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Please note that the Official Languages Act requires that government publications be available in both official languages.

In order to meet some of the requirements under this Act, the Commission's transcripts will therefore be bilingual as to their covers, the listing of CRTC members and staff attending the hearings, and the table of contents.

However, the aforementioned publication is the recorded verbatim transcript and, as such, is transcribed in either of the official languages, depending on the language spoken by the participant at the hearing.

 

 

 

 

 

 

 

              TRANSCRIPT OF PROCEEDINGS BEFORE

             THE CANADIAN RADIO‑TELEVISION AND

               TELECOMMUNICATIONS COMMISSION

 

 

 

 

             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 15, 2007                      Le 15 octobre 2007

 


 

 

 

 

Transcripts

 

In order to meet the requirements of the Official Languages

Act, transcripts of proceedings before the Commission will be

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

and staff attending the public hearings, and the Table of

Contents.

 

However, the aforementioned publication is the recorded

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

either of the official languages, depending on the language

spoken by the participant at the public hearing.

 

 

 

 

Transcription

 

Afin de rencontrer les exigences de la Loi sur les langues

officielles, les procès‑verbaux pour le Conseil seront

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

membres et du personnel du CRTC participant à l'audience

publique ainsi que la table des matières.

 

Toutefois, la publication susmentionnée est un compte rendu

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

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

officielles, compte tenu de la langue utilisée par le

participant à l'audience publique.


               Canadian Radio‑television and

               Telecommunications Commission

 

            Conseil de la radiodiffusion et des

               télécommunications canadiennes

 

 

                 Transcript / Transcription

 

 

 

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 15, 2007                  Le 15 octobre 2007

 


- iv -

 

           TABLE DES MATIÈRES / TABLE OF CONTENTS

 

 

                                                 PAGE / PARA

 

RESUMED:  DALE HATFIELD                          1240 / 8618

RESUMED:  IAN PATTINSON

RESUMED:  DAVID WATT

RESUMED:  SUZANNE BLACKWELL

RESUMED:  ROGER WARE

 

Cross-examination by The Companies (Cont'd)      1240 / 8619

Cross-examination by TELUS                       1363 / 9517

Cross-examination by MTS Allstream               1466 /10133

Cross-examination by Primus                      1475 /10233

Cross-examination by PIAC                        1482 /10281

Cross-examination by Cybersurf                   1503 /10399

Cross-examination by Xittel                      1536 /10633

 

 


- v -

 

              EXHIBITS / PIÈCES JUSTIFICATIVES

 

 

No.                                              PAGE / PARA

 

BUREAU-3      Response to CRTC undertaking - 02 1239 / 8613

              to provide the Commission with a

              rewrite of the Bureau's test for

              an essential facility from a

              restrospective perspective

 

CRTC-6        CRTC Undertakings register        1335 / 9316

              CRTC version 2007-15-15

 

COMPANIES-5   Joint Center report dated         1361 / 9506

              June 2006, "Broadband and

              Unbundling Regulations in OECD

              Countries

 

COMPANIES-6   LECG Report dated September 2007  1361 / 9507

 

COMPANIES-7   "Watt's New" clipping - Winter    1361 / 9508

              2006 entitled, "Net Optiks/Rogers

              partnership provides innovative

              network for Catholic schools

 

COMPANIES-8   Globe and Mail clipping -         1362 / 9509

              "Solutions for the little guy" -

              Sept.10,2007

 

COMPANIES-9   Clipping dated 7 October 2007     1362 / 9510

              with photo and EASY IP title

 

COMPANIES-10  Clipping from Rogers.com -        1362 / 9511

              "Ethernet Services"

 

TELUS-1       Rogers Cable letter dated         1465 /10127

              Aug. 17, 2007 re: Application by

              Rogers Cable Communications Inc.

              to Amend Class 1 Regional Licence

              for Cable Broadcasting

              Distribution Undertakings in

              Ontario

 

TELUS-2       Rogers letter dated July 5, 2006  1465 /10128

              re: Application to Review and

              Varyu Telecom Decision

              CRTC 2006-9 - Disposition of

              Funds in the Deferral Accounts


- vi -

 

              EXHIBITS / PIÈCES JUSTIFICATIVES

 

 

No.                                              PAGE / PARA

 

TELUS-3       Competition Bureau - Speaking     1466 /10129

              Notes for Sheiradan Scott -

              June 13, 2007

 

CRTC-7        "Abuse of Dominance under the     1475 /10227

              1986 Canadian Competition Act"

 

COMPANIES-11  The Companies - Survey of         1475 /10228

              buildings in Ottawa Downtown Core

 

CYBERSURF-2   "Consequences of                  1519 /10516

              Uncompetitiveness", Wednesday,

              March 1, 2006

 

CYBERSURF-3   "Canadian Boradband Growth Ranks  1519 /10516

              29th out of 30 OECD Countries"

 

 

 


                 Gatineau, Quebec / Gatineau (Québec)

‑‑‑ Upon resuming on Monday, October 15, 2007

    at 0831 / L'audience reprend le lundi

    15 octobre 2007 à 0831

LISTNUM 1 \l 1 \s 86078607             THE CHAIRPERSON:  Good morning.

LISTNUM 1 \l 18608             Mr. Daniels, I believe you were in full flight, so please continue.

LISTNUM 1 \l 18609             MR. DANIELS:  Thank you very much, Mr. Chairman.

LISTNUM 1 \l 18610             THE SECRETARY:  Mr. Chair, if you will allow me.

LISTNUM 1 \l 18611             THE CHAIRPERSON:  Yes, sure.

LISTNUM 1 \l 18612             THE SECRETARY:  There were some filings with me this morning.

LISTNUM 1 \l 18613             I am acknowledging reception of the Bureau Exhibit No. 3 in response to an undertaking from the CRTC to a rewrite of the Bureau's proposed test for whether a service or facility is essential.

EXHIBIT BUREAU‑3:  Response to CRTC undertaking - 02 to provide the Commission with a rewrite of the Bureau's test for an essential facility from a restrospective perspective

LISTNUM 1 \l 18614             MS PALUMBO:  Mr. Chair ‑‑


LISTNUM 1 \l 18615             THE CHAIRPERSON:  Yes.

LISTNUM 1 \l 18616             MS PALUMBO:  ‑‑ we have provided the secretary with copies of the undertaking.  This was in relation to the rewrite of the Bureau's proposed test for whether a service or facility is essential from a retrospective rather than a prospective perspective and that is what that undertaking is satisfying.

LISTNUM 1 \l 18617             THE CHAIRPERSON:  Thank you very much, Ms Palumbo.  I appreciate your doing this in a timely manner because then we can use your retrospective definition now as we hear the other submissions.

LISTNUM 1 \l 18618             Thank you.

RESUMED:  DALE HATFIELD

RESUMED:  IAN PATTINSON

RESUMED:  DAVID WATT

RESUMED:  SUZANNE BLACKWELL

RESUMED:  ROGER WARE

EXAMINATION (CONT'D) / INTERROGATOIRE (SUITE)

LISTNUM 1 \l 18619             MR. DANIELS:  Thank you, and good morning, Mr. Chairman and panel.

LISTNUM 1 \l 18620             When last we left off ‑‑


LISTNUM 1 \l 18621             MR. WATT:  I am sorry to interrupt but we had taken a couple of undertakings on Friday to go and check on some matters and I think probably it would be best if I just reported on those while you are still at the cross‑examining table and then if you would like to follow up you will have an opportunity to do that.

LISTNUM 1 \l 18622             MR. DANIELS:  Go right ahead.

LISTNUM 1 \l 18623             MR. WATT:  At Volume 4 of the Transcript at paragraphs 8333 to 8369 Rogers undertook to review the FCC's dedicated transport rulings regarding the necessary number of fiber‑based co‑located competitors.  This was the question as to whether the number was 4 or 3, if you recall that, on Friday.

LISTNUM 1 \l 18624             We can confirm that with respect to transport facilities at the capacities of DS‑3s and dark fiber the FCC applied a threshold of fewer than 3 fiber‑based co‑located competitors as the standard for impairment and not 4, as stated in Rogers' submissions in this proceeding.

LISTNUM 1 \l 18625             Specifically, for those facilities the FCC found that competitors would not be impaired without mandated access at DS‑3 or dark fiber facilities where the wire centres at both ends of the transport facility had either at least 3 fiber‑based co‑locators or more than 24,000 business lines.


LISTNUM 1 \l 18626             You will recall in the context of the discussion on DNA we discussed the importance of having those conditions met at both ends of the route, at both wire centres, in order to be forborne.

LISTNUM 1 \l 18627             Just to complete the table, we confirm that the top three rows in our table with respect to DS‑1 at the access level and then DS‑1 transport remain at the 4 fiber‑based co‑locator level.

LISTNUM 1 \l 18628             THE CHAIRPERSON:  If you go to your opening statement, page IV ‑‑

LISTNUM 1 \l 18629             MR. WATT:  Right.

LISTNUM 1 \l 18630             THE CHAIRPERSON:  ‑‑ the table there, so for dark fiber for transport I should insert "3" instead of "4"?

LISTNUM 1 \l 18631             MR. WATT:  Exactly.

LISTNUM 1 \l 18632             THE CHAIRPERSON:  And the rest stays the same?

LISTNUM 1 \l 18633             MR. WATT:  The rest stays the same.

LISTNUM 1 \l 18634             THE CHAIRPERSON:  Okay, thank you.

LISTNUM 1 \l 18635             MR. WATT:  As I say, both wire centres on that route have to have 3 in order to be let go.

LISTNUM 1 \l 18636             So that is the first matter.

LISTNUM 1 \l 18637             Then the second matter was further on on Friday afternoon and this is now at Transcript paragraphs 8455 and 8505.


LISTNUM 1 \l 18638             Rogers undertook to review the per building and per route caps that the FCC imposed on competitor use of mandated access at transport facilities where the FCC general criteria for mandated wholesale was met.

LISTNUM 1 \l 18639             Briefly, the CRTC limits a competitor to 10 DS‑1 unbundled loops to any single building or 1 DS‑3 to that single building, and then similar rules apply on the transport level as well, again, on a per route basis.

LISTNUM 1 \l 18640             In our view, this is a very granular approach to the issue of market unbundling.  We do see some merits to it in the sense that it does very precisely identify what the revenue opportunities are to a competitor to a particular building or a particular route and grant them access up to certain levels with those conditions.

LISTNUM 1 \l 18641             However, at this time we think while the Commission certainly should be aware of this and consider it in its assessment of our proxy model, we would place the emphasis on the proxy model that we put before you and still wish that to be used as a starting point for the Rogers position.


LISTNUM 1 \l 18642             And then you can adapt it as you see fit given the data information that you have, and again, that rests on the revenue opportunity, i.e. the number of lines, et cetera, and then the alternative supply by the facilities‑based fiber co‑locators.

LISTNUM 1 \l 18643             That concludes my undertakings.  Thank you.

LISTNUM 1 \l 18644             THE CHAIRPERSON:  Are you going to file something in accordance with what you just said or does the record speak for itself?

LISTNUM 1 \l 18645             MR. WATT:  I thought the record could probably speak for itself and I will save the paper.

LISTNUM 1 \l 18646             THE CHAIRPERSON:  Okay, fine.  I wanted to understand how you intend to proceed.  Thank you.

LISTNUM 1 \l 18647             MR. WATT:  Although I might ‑‑ what we probably should re‑file are ‑‑ I think there are three or four places in the record where we have the table.

LISTNUM 1 \l 18648             THE CHAIRPERSON:  Yes.

LISTNUM 1 \l 18649             MR. WATT:  And so we will just replace those 4s with 3s.

LISTNUM 1 \l 18650             THE CHAIRPERSON:  Okay, thank you.

LISTNUM 1 \l 18651             Mr. Daniels.

LISTNUM 1 \l 18652             MR. DANIELS:  Thank you.


LISTNUM 1 \l 18653             When last we left off we had been talking about ‑‑ well, besides just the FCC test, we had been talking generally about the second exception.  In your testimony with the Competition Bureau you had pointed out that there was one exception of an unbundled loop in the residential market which was the one case where despite getting retail forbearance on the basis of facilities‑based competition that you still sought an exception.  And then we talked about a second possible exception, the CDN test and the DNA.

LISTNUM 1 \l 18654             So I would like to begin this morning by talking about two other exceptions that I think are in your proposal.  Let's just see if we can get agreement on them and we can, at least for one of them, move on very quickly.

LISTNUM 1 \l 18655             You have proposed, as I understand it, that Ethernet be regulated at the wholesale level everywhere except bands A and B.

LISTNUM 1 \l 18656             Am I correctly characterizing your proposal in that sense?

LISTNUM 1 \l 18657             MR. WATT:  Yes, you are.

LISTNUM 1 \l 18658             MR. DANIELS:  Okay.  And so can we agree then ‑‑ and as I say, just move on from that ‑‑ that in terms of at the retail level, Ethernet is forborne or the IP‑VPN service upon which it is generally provided in the market, those are forborne at the retail level; can we agree on that?


LISTNUM 1 \l 18659             MR. WATT:  Frankly, I am not aware of that and the rationale, obviously, for our proposal is that we think it is unlikely if you are going to have the necessary fiber facilities into those smaller locations but we will check on the retail treatment of Ethernet.

LISTNUM 1 \l 18660             MR. DANIELS:  Well, are you familiar with that ‑‑ and to be fair, I haven't given you this in terms of an exhibit because I really don't want to get into the details.

LISTNUM 1 \l 18661             But are you familiar with the Wide Area Network, the WAN, forbearance that was issued in 2000?  Are you familiar with that decision in terms of generally providing for forbearance for wide area networks which has generally been used?

LISTNUM 1 \l 18662             MR. WATT:  No, actually I can't say that I am.  I'm surprised to hear the date 2000.  But we will go and check.

LISTNUM 1 \l 18663             MR. DANIELS:  All right.  So subject to check, you will check to see on the basis that retail forbearance has been granted in Ethernet and IP VPN services, that being a third exception.


LISTNUM 1 \l 18664             So let me move on, then, to the fourth exception which I would like to present to you.  That has to deal with your proposal regarding our GAS and HSA service, which is high‑speed internet service.

LISTNUM 1 \l 18665             MR. WATT:  Maybe just before we do move on, I just had a note passed to me, however, that there certainly are Ethernet tariffs that do exist.

LISTNUM 1 \l 18666             MR. DANIELS:  Okay.  Well, as I say, in terms of the vast majority of services I'm putting to you ‑‑ and you can subject to check in terms of the retail Ethernet as service, as well as falling under an IP VPN which generally upon which the wholesale input Ethernet could be in the retail market ‑‑ I'm putting to you that is forborne under the wide area network forbearance, just for your reference.

LISTNUM 1 \l 18667             MR. WATT:  Okay, fair enough.  We will check.

LISTNUM 1 \l 18668             MR. DANIELS:  Yes, Order CRTC 2000‑553, just to make it a little easier for your reference.

LISTNUM 1 \l 18669             Moving, then, onto the fourth exception which I would like to put to you, and that is your proposal regarding GAS, HSA, which is our wholesale DSL product.

LISTNUM 1 \l 18670             So I assume we can agree that there has been retail internet forbearance since 1999 in Canada?

LISTNUM 1 \l 18671             MR. WATT:  Yes, there has.


LISTNUM 1 \l 18672             MR. DANIELS:  I don't really want to take you through the whole logic or all the arguments, so I just want to see if we can move through this a little quickly.

LISTNUM 1 \l 18673             But as I understand it, you have said in your evidence that the internet market is competitive and specifically you raised at one point a distinction between the local market and the internet market.  I don't want to get into the differences here at this point of our discussion, but in terms of that discussion, specifically when we ask you in an interrogatory, which can be found at Tab Z of our material ‑‑

LISTNUM 1 \l 18674             COMMISSIONER CRAM:  Which tab again?  I'm sorry?

LISTNUM 1 \l 18675             MR. DANIELS:  This is Tab Z.

LISTNUM 1 \l 18676             For those of you who don't have our material tabs, that is Rogers/The Companies 12 April 07‑31.

LISTNUM 1 \l 18677             Do you have that there?

LISTNUM 1 \l 18678             MR. WATT:  Yes, I do.


LISTNUM 1 \l 18679             MR. DANIELS:  When we, The Companies, asked you to explain the basis for the conclusion that there are more facilities‑based alternatives in the internet market than there are in the local telephony market, you said "In the internet market" ‑‑ I'm reading your answer from (a), just the first sentence:

"... there are a number of widely deployed mobile and fixed wireless satellite‑based and wireline‑based competitors."  (As read)

LISTNUM 1 \l 18680             Just so we can agree, your proposition is that on the internet market there is facilities‑based alternatives?

LISTNUM 1 \l 18681             Is that correct?

LISTNUM 1 \l 18682             MR. WATT:  I think our position is, consistent with our request, that outside Bands A and B there are very limited facilities, hence our request for access to GAS in those areas.

LISTNUM 1 \l 18683             MR. DANIELS:  Mr. Watt, are we confusing ‑‑ I think we may be confusing your Ethernet proposal and your GAS proposal.  Because as I understood your GAS proposal, it is not based on banding, it is based on the remote issue, which we are going to get into.

LISTNUM 1 \l 18684             MR. WATT:  It is the remote issue, that is correct.

LISTNUM 1 \l 18685             MR. DANIELS:  So it's not ‑‑


LISTNUM 1 \l 18686             MR. WATT:  No, it is the remote.  That's what I had in mind.  My apologies

LISTNUM 1 \l 18687             MR. DANIELS:  All right.  So your position, then again, so let me just understand ‑‑ I was just putting a general proposition before you that in the internet market there are facilities‑based alternatives.

LISTNUM 1 \l 18688             We can agree on that?  I'm just reading your sentence right here, the first sentence in line (a), you have listed them there.

LISTNUM 1 \l 18689             MR. WATT:  There are alternatives.  We don't think that they are perfect alternatives in certain areas and not at the same cost structure certainly in the business market.

LISTNUM 1 \l 18690             MR. DANIELS:  With that in mind I'm going to ask you to turn back ‑‑ because we will talk a little bit about that in a minute.

LISTNUM 1 \l 18691             But I'm going to ask you to turn back to your opening statement where I think you have articulated your test for an essential facilities.

LISTNUM 1 \l 18692             So this is in our binder that we gave you for ease of reference.  It is Tab D as in David or Daniels.


LISTNUM 1 \l 18693             Just to be clear, I think we have given you two binders so it's the Jonathan Daniels binder, because my colleague, Mr. Hofley, has a separate binder.

LISTNUM 1 \l 18694             I'm looking at page 2 of your opening statement.

LISTNUM 1 \l 18695             MR. WATT:  Yes, I have it.

LISTNUM 1 \l 18696             MR. DANIELS:  I'm just going to give a minute for other people to find it.

‑‑‑ Pause

LISTNUM 1 \l 18697             MR. DANIELS:  So if I look at page 2, your second bullet is your proposed definition for an essential facilities.

LISTNUM 1 \l 18698             So I would just like to go through this.

"An essential facility means an input used by competitors to provide services in the downstream market."  (As read)

LISTNUM 1 \l 18699             So that's strictly an input.  We won't spend time on that.

LISTNUM 1 \l 18700             The second one:


"Where an input is controlled by a supplier that possesses market power in respect of its supply, such that absent mandated supply of the input on regulated terms the supplier could use its market power in the relevant upstream market to prevent or lesson, in a non‑trivial manner, competition in the relevant downstream markets."  (As read)

LISTNUM 1 \l 18701             Then your third part is:

"It's not feasible to duplicate the input or an input equivalent functionality having regard to economic or technical factors."  (As read)

LISTNUM 1 \l 18702             Now, I want to focus for a moment on the residential internet market.

LISTNUM 1 \l 18703             Can we agree that the cable companies ‑‑ I assume we can agree that you have the capability of providing high‑speed internet service in the residential cable market?

LISTNUM 1 \l 18704             MR. WATT:  Yes.

LISTNUM 1 \l 18705             MR. DANIELS:  All right.

LISTNUM 1 \l 18706             In fact ‑‑ and if we want we can turn to it, it's in Tab AA, but in the CRTC's Monitoring Report ‑‑ actually, maybe we should just so that we are all in agreement.


