to respond.

5258 In the three days of this public consultation we have heard that access independent voice over IP is different for all the reasons we addressed and more. We heard from competitors such as Cybersurf and AT&T Canada that tariff regulation of this service, when offered by the ILECs, is not necessary.

5259 TELUS and others have demonstrated that access independent voice over IP service is different from PES and TELUS is requesting that it be permitted to provide access independent voice over IP service in territory free of tariff regulation. TELUS is not asking for a change in the regulation of its primary exchange service or any PES like access dependent VoIP service, which is not provided over the internet that it might offer in the future.

5260 Some parties do not agree with our position and argue for tariff regulation and even additional regulation of all VoIP services. I have listened to the testimony presented over the past three days. I have heard expressions of general unease and assertions that the ILECs could leverage any market power they might have in the provision of PES to prevent competitors from succeeding in the provision of access independent voice over IP. But I have not heard anyone explain exactly how the ILECs might be able to leverage any PES market power in the provision of access to independent VoIP service other than the extraordinary scenario painted by the CCPA.

5261 In our view, the idea that we would incur the expense and go through the complex machinations required to achieve the CCPA's scenario of preferring our own internet voice traffic is really reaching. Access independent voice over IP is already priced at market levels, so how could we incur all the extra costs and still be competitive. As for Mr. Stein's comment that Shaw customers receiving TELUS access independent VoIP service over Shaw high speed internet access would somehow think they were still getting TELUS primary exchange service is an idea that not even Mr. Engelhart could figure out.

5262 Let us be clear, given there are concerns about recovering the cost of their investments, they have every incentive to prevent all access independent providers from successfully providing service to cable high speed internet access customers. We will address these points and others made by the CCTA fully in our reply comments. Access independent voice over IP, as we have defined it, is an internet based voice application, the provision of which is decoupled from the provision of the underlying access service just as email applications are. It would make no sense for the ILECs to lower price below cost for access to independent VoIP service because there will be no opportunity to raise prices later to recover the losses. Barriers to entry are very low and competitors from all over the world would simply rush in in response to attempts to raise prices above cost to recoup past losses. TELUS is certainly not in the business to intentionally lose money and that is precisely what below cost pricing would mean.

5263 Of course, we have heard that the access independent voice over IP providers were concerned about the possibility that the quality of the high speed internet access through which access independent voice over IP is delivered might be degraded by the ILECs or cable companies. As a company planning to offer this service across the country, we would be concerned about that too. We have heard no one, other than AT&T, in only one of the many countries around the world that it serves that has experienced any such problems. In our case we do not believe it is in our best interest to degrade our competitive high speed internet access service, it is simply not in our business interest to do so in a competitive high speed access business where, as you know, we are not even a leading provider in Alberta an British Columbia.

5264 In addition, TELUS has made two important commitments that address any lingering reservations regarding the non-tariff provision of in-territory access independent VoIP service. First, we have made a commitment to provide the same quality of service over our DSL lines to other access independent voice over IP service providers, as we provide to our own access independent voice over IP service. As you know, the prohibition against unjust discrimination is already a condition of the forbearance order for internet access services. If you think you need to specify a further access condition, the technical and standards issues would have to be worked out in CISC and we have said that that would be the best place to do so. But this is not an issue related to whether the ILECs should be required to file tariffs for access independent VoIP service.

5265 Our second commitment is that TELUS will provide fully standalone DSL service by the first quarter of next year. This means that any TELUS customer who has access to DSL service will be able to purchase the service without purchasing PES from TELUS or any other company. This will allow customers to combine DSL access with any access independent voice over IP service without purchasing primary exchange service. In addition, the Commission's bundling rules provide protection against anticompetitive pricing by the ILECs.

5266 This week we have heard a number of very important issues related to access independent voice over IP raised. Like the access issues, none of these issues would be resolved by requiring the ILECs to tariff in-territory access independent voice over IP service. Issues such as 911, these are important issues and we have been impressed by the eloquence with which parties have expressed the urgency of this issue, but we do not believe you should attempt to shutdown access to independent VoIP service until these issues are resolved, indeed we believe it would not be possible to do so. I made a commitment to Commissioner Cram to get back about the timing for this and will certainly do that in our written reply.

5267 But once again, this is not an issue that touches on the question of whether ILECs should be required to tariff access independent voice over IP service.

5268 Now, the Panel has asked that I address three other specific issues. One, is with respect to equal access and in the access independent voice over IP world we don't think that that makes any sense. Second, the Chairman wondered whether access independent voice over IP services, as it evolves, will remain access independent, and our view is that it will and that customers will be able to get both an access dependent and access independent voice over IP service from the likes of the cable companies in short order or get their access dependent voice over IP service from the cable company and then access independent service from someone else, and that is how things are likely to evolve.

5269 The third issue was the issue Commissioner Langford raised and invited me to respond to this concern. Just briefly in the short time I have, you know, the conclusion that I still stick with is that the contribution mechanism should ensure that whoever provides service to high cost customers can be assured that they will have a reasonable opportunity to recover their costs. I will discuss that more fully in our written reply.

5270 In conclusion, we believe that the record of this proceeding and, in particular, what you have heard this week provides you with more than adequate evidence that there is no reason to require ILECs to tariff into a territory access independent voice over IP service. We have made commitments regarding access by third party voice over IP service providers to our high speed internet access customers and the record suggests that there is no need for you to impose access conditions. And, we are committed to contributing to a timely resolution of the 911 issues as soon as possible.

5271 Thank you for the opportunity to appear before you today and this week.

5272 THE CHAIRPERSON: Thank you very much, Mr. Grieve. I have two follow-up questions in respect of the access independent VoIP provided to your customers and to those of competitors. I don't know whether you have with you, you may not, the CCTA oral presentation this morning. I will read you the comment and I would like you to comment on it.

5273 This is page nine, the second and third bullet. Second bullet, "TELUS access independent calls will be carried over a TELUS DSL line and then transit over a TELUS internet backbone to a piered TELUS PSTN gateway all in the same central office." Third bullet, "Competitor services will travel over the public internet before reaching a PSTN gateway." This is under the general heading, "Access Independent?"

