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TRANSCRIPT OF PROCEEDINGS BEFORE
THE CANADIAN RADIO‑TELEVISION AND
TRANSCRIPTION DES AUDIENCES DEVANT
LE CONSEIL DE LA RADIODIFFUSION
ET DES TÉLÉCOMMUNICATIONS CANADIENNES
SUBJECT / SUJET:
Review of regulatory framework for wholesale
services and definition of essential service /
Examen du cadre de réglementation concernant les services
de gros et la définition de service essentiel
HELD AT: TENUE À:
Conference Centre Centre de conférences
Outaouais Room Salle Outaouais
140 Promenade du Portage 140, Promenade du Portage
Gatineau, Quebec Gatineau (Québec)
October 12, 2007 Le 12 octobre 2007
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
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.
Afin de rencontrer les exigences de la Loi sur les langues
officielles, les procès‑verbaux pour le Conseil seront
bilingues en ce qui a trait à la page couverture, la liste des
membres et du personnel du CRTC participant à l'audience
publique ainsi que la table des matières.
Toutefois, la publication susmentionnée est un compte rendu
textuel des délibérations et, en tant que tel, est enregistrée
et transcrite dans l'une ou l'autre des deux langues
officielles, compte tenu de la langue utilisée par le
participant à l'audience publique.
Canadian Radio‑television and
Conseil de la radiodiffusion et des
Transcript / Transcription
Review of regulatory framework for wholesale
services and definition of essential service /
Examen du cadre de réglementation concernant les services
de gros et la définition de service essentiel
BEFORE / DEVANT:
Konrad von Finckenstein Chairperson / Président
Barbara Cram Commissioner / Conseillère
Andrée Noël Commissioner / Conseillère
Elizabeth Duncan Commissioner / Conseillère
Helen del Val Commissioner / Conseillère
ALSO PRESENT / AUSSI PRÉSENTS:
Marielle Giroux-Girard Secretary / Secrétaire
Robert Martin Staff Team Leader /
Chef d'équipe du personnel
Peter McCallum Legal Counsel /
Amy Hanley Conseillers juridiques
HELD AT: TENUE À:
Conference Centre Centre de conférences
Outaouais Room Salle Outaouais
140 Promenade du Portage 140, Promenade du Portage
Gatineau, Quebec Gatineau (Québec)
October 12, 2007 Le 12 octobre 2007
- iv -
TABLE DES MATIÈRES / TABLE OF CONTENTS
PAGE / PARA
RESUMED: SALVATORE IACONO 936 / 6408
RESUMED: WILLIAM TAYLOR
RESUMED: PAUL ANDERSON
RESUMED: DENIS HENRY
RESUMED: MIRKO BIBIC
RESUMED: SERGE BABIN
RESUMED: MARGARET SANDERSON
RESUMED: PETER WATERS
Cross-examination by Primus (Cont'd) 936 / 6411
Cross-examination by Cybersurf 1006 / 6922
Cross-examination by Xittel 1060 / 7341
AFFIRMED: DALE HATFIELD 1109 / 7721
AFFIRMED: IAN PATTINSON
AFFIRMED: DAVID WATT
AFFIRMED: SUZANNE BLACKWELL
AFFIRMED: ROGER WARE
Examination-in-chief by Rogers 1109 / 7726
Cross-examination by The Competition Bureau 1111 / 7740
Cross-examination by The Companies 1171 / 8137
- v -
EXHIBITS / PIÈCES JUSTIFICATIVES
No. PAGE / PARA
PRIMUS-4 Bell Tariff CRTC 75-16 985 / 6750
XITTEL-1 Bell Canada document dated 1067 / 7388
July 5, 2007
XITTEL-1 Bell Canada document dated 1067 / 7389
October 18, 2007
BUREAU-2 Rogers' submissions in TPRP 1160 / 8076
COMPANIES-2 Excerpt of FCC Decision 1188 / 8260
COMPANIES-3 Appendix "J", FCC Decision, 1221 / 8522
Order on Remand, adopted
December 15, 2004
COMPANIES-4 Appendix "L", Telecom Decision 1221 / 8522
Gatineau, Quebec / Gatineau (Québec)
‑‑‑ Upon resuming on Friday, October 12, 2007
at 0832 / L'audience reprend le vendredi
12 octobre 2007 à 0832
RESUMED: SALVATORE IACONO
RESUMED: WILLIAM TAYLOR
RESUMED: PAUL ANDERSON
RESUMED: DENIS HENRY
RESUMED: MIRKO BIBIC
RESUMED: SERGE BATIN
RESUMED: MARGARET SANDERSON
RESUMED: PETER WATERS
LISTNUM 1 \l 1 \s 64086408 THE CHAIRPERSON: Good morning.
LISTNUM 1 \l 16409 Mr. Ruby, you will then first try to pick up where you left off yesterday.
LISTNUM 1 \l 16410 MR. RUBY: Thank you, Mr. Chairman.
EXAMINATION (CONT'D) / INTERROGATOIRE (SUITE)
LISTNUM 1 \l 16411 MR. RUBY: Panel, you will recall that where we left off yesterday we were looking at page 56 of Bell's March 15 evidence, the first sentence of paragraph 110.
LISTNUM 1 \l 16412 We had been talking about the continuing availability of ILEC retail services on a resale basis is a factor that must be considered by the Commission and I think we adequately covered the ILECs' views of resale in the future.
LISTNUM 1 \l 16413 I take it, Mr. Bibic, that you would agree with me that another important factor in determining essentiality in the residential market is the availability of cable retail access services on a resale basis, so the flip side.
LISTNUM 1 \l 16414 You say we are going to do wholesale essentially. Will you agree with me that the cable companies also doing wholesale is an important factor in determining essentiality?
LISTNUM 1 \l 16415 MR. BIBIC: We say it is a factor that you would look at to determine the state of competition downstream. Remember, that is the first screen of our test.
LISTNUM 1 \l 16416 If the Commission determines that there is a significant market power downstream or is concerned, generally, without making a finding of significant market power such that it wishes to go to the other elements of the test, then we get into the but for now system, duplicability, and don't think that resale plays a role in those aspects, those prongs of our test.
LISTNUM 1 \l 16417 MR. RUBY: I am only asking because you say that your, that is the ILECs', provision of retail services, effectively a wholesale service, is a factor that this Commission should consider.
LISTNUM 1 \l 16418 I just want to know if you feel the same about the cable companies, that in order to make this work, they have to also provide wholesale services.
LISTNUM 1 \l 16419 MR. BIBIC: No. The fact that they do may make the upstream market competitive. It may also add to competition downstream. If a service is not essential, I don't think it is essential for the incumbents or from the incumbent's point of view or the cable point of view.
LISTNUM 1 \l 16420 MR. RUBY: I have to admit you have confused me then. Then why is it a factor at all?
LISTNUM 1 \l 16421 MR. BIBIC: I think we covered that yesterday, Mr. Ruby, and the day before.
LISTNUM 1 \l 16422 It is, again, the Indian head example. There are resale opportunities there for others to come in and compete in the downstream market. You can't ignore that fact is what we are saying. It is a factor.
LISTNUM 1 \l 16423 We are not linking it specifically to any specific element of our three‑part essential facilities definition but it exists and will continue to exist and it is therefore a factor that can't be ignored.
LISTNUM 1 \l 16424 MR. RUBY: Okay. But you think you can ignore the cable side of it?
LISTNUM 1 \l 16425 MR. BIBIC: I didn't say that. I said to the extent that cable is providing wholesale services or third parties can resale cable services ‑‑ and when I say cable, I mean services offered over a cable platform ‑‑ then obviously, that is a factor you look at ‑‑
LISTNUM 1 \l 16426 MR. RUBY: Okay.
LISTNUM 1 \l 16427 MR. BIBIC: ‑‑ and that may speak to more vigorous competition downstream ‑‑
LISTNUM 1 \l 16428 MR. RUBY: All right.
LISTNUM 1 \l 16429 MR. BIBIC: ‑‑ and even makes the point stronger that there are no essential facilities.
LISTNUM 1 \l 16430 MR. RUBY: All right, thank you.
LISTNUM 1 \l 16431 I can't remember if we handed out my compendium yesterday. I don't think we got to it, so perhaps ‑‑ these are all pre‑filed materials, Mr. Chairman.
LISTNUM 1 \l 16432 MR. RUBY: If you can turn to Tab 12, please. This is Companies/Primus 12 April, number 7.
LISTNUM 1 \l 16433 THE CHAIRPERSON: Which tab are you on?
LISTNUM 1 \l 16434 MR. RUBY: Tab number 12, sir.
LISTNUM 1 \l 16435 THE CHAIRPERSON: Thank you.
LISTNUM 1 \l 16436 MR. RUBY: All right, if everybody has it, I would like to focus on question (b) where Bell was asked to essentially provide in a way its opening position with respect to the services that are on the Category 1 or 2 lists and now according to Bell's test for essentiality it feels would not be, and the answer was:
"The Companies' opening position..." (As read)
LISTNUM 1 \l 16437 This is at (b) at the bottom:
"The Companies' opening position regarding prices for those services subject to negotiation has not been determined." (As read)
LISTNUM 1 \l 16438 And you go on to list a bunch of factors.
LISTNUM 1 \l 16439 Mr. Anderson, maybe I should put this to you since you are on the wholesale side, as I understand it.
LISTNUM 1 \l 16440 I gather what you are telling me is sitting here today you can't tell me, for example, what Bell will charge for a local loop in Ottawa, for example, to my client Globility that is a CLEC, if you get what you want and it is not listed as an essential service; is that right?
LISTNUM 1 \l 16441 MR. ANDERSON: First of all, good morning, Mr. Ruby.
LISTNUM 1 \l 16442 MR. RUBY: Good morning.
LISTNUM 1 \l 16443 MR. ANDERSON: Absolutely, as we discussed yesterday, our approach is to sit down, two parties sit down and negotiate an arrangement based on your requirements and move forward from there.
LISTNUM 1 \l 16444 MR. RUBY: Okay. I am just trying to get an idea of, frankly, how much to expect prices for something like an unbundled loop will go up if your handcuffs come off. I am just looking for some help with this.
LISTNUM 1 \l 16445 So for example, you know how many unbundled local loops Globility has in Ottawa, right? So you know the volume they consume at the moment, right?
LISTNUM 1 \l 16446 MR. ANDERSON: I don't know personally but that is easy to find out.
LISTNUM 1 \l 16447 MR. RUBY: But Bell would know?
LISTNUM 1 \l 16448 MR. ANDERSON: Absolutely.
LISTNUM 1 \l 16449 MR. RUBY: Right. And you know their payment history, right?
LISTNUM 1 \l 16450 MR. ANDERSON: Absolutely, we would know that.
LISTNUM 1 \l 16451 MR. RUBY: You know the relationship that you have with them, so you know all those sort of soft factors that go into making a deal, right?
LISTNUM 1 \l 16452 MR. ANDERSON: Sure.
LISTNUM 1 \l 16453 MR. RUBY: Okay. So can't you give me some guidance? Are you going to increase prices on unbundled local loops 10 percent, 100 percent, 200 percent? Can you give the Commission a feel for what the intention is here?
LISTNUM 1 \l 16454 MR. ANDERSON: Well, I think what you have to look at is that each customer situation is different.
LISTNUM 1 \l 16455 MR. RUBY: Okay.
LISTNUM 1 \l 16456 MR. ANDERSON: For example, with Globility/Primus we have ‑‑ obviously, we do a lot of business with you as a customer, an important customer. There are a number of different factors that we talk about every single day and depending on what you were looking for, depending on what your requirements were, depending on the broader scope of the business that we do with you, then that would dictate in terms of where we would land on a price.
LISTNUM 1 \l 16457 MR. RUBY: Okay.
LISTNUM 1 \l 16458 MR. ANDERSON: You know, would it go up, would it go down? I don't believe that we are in a position right now ‑‑ depending on the individual circumstances, I don't believe that we can articulate that at this point.
LISTNUM 1 \l 16459 MR. RUBY: That's why I'm asking you about this one company that you already deal with. So you would know all the factors that you just talked about.
LISTNUM 1 \l 16460 has this not been thought through, sort of where prices are going to go in the key unbundled local loop service?
LISTNUM 1 \l 16461 MR. ANDERSON: I think the other factor involved here is we have to have a full understanding of what your future business is. I can tell you exactly what we do today, no problem, but what I don't completely understand is perhaps where the future is going.
LISTNUM 1 \l 16462 MR. RUBY: All right.
LISTNUM 1 \l 16463 MR. ANDERSON: I know in fact Bell and Primus executives are meeting today to talk about a number of different items. We meet regularly.
LISTNUM 1 \l 16464 MR. RUBY: Right.
LISTNUM 1 \l 16465 MR. ANDERSON: So those are the kinds of dialogues, that is the kind of environment ‑‑ frankly, that is the kind of relationship that we want to try and foster so that we can work through these kinds of arrangements.
LISTNUM 1 \l 16466 MR. RUBY: All right. But sitting here today knowing what you know about the present ‑‑ I'm not asking you to speculate ‑‑ I gather from your answer that you just can't help the Commission today on this point.
LISTNUM 1 \l 16467 MR. ANDERSON: I'm being as helpful as I can. At this point we don't have clear‑cut prices on every single product.
LISTNUM 1 \l 16468 THE CHAIRPERSON: Just a second. You keep saying all the time that the present regime is a disincentive for you to invest, which presumably means either to build them for your own but also that on resale you don't get returns that you would expect.
LISTNUM 1 \l 16469 So presumably if the mandating terminates we can assume that prices will rise.
LISTNUM 1 \l 16470 MR. ANDERSON: I'm sorry, we can assume that prices will rise?
LISTNUM 1 \l 16471 THE CHAIRPERSON: Yes. If not, correct me. If it's right now a disincentive to invest even only partially because the returns that you are on from mandated services are not sufficient. So wouldn't it then follow the logical corollary that there at least will be some increases in prices? The size of the increase may be subject to individual negotiations.
LISTNUM 1 \l 16472 MR. IACONO: Mr. Chairman, if I may offer a comment to your question, I think it is a very, very good question.
LISTNUM 1 \l 16473 One of the things that we need to consider here is, for example, today the way the pricing is structured ‑‑ and this is a general comment not just in relation to unbundled loops, but the way pricing is structured, if you are a wholesale customer buying one loop you pay whatever the tariff price is. If you are buying 10,000 loops you are paying the same per unit price.
LISTNUM 1 \l 16474 An environment that we are looking towards it seems to me only sort of normal and natural that a market would allow for pricing based on volume differentials. So it is not inconceivable that for some very large buyers of unbundled local loops today, it is not inconceivable that the price might get more advantageous with certain other elements.
LISTNUM 1 \l 16475 You know, contract terms, today you buy a loop, there is no contract term, there is no volume discount, et cetera, et cetera. So it's really difficult to generalize, but I would think that the same kind of pricing principles would apply for those services going forward as the pricing is structured today for retail services volume and contract and term, and so on.
LISTNUM 1 \l 16476 MR. TAYLOR: If I could toss in on other idea, I think, Mr. Chairman, your suggestion goes to what the supply curve looks like. It will be unconstrained, but remember that the price that ends up here between Primus and Bell is determined by the intersection of the supply and demand curve and we don't know what Primus is willing to pay and how many loops they would buy at a given price. That is also going to come into effect in determining what the price is going to be.
LISTNUM 1 \l 16477 THE CHAIRPERSON: Back to you, Mr. Ruby.
LISTNUM 1 \l 16478 MR. RUBY: Thank you, Mr. Chairman.
LISTNUM 1 \l 16479 Just to follow up, Dr. Taylor, on something you said, Mr. Anderson, when you negotiate with a customer, Mr. Iacono, they don't tell you their plan. Right? The two sides never know what each other are thinking in these negotiations. Right?
LISTNUM 1 \l 16480 MR. ANDERSON: I think it's all a matter of detail. I think in any relationship where you are sitting down and negotiating arrangements, I think good practice is to ask as much as you can about what the customer direction is, where they are headed, what their plans are, to the extent that they can share. Because how else can you put together a recommendation or a solution or whatever the point of discussion is?
LISTNUM 1 \l 16481 MR. RUBY: I couldn't agree more, which is why I asked you just about your opening position, not the end of the negotiations, what the price list will say.
LISTNUM 1 \l 16482 But I have your answer I guess, as best as you can give the Commission.
LISTNUM 1 \l 16483 MR. IACONO: Mr. Ruby, there are two sides there. One is ‑‑ actually, let me just cut to the chase.
LISTNUM 1 \l 16484 There is more to a good deal than price alone, there are all types of other factors, there is service, there are service levels, and so on.
LISTNUM 1 \l 16485 So it's really hard to generalize in any broad way.
LISTNUM 1 \l 16486 MR. RUBY: I appreciate that. I don't want to debate this point with you. That is why I asked you today, knowing everything you know about Globility ‑‑ because you know all the facts that you are ever going to know in a negotiation ‑‑ and you can't give me an answer and I'm happy to move on.
LISTNUM 1 \l 16487 MR. IACONO: Again, I personally don't know the facts because I am not involved in carrier services, but your point is a broad one so I would like to address it.
LISTNUM 1 \l 16488 THE CHAIRPERSON: Mr. Iacono, if he wants to move on, it's his privilege.
LISTNUM 1 \l 16489 MR. IACONO: All right.
LISTNUM 1 \l 16490 THE CHAIRPERSON: He is asking the questions, so let's move on.
LISTNUM 1 \l 16491 MR. RUBY: Thank you, Mr. Chairman.
LISTNUM 1 \l 16492 Of course, while we are debating this my computer decided to turn itself off, so with your indulgence for a moment ...
LISTNUM 1 \l 16493 MR. RUBY: I will give you a chance, Mr. Iacono, since you wanted to jump in here.
LISTNUM 1 \l 16494 Do you recall Mr. Hariton from the Bureau mentioning new residential construction? I think he called it Greenfields.
LISTNUM 1 \l 16495 Do you remember that from the first day of the hearing?
LISTNUM 1 \l 16496 MR. IACONO: Yes.
LISTNUM 1 \l 16497 MR. RUBY: All right. I would like to explore a little bit that Greenfields competition.
LISTNUM 1 \l 16498 First of all, just so we are all using the same term, Greenfields, is it fair to say, are things like new subdivisions where there are, well, no houses, never mind no competitors.
LISTNUM 1 \l 16499 Right?
LISTNUM 1 \l 16500 MR. IACONO: That's my understanding, yes.
LISTNUM 1 \l 16501 MR. RUBY: All right. Can you, please turn ‑‑ I will have to ask the Hearing Secretary, please, to hand out Rogers/Primus 12 April No. 14, please.
LISTNUM 1 \l 16502 MR. BIBIC: Mr. Ruby, is it in your compendium?
LISTNUM 1 \l 16503 MR. RUBY: It is not in the book. You will be glad to hear, Mr. Chairman, that I will probably not use most of the tabs in the book, that material has been covered by others before me, but I have a few additional things.
LISTNUM 1 \l 16504 MR. RUBY: If I can focus on 14(c), please, about two‑thirds of the way down the page, the question was to describe new residential housing developments, and so on. It's the Greenfields question.
LISTNUM 1 \l 16505 The answer was:
"In general the developer/builder pre‑buys services from Rogers for a set period of time and then in turn offers the package of services that it has purchased from Rogers to a new home buyer as a free option for the set period of time." (As read)
LISTNUM 1 \l 16506 First of all, Mr. Iacono, are you the right person I should be asking questions about this?
LISTNUM 1 \l 16507 MR. IACONO: It depends on your question.
LISTNUM 1 \l 16508 MR. RUBY: All right. Dealing with Greenfields development and retail offerings and building new construction, is that a mix? I just want to make sure.
LISTNUM 1 \l 16509 MR. BIBIC: It would be a mix between Iacono and myself and maybe Mr. Babin.