LISTNUM 1 \l 18707             So this is Tab AA.  This is a reference in binder ‑‑ this is a reference in the second page of that tab that says "Page 55 of 97" in the printout we have, but I actually think it is page ‑‑

LISTNUM 1 \l 18708             THE SECRETARY:  Mr. Daniels, I'm sorry.

LISTNUM 1 \l 18709             MR. DANIELS:  Yes?

LISTNUM 1 \l 18710             THE SECRETARY:  You are filing this as an exhibit?

LISTNUM 1 \l 18711             MR. DANIELS:  No, I believe, Madam Secretary, that this is the CRTC's Telecommunication Monitoring Report 2007 which has been filed already as a CRTC exhibit.

LISTNUM 1 \l 18712             THE SECRETARY:  Thank you.

LISTNUM 1 \l 18713             MR. DANIELS:  I'm simply using this to make it easier for the Commission and the panel to follow along.

LISTNUM 1 \l 18714             So what is written in my copy is "Page 55 of 97", because I think this is an internet copy, but for those who have the actual version of the Monitoring Report I believe it is page 71.

LISTNUM 1 \l 18715             This is figure 4.4.2 and if we look at this figure we can see in the most recent year 2006 that cable of all internet represents, in the residential market, 47 per cent of accesses.


LISTNUM 1 \l 18716             So can we agree here that here we are referring ‑‑ in this page we are referring to coaxial cable network?  This isn't counting the figure beforehand would do ‑‑ this is a technology description so their cable is referring to coaxial or fibre.

LISTNUM 1 \l 18717             Is that correct?  That's your understanding?

LISTNUM 1 \l 18718             MR. WATT:  In the residential market it will be coaxial cable.

LISTNUM 1 \l 18719             MR. DANIELS:  I just wanted to be clear, we are not, this isn't going to include Rogers using unbundled loops to provide ‑‑ in this chart here ‑‑ because this is done on, if you read it, "residential internet access technology mix".  The page before would have the market share number.

LISTNUM 1 \l 18720             MR. WATT:  I think that's probably correct.

LISTNUM 1 \l 18721             MR. DANIELS:  All right.

LISTNUM 1 \l 18722             MR. WATT:  I believe our use of DSL is combined almost entirely, if not entirely, to serving the business market.

LISTNUM 1 \l 18723             MR. DANIELS:  So just looking at this, in the residential market, just looking at this in our general understanding, can we agree that in terms of high‑speed internet services that the facility is clearly duplicable?


LISTNUM 1 \l 18724             We see a large amount of DSL, we see an even larger amount of cable across the country.  As a general proposition the facility is duplicable?

LISTNUM 1 \l 18725             MR. WATT:  I think that's fair to say in the residential market in territories where cable companies are present and operating.

LISTNUM 1 \l 18726             MR. DANIELS:  So then can we also agree then, going back to your test that, at least let us talk residential market, that as an essential facilities they don't meet the third prong of your test in the residential market?  Is that a fair statement?

LISTNUM 1 \l 18727             MR. WATT:  I think it is a fair statement for the cable company that is operating in that particular territory.  I think for Rogers to go outside its cable footprint area it would be a fair statement.

LISTNUM 1 \l 18728             MR. DANIELS:  Just so we are clear, in your test, all right, just going back to your test, when you say:

"It is not feasible to duplicate the input or an input equivalent function not having regard to economic or technical factors."  (As Read)


Now, I have taken that to mean that we are looking at generally whether it can be duplicated.  We are not looking at whether any one individual company can duplicate it.

LISTNUM 1 \l 18729             MR. WATT:  I think, in a general sense, that is correct.  But I think our view is that this facility cable is able to provide access into a home because it has a wire, it is leveraging off its video service that places its wire in there.  To us, it is a very open question as to whether any additional party will be able to place a third wire into that home.

LISTNUM 1 \l 18730             THE CHAIRPERSON:  But surely that is not the issue.  It can't be the issue according to your definition.  Your definition just says whether it is feasible.  Somebody has already done it, so it is clearly feasible.

LISTNUM 1 \l 18731             MR. WATT:  That is true.  I was just trying to make it clear that we think that it is only the cable company that has that feasibility.

LISTNUM 1 \l 18732             THE CHAIRPERSON:  Yes, but whether that cable company is Rogers or whether it is Shaw or somebody else's is irrelevant for the purpose of your test.

LISTNUM 1 \l 18733             MR. WATT:  Fair enough.


LISTNUM 1 \l 18734             DR. WARE:  If I could just, Mr. Chair, clarify one point.  Is that duplicable, at least in my view, is an economic test not a technological test.  And so, of course, it is true that a cable company has already done it, as you said.  But at the margin, of course, the question might be the next entrant could do it and that is an economic test and it depends on economies of scale and it depends on barriers to entry over a variety of kinds.

LISTNUM 1 \l 18735             So, you know, I don't think it is quite as simple as saying that somebody has already done it so it can be done.  It depends on economies of scale relative to the size of the market and what additional barriers there might be to another.

LISTNUM 1 \l 18736             THE CHAIRPERSON:  You will have to help me out here.  I thought these were sequential.  I thought we were going to, first of all, look at market power.  And surely, if there is a telco and a cable into one building then it is very hard to say that one of them has market power.  So we don't even get to duplicability.

LISTNUM 1 \l 18737             DR. WARE:  You are saying that with two firms there will be no market power?


LISTNUM 1 \l 18738             THE CHAIRPERSON:  Well, I mean, it is obviously a question of facts in that situation.  But using your favourite economic phrase, all other things being equal, if there are two people going into the same building you would assume that neither one of them has market power.

LISTNUM 1 \l 18739             DR. WARE:  Well, with respect, I wouldn't assume that, because I ‑‑

LISTNUM 1 \l 18740             THE CHAIRPERSON:  Well, that is why I said help me out here.

LISTNUM 1 \l 18741             DR. WARE:  Well, I mean, my view is if we look at, you know, what we have learned from competition policy, competition authorities around the world would not endorse a merger from three firms to two firms.  Why not?  Because they would expect a substantial lessening of competition.  In other words, the result would be market power.

LISTNUM 1 \l 18742             So, you know, I would generally think that, of course the particular circumstances matter a great deal, but generally speaking when we see two firms we expect there to be market power.

LISTNUM 1 \l 18743             THE CHAIRPERSON:  Yes sure, because you are worried about coordinated behaviour or price leadership or incentive.  But I understood the definition put forward by Rogers to be sequential, that you first of all look at one and two before you come to three.  Am I wrong there?


LISTNUM 1 \l 18744             DR. WARE:  Well no, I don't have a problem with that.  And I can't speak for Rogers of course on the definition that they put forward, but I just wanted to make I guess two points really; that it is really an economic issue, duplication; and secondly, that two to three could be a lot different from one to two.

LISTNUM 1 \l 18745             THE CHAIRPERSON:  Okay.

LISTNUM 1 \l 18746             MR DANIELS:  Just so I understand Rogers' position, because I understand Dr. Ware saying he can't speak for Rogers, can I get you to turn back again to the Rogers‑Companies‑31, which is at tab Z?  As I understand your position, and I just want to confirm this, again, you said:

"There are a number of widely deployed mobile and fixed wireless satellite and wireline competitors in the internet market." (As Read)

LISTNUM 1 \l 18747             And then if you look at the very last line, on page 2, your last statement you said in answer to a question:


"The ILECs are not dominant in the residential internet market and might be dominant in the business retail market." (As Read)

That is your position.

LISTNUM 1 \l 18748             So we can agree then that the ILECs are not dominant in the residential retail internet market?

LISTNUM 1 \l 18749             MR. WATT:  Not dominant, yes, I would agree with that.  But as we say, in the business market we feel in a majority of locations there is not a second wire into that business.  We have asked for access to unbundled local loops ‑‑

LISTNUM 1 \l 18750             MR. DANIELS:  Okay, I understand that.  But, Mr. Watt, I mean I am just being upfront in terms of the beginning and in terms of what I am focused on here.  I am focused on your exceptions and I am trying to understand your exceptions and that is why I'm focusing on the residential market, because I understand your position, whether I agree or not, about us dominant in the business market.

LISTNUM 1 \l 18751             But as long as we are agreed that the ILECs are not dominant in the residential market, I am trying to understand this exception about the GAS and the HSA.  Because I am reading your test here and I am trying to put it together, so that is why I am ‑‑


LISTNUM 1 \l 18752             MR. WATT:  I think Ms Blackwell will try and clarify for you that the primary purpose of our request for GAS, for most, is in order to serve the business market.  And then Ms Blackwell will clarify with respect to voice.

LISTNUM 1 \l 18753             MS BLACKWELL:  Mr. Daniels, I will just take you to paragraph 172 of the March evidence filed by Rogers.  What was clearly set out at the start of that paragraph right above it, there are two instances where wholesale access to services should be maintained on the same terms and conditions as currently established.  We described these as exceptions.  This is in the section discussing the business market.  So with respect to DSL and GAS and so forth the issue is with respect to the remotes in the business market, this is where this exception arises.

LISTNUM 1 \l 18754             In the residential market the discussion with respect to remotes starts at paragraph 203 of the Rogers' March evidence and that is really with respect to the voice market.  And if you look at the context of the discussion that continues through to paragraph 212 of that section, it is with respect to where Rogers has had difficulty obtaining loops and as with respect to the voice market and particularly with respect to the outside of the Rogers' Cable footprint.


LISTNUM 1 \l 18755             So I understand your discussion with Mr. Watt has been with respect to the high‑speed internet market in the residential services segment, but I don't think that that is particularly relevant to the exceptions that we have discussed in the March evidence.

LISTNUM 1 \l 18756             MR. DANIELS:  So, if I understand your clarification, your position is that your request GAS and HSA is strictly limited to the business market and that it would not be available in the residential market under your proposal?

LISTNUM 1 \l 18757             MS BLACKWELL:  Just wait for Mr. Watt to catch up with us here.

LISTNUM 1 \l 18758             MR. WATT:  The issue in the residential market is outside our serving territory where we do not have our cable facility and we would use the unbundled local loop to provide both voice service and data service.  But by virtue of the fact that the telephone companies have deployed remotes in those areas, we cannot get the copper connectivity all the way through from the customer back to the central office.


LISTNUM 1 \l 18759             We are unable, without some additional technical work, deployment of additional technologies, to provide high‑speed internet service together with our voice service that we are providing on the unbundled loop.  And, in that case, we would like to have access to the wholesale facility of the telephone company in order to be able to provide both voice and data services in those circumstances.

LISTNUM 1 \l 18760             THE CHAIRPERSON:  Can you repeat the opening?  Where would this apply?

LISTNUM 1 \l 18761             MR. WATT:  This would apply in locations where Rogers is using an unbundled local loop to provide voice service.

LISTNUM 1 \l 18762             Let's say Calgary.  We have the unbundled local loop, and we can provide our voice service, but if the telephone company has deployed technology involving a remote, fibre, and then copper doesn't go all the way back to the central office, there are technologies that allow ‑‑ there is some spare copper that could come back, and we could get that.  But in the absence of that, without access to the wholesale DSL tariff, we couldn't provide data service.  We would be limited.  Our loop is only useful for the voice purpose.

LISTNUM 1 \l 18763             Mr. Pattison, would you like to add to that?

LISTNUM 1 \l 18764             MR. PATTISON:  Yes.  The loop that we end up receiving in the central office is incapable of providing hi‑speed service because it goes through the remote technology.


LISTNUM 1 \l 18765             THE CHAIRPERSON:  So you are missing the piece that would go from the office to the remote.

LISTNUM 1 \l 18766             MR. WATT:  Yes, that's correct, we are missing that copper piece.

LISTNUM 1 \l 18767             MR. DANIELS:  Just so we are clear ‑‑ because, quite frankly, I just heard two different things from Ms Blackwell and Mr. Watt ‑‑ is it your position ‑‑

LISTNUM 1 \l 18768             I heard you say:  We would like it.

LISTNUM 1 \l 18769             Is it your position that GAS, in that situation, in the residential market, should be provided ‑‑ be mandated by this Commission?

LISTNUM 1 \l 18770             MR. WATT:  Yes.

LISTNUM 1 \l 18771             MR. DANIELS:  All right.  So, then, we are back to, with all due respect, the conversation about it only being in business.  We can put that aside.  In fact, you are looking for it in the residential market.


LISTNUM 1 \l 18772             Now that we have confirmed that, and we have also confirmed that the ILECs are not dominant in the residential market, and we can confirm that there are cable alternatives in the residential market for internet, you have also confirmed that there are many other facility‑based alternatives, so we are not going to get into all of these other issues about only two.

LISTNUM 1 \l 18773             Quite frankly, I am trying to understand, when I look at your definition of essential facilities, how it meets the definition of essential facilities.

LISTNUM 1 \l 18774             Let me be clear.  Does it meet your definition of essential facilities, or does it not meet your definition of essential facilities?

LISTNUM 1 \l 18775             And is it an exception to your definition of an essential facility?

LISTNUM 1 \l 18776             MR. WATT:  I think we believe that, without the mandated supply, subject to (ii) in the bullet, the supplier could use the market power that it has.

LISTNUM 1 \l 18777             We are not saying that it's dominant in that market, but it could use the market power that it has to lessen, in a non‑trivial fashion, us competing in the downstream market.

LISTNUM 1 \l 18778             Mr. Daniels, as you are aware, there have been a lot of examples where Bell has refused to provide the facilities in remotes and we have lost customers.


LISTNUM 1 \l 18779             I know there are debates about the costs that making the technology available to us impose upon you and so on and so forth, but it is a very serious situation.

LISTNUM 1 \l 18780             MR. DANIELS:  Mr. Watt, just so we are clear, when you say remotes here, you are talking about a situation where you can get access to voice. The fact is that you are co‑located and you can get access to voice, but you are saying:  I can't get access to DSL.

LISTNUM 1 \l 18781             That is the situation we are talking about here, right?

LISTNUM 1 \l 18782             MR. WATT:  Yes, that is correct.

LISTNUM 1 \l 18783             MR. DANIELS:  All right.  And GAS is available.

LISTNUM 1 \l 18784             MR. WATT:  Correct.

LISTNUM 1 \l 18785             MR. DANIELS:  All right.  So there is no situation where you have been refused access to GAS.

LISTNUM 1 \l 18786             MR. WATT:  Not that we are aware of, no.  And we would like to see that situation persist.

LISTNUM 1 \l 18787             MR. DANIELS:  Just as a finer point on this, just so I understand it, the places that you are talking about, the areas where you face this problem, are the areas outside your territory where you are co‑located and you can't get an unbundled loop that is pure copper, but you can put voice over it, and you can't put DSL.


LISTNUM 1 \l 18788             In that situation, the homes may have, and likely do have, both cable and a phone wire.  Correct?

LISTNUM 1 \l 18789             MR. WATT:  I would think that the vast majority would, yes.

LISTNUM 1 \l 18790             MR. DANIELS:  Okay.  I am trying to understand.  Why in that situation wouldn't wholesale cable internet be mandated?

LISTNUM 1 \l 18791             Why is it only the ILECs who are being mandated in your so‑called situation of this problem here?

LISTNUM 1 \l 18792             Why is it one and not the other?

LISTNUM 1 \l 18793             MR. WATT:  Why is it one and not the other?

‑‑‑ Pause

LISTNUM 1 \l 18794             MR. PATTISON:  Sir, as the product owner, I can tell you that we would much prefer to be using DSL, because we manage the quality of service across that service.

LISTNUM 1 \l 18795             MR. DANIELS:  I am not sure that that is an explanation.

LISTNUM 1 \l 18796             Is it just a preference issue?

LISTNUM 1 \l 18797             I am asking about it more as a policy matter, Mr. Watt, in terms of ‑‑ why is it one over the other?


LISTNUM 1 \l 18798             MR. WATT:  I think that, principally, as I say, our interest lies in extending our service in the business market.  In the residential market we would like to have it because we feel that it goes along with our unbundled loop offer in residential markets, which, in turn, makes economics better for unbundled loops in business, but I can see the inconsistency that you are pointing out.

LISTNUM 1 \l 18799             In this case, it is simply that we are not required to provide the unbundled facility for voice purposes, but if the telephone companies are, we are going to expend money to get that facility, and we think we should be able to provide a broader suite of services to those customers in those locations.

LISTNUM 1 \l 18800             THE CHAIRPERSON:  Mr. Watt, I wonder if you could rephrase it in terms of what this is about.  I mean whether we should mandate or not.

LISTNUM 1 \l 18801             You say "We would like," and I have trouble with what that means.

LISTNUM 1 \l 18802             Could you rephrase it?  Should the CRTC mandate or not mandate these things?

LISTNUM 1 \l 18803             MR. WATT:  We think they should mandate those things.  Otherwise, we think there will be a non‑trivial reduction in competition.

LISTNUM 1 \l 18804             MR. DANIELS:  Mr. Watt, could I get you to turn to Tab FF of the material?


LISTNUM 1 \l 18805             This is the response to Interrogatory Rogers‑CRTC‑12 April 07‑204.

LISTNUM 1 \l 18806             I am looking at the second page of that interrogatory.

LISTNUM 1 \l 18807             Have you found it?

LISTNUM 1 \l 18808             I would like to point out your answer to (b):

"The appropriate wholesale regulatory treatment for ILEC and cable company service should be determined by assessing each of the respective services ‑‑ "

LISTNUM 1 \l 18809             COMMISSIONER CRAM:  Excuse me, Mr. Daniels.  Did you say "FF", as in "Father Father"?

LISTNUM 1 \l 18810             MR. DANIELS:  I did.

LISTNUM 1 \l 18811             It is right at the back.

LISTNUM 1 \l 18812             COMMISSIONER CRAM:  All right.

LISTNUM 1 \l 18813             THE CHAIRPERSON:  There is another bunch of tabs.

LISTNUM 1 \l 18814             COMMISSIONER CRAM:  There is another bunch of tabs.  Thank you.

‑‑‑ Pause

LISTNUM 1 \l 18815             THE CHAIRPERSON:  Commissioner Cram is missing the second page.


LISTNUM 1 \l 18816             MR. DANIELS:  I strongly apologize for that.

LISTNUM 1 \l 18817             We have two binders, which may be causing some of the confusion.

‑‑‑ Pause

LISTNUM 1 \l 18818             THE CHAIRPERSON:  Okay.  I think we are there.

LISTNUM 1 \l 18819             MR. DANIELS:  Great.

"The appropriate wholesale regulatory treatment for ILEC and cable company services should be determined by assessing each of the respective services against the same essential service definition and associated criteria.  This procedure provides for regulatory symmetry."  (As read)

LISTNUM 1 \l 18820             Do you see that there, Mr. Watt?

LISTNUM 1 \l 18821             MR. WATT:  I do.

LISTNUM 1 \l 18822             MR. DANIELS:  Can we agree that what you have just proposed violates the principle of what I have just read?

LISTNUM 1 \l 18823             MR. WATT:  I think in the residential market it well might.

LISTNUM 1 \l 18824             MR. DANIELS:  Thank you.


LISTNUM 1 \l 18825             Mr. Chairman, I am going to turn my questions over now to my colleague, Mr. Hofley.  Thank you.

LISTNUM 1 \l 18826             MR. HOFLEY:  Mr. Chairman, that means a switch of binders.  There is another binder.  You will be very pleased to know that I spent my weekend determining that I didn't need ‑‑ did not need ‑‑ to take you to all of those tabs; in fact, did not need to take you to many of those tabs.

LISTNUM 1 \l 18827             THE CHAIRPERSON:  Thank you, Mr. Hofley.  I expect you and others not to ask questions that have already been answered, and I am sure, as usual, you were assiduous in your preparation, but a lot of these things have been answered by others.

LISTNUM 1 \l 18828             MR. HOFLEY:  And that is why it has been cut back, Mr. Chairman.

LISTNUM 1 \l 18829             MR. HOFLEY:  Good morning, all.  My name is Randall Hofley.  I am co‑counsel here with Jonathan Daniels for The Companies, and I will have a few questions for you this morning.  If I go too fast, please don't hesitate to slow me down, but I am trying to expedite things, given our time constraints.