5274 MR. GRIEVE: I will start and I will let Mr. Woodhead follow-up. First of all, you read out of their presentation and I just want to say that it is interesting how what Mr. Engelhart said morphed into something else by the time they got off the stand. It started off as, will be dumped onto the internet connection in our central office, and then ended up by the end of the conversation or at least as other parties came up where it would never touch the internet. I can assure you that the cost of splitting out the voice bits that would come up on the ADSL side of the spectrum or the DSL side of the spectrum on the loop, splitting out the voice bits and then identifying out of those voice bits which are TELUS' would be costly to do and it would have to be done in every central office in our territory and it is something that would make the service far far more costly than it would otherwise be and it is already a very competitive market.

5275 So with that, I will ask Mr. Woodhead to address further.

5276 MR. WOODHEAD: I don't really have much more to add other than to say that, for example, if Primus had its softswitch in Calgary, its traffic would be handled by us in the same fashion as our own. Vonage's traffic similarly, so it is all dependant on where you place your softswitch and it all hits the media gateway and it is spread out into the cloud on the most efficient route that the packet can find and everybody's packets are treated equally.

5277 THE CHAIRPERSON: I hear what you are saying. I guess one of the issues is that the sharp delineation between category two and category three or access independent and access dependent turns on the internet. So if we don't have a clear sense of what we mean by the internet then that boundary can get fudged. Can you help us in that regard?

5278 MR. WOODHEAD: Well, sometimes the internet could perhaps be 100 feet long or it could be 100,000 miles long, I mean it just depends. And, the packets are routed in the most efficient way, the signal controlling searches for the most efficient route and it is not distance sensitive, it just finds the most efficient route and takes that route. That is the difference between the internet and the PSTN. When you involve the internet it is just not distance sensitive.

5279 MR. GRIEVE: Maybe I can help you a little bit more. When the traffic comes up it goes to the DSLAM and then it goes to the router. Once it goes to the router and it hits the internet, whether it is a piece of the internet backbone that is in our office or the internet anywhere else, once it hits there you lose control of it for the amount of distance that it goes. So, if you had Comwave, for example, that had a server right next door and then before it came back, that is a very short distance for Comwave.

5280 We are using the Calgary example, if Comwave's was in Toronto, then it goes a farther distance there and back on the public internet. In our office, for the calls that originate and terminate at that office, it goes a short distance. But all the other calls it is going to go longer distances and a Comwave call might actually... in and out of that Calgary office, might go a shorter distance than another call that we would have that would go somewhere else in TELUS' territory.

5281 The interesting thing is, and luckily we still have an engineer here with us today, the interesting thing is that if when the traffic gets dumped on that 100 feet or 100 yards or whatever it is, that there is some congestion at that moment there, that traffic could go anywhere. It could go, as our engineer said, it could go to Boston and back, it is all the speed of light, but it is all the vagaries of the internet, you lose control of how it is routed.

5282 THE CHAIRPERSON: I take that point. I guess you have committed to the concept of equal treatment -- non-discriminatory treatment. The devil is in the details, and I guess what you are saying is, it might be -- I take it you don't think it is necessary currently, but it might be necessary to develop definitions, delineations and so on if it proves to be a problem.

5283 Would that be a fair way of summarizing your position?

5284 MR. GRIEVE: Yes. These are standard issues.

5285 I think one of the things that we have to understand is that all providers of high-speed Internet access today have in their terms and conditions of service that it is a best efforts basis. That is just the way the Internet is.

5286 For our access independent Voice over IP service, it would be just as much a best efforts basis as it would be for anyone else.

5287 So if you were to attempt to try to put a quality standard on it -- there is a discrimination issue and there is a quality issue. If you were to put a discrimination standard on it -- we think that is already there, actually, in your Internet forbearance.

5288 For someone like Shaw, who is not planning to provide an access independent Voice over IP service, that non-discrimination provision would not apply as between Shaw and anyone else, because this is a different service and you can only have discrimination, let alone unjust discrimination, between services.

5289 In the case of someone like Shaw, they can make a commitment that everyone is going to be treated the same, but everyone could be treated the same badly.

5290 THE CHAIRPERSON: I understand that there is an aggregate and that there is an aggregate --

5291 Thank you.

5292 The second comment is, you dismissed Mr. Engelhart's $51 bundle. I suppose that if we heard from Mr. Linton and others -- I suppose if you are sitting where Mr. Linton sits, with what he called 4 per cent of the lines, he is very worried about that kind of thing.

5293 It doesn't take much, given the size of TELUS relative to him, to do the $51 bundle for as long as it takes to bring competitors to the conclusion that this isn't maybe a good business plan, and that might not take very long.

5294 Then, Mr. Engelhart's point is, what happens later happens later. If Vonage comes in because prices start to rise for that bundled service, then they come in, and so on. The barriers are fairly low, but, in effect, 4 per cent of the base is at risk and the business plans of would-be competitors are now being severely questioned.

5295 I am wondering why you think of it as so far fetched under the scenario of a deregulated access independent voice service.

5296 MS YALE: I think the issue that underlies it is the presumption of market power. As Dr. Crandall explained, we are talking about a high-speed Internet service which is highly competitive and a Voice over IP application service which is also highly competitive, so there is no leverage. There is no base on which you can recover those losses. Those sorts of pricing practices develop in the context where one service is a monopoly service that is being used to advantage a competitive service. There is no monopoly or near-monopoly service here that is the basis on which that pricing practice could be leveraged.

5297 So the analogy that we drew in our earlier comments had to do more with the launch of cellular wireless services.

5298 If you think of this as a new service, which it is, riding on the Internet --

5299 One of the reasons we have a hard time contemplating it is because there is no way to recover the losses.

5300 MR. GRIEVE: I would like to add one thing.

5301 We have a situation where we have PES lines -- residential PES lines declining in real terms, despite significant growth in our population in Alberta and British Columbia, and in housing starts. The idea that we would have all of these costs to recover and that we would somehow, as we are dropping customers and dropping lines, come up with a service that would intentionally lose money in a challenging time like this, I find difficult --

5302 I can't imagine going in and saying to the marketing guy: This is a good idea.

5303 It is just not incented that way at all.

5304 THE CHAIRPERSON: Keep the customer for a couple of years, and so on, relative to whether the company is spinning off a $7 billion EBITDA or whatever the number was --

5305 MS YALE: But --

5306 THE CHAIRPERSON: And I understand the deep pockets. I am not making the deep pockets argument, I am making the argument that you are in the telecommunications business and every telecommunications provider wants the customer.