LISTNUM 1 \l 16510 MR. RUBY: All right. Fair enough.
LISTNUM 1 \l 16511 So is the idea here that what happens sometimes with these Greenfields developments, the subdivisions, is that Rogers comes in ‑‑ just to pick one cable company ‑‑ and makes an offer to the developer or the builder to pre‑buy services from Rogers. So here is a package of high‑speed internet, video and telephone for a set period of time, maybe a year, and then the home builder takes that package, incorporates it into the price of a house and that goes to the ultimate homeowner.
LISTNUM 1 \l 16512 Is that the situation you face?
LISTNUM 1 \l 16513 MR. BIBIC: Without speaking to the specifics ‑‑ you can ask Rogers ‑‑ that is my general understanding.
LISTNUM 1 \l 16514 MR. RUBY: All right. Well, this is their answer, that's why I put it to you. So it's not ‑‑
LISTNUM 1 \l 16515 MR. BIBIC: And that was my general understanding before this answer and it is confirmed here.
LISTNUM 1 \l 16516 MR. RUBY: All right. Terrific.
LISTNUM 1 \l 16517 If you can then turn up, please ‑‑ again, Madam Secretary, if you could hand this out ‑‑ Bell Canada/Rogers 12 April 46.
LISTNUM 1 \l 16518 Rogers seemed to have tried to deal with the same subject with Bell Canada so let's see if we can put the two answers together.
LISTNUM 1 \l 16519 MR. RUBY: You will see sort of at the (a) and (b) at the bottom of page 1 Bell Canada starts to say it performs the business case analysis, sort of the general answers we have been hearing a lot of.
LISTNUM 1 \l 16520 Then there is all kinds of information that, at least in the copy I have, has been redacted, all the key details.
LISTNUM 1 \l 16521 Then in the last sentence before part (c) ‑‑ this is on page 2 ‑‑ it says:
"In some cases, where the developer has signed an exclusive marketing arrangement with the service provider..."
‑‑ and that would be, just to pause there, Mr. Bibic, the prebuy type arrangement we just talked about or some other kind of exclusive marketing arrangement?
LISTNUM 1 \l 16522 MR. BIBIC: It could be a prebuy, not necessarily a prebuy.
LISTNUM 1 \l 16523 MR. RUBY: That's one of the types?
LISTNUM 1 \l 16524 MR. BIBIC: Yes.
LISTNUM 1 \l 16525 MR. RUBY: All right. So that where there's been an exclusive marketing arrangement with the service provider:
"...the penetration rates required to have a positive business case cannot be achieved, and, consequently, Bell has elected not to install its facilities to serve these subdivisions or buildings in circumstances where its obligation to serve, under the Bell Canada Act, is not applicable." (As read)
LISTNUM 1 \l 16526 Let's just deal very briefly with that last bit about the Bell Canada Act. I gather your
position is if you are further than, I think it's 66 or 67 metres from an existing line, you have no obligation to serve, right, something like that?
LISTNUM 1 \l 16527 MR. BIBIC: Yes, 62 or 65 metres.
LISTNUM 1 \l 16528 MR. RUBY: Okay, thank you. Whatever it is in the act, that's fine.
LISTNUM 1 \l 16529 So what we are to take from this is that, if Rogers makes a prebuy deal, as an example of an exclusive marketing arrangement with a developer, in that development there is not going to be two wires to the home, there's going to be just one, the Rogers' wire, right? You don't build.
LISTNUM 1 \l 16530 MR. BIBIC: In some cases.
LISTNUM 1 \l 16531 MR. RUBY: In some cases, okay.
LISTNUM 1 \l 16532 I'm just trying to figure out. That means that, from a wireline perspective, the duopoly actually becomes a monopoly again, right?
LISTNUM 1 \l 16533 MR. BIBIC: There will be one wire to the home.
LISTNUM 1 \l 16534 MR. RUBY: Right. Do you think it's fair to say that, if the economics of residential access are such that Bell won't build because of a competitor's marketing agreement, there's nobody else who's going to build another wire into a residential development?
LISTNUM 1 \l 16535 MR. BIBIC: Well, it depends on ‑‑ for now we won't build, but you never know how things go. Customers have ‑‑
LISTNUM 1 \l 16536 MR. RUBY: So you might build after the streets have been closed and the houses have gone up and...?
LISTNUM 1 \l 16537 MR. BIBIC: Or we might find a different way to get to the customer.
LISTNUM 1 \l 16538 MR. RUBY: Wireless.
LISTNUM 1 \l 16539 MR. BIBIC: The point is we make our business decision ‑‑
LISTNUM 1 \l 16540 MR. RUBY: Okay.
LISTNUM 1 \l 16541 MR. BIBIC: ‑‑ and, based on our business case, in some cases where we feel, because of these exclusive marketing arrangements, there's no point to lay down the wire right away doesn't mean that we are giving up on that area. We will find ways to compete. Basically, we don't have much of a choice.
LISTNUM 1 \l 16542 MR. TAYLOR: Mr. Ruby, think of it in two stages. There's competition for the residential centre at the beginning, and Bell and Rogers and whoever else competes to get the contract, and then when you are under the contract there is only one wire, I grant you, but customers in that subdivision are still protected in the sense that if Rogers, at the end of the contract, or whatever the deal is, says, "They have got one wire, I can raise price", no, because Bell can always come back in.
LISTNUM 1 \l 16543 I mean, Bell decides that at the current price it's not feasible to build a wire, but how about at a higher price. That's a different economic circumstance.
LISTNUM 1 \l 16544 MR. RUBY: All right, I understand. You are saying, despite the fact that your previous evidence was that rebuilding new facilities is hugely more expensive, I take it as. It's much more expensive to go in later than it is when construction, joint trenching is going on, all that good stuff, right?
LISTNUM 1 \l 16545 MR. TAYLOR: Oh, I agree. That's the cost side.
LISTNUM 1 \l 16546 MR. RUBY: All right.
LISTNUM 1 \l 16547 MR. TAYLOR: But the revenue side would be different if Rogers decided to exert significant market power.
LISTNUM 1 \l 16548 MR. RUBY: All right. Thank you, Dr. Taylor.
LISTNUM 1 \l 16549 MR. BIBIC: Mr. Ruby, I'm also advised that we do say "in some cases". In some cases we haven't, in many other cases we do build. And we do have a group that deals with developers, where we actively try to get the contract that ‑‑ in this situation, you have posited to us, Rogers has happened to earn the contract.
LISTNUM 1 \l 16550 MR. RUBY: Right. So sometimes you try to be the only one there, is that right?
LISTNUM 1 \l 16551 MR. BIBIC: No. Sometimes we just want access, so we try to negotiate access.
LISTNUM 1 \l 16552 MR. RUBY: Right. Do you try and get marketing arrangements with developers?
LISTNUM 1 \l 16553 MR. BIBIC: Nope.
LISTNUM 1 \l 16554 MR. RUBY: All right. It just seems like an awful fragile vision of competition, but let's move on.
LISTNUM 1 \l 16555 Let's change the subject a little bit and talk about traffic now moving from a central office to elsewhere in the network, okay? So we are not talking about residential access to the customer more, we are starting at the next step, central office back into the network. Are you with me?
LISTNUM 1 \l 16556 MR. BABIN: Who's? Our central office?
LISTNUM 1 \l 16557 MR. RUBY: Your central office.
LISTNUM 1 \l 16558 MR. BABIN: Okay.
LISTNUM 1 \l 16559 MR. RUBY: Okay?
LISTNUM 1 \l 16560 MR. BABIN: I'm with you.
LISTNUM 1 \l 16561 MR. RUBY: Now, I won't take you to it unless it's necessary, but I gather that Bell's position is that CLECs cannot aggregate traffic in a central office or traffic ‑‑
LISTNUM 1 \l 16562 MR. BABIN: My understanding is they can.
LISTNUM 1 \l 16563 MR. RUBY: Let me finish the question, then I'm happy to take your answer.
LISTNUM 1 \l 16564 That you can't aggregate traffic in a central office or coming out of a wire centre unless the CLEC meets the primary purpose rule. Right?
LISTNUM 1 \l 16565 MR. BABIN: That is correct.
LISTNUM 1 \l 16566 MR. RUBY: Just to make sure we are all on the same page, why don't you explain what the primary purpose rule is.
LISTNUM 1 \l 16567 MR. ANDERSON: So the primary purpose rule is, first of all, you need to be a collocator, in other words you have colloed in the central office, and so the traffic ‑‑ so the primary purpose of a collo is to connect to the local circuits, right, the loops or, if you are a DSL provider, the DSL. So once you have got that location, then you need to take that traffic somewhere else, typically back to a point of presence.
LISTNUM 1 \l 16568 So, really, there are three options. Number one, you can build your own fibre, which many of the collocators do; secondly, you can lease CDN from Bell Canada, which many do; or, alternatively, you can use another collocator that has fibre if you don't have fibre. So it's just using the other ‑‑ taking advantage of the other collocator.
LISTNUM 1 \l 16569 So what the primary purpose rule says is that, and I will try and make this as ‑‑ you might have trouble explaining it, but, basically, it says that most of the traffic ‑‑ and this is in the tariff ‑‑ most of the traffic has to be Bell originating. So, in other words, you can't just simply collocate them, move all your traffic out through another collocator. I think that's essentially it.
LISTNUM 1 \l 16570 MR. RUBY: So if we can take a minute and just explore some of the consequences of the physical idea that there's a collocator in a central office and this primary purpose rule that you have drawn our attention to, does that mean ‑‑ or I take it that it means that a third party, so somebody who built fibre but is not a collocator, cannot act as the conduit to take traffic from a CLEC out of a central office?
LISTNUM 1 \l 16571 MR. BIBIC: This was a rule that was ‑‑ it's in a tariff approved by the Commission and it stems from the view back in 1997‑15, in the collocation decision ‑‑
LISTNUM 1 \l 16572 MR. RUBY: Mr. Bibic, I'm sure the Commission's familiar with the rule. I want to know about the consequences of the rule in the real world.
LISTNUM 1 \l 16573 MR. BIBIC: Then, it's correct.
LISTNUM 1 \l 16574 MR. RUBY: Okay, thank you. See isn't that easy. Okay.
LISTNUM 1 \l 16575 So second, if you have got a collocator ‑‑ or two or three of them and they want to aggregate their traffic to try and get it out of your central office, the primary purpose rule could prevent that, right?
LISTNUM 1 \l 16576 MR. BIBIC: It might not.
LISTNUM 1 \l 16577 MR. RUBY: It might not, but let's say there are three collocators in an office, they each have an equal amount of traffic, they want to put their traffic together on a single line and send it out because that's more efficient, the primary purpose rule would prevent that from happening, right?
LISTNUM 1 \l 16578 MR. BIBIC: I think the primary purpose rule would state that the party who owns the fibre, at least 50 percent of the capacity travelling over that fibre must be traffic of the party who owns the fibre. So the other 49 percent, it could aggregate traffic from others.
LISTNUM 1 \l 16579 MR. RUBY: Okay. Well, let's try this again. I don't want to end up where Mr. Engelhart was with the numbers, but let me try and see if I can do this briefly.
LISTNUM 1 \l 16580 THE CHAIRPERSON: Before you do that, is the primary purpose rule part of these proceedings?
LISTNUM 1 \l 16581 MR. RUBY: Pardon me?
LISTNUM 1 \l 16582 THE CHAIRPERSON: Is the primary purpose rule part of these proceedings?
LISTNUM 1 \l 16583 MR. RUBY: The consequence of the primary purpose rule, sir, is that ‑‑
LISTNUM 1 \l 16584 THE CHAIRPERSON: Oh, I understand the consequence, you are just laying it out. I have just asked you very specific question. Is it part of these proceedings? I thought we were looking at mandated services.
LISTNUM 1 \l 16585 MR. RUBY: We are, sir. I am not questioning the primary purpose rule, but my submission will be, in final argument, that because of the primary purpose rule and the essentiality findings that Bell is proposing to you, we are going to have a massive number of circuits required to do what they say should be done. So we are going to end up with inefficient transitting network.
LISTNUM 1 \l 16586 THE CHAIRPERSON: You are saying if we adopt Bell's proposal, then, because of the primary purpose rule, it will result in inefficient traffic?
LISTNUM 1 \l 16587 MR. RUBY: That's one of the parts that will lead to that consequence.
LISTNUM 1 \l 16588 THE CHAIRPERSON: Okay, continue.
LISTNUM 1 \l 16589 MR. RUBY: Thank you, sir.
LISTNUM 1 \l 16590 So let's just keep this really simple. If you have CLEC A that has 33 units of traffic, CLEC B has 33 units of traffic and CLEC C has 33 units of traffic in an ILEC, or let us make it easier, a Bell central office, right ‑‑
LISTNUM 1 \l 16591 MR. BIBIC: Are they all co‑located?
LISTNUM 1 \l 16592 MR. RUBY: And they are all co‑located. We could not have one circuit coming out of your end office carrying all three of those co‑located CLECs full traffic, right? Because no one of them would be over 50 per cent, right?
LISTNUM 1 \l 16593 MR. BIBIC: That is correct. Some of that traffic could be aggregated and some couldn't. And the basic point is that purpose of co‑location wasn't to turn our central offices into carrier hotels, but there are options.
LISTNUM 1 \l 16594 MR. RUBY: Right, one of which is to get a circuit from Bell, right, at CDN?
LISTNUM 1 \l 16595 MR. BIBIC: Yes, at CDN rates today or build.
LISTNUM 1 \l 16596 MR. RUBY: Or build.
LISTNUM 1 \l 16597 MR. BIBIC: Or there might be CLEC D that would be willing to take that traffic.
LISTNUM 1 \l 16598 MR. RUBY: Right, right. So we have got to do a lot of building there to match‑up all of the exits from all of the COs?
LISTNUM 1 \l 16599 MR. BIBIC: No, it might already be there.
LISTNUM 1 \l 16600 MR. RUBY: Sorry?
LISTNUM 1 \l 16601 MR. BIBIC: There might be a fourth co‑locator there.
LISTNUM 1 \l 16602 MR. RUBY: There might be a fourth co‑locator there who couldn't aggregate the traffic either, right, because now you are down to 25 per cent shares?
LISTNUM 1 \l 16603 MR. BIBIC: No, it could, at least half of the traffic that it carries has to be its own, 49 per cent can be others.
LISTNUM 1 \l 16604 MR. RUBY: I see. If we have got one relatively large one it can carry some of other traffic, right?
LISTNUM 1 \l 16605 MR. BIBIC: As long as 51 per cent is its own traffic.
LISTNUM 1 \l 16606 MR. RUBY: All right, thank you. I understand your position.
LISTNUM 1 \l 16607 Can you turn up please, in my compendium, tab 9? And if I could take you to the second page. This is a question dealing with CDN and it is Companies Bureau, 12‑April No. 35.
LISTNUM 1 \l 16608 Now, you say in the first full ‑‑
LISTNUM 1 \l 16609 COMMISSIONER del VAL: Mr. Ruby, I am sorry, I didn't get the reference here, sorry.
LISTNUM 1 \l 16610 MR. RUBY: Oh sorry, pardon me. Well, first of all, tab 9 of my compendium, it is Companies Bureau, 12‑April‑07 No. 35, and page 2 please, the second paragraph that starts, "Furthermore."
"Further more, The Companies note that CDN service is a relatively insignificant input in the residential and business retail markets for toll services. Since CDN services are not available between metropolitan areas, even more telling is the fact that the Commission granted retail toll and internet forbearance before CDN services were even created. Thus, The Companies submit that the state of competition in the residential retail markets would not be impacted if CDN were no longer to be mandated." (As Read)
LISTNUM 1 \l 16611 Okay, let us take a minute and unpack this a bit, because you are talking about, in one paragraph, toll and local and internet. So let us start with toll if we can.
LISTNUM 1 \l 16612 First of all, I think we can all agree that CDN is not available between metropolitan areas, right, that is the key to toll, is between metro areas, right? And that is what it says, I am just trying this as a starting point.
LISTNUM 1 \l 16613 MR. BIBIC: Yes.
LISTNUM 1 \l 16614 MR. RUBY: Okay. But the CDN circuits that bring the traffic to the point where it is then sent out of a metropolitan area or I should say those circuits, those could be CDN, right?
LISTNUM 1 \l 16615 MR. BIBIC: Would you repeat that?
LISTNUM 1 \l 16616 MR. RUBY: Okay, let me try that again.
LISTNUM 1 \l 16617 Before you send traffic between Toronto and Ottawa you bring it to a central point and then you send it long haul, right, that is the way it works?
LISTNUM 1 \l 16618 MR. BIBIC: Yes.
LISTNUM 1 \l 16619 MR. RUBY: Okay. The circuits that bring it to a central point in Ottawa, for example, those can be CDN circuits, right, it is the long haul inter‑city stuff that is not CDN, right?
LISTNUM 1 \l 16620 MR. BIBIC: Yes.
LISTNUM 1 \l 16621 MR. RUBY: Okay. And also, CDN allow CLECs to move traffic between your central office and a CLEC POP or switch, right?
LISTNUM 1 \l 16622 MR. BIBIC: Yes.
LISTNUM 1 \l 16623 MR. RUBY: And you need one circuit to do that for each central office, usually a DS‑3 or an OC‑3, right?
LISTNUM 1 \l 16624 MR. BIBIC: Yes.
LISTNUM 1 \l 16625 MR. RUBY: Okay. So isn't this sort of an example of the steppingstone theory possibility, that once a CLEC accumulates sufficient traffic on these pieces coming out of the CO sufficient traffic and revenue gets amassed to justify a new facility, that is when the CLEC, the new entrant, can build the new facility and enjoy the benefits of increased control that you have talked about is important in having your own facilities. It is the way it works, isn't it?
LISTNUM 1 \l 16626 MR. BIBIC: It depends if the pricing of the CDN service is such that it provides an incentive to you to build even after you have amassed that traffic you are suggesting in your question.
LISTNUM 1 \l 16627 MR. RUBY: I understand. But the ability to do it, as opposed to the motivation, is that you can do it when enough traffic is available to come into that line to make it worth building, right? That is how you described how you work. You would expect at the residential transiting level it would work exactly the same way, right?
LISTNUM 1 \l 16628 MR. BIBIC: Well, one would look at whether or not there is enough traffic to justify the build or look at other options. There might be another supplier out there that is willing to give you an attractive price. Ultimately, those decisions are affected by the regulated prices of similar services from the incumbent.
LISTNUM 1 \l 16629 MR. RUBY: And I think you told us yesterday that building your own facilities from a controlled perspective is a good thing, it is what the companies generally want, right?
LISTNUM 1 \l 16630 MR. BIBIC: In the medium to long‑term, yes, that was my answer to the Chair's question, right.
LISTNUM 1 \l 16631 MR. RUBY: Then you would expect it would be the same for PRIMUS or Globility or anybody else who is in that space, right?
LISTNUM 1 \l 16632 MR. BIBIC: Right, and that is the way the market would work if it weren't otherwise distorted.
LISTNUM 1 \l 16633 MR. RUBY: All right. Let us talk about transition for a moment please. If you can again go back to my compendium. No, sorry, pardon me.
LISTNUM 1 \l 16634 MR. RUBY: Pardon me, it is the compendium, tab 14 please. Companies CRTC, 12‑April No. 401. And I am going to ask you to look at both 401 and 403, which are under the same tab. They refer back and forth to each other, so we will take them together.
LISTNUM 1 \l 16635 And the Commission asked about Cogeco had proposed some objectives for transition and The Companies' answer was, in the middle of the page:
"The Companies support the objective that the transition period creates incentives for wholesale customers of regulated products to promptly negotiate new arrangements with the ILECs or encourage these competitors to build their own facilities quickly." (As Read)
LISTNUM 1 \l 16636 So I gather that one of the objectives of the transition period, according to The Companies, Mr. Bibic, is that everybody should have time to make alternative arrangements for facilities, right, that is one?