LISTNUM 1 \l 18830             I hope the binders ‑‑ we have provided you with five as opposed to one ‑‑ will help you expedite matters.


LISTNUM 1 \l 18831             I would like to begin with you, Mr. Hatfield, since you have come a very long way, and I feel you have been left out so far.  But I only really have one area that I wanted to ask you questions about.

LISTNUM 1 \l 18832             In reading your report, Mr. Hatfield, I had the sense that you believe that a regulator's focus should be on the physical layer or the lowest layer of your protocol stack model.  Would you agree with that?

LISTNUM 1 \l 18833             MR. HATFIELD:  I don't think that completely characterized it.

LISTNUM 1 \l 18834             I think my comment was that the market power tends to be in the lower part of the protocol stack, not necessarily always at the physical level.  The example that we were just discussing where you have fibre to a remote, then copper beyond that, would be an example where you couldn't get to the wires, therefore, you couldn't put on your own ADSL.

LISTNUM 1 \l 18835             So, that might be a situation where we are quite a bit above the pure physical layer.


LISTNUM 1 \l 18836             MR. HOFLEY:  But, generally speaking, you would agree with me that the focus ‑‑ I mean, if you look at tab MM, there is an interrogatory response from The Companies and they quote you when you talk about your focus being on the challenges that reside at the physical layer or the lower layers of the protocol stack.  Do you recall that?

LISTNUM 1 \l 18837             MR. HATFIELD:  Yes.  I just don't want to be sort of held to just the physical layer, because there can be situations where the market power lies higher in the stack.

LISTNUM 1 \l 18838             MR. HOFLEY:  I will just quote it to you to help you.  It is tab MM, and you don't need to turn it up.  It is at page 3 of 7 where they are quoting you, and it says:

"This analysis focuses on the challenges that reside at the lower layers of the protocol stack; that is, the physical network layer."  (As read)

LISTNUM 1 \l 18839             Do you recall saying that?

LISTNUM 1 \l 18840             MS SONG:  Could counsel please refer, for the benefit of the rest of us in the room, which interrog response he is referring to.

LISTNUM 1 \l 18841             MR. HOFLEY:  I have done that again.  I am very sorry.

LISTNUM 1 \l 18842             It is Rogers/CRTC 12 April 07‑101.  It is at tab MM of the binder.  It is at page 3.  There is a quote there from Mr. Hatfield about midway down the page.  It is at the end of the quote.


LISTNUM 1 \l 18843             MR. HATFIELD:  Okay.  I am looking at, then, the ‑‑

LISTNUM 1 \l 18844             MR. HOFLEY:  It begins "In light of these considerations."

LISTNUM 1 \l 18845             MR. HATFIELD:  Oh yes, I see.  The very last sentence in that paragraph?

LISTNUM 1 \l 18846             MR. HOFLEY:  Right, the very last sentence.

LISTNUM 1 \l 18847             MR. HATFIELD:  Okay.

LISTNUM 1 \l 18848             MR. HOFLEY:  Okay?  So, your testimony is the same as was there.  Correct, Mr. Hatfield?

LISTNUM 1 \l 18849             MR. HATFIELD:  No, my testimony is what is in quotes above.

LISTNUM 1 \l 18850             MR. HOFLEY:  Would you agree with that statement?

LISTNUM 1 \l 18851             MR. HATFIELD:  The last sentence?

LISTNUM 1 \l 18852             MR. HOFLEY:  Yes.

LISTNUM 1 \l 18853             MR. HATFIELD:  No.  I say above here, it is in the lower layers, not just in the physical layer.

LISTNUM 1 \l 18854             MR. HOFLEY:  Okay.  So, the lower layers of the protocol stack?

LISTNUM 1 \l 18855             MR. HATFIELD:  That is my testimony.


LISTNUM 1 \l 18856             MR. HOFLEY:  Would your principal focus be on the physical layer, the network structure?

LISTNUM 1 \l 18857             MR. HATFIELD:  As I said before, not in all cases.

LISTNUM 1 \l 18858             MR. HOFLEY:  In the context of the protocol stack model, Mr. Hatfield, at the physical layer, what is the difference between DS‑3 private line and Ethernet?  Is there any difference?

LISTNUM 1 \l 18859             MR. HATFIELD:  DS‑3 private line, I believe DS‑3 is TDM architecture.  In other words, it uses a different way of organizing the bits on a TDM stream than you would on an Ethernet layer.

LISTNUM 1 \l 18860             MR. HOFLEY:  But Ethernet is a layer 2 service.  Correct?  It either rides over a layer 1 private line network or over equipment that provides both the layer 1 connectivity ‑‑

LISTNUM 1 \l 18861             MR. HATFIELD:  That was a little quick.  If we could go back.

LISTNUM 1 \l 18862             MR. HOFLEY:  Ethernet ‑‑ I am talking about your protocol stack model.

LISTNUM 1 \l 18863             MR. HATFIELD:  Yes.

LISTNUM 1 \l 18864             MR. HOFLEY:  Ethernet is a layer 2.  Correct?  It is not the physical layer?

LISTNUM 1 \l 18865             MR. HATFIELD:  Yes, meaning it is riding on copper of whatever other facility, that is correct.


LISTNUM 1 \l 18866             MR. HOFLEY:  Right.  So, it either rides over a layer 1 private line network ‑‑

LISTNUM 1 \l 18867             MR. HATFIELD:  I am a little confused by your term "private line."

LISTNUM 1 \l 18868             MR. HOFLEY:  A physical private line connection.

LISTNUM 1 \l 18869             MR. HATFIELD:  Dedicated?

LISTNUM 1 \l 18870             MR. HOFLEY:  Yes.

LISTNUM 1 \l 18871             MR. HATFIELD:  Yes, okay.

LISTNUM 1 \l 18872             MR. HOFLEY:  Or over equipment that provides both the layer 1 connectivity, as well as layer 2 Ethernet over the same physical fibre.

LISTNUM 1 \l 18873             MR. HATFIELD:  I believe that is correct, yes.

LISTNUM 1 \l 18874             MR. HOFLEY:  In the context of your barrier discussion, if problems at the physical layer required access, required mandated access from the Commission to CDN, and Ethernet services are effectively the same, how can they both be essential, Mr. Hatfield?

LISTNUM 1 \l 18875             MR. HATFIELD:  My testimony is if the upper layer, in other words, the service that is riding on it can both get access to the same pairs of copper wires or the same fibre, then I would say there is no difference.


LISTNUM 1 \l 18876             There might be some co‑location issues about making sure you can get your equipment in in both cases.

LISTNUM 1 \l 18877             MR. HOFLEY:  Thank you, Mr. Hatfield.

LISTNUM 1 \l 18878             Professor Ware, I would like to move to you, if I could.  Professor Ware, just a quick question about the title of your report.

LISTNUM 1 \l 18879             The title of your report is "The Proper Application of the Essential Facility Concept in Canadian Telecommunications."  I was struck by that, "The Proper Application."  Have you reviewed all of the services listed by each company as essential under their definition or under yours or Rogers' definition and applied that definition to the services?

LISTNUM 1 \l 18880             I am confused about the words "the proper application" of the essential facility concept.

LISTNUM 1 \l 18881             MR. WARE:  No, Mr. Hofley.  I haven't reviewed each individual service in terms of its applicability or eligibility.

LISTNUM 1 \l 18882             When I say "the proper application," the meaning of those words is intended to be a methodological discussion.  It's not intended to produce an outcome and, in fact, neither do I at the end of that report where I find individual services to be essential or non‑essential.


LISTNUM 1 \l 18883             MR. HOFLEY:  When you say "a methodological discussion," you mean simply about the appropriate definition of essential facilities.  Is that what you mean?

LISTNUM 1 \l 18884             MR. WARE:  I mean, definition and application, yes.  What it means ‑‑ I mean, obviously definitions can be a single line or they can be ‑‑ there are a lot of conceptual issues here, as you know.  So, it is a discussion of the methodological issues.

LISTNUM 1 \l 18885             MR. HOFLEY:  And that was your mandate; that was what Rogers requested that you do?

LISTNUM 1 \l 18886             MR. WARE:  Yes, it was, as I understood it anyway.

LISTNUM 1 \l 18887             MR. HOFLEY:  But would you agree with me that you went beyond that mandate in parts of your report, and let's take one, for example.  You have a section of your report which is called "Mandatory Access and Investment:  The Empirical Evidence."  Do you recall that?  It begins at paragraph 34 of your report, Dr. Ware.

LISTNUM 1 \l 18888             MR. WARE:  Yes, I do recall that.

LISTNUM 1 \l 18889             MR. HOFLEY:  Can you tell me how that was related to your mandate to discuss the essential facilities definition and the methodology associated with the essential facilities definition?


LISTNUM 1 \l 18890             MR. WARE:  That was an additional mandate.

LISTNUM 1 \l 18891             MR. HOFLEY:  So, one you didn't ‑‑ you then just mention a new one?

LISTNUM 1 \l 18892             MR. WARE:  Right.

LISTNUM 1 \l 18893             MR. HOFLEY:  In this section, you ‑‑

LISTNUM 1 \l 18894             MS BLACKWELL:  Mr. Hofley, I don't want to interrupt, but part of the discussion, as it says at the beginning of Dr. Ware's evidence, has been, first paragraph of that, "to assess the evidence filed by other parties in this proceeding with respect to the proper application of essential facilities."

LISTNUM 1 \l 18895             I believe a number of parties have, in their evidence, discussed the impact on investment as a result of whether you define essential facilities too broadly or too narrowly, which was something that Rogers itself addressed in its March evidence of trying to find a proper balance and, as we proposed, a nuanced approach between the hard extreme of too broad and too narrow.


LISTNUM 1 \l 18896             So, in that context, Dr. Ware took a few paragraphs in his submission, in the supplementary evidence filed on behalf of Rogers in July, to look at the issue of is there empirical evidence of the impact on investment with respect to how other countries and other academics have assessed the impact on investment where you have a broad or not so broad scope of mandated access.

LISTNUM 1 \l 18897             MR. HOFLEY:  Thank you, Ms Blackwell.  I am happy to understand that from you.

LISTNUM 1 \l 18898             I am really most concerned with what Dr. Ware understood to be his mandate, not what you understood to be Dr. Ware's mandate.

LISTNUM 1 \l 18899             So, if we could just turn to the report, Dr. Ware, again, this section, paragraph 34.  You say actually beginning at paragraph 38, when you discuss this issue of mandatory access and investment, you say that you have conducted ‑‑ and I am quoting ‑‑ "a balanced review of the evidence."  Do you recall that?

LISTNUM 1 \l 18900             MR. WARE:  Can you point me to that, please?

LISTNUM 1 \l 18901             MR. HOFLEY:  Paragraph 38.

LISTNUM 1 \l 18902             MR. WARE:  Yes, I have it.  Thanks.

LISTNUM 1 \l 18903             MR. HOFLEY:  Do you recall saying that?

LISTNUM 1 \l 18904             MR. WARE:  Yes, I do.

LISTNUM 1 \l 18905             MR. HOFLEY:  What is the evidence that you looked at?  Is it the evidence that you cite in your report, Dr. Ware?


LISTNUM 1 \l 18906             MR. WARE:  Yes, it is.

LISTNUM 1 \l 18907             MR. HOFLEY:  And the balanced review is your review.  Correct?  That is what you are referring to?

LISTNUM 1 \l 18908             MR. WARE:  Yes.

LISTNUM 1 \l 18909             MR. HOFLEY:  Here in this section you are disputing the point that mandatory access regimes create disincentives for investments.  Correct?

LISTNUM 1 \l 18910             MR. WARE:  That is correct, yes.

LISTNUM 1 \l 18911             MR. HOFLEY:  And you refer to some studies.  Correct?

LISTNUM 1 \l 18912             MR. WARE:  Yes, I do.

LISTNUM 1 \l 18913             MR. HOFLEY:  You say ‑‑ the first study you refer to is the Willig Report.  Do you recall that?

LISTNUM 1 \l 18914             MR. WARE:  Yes, I do.

LISTNUM 1 \l 18915             MR. HOFLEY:  And you say:

"With respect to Willig et al in a report filed..."

This is at the beginning of paragraph 39:


"...in a report filed for AT&T concluded that access by CLECs at cost‑based rates had caused ILEC capital expenditures to increase and increase with decreasing access prices."  (As read)

LISTNUM 1 \l 18916             Do you recall that?

LISTNUM 1 \l 18917             MR. WARE:  Yes, I do.

LISTNUM 1 \l 18918             MR. HOFLEY:  Are you familiar with the Willig Study, Professor Ware?

LISTNUM 1 \l 18919             MR. WARE:  Yes, I am.

LISTNUM 1 \l 18920             MR. HOFLEY:  Is the punch line of the article that the level of ILEC investment in the U.S. is positively related to the level of UNE pricing?  Is that the punch line of the article, Dr. Ware?

LISTNUM 1 \l 18921             MR. WARE:  Well, I don't know if it is the punch line of the article or not.  It is a conclusion of the article.

LISTNUM 1 \l 18922             MR. HOFLEY:  Would you agree, Dr. Ware, that if an ILEC has to provide unbundled network elements, they are required to provide unbundled network elements, that ILEC would have to also make investments in certain wholesale infrastructure?  Would you agree with that?

LISTNUM 1 \l 18923             MR. WARE:  Well, it is perfectly possible, yes.


LISTNUM 1 \l 18924             MR. HOFLEY:  Do you know if the Willig Study separated ILEC investment between UNE‑based investment; in other words, the investment they had to undertake to support providing of unbundled local loops and other ILEC investment?  In other words, do you know whether the study separated out the investment that they undertook to comply with the mandated access and that they undertook otherwise?

LISTNUM 1 \l 18925             MR. WARE:  No, I don't.

LISTNUM 1 \l 18926             MR. HOFLEY:  Isn't it possible, Dr. Ware, that the correlation between the ILEC investment and the lower UNE prices is driven by the ILEC investment to support UNE competition?  In other words, to comply with the mandated access?

LISTNUM 1 \l 18927             MR. WARE:  I think we ought to look at the document, but as I recall from reading Willig's paper, the hypothesis that he was testing was whether, as a result of mandated access, the ILEC would engage in I think what he calls defensive investment, which is investment that is designed to increase their competitiveness with respect to the entry under mandated access of the CLEC, of the competitor.

LISTNUM 1 \l 18928             He concludes that that hypothesis is supported by the data.

LISTNUM 1 \l 18929             Now, in response to ‑‑


LISTNUM 1 \l 18930             MR. HOFLEY:  But, Dr. Ware, he does not separate out the investment that is made by ILECs as a result of meeting the FCC's requirement to provide UNE‑P from the investments they made otherwise.  So, would you agree with me that unless you do that, the correlation is nothing but a correlation?

LISTNUM 1 \l 18931             MR. WARE:  Well, no, I wouldn't.  But in order to seriously debate Dr. Willig's paper, I think we would have to look at it, but I am willing to stand by the statement I just made, which is that he tests the hypothesis and he finds support for it.

LISTNUM 1 \l 18932             MR. HOFLEY:  The next report you refer to, Dr. Ware, is that of Mr. Crandall.  Do you recall that?

LISTNUM 1 \l 18933             MR. WARE:  Yes, I do.

LISTNUM 1 \l 18934             MR. HOFLEY:  You say:

"Crandall 2005 reviewed all the empirical studies to date and concluded that when carefully analyzed, none of the studies supported the view that mandatory access rates had influenced the level of capital spending by Bell companies."  (As read)

LISTNUM 1 \l 18935             Do you recall that?

LISTNUM 1 \l 18936             MR. WARE:  Yes, I do.


LISTNUM 1 \l 18937             MR. HOFLEY:  There you are referring, I believe we had confirmed in an interrogatory, you are referring to Robert Crandall's "Competition and Chaos:  U.S. Telecommunications Since the 1996 Telecom Act."  Correct?

LISTNUM 1 \l 18938             MR. WARE:  Yes.

LISTNUM 1 \l 18939             MR. HOFLEY:  Dr. Ware, you don't, in making this statement, cite to any portion of this piece, and I can tell you that we have had a look and we can't find in the Crandall piece any support for the statement that I just quoted you.

LISTNUM 1 \l 18940             So, can you take us to where in Crandall's "Competition and Chaos:  U.S. Telecommunications Since 1996" you base that statement on?

LISTNUM 1 \l 18941             MR. WARE:  First I would have to have the document.

LISTNUM 1 \l 18942             MR. HOFLEY:  It is your report, Dr. Ware, and you have cited that ‑‑

LISTNUM 1 \l 18943             MR. WARE:  Yes, but if you want me to take you to it right now, I would have to have the document.

LISTNUM 1 \l 18944             I think it was submitted as an exhibit by, was this by you or by someone else?


LISTNUM 1 \l 18945             MR. HOFLEY:  We provided you with an excerpt, but I am asking you where in the Crandall report you base this statement on?

LISTNUM 1 \l 18946             MR. WARE:  I would be willing to take an undertaking to do that.

LISTNUM 1 \l 18947             MR. HOFLEY:  That would be fine.  Thank you, Mr. Chairman.

LISTNUM 1 \l 18948             Just by the by, are you aware that in this monograph by Mr. Crandall ‑‑ and he will be here, Mr. Chairman, so I won't belabour this, he will be here on behalf of TELUS, I believe ‑‑ are you aware that Dr. Crandall is critical of the Willig Study that you cited?

LISTNUM 1 \l 18949             MR. WARE:  Yes, I read a couple of quotes from it last night, from this excerpt, and he says the proposition put forward by Dr. Willig is unlikely.

LISTNUM 1 \l 18950             MR. HOFLEY:  Right, and doesn't he say ‑‑ I am quoting:


"Furthermore, one cannot assume that investment responds to UNE‑P rates.  If those rates are measured for a period after the capital expenditures take place, one would have to show that subsequent investment expenditures fall or rise with differences in UNE‑P rates." (As read)

LISTNUM 1 \l 18951             Do you recall that, reading that last night?

LISTNUM 1 \l 18952             MR. WARE:  You would have to point me to that in the document.

LISTNUM 1 \l 18953             MR. HOFLEY:  Well, the document is there, Mr. Chairman.  Maybe we can move on.  And plus, Mr. Crandall will be here.

LISTNUM 1 \l 18954             Now, are you aware, Dr. Ware, that there are some more recent studies than "Competition in Chaos" by Mr. Crandall which support the proposition that investment levels fall with mandated access?

LISTNUM 1 \l 18955             Were you here, for example, for the testimony of the Bell panel?

LISTNUM 1 \l 18956             DR. WARE:  Most of it, yes.

LISTNUM 1 \l 18957             MR. HOFLEY:  So are you aware that there have been other more recent studies since 2005 which suggest that ‑‑ and suggest strongly, I would say to you ‑‑ that investment levels fall with mandated access?


LISTNUM 1 \l 18958             MR. WARE:  The only study that I have seen is one that I have found, more recently than my report, which is ‑‑ there is a manuscript by Waverman and some colleagues which was under the LECG brand name, which was published in ‑‑ well no, it hasn't been published rather, I am sorry, but it has a date of September 2007, which I have looked at.

LISTNUM 1 \l 18959             MR. HOFLEY:  I think that is fair and you are right, it was after your report was filed, Dr. Ware.

LISTNUM 1 \l 18960             I would like to take you to Tab RR, which is an exhibit which is entitled "Broadband and Unbundling Regulations in OECD Countries" by Scott Wallsten.  This was provided to you last Wednesday, I believe, Dr. Ware.

LISTNUM 1 \l 18961             MR. WARE:  Yes, I have it.

LISTNUM 1 \l 18962             MR. HOFLEY:  And would you agree with me that this report is dated June 2006?

LISTNUM 1 \l 18963             MR. WARE:  Yes.

LISTNUM 1 \l 18964             MR. HOFLEY:  And that it is an OECD ‑‑ it takes OECD data from 30 countries over five years, from 1999 to 2003?

LISTNUM 1 \l 18965             MR. WARE:  Okay.