5307 MS YALE: But you are assuming that we are going to offer a different price to customers who happen to be our DSL customers than to customers in Ontario, Quebec, Manitoba, Saskatchewan.

5308 You were positing that it was our DSL, at whatever, plus $1 for Voice over IP, but the bulk of the customers we are going to be targeting are not our own high-speed customers, because our high-speed is a small percentage of the total base of high-speed customers in Canada.

5309 I am saying that we are going to have national marketing programs, except to our own high-speed customers.

5310 From a pricing perspective, you have to remember that this is a national service that we will be offering to all high-speed customers, so the price point has to be set in relation to every customer who could sign up, most of whom, given the distribution of high-speed in Canada, won't be our own customers.

5311 THE CHAIRPERSON: I guess that is the issue. And it is not me who is positing it, I am trying to get you to comment on the CCTA's --

5312 MS YALE: If it was an access --

5313 THE CHAIRPERSON: If you would let me finish, Ms Yale --

5314 MS YALE: I'm sorry.

5315 THE CHAIRPERSON:  -- suggestion, which is positing a $20 service nationally for the VoIP and then $1 added on to the DSL customer base, in-territory -- nationally for that matter -- what is your DSL base outside of your territory?

5316 MS YALE: Yes.

5317 THE CHAIRPERSON: That's their point.

5318 MS YALE: I am just saying that we want to be able to do this on a national basis, to all high-speed customers, and we are going to have a pricing plan and program that is consistent to all customers.

5319 The point I was simply making was, the way in which we are going to price and offer the service is going to reflect the fact that our own high-speed base is a small percentage of the total high-speed base that we will be targeting.

5320 MR. WOODHEAD: If this was such a reality or a possibility, you might wonder why we didn't have a bundle with wireless and high-speed where we did that to drive some other competitor out of the market. It just hasn't happened.

5321 THE CHAIRPERSON: Thank you.

5322 Commissioner Williams.

5323 COMMISSIONER WILLIAMS: I have a quick question. Earlier Call-Net made the point -- and I will quote from it -- the important point is that VoIP is a voice service that is equivalent to primary exchange service and should be regulated accordingly.

5324 I wouldn't mind a quick response. I imagine that you would explore it in more detail in your final written argument.

5325 MR. GRIEVE: Thank you. We have addressed this a couple of times, and there are various things scattered around the record on this point.

5326 I listened very carefully today to the CCTA walk through -- on the one hand, it is just like PES; on the other hand, oh, it is completely different because it is much higher quality -- when they were talking about their own service, which would compete with our PES. It is higher quality, it has access to 9-1-1, it has power and all of those things.

5327 So, boy, our service is great, but forget I said that for a moment; this one over here is just like PES.

5328 I think that there are enough service attributes that are different -- and obviously carrying it on the Internet and the vagaries of the Internet -- it is the kind of service that may be good enough for some people and maybe not. Some people will prefer a switched PES service, others might prefer Shaw's service, and yet others might prefer access independent Voice over IP, and others wireless.

5329 We have this sort of mix of things, and isn't that a happy situation for the Commission to be in the situation where we do that mix of things.

5330 I think the big thing here is that it is carried on the Internet. You make two choices -- who is your high-speed Internet service provider, and then, who is your voice application provider.

5331 And you make another choice -- do I or do I not want an access dependent or managed service.

5332 COMMISSIONER WILLIAMS: Thank you.

5333 THE CHAIRPERSON: Thank you.

5334 Commissioner Cram.

5335 COMMISSIONER CRAM: I have a couple of questions, and I think that I have all of a sudden maybe understood something, or maybe not.

5336 If you had a voice customer in Toronto and a voice customer in Edmonton, and Vonage had the same -- two different people, so we are talking about four different people -- and your customer in Toronto wanted to phone your customer in Edmonton, because of the peering, would your call pretty well hit the Bell network almost immediately, and would then the Vonage call go down to their IP address, their gateway, on the public Internet and then go?

5337 Is that how it would go?

5338 MR. WOODHEAD: I am not aware of whether Vonage has a peering arrangement with Bell, but many --

5339 COMMISSIONER CRAM: Assume they don't. Assume that peers only peer with equals.

5340 MR. WOODHEAD: All right. So yes, but at some point we would both be on the public Internet and the packet would be treated maybe the same -- I don't mean treated the same, but they would be routed the same, maybe, or they would be routed differently, maybe, depending on the conditions at play on the various myriad routes that comprise the Internet.

5341 So if one road is busy, it will take another road. If one path is busy, it takes another path.

5342 COMMISSIONER CRAM: So the peering doesn't allow, essentially, a higher quality call amongst peering groups.

5343 MR. WOODHEAD: It allows, I think, a higher quality transfer.

5344 For example, I believe that the CCTA said today -- or someone said -- that somebody wouldn't peer with Shaw, or somebody wouldn't peer with Rogers. We and Shaw peer on this free basis -- non-compensation basis -- in Calgary and Vancouver. Why do we do that? Because Shaw, which has roughly 60 per cent of the market share in B.C. and Alberta --

5345 COMMISSIONER CRAM: I knew you would try to get that in here.

5346 MR. WOODHEAD: I try.

5347 They have roughly 60 per cent in B.C. and Alberta. But the point of that 60 per cent market share is that it generates a great deal of Internet traffic. So we will peer with people who are peers who generate large amounts of Internet traffic.

5348 So to say that somehow we would disadvantage -- or that we do disadvantage Shaw customers versus our own customers is inaccurate, because we would peer with AOL, we would peer with other large IPs.

5349 COMMISSIONER CRAM: I wanted to go back to the Dr. Crandall argument that there is no "What's in it for me" in ignoring your prices.

5350 There are cases, though, where lowering your prices below cost is justified -- and there has been much talk of Bell's $5 long distance.

5351 Would you say that that was a below-cost or an above-cost offer?

5352 MR. GRIEVE: I have no idea.

--- Laughter / Rires

5353 COMMISSIONER CRAM: If we used your costing it would be below cost, wouldn't it?

5354 MR. GRIEVE: I have no idea.

5355 There are different kinds of costs.

5356 COMMISSIONER CRAM: Oh, yes, I am very aware of that.

5357 MR. GRIEVE: There are marginal costs, and the marginal costs on a telephone network of carrying minutes is very low, and sometimes pricing down to marginal cost -- and I won't go into it, but sometimes pricing down there is necessary.