LISTNUM 1 \l 16637 MR. BIBIC: Correct.
LISTNUM 1 \l 16638 MR. RUBY: And the second is you have to have time to build alternative facilities, that is the bit at the end of that paragraph I just read?
LISTNUM 1 \l 16639 MR. BIBIC: Well, it actually says, "encourage these competitors to build their own facilities quickly," it doesn't necessarily mean that we are saying that all competitors need to build all facilities within a one‑year period of time of course.
LISTNUM 1 \l 16640 MR. RUBY: Okay. I mean, this isn't a shock, your answer. If you turn over the page to No. 403, there is another question from the Commission about exactly that:
"..support Bells underlying assumption that competitors can build facilities required in one year, including a discussion that identifies any facilities, services for which a one‑year transition period may not be appropriate." (As Read)
LISTNUM 1 \l 16641 Starting at the end, it is not really answered here, but I gather you think that there are no facilities that should have a more than one‑year transition period?
LISTNUM 1 \l 16642 MR. BIBIC: In our proposal, that is correct.
LISTNUM 1 \l 16643 MR. RUBY: You say:
"The Companies do not assume that competitors can or would build facilities during the one‑year transition period." (As read)
LISTNUM 1 \l 16644 I have to admit I have a hard time getting my head around this. We heard a discussion that it has taken Bell somewhere between 30 and 20 years to put in all that fibre, and you don't think that it can be done in a year; you have told us that. You have also told us that part of the reason for a transition is to have time to build some facilities.
LISTNUM 1 \l 16645 How much do you think is going to get built in a year?
LISTNUM 1 \l 16646 MR. BIBIC: Frankly, Mr. Ruby, I am not going to waste everyone's time commenting on your 20 to 30 years, so I will cut to the chase.
LISTNUM 1 \l 16647 Take Bell West. What we will do is we will sit down and we will say we have all these facilities that we are not using. We are going to migrate traffic over those facilities. In other cases we are going to sit down with Shaw, Big Pipe or TELUS, we will reach arrangements. In other cases we will sit down and we will say, let's re‑ignite the build program in the west, I suspect, or look at it, at least, and where it makes sense we will start building. It will be a mix of things.
LISTNUM 1 \l 16648 That is what we suspect everyone would do.
LISTNUM 1 \l 16649 MR. RUBY: So, not even for Bell West do you expect to get what you need built in a year?
LISTNUM 1 \l 16650 MR. BIBIC: Pardon me?
LISTNUM 1 \l 16651 MR. RUBY: Within a year, even for Bell West, you can't get built what you need in a year.
LISTNUM 1 \l 16652 MR. BIBIC: In some cases I am sure we can build some lateral connections in less than a year. In other cases, no. In other cases, we will use what we have. In other cases, I am sure Mr. Grieve over there and his colleagues will be happy to sell us services.
LISTNUM 1 \l 16653 MR. RUBY: We will ask Mr. Grieve how happy he will be about it.
LISTNUM 1 \l 16654 I take it, though, we can agree that certainly within the year nobody is going to be building a third wire line into homes in Canada. So, in the residential market, you don't expect any construction to take place?
LISTNUM 1 \l 16655 MR. BIBIC: Are you talking about access?
LISTNUM 1 \l 16656 MR. RUBY: Access. The wire from the central office or a cable head end, or whatever we call it, to the home.
LISTNUM 1 \l 16657 MR. BIBIC: Over time, technology may be such that providers will wirelessly connect to the home. In the meantime, again, there are options if you want access. We talk about out west in this particular case to the home and sit down with one of the two wire line providers and see what can be done.
LISTNUM 1 \l 16658 MR. RUBY: But I want to make this clear because this is important to my client.
LISTNUM 1 \l 16659 You have a transition period starting when the Commission makes its decision, let's say, roughly in six months. So, in 18 months we cannot expect collectively that there will be anybody who will have built on any significant basis residential access connections, and that is wireless, wire line, that is everything, right; that is not happening in the next 18 months?
LISTNUM 1 \l 16660 MR. BIBIC: Mr. Ruby, I don't think you and I disagree at all on this issue. I looked at your opening statement, and with respect to access you say:
"Wholesale regulation plays no role in innovation and investment decisions with respect to access." (As read)
LISTNUM 1 \l 16661 Wholesale regulation isn't causing people to build. You and I seem to agree it is great.
LISTNUM 1 \l 16662 MR. RUBY: Okay.
LISTNUM 1 \l 16663 MR. BIBIC: You also say:
"Only the advent of disruptive technologies leads to the construction of new access facilities, e.g. cable planned for telecom purposes." (As read)
LISTNUM 1 \l 16664 Again, you and I seem to agree, it is great. So, technology may change.
LISTNUM 1 \l 16665 At the end of the day, if we are a provider out west who wants to reach the residential home ‑‑ we happen not to be, but if we were ‑‑ well, maybe technology would allow us to or maybe it wouldn't. That would be for us to figure out.
LISTNUM 1 \l 16666 At the end of the day, from a policy perspective, the consumer is well served. They have the cable company; they have the incumbent out west; they have wireless; they have the resellers; the resellers can wholesale from the incumbents. There are lots of choice.
LISTNUM 1 \l 16667 Bell and Primus really seem to agree, based on your opening statement.
LISTNUM 1 \l 16668 MR. RUBY: All right. Well, I was happy to hear we agree. The rest of the speech I think I will just pass on and keep going.
LISTNUM 1 \l 16669 We have another document I would like you to turn to, please. It is Companies/Bureau 12 April, number 34. The Secretary is handing out copies.
LISTNUM 1 \l 16670 I would like to ask you about sub‑question (d) as in David.
LISTNUM 1 \l 16671 This is a question about interexchange carriers. The Bureau asked:
"If there is effective competition in the local exchange, is denial of interconnection of an IXC likely to result in a loss of consumer welfare? If so, why not?" (As read)
LISTNUM 1 \l 16672 And so on. And then asks:
"Does it matter if interconnection is for the purposes of termination or origination of traffic?" (As read)
LISTNUM 1 \l 16673 The answer you gave is:
"If there is effective competition in a local market, denial of IXC interconnection may not result in a loss of consumer welfare. Competition in the retail market may be unaffected because end customers generally obtain access to toll services through one of a number of competing integrated providers of local toll and service." (As read)
LISTNUM 1 \l 16674 Just so we understand, "competing integrated providers of local toll and service," those can only be ILECs and cable companies in the residential market. Right?
LISTNUM 1 \l 16675 I am asking ‑‑ who was responsible for this answer on your panel? I just want to make sure I ask the right person.
LISTNUM 1 \l 16676 MR. BIBIC: All of us.
LISTNUM 1 \l 16677 MR. RUBY: Okay. As I think you might have been called the Chairman of the panel, I will ask you, Mr. Bibic.
LISTNUM 1 \l 16678 So, "competing integrated providers of local and toll service," who is that code for?
LISTNUM 1 \l 16679 MR. BIBIC: Local exchange carriers and cable companies, I believe, who actually are local exchange carriers, CLECs, cable companies, ILECs.
LISTNUM 1 \l 16680 MR. RUBY: When you say "competing integrated providers," you are including CLECs?
LISTNUM 1 \l 16681 MR. BIBIC: Yes.
LISTNUM 1 \l 16682 MR. RUBY: Thank you. That clarifies it and I can move on.
LISTNUM 1 \l 16683 Ms Sanderson, I can't quite see you back there.
LISTNUM 1 \l 16684 MS SANDERSON: Yes.
LISTNUM 1 \l 16685 MR. RUBY: I have a very brief question for you.
LISTNUM 1 \l 16686 I seem to recall that yesterday you told Mr. Koch that CRA's analysis showed that, I think what you call EFC, end‑to‑end facilities‑based competition, leads to more broadband competition. Right?
LISTNUM 1 \l 16687 MS SANDERSON: Yes. That was one of the conclusions of our study. We have a number of conclusions from the study, but one of them was that the greater amount that you have of end‑to‑end facilities‑based competition, the greater broadband penetration you will get, and the effect of the end‑to‑end facilities‑based competition gives you greater broadband penetration and better pricing than if you rely on access‑based competition.
LISTNUM 1 \l 16688 MR. RUBY: Right. So one leads to the other was the gist of I think what I took from yesterday?
LISTNUM 1 \l 16689 MS SANDERSON: There are three hypotheses that we test in the study.
LISTNUM 1 \l 16690 MR. RUBY: I don't want to take you out of your materials. Can we turn up your report, and I have provided a copy of the page I want to refer to to the Secretary.
LISTNUM 1 \l 16691 This is the CRA report. It is page 2 of the report, pages 2 and 3. It is appendix 3 to Bell's March 15 evidence. While we are there, Madam Secretary, next I am going to go to page 21 of the same report, so maybe we can do them together.
LISTNUM 1 \l 16692 THE CHAIRPERSON: Don't we have the CRA report in front of us? Can't you just point us to the page?
LISTNUM 1 \l 16693 MR. RUBY: I can. If you have it in front of you, it is page 2.
LISTNUM 1 \l 16694 COMMISSIONER del VAL: Page 2 is the index.
LISTNUM 1 \l 16695 MR. RUBY: Sorry, it is page 8 at the top and page 2 at the bottom.
LISTNUM 1 \l 16696 THE CHAIRPERSON: Page 2 at the bottom, okay.
LISTNUM 1 \l 16697 COMMISSIONER del VAL: I think my numbering got renumbered.
LISTNUM 1 \l 16698 MR. RUBY: It is paragraph 10. How is that?
LISTNUM 1 \l 16699 COMMISSIONER del VAL: Thank you.
LISTNUM 1 \l 16700 THE CHAIRPERSON: Okay.
LISTNUM 1 \l 16701 MR. RUBY: These, Ms Sanderson, are the three hypotheses you just started to talk about?
LISTNUM 1 \l 16702 MS SANDERSON: Yes, they are.
LISTNUM 1 \l 16703 MR. RUBY: And 11 is your sort of summary conclusion, right?
"Our results on broadband concentration outcomes were clearly consistent with all three of these hypotheses." (As read)
LISTNUM 1 \l 16704 MS SANDERSON: Our results on broadband penetration, not concentration.
LISTNUM 1 \l 16705 MR. RUBY: Pardon me, I misspoke. Thank you for correcting me.
LISTNUM 1 \l 16706 If I can ask you to flip over to, you see there is a footnote 3, but footnote 3 actually appears on the next page, where it says:
"Note that our empirical work represents correlations rather than proof of causality." (As read)
LISTNUM 1 \l 16707 And then you go on to say but it supports what we are saying anyways. I take it that the CRA analysis, just to put this in a nutshell, does not prove that the level of wholesale regulation causes the level of end‑to‑end facilities‑based competition. That is what footnote 3 means. Right?
LISTNUM 1 \l 16708 MS SANDERSON: Even if one did a regression analysis, which we report in the study, other people's work in relation to regression analysis, there is this debate about sort of what causes what.
LISTNUM 1 \l 16709 Typically in economics, the way we think about these things is that when there is a very high correlation in the sense that we always find greater broadband penetration with more end‑to‑end facilities‑based competition or we tend to get lower prices on a performance‑adjusted basis when we have more end‑to‑end facilities competition, and if we control for other things that are happening ‑‑ differences in population density, differences in income, what actually is going on in the wholesale regulatory regime ‑‑ when we do all of that and we find this strong correlation, we, as economists, tend to think of it as causality or, in general terms, one causes the other.
LISTNUM 1 \l 16710 But from a pure statistical point of view, statisticians will think about it as a correlation.
LISTNUM 1 \l 16711 MR. RUBY: Thank you, Ms Sanderson.
LISTNUM 1 \l 16712 Only because you sort of talked about a number of other factors, I would just like to take you to one of them.
LISTNUM 1 \l 16713 One of your two key aspects of broadband you examined was price. Right?
LISTNUM 1 \l 16714 MS SANDERSON: Performance‑adjusted price.
LISTNUM 1 \l 16715 MR. RUBY: If we can flip to page 27 of the same report, which is 17 of 113, paragraph 69, I just want to take you to the first sentence, where you say:
"Broadband price is also a key outcome, but is less easily compared than penetration." (As read)
LISTNUM 1 \l 16716 Then you give a reason for that.
LISTNUM 1 \l 16717 I take it from your study, as far as I can see, in assessing price you included for Canada the effective pricing by non‑end‑to‑end facilities‑based competitors. Right? So the effect that companies like Primus' low prices affect the overall price in the market, that was taken into account in your study for Canada?
LISTNUM 1 \l 16718 MS SANDERSON: The price comparisons are actually not the average price across the market, but instead they are the prices that the ILEC is charging in each of the different countries on a per 100 kilobyte per second basis.
LISTNUM 1 \l 16719 To the extent obviously that there is competition in that market, so that Primus' prices and Rogers' prices and Vidéotron's prices and so on are affecting what the ILEC is charging, then that will be captured in the ILEC's price. The data that is in here is not an average price across all providers. It is a price for each ILEC in that territory.
LISTNUM 1 \l 16720 MR. RUBY: Thank you for that clarification. That is helpful.
LISTNUM 1 \l 16721 If I can ask you for one other clarification.
LISTNUM 1 \l 16722 I think you told Mr. Koch yesterday that countries with more competitors had higher penetration rates for broadband. Is that right?
LISTNUM 1 \l 16723 MS SANDERSON: We had three key findings.
LISTNUM 1 \l 16724 One was that the more end‑to‑end facilities‑based competition that you have, the greater your broadband penetration rates.
LISTNUM 1 \l 16725 The second conclusion was that when you then have both a lot of access‑based competition in addition to, so you have two things going on at once, you have end‑to‑end facilities‑based competition and you have access‑based competition through the wholesale regulatory regime, that the driver of either broadband penetration or the driver of low prices when you have both things going on is the end‑to‑end facilities‑based competition. That is a more important driver of those better market outcomes than the access.
LISTNUM 1 \l 16726 Then the last thing we concluded was that when you have a lot of end‑to‑end facilities‑based competition already and you add on top of that additional wholesale regulatory structures, you don't get a lot of additional benefits from adding that extra wholesale regulatory regime. Basically back to the main point that the thing that drives these better outcomes is the end‑to‑end facilities‑based competition.
LISTNUM 1 \l 16727 MR. RUBY: Thank you. I think your second point was actually the answer to my question.
LISTNUM 1 \l 16728 I take it, then, that all the competitors for your second point you are dealing with, those are retail competitors you are talking about?
LISTNUM 1 \l 16729 MS SANDERSON: These are end‑to‑end facilities‑based competitors, that is right, in retail broadband.
LISTNUM 1 \l 16730 MR. RUBY: Thank you.
LISTNUM 1 \l 16731 Mr. Bibic, maybe we can take a very few minutes and talk about Bell's position that access tandem connections are not essential. I have the position right. Right?
LISTNUM 1 \l 16732 MR. BIBIC: You will have to direct those questions to Mr. Henry.
LISTNUM 1 \l 16733 MR. RUBY: To?
LISTNUM 1 \l 16734 MR. BIBIC: Mr. Henry to my left.
LISTNUM 1 \l 16735 MR. RUBY: All right, Mr. Henry.
LISTNUM 1 \l 16736 MR. HENRY: Yes.
LISTNUM 1 \l 16737 MR. RUBY: Have I got the position right?
LISTNUM 1 \l 16738 MR. HENRY: Yes.
LISTNUM 1 \l 16739 MR. RUBY: Can you just take hopefully ten seconds and just make sure the Commission understands what an access tandem connection is.
LISTNUM 1 \l 16740 MR. HENRY: It is, in our view, transport from one switch to the local switch, or traffic that is destined from a long‑distance carrier to a local switch, for example, can be dropped off at an intermediate stage at an access tandem switch. So, it is the transport function to take it down to the local switch.
LISTNUM 1 \l 16741 Our view is that the mandated part of toll interconnection should really be at the local switch. Happy to have people connect at the higher level and the network, but that is transport.
LISTNUM 1 \l 16742 MR. RUBY: That is fine. I just wanted to make sure we were all on the page with which piece of technology we were talking about.
LISTNUM 1 \l 16743 So, let's focus on IXC origination connections as opposed to termination. All right, Mr. Henry?
LISTNUM 1 \l 16744 MR. HENRY: Okay.
LISTNUM 1 \l 16745 MR. RUBY: I take it you would agree with me that the routing of originating 800 or 888 calls is only done through an access tandem?
LISTNUM 1 \l 16746 MR. HENRY: Yes.
LISTNUM 1 \l 16747 MR. RUBY: Therefore, if we want to have competitive use of access tandems, so if a competitor, for whatever reason, because it was denied or the price was too high or whatever, couldn't use an access tandem, there would be no competitive 800 or 888 service. Do those two go together?
LISTNUM 1 \l 16748 If it helps you, Mr. Henry, I have provided to your counsel a few days ago a copy of Bell Tariff CRTC 75‑16. At item 40, sub (1), sub (d) ‑‑ and this would be an exhibit, Mr. Chairman ‑‑ that deals with this. So if that helps Mr. Henry answer the question, I am happy to have him look at it.
LISTNUM 1 \l 16749 THE SECRETARY: I note that exhibit to be Primus/Globility Exhibit No. 4.
LISTNUM 1 \l 16750 MR. RUBY: Thank you.
EXHIBIT PRIMUS‑4: Bell Tariff CRTC 75‑16
LISTNUM 1 \l 16751 MR. RUBY: So, the reference, Mr. Chairman, was item 40 ‑‑ this is the first page of the package ‑‑ 40(1)(d). It is the second to last bit on the first page. It talks about 800 calls and then says:
"This arrangement is available for AT connections only ..." (As read)
LISTNUM 1 \l 16752 MR. HENRY: I think the confusion is ‑‑ and I may have caused it ‑‑ I think we are saying for 800 it would be mandated for 800 service.
LISTNUM 1 \l 16753 MR. RUBY: Sorry, you think ‑‑ so, originating calls that are 800 calls could go through your access tandem on an essential basis, but no other type of call?
LISTNUM 1 \l 16754 MR. HENRY: On a mandated basis.
LISTNUM 1 \l 16755 It would be mandated interconnection, in the interconnection part of our ‑‑
LISTNUM 1 \l 16756 MR. RUBY: Could I ask you: Which one of the Commission's six buckets does that fit into?
LISTNUM 1 \l 16757 MR. BIBIC: What is the "it"?
LISTNUM 1 \l 16758 MR. RUBY: What Mr. Henry just described, 800 origination ‑‑
LISTNUM 1 \l 16759 MR. HENRY: It would be in either 5 or 6. I think 6 is interconnection.
LISTNUM 1 \l 16760 It would be in the interconnection bucket.
LISTNUM 1 \l 16761 MR. RUBY: Okay. Thank you.
LISTNUM 1 \l 16762 Let's stick with access tandems for a moment and originating traffic.
LISTNUM 1 \l 16763 I take it, Mr. Henry, you would agree with me that 1‑plus dialling gives an interexchange ‑‑ or the capability of offering subscribers access to the network. Right?
LISTNUM 1 \l 16764 That's what it does?
LISTNUM 1 \l 16765 MR. HENRY: That's one way, yes.
LISTNUM 1 \l 16766 MR. RUBY: That is certainly the way the customers like it ‑‑ right ‑‑ 1‑plus dialling?
LISTNUM 1 \l 16767 MR. HENRY: That is one way, but there is dial‑around, 10‑10 dialling, et cetera.
LISTNUM 1 \l 16768 MR. RUBY: All right. That's fine.
LISTNUM 1 \l 16769 Today, sitting here, the 1‑plus dialling feature can be connected either ‑‑ originating traffic I am talking about ‑‑ can be connected either at an access tandem or an end office. Right?