LISTNUM 1 \l 18966             MR. HOFLEY:  Now, if I could take you to ‑‑ well, would you agree with me ‑‑ I think you have had an opportunity to look at this because, as I said, I gave it to your counsel last Wednesday.


LISTNUM 1 \l 18967             Would you agree with me that this report finds, using ITU data, that more extensive sub‑loop unbundling is negatively correlated with broadband penetration because of the negative effect on incumbents' investment incentives?

LISTNUM 1 \l 18968             MR. WARE:  I would agree with you up to the last phrase.  I don't recall the qualifier about that, because of the negative effect on the incumbents' investment incentives.  If you can point me towards that conclusion.

LISTNUM 1 \l 18969             MR. HOFLEY:  Well perhaps we can take you to the key findings, Professor Ware, at page 1 of Tab MM, the Wallsten Report.

LISTNUM 1 \l 18970             It is about three pages in, Mr. Commissioner ‑‑ Mr. Chairman.

LISTNUM 1 \l 18971             MR. WARE:  What page are you on?

LISTNUM 1 \l 18972             MR. HOFLEY:  Page 1.

LISTNUM 1 \l 18973             You see, about ‑‑ towards the bottom of the page, you will see I have actually highlighted, commissioners, the sections in the margins.

"The most extensive form of mandatory unbundling included here, so‑called sub‑loop unbundling, appears to slow penetration growth." (As read)

LISTNUM 1 \l 18974             Do you see that?


LISTNUM 1 \l 18975             MR. WARE:  Yes, I do but we are talking about broadband penetration here, not investment.  I don't believe Mr. Wallsten had any investment data in this study.

LISTNUM 1 \l 18976             MR. HOFLEY:  So penetration growth does not require investment, Dr. Ware?

LISTNUM 1 \l 18977             MR. WARE:  Well, of course it does but this study is largely about laying cable on the ground.  It is largely about the rollout of cable in countries which for the most part ‑‑ of course, not true of Canada ‑‑ started from very low levels of cable footprints.

LISTNUM 1 \l 18978             MS BLACKWELL:  Mr. Hofley, if I could just add.

LISTNUM 1 \l 18979             When you said sub‑loop unbundling, I believe the same report says that ‑‑ an example that is UNE‑P, where you have the loop and the switching, an access regime that Canada has not had.

LISTNUM 1 \l 18980             MR. HOFLEY:  And I understand that but we are testing the fundamental proposal.

LISTNUM 1 \l 18981             Let's turn to page 6, Dr. Ware, bottom of the page.


"In sum, there is still a debate about the effects of unbundling policies.  Most economists and most studies conclude that unbundling in the U.S. reduce incentives to invest..." (As read)

LISTNUM 1 \l 18982             There is the incentives to invest piece.

"...in hi‑speed internet infrastructure." (As read)

LISTNUM 1 \l 18983             Do you see that?

LISTNUM 1 \l 18984             MR. WARE:  I do.

LISTNUM 1 \l 18985             MR. HOFLEY:  So you would disagree with most studies and most economists; correct?

LISTNUM 1 \l 18986             MR. WARE:  No, I would just point to the fact ‑‑ well, two points actually.

LISTNUM 1 \l 18987             One is I note that Mr. Wallsten does not cite anybody there at all.

LISTNUM 1 \l 18988             And secondly, that, as I just said a few minutes ago, the investment in hi‑speed cable footprint has already taken place in Canada, which puts it in a very different position than these countries.

LISTNUM 1 \l 18989             MS BLACKWELL:  Mr. Hofley, I could also point to ‑‑ the OECD's Communications Outlook for 2007 has a statement:


"Quite clearly, competition from new entrants over unbundled lines has also helped spur investment in several markets." (As read)

LISTNUM 1 \l 18990             So I think what we are seeing is depending on which study you are looking at, how the equations that the econometric analyses are specified, which is very, very important if you ask economists and econometricians, you can get different answers.

LISTNUM 1 \l 18991             I think in the context of this proceeding, as the Chair said earlier last week, this is a review process.  So in Canada we have the benefit of saying we have had an access regime that included certain components, some of which Rogers has proposed be kept, some not.

LISTNUM 1 \l 18992             You can actually look back in time and see the impact on investment as a result of that access regime.  You don't necessarily have to go to these conflicting reports depending on how the equation was specified, whether investment was part of it, how it was reflected.

LISTNUM 1 \l 18993             You can look at the Canadian experience and say has ICT investment increased, have competitors in the telecommunications market in Canada increased their investment, the Telecommunications Monitoring Report, reports on ‑‑


LISTNUM 1 \l 18994             MR. HOFLEY:  Ms Blackwell, did you write this report?

LISTNUM 1 \l 18995             MS BLACKWELL:  No, sir, I did not write this report ‑‑

LISTNUM 1 \l 18996             MR. HOFLEY:  Okay.

LISTNUM 1 \l 18997             MS BLACKWELL:  ‑‑ but I am trying to be helpful.

LISTNUM 1 \l 18998             MR. HOFLEY:  Now, Ms Blackwell, I am asking Dr. Ware about his report.  I haven't asked about Rogers' evidence.  I am asking Dr. Ware about his report ‑‑

LISTNUM 1 \l 18999             MS BLACKWELL:  Right.

LISTNUM 1 \l 19000             MR. HOFLEY:  ‑‑ and I am testing what Dr. Ware says and that is that he conducted a balanced review of the evidence.

LISTNUM 1 \l 19001             MS BLACKWELL:  I appreciate that, Mr. Hofley.  I am also just trying to provide the commissioners and the staff with some understanding of the context of where all these studies rest within the key issue in this proceeding, one of which is if they increase or decrease the access regime, is there going to be an impact on investment, and I am saying they can look at the Canadian evidence at hand.


LISTNUM 1 \l 19002             THE CHAIRPERSON:  Ms Blackwell, this is very helpful but really, the proceedings will go faster if you let counsel conduct their cross‑examination the way they want to.

LISTNUM 1 \l 19003             Mr. Hofley.

LISTNUM 1 \l 19004             MR. HOFLEY:  Thank you.

LISTNUM 1 \l 19005             Can we now turn to the Waverman study you appropriately referred to, Dr. Ware.  And that, again, is September 2007, LECG.  It is at Tab SS of the binder I provided both the panel and the Commission.

‑‑‑ Pause

LISTNUM 1 \l 19006             MR. HOFLEY:  Now, you have had an opportunity to look at this.  It was mentioned last week, Dr. Ware.

LISTNUM 1 \l 19007             DR. WARE:  Yes, I have.

LISTNUM 1 \l 19008             MR. HOFLEY:  And this is the study that you quite fairly pointed out came in after your report was written?

LISTNUM 1 \l 19009             MR. WARE:  Yes, it is.

LISTNUM 1 \l 19010             MR. HOFLEY:  Now, would you agree with me that this study looks at 12 countries over a five‑year period, 2002 to 2006?

LISTNUM 1 \l 19011             MR. WARE:  Yes.


LISTNUM 1 \l 19012             MR. HOFLEY:  And can you agree with me that this study, unlike perhaps others, utilizes econometric methods to test the impacts of specific aspects of access regulation embodied in the price of unbundled local loops on investment in alternative access platforms, also called last mile access infrastructures?

LISTNUM 1 \l 19013             MR. WARE:  Well, it does, but the conclusion relating to investment is in fact a simulation.  It's not a study of investment data.  What Professor Waverman does here is, his dependent variable in this study is actually broadband penetration and then what he does is he estimates a set of structural equations based on broadband penetration.  Then he says, "Let's suppose that there is 100 Euros of investment associated with an additional household, additional connection, and let's use our estimated equations to simulate the effect of different access regimes.  Then he says, with 100 Euro assumption this is how much more investment we would have got."  So that is not really a study of investment.

LISTNUM 1 \l 19014             MR. HOFLEY:  Have you conducted any econometric studies in this area, Dr. Ware?

LISTNUM 1 \l 19015             MR. WARE:  No, I haven't.

LISTNUM 1 \l 19016             MR. HOFLEY:  Or a simulation?

LISTNUM 1 \l 19017             MR. WARE:  No.

LISTNUM 1 \l 19018             MR. HOFLEY:  Can we go to what he concluded, Dr. Ware?  If we go to "Key Findings", page 3, it is paragraph 1.11.  Would you agree there that at least he says in 1.12 that:


"Our econometric analysis shows that all else equal a reduction of 10 per cent in the LLU price causes an 18 per cent fall in the subscriber share of alternative infrastructure."  (As read)

LISTNUM 1 \l 19019             Do you see that?

LISTNUM 1 \l 19020             MR. WARE:  Yes, I do.

LISTNUM 1 \l 19021             MR. HOFLEY:  That is one of his key findings.

LISTNUM 1 \l 19022             I think for non‑economists like me the next sentence is the one that I think I start to understand, Mr. Chairman, and that is where he says:

"This 18 per cent fall in subscriber share results in hundreds of thousands less broadband subscriber lines that utilize alternative access technologies."  (As read)

LISTNUM 1 \l 19023             So that would be speaking, depending on whether you agree with this methodology or not, Dr. Ware, to investment, wouldn't it?

LISTNUM 1 \l 19024             MR. WARE:  Well, with the qualification that I just made.


LISTNUM 1 \l 19025             MR. HOFLEY:  Yes.

LISTNUM 1 \l 19026             MR. WARE:  Really the investment part is a kind of an add‑on.  As I said, there are no investment data in this study.

LISTNUM 1 \l 19027             MR. HOFLEY:  No.

LISTNUM 1 \l 19028             Then he goes on to say:

"Thus intense access regulation. as measured through the LLU price, weakens facilities‑based competition and the benefits that such competition delivers."  (As read)

LISTNUM 1 \l 19029             Next:

"This fall in subscriber levels has the impact of reducing investment in alternative access platforms in both the short‑term and the long‑term."  (As read)

LISTNUM 1 \l 19030             Do you see that?

LISTNUM 1 \l 19031             MR. WARE:  Yes, I do.

LISTNUM 1 \l 19032             MR. HOFLEY:  Now, would you agree with me that a balanced review of the literature would have, had you had it at the time, included the Waverman study?


LISTNUM 1 \l 19033             MR. WARE:  Oh certainly, yes.  Absolutely.

LISTNUM 1 \l 19034             MR. HATFIELD:  Could I add a point here?

LISTNUM 1 \l 19035             We are focused here on increasing the investment in the access part of the network but, as my testimony goes to, there is an awful lot of investment and innovation that is occurring up the protocol stack.  So by mandating access at the lower levels you may be very well promoting lots of investment at higher levels in the protocol stack that is not addressed in these studies.

LISTNUM 1 \l 19036             MR. HOFLEY:  Thank you for that.  I do agree we are focusing, although we did have the debate I believe on Friday about innovation at the lower levels of the protocol stack on Friday.  But I take your point about the upper levels.

LISTNUM 1 \l 19037             COMMISSIONER del VAL:  Mr. Hofley, may I just ask one point of clarification?

LISTNUM 1 \l 19038             On that paragraph 1.12 it says:

"Our econometric analysis shows that all else being equal..."  (As read)

LISTNUM 1 \l 19039             I'm wondering if Dr. Ware or Mr. Hatfield could give me an example of what else would have to be equal?


LISTNUM 1 \l 19040             MR. WARE:  Madam Commissioner, we would have to look at his ‑‑ the way this is done is by writing down a series of structural equations and then looking at the estimated coefficients and then identifying those as partial derivatives in a mathematical sense, in the sense that what it means is suppose we hold everything else constant, so essentially that means the price of everything else and it means whatever else he has on the right‑hand side in his equations.

LISTNUM 1 \l 19041             And if we just change ‑‑ I'm sorry, I'm just going back.  I have lost the paragraph now.

LISTNUM 1 \l 19042             If I just change the LLU price what happens to the variable on the left‑hand side, which actually is the share of broadband penetration by alternative access technology?

LISTNUM 1 \l 19043             COMMISSIONER del VAL:  I think I understand that, but I was just wondering what was on the right‑hand side.

LISTNUM 1 \l 19044             MR. WARE:  Well, I would have to go and look.  I honestly can't remember exactly.


LISTNUM 1 \l 19045             MS BLACKWELL:  Commissioner del Val, I think at a very basic level what you are trying to do is, you try to gather all the variables that you think will explain this broadband penetration and some of the other variables in the equation may account for a larger share of the movement in what you are trying to figure out what makes that move.

LISTNUM 1 \l 19046             In the Waverman report if you look just at what is the impact of the LLU pricing, that relationship, but recognizing there are other things like population density might have a factor, as I think the Wallsten report actually speaks to.

LISTNUM 1 \l 19047             COMMISSIONER del VAL:  Thank you.

LISTNUM 1 \l 19048             MR. WARE:  Madam Commissioner, on page 20 for example he has one of his equations anyway, 20 of the report.  For example he has things like HHI, which is the Herfindahl‑Hirschman Index of concentration, and GDP on the right‑hand side.  So he is trying to allow for things like differences in income levels for example.

‑‑‑ Pause

LISTNUM 1 \l 19049             THE CHAIRPERSON:  Go ahead, Mr. Hofley.

LISTNUM 1 \l 19050             MR. HOFLEY:  Mr. Chairman, thank you.

LISTNUM 1 \l 19051             I would like to turn to whomever I guess now, the Rogers panel.

LISTNUM 1 \l 19052             Thank you, Dr. Ware.


LISTNUM 1 \l 19053             I would like to begin by taking you to paragraphs 88 and 89 of your March 15th evidence.  This is the section of your evidence in which you are discussing economic barriers.  You will see the heading starts at paragraph 84, which is page 22 of 61, but what I want to take you to is that page 23 of 61.  You are talking about the economic barriers that face competitors to the ILECs.

LISTNUM 1 \l 19054             Do you recall this section of your evidence, Mr. Watt?

LISTNUM 1 \l 19055             MR. WATT:  Yes, I do.

LISTNUM 1 \l 19056             MR. HOFLEY:  I would like to do a bit of an experiment and ask you if you would agree with me.

LISTNUM 1 \l 19057             Let's start at paragraph 88 and I'm going to replace the word "ILECs" with "cable cos".  So I'm going to read you these and I will ask you your views.

"The cable cos of course already have ubiquitous facilities at the lowest layers of the protocol stack and can rely on these facilities to offer customers comprehensive service packages at higher layers."  (As read)

LISTNUM 1 \l 19058             Would you agree with me with that?


LISTNUM 1 \l 19059             MR. WATT:  No, I wouldn't.  I would reword that sentence, following upon your proposal:

"The cable companies of course already have almost ubiquitous facilities to residential premises at the lowest levels of the protocol stack and can rely on these facilities to offer customers comprehensive service packages in the residential market at the higher level."  (As read)

LISTNUM 1 \l 19060             MR. HOFLEY:  So this is back to the lateral connection issue.

LISTNUM 1 \l 19061             Is that a fair statement?

LISTNUM 1 \l 19062             MR. WATT:  I'm not quite ‑‑

LISTNUM 1 \l 19063             MR. HOFLEY:  The last mile.

LISTNUM 1 \l 19064             MR. WATT:  The last mile is better.

LISTNUM 1 \l 19065             MR. HOFLEY:  I'm sorry.

LISTNUM 1 \l 19066             MR. WATT:  Generally I think the ILECs preferred that the lateral connection to be a fibre‑based facility.  It is the last mile, co‑ax and fibre.

LISTNUM 1 \l 19067             MR. HOFLEY:  The last mile.  I apologize.


LISTNUM 1 \l 19068             MR. WATT:  Into those 95 per cent of locations we don't have a facility today.  Yes.

LISTNUM 1 \l 19069             MR. HOFLEY:  Now, let's go to the next sentence.

"The cable cos facilities..."

LISTNUM 1 \l 19070             We will agree to disagree on that:

"The cable cos facilities were built and paid for while the cable cos operated monopolies and the investments have been recovered so as to ensure a reasonable rate of return on the investments."  (As read)

LISTNUM 1 \l 19071             MR. WATT:  I would again disagree with that sentence, the reason being that cable companies were granted exclusive franchises in a territory.  So you could say it was, in that sense, a monopoly over the provision of television signals over wires in that franchise area.


LISTNUM 1 \l 19072             There were other alternatives for radio signals so, in that sense, they were not a monopoly supplier of signals.  With respect to investments have been recovered through rates set so as to ensure a reasonable rate of return on investments, that is not true.  The rates were regulated, but there was no guaranteed rate of return in the sense.  Television services are not viewed as an essential service.  In fact, our penetration peaked out in the order of 84 per cent of homes.

LISTNUM 1 \l 19073             There was no guaranteed rate of return. We set our rates and then we realized the return that we did.  But no rate base was established with a guaranteed rate of return on that rate base.  Those investments were entirely at risk.

LISTNUM 1 \l 19074             MR. HOFLEY:  More like a price cap model?

LISTNUM 1 \l 19075             MR. WATT:  For basic rates, when we at one time had 12, 14 channels and then subsequently grew up to 60, 72, there was a cap after a period of time.  You will have to recall, in the early 1970s when cable started out there was zero penetration, so there was much less regulation.  When penetration reached higher levels there were caps eventually placed on basic rates, yes, and then they were related to capital investment, et cetera.

LISTNUM 1 \l 19076             MR. HOFLEY:  And CAPEX increases were allowed?

LISTNUM 1 \l 19077             MR. WATT:  When you say CAPEX increases were allowed, we were always allowed to spend as much as money as we possibly could and Rogers did.


LISTNUM 1 \l 19078             MR. HOFLEY:  I apologize, there was specific provision to allow for rate increases for CAPEX?

LISTNUM 1 \l 19079             MR. WATT:  In the late 1980s, early 1990s there were specific provisions.  But that time I think the Commission felt that they needed to pay some attention to the economics of the cable industry because it was penetrating fairly widely at that point.  So there was put in place a mechanism whereby the rates for basic service was related to the capital expenditure in that system.  And if you spent a certain amount of money, you could increase your rate up to a certain level.  And there is a long history to what happened to this after.  It was supposed to sunset after a period of years and so on and so forth, but that is not worth getting into now.

LISTNUM 1 \l 19080             MR. HOFLEY:  That is your qualification, on that sentence?

LISTNUM 1 \l 19081             MR. WATT:  That is my qualification, exactly, came from zero to fully penetrated in 45 years with no guaranteed rate of return, residential market.

LISTNUM 1 \l 19082             MR. HOFLEY:  Now, the last sentence:

"These facilities,"

with the qualifications you have given,


"afford cable companies substantially lower risks than new entrants encounter in making similar investments." (As Read)

LISTNUM 1 \l 19083             Would you agree with that?  Entrants who don't have facilities, for example.

LISTNUM 1 \l 19084             MR. WATT:  This one doesn't fit quite so neatly.  These arrangements ‑‑

LISTNUM 1 \l 19085             MR. HOFLEY:  The arrangements are referred to above.

LISTNUM 1 \l 19086             MR. WATT:  Right, the fact that we have almost ubiquitous facilities in residential locations, et cetera, afford the cable companies substantially lower risks than new entrants encounter in making similar investments.  Now, I take it the lower risks in reference here are with respect to ‑‑ well, I am having trouble now.  Lower risks in making similar investments into ‑‑

LISTNUM 1 \l 19087             MR. HOFLEY:  What did you mean when you ‑‑

LISTNUM 1 \l 19088             MR. WATT:  ‑‑ to the telecom market.

LISTNUM 1 \l 19089             MR. HOFLEY:  What did you mean when you said the ILECs face substantially lower risks?


LISTNUM 1 \l 19090             MR. WATT:  The ILECs face substantially lower risks because they already have the facilities in place and the guaranteed rate of return.  So I guess we would take the context in the historical sense, that the risks were lower historically.  Maybe to move this along, there is no doubt that new entrants today face greater risk, absolutely.

LISTNUM 1 \l 19091             MR. HOFLEY:  Than the cable companies?

LISTNUM 1 \l 19092             MR. WATT:  They face greater risks than cable companies and ILECs in the residential market, absolutely correct.

LISTNUM 1 \l 19093             MR. HOFLEY:  Okay, thank you.  Can I move on just to try and understand, since your focus has been, at least even in your answers in the last five minutes, on the business side?  I would like to just try and clarify and understand your evidence with respect to Rogers' share of the business market.