5358 But nobody prices there for a long, long time.

5359 COMMISSIONER CRAM: But if you attach it to something like retaining a client for two years, or being able to increase your subscription to other services, one of those services, if not more of them, if they are forewarned, could be offered under cost because there will be payback down the line.

5360 MS YALE: But, again -- and I know I keep coming back to it -- but it's not something that's just offered on an end-to-end basis to our own customers, where we are leveraging relationships with the existing customers. These people may be customers for our Voice over IP application and nothing else --

5361 COMMISSIONER CRAM: Yes, but you do have 4 million.

5362 MS YALE:  -- outside B.C. and Alberta so there's no place to recover it.

5363 COMMISSIONER CRAM: You do have 4 million subscribers, residential subscribers, in B.C. and Alberta, and there is still that one has to consider.

5364 So what I'm trying to say is there are occasions when there is something in it for to price things below cost, to price forborne services below cost.

5365 MS YALE: Well, I guess the question is: is the degree of competition out there sufficient? We believe this is an intensely competitive market, where prices are going to be set in the marketplace.

5366 You are asking whether or not we have an incentive to price even below that. I think we have made our position clear that we have no market power which would allow us to do that and to make it viable to do that on a shorter or long-run basis.

5367 I think our position on that is clear and that the evidence, in respect of other competitive markets where the Commission has forborne, supports that view because that has not been the case with respect to other competitive markets.

5368 COMMISSIONER CRAM: Can I suggest to you that if you offered -- if this is forborne and if you offered your VoIP, a forborne service, along with your Internet, retail Internet forborne, along with your broadcasting forborne, that would make a pretty nice package?

5369 MR. GRIEVE: Well, it sure makes a nice package for the cable companies.

5370 COMMISSIONER CRAM: Yes, but it would make a nice package for you, and you would gain because you never have had those as broadcastings, as BDU.

5371 MS YALE: But, again, as Dr. Crandall pointed out, if there are economics of marketing that justified putting a series of competitive services together and offering them at a price, I mean, think of the Full Meal Deal, where you get more value if you buy more than one thing, the issue isn't whether or not a series of competitive services put together can be offered in a package. They are all individually competitive. The question is whether or not each of those services individually is competitive or whether or not there are services in the package for which there are rules.

5372 If we put tariff services in the package, bundling rules apply to make sure that they are priced appropriately. If they are all individually competitive services, then the prices are set in the marketplace.

5373 COMMISSIONER CRAM: Yes. And once you have established -- it would be a sufficient sacrifice to do it under cost in order to capture and keep that market. It would be an okay price to sell it under cost.

5374 MS YALE: Well, our position is it wouldn't make sense to do that because this is an intensely competitive market with foreign-based providers who are not going to leave the marketplace because of irrational pricing strategies and our position is we wouldn't do that.

5375 COMMISSIONER CRAM: Thank you.

5376 Thank you, Mr. Chair.

5377 THE CHAIRPERSON: Thank you.

5378 Vice-Chair Colville.

5379 COMMISSIONER COLVILLE: Thank you, Mr. Chairman.

5380 Just to switch topics, we have been talking a bit here about the quality of service as between service providers. On the issue of quality of service for the consumer, is it your view that you would be forborne from the application of the quality of service measures, in addition to the forbearance from tariff price regulation, as well?

5381 MR. GRIEVE: For access independent voice --

5382 COMMISSIONER COLVILLE: For access independent, yes, I'm sorry. I should have clarified that.

5383 MR. GRIEVE: Yes. And, you know, I actually looked through those the other day. There are things in there like telephone delay and things like that that, as an Internet-based service, you have no control over.

5384 COMMISSIONER COLVILLE: No, I understand that. I understand there may be some of them that, because of the nature of the Internet aspects of it, they may not apply. There are others, like installation intervals, response at the call centre, those sorts of things. Is it your view that none of them would apply?

5385 MR. GRIEVE: I think none of them would apply. You know, it is, as Janet, an intensely competitive market. So the way a customer orders service from, say, a Vonage, if they call them up on their computer at home and order what they need and then the stuff gets delivered and they follow the instructions and hook it up themselves, it's quite a different thing.

5386 COMMISSIONER COLVILLE: So then in territory, how would your customer, who has bought telephone service, understand that in some cases the quality of service measures will apply and in some cases they won't?

5387 MR. WOODHEAD: In answer to an interrogatory, we sort of went through the source of collateral and you have heard some evidence about that from other people at the various sales and marketing collateral using the web portal for ordering the service and running through the purchasing sequence.

5388 As Willie alluded to earlier, every -- and you can look, staff can look, at the terms of service of every available high-speed service out there today and it will begin with, and will be repeated often throughout the litany of the language, that the service is on a best-effort basis.

5389 Now, with VoIP services, if you look at the terms of service of the access independent VoIP services out there, they typically begin with, "This is not a telephone service" or "This is not like a regular telephone service". The consumer is made aware of all of that stuff and they would become readily aware of it.

5390 Some of these issues, for example, that you said, one of the things, I mean, we would have to sort of look, I guess, back at the Q of S guidelines, but the call centre response time has nothing, really, to do with VoIP, it's about a call centre.

5391 So when the call comes in from a VoIP subscriber to the call centre, that call centre standard would still apply to the call centre, but there is no specific, to knowledge anyway, there's not specific to VoIP or to retail high-speed Internet access service quality of service indicators.

5392 COMMISSIONER COLVILLE: I take your point about all the other service providers. I guess what I'm getting at is, in working in one of the offices where I hear the calls come in on a daily basis complaining about one aspect of the service to our people -- and you folks get even more than we do -- the customer is going to understand I am getting telephone service from TELUS, the phone company.

5393 If it's Vonage or Yak or whatever, I'm sure people probably have a sense of difference and I'm curious know whether the people are going to have that same sense of difference if they buy VoIP service from TELUS, the phone company, and are going to appreciate that, well, if it's not working quite up to snuff, I had better not call the CRTC or TELUS and complain because that Q of S measure is not, and our response has to be: "Well, did you get VoIP service? Oh, yeah, well, then, the Q of S doesn't apply, so, you know, go call TELUS and complain to them" or whatever.

