ARCHIVED -  Transcript of Proceeding

Volume 4, 1 November 2010

TRANSCRIPT OF PROCEEDINGS BEFORE

THE CANADIAN RADIO-TELEVISION AND

TELECOMMUNICATIONS COMMISSION

SUBJECT:

Obligation to serve and other matters (Formerly Proceeding to review access to basic telecommunication services and other matters)

HELD AT:

Outaouais Room

Conference Centre

Portage IV

140 Promenade du Portage

Gatineau, Quebec

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.

Canadian Radio-television and

Telecommunications Commission

Transcript

Obligation to serve and other matters (Formerly Proceeding to review access to basic telecommunication services and other matters)

BEFORE:

Konrad von Finckenstein   Chairperson

Len Katz   Commissioner

Rita Cugini   Commissioner

Timothy Denton   Commissioner

Suzanne Lamarre   Commissioner

Peter Menzies   Commissioner

Candice Molnar   Commissioner

Marc Patrone   Commissioner

ALSO PRESENT:

Lynda Roy   Secretary

Alastair Stewart   Legal Counsel

John Macri   Hearing Manager

HELD AT:

Outaouais Room

Conference Centre

Portage IV

140 Promenade du Portage

Gatineau, Quebec

November 1, 2010

- iv -

TABLE OF CONTENTS

   PAGE / PARA

PRESENTATION BY:

TELUS Communications Company 643 / 3766

"ISPs"

- Accelerated Connections

- Radiant Communications

- SSI Micro Ltd.

- TekSavvy Solutions Inc. 748 / 4415

Union des consommateurs 795 / 4693

"Cable Carriers"

- Shaw Communications Inc.,

- Cogeco Cable Inc.

- Rogers Communications Inc.

- Quebecor Media Inc. (QMI)

on behalf of its affiliate Videotron Ltd.) 835 / 4874

- v -

UNDERTAKINGS

Undertakings can be found at the following paragraphs:

3862, 3913, 4181, 4635, 5175 and 5290

Gatineau, Quebec

--- Upon commencing on Monday, November 1, 2010 at 0900

3743 THE SECRETARY: Order, please. À l'ordre, s'il vous plaît.

3744 THE CHAIRPERSON: Good morning, everybody. Bonjour.

3745 This is a continuation of the Timmins hearing. Everything I said in Timmins applies today so let's just go right into the hearing.

3746 Madame la Secrétaire, you have some announcements to make?

3747 LA SECRÉTAIRE : Merci, Monsieur le Président. Bonjour à tous.

3748 I would now like to go over a few housekeeping matters to ensure the proper conduct of the hearing.

3749 Please note that the Commission Members may ask questions in French or English. Interpretation is available during the hearing. The English interpretation is on Channel 1. You can obtain an interpretation receiver from the Commissioner at the front entrance.

3750 We would like to remind participants that during the oral presentation they should provide for a reasonable delay for the interpretation while respecting their allocated presentation time.

3751 Veuillez noter que les membres du Conseil peuvent poser des questions en français ou en anglais.

3752 Le service d'interprétation simultanée est disponible durant l'audience. L'interprétation en français se trouve au canal 2. Vous pouvez vous procurer un récepteur auprès du commissionnaire à l'entrée de la salle de conférence.

3753 Nous désirons rappeler aux participants d'allouer un délai raisonnable pour la traduction lors de leur présentation à vive voix, tout en respectant le temps alloué pour leur présentation.

3754 When you are in the hearing room we would ask that you please turn off and not only put on vibration mode your cell phones and BlackBerrys as they cause interference on the internal communications systems used by our translators and interpreters. We would appreciate your cooperation in this regard during the hearing.

3755 We expect the hearing to end no later than this Friday. We will begin each morning at 9:00 a.m. We will advise you of any scheduling changes as they occur.

3756 We invite participants to monitor the progress of the hearing in order to be ready to make their presentation on the day scheduled or, if necessary, the day before or after their scheduled date of appearance, depending on the progress of the hearing.

3757 Pendant toute la durée de l'audience, vous pourrez consulter les documents qui font partie du dossier public pour cette audience dans la salle d'examen située à l'extérieur de la salle d'audience, à votre droite. Le numéro de téléphone de la salle d'examen est le 819-953-3168.

3758 There is a verbatim transcript of this hearing being taken by the court reporter sitting at the table to my right which will be posted daily on the Commission's website. If you have any questions on how to obtain all or part of this transcript, please approach the court reporter during a break.

3759 The hearing process will be similar to the one used in the hearing that took place earlier this year on wholesale high-speed services.

3760 Parties who wish to participate in Phase II, the rebuttal phase, must do so in person and be present for the entire duration of Phase II.

3761 Phase II will be held here in Gatineau and we expect it to begin on Wednesday, November 3rd. We would ask that by Tuesday, November 2nd at 2:00 p.m. you would advise me by e-mail if you do not wish to participate in the rebuttal phase.

3762 Also, to remind parties, undertakings given during the Timmins phase are to be filed and served by 6:00 p.m. today and undertakings given during the Gatineau phase are to be filed and served by 6:00 p.m., Tuesday, November 2nd.

3763 Now, Mr. Chairman, we will begin with the presentation by TELUS Communications Company.

3764 Please introduce your colleagues, after which you will have 25 minutes to make your presentation.

3765 Could you please turn your microphone on?

PRESENTATION

3766 MR. HENNESSY: Thank you, Madam Secretary.

3767 Thank you, Mr. Chairman and Commissioners, for allowing TELUS to begin week two of this hearing.

3768 Allow me to introduce the members of the TELUS panel.

3769 I am Michael Hennessy, Senior Vice-President, Regulatory & Government Affairs, and appearing with me are Eros Spadotto, on my right, Executive Vice-President, Technology Strategy; Christopher Langdon, on my right as well, Vice-President, Consumer Products and Services; Clément Audet, vice-président, Marché consommateurs, à ma droite; Dr. Zouheir Mansourati, Vice-President, Technology Strategy beside Eros; Orest Romaniuk, Vice-President and Controller, Corporate Financial Planning & Analysis and Regulatory Finance; Ted Woodhead, Vice-President, Telecom Policy & Regulatory Affairs on the left; and Dr. Robert Crandall, who you have met before, Senior Fellow at the Brookings Institution who is here to address matters of costing rural service and the Bell companies' evidence.

3770 TELUS is pleased to have this opportunity to address the question of access for Canadians in rural high cost areas to advanced services from telephone service to broadband.

3771 According to Statistics Canada the wireline and wireless penetration rate was 99.1 percent in 2008, the latest year for which statistics are available. That exceeds the highest wireline penetration rate ever recorded in Canada and underscores a remarkable achievement for Canadians.

3772 Our position on obligation to serve is simple and has four elements.

3773 There should be no obligation in forborne areas, but if it remains it needs to be modified;

3774 Only those with an obligation to serve should receive local service subsidies;

3775 Meeting the obligation should be technology neutral; and

3776 There is no need to impose any obligation to serve with respect to broadband.

3777 In our view the obligation to serve is an outdated regulatory construct designed in a monopoly environment when long distance rates were regulated along with business rates and kept high in order to keep residential rates artificially low.

3778 As part of the regulatory bargain these regulated cross-subsidies allowed monopolies to recover all of their costs and obtain a reasonable return on investment in return for meeting the obligation to serve.

3779 Today, the regulatory bargain is broken and subsidy pools have been depleted by competition. Yet that obligation persists.

3780 Competition has fundamentally altered the regulatory bargain in our territory. In our territory alone Shaw has gained over 800,000 home phone subscribers since 2005 for a 30 percent market share of the local phone business. It also has a 60 percent broadband share, yet even as market leader in broadband has no obligation to serve, let alone obligation to serve in the cable TV market.

3781 Wireless substitution in our territory is now estimated to be 14 percent kin Alberta and B.C., with at least half of that going to competitors like Rogers and Bell.

3782 What all this means is that the costs of maintaining existing networks are now spread out over a decreasing number of paying customers. This makes the business case for new investment increasingly negative, because networks designed to serve a total community in the past may only today attract a 50 percent penetration. CRTC costing does not presently reflect this reality.

3783 Unfortunately, while average costs increase and margins erode, TELUS finds itself in the position of having to operate under price caps in high cost areas, while our competitors are deregulated in terms of both price and obligation to serve. That, in our view, is not sustainable.

3784 Unlike ILEC competitors, cable is fully price deregulated. Cable has increased their basic TV rates fourfold in comparison to CPI over the last 10 years to fuel their growth. ILECs, on the other hand, have seen local rates increase significantly less, as you can see on the chart in front of you, while long distance and business rates have declined over the same period.

3785 Orest...?

3786 MR. ROMANIUK: Thank you, Michael.

3787 In this environment of declining revenues, no rational business case exists for wireline service in high cost serving areas, given the current system of price caps.

3788 Further, the current costing system has underestimated costs and resulted in only a partial and ever declining recovery per line with looming stranded plant issues.

3789 As evident from the slide, high cost serving area network access lines are declining, revenues are flat and costs are increasing. Both sides of this equation need to be fixed.

3790 The current regime of capped prices and subsidies is based on the broad average costs of a single supplier serving a massive geographic area and ignores the rational competitor strategy to target lower cost segments of high cost areas -- the doughnut effect.

3791 These are the highest density areas of the high cost areas. This dramatically favours competitors in three ways.

3792 First, competitors receive subsidies based on ILEC average costs across the entire region, but target the low-cost customers;

3793 Second, this has the effect of skewing the average cost calculation for the remaining higher cost customers that are left for the ILEC to serve; and

3794 Finally, ILECs are left with stranded plant issues because current subsidies are insufficient to recover existing shortfalls from the remaining customers, never mind those lost.

3795 As shown on the presented slide, Shaw provides coverage within the little blue dot within the red circle in the Morinville exchange in the bottom right-hand corner of the slide, while TELUS is left with all the longer loop and distribution costs of the remaining exchange.

3796 MR. HENNESSY: Thank you.

3797 Given that competition is now vigorous in the majority of exchanges, as evidenced by the 80 percent of residential lines that are now forborne, we submit that in forborne exchanges, the obligation to serve should be removed to ensure competitive equity.

3798 However, and in the alternative, the obligation to serve must at least no longer apply in the case of subdivisions or multi-dwelling units where competitors may have a lock on most customers before construction.

3799 In non-forborne exchanges we submit that if only a single carrier is forced to accept a monopoly obligation to serve across the whole of a high cost area, then only that company should receive a subsidy. If the public policy goal behind the subsidy is to ensure continued access to local service throughout high cost areas, it is no longer appropriate to divert scarce subsidy funds to support cream skimming that would have occurred irrespective of the subsidy.

3800 MR. ROMANIUK: Mr. Chairman, to the extent there is an obligation to serve then there must also be a corresponding regulatory bargain that ensures full recovery of the costs of the obligation.

3801 A reasonable first step would be to increase prices to better reflect the actual costs of delivering service. Since we believe that the current subsidy is inadequate, that must also increase to the extent that price increases do not fully recover cost.

3802 Canada has room to increase rates. Canadians have some of the lowest local wireline voice rates in the OECD because they are kept artificially low. Even if local rates increased by a minimum of $5.00 a month, we would still have some of the lowest rates in the OECD.

3803 But rate increases won't help if we simply impute lower subsidy costs. That does not change the real economics.

3804 Bell seeks to repatriate a significant portion of its circa $50 million of net payments into the Central Fund by arguing that western costs are inflated while their costs, with the exception of one rate band, are just right. Yet in a separate process Bell has updated its annual regulatory costing filing for high cost areas and has shifted costs between Bell and Bell Aliant such that an incremental $7 million additional shortfall magically appears in Bell Aliant territory with no change to aggregate combined costs.

3805 DR. CRANDALL: Mr. Chairman, you recall that Bell commissioned a statistical study by HDR/Decision Economics of the operating costs of the large ILECs in Canada. This study, which related average costs per line for residential service to population density in each company's rate band in each province, purported to show that the operating costs are overstated by western incumbents relative to their eastern counterparts.

3806 Relying on this study and a submission by Steven Turner of FTI describing the use of an engineering-cost model to determine subsidy levels in the United States, Bell Aliant recommends that the Commission consider employing a similar model for determining subsidy levels if it is to base subsidy levels on carrier costs.

3807 I responded to a subsequent interrogatory that the assertion that the U.S. uses engineering cost models to determine subsidy levels for low-density, high-cost areas is misleading. This approach is not used for determining the level of high-cost subsidies for the small rural carriers who account for about 92 percent of all U.S. high-cost subsidies.

3808 Moreover, the attempt by HDR/Decision Economics to use a simple regression of the logarithm of costs on the logarithm of density across all rate bands to determine the reasonableness of western companies' costs relative to those in eastern Canada assumes that this relationship is constant across all densities and it ignores the contribution of other factors such as topography to costs.

3809 Using the estimates from the U.S. Federal Communication Commission's engineering cost model -- the one that Bell Aliant recommends that you consider -- for up to 12,400 individual U.S. wire centres I provide a statistical analysis that demonstrates that the relationship between the costs per line and density in low density areas is not only very different from but is much less precise than the relationship in areas of average or higher densities. Therefore, it would be erroneous to use a single engineering cost model to establish high-cost subsidies.

3810 For this reason, the U.S. Federal Communications Commission does not use such a model to establish high-cost subsidy levels for the hundreds of small rural companies who receive subsidies in the United States.

3811 Orest...?

3812 MR. ROMANIUK: Mr. Chairman, what Bell basically ignores is that the west is made up of mountains and prairies; the former incredibly difficult to serve, the latter providing miles of empty space to serve with few households along the line to cover construction costs. Mr. Maduri of Barrett colourfully described this open space as "windshield time." For anyone, from the west this is self-evident by simply travelling a few miles outside of any urban area.