LISTNUM 1 \l 19094             And I provided you with a number of exhibits in the tabs and I am hoping this won't take very long, Mr. Chairman, but I think it is actually important for the Commission to understand what is on the record.

LISTNUM 1 \l 19095             Now, in paragraph 5 of March 15 evidence you state, you will recall, that your share of the business market is less than 3 per cent.  Do you recall that?

LISTNUM 1 \l 19096             MR. WATT:  Yes, I do.


LISTNUM 1 \l 19097             MR. HOFLEY:  Now, how was that calculated?

LISTNUM 1 \l 19098             MR. WATT:  Ms Blackwell has the detailed calculations on her computer here and she will find the reference in the record.

LISTNUM 1 \l 19099             MR. HOFLEY:  You might want to go to tab F of our binder, Ms Blackwell, it is a response of yours to Rogers‑Primus‑12‑April‑07‑2.

LISTNUM 1 \l 19100             MS BLACKWELL:  Okay, yes, we have those documents.

LISTNUM 1 \l 19101             MR. HOFLEY:  Now, maybe to expedite this along, would you agree with me that this calculation was based on total business NAS for all of Canada, correct?

LISTNUM 1 \l 19102             MS BLACKWELL:  That is correct.

LISTNUM 1 \l 19103             MR. HOFLEY:  So that is in and outside of Rogers' operating territory, correct?

LISTNUM 1 \l 19104             MS BLACKWELL:  I mean, the other issue here of course is the Rogers' business lines that we are doing ex post the Call‑Net acquisition, so of course we would have the Rogers' lines that are also served through the leased facilities that the company relies on outside of its cable footprint.


LISTNUM 1 \l 19105             MR. WATT:  Yes, you would have to say outside the cable footprint, because Rogers' operating territory for business solutions spans the entire country.

LISTNUM 1 \l 19106             MR. HOFLEY:  So inside your cable footprint, Mr. Watt, what would you estimate that market share to be?  If it is 3 per cent nationally, what do you think it would be in your cable footprint?  A rough number, like would it go up to 8 or 9 or what would it be?

LISTNUM 1 \l 19107             MR. WATT:  Rather than guess, we should probably go back and try and provide you with an educated calculation on that.

LISTNUM 1 \l 19108             MR. HOFLEY:  That would be fine, thank you.

LISTNUM 1 \l 19109             MS BLACKWELL:  Just recognizing that the denominator, if you will, is from the telecom monitoring report and I don't recall seeing footprints, for the business market, lines broken out by province, which would be probably the starting point in order to isolate the denominator for the equivalent of the Rogers' footprint.  So it may not be possible to actually calculate an accurate ‑‑


LISTNUM 1 \l 19110             MR. HOFLEY:  Well, do your best, but I would be interested in knowing what if we just looked at in your territory as opposed to across the country.  You can only do what you can do, Ms Blackwell, and I appreciate that.

LISTNUM 1 \l 19111             Now, you would agree with me though that these are lines in which Rogers' provides service, so it doesn't include the number of premises past, correct, that is another figure that we go to?

LISTNUM 1 \l 19112             MR. WATT:  It is indeed another figure that we go to.

LISTNUM 1 \l 19113             MR. HOFLEY:  Right.  Now, I would like to talk to you about that other figure.  And you will recall that that is an estimate that you made in response to an interrogatory from the Competition Bureau, it is 12‑April‑07 interrogatory 8, it is at tab G, Mr. Chairman, members of the Commission.

LISTNUM 1 \l 19114             You will recall there that your estimate was 5 per cent.  You estimated that Rogers' supplies 5 per cent of business premises in its cable footprint with cable television services.  Do you recall that?

LISTNUM 1 \l 19115             MR. WATT:  Yes, I do.

LISTNUM 1 \l 19116             MR. HOFLEY:  Now, that doesn't tell us how many businesses would be within a premise, correct?  Like, if it was a multiunit building this would just tell us the premise, correct, the address?


LISTNUM 1 \l 19117             MR. WATT:  The calculation actually was with respect to the number of customers with cable TV.  So if, for example, there were 50 customers of ours within say First Canadian Place, that would have counted as 50, so in a sense it would have over‑counted in that case, we would have counted as 50 when really it is only one building.

LISTNUM 1 \l 19118             We don't have an accurate count.  We do not know precisely how many buildings out of the 400 ‑‑ and again, I should say we have estimated from Dunn & Bradsteet material and Stats Canada information roughly 400,000 business locations within our cable operating footprint.  That is an estimate.  We do not know precisely how many of those business we have physical coax into.  We do know that we have roughly 20,000 cable TV subscribers in business premises.

LISTNUM 1 \l 19119             So that is the estimate of the 5 per cent.  You could probably consider ‑‑ we would have to see the condition of the plant, but it could be 6 or 7 percent with people who, at one time, took cable TV for business and internet and then cancelled.  So there would be remaining facilities into those locations.


LISTNUM 1 \l 19120             But we are quite convinced that we have facilities in the 5 to 7 percent range for coax, and with fibre ‑‑ we have approximately 1,850 fibre connections into buildings.  That is not all entirely within our cable footprint.  We have ‑‑

LISTNUM 1 \l 19121             MR. HOFLEY:  I'm sorry to interrupt, Mr. Watt, but so that I can understand ‑‑

LISTNUM 1 \l 19122             I am looking at your answer ‑‑

LISTNUM 1 \l 19123             MR. WATT:  Yes.

LISTNUM 1 \l 19124             MR. HOFLEY:  ‑‑ and it says ‑‑ the first April answer said:

"Rogers estimates that it supplies 5 percent of business premises in its cable footprint with cable television services."

LISTNUM 1 \l 19125             Right?

LISTNUM 1 \l 19126             MR. WATT:  Correct.

LISTNUM 1 \l 19127             MR. HOFLEY:  So that's how you estimate it, by the cable television services.

LISTNUM 1 \l 19128             MR. WATT:  That 5 percent, and I just went on to say that there will probably be, maybe, a percent or 2 more where legacy facilities ‑‑ where people at one time took cable television in a business location and have now cancelled.

LISTNUM 1 \l 19129             I don't know that number.  My estimate may be too high, but I just want you to understand that the 5 percent is not precise to 2 decimal points.


LISTNUM 1 \l 19130             MR. HOFLEY:  I didn't think it was, and your answers were fairly stated in the interrogatory responses.

LISTNUM 1 \l 19131             If we go over to ‑‑

LISTNUM 1 \l 19132             THE CHAIRPERSON:  Excuse me.  You have totally confused me with your answer.  I just want to understand this.

LISTNUM 1 \l 19133             The 5 percent refers to 5 percent of 400,000?

LISTNUM 1 \l 19134             MR. WATT:  That's correct.  That's how many buildings that we have coaxial cable in.

LISTNUM 1 \l 19135             THE CHAIRPERSON:  You just explained to me a moment ago that it's not buildings, it is business premises in buildings.

LISTNUM 1 \l 19136             You used the example of First Canadian Place.

LISTNUM 1 \l 19137             So I presume what you are saying is that there are 500,000 business premises, whether in one building or multiple buildings, and you serve 5 percent of those.

LISTNUM 1 \l 19138             MR. WATT:  I'm sorry, I am not only confusing you, I am confusing myself.

LISTNUM 1 \l 19139             This 20,000 into business ‑‑

LISTNUM 1 \l 19140             I think I see the confusion.


LISTNUM 1 \l 19141             We have translated or inferred that each one of those would be one business, one building, in making this statement.

LISTNUM 1 \l 19142             THE CHAIRPERSON:  You assumed that.

LISTNUM 1 \l 19143             MR. WATT:  We assumed that.

LISTNUM 1 \l 19144             THE CHAIRPERSON:  But you may be over‑counting, because there may be more than one business in a building.

LISTNUM 1 \l 19145             MR. WATT:  That's correct.  There may be over‑counting on that side, but I may be slightly under‑counting, in the sense that people who took the service historically, and now have cancelled, that wire is still in that location, but it wouldn't have shown up on this count.

LISTNUM 1 \l 19146             THE CHAIRPERSON:  So I should read 400,000 business premises, really, as 400,000 buildings.

LISTNUM 1 \l 19147             MR. WATT:  Four hundred thousand buildings.

LISTNUM 1 \l 19148             THE CHAIRPERSON:  Yes.  Okay.  Thank you.

LISTNUM 1 \l 19149             MR. HOFLEY:  I thought I understood it, and now I am confused.

LISTNUM 1 \l 19150             It is the premises, the building.  It could have many businesses in it, or it could have one.  Correct?

LISTNUM 1 \l 19151             MR. WATT:  Correct.


LISTNUM 1 \l 19152             MR. HOFLEY:  Thank you.

LISTNUM 1 \l 19153             If I take you over to another one of your answers on the same issue ‑‑ it is Rogers‑MTS Allstream‑12 April 07‑107.

LISTNUM 1 \l 19154             It can be found at Tab I of the compendium.

LISTNUM 1 \l 19155             I note that there, again, you say the same thing in the first paragraph:  "approximately 5 percent of business locations to provide cable television services."

LISTNUM 1 \l 19156             It says:

"In many cases where cable facilities are in a building they are suitable for video services only and not for telecommunications services."  (As read)

LISTNUM 1 \l 19157             Do you see that?

LISTNUM 1 \l 19158             MR. WATT:  Yes, I do.

LISTNUM 1 \l 19159             MR. HOFLEY:  That was your evidence at that time.


LISTNUM 1 \l 19160             Then you were asked some further questions about this.  At Tab J, which is Rogers‑The Companies‑19 July 07‑11, you were asked a follow‑up question on this, and you will see there that the answer has changed somewhat.  It says:

"Rogers identified the number of business premises that subscribe to cable television and hi‑speed internet services from Rogers in its cable operating territory."  (As read)

LISTNUM 1 \l 19161             Do you see that?

LISTNUM 1 \l 19162             MR. WATT:  I do.

LISTNUM 1 \l 19163             MR. HOFLEY:  So now we have said that it's not just cable television service any more, it includes hi‑speed internet services.

LISTNUM 1 \l 19164             I am a bit confused, though, as to the previous reference that I read to you, where it said that these locations don't, or cannot, or many of them cannot provide telecommunications services.

LISTNUM 1 \l 19165             Would you agree with me that, at least, many of them can, or is that where the 5 percent ‑‑


LISTNUM 1 \l 19166             MR. WATT:  Oh, absolutely.  We are just clarifying that in not all cases in business premises is the plant capable of providing hi‑speed internet, in the sense that there are certain building owners, believe it or not, who would not allow us to upgrade the plant to provide the two‑way capability, for whatever reason.  Principally, they were ‑‑

LISTNUM 1 \l 19167             Well, I will leave it at that.

LISTNUM 1 \l 19168             MR. HOFLEY:  I was curious, because 5 percent doesn't change, even though between April and July you have added services.

LISTNUM 1 \l 19169             In April you were saying that the 5 percent was with cable television, and in July you said that it now includes hi‑speed internet.

LISTNUM 1 \l 19170             The 5 percent number stayed the same.

LISTNUM 1 \l 19171             MR. WATT:  I was clarifying the earlier answer, that's all.

LISTNUM 1 \l 19172             MR. HOFLEY:  The original answer.

LISTNUM 1 \l 19173             MR. WATT:  The original answer.

LISTNUM 1 \l 19174             MR. HOFLEY:  I see.

LISTNUM 1 \l 19175             MR. WATT:  I thought that we should.

LISTNUM 1 \l 19176             MR. HOFLEY:  Okay.  Now, I want to talk to you about the statement that you are not connected in a number of these buildings.

LISTNUM 1 \l 19177             Were you here for Mr. Bibic's testimony on October 10th, which was last Tuesday, Mr. Watt?

LISTNUM 1 \l 19178             MR. WATT:  Yes, I was.

LISTNUM 1 \l 19179             MR. HOFLEY:  Mr. Bibic stated at page 511 of the transcript:


"Just in the downtown Ottawa core, for example, out of about 200 large buildings that we have looked at, Rogers is in close to 90 percent of those buildings in Ottawa in the downtown core with either its coaxial cable network or fibre."

LISTNUM 1 \l 19180             Do you recall hearing that?

LISTNUM 1 \l 19181             MR. WATT:  I do.

LISTNUM 1 \l 19182             MR. HOFLEY:  Given the 5 percent, and given this statement, do you disagree with what Mr. Bibic has said about the large buildings in downtown Ottawa?

LISTNUM 1 \l 19183             MR. WATT:  This is absolutely one of the key items in this proceeding:  to what extent do we have access into buildings.

LISTNUM 1 \l 19184             Bell says that we go up and down the road near 90 percent of them.  We say that ‑‑

LISTNUM 1 \l 19185             MR. HOFLEY:  I'm sorry, Mr. Watt, let's be careful.  He did not say that you went down the road past 90 percent of them, he said that Rogers is in close to 90 percent of those buildings in Ottawa in the downtown core, according to their survey of the 200 large buildings.


LISTNUM 1 \l 19186             What I am asking is, do you disagree with that?

LISTNUM 1 \l 19187             MR. WATT:  I do disagree with that.

LISTNUM 1 \l 19188             MR. HOFLEY:  Could you, then, undertake to look at the downtown core of Ottawa and provide us with the number that you think is right?

LISTNUM 1 \l 19189             MR. WATT:  Yes, if he would provide us with the list of the 200 buildings.

LISTNUM 1 \l 19190             MR. HOFLEY:  I would be happy to do that, if that is agreeable to the Commission, Mr. Chairman.

LISTNUM 1 \l 19191             THE CHAIRPERSON:  By all means, let's have a clarification on that.

LISTNUM 1 \l 19192             MR. HOFLEY:  I would like to turn to a different topic now, Mr. Watt.

LISTNUM 1 \l 19193             MR. WATT:  To speed things along, I can tell you that we counted, and we have 53 buildings in the greater Ottawa region connected with fibre.

LISTNUM 1 \l 19194             MR. HOFLEY:  We will give you our list, and you can have a look at that ‑‑

LISTNUM 1 \l 19195             Oh, fibre.  I apologize.  With fibre.  Okay.

LISTNUM 1 \l 19196             MR. WATT:  We provided that list to the Commission in our response to Bureau No. 8(b).


LISTNUM 1 \l 19197             MR. HOFLEY:  Just to be fair, Mr. Bibic's testimony, when he said "is in", is fibre or cable.  So what we are going to be asking you is whether you are in the building with fibre or cable.

LISTNUM 1 \l 19198             MR. WATT:  Or coaxial cable, as well.

LISTNUM 1 \l 19199             MR. HOFLEY:  Correct.

LISTNUM 1 \l 19200             Ninety percent of 200 large buildings was his testimony, and I think you have just agreed that you will take that list and you will look at it and tell us whether you think that list is right.

LISTNUM 1 \l 19201             MR. WATT:  That's correct.  We will have to track through whether there is coaxial cable in those buildings.

LISTNUM 1 \l 19202             MR. HOFLEY:  I just wanted to make sure that you understood what he said.

‑‑‑ Pause

LISTNUM 1 \l 19203             MR. HOFLEY:  My friend here wants to make sure that we are clear.  It is either/or fibre or coaxial cable.  I think you understood that.  Right?

LISTNUM 1 \l 19204             MR. WATT:  I do, and you of course understand the limitations of coax.

LISTNUM 1 \l 19205             MR. HOFLEY:  I do.

LISTNUM 1 \l 19206             I would like to talk about Rogers voice service to business or lack thereof, Mr. Watt.


LISTNUM 1 \l 19207             If I can take you to Rogers/Bureau 12 April 07‑37, it is at tab K, I believe, of the compendium in front of the Commission.  If you turn the page over to page 2, you will see that you have stated that:

"Rogers notes that at the current time it does not offer any business voice services using cable facilities."  (As read)

LISTNUM 1 \l 19208             Do you see that?

LISTNUM 1 \l 19209             MR. WATT:  I do.

LISTNUM 1 \l 19210             MR. HOFLEY:  That is even single line or two‑line services.  Is that right?

LISTNUM 1 \l 19211             MR. WATT:  I am going to ask Mr. Pattinson, who owns this product, to speak to that.

LISTNUM 1 \l 19212             MR. HOFLEY:  Thank you.  Sorry, Mr. Pattinson.

LISTNUM 1 \l 19213             MR. PATTINSON:  Yes, that is correct.  We do not provide business telephony service on the coax network today.

LISTNUM 1 \l 19214             MR. HOFLEY:  Are you aware of what other cable companies are offering in terms of business voice solutions over their network, Mr. Pattinson?


LISTNUM 1 \l 19215             MR. PATTINSON:  I am aware that other cable companies are starting the process of entering into business telephony starting with extremely small businesses, but do not have the complete host and suite of business telephony products that we would provide today under CDNS.

LISTNUM 1 \l 19216             MR. HOFLEY:  Are you aware that QMI offers business voice services over coaxial cable, Mr. Pattinson?

LISTNUM 1 \l 19217             MR. PATTINSON:  I am aware that there are several cable companies that are starting to offer business telephony services.

LISTNUM 1 \l 19218             MR. HOFLEY:  So, would several include EastLink and Shaw as well, to your knowledge?

LISTNUM 1 \l 19219             MR. PATTINSON:  Yes.  Again, just to confirm, they are starting with services that only service extremely small businesses and not large businesses, which are where we use services from CDNS.

LISTNUM 1 \l 19220             MR. HOFLEY:  Let me see if I can try and understand how you service small business customers today, given that you don't provide voice services using cable facilities, Mr. Pattinson.

LISTNUM 1 \l 19221             I would like you to assume the following example.  Rogers cable plant passes a small business in a geographic location served by an ILEC central office where Rogers is co‑located.  If you need to take down notes, please do.  I am really not trying to mislead you here.


LISTNUM 1 \l 19222             So, Rogers cable plant passes a small business in a geographic location served by an ILEC CO where Rogers is co‑located.  The small business requests a single telephone service, as well as digital cable TV and hi‑speed from Rogers.

LISTNUM 1 \l 19223             Can you describe the approach Rogers would take to provide service to this customer?  For example, will Rogers automatically request an unbundled loop from Bell or the ILEC, depending on what the territory is?

LISTNUM 1 \l 19224             MR. PATTINSON:  So, if I understand your question, the customer in this example is ordering three products from Rogers:  A television service, an internet service and a telephony service.

LISTNUM 1 \l 19225             MR. HOFLEY:  Yes, a small business customer.

LISTNUM 1 \l 19226             MR. PATTINSON:  Small business customer.  We would potentially be able to provide internet and television service through our coax network and an order would be placed for that, and I can describe how we would evaluate whether the customer was serviceable or not.


LISTNUM 1 \l 19227             Then for the business service, at the moment we do not have the ability even to provide a single line or a two‑line business customer on the coax network.  So, an order would be placed and the appropriate serviceability checks for an unbundled loop to that location.

LISTNUM 1 \l 19228             MR. HOFLEY:  How is a single line business service any different than the residential voice service that you provide over the coaxial cable, Mr. Pattinson?

LISTNUM 1 \l 19229             MR. PATTINSON:  A business service requires a business 911 record, as well as a business directory listing record, which is a completely different system from the residential system.

LISTNUM 1 \l 19230             Then eventually as that business grows and they need more than one line, they will require multi‑line hunting, which is a feature that is not yet available.

LISTNUM 1 \l 19231             MR. HOFLEY:  You are going beyond my hypothetical now.  We are talking about a small business who wants a single line or perhaps two lines, and you have said that there are some back office problems with providing that single line.  Correct?

LISTNUM 1 \l 19232             MR. PATTINSON:  There are back office OSS, as well as technology constraints, that exist inside the soft switch today that would prevent us from being able to provide that second line.


LISTNUM 1 \l 19233             MR. HOFLEY:  Have you determined when you can start serving these kind of customers using your cable facilities, Mr. Pattinson?  If you can't serve them today, like, when?

LISTNUM 1 \l 19234             MR. PATTINSON:  It is something that we are starting to work on.  We are evaluating what the changes are that will need to be made to the OSS, as well as when we will receive software upgrades from third party suppliers, which are still yet to be determined.