5394 MR. GRIEVE: Well, you know, this is interesting. I did hear Allstream talking about how will the Commission them apart, and the Commission will tell them apart. If it's available to anybody, whether it a Shaw high-speed customer or our high-speed customer, then it's an access independent Voice over IP service; if it's not, it's an access dependent service.

5395 But how will the customer know? Well, you know, the customer will have high-speed Internet access. They will probably have done this through their computer. I think anyone who does this service will know what they are getting. I mean, I can't imagine going through those steps and not knowing what you are getting.

5396 MS YALE: But if you think of some of the different quality of service measures, it's for the line going down. There is no line. It's installation for them to come and connect your line. It's repairs for damage to the line. So it's not clear how they would even apply in this context.

5397 It's not that I'm trying to be -- I'm having a hard time understanding --

5398 COMMISSIONER COLVILLE: I'm prepared to let this go.

5399 MS YALE: All right.

5400 COMMISSIONER COLVILLE: I just hope it's as clear to the customer as it is to you and me. I suspect not.

5401 MS YALE: Well, to your point, I think one of the issues is making sure people know and understand, as we heard in the case of the discussion of 9-1-1 service, that they know and understand what they are getting and paying for and what they are not.

5402 THE CHAIRPERSON: Thank you.

5403 Commissioner Noël.

5404 COMMISSIONER NOËL: Just one question -- actually, it's two.

5405 What's the proportion, in percentage, of the number of NAS that can have access to DSL, as opposed to those who cannot in your territories?

5406 MR. GRIEVE: Do you mean the number that actually have high --

5407 COMMISSIONER NOËL: Not those that do have it, but those that can access it?

5408 MR. GRIEVE: Oh, okay. Ted is telling me.

5409 MR. WOODHEAD: For whatever reason -- and take this with a grain of salt -- but I have in the back of my head that it's around 70 per cent in territory.

5410 COMMISSIONER NOËL: Seventy per cent in territory. And how much do have DSL access now? What percentage?

5411 MR. WOODHEAD: What percentage of those people?

5412 COMMISSIONER NOËL: No, what percentage of your total customer base or your NAS does have DSL service?

5413 MR. WOODHEAD: Roughly, 654,000.

5414 COMMISSIONER NOËL: NAS.

5415 MR. WOODHEAD: Out of NAS, I don't know how many NAS.

5416 MR. GRIEVE: We have somebody looking way at the back. There is someone checking.

5417 COMMISSIONER NOËL: About 25 per cent of your subscriber base would actually subscribe to your DSL service?

5418 MR. GRIEVE: Well, about 25 per cent of customers in Alberta and B.C. subscribe to a high-speed service, okay, so that's half, and about 40 per cent of those subscribe to TELUS's high-speed Internet.

5419 COMMISSIONER NOËL: So that would be 20 per cent?

5420 MR. GRIEVE: Roughly.

5421 COMMISSIONER NOËL: Thank you. You will be more precise in your written answers?

5422 MR. GRIEVE: Yes. Your math was pretty quick.

5423 THE CHAIRPERSON: In the NAS department and the TSL department, it combined for a ratio.

5424 Other questions? Thank you very much.

5425 Madam Secretary.

5426 THE SECRETARY: Thank you, Mr. Chairman.

5427 Next on the agenda for the final statement, The Companies.

5428 Mr. Chairman, while they are settling down, I have a special announcement to make. Is that okay?

5429 Mrs. Stephanie Traynor has lost her Alberta driver's licence. She believes it might have been switched by mistake when returning an translator device. Could you please verify your ID cards and, if you find Ms Traynor's permit, bring it to the reception.

5430 Thank you.

REPLY / RÉPLIQUE

5431 MR. BIBIC: Good afternoon.

5432 You have heard the now-familiar refrain from some, but interestingly not all, competitors that ILEC VoIP services must be subject to price regulation, otherwise ILECs will engage in anti-competitive pricing.

5433 These claims have no basis. Today, the VoIP segment of the market is vibrant and dynamic. There has been unimpeded entry, no barriers.

5434 Distinguished economists have testified that there is no incentive for the incumbents to engage in anti-competitive behaviour. And it's not just theory.

5435 We urge the Commission to look at the results in forborne markets. In none has there been any result, other than vibrant competition with lots of choices and low prices. The consumer wins.

5436 Some examples: the ILECs were not subject to price regulation for cellular, retail Internet access and new media, when these emerging services were first offered. The results: intense competition, innovation, low prices. No anti-competitive pricing.

5437 Let us clarify the history of cellular price regulation. Cellular services were not subject to price regulation when they were launched in 1985. Some eight months before that launch of cellular service, the Commission stated that, as a matter of regulatory policy, telco affiliates would not be required to file tariffs.

5438 Four years later, after the Federal Court ruled that the Commission did not have the power to forbear, the cellular companies were forced to file tariffs for the first time, but they then received automatic Commission approval.

5439 Official forbearance followed quickly after the Telecom Act was passed. The same regulatory policy applied to VoIP services today will maximize the benefits for consumers.

5440 Now, the CCTA claimed this morning that cellular succeeded because other safeguards were in place back then, but today for VoIP there are similar safeguards. Instead of structural separation, we have price caps; instead of joint marketing rule, we have restrictive bundling rules. With respect to head-starts, well, no ILECs are offering VoIP services in territory today.

5441 Another major focus has been on access. Some fear that access to the PSTN and to broadband facilities can be used as choke points, but the evidence is clear, VoIP providers currently operating in Canada have problems with neither.

5442 They obtain telephone numbers and PSTN access from LECs.

5443 For Category 2 VoIP services, it is the customer not the VoIP provider that purchases the access, and the Commission has found that the retail Internet access market is highly competitive.

5444 Those VoIP providers who wish to supply the underlying broadband access may obtain from the ILECs unbundled loops, collocation and other facilities at regulated wholesale prices. However, equivalent access is not provided by the cable companies, and that is an issue the Commission must address.

5445 Certainly if access were a problem, the principled and effective regulatory response would be to address it directly rather than regulating the retail prices charged by ILECs in their traditional serving areas.

5446 On Tuesday we discussed our view that Category 2 services are retail Internet applications and thus forborne in accordance with Order 99-592 and other decisions. Certainly the Internet industry itself regards such services as Internet applications.