3813 Perhaps the next time Bell execs and their families visit B.C. or Alberta to ski or watch a major sports event like the Olympics while on the way to Whistler, they might look up at those mountains and those towers that sit upon them and ask how much it costs to helicopter in resources to construct them and how much it costs every year to helicopter in gas and people to maintain them.

3814 Mr. Chairman, simply taking the Bell approach of deeming the costs of serving these areas to be lower, or imputing profits from other competitive services to cover regulated shortfalls, won't fix the challenges of serving such places. In the end, it will only accelerate the risk that households in the highest cost parts of high cost areas get even less attention.

3815 MR. SPADOTTO: Mr. Chairman, I have the responsibility in our company to chart the technology road map and I do so with careful consideration for both capital and operating costs, on the one hand, and the industry and market dynamics on the other.

3816 Based on my experience I ask you to consider a simple truth: If fibre were the only way to provide telephony or broadband services to every Canadian household, and if ILECs had to reach all households with fibre, it would take billions of dollars and years to achieve that. Such an enterprise would not be commercially viable and would disregard emerging technologies and evolving consumer behaviour.

3817 We are witnessing today two important phenomena in telecommunications: One is the hyper-connected universe and, second, the great inversion. Hyper-connectivity is a trend in networking in which all entities, both people and machines, that can communicate through the network, will do so. This is causing changes in networks due to the complexity, diversity and integration of new applications and devices. We will move from a world of tens of millions of connections in Canada to one of hundreds of millions of connections. The great inversion is simply a reflection of the fact that mobile connections have surpassed and will dramatically over time surpass fixed wireline connections.

3818 Therefore, market dynamics are inherently driving the shift to providing services over wireless networks. The desire to be always connected while out and about is evidenced by the growing popularity of Smartphones. It is, for example, estimated that by 2012 Smartphones will account for 30 to 35 percent of the total mobile device market. That's like adding five million new broadband devices to the broadband connection pool.

3819 In the context of serving high-cost areas, while it is cost prohibitive to extend broadband coverage by fibre or cable, wireless and satellite technologies do provide viable alternatives and are opening up these areas for advanced services in a manner that would eliminate the need for any new national broadband funding.

3820 You have heard that within the next 12 to 18 months every household in the country currently deemed unserved or underserved could be served by broadband satellite services capable of speeds up to 10 megabyte per second download. In my mind, that is job done.

3821 It is true today that wireless services have limitations in areas with high population density, but in remote areas population density is much lower and serving consumers with broadband wireless services becomes more viable.

3822 Furthermore, wireless technology continues to evolve quickly. For example, within the next 12 months TELUS will have upgraded our HSPA plus service to double download rates, thereby enhancing our already world-leading broadband services.

3823 This is remarkable when you consider that, within two years of launching the TELUS wireless network to offer 3G» services to 93 percent of the Canadian population, we will have upgraded the network again.

3824 Finally, I would add that, most likely by 2014, our wireless network will again have evolved to fourth generation LTE and we will be able to offer services capable of download speeds comparable to today's fixed wireline broadband services.

3825 MR. LANGDON: Mr. Chairman, in our view wireless is fast becoming a viable and robust remote and rural service alternative. Today all major wireless carriers offer what TELUS refers to as SmartHub for business, consumer and rural applications. In fact, we estimate that close to 800,000 Canadians currently enjoy mobile broadband services and this doesn't take into account the connections established through things like Smartphones with embedded browsers.

3826 For voice applications wireless is a clear substitute for fixed line delivery mechanisms as evidenced by the wireless substitution rates mentioned earlier. In fact, I would argue that wireless meets the intent of all the basic service objectives as it provides all the major feature sets required: touch tone, served by a digital switch, access to a directory, low speed data, enhanced calling features, access to long distance, emergency calling, message relay service and privacy protection.

3827 This same trend exists in the rest of the world, where most people today use wireless as their home phone service.

3828 But it's not just voice. Wireless has significant potential as a true broadband solution for Internet access across the entire wireless network. Today it covers over 99 percent of the population in B.C. and Alberta, extending to some of the most remote locations in the country.

3829 In addition to coverage, the HSPA plus network is currently one of the fastest wireless technologies available, delivering broadband speeds averaging 4 to 6 megabytes per second.

3830 So what does a wireless home gateway or hub look like? I'm holding one up in my hand. Similar devices are available on at least two other competitor networks at price points below $150.

3831 As you can see, it's the size of a regular computer modem and can wirelessly connect your home phones, computers and other devices in a matter of minutes.

3832 Clearly, wireless voice and broadband applications are in the market today. They are competing aggressively with alternative technologies and most importantly I believe delivering value to clients.

3833 M. AUDET: Bonjour.

3834 En effet, TELUS déploie présentement un réseau HSPA» conçu spécifiquement pour desservir 31 communautés de la Gaspésie avec des services Internet haute vitesse. Ce projet fait suite à un appel d'offres du milieu régional et il est financé en partenariat avec TELUS, le milieu municipal et le gouvernement fédéral et provincial.

3835 Dans son offre de service, TELUS s'est engagée à desservir 95 pour cent de la population visée dans ces 31 communautés, avec des vitesses moyennes de connexion qui seront toujours supérieures à 1,5Mgbs, soit la norme reconnue comme étant de la haute vitesse.

3836 Bien que le déploiement n'ait débuté que depuis un mois, la population régionale répond très positivement à la proposition de TELUS et nous avons déjà des taux de pénétration de 22 pour cent. Nous sommes confiants d'atteindre une pénétration de l'ordre de 50 pour cent en 18 mois, ce qui est comparable aux résultats que nous obtenons dans les régions rurales desservies avec nos services ADSL.

3837 Vous remarquerez dans la grille qui est sur l'écran que nos tarifs présentés sont même parfaitement concurrentiels avec les offres de base équivalentes des câblodistributeurs.

3838 De plus, ce réseau HSPA permet à ces populations d'avoir maintenant accès à la téléphonie sans fil.

3839 Cette approche de desserte de milieu rural par le réseau HSPA tant pour la voix que l'Internet est une solution gagnant-gagnant tant pour les entreprises que pour les communautés, et nous désirons éventuellement étendre ce modèle d'affaires.

3840 MR. HENNESSY: Mr. Chairman and Commissioners, let me go back to first principles. The provision of basic telephone service in Canada is a global success story. Over 99 percent telephone penetration is a remarkable achievement.

3841 Now, you have asked whether an aspirational target or an obligation for broadband should be set.

3842 A target to measure achievement is, in our view, quite reasonable, but a mandate or obligation to meet that target is not. In a competitive environment there will be no single choice. Broadband services will be delivered using a variety of technologies from a variety of suppliers and a broadband obligation is unnecessary at this point and will only distort the business plans and deter the investment by those that are already building today. You have already heard testimony on this point from Barrett.

3843 It's also unfair to force ILECs -- like TELUS that have less than 40 percent broadband market share -- to bear that obligation, when competitors are actually the market share leaders.

3844 A target is not a bad idea, but it can't just be for national bragging rights; there must be a goal or end game to be meaningful. Because if the target is simply for video services like Netflix, or to surf the web, complete network coverage to achieve that is almost here today.

3845 New fibre, cable, wireless and satellite networks are being upgraded and deployed without regulation, because investors see a business case to do so.

3846 So we need to ask: What would be the object of a new obligation to serve at the very point the market is poised to offer 100 percent coverage along with extensive broadband mobility?

3847 The market in this case has done its job and the role for government, in our view,k is to examine any remaining gaps due to the level of digital literacy and income disparity.

3848 That concludes my remarks, Mr. Chairman, Members of the Panel.

3849 My colleagues and I would be happy to respond to any questions you may have. Thank you.

3850 THE CHAIRPERSON: Thank you for your presentation. Let's go through the points you raise and the way you raised them.

3851 You say there should be no obligation to serve in forborne areas because competition will do the job. As you know, just because an area is forborne doesn't necessarily mean there is competition everywhere and so it may be as low as 5 percent, it may be up to 25 percent as part of the exchange there will be no competition. Who protects the folks in that area?

3852 MR. HENNESSY: Yes. I heard you ask that question in Timmins, which is why we have revised our evidence slightly.

3853 In our view, given that we know there is 99.1 percent telephone coverage in the country the chances are that virtually everybody has at least access to a wireless service.

3854 But accepting your point of view that we have sort of jumped ahead, rather than debating that, to say if you are worried about those people on the outside of the doughnut even in a forborne exchange, then we think that the appropriate measure is to create an ex ante rule that specifically excludes new subdivisions and multi-dwelling units from that obligation to serve requirement.

3855 The reason we have said that is because often there are marketing agreements in condominiums or whatever where most of the customers may be locked up before we have even stepped in there and to have to go in and actually overbuild a whole community may make no economic sense.

3856 So we think ex ante rule is simple, right.

3857 THE CHAIRPERSON: I'm just trying to figure out whether it is simple.

3858 Let's say, Mr. Hennessy, you convinced me by your logic, how do I apply it? So in forborne areas there is still an obligation to serve but it only applies to non-multi-dwelling units.

3859 Is that basically how it works?

3860 MR. HENNESSY: Multi-dwelling units and new subdivisions. So you make that an ex ante rule --

3861 THE CHAIRPERSON: How do you define "multi-dwelling" or "new subdivisions"? Presumably new subdivisions after this date.

3862 MR. HENNESSY: Yes. Well, what we can do -- what we will do for rebuttal is we will actually do an undertaking and give you a definition.

UNDERTAKING

3863 THE CHAIRPERSON: Yes.

3864 MR. HENNESSY: But the point is it would be an ex ante rule so it's not something that we would then come to you ever time for an exception, it's this is the rule: This is the number of units that makes a multi-dwelling unit; and a new subdivision is, you know, by definition I think new.

3865 THE CHAIRPERSON: It's a novel idea, I don't know whether -- but I always want to see how you apply this rule. So I appreciate your offer.

3866 MR. HENNESSY: We will write it out because the intent is to have an ex ante rule that is clear and therefore doesn't require any further filings or requests for exemptions.

3867 THE CHAIRPERSON: Okay.

3868 Then you agree the basic service obligation should stay in place for non-forborne areas, but you put in the added kicker that it should only apply to the -- only the ILEC should receive the subsidy, if I understand it.

3869 MR. HENNESSY: Not necessarily. I mean, if somebody else said, "Yes, I am willing to meet the same obligation," then I think, clearly, the subsidy should be portable.

3870 We are not trying to lock up a monopoly on the subsidy; what we are trying to say is: If we are the only party with the obligation, then you want to flow that money to supporting the roll-out of service and not flow that money to supporting competitive entry.

3871 THE CHAIRPERSON: And that would automatically, in your view, cure the doughnut effect, because it basically means that if a competitor comes in -- and, obviously, they are going to come to the high-density area -- then they won't be subsidized.

3872 MR. HENNESSY: That's correct.

3873 It won't cure it, because I think that you are going to continue to see that most of the sort of jelly part of the doughnut is already served, so it's late for that.

3874 And you are always going to see new technologies.

3875 You still have to address the issue of price and appropriate costing, but it does seem odd that, with everybody debating whether or not a subsidy is appropriate, the subsidy is actually flowing to support competition, rather than supporting the household at the end that is supposed to receive the subsidy.

3876 THE CHAIRPERSON: But, I mean, we have heard now a whole week of the doughnut effect, and especially the smaller companies are very worried about it, that, in effect, they cannot exist.

3877 There are two issues. One is the doughnut effect, and you seem to have made an offer, saying: Fine, come on in, but you don't get any subsidy.

3878 The second one is the cost of local number portability. Especially the small systems are saying that that is a huge cost, and it's not warranted, given their territory, et cetera. And there has been some suggestion that: Yes, you can come in, but you don't get local number portability.

3879 What are your views on that?

3880 MR. HENNESSY: Okay. So one and two -- we are not really saying: Yes, come on in.

3881 Everybody is in, right? There is no --

3882 THE CHAIRPERSON: I know, but there are some territories where we have stopped competition coming in right now.

3883 MR. HENNESSY: Yes, that's correct, and I would argue that that's not such a good thing. You know, to me it's rolling back the clock 15, 20 years from where the Commission started out.

3884 MR. WOODHEAD: Mr. Chairman, in addition, we view that actually stopping supply or limiting competitive entry in those exchanges could possibly breach Article 16 of the GATT, by establishing a monopoly in an area or limiting suppliers.

3885 That is another element of our position.

3886 THE CHAIRPERSON: Article 16 of what?

3887 MR. WOODHEAD: Article 16 of the GATT.

3888 THE CHAIRPERSON: How?

3889 MR. WOODHEAD: I believe there is a limitation in there about limiting supply, or suppliers, or establishing monopolies in a particular area.

3890 MR. HENNESSY: Anyways, I don't really want to go there.

3891 THE CHAIRPERSON: No. I am vaguely familiar with the GATT, but I don't see how it gets in here. Anyway --

3892 MR. HENNESSY: I think that Mr. Woodhead is correct, but it's not really -- I mean, we are talking about a social issue here first, so I am happy to --

3893 THE CHAIRPERSON: What we have right now is a moratorium, as you know, and I want in this hearing to deal with the issue --

3894 MR. HENNESSY: Let me jump to the other part of your question, in terms of local number portability, and I will let Mr. Audet address that.

3895 Clearly, local number portability, since 1994, has been considered a cornerstone of ensuring that if you do competition it occurs.

3896 But, Clément, you have been dealing with this issue in some SILEC and rural areas, and perhaps you would like to comment.

3897 M. AUDET : Oui, tout à fait.

3898 En fait, même, je vous dirais que, du côté de TELUS Québec, à la rigueur, on vit la même situation que les petites SILECs, parce que 116 de nos 136 circonscriptions sont en zone de desserte à coût élevé, si bien que la majorité de nos gens sont en zone de desserte à coût élevé.