LISTNUM 1 \l 16770 And we call the end office connection a direct connection?
LISTNUM 1 \l 16771 MR. HENRY: That's right.
LISTNUM 1 \l 16772 MR. RUBY: I take it that you don't want to get rid of direct connections. That's not part of your plan?
LISTNUM 1 \l 16773 MR. HENRY: So long as there is 1‑plus equal access mandated, yes, you would have to mandate toll interconnection at the local office, which is, as you say, direct connect.
LISTNUM 1 \l 16774 MR. RUBY: Let's explore a couple of consequences of that, then.
LISTNUM 1 \l 16775 If we have direct connection mandated, but not access tandem, which, as I understand it, you have said is Bell's proposal, that means, I take it, that ‑‑
LISTNUM 1 \l 16776 Let me put it this way. You would agree with me that direct connection circuits have a fixed capacity. There is no ability for them to overflow into other circuits. Right?
LISTNUM 1 \l 16777 That's the way they work?
LISTNUM 1 \l 16778 MR. HENRY: Now you are getting into a level of technical knowledge that is certainly beyond my knowledge.
LISTNUM 1 \l 16779 I am told by my experts that there is an overflow portion for the interconnecting circuits. There is an overflow option.
LISTNUM 1 \l 16780 MR. RUBY: That is with access tandem. Right?
LISTNUM 1 \l 16781 With access tandem there is a network, so things can overflow.
LISTNUM 1 \l 16782 MR. HENRY: No, I'm told that the option exists for direct connect, as well.
LISTNUM 1 \l 16783 MR. RUBY: Okay. Let me look at this a different way.
LISTNUM 1 \l 16784 If a CLEC builds a direct connection, its traffic flows over its circuit ‑‑ right ‑‑ all of it. If it has too much traffic to go over that circuit, Bell doesn't automatically pick up the excess. Right?
LISTNUM 1 \l 16785 MR. HENRY: You can order extra circuits on an overflow basis.
LISTNUM 1 \l 16786 MR. RUBY: Okay. So you say that I can buy it from you, but there is no automatic overflow system for direct connections like there is for an access tandem. Right?
LISTNUM 1 \l 16787 MR. HENRY: No.
LISTNUM 1 \l 16788 MR. RUBY: That means, doesn't it, that a CLEC who is building a circuit has to build each circuit to accommodate the maximum amount of traffic that may flow through it?
LISTNUM 1 \l 16789 Otherwise, you are going to risk dropped calls.
LISTNUM 1 \l 16790 And that is different from an access tandem, where there is an overflow mechanism. Right?
LISTNUM 1 \l 16791 MR. BABIN: Maybe I could add, Mr. Ruby, that, obviously, in traffic engineering you have to design how many circuits you would need based on your assumptions, or on your client's assumptions of the number of customers that are going to be using those types of facilities.
LISTNUM 1 \l 16792 It is traffic engineering.
LISTNUM 1 \l 16793 MR. RUBY: Okay. Let me ask you this. When you do your traffic engineering, if you don't have an overflow capability, you need to either put in more circuits or bigger capacity circuits to deal with the high‑end traffic that comes along once in a while. Right?
LISTNUM 1 \l 16794 That's the way it works?
LISTNUM 1 \l 16795 MR. BABIN: Generally, companies are growing, traffic is growing, you would probably add more circuits. Absolutely.
LISTNUM 1 \l 16796 MR. RUBY: And that costs more. Right?
LISTNUM 1 \l 16797 MR. BABIN: More customers, more infrastructure, more cost.
LISTNUM 1 \l 16798 MR. RUBY: Would you agree with me that it is less efficient to have all of these competitors building these circuits that are bigger and better instead of using an access tandem system where there is overflow and the opportunity to balance traffic?
LISTNUM 1 \l 16799 MR. BABIN: The interconnection we are offering is at the DC, at the COs, and those are the technical services that we have.
LISTNUM 1 \l 16800 MR. RUBY: Right, but you were talking about planning the network. It is more efficient to use access tandem ‑‑ that system, that network ‑‑ as a whole for the system. Right?
LISTNUM 1 \l 16801 It's indisputable.
LISTNUM 1 \l 16802 Or, maybe you do dispute it.
LISTNUM 1 \l 16803 MR. BIBIC: There are network efficiencies, and those can be derived through parties sitting together and figuring out if they could take advantage of efficiencies by banding together and coming to a solution together.
LISTNUM 1 \l 16804 MR. RUBY: I think we have talked a little bit about that already.
LISTNUM 1 \l 16805 Staying with direct connections and interexchange carriers ‑‑ and I will make some, hopefully, easy assumptions to do this.
LISTNUM 1 \l 16806 If there are 30 interexchange carriers in Canada that operate nationally ‑‑
LISTNUM 1 \l 16807 By the way, is that a reasonable assumption?
LISTNUM 1 \l 16808 I have to admit that I looked on the Commission's website and I can't find a list any more for IXCs. The lists seem to be divided a different way, but the Commission certainly knows how many IXCs there are.
LISTNUM 1 \l 16809 Maybe not right this minute, but ‑‑
LISTNUM 1 \l 16810 MR. BIBIC: We can't comment one way or another.
LISTNUM 1 \l 16811 THE CHAIRPERSON: In any event, it's not relevant. There is more than one, and we all know that.
LISTNUM 1 \l 16812 MR. RUBY: Right.
LISTNUM 1 \l 16813 Just for number purposes, I am telling you it's 30. The Commission may figure out that it's different, but if you could assume with me for the moment that it's 30, that's my best guess from a review of the information available.
LISTNUM 1 \l 16814 Is it fair to say that there are at least 3,000 end offices in Canada?
LISTNUM 1 \l 16815 MR. HENRY: Again, I will take that subject to check.
LISTNUM 1 \l 16816 MR. RUBY: It's closer to 4, right? So 3 is a pretty reasonable assumption, do you think?
LISTNUM 1 \l 16817 MR. HENRY: I will take it subject to check. I have no idea.
LISTNUM 1 \l 16818 MR. RUBY: All right. So if we have 30 IXCs and 3,000 end offices in Canada, it is not difficult math to know that you would need 90,000 direct connection circuits to provide the same service as access tandems do today.
LISTNUM 1 \l 16819 That is just 30 times 3,000.
LISTNUM 1 \l 16820 MR. BABIN: Those connections are in place today, Mr. Ruby. You are assuming that access tandem facilities no longer exist.
LISTNUM 1 \l 16821 MR. RUBY: No, I am assuming that you have either refused people the right to use them, or priced them above the cost that you can construct your own network.
LISTNUM 1 \l 16822 If you want us to use your facilities, then let's make them essential and have mandated pricing, and off we go. But, as I understand it, that's not your proposal. You want to take access tandem out of the mandated box.
LISTNUM 1 \l 16823 MR. BIBIC: Yes, and that doesn't mean that we don't want customers to use them.
LISTNUM 1 \l 16824 COMMISSIONER CRAM: Excuse me. I would like an answer to the question that was asked: If there were 3,000 end offices and 30 IXCs, you would need 90,000 DC circuits instead of an AT.
LISTNUM 1 \l 16825 MR. BIBIC: Ms Cram, if all incumbents across the country were to deny use of their facilities ‑‑
LISTNUM 1 \l 16826 COMMISSIONER CRAM: Mr. Bibic, I just want the answer to that.
LISTNUM 1 \l 16827 MR. BIBIC: I am giving you the answer, Ms Cram.
LISTNUM 1 \l 16828 ‑‑ and all of the interexchange carriers had to build their own, and the Commission didn't come in and find them to be essential, then, yes.
LISTNUM 1 \l 16829 COMMISSIONER CRAM: Thank you.
LISTNUM 1 \l 16830 MR. BABIN: Could I also add, Mr. Ruby, that there is no incentive for the ILECs to deny access to those facilities because their end customers are going to suffer.
LISTNUM 1 \l 16831 As you know, if an IXC customer is calling an ILEC end customer, and there is no ability to get to that customer, there is no incentive for us to deny that access, because our customers are going to request it.
LISTNUM 1 \l 16832 MR. RUBY: I am not going to argue about this with you, sir.
LISTNUM 1 \l 16833 THE CHAIRPERSON: But, presumably, your main point is, if your wholesale dropped dead, business would surely suffer ‑‑ if you denied access to all of these people.
LISTNUM 1 \l 16834 That is what I seem to have heard over the last two days.
LISTNUM 1 \l 16835 MR. BIBIC: Yes, the wholesale business would suffer, and so would our retail business, because the customers wouldn't be able to make calls.
LISTNUM 1 \l 16836 MR. RUBY: You could certainly raise the prices, though, because you are the only ones who have it. Right?
LISTNUM 1 \l 16837 MR. BIBIC: Then, if we were to do that, the customer would be kind of annoyed and might go to the cable company provider to get their toll and local and everything else, or any other number of providers.
LISTNUM 1 \l 16838 MR. RUBY: Don't the cable companies want to use your access tandems, too?
LISTNUM 1 \l 16839 MR. BIBIC: They have a lot of customers. Again, if we prevent the ability of customers to contact each other, that's not very good business.
LISTNUM 1 \l 16840 MR. RUBY: That's fair enough. This is part of your "Trust us" message.
LISTNUM 1 \l 16841 If we contrast the situation with access tandems, how many access tandems, roughly, are there in Canada?
LISTNUM 1 \l 16842 I am guessing 30, but you would have a better idea than I would.
LISTNUM 1 \l 16843 MR. HENRY: I don't know in Canada. I think there are 12 in Ontario and Quebec.
LISTNUM 1 \l 16844 MR. RUBY: All right. So let's take 30 subject to check. We could always redo the math.
LISTNUM 1 \l 16845 If we have 3,000 end offices, 30 access tandems, and 30 interexchange providers, that means, for access tandem architecture, that we would only need 3,900 circuits ‑‑ right ‑‑ as opposed to 90,000 for direct connect?
LISTNUM 1 \l 16846 That is, relatively, the kind of construction or new facility difference we are talking about.
LISTNUM 1 \l 16847 COMMISSIONER CRAM: Could I have those numbers again, Mr. Ruby?
LISTNUM 1 \l 16848 MR. RUBY: If there were 3,000 end offices, the same ‑‑
LISTNUM 1 \l 16849 COMMISSIONER CRAM: Yes.
LISTNUM 1 \l 16850 MR. RUBY: ‑‑ assumption as last time, 30 IXEs, the same assumption as last time, and 30 access tandems ‑‑
LISTNUM 1 \l 16851 COMMISSIONER CRAM: Yes.
LISTNUM 1 \l 16852 MR. RUBY: ‑‑ which we are making a jump from 12 in Ontario to Quebec to make it 30 for the whole country, that adds up to me to 3,900, 30 times 30 plus 3,000.
LISTNUM 1 \l 16853 COMMISSIONER CRAM: Thirty‑nine hundred circuits?
LISTNUM 1 \l 16854 MR. RUBY: Thirty‑nine hundred circuits. So that is all you need compared to the 90,000.
LISTNUM 1 \l 16855 COMMISSIONER CRAM: Thank you.
LISTNUM 1 \l 16856 MR. RUBY: But I don't think I got an answer from the Bell panel.
LISTNUM 1 \l 16857 MR. HENRY: The reason I am struggling, Mr. Ruby, is because you are assuming that they couldn't connect, make arrangements with other carriers to connect and transport some of that traffic. So it wouldn't follow that you would have to do all of those routes.
LISTNUM 1 \l 16858 MR. RUBY: All right. I am just getting out the magnitude. If they couldn't make common arrangements, it would be 90,000 versus roughly 4,000. If there was a whole lot of connection, we would bring it down to 45,000 new circuits.
LISTNUM 1 \l 16859 You can't disagree with me about this, right
LISTNUM 1 \l 16860 MR. HENRY: Under your assumptions, if you assume that nobody is going to connect with anybody else and that they had to build on every route, then I guess your match is correct.
LISTNUM 1 \l 16861 MR. RUBY: Okay. And I take it if they did do that ‑‑ so you stuck with my assumptions and we had ‑‑
LISTNUM 1 \l 16862 MR. HENRY: If I can just give you an example, I think, on the record ‑‑
LISTNUM 1 \l 16863 MR. RUBY: No, Mr. Henry, I am fine, I am moving on to the next question.
LISTNUM 1 \l 16864 MR. HENRY: Well, I am going to give you an example why perhaps yours is unrealistic.
LISTNUM 1 \l 16865 Cogeco connects without even connecting through Bell in Ontario and they connect through TELUS. So again, they haven't any problem transporting their traffic or getting transmitted.
LISTNUM 1 \l 16866 MR. RUBY: I am not saying that it will have to be a full 90,000. Sure, there would be cooperation.
LISTNUM 1 \l 16867 But you will agree with me that the magnitude of the difference is huge, right?
LISTNUM 1 \l 16868 You know, I am not even going to ask you to answer the question, I will move on.
LISTNUM 1 \l 16869 THE CHAIRPERSON: I think it is time to move on. You have made your point. We will draw whatever conclusion we want from it.
LISTNUM 1 \l 16870 MR. RUBY: Let me, if I may, ask one last question.
LISTNUM 1 \l 16871 I take it that whether the number is 90,000 or 50,000 or 40,000 new direct connection circuits, the customer gets no advantage from all these new circuits; right? These are just transport, extra fiber. The customer doesn't benefit if there is no new services coming. If anything, the prices have to go up.
LISTNUM 1 \l 16872 MR. HENRY: Well, that is like saying the customer doesn't benefit from any kind of transport that is being built by other carriers. I mean we have had all kinds of evidence this week about incentives to build, why we need them, the innovation that comes from that, et cetera, et cetera.
LISTNUM 1 \l 16873 To say, well, why don't we just have one carrier and the customer is not going to get any more benefit if he has different facilities in the ground, I am not sure ‑‑
LISTNUM 1 \l 16874 MR. RUBY: But what we are talking about is these new circuits to just get us to where we are today. This isn't expanding the network, right? We are just comparing what exists today for access tandem to what it would take if we had to build out direct connections instead.
LISTNUM 1 \l 16875 MR. HENRY: That is all we are talking about with any kind of local competition, is customers getting to call the same people.
LISTNUM 1 \l 16876 MR. RUBY: Well, I am not sure that is ‑‑
LISTNUM 1 \l 16877 MR. HENRY: I mean I really don't follow your point, Mr. Ruby.
LISTNUM 1 \l 16878 MR. RUBY: All right. Well, I am not sure that is what I read in your materials but thank you, panel, and thank you, Mr. Chairman, those are my questions.
LISTNUM 1 \l 16879 THE CHAIRPERSON: Thank you very much.
LISTNUM 1 \l 16880 Commissioner Noël, you had a question?
LISTNUM 1 \l 16881 COMMISSIONER NOEL: I guess I forgot what it was.
LISTNUM 1 \l 16882 THE CHAIRPERSON: Okay.
LISTNUM 1 \l 16883 Commissioner Cram.
LISTNUM 1 \l 16884 COMMISSIONER CRAM: I am sorry, there is one issue that I forgot yesterday.
LISTNUM 1 \l 16885 Dr. Taylor, when you were being asked about 1123 in your Price Cap II testimony, I am not sure ‑‑ 1123.
LISTNUM 1 \l 16886 MR. TAYLOR: I am there.
LISTNUM 1 \l 16887 COMMISSIONER CRAM: And you said to Mr. Koch when he was referring to access at the ILEC's costs, you changed it and said at the ILEC's economic cost.
LISTNUM 1 \l 16888 Now, are you really talking Phase II plus a mark‑up; is that what you are talking about?
LISTNUM 1 \l 16889 MR. TAYLOR: Well, let me put my head around 2001 again.
LISTNUM 1 \l 16890 COMMISSIONER CRAM: Sure. Yes.
LISTNUM 1 \l 16891 MR. TAYLOR: You are referring specifically to the first sentence:
"The Commission's framework encourages efficient interconnection arrangements by making network elements available to competitors at the incumbent's cost." (As read)
LISTNUM 1 \l 16892 Yes, by that, I would mean Phase II plus a mark‑up. I said economic because I am talking about assuming that you guys got the numbers right and these were supposedly the economic costs. People disagree as to whether the numbers are right, of course, and I don't take a position on that.
LISTNUM 1 \l 16893 COMMISSIONER CRAM: Okay, thank you very much.
LISTNUM 1 \l 16894 MR. TAYLOR: Sure.
LISTNUM 1 \l 16895 THE CHAIRPERSON: Commissioner Noël.
LISTNUM 1 \l 16896 COMMISSIONER NOEL: A very short question about the construction in greenfields, dans les nouveaux développements.
LISTNUM 1 \l 16897 In new developments, is it your experience that the facilities are built underground in conduits or are they above ground over posts?
LISTNUM 1 \l 16898 MR. BABIN: Generally, they are underground in conduits, yes.
LISTNUM 1 \l 16899 COMMISSIONER NOEL: In conduits under the streets.
LISTNUM 1 \l 16900 And if you wanted to go after a ‑‑ Rogers, for example, had exclusive arrangements with the developer, once the streets and the infrastructures are turned over to the city and not to the developer anymore, you could piggyback on Rogers' support structure to get your wire in?
LISTNUM 1 \l 16901 MR. BABIN: If there are structures there, yes.
LISTNUM 1 \l 16902 COMMISSIONER NOEL: Without ripping the street. Thank you.
LISTNUM 1 \l 16903 THE CHAIRPERSON: Mrs. Sanderson, I have a question for you. I gather you are not going to be with us after the break because you have other ‑‑
LISTNUM 1 \l 16904 MS. SANDERSON: I actually have made arrangements, I can stay.
LISTNUM 1 \l 16905 THE CHAIRPERSON: Oh! Wonderful.
LISTNUM 1 \l 16906 Nonetheless, I just ‑‑
‑‑‑ Laughter / Rires
LISTNUM 1 \l 16907 THE CHAIRPERSON: Help me here because the last point that Mr. Ruby raised was basically saying, you know, take his example of access tandem, basically, we are going to build more redundancy in the system. It works right now building if they have to because they find the pricing from the ILECs unacceptable but it will result in extra facilities which we don't need at this present time.
LISTNUM 1 \l 16908 How do I square that with your conclusion number 1 that says that more end‑to‑end facilities‑based competition results in superior market outcomes? I would have thought redundancies by definition means inefficiencies and therefore can't be a more superior market outcome. What am I missing here?
LISTNUM 1 \l 16909 MS SANDERSON: I think what Mr. Ruby was talking about was quite a different situation than what we, in fact, are measuring.
LISTNUM 1 \l 16910 But at a more general level, we are not going to expect ‑‑ when people build these facilities out, as I think was mentioned earlier in the discussion yesterday or perhaps the day before as well, they have greater control over the cost structure to which they are then providing those services and they then have the ability to provide additional services over whatever the structures are that they have put forward.
LISTNUM 1 \l 16911 Now, Mr. Ruby was speaking about transport and I guess just ‑‑ I am not a technical expert. He was basically speaking about something quite specific but we would expect that in the context of building out these networks that the fiber is going to be used to provide any number of additional services, as it has been over time.
LISTNUM 1 \l 16912 So what we were measuring in our study was the extent to which end‑to‑end facilities‑based competition, the fact that you have got two wires into the home then allows each of those competitors that owns those wires to provide a multitude of services and have greater control over their cost structures in terms of them providing those services.
LISTNUM 1 \l 16913 And what we find through that, which is a very consistent finding across a lot of studies involving many countries ‑‑ some of them have 30 in them, some of them are just Europe, ours is a combination of things that has Canada in it ‑‑ is that we always get better market outcomes when we have greater end‑to‑end facilities‑based competition compared to having a situation where the competition is over one wire and everybody is trying to get access to that one wire, because in those circumstances, the other competitors don't have the same control over their cost structure in offering those services.