LISTNUM 1 \l 19235             MR. HOFLEY:  So, QMI and Shaw and EastLink have solved these problems, at least to the point where they can provide the service that they are providing, but you are going to take some more time?

LISTNUM 1 \l 19236             MR. PATTINSON:  I think in your example of EastLink, they are using a different switching technology they deployed many years ago using circuit switch.  We have not.  But we recognize there is opportunity there and we would like to develop it.

LISTNUM 1 \l 19237             MR. HOFLEY:  Could I turn you to ‑‑ every once in a while I have to make sure I am doing this right; my colleague here.


LISTNUM 1 \l 19238             Could I turn you to a recent article that is at tab S of the compendium.  For those listening it is called "Watt's New," catchy title.  It is published by Brantford Power and Brantford Hydro in the winter of 2006.  Do you see that, Mr. Pattinson or Mr. Watt, whoever is appropriate?

LISTNUM 1 \l 19239             MR. PATTINSON:  Yes, I do.

LISTNUM 1 \l 19240             MR. HOFLEY:  This announces that NetOptiks, a division of Brantford Hydro Inc., and Rogers Cable Communications completed an innovative, award‑winning solution using a fibre coaxial hybrid network that delivers hi‑speed internet access to 35 schools.  So, you are familiar with this.  Correct?

LISTNUM 1 \l 19241             MR. PATTINSON:  Yes, I am.

LISTNUM 1 \l 19242             MR. HOFLEY:  The article describes the customized network combines the facilities of NetOptiks fibre assets and the coaxial ADSL facilities of Rogers to provide hi‑speed internet access and other IT applications to all of the board's schools using MPLS.  Do you see that?

LISTNUM 1 \l 19243             MR. PATTINSON:  Yes, I do.

LISTNUM 1 \l 19244             MR. HOFLEY:  And it says that:

"Educators and students are now able to layer voice, video and other applications on top of data all over a single network."  (As read)

LISTNUM 1 \l 19245             Do you see that?


LISTNUM 1 \l 19246             MR. PATTINSON:  I think I see that they say that there is a platform of possibilities, of which they have not layered those applications over the network, but I do see that.

LISTNUM 1 \l 19247             MR. HOFLEY:  Right, it is a possibility.  So, it is possible to offer voice over the MPLS network.  Is that a fair statement?

LISTNUM 1 \l 19248             MR. PATTINSON:  That is not voice being provided by Rogers.  In this case ‑‑ and this is not a Rogers press release, nor is it a partnership or a GV.  In this case, NetOptiks is a customer of Rogers, where Rogers is only providing the underlying MPLS network.

LISTNUM 1 \l 19249             Any type of services referred to in here are not being provided by Rogers in any way.

LISTNUM 1 \l 19250             MR. HOFLEY:  But it is still being provided over your network.  Correct?

LISTNUM 1 \l 19251             MR. PATTINSON:  Not in all cases.  They have their own sites.

LISTNUM 1 \l 19252             MR. HOFLEY:  In some cases ‑‑

LISTNUM 1 \l 19253             MR. PATTINSON:  You will notice a black box where they are providing their own fibre drops, but ‑‑

LISTNUM 1 \l 19254             MR. HOFLEY:  In some cases it is being provided over your network?

LISTNUM 1 \l 19255             MR. PATTINSON:  In some cases it is being provided over the MPLS data network.


LISTNUM 1 \l 19256             MR. HOFLEY:  Thank you.

LISTNUM 1 \l 19257             I would like you to turn in your compendium to the next tab, it is tab T.  It is an article called "Solutions for the Little Guy."  I think the little guy here is small‑ and medium‑sized business or maybe just small business.  It is a 10 September, 2007 article.

LISTNUM 1 \l 19258             It quotes Sarah Bryant, your Vice‑President of Small Business Marketing as talking about your new product called Easy IP, which is described as a hosted integrated communication solution that delivers converged voice and data network access, and you will see I have highlighted, Ms Bryant says:

"The suite spot for us for that solution is anywhere between five and 49 employees, which is really ideal in terms of the combinations it offers."  (As read)

LISTNUM 1 \l 19259             I take it you are familiar with Easy IP, Mr. Pattinson or Mr. Watt?

LISTNUM 1 \l 19260             MR. PATTINSON:  Yes, I am quite familiar with this product.  It is one of many in a suite of our business products that we provide to customers today.


LISTNUM 1 \l 19261             MR. HOFLEY:  If I go over to the next tab, which is excerpts from ‑‑

LISTNUM 1 \l 19262             MR. PATTINSON:  If I could just add, then, sir, I would like to say that to date ‑‑

LISTNUM 1 \l 19263             MR. HOFLEY:  I am not finished with Easy IP, sorry, but go ahead.

LISTNUM 1 \l 19264             MR. PATTINSON:  You are, okay?

LISTNUM 1 \l 19265             MR. HOFLEY:  No, I am not finished, sir, just so you know.

LISTNUM 1 \l 19266             If I go over to the next page, there is the website for Easy IP.  I want to make sure I gave you a chance to talk about it.

LISTNUM 1 \l 19267             MR. PATTINSON:  Sorry, you are at what tab now, please?

LISTNUM 1 \l 19268             MR. HOFLEY:  It is tab U.

LISTNUM 1 \l 19269             MR. PATTINSON:  Yes.

LISTNUM 1 \l 19270             MR. HOFLEY:  I don't actually think there is an exhibit number that has been given to these.  Maybe I am going through these too quickly.

LISTNUM 1 \l 19271             THE SECRETARY:  Actually, I was going to resume all the exhibits you filed before the break.

LISTNUM 1 \l 19272             MR. HOFLEY:  Thank you.  I am just trying to move this along.


LISTNUM 1 \l 19273             You will see there that this exhibit describes your Easy IP communication solution, Mr. Pattinson, and it talks about there the features that it provides, correct, right at the beginning of the website?

LISTNUM 1 \l 19274             MR. PATTINSON:  That is correct.

LISTNUM 1 \l 19275             MR. HOFLEY:  So it talks about local land line service and long distance minutes, hi‑speed internet access and e‑mail, exciting new productivity features, network upgrade, easy to use web IP, web‑based administration tools, and it refers to the new Mitel 5224 IP phones.

LISTNUM 1 \l 19276             These are the services, you would agree with me, that are provided over Easy IP?

LISTNUM 1 \l 19277             MR. PATTINSON:  Yes, they are.

LISTNUM 1 \l 19278             MR. HOFLEY:  If I go down further, I believe it says ‑‑ well, let me ask you this.  So, is Easy IP a way to deliver voice to business customers?

LISTNUM 1 \l 19279             MR. PATTINSON:  Yes, it is.

LISTNUM 1 \l 19280             MR. HOFLEY:  I am looking at a quote, if I turn the page over ‑‑

LISTNUM 1 \l 19281             MR. PATTINSON:  You are in which exhibit now, please?

LISTNUM 1 \l 19282             MR. HOFLEY:  Still in U, just turn the page over one.  You will see there it says:


"Unlike consumer voice‑over‑IP services that run on the public internet, with Easy IP, your voice and data traffic run over our private IP network for the security and call quality you need."  (As read)

LISTNUM 1 \l 19283             Do you see that?

LISTNUM 1 \l 19284             MR. PATTINSON:  Yes, I do.

LISTNUM 1 \l 19285             MR. HOFLEY:  Is this a private IP network not unlike the one we referred to in the NetOptiks example that we just discussed?

LISTNUM 1 \l 19286             MR. PATTINSON:  That is correct.  Then I will add, sir, that this product was built on the former CallNet network.  It is 100 per cent built on that former network using unbundled loops.  We would love to be able to bring this product to the cable network, but we cannot, at this point, due to many upgrades that I have referred to earlier on that need to be made on the voice soft switches, as well as our doc sys network.

LISTNUM 1 \l 19287             MR. HOFLEY:  But you are not suggesting that it can't be done over fibre or coax, are you, Mr. Pattinson?

LISTNUM 1 \l 19288             MR. PATTINSON:  At the moment there are large technology hurdles that are preventing it being delivered over the coax network.


LISTNUM 1 \l 19289             MR. HOFLEY:  Doesn't the Mitel system that you referred to actually provide for delivery of voice services over coaxial cable or over fibre?

LISTNUM 1 \l 19290             MR. WATT:  If I could interject, because the point may have been missed, one would have to have that coax network or the fibre network into the physical location.  That is the key item.  This service runs off the mandated facilities that are the ‑‑

LISTNUM 1 \l 19291             MR. HOFLEY:  Right, but it could be over coax if it was in the building, or over fibre if it was in the building.  Is that is your point, Mr. Watt?

LISTNUM 1 \l 19292             MR. PATTINSON:  If I could refer to the quote that you referred to at the bottom of the fifth paragraph that talked about the suite spot between five and 49, the cable network at this point is not capable of providing that service to greater than about eight customers due to congestion issues in the upstream doc sys channel.

LISTNUM 1 \l 19293             MR. HOFLEY:  But, again, it can be provided over fibre or coax?  You are not saying that is not technically possible.  Correct?


LISTNUM 1 \l 19294             MR. PATTINSON:  I would love to be able to provide this product on the coax network to recover margin from very expensive T‑1 resale that we buy from you today.

LISTNUM 1 \l 19295             MR. HOFLEY:  I will just leave that.

LISTNUM 1 \l 19296             THE CHAIRPERSON:  Can you come to the punch line here?  I don't quite understand.  I am lost here.

LISTNUM 1 \l 19297             You are trying to establish if they can establish phone over coaxial or not?

LISTNUM 1 \l 19298             MR. HOFLEY:  Yes.

LISTNUM 1 \l 19299             THE CHAIRPERSON:  Does this IP document, Easy IP that you have just introduced, does that demonstrate yes, they can, or no?

LISTNUM 1 \l 19300             MR. HOFLEY:  It seems to be, with the testimony, it demonstrates that they are not, but that it is technically possible to do so.

LISTNUM 1 \l 19301             THE CHAIRPERSON:  Thank you.

LISTNUM 1 \l 19302             MR. HOFLEY:  I think that is what I just heard.

LISTNUM 1 \l 19303             MR. PATTINSON:  It is technically possible at the smallest level.  So, up to eight customers, and that is still several years away.  That is the Pandion multiple technologies from third parties, as well as a lot of heavy lifting inside of our own OSS back end that we intend to do.


LISTNUM 1 \l 19304             It is my mandate, at the direction of Ted Rogers, to always build our products on our network, where we can deliver that quality of service.

LISTNUM 1 \l 19305             MR. HOFLEY:  Let's talk about building those products, then, Mr. Chairman, and move on to the seat to the business side.

LISTNUM 1 \l 19306             THE CHAIRPERSON:  I would like to make a general comment for you and for other counsel.

LISTNUM 1 \l 19307             We, as a panel here, would find it very useful, when you go through a line of questioning and you get the answers you want, before you move on you sort of deliver the conclusion of what this was all about.  It would help us put it in context because very often we sit here and follow the exchange and say, okay, what did you prove or disprove by this exchange.  Rather than having us guess or waiting for a submission a month from now, it would be helpful if you just shortly summarized it.  Thank you.

LISTNUM 1 \l 19308             MR. HOFLEY:  Was that sufficient, my last one, Mr. Chairman?

LISTNUM 1 \l 19309             THE CHAIRPERSON:  That was perfect.

LISTNUM 1 \l 19310             MR. HOFLEY:  I apologize, I should have done that.


LISTNUM 1 \l 19311             I am now going to move on to my last set of questions, Mr. Chairman, and this relates to Rogers' position in respect of CDN at DS‑3 above and Ethernet.  So, these are the more hi‑speed business services.

LISTNUM 1 \l 19312             THE CHAIRPERSON:  Before you do that, I notice it is 10:30.  I think we should take a ten‑minute break.  Thank you.

‑‑‑ Upon recessing at 1030 / Suspension à 1030

‑‑‑ Upon resuming at 1042 / Reprise à 1042

LISTNUM 1 \l 19313             THE CHAIRPERSON:  Madam Secretary, you have an announcement?

LISTNUM 1 \l 19314             THE SECRETARY:  Yes, thank you, Mr. Chairman.

LISTNUM 1 \l 19315             Please be seated.

LISTNUM 1 \l 19316             I am presenting at this moment the next CRTC exhibit, which is the undertakings requested by all the parties involved since last week.  It is dated 15 October 2007 and it is logged as Exhibit No. 6.  It has already been distributed on everybody's table.

EXHIBIT CRTC‑6:  CRTC Undertakings register CRTC version 2007-15-15

LISTNUM 1 \l 19317             THE SECRETARY:  As for all the exhibits filed by the Companies this morning, after their cross‑examination, I will summarize everything that was filed before the Commission.

LISTNUM 1 \l 19318             Thank you.


LISTNUM 1 \l 19319             THE CHAIRPERSON:  Okay, Mr. Hofley, proceed.

LISTNUM 1 \l 19320             MR. HOFLEY:  Thank you.  I won't be long.  I had hoped to finish before the break but unfortunately I didn't, so I apologize for that.

LISTNUM 1 \l 19321             THE CHAIRPERSON:  Our bladders can only take two hours.

‑‑‑ Laughter / Rires

LISTNUM 1 \l 19322             MR. HOFLEY:  Mr. Chairman, as I said, my last area of questions for this panel deals with CDN at DS‑3 above and Ethernet.

LISTNUM 1 \l 19323             Should I be directing my questions to you on this, Mr. Pattinson, or to you, Mr. Watt, or both?  I will tell you what, you answer when you ‑‑

LISTNUM 1 \l 19324             I just want to situate your services on Ethernet for the purposes of the Commission and so what I have done is I have provided the Commission at Tab BB an excerpt from Rogers website.  It is Tab BB of the compendium.

LISTNUM 1 \l 19325             I just want to get you to have a look at that and then just highlight for me the services you provide and then I have a few questions to do with those and we will be done.

LISTNUM 1 \l 19326             Do you have that?

LISTNUM 1 \l 19327             MR. PATTINSON:  We do.


LISTNUM 1 \l 19328             MR. HOFLEY:  Thanks.

LISTNUM 1 \l 19329             Now, here it says that:

"Rogers offers transport land solutions to Canadian businesses of all sizes, connecting local or national lands via traditional copper accesses such as DSL T1 and T3, as well as next generation broadband Ethernet accesses such as ET‑1, E‑10, E‑100 and OCX." (As read)

LISTNUM 1 \l 19330             Do you see that?

LISTNUM 1 \l 19331             MR. PATTINSON:  Yes, I do.

LISTNUM 1 \l 19332             MR. HOFLEY:  It is a combination of both traditional copper accesses as well as next generation broadband accesses; correct?

LISTNUM 1 \l 19333             MR. PATTINSON:  Correct.

LISTNUM 1 \l 19334             MR. HOFLEY:  Is that what that means?  Okay.

LISTNUM 1 \l 19335             I am not a technical person, Mr. Pattinson, so forgive me if I ask silly questions.

LISTNUM 1 \l 19336             Then you go on and you talk about your fiber to the premises footprint and you say:


"That covers all primary metropolitan centres and many secondary business centres across the country." (As read)

LISTNUM 1 \l 19337             What do you mean by secondary business centres there?

LISTNUM 1 \l 19338             MR. PATTINSON:  Small cities, places that we do not have network running into.

LISTNUM 1 \l 19339             MR. HOFLEY:  Okay.  And ‑‑

LISTNUM 1 \l 19340             MR. WATT:  I can add here when it says our fiber to the premise footprint, it is 850 (sic) buildings.  They are all in eastern Canada.  The large cities are obviously Toronto, Montreal, Ottawa.  Secondary would be the smaller locations, the GT fiber assets in Fredericton and Saint‑John.

LISTNUM 1 \l 19341             That is our fiber to the premise footprint to that, nothing aside from a few fiber facilities in Vancouver that Mr. Pattinson will speak to.

LISTNUM 1 \l 19342             MR. HOFLEY:  I just want to make sure, Mr. Watt.  Did you just say 850 or 1,850?

LISTNUM 1 \l 19343             MR. WATT:  One thousand eight hundred and fifty.

LISTNUM 1 \l 19344             MR. HOFLEY:  That is what I thought.


LISTNUM 1 \l 19345             MR. WATT:  And as I say, that is provided ‑‑ each street address provided to the Commission in confidence in response to the Bureau 8(b), the attachment.

LISTNUM 1 \l 19346             MR. HOFLEY:  Then you go on to talk about the larger metropolitan areas and I think ‑‑ and again, I hope I have my terminology right ‑‑ are fiber, and I think it is the metro area network footprint covers Toronto, Montreal, Ottawa, Calgary, Edmonton and Vancouver.

LISTNUM 1 \l 19347             Am I right on that, metro area networks ‑‑

LISTNUM 1 \l 19348             MR. PATTINSON:  That is correct.

LISTNUM 1 \l 19349             MR. HOFLEY:  ‑‑ offering Ethernet services?

LISTNUM 1 \l 19350             MR. PATTINSON:  Yes.  This is the former Call‑Net network and I agree that it is a fabulous inner‑city and metro network but it doesn't go into those buildings.

LISTNUM 1 \l 19351             MR. HOFLEY:  Okay.  And then you talk about your international partnerships and these are agreements that you enter into to provide your customers with services for their various locations, just like the ILECs do out‑of‑territory; correct?

LISTNUM 1 \l 19352             MR. PATTINSON:  I am sorry, could you repeat that?


LISTNUM 1 \l 19353             MR. HOFLEY:  The reference to the international partnerships, that is just simply a reference to the fact that you enter into agreements with other TSPs in other locations so that your customers can get access in other locations; correct ‑‑

LISTNUM 1 \l 19354             MR. PATTINSON:  That is correct.

LISTNUM 1 \l 19355             MR. HOFLEY:  ‑‑ just like the ILECs do?

LISTNUM 1 \l 19356             MR. PATTINSON:  So that we can provide service to customers outside of ‑‑

LISTNUM 1 \l 19357             MR. HOFLEY:  Outside of your territory?

LISTNUM 1 \l 19358             MR. PATTINSON:  ‑‑ and that is into the metropolitan area network, which in most cases, sir, only has three or four nodes.

LISTNUM 1 \l 19359             MR. HOFLEY:  Okay.

LISTNUM 1 \l 19360             MR. PATTINSON:  It is nice but it is very small.

LISTNUM 1 \l 19361             MR. HOFLEY:  And finally, it says under the detail section that:

"Rogers was ranked by business analysts as the number three Ethernet provider in Canada." (As read)

LISTNUM 1 \l 19362             Do you see that?

LISTNUM 1 \l 19363             MR. PATTINSON:  Yes, I do.


LISTNUM 1 \l 19364             MR. HOFLEY:  Okay.  You have both cable and telephony network; correct?  That is what you just said, I think; right, Call‑Net?

LISTNUM 1 \l 19365             MR. PATTINSON:  We have cable networks and we have TDM networks.

LISTNUM 1 \l 19366             MR. HOFLEY:  Right.  And that is similar to QMI, to Vidéotron?

LISTNUM 1 \l 19367             MR. PATTINSON:  I would suggest they are more limited to ‑‑ Vidéotron, as an example, would be more cable‑ and DocSys‑oriented.

LISTNUM 1 \l 19368             MR. HOFLEY:  But they do have telephony as well, just like you, correct?

LISTNUM 1 \l 19369             MR. PATTINSON:  They have some telephony services.

LISTNUM 1 \l 19370             MR. HOFLEY:  Right.

LISTNUM 1 \l 19371             Now, I would like you to turn if I could ‑‑ I would like to take you to and ask you questions about your fellow cable companies and why they can do things that you are not yet doing.

LISTNUM 1 \l 19372             So if we turn ‑‑ I hope that I am helping where we are going there, Mr. Chairman, although it is against every instinct I have as a cross‑examiner.

‑‑‑ Laughter / Rires

LISTNUM 1 \l 19373             MR. HOFLEY:  I can feel my stomach turning as I speak.


LISTNUM 1 \l 19374             THE CHAIRPERSON:  Life is a trade‑off, Mr. Hofley.