3899 Et sur ces territoires-là présentement, les cablôdistributeurs en zone de desserte à coût élevé ont des services voix à près de 80 pour cent de nos clients, et au fil des années, moins de la moitié de ces endroits-là, nous avons obtenu la déréglementation, donc, sont des zones... juste la moitié sont foreborne.

3900 Si bien qu'on se retrouve, nous aussi, dans une situation où nous avons des cablôdistributeurs qui sont présents, avec ce qu'on appelle le doughnut effect.

3901 Selon nous, si on veut avoir... Et on est ouvert... malgré tout, on est ouvert totalement à la compétition. On pense qu'elle doit avoir lieu aussi dans les petites SILECs, et c'est un élément clé d'avoir la transférabilité des numéros, parce que dans des régions rurales, le numéro appartient pratiquement à la famille depuis des années.

3902 Alors, le compétiteur n'aura aucune chance d'obtenir ou moins de chance d'obtenir le client vers lui s'il n'a pas le numéro local qui est adressé avec. Alors, la transportabilité est requise. Par contre, la façon de la donner peut varier.

3903 On a eu des expériences, nous, de notre côté, à Wabush, où on a finalement réalisé la transférabilité via un renvoi d'appel permanent.

3904 Donc, il est possible par la créativité de voir différentes façons pour les petites SILECs de donner la transférabilité des numéros. Non, elle doit quand même être de mise.

3905 LE PRÉSIDENT : Je ne comprends pas de quelle façon. Si je comprends bien, pour avoir la portabilité des numéros, c'est nécessaire de désigner... de refaire les ordinateurs qui font le switch.

3906 Est-ce que vous m'avez dit qu'on a d'autres moyens pour l'obtenir?

3907 M. AUDET : Il y a d'autres façons, effectivement, comme d'utiliser ce qu'ils appellent en anglais call forwarding...

3908 LE PRÉSIDENT : Oui.

3909 M. AUDET : ...donc, utiliser des options, utiliser des features qui sont déjà dans les switch plutôt que de changer carrément la technologie.

3910 LE PRÉSIDENT : Et c'est moins cher?

3911 M. AUDET : C'est beaucoup moins cher, effectivement.

3912 LE PRÉSIDENT : Est-ce que vous, dans votre réponse écrite, expliquez ces... décrivez ces moyens qui existent? Selon vous, c'est une portabilité des numéros plus efficiente, moins chère?

3913 M. AUDET : Oui, nous pourrons vous donner le détail, effectivement.

UNDERTAKING

3914 THE CHAIRPERSON: Okay.

3915 The upshot of that, as I understand you, Mr. Hennessy, is that you are saying no portability of subsidy, but number portability is essential, as Mr. Audet said, especially in rural areas, where numbers are part of the family inheritance, and if you don't change the number, you say that you won't have competition.

3916 MR. HENNESSY: Yes. No, absolutely, I think that number portability is critical for competition. That has been found a number of times by the Commission.

3917 THE CHAIRPERSON: Now, let's talk about subsidy. You are taking great exception to what Bell Aliant said, who claims that there is a historical injustice, and for reasons that aren't quite clear, Bell Aliant's costs are understated and they should be equal to yours.

3918 Now, as I understand it, you are saying, number one, that you don't agree with Bell Aliant; and number two, yours are also understated?

3919 MR. HENNESSY: Yes. I will let Mr. Romaniuk comment on that, but absolutely.

3920 I think the pictures show that if you look at P.E.I. or Nova Scotia or New Brunswick, apart from the fact that they are a lot smaller in territory than the high-cost areas that we serve -- nobody skis there, except a couple of people in the Wentworth Valley, because they don't really have any hills.

3921 It's pretty easy to provide service there, and it's a lot cheaper, and people live closer together because it's a smaller geographic area.

3922 But Orest can explain what it is that we object to in terms of the costing itself, and so can Bob Crandall.

3923 MR. ROMANIUK: Specific to Bell Aliant, what we really object to is, in the original Bell Aliant submissions in this proceeding, they claimed that Bell costs were very accurate. Bell costs are correct, as are Bell Aliant's. The western costs are wrong. Yet, at the same time, they are making additional submissions: Well, maybe they are not exactly correct, so let's shift $7 million around without changing aggregate costs.

3924 I am not saying that the $7 million is right or wrong, I am saying that costs are variable, costs change, and Bell's assertions that all of their costs were correct was, in fact, maybe not as clear when they made their original evidence in this case.

3925 Our costs are higher.

3926 THE CHAIRPERSON: I thought their point was slightly different. You know, costing is always questionable, and you never get it accurate, but you hope to be relatively accurate.

3927 They basically said that the difference between the costs out west and the costs down east is so marked, and, yes, there are topographical differences, and there is wider distribution with western, but the topography in the east is different, et cetera.

3928 But, statistically, there shouldn't be such a big divergence. The words they used were that it was statistically improbable -- a divergence of what -- of this rate could be if the same costing formula was applied in the east and in the west.

3929 That is, essentially, their point.

3930 DR. CRANDALL: But that conclusion comes strictly from a statistical analysis which has one variable in it, and that is density.

3931 If you were to include other variables, you would find that, in fact, probably a lot of that goes away.

3932 In the United States, when the Federal Communications Commission tried to use its engineering cost model to estimate costs, it found that they could not predict very accurately the costs of very small operators in rural communities.

3933 In fact, when I did that analysis that I referred to in the opening statement, which I submitted in response to an interrogatory, what I found was that the variance in costs for low-density areas around the expected relationship with density -- which, by the way, got much stronger as you got to low-density areas -- that variance increased markedly, because there are all sorts of other variables in these small areas, topography -- whatever -- that drive cost.

3934 So you can't simply look at that evidence that says: Here's the relationship between costs and density, and, in fact, it seems to show that costs are too high in the west and too low in the east.

3935 There are other things that drive cost besides density.

3936 THE CHAIRPERSON: Okay, what are they? What are the key variables that you should look at besides density?

3937 DR. CRANDALL: The cost of inputs in various areas --

3938 The serious question in the United States was the cost of inputs, and the way you build out a network because of topography, and the number of miles of copper that you have to have to build out that area, and then where you have to build it, whether it's underground or overhead.

3939 There are lots of things that go into cost. You can ask Mr. Romaniuk what drives TELUS' cost.

3940 THE CHAIRPERSON: Okay. Now, while Bell Aliant made their point, it was also quite clear that they are not keen on a re-costing exercise, which they think would be arduous and lengthy, and would probably not necessarily yield a more confidence-inspiring result, let's say.

3941 What they suggested is, really, increased pricing. They said that the highest price that we have authorized is $36, somewhere -- in Val-des-Monts or something. They suggested that they should be allowed to increase all of their basic rates to that $36.

3942 When I asked them how they would do that, they said that it would be over a three-year span, in three equal increments, which would be slightly higher than -- I guess that the average urban cost is around $32, or somewhere around there.

3943 You also mentioned that you wanted to see price increases.

3944 First of all, would you agree with Bell that a costing exercise is really not something to consider at this point? Secondly, if yes, do you agree that you should be allowed to increase prices, in three steps, the way Bell has suggested it?

3945 MR. HENNESSY: I would disagree on the first point, and Orest can explain that. You can do costing; I think the concern here is that, if you have a costing exercise, it becomes a nightmare and goes on forever.

3946 But, I think, if you look at a couple of key variables that are the largest determinant of cost, then you can make it a lot simpler.

3947 Orest, maybe you could explain that.

3948 MR. ROMANIUK: The largest components, obviously, are capital and maintenance. If you focus your efforts on those areas, the Commission, in its recent cost --

3949 THE CHAIRPERSON: Capital and maintenance, you say?

3950 MR. ROMANIUK: Yes. Those would make up 80 to 90 percent of your line costs.

3951 Recently, two years ago, the Commission -- it actually did not do a costing exercise, it firmed up the methodologies. It didn't review costs, it firmed methodologies.

3952 If you focus your time now on those two key variables, you will get the vast majority of costs.

3953 Bell has redone its costing studies. TELUS is very close to it. So the information is there. Systems provide more accurate information. It's faster and easier to obtain loop lengths, loop studies.

3954 So we believe that it would not take as long as in past years, where it would take years to do a costing study.

3955 Be tactical and focused on where you need to focus costs, look at real costs, and that should get you very close to where you need to be.

3956 THE CHAIRPERSON: So you are suggesting that Bell should make an application to have its costs -- its capital and maintenance costs re-examined by us and readjusted?

3957 MR. ROMANIUK: I believe that all ILECs, as part of --

3958 THE CHAIRPERSON: No, I am asking you --

3959 MR. ROMANIUK: Yes. Yes, to focus on that area, and to look at actual costs that are being placed in the ground.

3960 THE CHAIRPERSON: Okay. What about your second point?

3961 MR. HENNESSY: Okay. The second point is, yes, we have said that prices should go up, and the number, I guess, is the number you debate.

3962 Orest has looked at some things. I think that our average price in high-cost areas now is $27.82. In Alberta our price is $31. We are not seeing any -- there are no affordability issues that we can see because of that, so you could go up as high as $36. We think that you should certainly go up as high as $32.

3963 But the issue then becomes: What is the consequence of that.

3964 We strongly believe that you are not impacting affordability, but if you don't get your costs right to begin with and you just say, "We are going to increase rates by an average of $5 or $6 over three years, and we are going to increase costs as they are today," you really haven't changed the economics of serving those markets.

3965 So to the extent that the economics today are challenging, all you have done on an accounting stance is left everything neutral.

3966 So I think you have to fix both the price and the cost, but in terms of moving to $32 or $34 or $36, yes, definitely we would support that, and the way to do it is over a phased-in process. But it doesn't get you all the way there.

3967 THE CHAIRPERSON: I wasn't quite sure from your presentation, did you, like Bell Aliant, ask for the CRTC to increase the rates that you may charge or not?

3968 MR. HENNESSY: Yes, we suggested that rates should go up. We didn't set a specific rate in our evidence.

3969 MR. ROMANIUK: At a minimum $5. That would get us above the Alberta rate, to, maybe, $32 or $33. We believe that would be bearable by the market, and, as Michael said, Alberta is at $31, so $32 or $33 does not seem that extensive a stretch beyond that.

3970 THE CHAIRPERSON: Now, we heard an awful lot about technology, and you, like everybody else, make a very eloquent case that we should be technology neutral, we should not favour anybody.

3971 As you saw on Friday, we reversed one of our decisions, because we believe in being technology neutral. So if you come forward with technology that fits our model -- it's up to you to do that.

3972 Wireless technology, to what is extent is it an alternative, especially satellite?

3973 I mean, what we are really talking about here are the high-cost areas, the areas where -- it's very unlikely that you are ever going to string a line out there, et cetera, and how do you serve them best, et cetera.

3974 We have heard all sorts of evidence as to whether technology is -- wireless is there and whether satellite is there, or when it will be there, et cetera.

3975 What is your take on this?

3976 MR. HENNESSY: I will set it up for Eros, because he knows just a little bit more about technology than I do.

3977 Our fundamental point is that the satellite -- all we heard from Barrett, with the new Loral bird that they are using -- is going to deliver speeds in the neighbourhood of 10 megs down and 2 up. They seem to have the capacity to reach more than the total number of identified unserved households, which I think Industry Canada has said is around 700,000.

3978 So, in terms of broadband, we are saying that's job done, but the reality is that, increasingly, as Clément said, wireless is also a solution in certain areas.

3979 The neat thing about wireless, of course, is that it is also portable. As Chris Langdon pointed out, there are already something like 800,000 Canadians, really just in the last year and a bit, that have adopted mobile sticks for their laptop computers, which allows them access to broadband anywhere within an HSPA footprint, which is pretty much everywhere, at speeds at anywhere from 4 to 6 megs right now.

3980 So that's incredibly good.

3981 MR. SPADOTTO: Michael does a brilliant job of answering the question and then passing it to me.

--- Laughter

3982 THE CHAIRPERSON: Let me be a bit more specific, because I keep hearing that -- you showed me this little wireless box, which Mr. Engelhart has shown me many times, et cetera. If somebody buys one of those and they do what most other users do, keep this on 24 hours a day, surely the price is not at all the same as it would be with wireline.

3983 I mean, this is just for the -- I mean, wireless is okay, in terms of access. I can see that, but in terms of usage, and major usage, isn't there a huge price differential?

3984 MR. LANGDON: Yes, when you look at the prices in the market today, generally you are seeing, on the data side, anywhere from $35 to $60, and that will get people anywhere -- usually around 5 to 10 gig, which is fairly competitive with what you would see at the high end, anyway, with internet plans and usage caps today.

3985 And those price points span -- in-market cellular pricing today -- you know, you can go to the Bell and the Rogers' website, as well as TELUS', and see those price points. They are also available through some of the satellite providers.

3986 THE CHAIRPERSON: If I buy that box from you and turn it on, you are telling me that for $60 I get 5 megabytes, and that would be 24/7?

3987 MR. LANGDON: Yes, for $60 you would get 5 to 10 gig.

3988 THE CHAIRPERSON: For data.

3989 MR. LANGDON: For data, right.

3990 THE CHAIRPERSON: And can I keep it on 24/7?

3991 MR. LANGDON: The nice thing about these networks is that, unless you have an application at the other end that is continually zinging data, you are basically only utilizing it when it's actually connected. Right?

3992 THE CHAIRPERSON: Yes.

3993 MR. LANGDON: Those are sort of the usage caps that are available today, across multiple providers.

3994 THE CHAIRPERSON: The pre-condition being that I live in an area which is served by HSPA.

3995 MR. LANGDON: Right. Over 99 percent of the population of B.C. and Alberta -- it is actually a little bit higher than that -- could enjoy that service.

3996 THE CHAIRPERSON: And the rest of the country?

3997 MR. LANGDON: I think we quoted about 93 percent coverage, but that's growing all the time as well, right, as we continue to build out our networks.