LISTNUM 1 \l 16914 I may not have answered it fully.
LISTNUM 1 \l 16915 THE CHAIRPERSON: You answered it. I'm sure that was your finding overall, but don't you have to make them market‑specific? Don't you have to take into account whether it is a market with a population density, et cetera, that actually allows you to have this end‑to‑end competition? There has to be a minimum mass of users and beneficiaries before all of those principles apply.
LISTNUM 1 \l 16916 MS SANDERSON: Those things have been controlled for in these studies and in preparing for this hearing I also ran regressions to then control for population density, GDP per capita and some of these other things that might reflect those differences. Even when you control for those things, either in the work that I have done or in the studies that are cited in our report, you always come out with the same result, which is that you get greater broadband penetration, better pricing in terms of a performance‑adjusted price when you have greater facilities‑based competition and that if you add sort of a very extensive wholesale access regime on top of good facilities‑based competition you don't get much additional benefit, so that what really ultimately is driving the good market outcomes in terms of penetration and pricing is the facilities‑based competition.
LISTNUM 1 \l 16917 THE CHAIRPERSON: I see it is nearly 10 o'clock, let's take a 10‑minute break before we start with the next witness.
‑‑‑ Upon recessing at 0952 / Suspension à 0952
‑‑‑ Upon resuming at 1005 / Reprise à 1005
LISTNUM 1 \l 16918 THE SECRETARY: Please be seated.
LISTNUM 1 \l 16919 As noted on the Order of Appearance, PIAC withdrew its intention to cross‑examine The Companies.
LISTNUM 1 \l 16920 We are now moving on with Counsel Tacit on behalf of Cybersurf Corporation.
LISTNUM 1 \l 16921 Mr. Tacit.
EXAMINATION / INTERROGATOIRE
LISTNUM 1 \l 16922 MR. TACIT: Thank you.
LISTNUM 1 \l 16923 I would like to discuss with you the possibility of facilities arrangements post the kind of regime that The Companies envision, and specifically I understand it's The Companies evidence that there is nothing to prevent them from entering into resale arrangements of all sizes with all kinds of wholesale customers if indeed mandated access is withdrawn and that they indeed would have the motivation to do so.
LISTNUM 1 \l 16924 Is that correct?
LISTNUM 1 \l 16925 MR. BIBIC: Yes.
LISTNUM 1 \l 16926 MR. TACIT: In that vein, is it possible that one or more of the companies could enter into reciprocal sharing arrangements with another ILEC, such as TELUS for example, giving each other access to each other's facilities on a customer‑specific basis?
LISTNUM 1 \l 16927 MR. ANDERSON: Could you repeat the question please, to make sure I understand it?
LISTNUM 1 \l 16928 MR. TACIT: Yes. Is it possible that Bell Canada, for example ‑‑ let's just use that example, keep it simple ‑‑ could decide that it should enter into a reciprocal resale arrangement with TELUS so that each of the two companies would have the ability to obtain access to each other's facilities in its territory, in it's in‑home ILEC territory?
LISTNUM 1 \l 16929 MR. ANDERSON: We currently have relationships with TELUS on different product lines.
LISTNUM 1 \l 16930 MR. TACIT: But that's not my question.
LISTNUM 1 \l 16931 MR. ANDERSON: All right. Sorry, then I misunderstood it.
LISTNUM 1 \l 16932 MR. TACIT: Under this regime would it be easier to do that?
LISTNUM 1 \l 16933 MR. BIBIC: We would be able to enter into wholesale arrangements with TELUS, but I have a feeling you are getting into something very specific that I'm not understanding, just kind of you ride on my network whenever you want and I will ride on your network whenever I want.
LISTNUM 1 \l 16934 Is that what you ‑‑
LISTNUM 1 \l 16935 MR. TACIT: Well, maybe not whenever you want, but it could be a specific arrangement where there is a pretty broad scope for reciprocal access. Is that not an arrangement that could conceivably occur?
LISTNUM 1 \l 16936 MR. BIBIC: Yes.
LISTNUM 1 \l 16937 MR. TACIT: All right.
LISTNUM 1 \l 16938 Are such arrangements in place today in fact? Any such arrangements in place between any of The Companies and TELUS or any of the Bell companies and SaskTel, and so on?
LISTNUM 1 \l 16939 MR. BIBIC: Certainly we have roaming and resale arrangements with TELUS for example on the wireless side.
LISTNUM 1 \l 16940 MR. TACIT: Are there any wireline arrangements like that?
LISTNUM 1 \l 16941 MR. BIBIC: We buy services from them and they buy from us.
LISTNUM 1 \l 16942 Do you mean one global arrangement?
LISTNUM 1 \l 16943 MR. TACIT: Not necessarily global, but I'm talking about non‑tariffed reciprocal access arrangements.
LISTNUM 1 \l 16944 MR. BIBIC: Oh, I see.
LISTNUM 1 \l 16945 MR. ANDERSON: So I would define it as a bilateral agreement, a swap.
LISTNUM 1 \l 16946 MR. TACIT: Yes. Are there such arrangements now?
LISTNUM 1 \l 16947 MR. ANDERSON: Subject to check, I expect there could be. I would have to double check that.
LISTNUM 1 \l 16948 MR. TACIT: All right. Well, I would be interested in knowing if there are such arrangements and the scope of them, if you could provide that information.
LISTNUM 1 \l 16949 MR. BIBIC: We will double check and then I will have to determine the confidentiality of that information and we can file with the Commission with the appropriate confidentiality claims if required.
LISTNUM 1 \l 16950 MR. TACIT: Fair enough.
LISTNUM 1 \l 16951 Now what I would like you to do, just so we are clear on what the question is, is check this not only as between Bell and TELUS, but any of the Bell companies and any other ILEC, and SaskTel and any of the other ILECs.
LISTNUM 1 \l 16952 What I'm trying to get at is, are there any bilateral or multilateral facility‑sharing agreements of that sort of expanded scope that go beyond tariff arrangements?
LISTNUM 1 \l 16953 MR. BIBIC: For Bell and TELUS, Bell Aliant and TELUS, SaskTel and TELUS.
LISTNUM 1 \l 16954 Correct?
LISTNUM 1 \l 16955 MR. TACIT: Yes. And Bell and SaskTel. Any combinations that you can find like that, bilateral or multilateral.
LISTNUM 1 \l 16956 MR. BIBIC: All right.
LISTNUM 1 \l 16957 MR. TACIT: The reason, just to get it on the record. The relevance of this, of course, is that should those kind of arrangements either exist now or come to fruition in the future, it may well be the case that there would be interest in the ILECs riding on those agreements, but not necessarily being so generous with other potential competitors.
LISTNUM 1 \l 16958 MR. BIBIC: Okay, well, you will have your opportunity to make ‑‑
LISTNUM 1 \l 16959 MR. TACIT: Yes.
LISTNUM 1 \l 16960 MR. BIBIC: ‑‑ your submission which you started to do.
LISTNUM 1 \l 16961 MR. TACIT: Fair enough. I'm just establishing the relevance of that. Okay.
LISTNUM 1 \l 16962 Are there, in fact, any such negotiations taking place now for any of these kinds of agreements or arrangements?
LISTNUM 1 \l 16963 MR. BIBIC: Are we talking forborne services now?
LISTNUM 1 \l 16964 MR. TACIT: Yes.
LISTNUM 1 \l 16965 MR. BIBIC: Don't know.
LISTNUM 1 \l 16966 MR. TACIT: Okay. Can you check?
LISTNUM 1 \l 16967 MR. BIBIC: Yes, under the same provisos as before.
LISTNUM 1 \l 16968 MR. TACIT: Okay. Thank you.
LISTNUM 1 \l 16969 Now, under that sort of arrangement ‑‑ I just want to complete that thought ‑‑ could it be the case that there would be motivation, for example, for a Bell Canada and a TELUS to save costs by entering into such an arrangement? Because both are well capitalized, well funded firms, both are large competitors and both know that if they don't cooperate, ultimately, the other company will come in and build facilities. So let's just avoid that whole cost and give each other some preferred access, but we won't necessarily facilitate other competitors, as well.
LISTNUM 1 \l 16970 MR. BIBIC: Like, I mean, that's a broad question. Is it possible? Sure it's possible.
LISTNUM 1 \l 16971 MR. TACIT: Okay.
LISTNUM 1 \l 16972 MR. BIBIC: Showing network builds are sometime ‑‑ in any industry, network industries, are sometimes efficiency enhancing. I think Inukshuk, the Inukshuk wireless platform is an example of an efficiency enhancing joint network build, in my view, at the network infrastructure level.
LISTNUM 1 \l 16973 MR. TACIT: Okay. So when we look at, you know, CDN costs declining as being a deterrent to facilities' build, there may be other reasons why The Companies would want to avoid building facilities and they might find means to do so anyway. Correct?
LISTNUM 1 \l 16974 MR. BIBIC: In a competitive market, we will make our determinations. As I said before, we will build where it makes sense for us, we will lease at market rates where it makes sense for us and we will use the facilities we already have where it makes sense for us. Yes, there's all those possibilities.
LISTNUM 1 \l 16975 MR. TACIT: Thank you.
LISTNUM 1 \l 16976 MR. HENRY: Mr. Tacit, it happens with competitors, as well. I mean, the Government of Newfoundland just partnered with Allstream and Rogers, I think it was. There was a consortium of competitors that got together to do a new build. We were not one of them.
LISTNUM 1 \l 16977 MR. TACIT: That may well be, but they are not subject to this proceeding, so...
LISTNUM 1 \l 16978 On the CDN issue, I know you have that Appendix 9 in your evidence, which goes into the details of how The Companies view the reduction in CDN rates has served as a deterrent to facilities builds, but let me ask you this question.
LISTNUM 1 \l 16979 Could it be the case that, in fact, one of the reasons there was an incentive for carriers to build under the prior rates was because the rates were, in fact, too high. In other words, those builds would not have necessarily been economically efficient. Is that a possibility?
LISTNUM 1 \l 16980 MR. TAYLOR: Well, I assume it's a logical possibility. I'm not familiar with the level of CDN rates. So, yes, it's logic ‑‑ it could be it could have happened. But the main point is just that a reduction in those rates will surely stimulate demand. Demand curves slope downward. That much you can take.
LISTNUM 1 \l 16981 MR. TACIT: Thank you.
LISTNUM 1 \l 16982 Ms Sanderson, I have a follow‑up question for you.
LISTNUM 1 \l 16983 Oh, she's gone. Okay. All right, then I guess I don't. Sorry about that.
LISTNUM 1 \l 16984 Okay, I would like to just confirm that the double dominance requirement is a part of The Companies' test for what constitutes essential wholesale facilities, as well. Is that right? You have been adopting the competition test. You have adopted the double dominance requirement.
LISTNUM 1 \l 16985 MR. BIBIC: Just so we are using the same language, look at dominance downstream, dominance upstream, is that what you mean by "double dominance"?
LISTNUM 1 \l 16986 MR. TACIT: Yes.
LISTNUM 1 \l 16987 MR. BIBIC: Then, yes.
LISTNUM 1 \l 16988 MR. TACIT: Thank you.
LISTNUM 1 \l 16989 Okay, so I would like to explore just a little bit around the effect of wholesale on retail, based on the characteristics of the retail market. I would just like to take you through that for a few minutes.
LISTNUM 1 \l 16990 MR. BIBIC: Sure.
LISTNUM 1 \l 16991 MR. TACIT: Would you agree with me that ILEC and cable company residential local exchange services in a particular local exchange are generally in the same product market and they are substitutable?
LISTNUM 1 \l 16992 MR. BIBIC: Yes.
LISTNUM 1 \l 16993 MR. TACIT: Would you agree that's also true with respect to hi‑speed Internet services in the same geographic areas?
LISTNUM 1 \l 16994 I know you might argue that you can do it over bigger areas, but let's just stick to this local exchange. In a particular local exchange, would you agree with me that if an ILEC and a cable company are offering hi‑speed Internet, they are generally in the same product market and substitutable?
LISTNUM 1 \l 16995 MR. BIBIC: Yes.
LISTNUM 1 \l 16996 MR. TACIT: And the same for long distance services?
LISTNUM 1 \l 16997 MR. BIBIC: I'm not going to argue with you on geographic definitions now. Yes.
LISTNUM 1 \l 16998 MR. TACIT: Okay. And following that logic, if you had a bundle of all of those three, would you agree that those are also in the same product markets and substitutable?
LISTNUM 1 \l 16999 MR. BIBIC: Well, now, I would have to go into the world of "it depends", but certainly I think some have argued and submitted that there might come a time where it may be appropriate to consider bundles as being in a product market. But I haven't done that analysis and I'm not sure there's been any findings to that level.
LISTNUM 1 \l 17000 MR. TACIT: Well, my question isn't ‑‑
LISTNUM 1 \l 17001 MR. BIBIC: It's conceivable, certainly.
LISTNUM 1 \l 17002 MR. TACIT: ‑‑ about theoretical studies. When you go and compete with a cable company in a local exchange, are you trying to win the bundle or aren't you?
LISTNUM 1 \l 17003 MR. BIBIC: Sure.
LISTNUM 1 \l 17004 MR. TACIT: So you would say they are in the same product market, wouldn't you?
LISTNUM 1 \l 17005 MR. BIBIC: Well, the two competing bundles would be in the same product market. I'm not limiting the product market to just those two bundles, though, that's what I'm trying to say.
LISTNUM 1 \l 17006 MR. TACIT: Okay, fair enough.
LISTNUM 1 \l 17007 MR. BIBIC: I just want to be clear, that's all.
LISTNUM 1 \l 17008 MR. TACIT: But those bundles are in the same product?
LISTNUM 1 \l 17009 MR. BIBIC: Correct.
LISTNUM 1 \l 17010 MR. TACIT: Okay. And if you add video to that, would the test be the same?
LISTNUM 1 \l 17011 MR. BIBIC: Two identical ‑‑
LISTNUM 1 \l 17012 MR. TACIT: Would the outcome be the same?
LISTNUM 1 \l 17013 MR. BIBIC: So two identical ‑‑
LISTNUM 1 \l 17014 MR. TACIT: So we are going from ‑‑
LISTNUM 1 \l 17015 MR. BIBIC: ‑‑ bundles offered by a cable company in an that scenario?
LISTNUM 1 \l 17016 MR. TACIT: Well, they are not necessarily identical in every respect, but, generally speaking, would you see the bundles as being in the same product market?
LISTNUM 1 \l 17017 MR. BIBIC: I will be frank with you, I don't think you are going to pin me down on saying absolutely they will be. It's going to be "it depends". If you are taking video out of one and video's in the other, I would have to look it and come to a judgment.
LISTNUM 1 \l 17018 MR. TACIT: I'm assuming video are in both.
LISTNUM 1 \l 17019 MR. BIBIC: Then, if it's the same bundles, the same geographic market, cable company, ILEC, sure.
LISTNUM 1 \l 17020 MR. TACIT: Okay. Now, would you agree with me that when you look at the overall market demand for bundles of such services, there are many, many consumer transactions taking place in the marketplace on the residential side, and those transactions are each, individually, pretty small compared to the overall demand for those services? Would you agree with the proposition?
LISTNUM 1 \l 17021 MR. TAYLOR: Yes, for mass market services, it's certainly correct that mass market residential services, customers ‑‑ there are many transactions which take place. Of course, some at contracts, that is if you want the bundle, you sign up ‑‑ speaking for the U.S., you would sign up for a year or two years to get a good price. But, yes, there are bundles. Many transactions take place.
LISTNUM 1 \l 17022 MR. TACIT: Okay. And the price of those transactions is low relative to the overall demand in the marketplace. Is that correct? In other words, any one transaction represents a small percentage of the overall demand.
LISTNUM 1 \l 17023 MR. TAYLOR: Because there are many transactions ‑‑
LISTNUM 1 \l 17024 MR. TACIT: Right.
LISTNUM 1 \l 17025 MR. TAYLOR: ‑‑ it follows by arithmetic, yes.
LISTNUM 1 \l 17026 MR. TACIT: Okay. And is it The Companies' evidence that information is readily available in the marketplace about the various local exchange, long distance, Internet and video prices that both the ILECs and the cable companies provide, and the bundles for those? Is that information readily available in the marketplace?
LISTNUM 1 \l 17027 MR. TAYLOR: Well, I think offered prices are, that is you can go to anyone's website and see what the offer is. I can't speak for Canada, but in the U.S. you often get a different price when you call up and ask for service, particularly if you call up the ILEC and say, "I'm leaving if that's the best you can do". Often you get a different price.
LISTNUM 1 \l 17028 MR. TACIT: But Mr. Bibic, you can confirm that the offered prices are readily available and advertised publicly?
LISTNUM 1 \l 17029 MR. BIBIC: Yes, they are. I will confirm it ‑‑ in a variety of sources, Internet, TV advertising, media advertising, et cetera.
LISTNUM 1 \l 17030 MR. TACIT: Okay. And it's also the case that the ILECs ‑‑ and let's now stick to some of the larger cable companies, let's talk about the largest four, five or six ‑‑ that they, in fact, offer these services in bundles of services over geographic areas that cover multiple local exchanges. Is that right?
LISTNUM 1 \l 17031 MR. BIBIC: The cable companies?
LISTNUM 1 \l 17032 MR. TACIT: Yes.
LISTNUM 1 \l 17033 MR. BIBIC: That's correct.
LISTNUM 1 \l 17034 MR. TACIT: And ILECs, too.
LISTNUM 1 \l 17035 MR. IACONO: Yes.
LISTNUM 1 \l 17036 MR. TACIT: Okay. And would you also agree with me that the ILECs and the cable companies account collectively for the largest proportion of output of all of these services and service bundles in the areas in which they are offered?
LISTNUM 1 \l 17037 MR. BIBIC: And here you are talking about ‑‑
LISTNUM 1 \l 17038 MR. TACIT: Largest market share total.
LISTNUM 1 \l 17039 MR. BIBIC: Okay, residential telephony, internet, video?
LISTNUM 1 \l 17040 MR. TACIT: Yes, if you take the amount that ILECs and the cable companies jointly offer in a particular area would you agree that they account for the vast majority of those services ‑‑
LISTNUM 1 \l 17041 MR. BIBIC: Nationally you are speaking now?
LISTNUM 1 \l 17042 MR. TACIT: I am talking about wherever they are offered, whether it is in an exchange or in a city.
LISTNUM 1 \l 17043 MR. BIBIC: I can't speak to a particular exchange, but as a general proposition, nationally yes.
LISTNUM 1 \l 17044 MR. TACIT: Okay. Now, The Companies have claimed that there are a number of new technologies such as Wi‑Max, Wi‑Fi broadband over power lines being used to provide high‑speed internet services. Without getting into that detailed evidence, can you confirm with me that so far those technologies account for less than 1 per cent of the internet access technology mix?
LISTNUM 1 \l 17045 MR. IACONO: I can't confirm the per cent that it covers, but I can certainly confirm that there are quite a few providers out there providing service across the country in various locations.
LISTNUM 1 \l 17046 MR. TACIT: Okay. Perhaps I could draw your attention to Figure 4.4.2 of the monitoring report, which is a CRTC exhibit in this proceeding.
LISTNUM 1 \l 17047 MR. IACONO: Which page?
LISTNUM 1 \l 17048 MR. TACIT: It is on page 71.
LISTNUM 1 \l 17049 MR. IACONO: Seventy‑one?
LISTNUM 1 \l 17050 MR. TACIT: Yes.
LISTNUM 1 \l 17051 MR. IACONO: Thank you.
LISTNUM 1 \l 17052 MR. TACIT: Do you have that?
LISTNUM 1 \l 17053 MR. IACONO: Yes, I do, thank you.