‑‑‑ Laughter / Rires

LISTNUM 1 \l 19375             MR. HOFLEY:  Mr. Pattinson, so if I could take you to Tab DD, which is QMI‑Bureau 12Apr07‑1.

LISTNUM 1 \l 19376             You will see there that QMI says that they provide:

"...local telephone service and internet access service over a hybrid optical fiber coaxial cable network to residential customers and small business customers, up to two local phone lines." (As read)

LISTNUM 1 \l 19377             But they also provide:

"...advanced business telephony data and internet access services over fiber to the premises to medium and large businesses." (As read)

LISTNUM 1 \l 19378             Do you see that?

LISTNUM 1 \l 19379             MR. PATTINSON:  Yes, I do.


LISTNUM 1 \l 19380             MR. HOFLEY:  And then if you turn to Tab EE, which is QMI‑Bureau 12Apr07‑23, we see there down under (e) and (g) that QMI says:

"With limited exceptions all of QMI's CDN‑equivalent services are self‑supplied."  (As read)

LISTNUM 1 \l 19381             Were you aware of that?

LISTNUM 1 \l 19382             MR. PATTINSON:  No, I'm not.

LISTNUM 1 \l 19383             MR. HOFLEY:  But you don't have any basis for disputing that, do you?

LISTNUM 1 \l 19384             MR. PATTINSON:  I see what is written here, but I'm not ‑‑

LISTNUM 1 \l 19385             MR. HOFLEY:  If I go over to the next tab, which is QMI 12 April 2007‑24, you will see again under (e) and (g) ‑‑

LISTNUM 1 \l 19386             MR. PATTINSON:  I'm sorry, you are in FF now?

LISTNUM 1 \l 19387             MR. HOFLEY:  I believe I am.  I apologize.  FF.

LISTNUM 1 \l 19388             You will see there it says:

"With limited exceptions all of QMI's Ethernet services are self‑supplied."  (As read)


LISTNUM 1 \l 19389             So QMI can do this, but Rogers can't.  Is that what you are saying?  They can self‑supply, they can provide CDN‑equivalent services and Ethernet services through self‑supply, but you are saying that you cannot?

LISTNUM 1 \l 19390             MR. PATTINSON:  I think what it's saying here is in the buildings for which they have access they are providing those services.  I don't think they are commenting on their entire territory.

LISTNUM 1 \l 19391             MR. HOFLEY:  I'm just reading what they are saying.  So you just said you don't know what they are saying, but ‑‑ you have just said you can read the words, but you are not sure what the extent is.  So are you just speculating as to whether that is what they are saying?

LISTNUM 1 \l 19392             MR. PATTINSON:  No.

LISTNUM 1 \l 19393             MR. HOFLEY:  Because I read it and it says:

"With limited exceptions all of QMI's Ethernet services are self‑supplied."  (As read)

LISTNUM 1 \l 19394             MR. WATT:  I think actually your question was why can QMI do this ‑‑ why can Rogers not do it when QMI can do it?

LISTNUM 1 \l 19395             The fact is that we do provide sophisticated data services over our own facilities where we have those facilities.  In other cases obviously we use the telephone companies.


LISTNUM 1 \l 19396             QMI provides the services where they have the fibre connections into the buildings as well.  Their emphasis is different historically than Rogers Call‑Net because Call‑Net operated right across the country and had a grander ambition in terms of providing service.

LISTNUM 1 \l 19397             QMI has started small within its cable footprint in Montréal ‑‑ and you can speak to them about this ‑‑ and they have taken a different strategic approach.

LISTNUM 1 \l 19398             They also note, though, that there are instances where they do require telephone company unbundled facilities and presumably that is for accounts that are multi‑location businesses where you require, in order to bid at all, to serve all the locations and their network doesn't go everywhere so they have to use ‑‑ even though it is not their strategic focus, they have to use telco facilities to couple with their own.

LISTNUM 1 \l 19399             MR. HOFLEY:  You would agree with me that they haven't asked for that to be regulated, though.

LISTNUM 1 \l 19400             You would agree with me that they haven't asked for CDN or Ethernet services to be regulated, wouldn't you ‑‑ be mandated?


LISTNUM 1 \l 19401             MR. WATT:  You mean in the context of this proceeding?

LISTNUM 1 \l 19402             MR. HOFLEY:  Yes.  Yes.

LISTNUM 1 \l 19403             MR. WATT:  I believe that is the case.  They are certainly presumably availing themselves of the tariffs that exist today.

LISTNUM 1 \l 19404             MR. HOFLEY:  QMI also provides wholesale services in this area.

LISTNUM 1 \l 19405             Were you aware of that?  Wholesale high‑speed internet services?

LISTNUM 1 \l 19406             MR. PATTINSON:  Yes.

LISTNUM 1 \l 19407             MR. HOFLEY:  CDN service or wholesale private line services, wholesale Ethernet services?

LISTNUM 1 \l 19408             Have you talked with QMI about using their wholesale services?

LISTNUM 1 \l 19409             MR. PATTINSON:  We do buy some services today from QMI.

LISTNUM 1 \l 19410             MR. HOFLEY:  I think you said earlier, mr. Pattinson, that you were aware of EastLink's different strategy with respect to providing business services than Rogers.

LISTNUM 1 \l 19411             Perhaps just to make things go faster, would you agree with me that EastLink provides CDN and Ethernet services to business using their own facilities?


LISTNUM 1 \l 19412             MR. PATTINSON:  I don't know about CDN, but I do know that they provide services on their own network to residences and businesses.

LISTNUM 1 \l 19413             MR. HOFLEY:  In fact there is a response to an interrogatory from you that sets that out.  That's why I'm trying to expedite this.  That, by the way, is EastLink/Rogers 12 April 07‑04.

LISTNUM 1 \l 19414             Were you aware that EastLink is also providing wholesale internet private line and Ethernet services?

LISTNUM 1 \l 19415             MR. PATTINSON:  Yes, I am.

LISTNUM 1 \l 19416             MR. HOFLEY:  If I take you to Tab JJ, which is EastLink/TELUS 12 April 07‑3, you will see there again, like QMI, that EastLink says that it:

"... offers the majority of its services ..."

LISTNUM 1 \l 19417             It is the second paragraph:

"... via it's own facilities and attempts to rely minimally on third parties."  (As read)

LISTNUM 1 \l 19418             Do you see that?

LISTNUM 1 \l 19419             Mr. Watt, does EastLink have a different business strategy than Rogers?  Again, just like QMI has a business strategy, does EastLink have a different business strategy?


LISTNUM 1 \l 19420             MR. WATT:  EastLink has had a different business strategy.  As you are aware, EastLink was the first cable company to provide telephony services.  They started in, I think, about the 1997‑98 timeframe using circuit switch technology.  That circuit switch was used for residential and then they have evolved it into business.

LISTNUM 1 \l 19421             None of the other cable companies chose to use circuit switch technology in the provision of their cable telephony service so they have a history of pursuing a different technology path and a different strategy than ‑‑

LISTNUM 1 \l 19422             MR. HOFLEY:  Arguably they made some risky investments.  Correct?  They innovated?

LISTNUM 1 \l 19423             MR. WATT:  We don't think actually they did innovate using circuit switch technology.  We think we innovated using IP packet cable standards and we are happy with our strategic choice.

LISTNUM 1 \l 19424             MR. HOFLEY:  With every strategic choice comes consequences.  Correct, Mr. Watt?

LISTNUM 1 \l 19425             MR. WATT:  Yes.

LISTNUM 1 \l 19426             MR. HOFLEY:  Just out of curiosity, have you made wholesale services EastLink?  Have you made any arrangements to use any of their wholesale services?


LISTNUM 1 \l 19427             MR. PATTINSON:  I think we buy a small amount.

LISTNUM 1 \l 19428             MR. HOFLEY:  Would you agree with me that these companies, EastLink and QMI, you are as equally well capitalized as these companies?  You have similar or greater means to invest.

LISTNUM 1 \l 19429             Would that be a fair statement, Mr. Watt?  You are a big company.

LISTNUM 1 \l 19430             MR. WATT:  We are a big company.  Well, I think to put it into perspective, EastLink, QMI, other cable companies, they provide their business services directly to businesses where they have facilities into those businesses.  We do the same.

LISTNUM 1 \l 19431             We chose to go farther and have more expansive offerings so that we tie more locations together using more telco facilities.

LISTNUM 1 \l 19432             Certainly our plan is to grow scale in that fashion and then finance additional capital expenditures.  As is quite evident, Rogers definitely wants to expend the money, it wants to have the end‑to‑end control, and that is the plan we are laying out.


LISTNUM 1 \l 19433             If we can't get there and build a viable business by coupling both our own facility to leased facilities we will not be able to go forward and increase our investment and reach the self‑supply stage.

LISTNUM 1 \l 19434             MR. HOFLEY:  Mr. Watt, these are my last questions.

LISTNUM 1 \l 19435             Were you here on Friday morning when The Companies were testifying?

LISTNUM 1 \l 19436             MR. WATT:  I was here for a portion Friday morning.

LISTNUM 1 \l 19437             MR. HOFLEY:  Well, you may recall during that testimony that Mr. Ruby characterized The Companies' position as the "trust me" theme.  He didn't give them an opportunity to respond.  I'm sure they would have said their theme is "trust the market".

LISTNUM 1 \l 19438             But I am seeing a theme emerge from your submissions here and I do want to give you, in fairness, an opportunity to respond.

LISTNUM 1 \l 19439             The theme that I see emerging is that your position before the CRTC is really "Don't rush me".  That is really your position here before the CRTC, is "Don't rush me."

LISTNUM 1 \l 19440             Is that a fair description, albeit short?

LISTNUM 1 \l 19441             MR. WATT: No, I don't think it is fair at all.


LISTNUM 1 \l 19442             Our position here before the CRTC is we are looking to them to establish the proper regulatory rules such that competition can develop on an economic basis.  We are asking for terms, economic terms that allow us to proceed in this market.  Without those economic terms we can't proceed.

LISTNUM 1 \l 19443             So it is not a question of saying "Don't rush me", we are saying "Please, put in place a regime that makes it economic for us to develop and grow into using our own facilities over time."

LISTNUM 1 \l 19444             MR. HOFLEY:  Is your five‑year transition period you proposed enough time for that?

LISTNUM 1 \l 19445             MR. WATT:  Well, I think it might be worthwhile having Mr. Pattinson explain the obstacles that companies do face in placing facilities into buildings on a widespread basis.  Just leaving aside the issue of the simple economics, we are a big company but with a billion business locations across the country.  And you have seen the numbers in terms of fibre, the numbers are large, a million times, even a hundred thousand, you are looking at significant amounts of money.


LISTNUM 1 \l 19446             But more than that, it is not just the absolute amount of the money, the issue is can you make any money by having invested that money? Because we have to realize, we have got a certain market share, say it is 3 or 4 per cent, but we have to get customers to switch to us from the incumbents in order to provide us the revenue to pay for those investments.  If that is not the case, then we simply will not make those investments.

LISTNUM 1 \l 19447             MR. HOFLEY:  I understand, Mr. Watt, and I understand your are in the business of making money.  Did you say a billion businesses?

LISTNUM 1 \l 19448             MR. WATT:  I may have said a billion, I didn't think I did, I thought I said a million.

LISTNUM 1 \l 19449             MR. HOFLEY:  Okay, no, I am sorry, I just wanted to make sure.

LISTNUM 1 \l 19450             So the answer is your five‑year transition period may not be enough, depending on the situation, is that fair?

LISTNUM 1 \l 19451             MR. WATT:  Well absolutely, yes, because the five‑year transition period, are we seriously going to contemplate putting in coax into every one of those million business locations?  That is putting facilities into all the businesses that the telephone companies have put facilities into as they have grown up over a 100 years.  I just don't think that that is very likely to be the case, hence our request to have unbundled local loops be deemed an essential facility.  And we don't think that that would go away after a five‑year transition period.


LISTNUM 1 \l 19452             MR. HOFLEY:  So in other words, that kind of mandated access won't incent your investment in these areas and will have regulation in perpetuity in this area?

LISTNUM 1 \l 19453             MR. WATT:  It depends upon the economics in those locations.  And if it doesn't make economic sense, then ‑‑

LISTNUM 1 \l 19454             MR. HOFLEY:  You have regulation in perpetuity?

LISTNUM 1 \l 19455             MR. WATT:  ‑‑ then you might insert some of those locations.  However, what you are probably more likely to find, and this will be over time, as we grew out, that there would be a subset of customers where we didn't put the facilities in, but you would be satisfied that it is a small enough number that we can let the market go.

LISTNUM 1 \l 19456             And if there is any attempted abuse that, because it would be small, the cable companies having grown out to a fair extent, it would be able to go into those buildings and discipline.

LISTNUM 1 \l 19457             MR. HOFLEY:  Mr. Watt, I asked a simple question.  Does this mean regulation in perpetuity?


LISTNUM 1 \l 19458             MR. WATT:  It could be, but you always have the option available to apply for forbearance if you think the conditions change.  But it could be the case ‑‑

LISTNUM 1 \l 19459             MR. HOFLEY:  Those are my questions.

LISTNUM 1 \l 19460             THE CHAIRPERSON:  Presumably rather than in perpetuity, you mean until the next wholesale review?

‑‑‑ LAUGHTER / RIRES

LISTNUM 1 \l 19461             MR. HOFLEY:  Well, you will see that our position, Mr. Chairman, is there shouldn't be another wholesale review, but obviously that is an option.

LISTNUM 1 \l 19462             I don't have any further questions.  I would like to thank the panel for their attention and for their answers.

LISTNUM 1 \l 19463             THE CHAIRPERSON:  Thank you.

LISTNUM 1 \l 19464             Madam Secretary, who is next?  Oh, do you have a question?  Sorry, Commissioner Cram had a question.

QUESTIONS BY THE COMMISSION


LISTNUM 1 \l 19465             COMMISSIONER CRAM:  Mr. Watt, I am sitting here and I think twice, once with the Bureau and now with Bell, you talked about more than a duopoly.  I read the direction or the variation in our forbearance order and why is it that I can't read into that that the government thinks we have met our mandate of sustainable competition if there is a duopoly only in the wireline market?

LISTNUM 1 \l 19466             In other words, should we hope for more when the government, under the variation, has said, you are doing a great job if you have got two on wireline?

LISTNUM 1 \l 19467             MR. WATT:  Bearing in mind that that it is premised on mandated wholesale facilities in the business market in order to achieve that second player, our principal concern in this proceeding is that but for those facilities you would be down to simply one competitor in much of the business market.

LISTNUM 1 \l 19468             As to whether two should be the goal or three should be the goal, possibly I should ask Roger Ware to speak to the generally recognized benefits that more diverse competition brings than just two.

LISTNUM 1 \l 19469             DR. WARE:  Excuse me, Commissioner Cram, if I could just very briefly speak to that, and I did have an exchange with the Chair about this.  But certainly, among competition agencies a three to two merger would not be permitted unless there were extraordinary efficiency gains.


LISTNUM 1 \l 19470             You know, based on the standards used by competition agencies around the world, we would normally expect a duopoly to involve some market power.  And so two to three is something that is worth having.  And in terms of the, for example, the Commission has revised definition of an essential facility, would generally involve a substantial increase in competition.

LISTNUM 1 \l 19471             COMMISSIONER CRAM:  Thank you.

LISTNUM 1 \l 19472             And in the residential market, what about the duopoly issue, Mr. Watt?

LISTNUM 1 \l 19473             MR. WATT:  Well, again, that is why we have asked for access to unbundled local loops so that we can, outside our cable footprint territory, bring in a third player into that particular market and we think, say there are benefits through that, and that removal of access to those loops would cause us to exit that market.  And there are 180,000 customers currently in just three metropolitan areas that take our service, they would not longer be taking service from us and we think that would be a lessening of competition.


LISTNUM 1 \l 19474             COMMISSIONER CRAM:  And what would be the impact on your Call‑Net business and residential market on a scale of 1 to 10, 10 being exiting the business, 1 being trivial?  What will be the impact on that Call‑Net sector if we increased the mark‑up to 20 per cent and then subsequently in a year or two later increased it to 25 per cent?

LISTNUM 1 \l 19475             MR. WATT:  So if I took an average cost of an unbundled local residential loop at say $12 and the mark‑up today is 15 per cent, we would have to do the inverse ‑‑ the mark‑up say $1.50, about $2.00 of that is ‑‑ I think maybe at $1.50 of that is mark‑up and you are going to increase the mark‑up from 15 to 20, so 25 per cent you would be adding 50 cents to the cost of a loop.

LISTNUM 1 \l 19476             That would deteriorate our economics.  Would we exit the market at that point given the, you know, if we are going to retain access to the loop for business purposes, they are going to be co‑located there, get those synergies, would deteriorate our economics.  I could not make the categorical statement that we would withdraw I don't believe.

LISTNUM 1 \l 19477             Mr. Pattinson, would you like to ‑‑


LISTNUM 1 \l 19478             MR. PATTINSON:  Commissioner Cram, I would also add that in the likelihood that those loops were unregulated, I believe that it is fair to estimate that the QoS requirements would dissolve.  And from a product perspective, we would not be able to rely on services being available to the residential market in a quick manner.  And we have spent a great deal of time with the Commission over the last five years trying to get those QoS indicators enforced and I would be very very concerned.  And it would limit my ability to be able to react quickly to a customer and say that I can actually provide service.

LISTNUM 1 \l 19479             COMMISSIONER CRAM:  You mean, if something is not declared to be essential or mandated the QoS would dissolve?  I mean, the QoS is always there, wouldn't it always be there?

LISTNUM 1 \l 19480             DR. WARE:  If the loops were completely unregulated, that was the example I was bringing.

LISTNUM 1 \l 19481             COMMISSIONER CRAM:  Oh, if it is a forborne ‑‑

LISTNUM 1 \l 19482             DR. WARE:  If it was completely forborne.

LISTNUM 1 \l 19483             COMMISSIONER CRAM:  All right.  I understand.

LISTNUM 1 \l 19484             My final question is on the Willing Report and the issue of investment.

LISTNUM 1 \l 19485             In that wholesale regime, did the FCC require the ILECs to sell loops if they were available, or to build loops for the demand?

LISTNUM 1 \l 19486             Are you aware?


LISTNUM 1 \l 19487             MS BLACKWELL:  I am trying to think of it in the context of the second decision in 2005, and even the previous one.

LISTNUM 1 \l 19488             The impression I have is that it certainly acknowledged the fact that, for the most part, those loops are in place.

LISTNUM 1 \l 19489             Even in Rogers' own evidence, when we talk about Greenfield builds, assuming all potential entrants to a new subdivision had equal access to the opportunity to put facilities in the conduits as the subdivision was being built, then that may not be a circumstance where you would have an essential facility.

LISTNUM 1 \l 19490             So, from that perspective, in the Rogers' context, you might want to take a look at that Greenfield build.

LISTNUM 1 \l 19491             I can't recall off the top of my head exactly which interrogatory response it was.

LISTNUM 1 \l 19492             In the U.S. market, though, with respect to forcing the incumbent local exchange company to put in place a copper loop, in particular, I would have to check, but I don't think they were mandating access where it was not already built.


LISTNUM 1 \l 19493             Certainly, that is something, I think, in the expert evidence that Mr. Hatfield talked about.  There is a totally different issue in terms of incentives ‑‑ that you might be impacting the incentives to invest of the incumbent when you are talking about facilities that are in place.

LISTNUM 1 \l 19494             COMMISSIONER CRAM:  In other words, even if we were dividing the capital for provisioning between UNEP and other capital, they would probably be building the UNEP for their own purposes in terms of investment.

LISTNUM 1 \l 19495             MS BLACKWELL:  UNEP is the loop plus the switch.

LISTNUM 1 \l 19496             COMMISSIONER CRAM:  The access, yes.

LISTNUM 1 \l 19497             MS BLACKWELL:  Right.  And I think the FCC recognized in the 2005 decision that switching, in particular, had become something that most competitors could readily put in place.

LISTNUM 1 \l 19498             In the context of the protocol stack, it is higher up in the layers of the stack; whereas, the actual transmission path, the physical network and some of the other parts that reside lower in the stack, that's where you have issues.