3998 THE CHAIRPERSON: For Timmins, where we just came from, where we heard that very -- or here, there is a delegation from Papineau that is complaining very much about the fact that -- and they are sure that Papineau is served by HSPA. So this is the answer for them?

3999 MR. LANGDON: I would say so. I think that delegation had specific roaming challenges with that area, but this definitely would be one of those capability sets.

4000 And I think it's a multitude, it's not just wireless cellular. You will see it through satellite as well.

4001 MR. HENNESSY: As you saw in Timmins, you may not be able to use our HSPA network, but you can use our competitor's.

4002 THE CHAIRPERSON: Yes, but I am talking about access here, I am not talking about TELUS access.

4003 I heard a whole morning from the people from Papineau how essential it is for them to be part of the internet economy, for them to be able to keep their young people there, to attract business, et cetera, and one of the biggest problems is that there is no internet access, and especially high-speed.

4004 Now you are telling me that with HSPA and that box -- we have to buy it from Bell, obviously, rather than from you -- they would be in business?

4005 MR. LANGDON: Yes, these are available today from multiple competitors.

4006 MR. HENNESSY: They can buy it from us in Papineau, as well. Our footprint covers Papineau.

--- Laughter

4007 THE CHAIRPERSON: Okay. Now, then, of course, there are areas which will not be served by HSPA, and for them, basically, it's satellite.

4008 And for satellite, whatever the start-up costs are, they are not $65.

4009 I think that you said $65 for that box. Right?

4010 For satellite, we are talking about $500 to $700, depending on where you are located.

4011 MR. HENNESSY: Yes, we actually went online yesterday when we were prepping, and the new prices -- they are now down to $199.

4012 THE CHAIRPERSON: For installation?

4013 MR. HENNESSY: For installation, including the dish.

4014 THE CHAIRPERSON: Well, it depends on where you are located, surely. I mean, the evidence that they themselves gave me in Timmins was that it was anywhere -- $500, $600, $700 in some places.

4015 MR. HENNESSY: Okay. We were just on their website, so you may want to talk to them about that.

4016 THE CHAIRPERSON: But are you suggesting -- let's assume that we adopt your approach and say that we will be technology neutral. It seems that wireless and wireline, one or the other, will give the majority of Canadians -- over 90 percent -- whatever the exact figures is -- access.

4017 And the last, remaining ones, whether it's 3 percent or 2 percent, or whatever, you have to serve them by satellite.

4018 But then, basically, we have to establish a subsidy regime for satellite, at least for the initial installation cost, because asking people to dish out $700 to have access is a tall order, and then we are really running into affordability.

4019 MR. HENNESSY: That's where I disagree.

4020 The first thing, I think, that we want to get clear in rebuttal is that that's the price, because we just went to the internet and that's not what is being advertised. But let's assume --

4021 THE CHAIRPERSON: We will have rebuttal and, trust me, that point will be examined.

4022 MR. HENNESSY: Yes.

4023 Let's assume for a second that it is $500. If you think about it, if we provide you with one of the newest and best smart phones, the cost of that could be, easily, $500. But depending on the contract you sign, and the degree to which we want to attract you as a customer, we are going to underwrite a lot of that cost, because we want the business.

4024 THE CHAIRPERSON: Yes, because of competitive pressure, but there is nobody who is competing for those folks.

4025 MR. HENNESSY: Well, I mean you could do that, but you have to be very careful. If you are saying that there is 2 percent or 3 percent of the country where only satellite is available, and people can't afford the installation costs, Question No. 1 that you have to ask yourself is: If you can't afford the installation cost, the one-time cost to drive the broadband service, can you afford the computer that the broadband service connects to?

4026 It goes to that last step of income and digital literacy, in terms of -- if you are going to target these kinds of things, you have to make sure that you are targeting the right thing to begin with.

4027 I think it is, obviously, a point that has to be explored. We would say, can you really -- you know, if you are saying that -- because you don't want to give -- if satellite is already about to rollout with a viable business proposition to 100 percent of unserved homes, and most of them are also in areas where there may be wireless or other solutions, then you don't want to subsidize that.

4028 So you need a totally different tool from what you have today, and a different definition of what the high-cost issue is and what the challenge is, because it sounds like a one-time payment, rather than multiple --

4029 So it's a totally sort of new way of targeting.

4030 THE CHAIRPERSON: Yes, you are saying that it's difficult and you have to make sure that you target the right people, but surely, at the end of the day, that's the logical conclusion that you are driving me to. That is really the only way, if you want to achieve 100 percent access, given our topography, given our population distribution -- you have to find some way to get those folks on satellite.

4031 MR. HENNESSY: Yes. Now, you still won't have 100 percent access, because there is something like a 20 percent gap in the country today of people that don't have a computer in their home.

4032 THE CHAIRPERSON: Available -- access available. Whether they use it --

4033 MR. HENNESSY: Yes, you will have 100 percent availability next year if you do nothing. The issue is then -- your question to me is: How do you ensure that people who only have that choice overcome the barrier and adopt the service. I think that's your question.

4034 THE CHAIRPERSON: Add another adjective, "affordable". Affordable access, that's what we are really talking about.

4035 MR. HENNESSY: They are talking about urban rates, right, so it likely is affordable.

4036 I mean, everything -- let's face it --

4037 THE CHAIRPERSON: No, but that's the whole point, the rate is affordable, the installation is not.

4038 That's exactly what we started off with. We are going in a circle here.

4039 MR. HENNESSY: Okay. So let me answer your question, hopefully, in a way that closes it.

4040 If the only option available to consumers in some area is satellite -- that's Caveat No. 1 -- and if the costs of installation are so substantial that it is a barrier to adoption, then it would be appropriate for government, in that kind of income-challenged thing, whether it is the CRTC or some other mechanism, to look at a funding mechanism to remove that barrier.

4041 THE CHAIRPERSON: Okay. Now, you poopooed our idea of a national broadband goal. I mean broadband some people speak about high speed. You spoke about it saying 1.5. I think Mr. Audet said that, et cetera, et cetera. You know other nations are setting much more loftier goals of 4 percent -- 4 Mbps, 10 Mbps, 100 Mbps for 100 million, et cetera, et cetera.

4042 I think it is very key that we do at least have a goal and hopefully the competitive forces in the market will get us there. We should be -- we should have some idea of what we want to see.

4043 Right now in the foreseeable future, obviously technological development and needs and uptake may change and may be a moving target, but as far as we can see and given the developments now and the participants, doesn't it behove us to say, look, by whatever -- take any date you want, 2015 or something, we should see that basically everybody has access at 4 Mbps or 10 Mbps or whatever number it is so that we, in effect, can then see and have something to measure. That's our aspiration. That's how we want to go, et cetera.

4044 If that doesn't happen then you can decide do we have to change regime, do we have to subsidize, should we impose conditions or what, et cetera. Without it, it's just sort of letting it go as we do right now.

4045 Don't we fall -- don't we have a serious danger of falling behind and sort of self-congratulating ourselves we have such great coverage in the industry -- such a good job and, yet, we do it and it doesn't happen uniformly across the country and compared to other nations we are falling behind.

4046 MR. HENNESSY: Yes. For the record -- I'm going to give this to Eros but, for the record, we didn't poopoo a goal. We support a goal. That's no problem at all. My question was -- we don't support an obligation. We support a goal.

4047 But my question was what is the goal for because -- now, I will let Eros explain. Now, depending on, you know, just in terms of different - how different technologies and different requirements require different speeds and characteristics so there may be some examples of that to sort of say, "What is it we really need to set for a goal if we are talking about the future and not the current time"?

4048 MR. SPADOTTO: Thank you, Michael.

4049 Well, Mr. Chairman, TELUS is proof in fact that the market will actually move technology forward. If you take a look at what we have done with our HSP network we have introduced technologies that are at far greater speeds than were previously available on wireless and we have already gone through the step of announcing an upgrade that will double that speed and, you know, further we will go to LTA when possible.

4050 The interesting thing is when you take a look at LTA and the capabilities of LTA one of the big requirements of the long term evolution is the availability of spectrum. That's actually one of the things that the government creates a nice paradox for us because on one hand, you know, we are desirous as Canadians of broadening out our speeds and broadening out our services. That requires that spectrum, and I think you would agree with us.

4051 On the other hand, you know, in a desire to increase competition Industry Canada parcels up that spectrum into smaller chunks which actually takes away from the ability to provide speed.

4052 So we have this paradox where we have on one side we have the desire to actually increase our speeds, you know, to benefit Canadians. On the other side that very desire to increase competition takes away from that possibility of speed.

4053 So for us we will continue of course in our deployment of technologies, taking advantage of what the technologies have to offer, to the extent that we have the availability of that correct spectrum.

4054 THE CHAIRPERSON: Yeah, but I mean as you know, we have done our best to make sure that you do have spectrum. The broadcasters are advocating, reluctantly albeit, the 700 megahertz spectrum so it can be auctioned off, et cetera. So I mean spectrum will come online. That's a part of the spectrum policy.

4055 It's not my domain so I won't comment on that.

4056 MR. HENNESSY: But I think your question too was though is it 2, is it 4, should it be 10 in a couple of years or should it be 100 at some point, right? Is that more or less --

4057 THE CHAIRPERSON: Right, right. I mean I read it out in Timmins. I can do it again.

4058 The goals that other countries have set for themselves and the level, et cetera, and we as you know are in the middle of a whole national digital strategy, et cetera.

4059 But I think one contribution we can sort of say is as a result of this hearing then, having heard from the various participants of the industry it strike us it's a goal of so much by such a date. Is it achievable? Should it be achieved and would it be a good measuring stick to see the progress under this area by Canada?

4060 MR. SPADOTTO: So I think, Mr. Chairman, the way that I would answer that question is if the availability of spectrum is there and we are allowed to have spectrum in the right desirable chunks, we can see ourselves going from where we can get, as Mr. Audet has already suggested, 1.5 now. We can see ourselves doubling that in the next three or four years and then a further doubling in the preceding three or four years.

4061 So I can see ourselves getting to somewhere in the 6 to 10 territory, call it eight to 10 years from now wide, right across the country.

4062 MR. AUDET: Si je peux me permettre.

4063 THE CHAIRPERSON: Okay. You may want to be more specific in your written reply.

4064 You have talked about the need for adoption, to encourage adoption and that access was not, et cetera, and so have others, et cetera.

4065 Have you or the company sort of sort of thought or are you going to introduce sort of base-level packages at a reduced price to encourage people to adopt broadband internet, see what can be offered there, et cetera, and then obviously gradually raise it?

4066 MR. HENNESSY: Let me give that to Chris Langdon because we have actually been doing things for, you know, the last three years in terms of broadband adoption, because that's not really you know a high-cost area question. This is we are now talking about --

4067 THE CHAIRPERSON: No, no. But do they --

4068 MR. HENNESSY: No, no. It is a good question; a good question.

4069 So Chris, maybe just talk a bit about many of our plans in terms of broadband and computers.

4070 MR. LANGDON: Sure.

4071 At least in our market no competitors today price discriminate based on -- at least for broadband services based on geography. There is limited time promotions that you see occasionally pop up, and they may be funded by a specific distribution channel. But generally you're seeing, you know, rates as low -- we have seen them as low as $9.99 for six months. So there has been a significant amount of promotional activity as aggressive competitors fight for share.

4072 In addition to that, and maybe speaking to some of Michael's comments around the demand side, TELUS has been active for many, many years on promoting and providing PCs with our service, recognizing you know as we go down the demand curve and you are starting to hit clients who may not have had broadband before, you know, access to a computer may be important for some of those.

4073 So we have actually bundled in PCs with our service either as part of a contractual obligation similar to what you would see with a cell phone, you know, sign up for three years, get a free PC, or on a smaller pay-as-you-go plan over a period of time.

4074 So we are quite aggressive in trying to stimulate demand and I think the market, if you just look at the history of promotions over the last 24 to 36 months you will see that.

4075 THE CHAIRPERSON: Okay. Lastly, back to subsidies and the subsidy formula itself, you didn't make any comment on that at all. We have heard evidence especially in the high-cost areas a productivity factor doesn't apply and it doesn't make sense. You should not apply it and also that the implicit benefit of $5.00 is either understated or overstated, depending on where you are.

4076 Are you happy with the formula the way it works right now?

4077 MR. HENNESSY: No, we are not. We are not happy with the formula either in terms of imputing productivity where it doesn't exist or, you know, the current estimate of what the enhanced features are. But Orest is the expert on that so I will let him explain why.

4078 MR. ROMANIUK: First off, looking at the productivity side, since 2002 when the productivity factor was applied we have seen costs reduced by a little over $10 -- about $10.25 per line.

4079 What this translates to is -- as an example say in 2010 this would take $60 million of implicit productivities that should be there. How productivities happen is generally in most marketplaces you have economies of scale. So you try to serve more customers with less.

4080 As evident in one of the slides that I showed, in fact our high-cost customer base is declining. You cannot have or is it extremely difficult to impute productivities in declining -- where your customer base is declining. Therefore, it does not make sense to continually year over year over year imply about 3.2 percent or the I minus X, which is now in 2010 hitting us by about $60 million as I mentioned, cumulatively $290 million since 2009 of taken costs out when your subscriber base is declining.

4081 THE CHAIRPERSON: Therefore we should do what?

4082 MR. ROMANIUK: We should remove the productivity factor absolutely from the cost structure.

4083 THE CHAIRPERSON: In the high-cost areas.

4084 MR. ROMANIUK: And actually go back -- as part of the costing review, go back to your actual costs. Right now the subsidy formula is based on notional 2002 costs continually ground down. That does not make sense.

4085 So go back, look at actually what your costs are doing, what your fail factors are, what cable lengths you have, taking into account the dome effect, what cable size you are using and then structure your subsidy based on that.