LISTNUM 1 \l 17054 MR. TACIT: Okay. So if you look at the pie chart for 2006 this is a figure that represents the residential internet access technology mix. You will see that dial‑up, cable and DSL together account for more than 99 per cent. Is it not logical then that all the other technologies that you referenced would account for something less than 1 per cent?
LISTNUM 1 \l 17055 MR. IACONO: Yes, obviously. Based on this information, I will accept the 1 per cent. But one important point to note is that technology is evolving very quickly and the marketing activities of the firms offering these technologies are increasingly becoming more intense. So I imagine that over time it will grow.
LISTNUM 1 \l 17056 MR. TACIT: Okay, well we will see how the market evolves and what the Commission makes of that, but we are talking about today.
LISTNUM 1 \l 17057 Now, in Cybersurf/The Companies 12‑April‑07‑2, and by the way, I don't if the package has been distributed of interrogatory responses, if it could be. I put together just a small stapled compendium of selected interrogatory responses and I believe that this was also actually given to your counsel.
LISTNUM 1 \l 17058 MR. BIBIC: We have them all.
LISTNUM 1 \l 17059 MR. TACIT: Thank you.
LISTNUM 1 \l 17060 MR. BIBIC: Which page is it, Mr. Tacit?
LISTNUM 1 \l 17061 MR. TACIT: So you will see I have added numbered pages at the bottom right‑hand corner. So on page 4 of the document, which is page 1 of Cybersurf/The Companies 12‑April‑07‑2. And I want to draw your attention to a statement made right near the end of that first long paragraph of the response where The Companies say:
"The Companies note that the question suggests that without regulation there would be no business case for The Companies to provide wholesale DSL services. The Companies do not agree with such a suggestion, especially given that wholesale revenues provide an important part of The Companies' business and that, as illustrated in Bell Canada/Primus 12‑April‑07‑4, wholesale DSL gateway access service constitutes the third largest revenue source of wholesale regulated service." (As Read)
LISTNUM 1 \l 17062 Now, that is still The Companies' evidence, correct?
LISTNUM 1 \l 17063 MR. BIBIC: Yes.
LISTNUM 1 \l 17064 MR. TACIT: Okay. And then if we actually flip over to attachment 2, to Bell Canada/Primus‑4, which is at page 16 of that same package, we can indeed see that GAS is the third on the list, correct?
LISTNUM 1 \l 17065 MR. BIBIC: Yes.
LISTNUM 1 \l 17066 MR. TACIT: But the heading of that attachment deals with Bell Canada and Bell Aliant, Ontario and Quebec.
LISTNUM 1 \l 17067 MR. BIBIC: Yes.
LISTNUM 1 \l 17068 MR. TACIT: Now, can you tell me where a GAS‑like service would stand if this chart related to Bell Aliant Atlantic provinces, where would it be on that list?
LISTNUM 1 \l 17069 MR. BIBIC: We don't know.
LISTNUM 1 \l 17070 MR. TACIT: Well, let me ask a simpler question. Is a GAS‑like service being offered by Bell Aliant in the Atlantic provinces?
LISTNUM 1 \l 17071 MR. HENRY: Yes, it is.
LISTNUM 1 \l 17072 MR. TACIT: Okay. And can you find out for me how significant it is in terms of this 1 to 10 ranking or if it is lower than 10?
LISTNUM 1 \l 17073 MR. HENRY: Sure.
LISTNUM 1 \l 17074 MR. HOFLEY: Mr. Chairman, there was an interrogatory process for this. This is a 12‑April‑07 response, there was a second round subsequent to this, and these questions were not asked. That is what the interrogatory process is for. So obviously I am in your hands, but this is what the interrogatory process is for.
LISTNUM 1 \l 17075 THE CHAIRPERSON: Well maybe you tell me what is the relevance of this information to you?
LISTNUM 1 \l 17076 MR. TACIT: Well, the relevance is this and this has become apparent through responses to both rounds of interrogatories in evidence in this proceeding, and that is that it may be well and good for The Companies to say that they have an incentive to keep providing a service that they have already been providing where it has been mandated. But where the service either hardly exists or isn't even off the ground the situation may in fact be quite a bit different.
LISTNUM 1 \l 17077 And so I am going to be pursuing that line of questioning a bit and it would certainly be helpful to know if there is any kind of a vibrant wholesale market right now for DSL services in a Bell Aliant Atlantic province or a SaskTel territory. And I am not looking for specific numbers here.
LISTNUM 1 \l 17078 THE CHAIRPERSON: Let us just understand, you basically want the same shot but only for Bell Aliant, so to know where ‑‑
LISTNUM 1 \l 17079 MR. TACIT: I don't even need the chart, I just need to know where it ranks, where it ranks in terms of wholesale offerings for the Atlantic provinces, and for SaskTel was my next question as well.
LISTNUM 1 \l 17080 THE CHAIRPERSON: Okay, I think it is obviously relevant so I will allow it. But I think Mr. Hofley's intervention is quite right. You should try to restrict yourself to issues that have been dealt with by interrogatories.
LISTNUM 1 \l 17081 MR. TACIT: Thank you, Mr. Chairman.
LISTNUM 1 \l 17082 MR. HENRY: And I can clarify, you did put the interrogatory to us ‑‑
LISTNUM 1 \l 17083 MR. BIBIC: Primus did.
LISTNUM 1 \l 17084 MR. HENRY: ‑‑ or Primus did rather, in Bell Aliant/Primus 12‑April‑07‑4 and the listing of the top 10 wholesale services are there and that is not among them.
LISTNUM 1 \l 17085 MR. TACIT: Okay, thank you. And is there one for SaskTel as well, do you know, because we can just dispose ‑‑ anyway I will look. But if there isn't, if you could respond to the question?
LISTNUM 1 \l 17086 MR. BIBIC: Okay, well I will consider the undertaking with respect to Bell Aliant to have been discharged?
LISTNUM 1 \l 17087 MR. TACIT: Yes, thank you. And I did not find that interrogatory, so I must apologize.
LISTNUM 1 \l 17088 MR. BIBIC: With SaskTel, I will take that undertaking. If we can come up with an answer before we get off the stand, we will give it ‑‑
LISTNUM 1 \l 17089 MR. TACIT: Absolutely, that is fine.
LISTNUM 1 \l 17090 Let me ask this question. To what extent have Bell and Bell Aliant been willing to introduce new wholesale speeds for ADSL services as new speeds are added for retail internet services?
LISTNUM 1 \l 17091 MR. ANDERSON: We are obviously looking at enhancing the product. We have just recently launched new volume discounts on GAS, so that is one thing, and we will be introducing, on a wholesale basis, upgraded speeds and there will be more details to follow in the coming weeks.
LISTNUM 1 \l 17092 MR. TACIT: But you will agree that certainly you have resisted providing it on a mandated basis?
LISTNUM 1 \l 17093 MR. ANDERSON: It is not a matter of resistance, it is a matter of working through the product. One of the unique elements of wholesale, I think you would agree, is that versus the retail market there are other implications when you are dealing with other providers, there is interface activities, there is back office process, those kinds of things are all part of the process. So it is not a matter of resisting, it is a matter of how quickly we can get the product to market.
LISTNUM 1 \l 17094 MR. BIBIC: The answer is we don't believe that these services should be provided on a regulated mandated basis, that is quite clear from our evidence.
LISTNUM 1 \l 17095 MR. TACIT: And it is quite clear from the successful review and vary of the ADSL orders. Because the whole issue there was whether additional speeds should be offered or not, right.
LISTNUM 1 \l 17096 MR. BIBIC: Well, the issue there, Mr. Tacit, is ‑‑
LISTNUM 1 \l 17097 MR. TACIT: Well, I am talking about that issue.
LISTNUM 1 \l 17098 MR. BIBIC: No, I am not going to get into details.
LISTNUM 1 \l 17099 The issue is not the willingness of The Companies to provide those services. The issue is how they are categorized in the regulatory environment, whether it is category 1, category 2 and the pricing. That is what the fundamental issues are behind the proceedings you refer to.
LISTNUM 1 \l 17100 MR. TACIT: I don't know if we were at the same proceedings, but my understanding is that ADSL services are priced as category 2. So I don't know what the complaint is, if that is the case.
LISTNUM 1 \l 17101 MR. BIBIC: The issue, the fundamental issue is whether or not these services should be mandated in the fashion that they are. Our position is no.
LISTNUM 1 \l 17102 MR. TACIT: Would it be correct for me to suggest that when Bell Canada does offer a new retail speed, if a wholesaler wants that same speed in a completely forborne environment, it would only be after they notice that there is a retail offering that they would come to Bell and Bell would have the discussion with the wholesaler to determine if there is demand, if there is sufficient demand to offer this service and under what terms and conditions. Is that the mechanism as you have described it so far through this proceeding?
LISTNUM 1 \l 17103 MR. ANDERSON: If there isn't a wholesale product, so for example ‑‑ let me just make sure I understand the question clearly.
LISTNUM 1 \l 17104 What you are describing is there is a new retail product that is out in the market currently not available at wholesale. Is that the scenario?
LISTNUM 1 \l 17105 So then absolutely we would sit down ‑‑ if that is the case, I am trying to think of an example where that might be, but if this is the case, then certainly we would sit down, obviously evaluate, do we have a wholesale product for the wholesale market. I think that is part of the undertaking, what is the overall demand, what are the requirements of the customer. Then we would proceed from there.
LISTNUM 1 \l 17106 MR. TACIT: If you came out with a 10 meg service tomorrow, just hypothetically, you wouldn't tell all your wholesale customers ahead of time, we are going to come out with ‑‑ let's say in three months, we intend to come out with a retail offering in three months, can you let us know if you want a wholesale offering that is going to be available around the same time? Would you do that?
LISTNUM 1 \l 17107 MR. ANDERSON: We haven't typically done it to date. That is a matter of timing, demand. So, I think anything is open for consideration.
LISTNUM 1 \l 17108 MR. IACONO: Mr. Tacit, if I may, the market is clearly competitive at the retail level. Given that it is clearly competitive at the retail level, I am not sure why we would, as a company, from a retail point of view, pre‑announce with long periods of time our marketing strategies to competitors. I just don't understand, just like your company wouldn't announce to us what you are planning on doing three or six months from now.
LISTNUM 1 \l 17109 It is not a category 1 service. The market is sufficiently competitive. That has been concluded many times.
LISTNUM 1 \l 17110 MR. TACIT: I understand your motivation, but thank you for clarifying the response, and the response is no, you wouldn't typically do that. Is that right?
LISTNUM 1 \l 17111 MR. IACONO: That is correct.
LISTNUM 1 \l 17112 MR. TACIT: Thank you.
LISTNUM 1 \l 17113 Is there a risk that a voluntary approach to the provision of these kind of services will result in no services being provided by those companies that haven't been required to provide it yet?
LISTNUM 1 \l 17114 MR. BIBIC: It may be a possible outcome in this scenario, but, again, from the end customer's perspective and a policy perspective, if the retail market is competitive, then the end customer is well served.
LISTNUM 1 \l 17115 However, as I mentioned to the Chair yesterday in response to a question, if we are facing vigorous competition from the cable company, we have 10 meg speed downstream and the cable company beats us to 20 and we have to catch up and go to 25, if we are going to lose customers and we have capacity there, I see no reason why we would rather not lose the customer to a competitor that is riding on our network rather than to the cable company. That is how retail and wholesale markets tend to work.
LISTNUM 1 \l 17116 MR. TACIT: That brings me exactly to the point of the difference between losing customers where you have an established base and the motivation might be different for an ILEC that simply doesn't have a wholesale base of any significance in the ADSL area. They might be less motivated to go after that business because they don't have it to begin with.
LISTNUM 1 \l 17117 MR. BIBIC: Well, no, it is the same principle. You are talking about an ILEC here, so clearly in your hypothetical, the company has a network, the ILEC has a network.
LISTNUM 1 \l 17118 Whether or not it has a wholesale business, if it is going to lose the retail customer because the customer service is no good or the speed is no good or for whatever reason, if that ILEC is going to not gain a customer it doesn't have or lose a customer it has to a cable company, it may instead prefer to lose that customer or not gain that customer at the expense of a wholesale competitor who is riding on that network.
LISTNUM 1 \l 17119 I think the principle applies whether or not the company in question has a large wholesale base today or doesn't.
LISTNUM 1 \l 17120 MR. TACIT: Yet it has taken a very long time for these services to develop, wouldn't you agree?
LISTNUM 1 \l 17121 MR. BIBIC: Which services?
LISTNUM 1 \l 17122 MR. TACIT: The ADSL broadband services offered by ILECs. So that would suggest that what you are saying isn't entirely borne out.
LISTNUM 1 \l 17123 MR. BIBIC: I disagree with you.
LISTNUM 1 \l 17124 MR. TACIT: I guess we will have to disagree.
LISTNUM 1 \l 17125 Is there also a risk that a voluntary approach to the provision of these kind of services might result in pricing that is not sustainable for competitors? Is there such a risk?
LISTNUM 1 \l 17126 MR. BIBIC: Could prices change for these services? It is possible. It depends on what the wholesale customer, as Mr. Anderson said this morning, brings to bear, how long the commitment is for, what the breadth of services are they are acquiring from the ILEC. It all depends.
LISTNUM 1 \l 17127 At the end of the day, is the end customer served, yes, in the retail internet market, absolutely. There is a lot of vigorous competition, Mr. Tacit, as you know. You operate in that market.
LISTNUM 1 \l 17128 MR. TACIT: Could it also be the case that an ILEC would attempt to leverage the ability or the fact that it is one of the one or two only sources of these kinds of services, and try to get its competitors to buy other services at the same time as a condition of buying the ADSL service?
LISTNUM 1 \l 17129 They may be related services, for example, transport services, but basically if you want to get this price, this really good price, you are also going to have to buy transport from us or something else. Is that a possibility?
LISTNUM 1 \l 17130 MR. BIBIC: It is a possibility that a competitor may get a better arrangement if they buy more services, and all this subject to tied selling provisions in the Competition Act.
LISTNUM 1 \l 17131 MR. TACIT: If we were to look at the wireless market the way it has developed as a proxy for the kind of suggestions that you are making as to how this might develop in the future, is it your evidence that the wireless market is pretty competitive at the retail end right now?
LISTNUM 1 \l 17132 MR. BIBIC: Yes.
LISTNUM 1 \l 17133 MR. TACIT: Do you consider that the wholesale market in the wireless side is well developed, vibrant?
LISTNUM 1 \l 17134 MR. BIBIC: Well, it is developing, and there are many, many wholesale channels that have been developed in Canada in wireless since 2004, the entry of Virgin and there are a whole bunch of other providers who have reached wholesale arrangements with either TELUS or Rogers.
LISTNUM 1 \l 17135 MR. TACIT: Could I just ask you to turn again to the monitoring report, figure 4.6.7.
LISTNUM 1 \l 17136 MR. BIBIC: What page, Mr. Tacit?
LISTNUM 1 \l 17137 MR. TACIT: Sorry, it is at page 101. Do you have that?
LISTNUM 1 \l 17138 MR. BIBIC: Yes, Mr. Tacit. I am just looking for something else at the same time.
LISTNUM 1 \l 17139 MR. TACIT: Okay, let me know when you are ready.
LISTNUM 1 \l 17140 MR. BIBIC: I am now ready.
LISTNUM 1 \l 17141 MR. TACIT: So, figure 4.6.7 shows the retail and wholesale revenue split. It looks like, based on this, the retail split appears to be somewhere in the excess of $12 billion ‑‑ sorry, the retail portion of that.
LISTNUM 1 \l 17142 It is harder to read what the wholesale is, but maybe it is around somewhere between $100 and $200 million, I am not quite sure.
LISTNUM 1 \l 17143 MR. BIBIC: Maybe I can help you. Turn to page 25. You see table 4.1.1.
LISTNUM 1 \l 17144 MR. TACIT: Right.
LISTNUM 1 \l 17145 MR. BIBIC: Look at wireless.
LISTNUM 1 \l 17146 MR. TACIT: Right.
LISTNUM 1 \l 17147 MR. BIBIC: Look at wholesale.
LISTNUM 1 \l 17148 MR. TACIT: Right.
LISTNUM 1 \l 17149 MR. BIBIC: It has gone from nothing in 2002, nothing in 2003, and then $100 million in 2004, $100 million in 2005 and 2006.
LISTNUM 1 \l 17150 So, wholesale wireless revenues are growing rather fast.
LISTNUM 1 \l 17151 MR. TACIT: If you could go to page 100 for a second.
LISTNUM 1 \l 17152 MR. BIBIC: Yes.
LISTNUM 1 \l 17153 MR. TACIT: You will see that the definition of wholesale revenues includes two elements. It includes roaming revenues the company received for processing calls from wireless subscribers of other companies roaming within its territory.
LISTNUM 1 \l 17154 MR. BABIC: Yes.
LISTNUM 1 \l 17155 MR. TACIT: And revenues derived from the sale of wireless minutes to MVNOs.
LISTNUM 1 \l 17156 MR. BIBIC: That is correct.
LISTNUM 1 \l 17157 MR. TACIT: Would it be your expectation that roaming revenues have increased steeply in the last two or three years?
LISTNUM 1 \l 17158 MR. BIBIC: I don't know.
LISTNUM 1 \l 17159 MR. TACIT: Can you find out?
LISTNUM 1 \l 17160 MR. BIBIC: Whose roaming revenues?
LISTNUM 1 \l 17161 MR. TACIT: Well, I guess, you are right, those companies aren't before us here, so forget that.
LISTNUM 1 \l 17162 But I guess what I am suggesting to you is that, in fact, the MVNO part of this business is still pretty small. The growth is predominantly in the roaming revenue section. Even if I am wrong in that assumption, it still appears that overall the wholesale market is pretty small compared to the retail market. It doesn't suggest to me a vibrant wholesale market.
LISTNUM 1 \l 17163 MR. BIBIC: I will leave your submission alone, but clearly the wholesale segment of the market is smaller than the retail segment.
LISTNUM 1 \l 17164 When I refer to wholesale arrangements in wireless, I don't limit those to MVNOs. There can be resale agreements; there can be distribution arrangements where ‑‑ and I am not sure of the specifics ‑‑ East Link or Vidéotron, as the case may be is offering a Rogers wireless service. I mean, those are wholesale arrangements and shouldn't be foreclosed in the lexicon of wholesale.
LISTNUM 1 \l 17165 MR. TACIT: And you don't think those are captured here?
LISTNUM 1 \l 17166 MR. BIBIC: I don't know.
LISTNUM 1 \l 17167 THE CHAIRPERSON: Did you ask Bell to find out something about roaming?
LISTNUM 1 \l 17168 MR. TACIT: No, it was fine, thank you.
LISTNUM 1 \l 17169 Is it The Companies' evidence that if wholesale access is mandated for certain services, the Commission should not require the ILECs to offer monthly rated options for those services? In other words, it should allow the ILECs to only offer longer‑term contracts?
LISTNUM 1 \l 17170 It is not a trick question. If you are having trouble with that, you can turn to page 158 of your first round evidence ‑‑ or, sorry, paragraph 158 on page 72.
LISTNUM 1 \l 17171 THE CHAIRPERSON: What is that page number again?
LISTNUM 1 \l 17172 MR. TACIT: Page, I think it is 72, yes, paragraph 158.
LISTNUM 1 \l 17173 MR. BIBIC: Thank you for pointing me to this because I was trying to recall what ‑‑
LISTNUM 1 \l 17174 MR. TACIT: That is fine. I didn't refer you ‑‑ it was a matter of just expediting the process, not to trip you up.
LISTNUM 1 \l 17175 MR. BIBIC: Thank you.