5447 Moreover, in the 1999 New Media Decision and the 2003 Report to the Governor in Council, the Commission stated that VoIP is an Internet application. It is true that the forbearance orders do not specifically define retail Internet services, but there is a reason for that: namely, a recognition that there is a diverse range of Internet services which cannot be precisely defined because they continually evolve.

5448 The mere fact that in Order 2001-220 and for contribution purposes only the Commission had to carve out VoIP services from the definition of retail Internet services, serves to highlight that VoIP services are Internet applications.

5449 Since these decisions, the companies and other carriers have introduced many new Internet applications, firewall and virus protection services and downloadable games, to name a few. No one has ever challenged that these are forborne Internet applications. There have been no CRTC proceedings challenging that view, and none of those applications are specifically defined in Order 99-592.

5450 To conclude, with cellular, Internet and new media, the Commission demonstrated vision and decisiveness in forbearing from economic regulation. VoIP warrants no less. To do otherwise risks Canada's competitiveness and world leadership in telecommunications.

5451 We are not asking you to regulate on the basis of what might be. Given the market conditions in place today, it would be bad public policy to regulate ILEC VoIP prices just in case.

5452 This is my first CRTC public hearing, and I actually found it quite interesting. There is one aspect of the last three days that I found particularly fascinating because it is counter-intuitive. As I sat through the three days listening to the intervenors, it struck me that none of the small VoIP competitors actually came up here to pound on the table asking for full ILEC price regulation for their VoIP services; rather, the ones clamouring most loudly for full regulation were the big companies, the ones with the strong brands, the large subscriber bases, the strong networks.

5453 We heard them this morning, the CCTA. In fact, they went so far as to say this morning that ILEC price regulation is not necessary to protect the consumer.

5454 That reveals their true motivation. They want to be protected from competition.

5455 I was listening in the back this morning, and Mr. Stein from Shaw said something this morning that struck me. I may not have it accurately because I was scribbling it down madly when he said it. He said Shaw is focused on TELUS to offer the best digital phone service in the world.

5456 Does that sound like a company that needs protection? No. It sounds like a company ready to go and expecting to win.

5457 To conclude, again, it is not the Commission's role to protect particular competitors. Your role is to foster competition and encourage innovation.

5458 THE CHAIRPERSON: Thank you, Mr. Bibic.

5459 I have a number of follow-ups.

5460 In your last comment you focused on Shaw's comment that they wanted to offer the best service in the world. Does that seem like a company that needs protection? At the same time, you say that that should not be the Commission's job, in any case, to protect competitors.

5461 I guess the issue is protection from anti-competitive conduct.

5462 I wonder whether you would care to comment on the submissions that we have heard. I don't know whether you were here for Mr. Gouin's presentation.

5463 MR. BIBIC: I was here for part of it and I listened to the rest of it back at the office.

5464 THE CHAIRPERSON: You probably don't have it with you, but he was referring to Bell's thousand long distance minutes $5.00 plan and made the point that only a company of Bell's financial size and scope could possibly contemplate such an uneconomic price point -- and I am quoting. Furthermore, because incumbent provision of local and long distance services are so highly integrated in customers' minds, Bell has effectively found an indirect way to offer a heavily discounted local service bundle, something which you cannot do directly. And then he goes on to say that this affected their own business plan thinking in respect to their local entry.

5465 Do you have a comment on any or all of that?

5466 MR. BIBIC: I think it is just another example of clamouring for protection. People have to adjust their business plans based on the competitive marketplace. We heard from Mr. Meldrum from SaskTel on Tuesday, who described that at the last minute, right when Navigata was going to launch WebCall, the service launch had to be delayed because of pricing in the competitive marketplace now.

5467 Surely that affected the top line revenue line in the Navigata business plan, but they adjusted and they went out into the marketplace.

5468 If we look at the bundle, it is a response to competition. Voice plans out there today offer flat rate pricing for services that effectively combine local service and long distance. You get your phone number, your two or three phone numbers, and all of a sudden your calls are part of your flat rate pricing.

5469 That is effectively just a response to competition.

5470 THE CHAIRPERSON: Would you care to comment on his point that it is an uneconomic price point?

5471 MR. BIBIC: I would echo Mr. Grieve's comments that there is a lot to cost. I don't have an analysis in front of me, but what I would point out is that the $5.00 for a thousand minutes, not every single consumer actually uses up the thousand minutes, and that affects the cost.

5472 MR. FARMER: I don't actually have a lot to add on this one, because I haven't seen the economics of it.

5473 I can say, really just to parity some of the comments that we heard from the TELUS panel, the objective is not to jettison money out of the company as quickly as we can get it. Quite frankly, what we have done there is we have attempted to put clearly an attractive package in front of customers, but it is not one where the objective is to lose money. That has never been an objective of any plan that we have ever put forward to customers.

5474 To Mirko's last point, it was described the other day as half a cent a minute, which of course by almost any standard sounds like a very low price. But at a hundred minutes, that's five cents a minute and suddenly it doesn't seem to be quite so uneconomic, to use the term, which was used and frankly without any evidence whatsoever.

5475 MR. BIBIC: There is a discussion that the Commission had with the previous panel, the TELUS panel, and I would largely echo those comments.

5476 You heard from Dr. Crandall on Tuesday, who described how acting in a predatory manner would be futile in an environment such as this.

5477 The bottom line is with that bundle, there is no market power. We don't have any market power in any of those services. If we were to act for a predatory purpose -- in other words, reduce the price, drive everyone out and then try to recoup the losses subsequently by raising the prices -- aside from the fact that, as Dr. Crandall points out, it would be a futile exercise, it is a criminal offence under the Competition Act.

5478 Companies can't just go around willy-nilly doing this.

5479 If we have no market power, which in this case we don't in these services, and we were not responding to competition, then as Mr. Farmer says, it would basically be irrational.

5480 I could go on. If we were to tie a bundle of that sort with Primary Exchange Service, then we would have a regulated bundle, and the Commission would examine the cost.

5481 Ultimately, as my colleague Mr. Hunter pointed out on Tuesday, it is price that determines cost, not the other way around.

5482 THE CHAIRPERSON: You don't think you would have a regulated industry's defence against it? You mentioned the criminality of predatory pricing.

5483 MR. BIBIC: Well, we wouldn't because in the case of the long distance bundle in question, there are no regulated services involved in that package.