4086 THE CHAIRPERSON: Is that still re-costing?

4087 MR. ROMANIUK: It is part of -- I think your earlier question --

4088 THE CHAIRPERSON: I thought we heard Mr. Hennessey saying that, no, he didn't want a re-costing.

4089 MR. ROMANIUK: No. We said we wanted a targeted costing based on the key areas of capital and maintenance, review those, get those right, a re-cost of those.

4090 THE CHAIRPERSON: You just talked about cable length and stuff like that.

4091 MR. ROMANIUK: That is part of capital. Your cable length is your capital cost.

4092 THE CHAIRPERSON: Okay. So you say eliminate the "I minus X" altogether?

4093 MR. ROMANIUK: Yes.

4094 THE CHAIRPERSON: What about the implicit benefits?

4095 MR. ROMANIUK: Well, the implicit subsidy -- implicit subsidies for the enhanced services -- and now, in essence, looking at this takes you back almost three levels of regulation where your rate of return regulated in 2006. Imputing implicit subsidies from competitive services just doesn't make sense these days.

4096 In addition, if you actually look at those margins and the revenues versus the costs given, compared to pressures and the features that customers had taken, those are significantly declining. If we look at enhanced features, the margins -- and I think we looked at this in an interrogatory -- have gone down 42 percent in the last couple of years.

4097 The $5.00 is you know if anything, it's probably higher than what the margin is on an enhanced service today. Tomorrow, if you apply the 42 percent to the $5.00 it should be down to $2.80 or $2.90. It's too high. The margins aren't there from those services, from enhanced services.

4098 THE CHAIRPERSON: But surely the enhanced services that you can sell now have multiplied, have gone up, not down. I mean there are far greater opportunities now than there were, whenever this was put in place.

4099 So I mean the margins may be down but you have -- you also get the whole effect, the bundling effect, the marketing positivity, et cetera.

4100 So I find this hard to -- if I understand you correctly you are saying eliminate the implicit benefit as well in an area when in effect you have far more additional products that you can sell by virtue of having the line in before?

4101 MR. ROMANIUK: So first I will answer the bundling issue.

4102 Generally, the bundling is you offer more services for the same price. So in fact your margins are declining because you are offering now three, four, five services for $5.00 or $6.00.

4103 THE CHAIRPERSON: Yeah.

4104 MR. ROMANIUK: Therefore, your revenues are not going up. In fact, your margins are going down because you are offering more services for $6.00 to the customer. They are getting value out of it. That's what we are doing to all of our customers in --

4105 THE CHAIRPERSON: I am presuming with a benefit to you too. Otherwise you wouldn't be doing it.

4106 MR. ROMANIUK: But we are trying to retain the customers, trying to decrease that sloping decline of customer loss. So yes, that is what we are doing.

4107 You have to do what you can to retain those customers. That is really the bundling impact. That's the target of bundling, is more services for the same price.

4108 THE CHAIRPERSON: Len, you are the expert on numbers; over to you.

4109 COMMISSIONER KATZ: Thank you, Mr. Chairman. Good morning. I will pick up on that conversation.

4110 These services that were defined under the implicit contribution regime took place some eight years ago.

4111 MR. ROMANIUK: Yes.

4112 COMMISSIONER KATZ: Has TELUS introduced any new services that are related to the obligation of PES, primary exchange service that would change the products that are included in the calculation of the implicit contribution?

4113 MR. ROMANIUK: Chris, do you want to take a look at that?

4114 MR. LANGDON: I would actually say in terms of local features and value-added services the market has been pretty ruthless. You know, if you looked at the potpourri of feature sets and enhanced calling features that people could obtain through some of the digital switches, I think there has been a real ratchet-down of the number of features actually people want, you know if you are looking at maybe voice mail and call forwarding and some very simple calling line ID-type services.

4115 So we haven't seen a lot of expansion in terms of demand. Most operators today provide a bundle of features in there with their local lines. So you have actually seen declines in revenue associated with that as more things get added to the bundle on the local line service.

4116 COMMISSIONER KATZ: I would have thought that the way I have seen some of the prices being represented is you get basic telephone service for X amount and then you pay for features. You may pay a decreasing amount for every additional feature but you are paying per feature.

4117 MR. LANGDON: Yeah. I think at least the way that we go to market we generally bundle in a base set of features with your phone.

4118 And what we have found, though, is that as soon as you get above the top three features there is very little demand beyond that. People may sign up for it and say, okay, 10 is better than three features but the utilization of those features is very, very small.

4119 COMMISSIONER KATZ: Do you bundle in the network access charge?

4120 MR. LANGDON: As it relates to...?

4121 COMMISSIONER KATZ: At is it relates to the service that you offer called network access charge.

4122 MR. LANGDON: So on those, yes. For existing, if you are a TELUS long distance provider or long distance client on many of our promotions and plans we waive that. If you are not we do apply it if you use the service.

4123 COMMISSIONER KATZ: You pay for it.

4124 MR. LANGDON: You pay for it, yes, indeed.

4125 COMMISSIONER KATZ: And how much is the network access charge feature?

4126 MR. LANGDON: $2.95.

4127 COMMISSIONER KATZ: And what does the customer actually get for the $2.95?

4128 MR. LANGDON: They get access into our long distance service.

4129 COMMISSIONER KATZ: As long as they are a primary exchange service customer of TELUS?

4130 MR. LANGDON: They are picked to TELUS for long distance services.

4131 COMMISSIONER KATZ: So they have to be a TELUS local customer first. If not, you can't subscribe to a network access charge if you are not a TELUS customer.

4132 MR. LANGDON: Correct.

4133 COMMISSIONER KATZ: Okay. I want to take you to, I guess, page 10 of your submission this morning. I just want to understand and confirm something.

4134 You say on top of page 10, the second paragraph:

"For voice applications wireless is a clear substitute for fixed line delivery mechanisms."

4135 We heard last week that wireless is a clear substitute, if I can use your words in urban areas but not in rural areas. Are you saying that ubiquitously throughout Canada wireless is a clear substitute for wireline?

4136 Is that your evidence?

4137 MR. HENNESSY: Then you are talking just here about voice telephone service?

4138 COMMISSIONER KATZ: I am.

4139 MR. HENNESSY: I wouldn't use the word "ubiquitous", no. But if I was -- you know, I think I'm going to ask the man who built the network here in terms of -- because we are talking too about household access. I think everybody would agree not every household in the country would have, you know, a super voice quality wireless service but most would.

4140 Eros...?

4141 MR. SPADOTTO: Well, we have already talked about the fact that in B.C. and Alberta with our wireless networks we cover over 99 percent of the population. In those cases, you know, virtually all of them would have the ability to take wireless as a substitute for wireline services and many have chosen to do that.

4142 MR. AUDET: If I may add on this, as I was saying you know that the TQ ILEC is pretty rural and we had exactly the same trend. We are not at 14 percent as they are in Alberta and B.C. but we are at close to 10 and every year we see the same path, so the trend is the same.

4143 COMMISSIONER KATZ: When I use the term "substitute" I use the term not just in terms of technology and capability but price.

4144 So are you saying, Mr. Spadotto, that in the province of British Columbia or Alberta we have 99 percent overlap of services? Someone who moves from wireline to wireless, basically, gets the same product, the same quality at virtually the same price?

4145 MR. SPADOTTO: I will defer to Mr. Langdon on pricing but what I will tell you is that you do see a motion where people are choosing wireless. Specifically youth, many people of a younger age that have you know entered the workforce see no need for a wireline. That is true whether that's in urban environments or, as Mr. Audet has suggested, even in rural environments.

4146 Now, in terms of our ability to price I will turn it over to Mr. Langdon.

4147 MR. HENNESSY: Just before that, I think there is an important point to make just in terms of the comparisons.

4148 That is that you can't say is the price of a wireless substitute product the same as or comparable to a fixed wireline product because what you are really doing by taking the wireless product is substituting that for something that was once two products. So it's both now a -- you know, a voice telephone product service for somebody and still a mobile device.

4149 But we do have products that are priced just for fixed services, both Clément and Chris can tell you, but I think that is a very important metric to remember.

4150 MR. LANGDON: Maybe I will add in on the voice side.

4151 So you are seeing in the market today price points of about 20 bucks for unlimited local calling, voice mail and for -- you are also seeing those include things like conference calling and then for another 20 bucks you are seeing things that would embed unlimited long distance across Canada.

4152 So you know as part of the implementation of these which are broadband and voice capability, you are seeing price points in the $20 to $35 range for voice services.

4153 COMMISSIONER KATZ: So when you say that for $20 I could get unlimited voice calling in local unlimited voice calling in TELUS territory, that's what you are saying?

4154 MR. LANGDON: Yes, for these sorts of rural applications, right.

4155 COMMISSIONER KATZ: Yeah. Are you making money on that?

4156 MR. LANGDON: One would -- yes, we make money off that.

4157 COMMISSIONER KATZ: So when I look at the equation, subsidy equals cost less revenue less implicit contribution, why are we using a cost component that is so high in order for you to provide fixed terrestrial service when you can provide wireless service to those people profitably at a cost of $20?

4158 MR. HENNESSY: You have to remember that the costs are not all forward-looking, that most of the costs of running the network today reflect the historic costs of investment plus the ongoing costs of continuing to maintain a copper network.

4159 COMMISSIONER KATZ: Okay. We heard last week from SaskTel of their proposal which was, basically, don't provide a subsidy in the base rate area to anybody. Just provide it outside the base rate area.

4160 Have you taken a look at that proposal and do you have any comments on it?

4161 MR. ROMANIUK: We believe that even in the base rate or in high-cost areas that subsidies still should be provided in a high-cost region, forborne and non-forborne exchanges. Then you provide it to the carrier that has the obligation to serve.

4162 If you have got that obligation then you should also be provided a subsidy, be it in the core of the town or the outside of the doughnut.

4163 COMMISSIONER KATZ: So you are saying a subsidy should remain even though there may be a competitive market?

4164 MR. ROMANIUK: A subsidy should remain for the carrier that has the obligation to serve because they have to serve those loop links that are 10,000 or 11,000 metres long whereas the competitor has loop links of 4,400 metres.

4165 COMMISSIONER KATZ: Okay. Those are my questions, Mr. Chair.

4166 THE CHAIRPERSON: Thank you.

4167 Suzanne...?

4168 CONSEILLÈRE LAMARRE : Merci, Monsieur le Président.

4169 Premièrement, une précision. Tout à l'heure, Monsieur Audet, vous avez fait une affirmation que je n'ai pas notée assez rapidement. Vous avez dit que 116 des échanges de TELUS étaient à coût élevé au Québec sur un total de...?

4170 M. AUDET : 136 pour TELUS Québec.

4171 CONSEILLÈRE LAMARRE : 136. Merci beaucoup.

4172 Maintenant, en ce qui concerne votre présentation de ce matin, au bas de la page 2, vous affirmez que, selon Statistique Canada, le taux de pénétration en sans-fil et en service filaire était de 99.1 pour cent en 2008, et, après ça, il y a une phrase qui suit qui dit :

"This exceeds the highest wireline penetration rate ever recorded in Canada."

4173 Cette phrase-là, est-ce que c'est une affirmation de TELUS ou une affirmation de Statistique Canada?

4174 MR. HENNESSY: The first part is obviously Statistics Canada 2008.

4175 The second point is when our team looked at the data in the past in terms of wireline penetration we could not find a number that high.

4176 CONSEILLÈRE LAMARRE : Merci.

4177 Maintenant, ce qui serait intéressant à ajouter à tout ça, au fond, ça serait la progression de la pénétration, autant avec fil que sans fil.

4178 Est-ce que vous avez les données pour votre propre réseau et est-ce que vous pouvez nous les rendre disponibles? Peut-être les cinq dernières années ou les 10 dernières années, si vous les avez.

4179 MR. HENNESSY: I am not quite sure what you are looking at. One of the problems with the Stats Can data is that they don't do that anymore.

4180 CONSEILLÈRE LAMARRE : Oui, mais, vous, est-ce que vous le faites pour votre service à vous, TELUS? Est-ce que vous avez, au cours des années, évalué le taux de pénétration que vous avez dans vos échanges, dans vos zones de service, en sans-fil et avec fil? Est-ce que c'est des données que vous avez pour les réseaux de TELUS et est-ce que c'est des données que vous pouvez partager avec nous?

4181 MR. HENNESSY: Yes. I think we could undertake to try to produce that for you, yeah.

UNDERTAKING

4182 CONSEILLÈRE LAMARRE : Merci.

4183 Maintenant, je veux parler un petit peu en détail du service sans fil pour accès haute vitesse qui a été déployé en Gaspésie, et la raison pour laquelle je pose les questions, c'est que vous vous en servez avantageusement ici comme exemple -- et je ne vous blâme pas pour ça -- mais pour pouvoir vraiment comprendre ce qui se passe, je pense que j'aurais besoin d'un petit peu plus de détails.

4184 Vous dites que vous vous êtes engagés à desservir 95 pour cent de la population visée dans les 31 communautés en question.

4185 Alors, ma première question, c'est : Pouvez-vous nous fournir la liste des 31 communautés? Ça, je pense que c'est assez facile.

4186 La deuxième, c'est : Qu'est-ce qui vous empêche de promettre une pleine couverture pour le 5 pour cent qui reste, étant donné que, depuis ce matin, vous faites l'apologie du sans-fil comme substitution pour la haute vitesse?

4187 M. AUDET : Dans le cas précis de la Gaspésie, on parle de géographie. Si vous y êtes déjà allée, le côté nord de la Gaspésie, vous savez comment c'est extrêmement un relief complexe.

4188 On parle d'un territoire où il n'y avait aucun réseau cellulaire sans-fil traditionnel, ni Internet haute vitesse, si bien que le milieu régional est allé en appel d'offre pour avoir maintenant des réseaux...