LISTNUM 1 \l 19499             So when they took away UNEP, they really just took away the switching part of it.

LISTNUM 1 \l 19500             COMMISSIONER CRAM:  Thank you.

LISTNUM 1 \l 19501             Thank you, Mr. Chair.

LISTNUM 1 \l 19502             THE CHAIRPERSON:  Thank you very much.


LISTNUM 1 \l 19503             Let's have the next cross‑examiner, Madam Secretary.

LISTNUM 1 \l 19504             THE SECRETARY:  Thank you, Mr. Chairman.

LISTNUM 1 \l 19505             I would now ask TELUS to come forward while I summarize the exhibits filed by The Companies.

LISTNUM 1 \l 19506             The Companies Exhibit No. 5 will be the Joint Centre report by Scott Wallsten of June 2006.

EXHIBIT COMPANIES‑5:  Joint Center report dated June 2006, "Broadband and Unbundling Regulations in OECD Countries"

LISTNUM 1 \l 19507             THE SECRETARY:  Exhibit No. 6 will be the LECG Expert Report, dated September 2007.

EXHIBIT COMPANIES‑6:  LECG Report dated September 2007

LISTNUM 1 \l 19508             THE SECRETARY:  Exhibit No. 7 will be the "Watt's New" newsletter clipping.

EXHIBIT COMPANIES‑7:  "Watt's New" clipping - Winter 2006 entitled "Net Optiks/Rogers partnership provides innovative network for Catholic schools"


LISTNUM 1 \l 19509             THE SECRETARY:  Exhibit No. 8 will be the Globe and Mail September 10, 2007 clipping, entitled "Solutions for the Little Guy".

EXHIBIT COMPANIES‑8:  Globe and Mail clipping - "Solutions for the Little Guy" - Sept. 10, 2007

LISTNUM 1 \l 19510             THE SECRETARY:  Exhibit No. 9 will be the clipping with a picture of the EASY IP, dated 7 October 2007

EXHIBIT COMPANIES‑9:  Clipping dated 7 October 2007 with photo and EASY IP title

LISTNUM 1 \l 19511             THE SECRETARY:  The last exhibit will be The Companies Exhibit No. 10, a clipping entitled "Ethernet Services".

EXHIBIT COMPANIES‑10:  Clipping from Rogers.com - "Ethernet Services"

LISTNUM 1 \l 19512             Counsel Rogers, when you are ready, you may proceed.

LISTNUM 1 \l 19513             THE CHAIRPERSON:  Mr. Rogers, welcome again.

LISTNUM 1 \l 19514             I would appreciate it if, like Mr. Hofley, you would not ask questions that have been asked before.


LISTNUM 1 \l 19515             Also, sir, give some guidance to the panel as to where you are going and what you have concluded once you have finished your questioning.

LISTNUM 1 \l 19516             Thank you.

EXAMINATION / INTERROGATOIRE

LISTNUM 1 \l 19517             MR. ROGERS:  I will endeavour to do so, Mr. Chairman.  Thank you.

LISTNUM 1 \l 19518             Mr. Chairman and members of the panel, good morning.  To facilitate the whole process, in terms of documentation, it will go much more smoothly if everyone has certain documents in front of them.

LISTNUM 1 \l 19519             We have provided a black duotang folder, which I hope has reached the Commission panel members.  It should also be in the hands of all of the witness panels.  That will make things much easier in terms of access to documents.

LISTNUM 1 \l 19520             The other documents which you will want to have readily at hand are the Rogers March 15 evidence and your supplemental evidence of July.

LISTNUM 1 \l 19521             THE CHAIRPERSON:  For the benefit of your co‑counsel, you will still have to read out some of the references, because they don't have this duotang in front of them.

LISTNUM 1 \l 19522             MR. ROGERS:  I will do so, Mr. Chairman.


LISTNUM 1 \l 19523             In terms of the record, a number of the documents in the folder are actually already exhibits in the proceeding, so they don't need to be made exhibits in a formal sense.

LISTNUM 1 \l 19524             Other documents are to be introduced, and I trust that the Secretary will, at the conclusion, do the customary assignment of numbers.

LISTNUM 1 \l 19525             Mr. Watt, I will begin with you.  You can obviously handle this yourself or with anybody else.

LISTNUM 1 \l 19526             I would like to begin by asking you to turn to the attachment to the Commission's letter of October 3rd, which sets out the six‑part framework that the Commission asked all of us to consider.

LISTNUM 1 \l 19527             I expect that you have had a chance to consider that, Mr. Watt.

LISTNUM 1 \l 19528             MR. WATT:  Yes, we have.

LISTNUM 1 \l 19529             MR. ROGERS:  I would like to begin by seeing if there are any elements of that Commission framework on which there may be, possibly, some convergence, if I could use that term.


LISTNUM 1 \l 19530             For example, you would agree, I believe, that there are some services that are essential, and without getting into the definition of what "essential" means, you would agree that there are some, and that they should continue to be mandated at the conclusion of this proceeding.

LISTNUM 1 \l 19531             MR. WATT:  Yes.

LISTNUM 1 \l 19532             MR. ROGERS:  For the services or facilities determined by the Commission in this proceeding to be non‑essential, you would agree that there should be a phase‑out over some transition period.

LISTNUM 1 \l 19533             MR. WATT:  Yes.

LISTNUM 1 \l 19534             MR. ROGERS:  And your proposed transition period is five years.

LISTNUM 1 \l 19535             MR. WATT:  Yes.

LISTNUM 1 \l 19536             MR. ROGERS:  And you are aware that the TELUS proposal is three to five years, depending on the facility.

LISTNUM 1 \l 19537             MR. WATT:  Yes, I am aware of that.

LISTNUM 1 \l 19538             MR. ROGERS:  Do you see any merit ‑‑ this came up in a discussion with the Chairman on an earlier day ‑‑ to considering the possibility of different transition periods for different facilities?

LISTNUM 1 \l 19539             Do you think that's worth further consideration?

LISTNUM 1 \l 19540             MR. WATT:  Yes, I think it's worth consideration.


LISTNUM 1 \l 19541             MR. ROGERS:  If you were to assume that the Commission will, during the transition period, continue to set regulated tariff rates for these non‑essential facilities, subject to the phase‑out, would you have any objection if the Commission also permitted the incumbent and the CLEC during that period to negotiate mutually agreeable terms different from the tariff, provided the tariff always remains in place as a backstop?

LISTNUM 1 \l 19542             MR. WATT:  Yes.

LISTNUM 1 \l 19543             MR. ROGERS:  Could you elaborate?

LISTNUM 1 \l 19544             MR. WATT:  Yes.  We think that the incumbent and the purchaser or the current leaser of the facility should be able to negotiate during the five‑year period for non‑essential services that are going to be ‑‑

LISTNUM 1 \l 19545             MR. ROGERS:  I misunderstood you.  I said "Would you have any objection," and I think your answer is, you have no objection.

LISTNUM 1 \l 19546             MR. WATT:  That's right, we have no objection.

LISTNUM 1 \l 19547             MR. ROGERS:  All right.  That's fine.

LISTNUM 1 \l 19548             MR. WATT:  Just to confirm, for the non‑essential services.

LISTNUM 1 \l 19549             MR. ROGERS:  Right.

LISTNUM 1 \l 19550             MR. WATT:  Yes.


LISTNUM 1 \l 19551             MR. ROGERS:  Provided the tariff remains in place over that period.

LISTNUM 1 \l 19552             With regard to the Commission's Category 5, the public good, you would agree, I take it, that the current arrangements for 9‑1‑1, message relay service, and so on, should continue, more or less, as they are?

LISTNUM 1 \l 19553             MR. WATT:  Yes.

LISTNUM 1 \l 19554             MR. ROGERS:  And the last of the categories, which is interconnection, that is, Category 6, whether one labels this as an essential service or not ‑‑ there are different views on the point ‑‑ you would also agree that interconnection should be mandated for all service providers?

LISTNUM 1 \l 19555             It is necessary?

LISTNUM 1 \l 19556             MR. WATT:  Yes, we do.  We just were nervous when we saw the attachment, the comment in parenthesis, "such as direct connection."

LISTNUM 1 \l 19557             There was a lengthy discussion about the importance of access tandem, and some parties think that should not be maintained as a regulated service.  We believe it should.

LISTNUM 1 \l 19558             But, yes, we agree that the current interconnection arrangements should continue in place.  So there is agreement there.

LISTNUM 1 \l 19559             MR. ROGERS:  On that, as well.


LISTNUM 1 \l 19560             Mr. Watt, this has gone very smoothly so far.  We could save an enormous amount of time if you were to simply deem to agree to all of my subsequent proposals.

LISTNUM 1 \l 19561             The Chairman, I think, would be ready to agree with that, if you would.  I take that is a no.  All right.

LISTNUM 1 \l 19562             Given that we have a six‑part framework to consider as presented by the Commission, that framework or any variation of it, of course, assumes that there will be a definition of essential facility.  It is a critical part of establishing that framework and, of course, a central issue in this proceeding.

LISTNUM 1 \l 19563             I would like now to turn to your definition of a central facility as you have proposed it.  That, of course, is found in your evidence, and I am turning, for the sake of convenience, to your paragraph E‑22, which is the Executive Summary of your March 15 evidence, if you would like to turn that up.

LISTNUM 1 \l 19564             Do you have that, Mr. Watt?

LISTNUM 1 \l 19565             MR. WATT:  I will in just one moment.

LISTNUM 1 \l 19566             MR. ROGERS:  It is your three‑part definition.

LISTNUM 1 \l 19567             MR. WATT:  Yes, we have it.


LISTNUM 1 \l 19568             MR. ROGERS:  For the purposes of this discussion, I am going to focus on the third element.

LISTNUM 1 \l 19569             Before we get to that, though, I think you have said earlier that all three elements are necessary.  I will wait until you get to it, Mr. Watt.

LISTNUM 1 \l 19570             MR. WATT:  Yes, I have it.

LISTNUM 1 \l 19571             MR. ROGERS:  And all three elements of the test are necessary.  Correct?

LISTNUM 1 \l 19572             MR. WATT:  Correct.

LISTNUM 1 \l 19573             MR. ROGERS:  The third element reads:

"It is not feasible to duplicate the input, having regard to economic and/or technical factors."  (As read)

LISTNUM 1 \l 19574             Correct?

LISTNUM 1 \l 19575             MR. WATT:  Yes.

LISTNUM 1 \l 19576             MR. ROGERS:  I would like to understand the third element a little more clearly when you refer to an input that may or may not be feasible to duplicate.  Do you mean duplication of exactly the same physical facility or duplication of the particular functionality provided over that facility?


LISTNUM 1 \l 19577             MR. WATT:  Actually, if you look to our opening statement, I think you have drawn my attention to the three bullets in the March 15th evidence.

LISTNUM 1 \l 19578             MR. ROGERS:  Right.

LISTNUM 1 \l 19579             MR. WATT:  There we did say, in the March 15th evidence:

"It is not feasible to duplicate the input, having regard to economic and/or technical factors."  (As read)

LISTNUM 1 \l 19580             Then there was subsequent discussion from various parties as to whether it really should read "or an input of equivalent functionality."

LISTNUM 1 \l 19581             So, we have ‑‑

LISTNUM 1 \l 19582             MR. ROGERS:  You have revised the test?

LISTNUM 1 \l 19583             MR. WATT:  We have revised that test, so for us it now reads:

"It is not feasible to duplicate the input or an input of equivalent functionality..."

Which was your question, I believe.

"...having regard to economic and/or technical factors."  (As read)

LISTNUM 1 \l 19584             That is in our opening statement on page 2.


LISTNUM 1 \l 19585             MR. ROGERS:  I thought that was the case.  In fact, you had used that language earlier in your March 15 evidence in paragraph 213.  So you have updated the test.

LISTNUM 1 \l 19586             Duplication can mean in this context either self‑supply or supply obtained from a third party.  Correct?

LISTNUM 1 \l 19587             MR. WATT:  Yes.

LISTNUM 1 \l 19588             MR. ROGERS:  I would like you to refer to another part of your March 15 evidence, and this is at paragraph 213, the one I just referred to a moment ago.  I will give you a moment to turn that up.

LISTNUM 1 \l 19589             Do you have that, Mr. Watt?

LISTNUM 1 \l 19590             MR. WATT:  I do.

LISTNUM 1 \l 19591             MR. ROGERS:  What I would like you to look at in that paragraph, and I will read the relevant lines:

"Based on a foregoing analysis, Rogers submits that it is not economically feasible to duplicate the ILEC loops used to serve residential customers in areas where the company does not already have a coaxial cable network."  (As read)


LISTNUM 1 \l 19592             Do you see that line?

LISTNUM 1 \l 19593             MR. WATT:  I do.

LISTNUM 1 \l 19594             MR. ROGERS:  Mr. Watt, you are no doubt aware, as other members of the panel are, that in mid‑August Rogers filed an application with the CRTC to build out its existing cable service footprint west of Toronto into the areas Oakville and Burlington.  You're aware of that?

LISTNUM 1 \l 19595             MR. WATT:  Yes, I am aware of the application.

LISTNUM 1 \l 19596             MR. ROGERS:  And also north into Aurora?

LISTNUM 1 \l 19597             MR. WATT:  Yes.

LISTNUM 1 \l 19598             MR. ROGERS:  In those particular areas there are already both a cable system in the west side of Toronto, it would be Cogeco, as well as a telephone company network, and such plans proposed by Rogers in this case are sometimes referred to as an overbuild.  You have heard the term?

LISTNUM 1 \l 19599             MR. WATT:  I have heard the term.


LISTNUM 1 \l 19600             MR. ROGERS:  The new cable plant that you intend to put in, it will be, I am asking you, the advanced digital capability that you have in most other parts of Toronto to provide digital video services and telecom and telephone services; that is what you intend?

LISTNUM 1 \l 19601             MR. WATT:  Yes, where we build plant in these locations it will be the advanced network, and I can explain further what our intentions are.

LISTNUM 1 \l 19602             MR. ROGERS:  I am fine with what you said so far.

LISTNUM 1 \l 19603             Subject to the Commission approving your application to extend into these territories, it is feasible to duplicate the equivalent of the ILEC loops, the loop access service in these areas?

LISTNUM 1 \l 19604             MR. WATT:  Well, what Rogers is proposing to do is, as you know the cable companies are adjacent.  We are running into a situation in the rapidly growing areas in these rapidly developing new subdivisions in these high‑growth areas, there are subdivisions going up that are just over the line into Cogeco or Aurora Cable territory.  There are Greenfield sites.

LISTNUM 1 \l 19605             We intend to go in with the trenching and provide service to those subdivisions.  Those are our intentions in these areas.


LISTNUM 1 \l 19606             In fact, some of these subdivisions actually sit on either side of the line, so that some would partially be in Cogeco, some in Rogers.  So we are proposing to go into those Greenfield sites and extend our cable operations to grow.

LISTNUM 1 \l 19607             MR. ROGERS:  So you have an existing cable footprint now, the existing licensed area.  You see the prospect of expanding and growing into it and building out facilities into a residential market?

LISTNUM 1 \l 19608             MR. WATT:  As I say, the current plan is to grow into Greenfield residential developments.  There are no plans to overwire the downtown core of Oakville in the existing locations.

LISTNUM 1 \l 19609             MR. ROGERS:  The plant that you put in, of course, will be Rogers cable plant, but there will likely be a telephone company plant, likely Bell, put into those areas as well?

LISTNUM 1 \l 19610             MR. WATT:  In most cases there generally would be, but as you are probably aware, there are a number of subdivisions where Bell, for reasons of their own, have decided not to put their facilities into certain new home subdivisions.


LISTNUM 1 \l 19611             MR. ROGERS:  Where there is a Bell facility or a network either in place already or one which will go in at the same time, what I am suggesting to you is that in those circumstances you will be building out new plant or capacity into a residential market and, in the process of doing so, duplicating the functionality which otherwise could be delivered, the loop functionality that otherwise would be delivered over the telephone company plant?

LISTNUM 1 \l 19612             MR. WATT:  Yes, that is correct.  Where they enter, we would both go into the trench, to the new home, and we would each be duplicating a functionality of the other in that regard.

LISTNUM 1 \l 19613             MR. ROGERS:  When you extend your network west, as you propose to do, you will be installing the same mix of fibre and coax digital system.  We talked about that earlier.

LISTNUM 1 \l 19614             Regarding your planned expansion into Oakville and Burlington, you would agree with me that there are businesses in Oakville and Burlington, aren't there?

LISTNUM 1 \l 19615             MR. WATT:  Yes.

LISTNUM 1 \l 19616             MR. ROGERS:  And if there are neighbourhoods that you plan to go into which are mixed business and residential use, do you plan to deliberately avoid those neighbourhoods and not construct plant there?


LISTNUM 1 \l 19617             MR. WATT:  No, we don't plan to deliberately avoid those neighbourhoods.  As they go up in the neighbouring adjacent territory we are going to put our plant in.  With respect to, say, any new ‑‑ what is the word I am looking for ‑‑ industrial malls in those areas, and I would confirm that, but I expect we will be putting our facilities nearby.  Again, the issue, and Mr. Pattinson can add to this possibly, is whether we would put the coax into each of those units at the current time as we build.  I am not sure.

LISTNUM 1 \l 19618             MR. ROGERS:  All right.  We don't need to get into particularly the nature of the technology, but what we have established is that you are going to go into new areas where you don't have plant today.  There will, in most cases, be some telephone company plant, maybe not everywhere, and you will be duplicating by the new build a functionality which the telephone company will also have through its plant?

LISTNUM 1 \l 19619             MR. WATT:  We will be doing that in the new territories if the application is approved, where new development is going forward where it is near our existing plant, just as we do within our licenced territory today where there is a new subdivision.  Bell and ourselves, in the vast majority of cases, both go into the trench at the same time and duplicate each other's functionality.


LISTNUM 1 \l 19620             I do want to just clarify, though, that if there is a new subdivision, other than the far side of Oakville that is no where near our plant, that will have to be looked at on a case‑by‑case basis.  The ones we are interested in are the ones that are near the neighbouring border.

LISTNUM 1 \l 19621             MR. ROGERS:  Fine.  We talked earlier about the presence of mixed use business and residents in those neighbourhoods, and you are prepared to build out into the neighbourhoods which are also commercial or business?

LISTNUM 1 \l 19622             MR. WATT:  There are two points there.

LISTNUM 1 \l 19623             We are certainly prepared to build out into the mixed use locations.  Into the business locations I believe we will be as well.  Those are our aspirations.

LISTNUM 1 \l 19624             MR. ROGERS:  Right.  It would seem rather foolish to embark on a new build and just leave all the businesses out?

LISTNUM 1 \l 19625             MR. WATT:  That it would.  You really need to be in the trench at the outset to improve the economics.

LISTNUM 1 \l 19626             MR. ROGERS:  I would ask you to turn to paragraph 93 of your March 15 evidence.  I will give you a moment.

‑‑‑ Pause

LISTNUM 1 \l 19627             MR. ROGERS:  Do you have that?


LISTNUM 1 \l 19628             MR. WATT:  I do.

LISTNUM 1 \l 19629             MR. ROGERS:  I am looking at the second sentence in that paragraph which reads:

"This is a discussion of the economics of constructing facilities."  (As read)

LISTNUM 1 \l 19630             The second sentence reads:

"The average cost per customer is lower where there is higher density and shorter loop lengths.  Business customer locations are often clustered within a small geographic area.  This can reduce the cost per customer where traffic can be aggregated."  (As read)

LISTNUM 1 \l 19631             Do you see that?

LISTNUM 1 \l 19632             MR. WATT:  Yes, I do.

LISTNUM 1 \l 19633             MR. ROGERS:  You make very similar statements to almost the same effect, if you want to check, in paragraph 153.  There is a further discussion of the same kind of analysis of business markets.  You talk about concentrated dense urban areas, shorter loop lengths, and you go on to say:


"These factors can produce higher average revenues for a business customer."  (As read)

LISTNUM 1 \l 19634             MR. WATT:  Yes.

LISTNUM 1 \l 19635             MR. ROGERS:  All of which seems to make perfectly good sense.

LISTNUM 1 \l 19636      &n