5484 THE CHAIRPERSON: You are referring back to the long distance bundle.

5485 Do you have any comment on the statement of the CCTA in regard to their suggested types of anti-competitive conduct: cross-Canada pricing, $20 everywhere but $1.00 when bundled with VSL?

5486 MR. BIBIC: It is really the same answer.

5487 THE CHAIRPERSON: Thank you. Those are our questions.

5488 Madam Secretary.

5489 THE SECRETARY: Thank you, Mr. Chairman.

5490 The next final statement is from Comwave Telecom Inc.

REPLY / RÉPLIQUE

5491 MR. BARZAKAY: Mr. Chairman, Commissioners, thank you.

5492 First, just to reiterate, Comwave's position is clear that the existing framework need not change since we are all talking about simply another voice product, although granted one that is far more robust, more advanced and that will lead us to the future in new products.

5493 If it is in territory, access-dependent or independent should be treated the same and therefore regulated. In territory access-independent still acts as the same monopoly PSTN the territory that was built, meaning although the call goes through the Internet and may go through Shaw's Internet, ultimately that call, whether it goes two blocks away and then back to the CO or does a merry-go-round to the United States and comes back in order to call Pizza Pizza down the street, it still goes through the PSTN access of the incumbent in the territory.

5494 So I urge you not to go and think about whether the call is going around the world or around the globe. The fact that it is in territory and that it is access-independent has no bearing. The call has to terminate on a PSTN, and the PSTN is controlled by the incumbent in the area. The CO is something that they have exclusive access to.

5495 So I don't see where the merry-go-round and the Tour de France actually has anything to do with it.

5496 We go further than the Commission's preliminary view with respect to the cable companies, however. We would like to see the cable companies regulated similarly to the ILECs and, in the alternative, prohibited from engaging in bundling VoIP at all.

5497 Prohibition of bundling by the ILECs and cable companies is essential so as to ensure that they do not sell VoIP as a means to bolster their other product offerings.

5498 TELUS stated that this would not be feasible, and we have heard from Bell as well. We argue that not only is it feasible, but given their smaller market share in DSL business they may very well offer free VoIP to attract new customers. They said so themselves that their market share in the Shaw territory is much smaller. So why not?

5499 Bell also sells long distance below cost. We have heard that they don't know, they have to check statistics. I can't buy half a penny a minute anywhere, and certainly nobody is going to buy long distance, a $5.00 plan. Nobody buys voicemail if they don't need it. Nobody buys caller ID if they don't need it.

5500 Quite frankly, we just can't trust that the ILECs won't use VoIP to bundle with other products.

5501 The other important thing is did Bell's $5.00 product actually affect Comwave at all? Absolutely.

5502 The highest cancellation rate of any Comwave package is our Unlimited Canada Plan that was $19.95. Bell basically took the perceived value away from domestic long distance, signalling to consumers that it was worthless. At half a penny a minute, Bell customers are positioned to sell to us.

5503 We believe that cable companies are not far behind with this conduct.

5504 We heard from Cogeco, Rogers and Shaw of the incumbent's ability to sell $20 VoIP without DSL and $1.00 with. The cable companies can do the same. Why wouldn't they bundle? It makes sense for them too.

5505 They further rationalize that VoIP regulation is needed on ILECs, as we agree as well. But because of proven anti-competitive behaviours, we also heard from YAK about a letter; that they went out and they restricted access to their dollar round; also, bundling services at below cost, as we have already discussed.

5506 But what about the same regulations to apply to the cable companies? Should they be able to bundle discount VoIP to sell high-speed Internet or cable video-on-demand? How is that different from their fears of the ILECs' conduct?

5507 Just like the argument that the cable companies made about the ILECs, they too have direct local loops to millions of homes with numbers more than 80 per cent of homes in their territory. They also have direct billing and marketing relationships, just like the ILECs. Therefore, they too can leverage and sell VoIP and position their VoIP as a better product, or even obligate customers to take VoIP for that matter.

5508 Comwave agrees with YAK's proposition of access conditions for packet manipulation safeguards. There is a real threat of this. Technology does exist. Actually, the technology is there to safeguard and provide quality of service. But by providing quality of service also may eliminate quality of service to an alternate provider.

5509 We are not thinking about regulating for packet control while the call is on the Internet, certainly that can't be done and it is beyond their control, the ISP's control.

5510 But so long as the call is on their network, be it at the DSLM or the router, or anywhere so long as it is within their control, at the point just before it hits the public Internet the Comwave package should not be manipulated or given inferior priority.

5511 There was also some talk about innovation from the ILECs; that they want a free-for-all that will create innovation, as they say.

5512 I say VoIP innovation has not come from the ILECs at all. They are merely responding now to the impeding competition. Innovation will come from companies like Comwave that will only emerge in an environment that will see VoIP services not marginalized by larger players imposing triple play.

5513 Why haven't they innovated up until now? Where have they been for the last many years? They brought us caller ID; they brought us call waiting. Where is the innovation?

5514 With respect to 911, the Commission wanted some timelines that nobody here seems to know or wants to really comment on. Comwave is fairly confident that a workable solution can be attained within a reasonable time. The reasonable time, we feel, is somewhere around 24 months, maybe sooner, provided the PSAPs are willing to work with us closer than they have in the past.

5515 The Commission needs to direct the parties, the PSAPs and the VoIPs to work directly on live trials and to do this now.

5516 Our engineers would like to experiment with a workable solution to make PSAPs more IP-centric when 911 calls can go directly to the correct PSAPs. But a willing PSAP is still needed. Comwave is willing to start trials now.

5517 It will take industry and PSAPs together to get all the wrinkles out, but until there is a workable solution, be it 24 months or more, Comwave's clear disclosure to its customers of how Comwave 911 functions and its use of third party and address registration is socially responsible and, we argue, is far better than not providing 911 at all or routing them to the wrong PSAP.

5518 Thank you.

5519 THE CHAIRPERSON: Thank you very much.

5520 Commissioner Cram.

5521 COMMISSIONER CRAM: Thank you.

5522 I heard you saying that you were hurt by the $5.00 plan from Bell. Can you give me an idea of percentages or numbers or quantum when you talk about that?

5523 Of your subs in Bell country, what percentage of them did you lose?

5524 MR. BARZAKAY: We don't really measure that way. I called our office to get numbers just for this. We measure cancellation rates on every single plan that we have, and we asked: What is the highest cancellation rate and on which plan? Which plan has the highest cancellation rate?