4189 À l'origine, leur but était vraiment d'avoir des réseaux Internet, et l'appel d'offre était dans le cadre du programme Communautés rurales branchées, et le fédéral aussi était un partenaire financier.

4190 Donc, nous, lorsqu'on a regardé pour déployer dans ce cadre-là notre réseau HSPA, on a regardé géographiquement comment étaient constituées les 31 communautés et pour aussi arriver à le faire dans un coût qui était concurrentiel, parce qu'on était en processus d'appel d'offre à ce moment-là. D'autres compagnies aussi étaient dans la liste.

4191 On s'est rendu compte que de desservir... pour avoir 100 pour cent de couverture, il aurait aussi fallu desservir toute la route 132 sur une distance de 200 kilomètres pour aller chercher marginalement 5 pour cent d'une population...

4192 On va donner les chiffres : 31 villages représentent à peu près 2 300 maisons. Donc, lorsqu'on parle du 5 pour cent, on parle à peu près d'une vingtaine de maisons. Donc, 200 kilomètres de réseau continu pour une vingtaine de maisons, les coûts devenaient vraiment prohibitifs et l'on sortait carrément de l'appel d'offre.

4193 Alors, avec 95 pour cent de couverture -- c'est ce qui était la demande -- ça, nous, on le jugeait faisable.

4194 CONSEILLÈRE LAMARRE : O.K. Je comprends la dynamique.

4195 Maintenant, est-ce que ça ne met pas en évidence justement que malgré beaucoup de bonne volonté et beaucoup d'argent aussi, quand vous dites là que c'est une approche gagnant-gagnant, il reste qu'il y a toujours une portion de la population qui est très difficile à desservir?

4196 M. AUDET : Et ce 5 pour cent là, même tous les différents fournisseurs dans l'appel d'offre n'arrivaient pas à couvrir 100 pour cent. Donc, c'est là que le satellite devient une option intéressante.

4197 Je pense que, inévitablement, par la géographie de notre pays, par la densité, par la topographie, atteindre 100 pour cent avec un seul réseau va être toujours une tâche qui va être tellement coûteuse économiquement qu'elle devient pratiquement impossible, si bien que c'est...

4198 Et c'est de ça qu'on parle, d'avoir une continuité. C'est un mixte de réseaux ADSL, de réseaux HSPA et de réseaux satellitaires qui va permettre de couvrir économiquement le Canada.

4199 CONSEILLÈRE LAMARRE : Maintenant, à la page 11 de votre présentation de ce matin, il y une affirmation qui m'agace un petit peu, et je vais vous demander de la préciser.

4200 Vous dites... le deuxième paragraphe en français là, après la diapo numéro 10, vous dites :

" ...TELUS s'est engagée à desservir 95 pour cent de la population visée dans ces 31 communautés... "

4201 Vous venez d'expliquer la dynamique de tout ça.

" ...avec des vitesses moyennes... "

4202 Je souligne " moyenne ".

" ...de connexion qui seront toujours supérieures... "

4203 Et je souligne " toujours supérieures. "

" ...à 1,5Mgbs... "

4204 Lequel est-ce? Ce sont des vitesses moyennes ou ce sont des vitesses qui ne descendront jamais en bas de 1,5 Mgbs, parce que ce genre d'affirmation-là, quand on a " moyenne " et " toujours " dans la même phrase, ça peut mener à confusion.

4205 M. AUDET : Dans un premier temps, c'était la condition de l'appel d'offre. On nous demandait de desservir des vitesses moyennes de 1,5 Mgbs.

4206 CONSEILLÈRE LAMARRE : Mais dites-moi ce que vous faites aujourd'hui.

4207 M. AUDET : C'est ça. Ce qu'on fait aujourd'hui, il faut regarder que la taille des communautés que l'on dessert dans ce projet-là va varier entre 22 résidences et la plus grosse communauté à peu près 380 résidences.

4208 Alors, avec des taux de pénétration qui vont être de l'ordre de 50 pour cent dans les communautés rurales, ce qui est à peu près l'expérience qu'on vit avec le bagage qu'on a présentement sur nos réseaux ADSL, dans toutes ces communautés-là, en moyenne, il va y avoir à peu près, quoi, entre 10 et 100 maisons qui vont être branchées, et comme elles ne sont pas toujours branchées en même temps, avec nos réseaux HSPA qui sont rattachées à des fibres de 100 Mgbs, on est convaincu qu'on va toujours pouvoir... quand une personne va se brancher, elle aura toujours en moyenne 1,5 Mgbs et plus, parce qu'il y a du réseau disponible...

4209 CONSEILLÈRE LAMARRE : En moyenne ou le plus bas possible là?

4210 M. AUDET : Oui. Bien, en fait, c'est ça le plus bas possible. Lorsqu'on dit en moyenne, c'est que là, tu vas regarder une communauté, cette personne-là, s'ils sont 20 en même temps à ouvrir l'ordinateur ou s'ils sont 10, la vitesse peut varier légèrement, mais elle va toujours être au-dessus de 1,5.

4211 CONSEILLÈRE LAMARRE : Elle va toujours être au-dessus de 1,5?

4212 M. AUDET : Dans la majorité des cas. Où, par contre, ça peut changer, c'est qu'il y a aussi...

4213 CONSEILLÈRE LAMARRE : Non, toujours... dans la majorité, ce n'est plus toujours là.

4214 M. AUDET : Oui, bien, on parle vraiment de moyenne, ce qui était l'appel d'offre, et une personne qui vit l'expérience haute vitesse. Mais même un réseau ADSL, on dit que c'est des vitesses pouvant atteindre jusqu'à 5 Mgbs.

4215 C'est très difficile d'avoir une affirmation qui est une vitesse constante, surtout que vous avez une notion de distance, et vous avez la même notion dans le sans-fil.

4216 CONSEILLÈRE LAMARRE : Donc, je peux enlever le " toujours " qu'il y a dans ce paragraphe-là?

4217 M. AUDET : Bien, en moyenne... oui, bien, qui seront supérieures, en moyenne supérieures.

4218 CONSEILLÈRE LAMARRE : Oui.

4219 M. AUDET : Vous pouvez enlever le " toujours " si ça vous plaît. Effectivement.

4220 CONSEILLÈRE LAMARRE : Maintenant, au niveau de la grille... une dernière question.

4221 Au niveau de la grille de prix que vous nous avez donnée en annexe de votre présentation, les tarifs que vous avez ici pour TELUS en Gaspésie, est-ce que le tarif est le même, peu importe la communauté parmi les 31 que vous desservez?

4222 M. AUDET : Oui, le tarif est le même, et l'intérêt du tarif, lorsqu'on l'a regardé dans le cadre de notre partenaire, c'est que c'est un tarif qu'on appelle flex, à savoir que le prix d'entrée est 29,95, et si une personne, après trois mois par exemple, a adhéré au tarif à 29,95, et ce mois-ci, elle a une utilisation qui va dépasser en download plus de 5 Gig, à ce moment-là, elle est tarifée maximalement au prix qu'on voit entre 5 et 10 Gig, à 59,00, et le mois d'après, elle revient à 29,95.

4223 Donc, la tarification s'ajuste selon l'usage. Donc, ça permet aux gens d'avoir un bon contrôle de leur utilisation.

4224 CONSEILLÈRE LAMARRE : O.K. Donc, c'est une tarification dynamique...

4225 M. AUDET : Oui.

4226 CONSEILLÈRE LAMARRE : ...à l'avantage du client?

4227 M. AUDET : Tout à fait.

4228 CONSEILLÈRE LAMARRE : C'est ça que vous dites, bon.

4229 Maintenant, vous avez fait aussi un tableau comparatif avec Cogeco et Vidéotron. Est-ce que Cogeco et Vidéotron desservent ces communautés-là?

4230 M. AUDET : Non.

4231 CONSEILLÈRE LAMARRE : Alors, comment vous pouvez comparer?

4232 M. AUDET : Bien, on est allé sur leur site Web et on regarde... Ça, c'est des tarifs qui sont en vigueur à Vidéotron à Montréal. Lorsqu'on a présenté aux gens de la Gaspésie...

4233 CONSEILLÈRE LAMARRE : O.K. Donc, Vidéotron... Je m'excuse de vous interrompre.

4234 M. AUDET : Oui.

4235 CONSEILLÈRE LAMARRE : Donc, le tarif que vous nous avez donné ici pour Vidéotron, c'est Montréal?

4236 M. AUDET : Oui, c'est provincial.

4237 CONSEILLÈRE LAMARRE : Et celui de Cogeco?

4238 M. AUDET : Oui, aussi, c'est leur tarif présentement en vigueur sur les territoires...

4239 CONSEILLÈRE LAMARRE : O.K.

4240 M. AUDET : ...qu'ils desservent.

4241 CONSEILLÈRE LAMARRE : Parfait. C'est ce que je voulais savoir. Merci.

4242 M. AUDET : Merci.

4243 CONSEILLÈRE LAMARRE : Merci, Monsieur le Président.

4244 THE CHAIRPERSON: Peter.

4245 COMMISSIONER MENZIES: Thanks. I just wanted to check on -- you mentioned that the wireless network covers 99 per cent of the population of B.C. and Alberta. How does that compare with other areas of the country?

4246 MR. HENNESSY: Mr. Spadotto?

4247 MR. SPADOTTO: Most of the operators are actually extending their coverage as we go on. We are probably the most aggressive operator, hitting 99 per cent already. As you go across the country you will see that there are successive builds right across the country.

4248 So as we go into Saskatchewan our friends at SaskTel are building a broader network as we speak. As we move into Manitoba MTS has partnered with Rogers and they are expanding out their network. As we get into Ontario and Quebec we see that Bell is expanding.

4249 So they are all catching up to that variable and I think we will get, you know, higher than 93 per cent in due order.

4250 COMMISSIONER MENZIES: That is all the providers -- when you said 99 per cent in British Columbia and Alberta, that is counting all the providers or is that just TELUS?

4251 MR. SPADOTTO: Well, we happen to be the largest, so it is 99 per cent, that is because we are the largest there.

4252 COMMISSIONER MENZIES: Okay. So the point being that people have access to some provider somewhere 99 per cent of the time.

4253 MR. SPADOTTO: Correct.

4254 COMMISSIONER MENZIES: And in other parts of the country that would be -- the average for other parts of the country would be 93, 92?

4255 MR. SPADOTTO: Yes, the average for Canada is 93 and we would have to segment it down for different provinces.

4256 COMMISSIONER MENZIES: Right, so it would be skewed up.

4257 Why is it higher? What has driven that percentage to be as high as it is in British Columbia and Alberta?

4258 MR. SPADOTTO: I think it is simply the market. We as an operator have decided that we can make return by expanding our coverage and we have done so.

4259 COMMISSIONER MENZIES: Competition?

4260 MR. SPADOTTO: Competition in some cases where we have, you know, chosen to be better than the competition to expand our coverage to be larger than theirs, yes.

4261 COMMISSIONER MENZIES: Is there any government subsidy involved in any of this at all?

4262 MR. SPADOTTO: Not in the HSP network.

4263 COMMISSIONER MENZIES: Okay. So if we were to take a technology neutral approach, at least in British Columbia and Alberta, the goal of accessibility to all services has more or less been achieved at 99 per cent? Is that a correct assumption?

4264 MR. HENNESSY: Yes, I think it is that goal in terms of accessibility for telephone service was achieved a long time ago where we are really replicating it so, yes.

4265 COMMISSIONER MENZIES: I am talking in terms of internet access and broadband access, if --

4266 MR. HENNESSY: Yes, I think -- well, you know, and it is my belief we are really talking in terms of, you know, coverage availability of these services, you know, we hit 100 per cent by next year of wireless, wireline, satellite, everything, 100 per cent. Somebody is going to get broadband from somebody. As of the end of next year, 100 per cent that is done.

4267 COMMISSIONER MENZIES: And all of that access would all be considered to meet a standard of affordability relative to the traditional definition of that?

4268 MR. HENNESSY: Now, here is a very interesting point. The CRTC has never in its history defined what is affordable. We have never had from a perspective of regulation a definition of, you know, how do you ensure that even the lowest income household can access the network?

4269 It is always what has been called affordable rates is that you roll out a telephone system based on restrictions on price increasing in a general sense as to what you think might be affordable. And then you kind of look at the penetration data, which suggests that whatever those rates are that were set for the majority of Canadians, so you know when it was wireline 98 or we are over 99 per cent now, would seem to be affordable because they buy it.

4270 But if you then go behind the numbers and actually say, well, does that mean that in every area of the country it is 99? No. Does that mean that the lowest income houses have 98 per cent penetration? No.

4271 But nobody has ever ever looked at that question. It has always been, you know, the regulatory policy is kind of like healthcare, everybody gets sort of the same thing and it should be pretty good and, therefore -- and the results, to be fair, suggest that, you know, we have amongst the highest penetration rates for telephone service in the world under that model. But it has never been an income-driven model.

4272 COMMISSIONER MENZIES: And just to clarify in terms of the conversation you had with the Chairman regarding this affordability issue, you suggested that for those people for whom affordability is an issue, that it might be appropriate on an income to make -- what I took from it was that it might be appropriate for that to be measured on an individual income basis and that there might be mechanisms which government -- I think you suggested the CRTC as well as other government agencies might wish to address that directly rather than in general?

4273 MR. HENNESSY: Yes. In our view next year, at least for now, recognizing the Chairman's comment about what is the long-run kind of target for broadband. Next year it is job done. I mean, next year anybody that wants to, you know, do their Netflix or Apple TV or whatever they want with broadband, we will have the availability of that network.

4274 So the issue then becomes will there be barriers either in terms of digital literacy, which is probably an HRDC issue address and it is an issue that is being addressed under the national digital economic strategy or will there be, no matter what we do for a segment of households, will there never be access because, you know, they can't afford the service or they can't afford the computer or these types of things?