LISTNUM 1 \l 17176 We refer here to kind of specific difficulties we have had with the mandated requirement to have monthly options with respect to the obligation to provide loops because, of course, what has been happening there ‑‑
LISTNUM 1 \l 17177 MR. TACIT: Excuse me, but I am not asking for the reasons right now. I am just asking whether it is The Companies' evidence that it doesn't want to have monthly rated options mandated even if wholesale services are mandated. That is the question.
LISTNUM 1 \l 17178 MR. BIBIC: That is the position.
LISTNUM 1 \l 17179 MR. TACIT: So, if that is true, I guess what I am curious about is how does locking in customers to longer‑term commitments for wholesale services create an incentive for those customers to build facilities and move to their own facilities as soon as possible?
LISTNUM 1 \l 17180 MR. BIBIC: Mr. Tacit, I mean, each company will come to its own judgment. We are not saying that these long‑term commitments have to be 20 years. They could be one year, two years, three years, four years, five years. It will be up to each provider to make their own choices. Now I am repeating myself, so I won't proceed.
LISTNUM 1 \l 17181 MR. TACIT: But I guess I am just looking at the economic incentive. I mean, as I understand it, The Companies' evidence is based on its theories of what sound economics are.
LISTNUM 1 \l 17182 I am just wondering ‑‑ it is a simple question ‑‑ how locking customers in is going to create the necessary incentive for them to build out and move to their own facilities as quickly as possible.
LISTNUM 1 \l 17183 MR. BIBIC: Our proposition is quite simple. It is that the regulatory regime is not what should be determining what providers do in terms of building or leasing. It is the market that should be determining that.
LISTNUM 1 \l 17184 A provider may have an incentive to build and will make its judgments. We may have an incentive to have them buy as much as we possibly can get them to buy from us and the market will sort that out. Somewhere in between in some places you will build, and in some places you will buy from us, et cetera. So, the regulation shouldn't force these outcomes. The market should force these outcomes.
LISTNUM 1 \l 17185 MR. TACIT: But could it be the case that if that happened, the incentive to build would be dampened or at least delayed?
LISTNUM 1 \l 17186 MR. BIBIC: Regulation wouldn't be causing disincentives and wouldn't be trying to force incentives with asymmetrical information.
LISTNUM 1 \l 17187 Again, the market will sort that out and policy direction says rely on market forces to the maximum extent feasible, and market forces don't foreclose the possibility that companies will buy from others.
LISTNUM 1 \l 17188 MR. TACIT: Thank you. I think I have your evidence on this point.
LISTNUM 1 \l 17189 At paragraph S‑4 of appendix 1 of their first round evidence, if you could just turn to that.
LISTNUM 1 \l 17190 MR. BIBIC: Whose evidence, sir?
LISTNUM 1 \l 17191 MR. TACIT: The Companies' evidence. Paragraph S‑4 of appendix 1.
LISTNUM 1 \l 17192 MR. BIBIC: We are with you.
LISTNUM 1 \l 17193 MR. TACIT: I am not with me, so bear with me for a sec.
LISTNUM 1 \l 17194 It is page 1 of 54. The Companies state, starting at the very bottom of the paragraph, the very last sentence:
"Based on recent experience, the cable companies are able to quickly capture a significant share of any local access market they choose to enter." (As read)
LISTNUM 1 \l 17195 Just skipping the next sentence.
"Furthermore, by providing telephony service, cable companies have been able to reverse the erosion of their basic cable subscribers, re‑assert their leadership in high speed internet access, reduce customer return and significantly improve their revenue and profitability performance. Cable companies are committed to the provision of telephony and are, or in some cases, beginning the process of expanding their capability in business markets to stimulate even faster growth." (As read)
LISTNUM 1 \l 17196 Now, that is still The Companies' evidence. Correct?
LISTNUM 1 \l 17197 MR. BIBIC: Yes.
LISTNUM 1 \l 17198 MR. TACIT: I am interested in your choice of the word "leadership" in that passage. Could another word for leadership also be dominance?
LISTNUM 1 \l 17199 MR. BIBIC: No.
LISTNUM 1 \l 17200 MR. TACIT: Can you explain the difference?
LISTNUM 1 \l 17201 MR. BIBIC: We use the term "leadership" in the sense that ‑‑ of course, this is kind of a gross generalization because we are not talking about specific geographic markets, but generally across the country, I believe the share of retail subscribers that are on a cable internet platform rather than an ILEC internet platform is greater, hence leadership.
LISTNUM 1 \l 17202 MR. TACIT: Has that always been the case?
LISTNUM 1 \l 17203 MR. BIBIC: Yes.
LISTNUM 1 \l 17204 MR. TACIT: Is the process accelerating in favour of the cable BDUs, as far as you are concerned?
LISTNUM 1 \l 17205 MR. BIBIC: What do you mean by that?
LISTNUM 1 \l 17206 MR. TACIT: You say that they are re‑asserting their leadership. So, presumably there must have been a time when there was no leadership. I am curious as to what you view as the changes that have taken place in the last few years.
LISTNUM 1 \l 17207 MR. IACONO: Well, there is lots going on, Mr. Tacit. They are obviously positioning with faster speeds, broader services, more bundle choice, obviously broader range of services, including in some instances wireless, which they are making arrangements through others, there are home phone services. So, they are basically continuing to very, very aggressively make incursions into the market, if you will. That is how competitive markets work.
LISTNUM 1 \l 17208 We are dealing as best we can with the different cable companies that we compete with.
LISTNUM 1 \l 17209 MR. TACIT: Let me take you perhaps one last time, then, to the CRTC monitoring report. This time I would like you to look at table 4.4.3 on page 66. Let me know when you have that.
LISTNUM 1 \l 17210 MR. BIBIC: I have it, thank you.
LISTNUM 1 \l 17211 MR. IACONO: I have it too.
LISTNUM 1 \l 17212 MR. TACIT: So, if we look at the first two rows, incumbent TSPs and then cable BDUs, we see that in fact up until 2005 the incumbent TSPs were actually ahead of the cable BDUs in terms of internet retail access service revenue market share. Would you agree with me?
LISTNUM 1 \l 17213 MR. BIBIC: Yes.
LISTNUM 1 \l 17214 MR. TACIT: Then in 2006 the cable BDUs exceeded that.
LISTNUM 1 \l 17215 MR. BIBIC: I guess that is why we used "re‑assert."
LISTNUM 1 \l 17216 MR. TACIT: I ask you again: Is there a concern about the BDUs perhaps becoming dominant in this market over time?
LISTNUM 1 \l 17217 MR. BIBIC: No.
LISTNUM 1 \l 17218 MR. TACIT: On what do you base that?
LISTNUM 1 \l 17219 MR. BIBIC: On the fact that we will do whatever we possibly can to gain as many retail internet subscribers as we can, and the cable companies will do the same, and other providers, who either have their networks, wireless internet, or wholesalers who ride on the cable platform or ILEC platform, will continue to compete, and customers will be well served.
LISTNUM 1 \l 17220 MR. IACONO: Mr. Tacit, if I may add, companies like the company you are representing are obviously aggressively competing in various markets.
LISTNUM 1 \l 17221 Just looking at some of the offers that Cybersurf provides, the bundle involving home phone service, et cetera, where internet is provided on a free basis, that, presumably, is intended to gain share from either the cable companies or from the DSL providers.
LISTNUM 1 \l 17222 It is happening all over the place, big and small.
LISTNUM 1 \l 17223 MR. TACIT: Thanks for the free advertising, Mr. Iacono, I appreciate it.
LISTNUM 1 \l 17224 If I could go to page 24 of that interrogatory response package that we handed out, this is a response to Companies‑CRTC‑204, 12th of April `07. Right at the bottom of the Companies' answers to parts (a) to (d), the Companies state:
"Nevertheless, if the Commission proceeds to mandate access to ILEC facilities in these circumstances..."
‑‑ and we are talking here about DSL. I think that is the context:
"...which the Companies vigorously oppose for the reasons set out above, it must also proceed symmetrically by mandating access to the cable facilities." (As read)
LISTNUM 1 \l 17225 Can you explain to me what the basis is of that position?
LISTNUM 1 \l 17226 MR. BIBIC: The circumstances here are internet?
LISTNUM 1 \l 17227 MR. TACIT: Yes.
LISTNUM 1 \l 17228 MR. BIBIC: Broadband.
LISTNUM 1 \l 17229 Frankly, we don't believe that there should be mandated access to either platform. That's our position.
LISTNUM 1 \l 17230 MR. TACIT: That's a given. Understood.
LISTNUM 1 \l 17231 MR. BIBIC: But if access is going to be mandated to something which is not essential in any manner, shape or form, to us, it wouldn't make sense that access be mandated to one but not the other. That would be, frankly, an unprincipled outcome.
LISTNUM 1 \l 17232 But I don't see why access should be mandated to our network and not the cable networks, or vice versa, in this particular case, where it is clear that there is no question of essentiality.
LISTNUM 1 \l 17233 MR. TACIT: Is one possible explanation that it might make it easier for the cable companies to exhibit even greater leadership in that market?
LISTNUM 1 \l 17234 MR. BIBIC: I don't get your point.
LISTNUM 1 \l 17235 MR. TACIT: Become more dominant in that market?
LISTNUM 1 \l 17236 MR. BIBIC: Are you suggesting that we wrote that to make the point that you just made?
LISTNUM 1 \l 17237 Absolutely not.
LISTNUM 1 \l 17238 MR. TACIT: I am not suggesting why you wrote anything, I am just asking the question.
LISTNUM 1 \l 17239 If there is, as you call it, asymmetrical regulation, would that make it easier for the cable companies to become more dominant in the internet market?
LISTNUM 1 \l 17240 MR. BIBIC: I am not tying this sentence to that point at all.
LISTNUM 1 \l 17241 MR. TACIT: Would you feel that the ILECs' hands are being tied to such an extent that it would make it easier ‑‑ by regulation, that it would make it easier for the cable companies to run away with that market?
LISTNUM 1 \l 17242 MR. BIBIC: I am just saying, if we are going to have an unprincipled essentiality regime, then we might as well grant access to both. Otherwise, it makes no sense.
LISTNUM 1 \l 17243 MR. TACIT: Could you focus on the question I asked?
LISTNUM 1 \l 17244 MR. BIBIC: Honestly, I don't understand it.
LISTNUM 1 \l 17245 MR. TACIT: Okay. Let me try to parse it out.
LISTNUM 1 \l 17246 Assume a scenario where the ILECs are regulated, in terms of DSL access, but TPIA is forborne and disappears.
LISTNUM 1 \l 17247 MR. BIBIC: Okay.
LISTNUM 1 \l 17248 MR. TACIT: Let's assume that scenario.
LISTNUM 1 \l 17249 MR. BIBIC: Yes.
LISTNUM 1 \l 17250 MR. TACIT: Would the ILECs feel hamstrung by that in the marketplace, and do they perceive a greater risk that the cable companies would become more dominant in the internet broadband markets as a result of that?
LISTNUM 1 \l 17251 MR. BIBIC: If somebody on the panel disagrees with me they will jump in, but I don't. I just don't think that makes any sense.
LISTNUM 1 \l 17252 MR. TACIT: Okay. Why doesn't it make sense?
LISTNUM 1 \l 17253 If it is no threat to you, then why do you care one way or the other?
LISTNUM 1 \l 17254 MR. BIBIC: Because it is completely unprincipled.
LISTNUM 1 \l 17255 MR. TACIT: I see.
LISTNUM 1 \l 17256 MR. BIBIC: There are no economics involved, but it's unprincipled.
LISTNUM 1 \l 17257 DR. TAYLOR: There are economics ‑‑
LISTNUM 1 \l 17258 COMMISSIONER del VAL: Mr. Tacit, I am not following where you want to go with this. The relevance of it isn't immediately apparent to me.
LISTNUM 1 \l 17259 MR. TACIT: Commissioner del Val, the issue is ‑‑ one of our concerns is that there could be either joint dominance or, also, dominance by the cable companies, and that forbearing in the wholesale market could increase the likelihood of dominance by either the ILECs or the cable companies, or some form of joint dominance increasing.
LISTNUM 1 \l 17260 What I am trying to explore with the panel is what the effects are of removing one or another component of the wholesale market, in the likelihood that that sort of dominance in the retail end might develop.
LISTNUM 1 \l 17261 That is what I am exploring with the panel.
LISTNUM 1 \l 17262 THE CHAIRPERSON: Mr. Taylor, you said that there were some economic points that you wanted to make.
LISTNUM 1 \l 17263 DR. TAYLOR: Yes. As I understand the issue, it is whether or not there should be an asymmetric regulatory rule that applies to one competitor in a market and not to another.
LISTNUM 1 \l 17264 Now, one would think, a priori, that a result of such a rule would be sort of unpredictable. We don't know exactly what the nature of mandated access at a particular price is going to be, but one thing we can say is that it is probably going to distort the market outcome in one way or another.
LISTNUM 1 \l 17265 I can't say, necessarily, that it is going to end up with cable dominance. There are, after all, other competitors playing this game, as well. But it is an unnecessary, unprincipled even, regulatory stick in the pot where it doesn't belong.
LISTNUM 1 \l 17266 MR. TACIT: But could it, in fact, strengthen the cable companies' position?
LISTNUM 1 \l 17267 DR. TAYLOR: That is one possible outcome, yes.
LISTNUM 1 \l 17268 MR. TACIT: Thank you.
LISTNUM 1 \l 17269 THE CHAIRPERSON: I suggest you go back to Mr. Bibic's fundamental assumption that we make principled regulation.
LISTNUM 1 \l 17270 MR. TACIT: Yes.
LISTNUM 1 \l 17271 THE CHAIRPERSON: Don't go any further with this example of unprincipled regulation.
LISTNUM 1 \l 17272 MR. TACIT: No ‑‑
LISTNUM 1 \l 17273 THE CHAIRPERSON: If it's asymmetric, it is obviously to cure some sort of perceived evil, not just asymmetric for the sake of being asymmetric.
LISTNUM 1 \l 17274 MR. TACIT: We understand that, and there was no intent to characterize the Commission's regulation as being unprincipled.
LISTNUM 1 \l 17275 I would like to move on to another topic.
LISTNUM 1 \l 17276 At page 25 of that same package, at the bottom of Page 1 of 2 of the Companies‑CRTC‑1007, the Companies state:
"As outlined in section 6(2) of the Companies' 15 March 2007 evidence, the Companies are strongly opposed to the concept of overlapping regulation. Overlapping regulation refers to the application of regulation to individual unbundled components, as well as to one or more wholesale services involving the combinations of unbundled components, where each of the regulatory measures is intended to address the same demonstrated market failure. The Companies also believe that the Commission should adopt the remedy that least interferes with market forces.
In light of all of the above, if the Commission determines that only the subcomponent of a service is an essential facility, then the Commission should only mandate the unbundling of that subcomponent." (As read)
LISTNUM 1 \l 17277 My question is, if it turned out that an end‑to‑end service was comprised of a whole bunch of essential services, I gather that the Commission ‑‑ if the Commission was not persuaded that the individual elements ought to be forborne ‑‑
LISTNUM 1 \l 17278 In other words, if the Commission were to continue regulating the unbundled elements, I suppose that the Commission would still prefer if the end‑to‑end service were no longer regulated, as well.
LISTNUM 1 \l 17279 Is that correct?
LISTNUM 1 \l 17280 Is that a logical outcome of that passage?
LISTNUM 1 \l 17281 THE CHAIRPERSON: You mean the Companies, not the Commission.
LISTNUM 1 \l 17282 MR. TACIT: I'm sorry, the Companies.
LISTNUM 1 \l 17283 MR. BIBIC: Could you repeat the question, Mr. Tacit, just so I'm sure I have it right before I answer?
LISTNUM 1 \l 17284 MR. TACIT: Yes.
LISTNUM 1 \l 17285 You have a service, end‑to‑end, that is currently characterized as mandated and is tariffed.
LISTNUM 1 \l 17286 MR. BIBIC: Okay.
LISTNUM 1 \l 17287 MR. TACIT: The underlying components are also essential, and the Commission, for whatever reason, decides that they are not going to forbear from requiring you to provide the elements.
LISTNUM 1 \l 17288 I am suggesting to you that a logical outcome of the evidence you have given in this passage, or that the Companies have given in this passage, is that the Companies would still prefer to see the end‑to‑end service forborne in that scenario.
LISTNUM 1 \l 17289 MR. BIBIC: Yes, and I think that the premise in your question is that all of the different subcomponents are deemed to be essential. I think it might be one logical conclusion that we might as well mandate the end‑to‑end service.
LISTNUM 1 \l 17290 MR. TACIT: I'm sorry ‑‑
LISTNUM 1 \l 17291 MR. BIBIC: If every single subcomponent of that end‑to‑end service were deemed essential, then I think it's not too much of a stretch to suggest that the actual end‑to‑end service might be deemed by the Commission to be essential.
LISTNUM 1 \l 17292 MR. TACIT: Actually, my question was the opposite. It might not be necessary to mandate the end‑to‑end service.
LISTNUM 1 \l 17293 MR. BIBIC: In that case, if that were the Commission's judgment, then they would mandate the subcomponents.
LISTNUM 1 \l 17294 MR. TACIT: Okay. But what I was getting at was, is it a logical extension of what is here ‑‑ you are saying you don't want overlapping regulation, right? You are saying you don't want both components and end‑to‑end services to be regulated? That is the way I read this.
LISTNUM 1 \l 17295 MR. BIBIC: The overlapping regulation point is slightly different, I think.
LISTNUM 1 \l 17296 What we are getting at here is when the Commission mandates access to a facility as being essential, it should focus on the smallest sub‑component possible.
LISTNUM 1 \l 17297 To the extent that it is not possible to uncouple the smallest sub‑component from the end‑to‑end facility, then it might be the case that the Commission would order access to the end‑to‑end facility. There is no hard and fast rule, as we say here.
LISTNUM 1 \l 17298 When I think of overlapping regulation, and the way that I think we have put it in our submission, it is the point I was going through with Ms Song yesterday, the Commission should not have multiple ‑‑ for example, unbundled loops, CDNA, GAS/HSA, Ethernet access service, those are all access methods that competitors or all providers use and choose.
LISTNUM 1 \l 17299 So the Commission should determine if there is a problem downstream, do we actually need to give access to each and every one of these or is unbundled loops enough?
LISTNUM 1 \l 17300 MR. TACIT: Okay. So basically what I am getting at is then it is the Companies' position that unbundling at the lowest level is the best way to go, if you are going to mandate something at all, rather than mandating end‑to‑end service, mandate all of the pieces that are essential and let the competitors use those pieces?
LISTNUM 1 \l 17301 MR. BIBIC: To address a particular problem downstream.
LISTNUM 1 \l 17302 MR. TACIT: Okay, thank you.
LISTNUM 1 \l 17303 THE CHAIRPERSON: But, Mr. Bibic, his initial question presupposed that all the elements are deemed essential and he asked would it be your preference then still not to designate the end‑to‑end service.
LISTNUM 1 \l 17304 Are you saying it is indifferent if you designate all the components, you might as well designate the whole thing?
LISTNUM 1 \l 17305 MR. BIBIC: I think I would have a hard time quarrelling with the Commission if they said there are four components to an end‑to‑end service and we need to give access to remedy a problem instead of forcing everyone to buy four separate pieces, let's give them the whole ‑‑ that seems to be logical to me.
LISTNUM 1 \l 17306 MR. TACIT: Mr. Chairman, thank you very much, I am completed here.
LISTNUM 1 \l 17307 THE CHAIRPERSON: Thank you very much.
LISTNUM 1 \l 17308 Madame Girard‑Giroux, who do we have now ‑‑ oh! sorry, I looked around, I didn't see ‑‑
LISTNUM 1 \l 17309 Go ahead, Commissioner Cram.
LISTNUM 1 \l 17310 COMMISSIONER CRAM: Mr. Bibic, a couple of questions.
LISTNUM 1 \l 17311 The symmetry of DSL TPA, and I am just doing it in reference to the Direction, would this be regulation of an economic nature or not?