5525 The Canadian-U.S. bundled plan that we had for 1995 is our highest cancelled plan today.

5526 COMMISSIONER CRAM: And the Bell $5.00 plan was for Canada-U.S., was it?

5527 MR. BARZAKAY: I believe it was, yes.

5528 COMMISSIONER CRAM: Those cancellations were for what period of time?

5529 MR. BARZAKAY: The cancellations only started in the last two months, so we are measuring cancellations. We have sales that go on many different countries, but this is the one that we are losing the most of.

5530 COMMISSIONER CRAM: Thank you very much; thank you, Mr. Chair.

5531 THE CHAIRPERSON: Thank you.

5532 Madam Secretary.

5533 THE SECRETARY: Thank you, Mr. Chairman.

5534 Please note that Vonage Holdings Corp. has cancelled its participation this afternoon.

5535 Next on the agenda is Primus Telecommunications Canada Inc.

REPLY / RÉPLIQUE

5536 MR. STEIN: Good afternoon, Mr. Chair and other Members of the Commission's Panel.

5537 Primus would like to leave you with three points.

5538 My first point deals with the provision of 911 service in a VoIP environment and the discussion that has taken place regarding whether the Commission should, or even could, set a date by which the VoIP 911 puzzle can be solved in the Canadian market.

5539 We provided our view in our opening statement that the CISC Emergency Services Working Group is the appropriate place to investigate possible solutions to the puzzle. This remains our view.

5540 We also told you that when our customers use of service is fixed and the TalkBroadband NPA-NXX is native to the telephony exchange -- so that would be a situation where a customer has a 416 NXX in the Toronto exchange -- calls will be routed to the correct PSAP with all of the information normally provided in an E-911 call. This happens today.

5541 For those instances where the use of the service is fixed but non-native -- so that would be a 416-NXX operating out of London, Ontario, for example -- Primus believes that if all of the affected parties come to the Emergency Services Working Group table and are motivated to take the necessary steps, this routing issue can be resolved and, more importantly, we believe that a date can be established by which this particular piece of the puzzle should be solved.

5542 We would note for the record, however, that most of the network modifications would be internal to the ILECs' networks. We can't do it without their cooperation.

5543 As for the nomadic use of TalkBroadband or any other VoIP service, we note that this case tends to be associated with an individual who transports the device with them. This should reduce the odds of users not realizing that 911 is not supported.

5544 Primus would like to see this issue solved, but we believe that it is currently not possible to establish a date by which a solution will be in place. Many parties were asked this question and with the exception of Comwave a couple of minutes ago, none of them ventured a firm answer on a possible date.

5545 This included the Pulver.com representatives, who presumably have a good picture on developments in the U.S. market where a lot of work has already been done on this issue.

5546 A date is possible for fixed non-native but not currently for nomadic service. However, the Commission could set up a reporting timetable from the Emergency Services Working Group to maintain visibility on this key issue.

5547 Second, Primus reiterates its view that cable companies and ILECs possess bottleneck access facilities and that non-discriminatory access to those facilities must be provided to ensure no undue preference is granted to either part of the access duopoly.

5548 This is essential for both innovation and competition.

5549 Regarding the cable company, Primus would like to clarify the source of its concern as a combination of two separate factors.

5550 The first is the current lack of access to the cable companies' networks under reasonable terms and conditions at reasonable rates. We have talked a lot about that in this proceeding.

5551 The second part of the equation relates to the fact that, for example, Rogers Cable will be in a position to offer a local telephony service to 1.8 million households in its operating territory essentially on the day that it decides to enter the market.

5552 That means that its network already reaches at least 1.8 million households. Other cable companies are in a similar position. It is the combination of rapid market entry, facilitated by the already installed networks of the cable companies, combined with the lack of reasonable access to cable companies' bottleneck access facilities, that is the source of our concern and we believe a real threat to competitive forces in the local market.

5553 My final point relates to the regulation of the ILECs' access-independent VoIP services, which our position is they are a substitute for Primary Exchange Service.

5554 We have no objection to a regime in which access-independent VoIP services offered by an ILEC outside of its traditional operating territory are forborne from regulation.

5555 However, when offered in territory, even as part of a wider national offering like we have heard about, we believe that these services should be subject to tariff regulation. The ILECs continued dominance in their respective operating territories and the overwhelming power and presence of their brands in territory argue in favour of tariff treatment for this PES replacement service.

5556 Primus reiterates its view that decisions on regulatory treatment need to be based on service characteristics and not on technology. From a consumer's perspective, an access-independent VoIP service will look just like another new local voice service offered by Bell or TELUS. To the consumer, the offer will look like Primary Exchange Service, and the customer may say to himself: Hey, I can still even get call answer, call waiting and voicemail on this service, and wow, there's a couple of other new neat things as well.

5557 Access-independent VoIP service is a substitute for traditional local voice service.

5558 Once again, this demonstrates that the Commission should stay the course indicated in its preliminary position regarding ILEC VoIP services.

5559 Those are my closing remarks, Mr. Chair. Thank you.

5560 THE CHAIRPERSON: Thank you very much.

5561 This brings us to the end of this phase, then, does it?

5562 LA SECRÉTAIRE : Oui. Je crois bien, Monsieur le Président, que ceci complète l'agenda de cette consultation.

5563 THE CHAIRPERSON: Our next date of note is October 13th, when written reply is due from all parties. We look forward to receiving it.

5564 I want to thank our stalwart staff for their tremendous work in preparing us for this hearing and all the late nights that they worked to do this in organizing all the volumes of material that you see before you. Thanks to all of you for your hard work.

5565 I want to thank my fellow Commissioners for their patience and their orderliness, in practically every case, during this three-day session. I know we listened very hard.

5566 Above all, I want to thank all of the parties to this proceeding who prepared extensive briefs, responded to interrogatories and participated in this oral phase of the hearing. You have given us an awful lot to think about.

5567 Somebody said our task is daunting -- we can triple underline that -- in coming to a conclusion. I very foolishly indicated that a decision in this proceeding would be out no later than the first quarter of next year -- that is no later than. And we certainly hope to adhere to that timetable and to try and exercise the wisdom that your input will hopefully inspire in us.

5568 Thank you all very much again. This hearing is now concluded.

--- Whereupon the hearing concluded at 1725 /

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