4275 And at some point, if that is where we end up I think it is critical, rather than trying to turn the regulatory system on its head to figure out how to fix that, what you have to start doing is have some kind of direct income transfer process in government. It might be that, you know, the government says, regulator, it is your job to do it, it might be a provincial program. I don't know.

4276 I just know that you will always, no matter what the coverage you have and even if you solve all the digital literacy thing and ignore the people that just don't care about having access to broadband, there will always be some Canadians who simply can't afford, you know, telephone service today let alone broadband service tomorrow. And the only way you fix their problem is not with averages, it is with targets.

4277 THE CHAIRPERSON: It is not before us. We are talking about access here, we are not talking about --

4278 MR. HENNESSY: Sorry, I was just trying to answer the question.

4279 THE CHAIRPERSON: I know, but I am trying to also keep things within focus. Thanks for your answer.

4280 Peter.

4281 COMMISSIONER MENZIES: I think we are done.

4282 THE CHAIRPERSON: Okay.

4283 Candice.

4284 COMMISSIONER MOLNAR: Thank you.

4285 Let me begin by ensuring I understand your position on all the costing issues.

4286 If the subsidy is no longer portable and is made available to the ILEC or whoever it is who seeks to accept the obligation to serve for the full high-cost area in question, in your view could that adequately compensate you for serving that high-cost area?

4287 MR. ROMANIUK: If you look at actual costs incurred, it's not sort of how the "I minus X" is applied and it reduced our costs by $10 to $12 from 2002 levels. Yes, that would adequately compensate us.

4288 So look at our costs and structure rates and the subsidy appropriately that recover. Those are two mechanisms to recover the costs, yes.

4289 COMMISSIONER MOLNAR: And if that approach is taken, do you believe there is any need to do any kind of rebanding?

4290 MR. ROMANIUK: No.

4291 COMMISSIONER MOLNAR: But you do believe there is a requirement to look at the capital and maintenance costs?

4292 MR. ROMANIUK: Yes.

4293 COMMISSIONER MOLNAR: You put that forward as a simpler approach, but as you know and I know looking at capital is the most complicated element of any costing exercise.

4294 So I am not sure that I necessarily agree that this is a simpler costing exercise. I mean, if we look at the length of time that Bell's unbundled loop costs, you know, it took just to look at that, it is a complicated matter. If you were listening last week to our proceeding, you will know I have asked a couple of different parties are there any alternatives to doing the full costing review?

4295 MR. ROMANIUK: To your first part, it is a complicated matter, however, it is fundamental to our business. I run obviously the Regulatory Economics Group. The majority of our time is actually spent on running and reviewing bids and competitive information. So not only do we just this regulatory, we also run the business, so everybody looks at the costs. And if we didn't do this we probably could lose a lot of money on running the real business. So, yes, there is a lot of scrutiny and there is a lot of focus internally as well as through these proceedings, so there is a lot of effort on it.

4296 Having said that, yes, I understand Bell did take, you know, significant time, as it took ourselves. However, the system information is better to provide that information, to provide that analysis, so where it did take, you know, months and months and months in past, I think we could be focused. And the fact that, as a result of the proceeding that finished a couple years ago, a lot of the base fundamentals has been clarified.

4297 So I guess just to be seen, but I don't know how long it will --

4298 COMMISSIONER MOLNAR: So are you suggesting there is no alternative to a wholesale review of the capital and maintenance?

4299 MR. HENNESSY: Well, maybe can I try answering that question, Commissioner Molnar?

4300 You know, if you go back to first principles there is a complete alternative, which is to say we get rid of the subsidy for everybody, so the whole contribution fund, get rid of it. Allow the market to drive rates, so allow prices to increase which, you know, as prices go up attracts more and more competitors. But the issue is people will say, well, we are not sure that we want to do that for the SILECs, we are worried about what could happen if we did that.

4301 The problem is that when it comes to high-cost area we are all SILECs. But I think, you know, at the end of the day the simplest thing would really be to just get rid of the whole subsidy contribution thing if some companies can't exist without subsidy, those lines aren't going to be disappearing maybe what you are facing is more consolidation in the industry.

4302 So that, in many respects, is quicker, more efficient --

4303 COMMISSIONER MOLNAR: I have to admit that I was talking about costing and not blowing up the subsidy mechanism or potentially causing the sorts of rate increases that would require.

4304 MR. HENNESSY: Well, the problem then is, as you identified --

4305 COMMISSIONER MOLNAR: I was just talking, is there a simpler way? Can we perhaps base it upon the costing that was done earlier with some adjustments so we are not involved in a lengthy extensive costing process and we can come out with an outcome that you believe more accurately would reflect your subsidy requirement?

4306 MR. ROMANIUK: Looking at things as fill factors, cable lengths, that would be a really good start. If you focus on those areas, cable sizes, that would get you most of the way there. And that is where we have to go because that is where, as you know, the significant cost of providing service in rural areas is, and it is inevitable.

4307 But where the costs are today, it is not reflective of what is happening in the business. So those have to be addressed but we can target it, as I mentioned, on fills, cable lengths, cable size.

4308 COMMISSIONER MOLNAR: Moving on to your discussion on page 10 of your comments about the fact that wireless is a clear substitute for fixed line delivery. And you did hear the conversation last week where companies such as MTS and SaskTel argued it wasn't a clear substitute in many cases, especially in rural and remote areas because of coverage issues, you know, the inability, you can't use it in the house, you have to be outside and so on.

4309 But putting that aside, in some situations perhaps it is a clear substitute from a technology perspective. And I agree with the comments you made earlier in your statement that the obligations should be technology neutral. So if a wireless solution came from a technology perspective meet a customer's requirements for basic telephone service and it is a lesser cost alternative to do that, so be it.

4310 But I wonder if the BSO should have to be changed if that was to be enabled? And particularly one of the things in a high-cost area and if they are being served by a wireless, it is their only choice. It isn't their choice to be served by wireless it is -- you know, the obligation to serve is being filled by wireless.

4311 So what are your thoughts on modifying the BSO to ensure that it is defined in a way that provides the consumer with a product equivalent to what they would get on a wired basis?

4312 And let me throw out what to me are two big examples of that. One is equal access. With the wired service as part of, you know, the obligation to serve, ILECs are required to provide equal access as are CLECs. With the wireless service today, as far as I know that obligation doesn't exist.

4313 MR. HENNESSY: Yes, that is correct. That obligation doesn't exist. And if you wanted to operate a wireless CLEC -- I think we have a Telular service today that operates as, you know, a wireless CLEC, and when it does it has to meet that requirement. But I wouldn't see the necessity of doing that if somebody has just chosen to substitute.

4314 COMMISSIONER MOLNAR: Fair enough. I agree, where someone chooses to substitute.

4315 My thought was if the BSO is linked to the obligation to serve, it is essentially we are talking about an obligation where consumers don't have choice. So if, as TELUS, you had a customer within an outlying are of, you know, Lethbridge or Grand Prairie or High Prairie somewhere and you felt that you could use wireless as a means of serving that customer instead of a wired service, the service they are provided should have certain characteristics. And one of those, in my view, would be equal access to the long-distance networks.

4316 MR. HENNESSY: You are saying, rather than providing them a mobility solution in a situation where you are providing it as a fixed service and looking for entitlement to subsidy, et cetera, should there be equal access?

4317 Chris, what are the kind of products that you would offer today in that circumstance?

4318 MR. LANGDON: Well, today we do offer equal access through CDMA, so we have a compliance solution. What we do find is people -- you know, most people don't choose that, they choose the HSPA solutions we have today, is they feel the features set around that are superior. So when I go through all of the BSOs with the exception of equal access and loop unbundling, you know, people haven't asked us for that.

4319 And as we deploy wireless networks, you know, calling I think the blurring between local and long distance is becoming quite blurred and people don't necessarily delineate between the two in a significant way.

4320 COMMISSIONER MOLNAR: I am sorry, but I don't think I understood that answer.

4321 You say you offer equal access today?

4322 MR. LANGDON: Yes. So we --

4323 COMMISSIONER MOLNAR: So if you were going to use a wireless solution to serve a customer with their first line, you know, to meet an obligation to serve you would provide equal access?

4324 MR. LANGDON: Right. So today we have two solutions --

4325 COMMISSIONER MOLNAR: Just yes or now please.

4326 MR. LANGDON: Yes, we have two solutions --

4327 COMMISSIONER MOLNAR: Okay, thank you.

4328 MR. WOODHEAD: Actually, no.

--- Laughter

4329 MR. WOODHEAD: We have two wireless solutions available, the first one is Telular on CDMA. And when we deploy that, when a customer decides they want to take Telular, it has equal access associated with it. That is the Telular solution. On the HSPA network, no.

4330 COMMISSIONER MOLNAR: Yes, fair enough. I wasn't suggesting you have to provide equal access over your whole high-speed network, I was just asking if we were to change the BSO to clearly establish that equal access to long-distance networks, you know, was a requirement and potentially unlimited local calling, which are available to most parties today, if that would be a problem.

4331 MR. HENNESSY: I think as long as, you know, we would continue to have the flexibility to offer services that people might find more attractive than those that are defined within a specific BSO, right?

4332 COMMISSIONER MOLNAR: Of course, yes.

4333 MR. HENNESSY: So, you know, if you can upsell somebody to a basic product that offers a whole bunch more functionality but doesn't meet all your requirements, you know, we might focus on that.

4334 COMMISSIONER MOLNAR: Yes, okay.

4335 I just want to move briefly to the broadband and broadband target. You know, unfortunately I am one of the customers who often is within the high-cost area, so within the 7 per cent of Canadians who don't have access to the broadband network and the HSPA network. I have to tell you I am often often often without coverage and I think, you know, we tend to look at the numbers and the numbers look great.

4336 But when we focus on the numbers within the high-cost serving areas, they start to look very different. If you take away the 80 per cent of the country that is, you know, within non-high-cost areas and then you start looking at the results, they are very different.

4337 MR. HENNESSY: Yes, we would agree with that.

4338 COMMISSIONER MOLNAR: I actually wrote down a list of everywhere I didn't have service, but decided not to share that.

4339 One of my issues here or not issues, but what I wanted to just explore a little bit, there is really two things. You know, you said next year job is done and everybody has connection to broadband. But one of the things that I believe we should maybe be focusing upon is the future.

4340 We have heard some parties in here talk about underserved, that customers in high-cost areas are rapidly underserved as it relates to their broadband service. As applications grow in demands the 1.5 isn't adequate and we should be looking at the future.

4341 I see that you say in your remarks "a target to measure achievement is reasonable." So I assume that is the aspirational target. And I think I heard you say that it is potentially 6 to 10 megabytes in eight to 10 years, something like that, as a reasonable target?

4342 MR. HENNESSY: I don't think I said that.

4343 COMMISSIONER MOLNAR: I think your colleague did.

4344 MR. HENNESSY: Oh, did he?

--- Laughter

4345 MR. HENNESSY: There you go, I guess the Chairman has a target to shoot for.

4346 But I think what I did say is that -- and I agree with you and so, you know, one of the things we were asked is, you know, come back, see if we can kind of talk about what numbers. And you know, the issue is what do you want the number for, what does it produce? So we know that, you know, that for just pure access if you are thinking about things like the person that needs to find a job, that needs that kind of basic able to surf the internet, I mean I have that today at my cottage with a half a meg service from Barrett. It does the job perfectly.

4347 If you are moving where a lot of the internet world is moving to, you know, a world of video entertainment is kind of your base case, I think you probably need, you know, 4 meg to really allow you, as I said, to do the Netflix or Apple TV or, you know, Canadian services assuming that more and more of them use that kind of technology.

4348 So that is kind of where you are today. And as I said, with the satellite you get that.

4349 So the question I was kind of asking is, okay, where do we go from there? Because it doesn't matter that maybe not all of our services are above 1.5. If somebody in the community has access to a service that is 10, because the goal -- a national goal means, you know, the accumulation of all -- you know, what individual Canadians have access as opposed to what every supplier can provide.

4350 But I am not sure -- you know, I know people say, oh, we have to get to the 100 meg network and there is lots of cable networks that are doing that. I don't know what the next jump is.

4351 COMMISSIONER MOLNAR: I think that is very fair and I think that is something we have kind of heard, that what the target is may not be that clear and it is certainly dynamic and ever changing.

4352 So my question is, what is the role of the Commission in there and what -- let me rephrase that question.

4353 It seems to me that potentially there is a role for monitoring --

4354 MR. HENNESSY: Yes.

4355 COMMISSIONER MOLNAR: -- monitoring particularly in high-cost areas --

4356 MR. HENNESSY: Yes.

4357 COMMISSIONER MOLNAR: -- what the needs are and what the results are. And monitoring at a level of detail that would enable us to see where are the key issues of strain or gaps or so on.

4358 So give me your thoughts on this. You know, to set up a monitoring that would have it at a level of detail where we would understand, you know, is it the customer PRIM, is it the last mile, is it the middle mile, you know, where is the strain that is causing the high-cost areas to maybe lag behind? And maybe also measuring the application requirement, so that you could create a more dynamic target setting, if you will.

4359 MR. HENNESSY: Yes. I would say as a starting point that you should be involved. I am not sure whether the actual program itself should ultimately be run through Statistics Canada or through you, but there should be coordination with that.

4360 So that is all maybe in many respects housekeeping, so let's -- you know, to target your question, I just thought somebody else said at the middle mile which, you know, we kind of smile at it, because there is no middle mile problem in this country. There is a problem of, you know, middle hundreds of kilometres between point A and point B which is, you know, just --

4361 COMMISSIONER MOLNAR: Well, fair enough, but the backhaul, I mean there is backhaul issues there.

4362 MR. HENNESSY: Yes, but it is big. It is big.

4363 COMMISSIONER MOLNAR: Yes.

4364 MR. HENNESSY: And the interesting thing is a lot of, you know, that backhaul problem will never be resolved to get broadband out to certain people, but at the same time we are saying but they are going to have it anyway.