LISTNUM 1 \l 17312 MR. BIBIC: Yes, it would be.
LISTNUM 1 \l 17313 COMMISSIONER CRAM: It would be, okay. So then we are not bound by 1(b)(3) in the symmetrical part?
LISTNUM 1 \l 17314 MR. BIBIC: I don't understand the question. I think you would be.
LISTNUM 1 \l 17315 COMMISSIONER CRAM: Okay, I am at the Direction.
LISTNUM 1 \l 17316 MR. BIBIC: I am too.
LISTNUM 1 \l 17317 COMMISSIONER CRAM: And I am at 1(b)(3). And maybe I ‑‑
LISTNUM 1 \l 17318 MR. BIBIC: Oh! I misunderstood your question.
LISTNUM 1 \l 17319 COMMISSIONER CRAM: Maybe we have doubled or not, so we don't know which ‑‑
LISTNUM 1 \l 17320 The symmetrical internet access would be a regulation of an economic nature, in which case (2) applies, or not of an economic nature, in which case (3) would apply?
LISTNUM 1 \l 17321 MR. BIBIC: I apologize, I misunderstood you.
LISTNUM 1 \l 17322 Correct, 1(b)(3) would not ‑‑
LISTNUM 1 \l 17323 COMMISSIONER CRAM: Apply.
LISTNUM 1 \l 17324 MR. BIBIC: ‑‑ apply.
LISTNUM 1 \l 17325 COMMISSIONER CRAM: Thank you.
LISTNUM 1 \l 17326 My other question is: It seems to me as I read your evidence that your problem with the monthly offering, the requirement to offer monthly, was really the issue of: (a) your provisioning problems because it is an issue for you because it is a cost to only have somebody buy in for a month or two; but (b) the fact that it appears that maybe some competitors are using those services for a temporary period of time in order to transition themselves into their own facilities. Is that the issue?
LISTNUM 1 \l 17327 MR. BIBIC: That highlights the problem, yes.
LISTNUM 1 \l 17328 COMMISSIONER CRAM: Yes.
LISTNUM 1 \l 17329 What if we did something along the idea of saying you are required to do it monthly but that the margins or the costs are higher because of your costs of acquisition and the ordering and that sort of thing, would that seem to be ‑‑ I mean that would seem to solve the two issues and make more efficient sort of ‑‑
LISTNUM 1 \l 17330 MR. BIBIC: Yes, certainly if we are talking about what is an essential facility, I ‑‑
LISTNUM 1 \l 17331 COMMISSIONER CRAM: Yes.
LISTNUM 1 \l 17332 MR. BIBIC: That might work.
LISTNUM 1 \l 17333 COMMISSIONER CRAM: Mm‑hmm. Okay, thank you.
LISTNUM 1 \l 17334 THE CHAIRPERSON: Okay, Madame Girard‑Giroux, do we have somebody else?
LISTNUM 1 \l 17335 THE SECRETARY: Yes, please.
LISTNUM 1 \l 17336 I would like to call forward Mr. Denton on behalf of Xittel.
LISTNUM 1 \l 17337 THE CHAIRPERSON: Mr. Denton, just so we make efficient use of time, how long do you expect to be?
LISTNUM 1 \l 17338 MR. DENTON: Well, I want to be finished before lunch.
LISTNUM 1 \l 17339 THE CHAIRPERSON: Good, let's go.
LISTNUM 1 \l 17340 MR. HENRY: So do we.
‑‑‑ Laughter / Rires
EXAMINATION / INTERROGATOIRE
LISTNUM 1 \l 17341 MR. DENTON: Mr. Chairman, if I may be permitted, I haven't sat here cross‑examining Bell for 16 years and apart from the fact that some of us are older, greyer, fatter or balder, you might wonder what the differences are. So I would like just two things to let me know that I have woken up in a different universe.
LISTNUM 1 \l 17342 One was the very pleasant words to hear from a CRTC Commissioner talking about innovation at the applications layer, which was not something we might have heard back before the widespread popularity of the internet.
LISTNUM 1 \l 17343 And the second one, I will say this to Mr. Bibic before we start wrangling over stuff, was to hear him declare that in a competitive economy, in a competitive market, that prices ultimately determine costs.
LISTNUM 1 \l 17344 I remember we scandalized the faithful in 1991 by being less than wholly concerned with the cost structure of the incumbents. So there has been change in the 16 years.
LISTNUM 1 \l 17345 So onward.
LISTNUM 1 \l 17346 Mr. Taylor, I would like to start with a good little ideological tussle with you this morning just to keep us all a little amused and sharp.
LISTNUM 1 \l 17347 Can you go to your paragraph 51 of your declaration and there are statements there that I thought that would be interesting and might elucidate some of your thinking.
LISTNUM 1 \l 17348 MR. TAYLOR: Yes.
LISTNUM 1 \l 17349 MR. DENTON: You had strong language for ‑‑ it concerned the use of CLECs of unbundled loops to provide access to the internet rather than voice services.
LISTNUM 1 \l 17350 MR. TAYLOR: Correct.
LISTNUM 1 \l 17351 MR. DENTON: And you asked whether CLECs should be able to use the loop to provide something other than voice services, and rhetorically you said no and you flatly declared that to do otherwise was wrong.
LISTNUM 1 \l 17352 Now, as we know, my clients are ISPs rather than CLECs but I thought we might just sort of look at what the purpose was of getting unbundled loops.
LISTNUM 1 \l 17353 I think you would agree with me that the interest in getting access to the internet probable started around 1994, the widespread use of web browsers started about that time?
LISTNUM 1 \l 17354 MR. TAYLOR: No argument.
LISTNUM 1 \l 17355 MR. DENTON: Okay.
LISTNUM 1 \l 17356 MR. TAYLOR: That is roughly right.
LISTNUM 1 \l 17357 MR. DENTON: And I think you would also agree with me that the internet, the TCP protocol was inadequate for the transmission or use of voice services before, say, the early years of this century; would you agree with that?
LISTNUM 1 \l 17358 MR. TAYLOR: Yes.
LISTNUM 1 \l 17359 MR. DENTON: Okay. So I am kind of interested in your ‑‑ I am very much interested in your concept of essentiality in this context.
LISTNUM 1 \l 17360 Would you accept that the market power with which we may be concerned in this context is that which can be exercised through the control of facilities?
LISTNUM 1 \l 17361 MR. TAYLOR: That is a possibility, sure.
LISTNUM 1 \l 17362 MR. DENTON: Well, I am looking at your paragraph. It seems that ‑‑ I was trying to figure out the right word for your reasoning here and the best I could come up with was possibly anachronistic in the sense that the ISP industry grew up with the intention of getting access to the internet, which was then not useful for voice, and yet ‑‑ in other words, it was just a plain entrepreneurial response to the possibilities of satisfying consumer demand by getting access to the Internet.
LISTNUM 1 \l 17363 It seems to me in this paragraph are you are not arguing backward from the service definitions that are available into what can or shouldn't be done by entrepreneurs?
LISTNUM 1 \l 17364 In other words, regulated service definition seems to be influencing your idea of what can and should be done.
LISTNUM 1 \l 17365 MR. TAYLOR: No. On the contrary, what justifies paragraph 51 is what's going on in the market, that is the assumption in paragraph 51 is that Canadian consumers can get internet access, that the market is fully competitive, and that by mandating access to loops over which additional access could be provided, for example by your company, has no effect, or no additional effect in the downstream market, that that is competitive as it is.
LISTNUM 1 \l 17366 So if we go back to the definition for example that the Competition Bureau was throwing around, we don't gain anything in that market, or don't gain much. We don't gain a substantial increase in competition from forcing this access and distorting the market by declaring that the loop could be used for internet access.
LISTNUM 1 \l 17367 MR. DENTON: So are we not in a situation, then, that a regulatory permission is determining whether distortion is or is not taking place, in other words, regulatory permission to use it for other then strictly a voice service is in fact a distortion, in your view?
LISTNUM 1 \l 17368 MR. TAYLOR: That's correct.
LISTNUM 1 \l 17369 Look at the markets involved. We have a market for internet access, which by assumption is essentially competitive, and what the effect of declaring ‑‑ and finding loops which supposedly could be found to be essential for voice service, different service, have to be provided for voice service is regulatory intervention, has its costs, it has its benefits for voice, on the assumption that it is an essential facility for voice. We get, by assumption, significant increase in competition downstream.
LISTNUM 1 \l 17370 We don't get that in the market for internet access, so why would you want to distort that market when there is no benefit. You have a cost but no benefit, that seems to violate the principle of least intrusive regulation.
LISTNUM 1 \l 17371 MR. DENTON: All right. I see your point. I don't agree, but I take what you mean.
LISTNUM 1 \l 17372 I would suggest for your consideration, and ask you to respond, that in fact you are seeking that the CRTC maintain a rule about the uses to which an unbundled loop might be put on the theory that there is already sufficient competition in internet access.
LISTNUM 1 \l 17373 Is that correct?
LISTNUM 1 \l 17374 MR. TAYLOR: That there would be no benefit from permitting this exception, this essential facility exception, to be used for a market in which there is no gain as far as significant increase in competition.
LISTNUM 1 \l 17375 MR. DENTON: Thank you.
LISTNUM 1 \l 17376 Madam Secretary, is it possible that now we could distribute those tariff documents, please?
LISTNUM 1 \l 17377 THE SECRETARY: Sure.
LISTNUM 1 \l 17378 MR. DENTON: If you can just bear with me, we are going to have a distribution of documents.
LISTNUM 1 \l 17379 MR. DENTON: I have my own, thank you.
LISTNUM 1 \l 17380 I won't be going to them immediately, but you will have them before you. You have seen them, you have written them.
LISTNUM 1 \l 17381 MR. DENTON: Mr. Taylor, just to establish the obvious, you have said in paragraph 12 of your declaration of March 15 that:
"The ILECs are required to provide Category 2 wholesale Internet services on the basis of a cost‑plus Commission‑determined mark‑up." (As read)
LISTNUM 1 \l 17382 MR. TAYLOR: Yes. Yes, that is my understanding.
LISTNUM 1 \l 17383 THE SECRETARY: I'm sorry, I have to rectify something.
LISTNUM 1 \l 17384 MR. DENTON: I'm sorry.
LISTNUM 1 \l 17385 THE SECRETARY: You did file these documents as exhibits. Right?
LISTNUM 1 \l 17386 MR. DENTON: Yes.
LISTNUM 1 \l 17387 THE SECRETARY: All right.
LISTNUM 1 \l 17388 Please note that the Bell Canada one dated 5 July will be Exhibit No. 1.
EXHIBIT XITTEL‑1: Bell Canada document dated July 5, 2007
LISTNUM 1 \l 17389 THE SECRETARY: The other one dated October 18, Exhibit No. 2.
EXHIBIT XITTEL‑2: Bell Canada document dated October 18, 2007
LISTNUM 1 \l 17390 THE SECRETARY: Thank you.
LISTNUM 1 \l 17391 MR. DENTON: I guess this question may be for Mr. Bibic or other members of the panel.
LISTNUM 1 \l 17392 Can you provide the decision in which the Commission has actually mandated a mark‑up on Bell's Gateway Access Service, the GAS, which, as we know, is the main service that ISPs use from Bell.
LISTNUM 1 \l 17393 MR. BIBIC: I can't remember offhand.
LISTNUM 1 \l 17394 Do you want the decision number approving these tariff applications?
LISTNUM 1 \l 17395 Is that it?
LISTNUM 1 \l 17396 MR. DENTON: There is a decision that approves these tariff applications, but I think the issue is whether the Commission has put a limit on the mark‑up that you may charge for these wholesale services if they are not found to be essential.
LISTNUM 1 \l 17397 MR. BIBIC: They are Category 2 services.
LISTNUM 1 \l 17398 MR. DENTON: All right.
LISTNUM 1 \l 17399 In truth in relation to a series of services that I shall read I would ask you to agree with me that there is not a cap on the mark‑up established. There is HSA, support structures, ethernet access, dark fibre, interexchange private line.
LISTNUM 1 \l 17400 MR. BIBIC: Could we go through each one?
LISTNUM 1 \l 17401 So GAS, HSA ‑‑
LISTNUM 1 \l 17402 MR. DENTON: Yes.
LISTNUM 1 \l 17403 MR. BIBIC: Correct.
LISTNUM 1 \l 17404 MR. DENTON: Support structures?
LISTNUM 1 \l 17405 MR. BIBIC: I don't know.
LISTNUM 1 \l 17406 MR. DENTON: Ethernet access and transport?
LISTNUM 1 \l 17407 MR. BIBIC: No. I think there is a fixed mark‑up on Ethernet Access Service, EAS transport. It was a service deemed to be near essential and hence Category 1.
LISTNUM 1 \l 17408 MR. DENTON: Dark fibre?
LISTNUM 1 \l 17409 MR. BIBIC: I don't know.
LISTNUM 1 \l 17410 MR. DENTON: Interexchange private line?
LISTNUM 1 \l 17411 MR. ANDERSON: It would be both. There are both tariffed and a forborne versions.
LISTNUM 1 \l 17412 COMMISSIONER CRAM: I'm sorry, I missed that.
LISTNUM 1 \l 17413 MR. ANDERSON: I'm sorry. Just a minute.
LISTNUM 1 \l 17414 THE CHAIRPERSON: Why are you trying to get this out of Bell? Isn't this an issue of public record? I mean, it is just a question of checking the tariffs as published by the CRTC.
LISTNUM 1 \l 17415 MR. DENTON: Yes, sir, my purpose is rhetorical, to point out B.C. has not mandated the caps on these matters. We can proceed.
LISTNUM 1 \l 17416 MR. BIBIC: I can agree on that.
LISTNUM 1 \l 17417 THE CHAIRPERSON: Okay, thank you.
LISTNUM 1 \l 17418 MR. DENTON: So my question I guess to you, Mr. Bibic, is that what services do you provide today on a wholesale and mandated basis that, in your view, provide reasonable incentives for competitors to self‑supply at least a portion of their required facilities?
LISTNUM 1 \l 17419 MR. BIBIC: So you are asking me which services Bell provides on a wholesale mandated basis which creates incentives for competitors to build their own networks?
LISTNUM 1 \l 17420 MR. DENTON: At least a portion of their required facilities, yes.
LISTNUM 1 \l 17421 MR. BIBIC: I am not sure, if sitting here, I can point to any specific one.
LISTNUM 1 \l 17422 MR. DENTON: Fair enough. And therefore, the next question I have for you is in relation to Bell. What services do The Companies expect to provide on a wholesale, but not mandated basis, that provide incentives to competitors to self‑supply at least a portion of their required facilities?
LISTNUM 1 \l 17423 MR. BIBIC: I think you are getting at the same kind of point that was being made before, and that is if we were to enter into market arrangements competitors would make their choices and they may buy from us during a period of time sufficient to allow them to build. So if their build‑out in a particular location is one year, then I think the transition period under our proposal would cover that.
LISTNUM 1 \l 17424 If the build‑out will take longer, then presumably a competitor would come to us and ask for service in the interim period while they are building or, in a particular location, it may just not make sense for a competitor to build at all, in which case presumably the wholesale arrangements would last longer.
LISTNUM 1 \l 17425 MR. DENTON: Fair enough. I would like to turn to the Exhibit 1, the GAS and the HSA, which is Tariff Notice 5410. And just as a question of fact, can we agree that these Tariffs 5410 and 5420 comport several components; one is a loop between the home and the central office, and the other is the interoffice transporters included in these tariffs?
LISTNUM 1 \l 17426 MR. BIBIC: Which one are you referring to?
LISTNUM 1 \l 17427 MR. DENTON: I am referring to 5410, Gateway Access Service.
LISTNUM 1 \l 17428 THE CHAIRPERSON: Is this another rhetorical question?
LISTNUM 1 \l 17429 MR. DENTON: Sorry, sir?
LISTNUM 1 \l 17430 THE CHAIRPERSON: Is this another rhetorical question?
LISTNUM 1 \l 17431 MR. DENTON: Its purposes will become clear. I think it is quite directed towards the incentive to build facilities.
LISTNUM 1 \l 17432 THE CHAIRPERSON: You know, I understand that. It is just you are asking about a tariff which is existing and in effect. So are you asking the witness for an interpretation of what the tariff covers?
LISTNUM 1 \l 17433 MR. DENTON: Yes, sir.
LISTNUM 1 \l 17434 THE CHAIRPERSON: Okay.
LISTNUM 1 \l 17435 MR. BIBIC: Okay, try that again.
LISTNUM 1 \l 17436 MR. DENTON: Would you agree with me that the Tariffs 5410 GAS and 5420 HSA comport two essential components; one, a loop between the home and the central office and, two, interoffice transport?
LISTNUM 1 \l 17437 MR. BIBIC: Yes.
LISTNUM 1 \l 17438 MR. DENTON: Thank you. I refer you to the economic studies that were filed in support of them. Would you agree with me that the term of their study periods are coming to an end in the year 2008? And here I stand to be corrected if you have the correct facts.
LISTNUM 1 \l 17439 MR. BIBIC: We are looking for it, Mr. Denton. What are you looking at? It might make it go quickly.
LISTNUM 1 \l 17440 MR. DENTON: Well, I am looking at the economic evaluation.
LISTNUM 1 \l 17441 MR. BIBIC: For which one?
LISTNUM 1 \l 17442 MR. DENTON: For GAS and HSA, which was filed on 5 July, 2004.
LISTNUM 1 \l 17443 MR. BIBIC: Okay.
LISTNUM 1 \l 17444 MR. DENTON: And I was informed, but I do not know, that the study period comes to an end in 2008.
LISTNUM 1 \l 17445 MR. IACONO: Mr. Denton, perhaps I can help. I won't be very long. I mentioned this the other day when we filed and got approval for the GAS and HSA tariffs which was, I believe they were effective January 1, 2005. We filed them in November of 2004. They were filed as 6767D and the information is available in the public record. And there was no economic study required for the final rates that were approved by the CRTC.
LISTNUM 1 \l 17446 So the studies that you are looking at here were earlier vintages of economic studies that were not actually used to support the tariff filing that was finally approved.
LISTNUM 1 \l 17447 MR. DENTON: Mr. Iacono, are there in fact economic studies that support the tariff filings such as they are now?
LISTNUM 1 \l 17448 MR. IACONO: To my knowledge, I don't think they were required.
LISTNUM 1 \l 17449 MR. DENTON: Okay, thank you.
LISTNUM 1 \l 17450 Now, Mr. Bibic, supposing for instance that these services were continued in the future, whether essential or not, is it likely that their prices would be subject to considerable reduction as time goes on?
LISTNUM 1 \l 17451 MR. BIBIC: I don't know that.
LISTNUM 1 \l 17452 MR. DENTON: I am going to ‑‑
LISTNUM 1 \l 17453 COMMISSIONER CRAM: I am sorry, I didn't hear the answer.
LISTNUM 1 \l 17454 MR. BIBIC: I said, I don't know that.
LISTNUM 1 \l 17455 MR. DENTON: I am going to change now to some questions concerning definitional issues so we can have some further clarity of the discussion we are going to have.
LISTNUM 1 \l 17456 I would just like to ask you whether you would agree with me that a loop is the access network between the home and a central office or between a business and a central office? Is that an acceptable rough and ready definition?
LISTNUM 1 \l 17457 MR. BIBIC: Yes.
LISTNUM 1 \l 17458 MR. DENTON: Now, when a home or office is served from a remote, let us just use that as a term of art, or a digital subscriber line access multiplier, a DSLAM, or an outside plant interface or a joint working interconnect cabinet ‑‑ sorry for all the techno babble ‑‑ could we call that, the wire between them and the remote, a sub‑loop, again as a rough and ready?
LISTNUM 1 \l 17459 <