4365 So that is kind of the -- that big backhaul issue in some respects has been bypassed as a problem by technologies like satellite, by the extension of wireless networks that get broadband to the end user irrespective of the absence of those facilities. So you should look at it, but you should really decide is it needed? You know, I would start with the goal. So it is important, the goal is to ensure that 100 per cent of Canadians have coverage and then availability of the service.

4366 And you look at the kind of things you identified to see are they barriers to that achievement?

4367 COMMISSIONER MOLNAR: Yes, thanks.

4368 That is it, thank you.

4369 THE CHAIRPERSON: Okay, thank you.

4370 Let me just make sure I understood your answer to my colleague correctly.

4371 If I understood it being the basic service obligation if you include there the provision of broadband but give you the option to do it by wireline or wireless, you would say you would do it wirelessly. In that case, the wireless option would include unlimited local calling and equal access. Is that what you said?

4372 MR. HENNESSY: No. I don't think I did say that, and I don't think I would say that.

4373 THE CHAIRPERSON: She was talking about how to live up to the -- service application. And if you lived it up, if we allowed you to fulfil by wireless, and she said the wireless unfortunately does not include equal access or unlimited local calling. So if you chose to comply and use wireless you would provide it.

4374 That is what I thought you said. If not, here is your chance to correct me.

4375 MR. HENNESSY: Yes. So we provide today a CDMA service that meets those obligations and we would provide -- I think what I said at the end is we would also elect the right to say, you know, if you want to offer some sort of minimum thing like that, that is one thing.

4376 But if we choose to offer a service that we think is collectively better, for instance it includes broadband but doesn't include equal access, to a customer, we wouldn't come looking for a subsidy or anything on that but that might be how we would much rather proceed in the marketplace to offer the service.

4377 THE CHAIRPERSON: Okay, then me ask you the question I thought she asked you. Let me ask it so there is no further confusion now.

4378 MR. HENNESSY: Sure, go ahead.

4379 THE CHAIRPERSON: Let's assume we think broadband is something desirable, dial-up won't cut it. So we say broadband, we define it at let's say 1.5, but however you have the option of doing it either wirelessly or wireline, provided when you do it wirelessly you have to throw in unlimited local calling and equal access.

4380 MR. HENNESSY: Okay, sorry, so there is -- I answered you absent the whole broadband question, sorry I missed that.

4381 THE CHAIRPERSON: Okay, that is why I rephrased it so now that you have --

4382 MR. HENNESSY: Yes, thank you. Thank you, because that is a very important point.

4383 Under no circumstances do we believe that it is right or appropriate for the Commission to require anybody to provide broadband service because the market as of next year will have ensured 100 per cent availability and it did it without the requirement.

4384 THE CHAIRPERSON: I heard you. I heard you, but I didn't start the question that way. Take my premise, which you don't accept?

4385 MR. HENNESSY: Yes, okay. So I absolutely don't accept your premise. Now, I am not sure what you want me to take it and do with it, but --

4386 THE CHAIRPERSON: If you take that premise and we do mandate a minimum broadband would it make sense to then say but you can deliver it technologically neutral if I do it wireline or wireless as long as the wireless includes equal access, not limited local calling?

4387 MR. WOODHEAD: But those aren't part of the basic service objective today. You are adding to the basic service objective in order -- that is what you are saying.

4388 THE CHAIRPERSON: Well, am I or not, don't you have that in wireline?

4389 MR. WOODHEAD: No.

4390 MR. HENNESSY: No.

4391 MR. WOODHEAD: Equal access is a LEC obligation, it is not part of the basic service --

4392 MR. HENNESSY: No, no, Ted, he is talking about broadband.

4393 MR. WOODHEAD: I am sorry, what are you talking about? You have talked about three things. You have talked about broadband which is clearly not in the basic service objective today.

4394 THE CHAIRPERSON: Yes. I made the premise assume it is.

4395 MR. WOODHEAD: Okay, so assuming it is. Then you said, would you accept unlimited local calling --

4396 THE CHAIRPERSON: But then so, you know, obviously I assumed -- maybe I made a mental jump -- I assumed that customer, you would not give him -- would give him everything wireless, you know, both voice and the data, et cetera, and therefore to give you some flexibility and to bring in, import this concept --

4397 MR. HENNESSY: So if there is a regulatory environment tomorrow and the regulator says -- and putting aside all this legal garbage, everything else -- and you just say this is the obligation, the basic service objective includes broadband.

4398 And in that case, you know, can we have the choice of saying, well, that is fine but we are going to meet that with wireless? And I would say, you know, that far down the path, sure, of course. You know, not that we agree with any of that, but sure, of course. Because if you had to do that then going forward wireless is the future, not wireline, so of course.

4399 Therefore, I think your next question is, well but, you know, now that we have included broadband and it is still the basic service objective, then don't you also have to ensure that you have unlimited local calling?

4400 THE CHAIRPERSON: Exactly.

4401 MR. HENNESSY: And I would say you have to ensure that the price of broadband, you know, if we are going to the price of broadband, what used to be local service and the value you got from the mobility are really the combination of that is some kind of thing that you would come up with in the end.

4402 And I mean, we provide basic -- today, I think we would provide likely unlimited local service on pretty much -- that is where we are going anyway so, yes.

4403 THE CHAIRPERSON: Okay. Well, thank you very much and I look forward to your written response, specially what I would describe as the aspirational goal for broadband. And take into account that we live in North America and next to the U.S. So I think, you know, sort of a similarity with the U.S. which right now is --

4404 MR. HENNESSY: Yes, I have noticed that. Thank you, Chairman.

--- Laughter

4405 THE CHAIRPERSON: No, I mean that is why I want to make sure for you, as a major carrier, what you think would be realistic under those circumstances.

4406 MR. HENNESSY: Yes.

4407 THE CHAIRPERSON: Thank you.

4408 We will take a 10-minute break. Thank you.

--- Recessing at 1108

--- Upon resuming at 1122

4409 THE SECRETARY: Order, please. À l'ordre, s'il vous plaît.

4410 THE CHAIRPERSON: Okay, commençons.

4411 THE SECRETARY: Mr. Chairman, for the record I would like to indicate that the Communications, Energy and Paperworkers Union, Item 17 on the Agenda, has advised the Commission they will not be appearing at this hearing.

4412 THE CHAIRPERSON: Okay.

4413 THE SECRETARY: We will now proceed with the joint presentation by Accelerated Connections (ACI), Radiant Communications, SSI Micro Ltd., (SSI), and TekSavvy Solutions Inc. (TSI).

4414 Appearing for the ISPs is Mr. Chris Tacit. Please introduce your colleagues, after which you will have 50 minutes for your joint presentation.

PRESENTATION

4415 MR. TACIT: Thank you.

4416 Mr. Chair and Commissioners, my name is Chris Tacit and I represent Accelerated Connections, Radiant Communications, SSI Micro and TekSavvy Solutions in this proceeding. In the balance of this presentation we will refer to the four companies as the ISPs.

4417 Seated with me are Mr. Michael Garbe, President of ACI; Mr. David Buffet, President of Radiant; and Mr. Rocky Gaudrault, CEO of TekSavvy.

4418 SSI's senior management ranks are very small and due to business constraints that company was unable to send a representative to this hearing. Therefore, in addition to making some comments that apply to all four of the companies now before you, during the course of my portion of this presentation I will also make some comments that are specific to SSI.

4419 Here is how we have organized the balance of this presentation. After some additional introductory remarks each of my fellow panel members will provide a bit of background information about his respective company and I will provide some background on SSI.

4420 After that I will discuss most of the substantive issues raised in the proceeding, with the exception of local competition in the territories of the SILECs, which the ISPs do not intend to address.

4421 In discussing the issues under consideration, I will focus on the questions posed by the Commission in the Appendix to its October 8 letter.

4422 Following my remarks on the technical issues, each of my fellow panel members will describe the adverse impact that the application of contribution charges on broadband services will have on his business and I will do the same for SSI.

4423 I will then make some concluding remarks.

4424 As you will hear during the balance of our presentation, this proceeding is of exceptional significance to the independent ISP industry. In Telecom Regulatory Policy 2010-632 the Commission found that the presence of non-incumbent ISPs in both the retail residential and small to medium sized business Internet service markets brings pricing discipline, innovation, and consumer choice to those markets.

4425 As the Commission is also aware, competition in these markets is still very fragile. For example, the Commission's most recent Communications Monitoring Report reveals that non-incumbent ISPs accounted for only 6.2 percent of residential Internet service revenues in 2009.

4426 As another example, in TRP 2010-632 the Commission concluded that without a speed-matching requirement for wireline aggregated ADSL access and TPIA services, it is likely that competition in retail Internet service markets would be unduly impaired, an ILEC and cable carrier duopoly would likely occur in the retail residential Internet service market, and competition might be reduced substantially in small to medium sized retail business Internet service markets.

4427 The Commission concluded that in such circumstances, retail Internet service competition would not continue to be sufficient to protect consumers' interests.

4428 The lack of speed matching does not represent the only danger to retail Internet and other broadband service competition. If the Commission decides to apply a contribution charge to Internet services, significant revenues will be siphoned away from the telecommunications industry and non-incumbent TSPs will experience a disproportionately large corresponding adverse impact. This is because the non-incumbents simply do not have the financial strength of the incumbents.

4429 Such a development would mean less price discipline, innovation and consumer choice in retail Internet service and other broadband markets. In the end, there is a real and present danger that retail Internet and other broadband service competition would not be sufficient to protect consumers' interests.

4430 David will now provide an overview of Radiant.

4431 MR. BUFFET: Thank you, Chris.

4432 Radiant has been providing full service Internet solutions to industry-leading companies since 1996 and today over 4,000 business customers use our broadband access and private networking services throughout North America.

4433 Radiant is uniquely positioned as a national full service, single source for:

4434 Fully managed high-speed Internet connectivity across North America; Comprehensive broadband failover solutions and mission critical applications; We have private networking; Enterprise Private Cloud Computing; Hosted Microsoft Exchange; and Disaster recovery services.

4435 Many people might not have heard of Radiant, but you certainly have heard of some of our larger customers. We provide managed broadband services to all Tim Horton's & lululemon atheletica locations across North American. We also serve WalMart Canada, The Forzani Group, Sun Life Financial, First Ontario Credit Union and DB Schenker Logistics.

4436 In addition to these larger accounts, we also serve thousands of smaller mid-size businesses, CMLS, Viceroy Homes, AIDS Vancouver and the YWCA of Greater Vancouver are just a few examples.

4437 Radiant has also partnered with industry leading companies such as Juniper, Cisco, IBM, Microsoft, VMware to deliver next generation technology with open standards, providing multi-location businesses with scalable, flexible and cost-efficient services.

4438 We have also partnered across Canada and the United States to deliver lastmile broadband connections into Radiant's core network including Bell, TELUS, Shaw, MTS, SaskTel, Aliant, Rogers and, in the United States, MegaPath and Covad, AT&T and Verizon. We have over 60 agreements in place.

4439 Our senior executives have many years of high-level experience in both North America, the United States and Europe. We are familiar and have worked with all the incumbent ILEC's and regulatory bodies in both the United States and Europe.

4440 Over the past several years, Radiant has steadily grown from a local ISP in Vancouver to Canada's largest independent provider of comprehensive, business broadband solutions. In addition to our head office in Vancouver, we have offices in Montreal, Toronto, Calgary and Edmonton.

4441 Radiant is the only publicly traded company amongst the ISPs. Radiant Communications Corp. shares are listed on the TSX Venture under the symbol RCN. As a result of this company public status I can openly discuss in this hearing some of the company's detailed financial information which is in the public domain.

4442 Some of our financials. In 2009 we had revenues of $30 million and a very modest net profit of $73,000 after a number of years of featuring losses. In the last while, we have invested over $3.5 million of capital into our network and services, and this year were able to attract $4.2 million in new investment.

4443 We serve 20,000 business sites and we have 106 employees. Radiant has been recognized by IT World Magazine and IDC as one of a very few companies in Canada offering a full suite of Cloud Computing services and some of our other successful and innovative services include AlwaysThere Hosted Applications, Virtual Server and Surelink.

4444 In order to survive Radiant needs to continue to invest and lead in innovation.

4445 I will now invite Rocky to tell you a bit about TekSavvy.

4446 MR. GAUDRAULT: Thank you, David.

4447 In contrast to Radiant, TekSavvy provides Internet services primarily to the residential community. TSI currently provides Internet access to nearly 60,000 homes and businesses.

4448 As with fellow presenters in this group, TSI's current market presence is made up predominantly of a particular market niche, which in our case is technology savvy clients.

4449 From the ability to provide first call resolution on topics ranging from Internet access to routers, to providing bonded DSL, unlimited broadband services or being one of Canada's leaders in ISP deployment of custom static IP addresses and IPv6, TSI has played a key role in Canadians' online experience.

4450 Current investments include a national roll-out of cable broadband with Shaw, Videotron, Rogers, Cogeco and Eastlink.

4451 An eastern roll-out of DSL with Bell Aliant should be completed in the first quarter of 2011.

4452 The opening of a central office based option in one of our locations is but days away.

4453 A full roll-out of VoIP is approaching a critical stage in its development.

4454 We have recently launched a local wireless Internet service in one community and continue to move ahead with IPTV.

4455 Fibre-to-the-home investments also continue in small pockets of Ontario.

4456 We have been very busy, to say the least!

4457 Our network spans from Vancouver, to Quebec and will soon extend to the east coast as we move into Halifax.

4458 In order to provide its services, TSI currently obtains aggregated DSL wholesale services from Bell Canada, Bell Aliant and TELUS, as well as TPIA from the major cable carriers.

4459 TekSavvy's current business plans are to develop its network and business according to the ladder of investment which we discussed in detail in the proceeding leading to TRP 2010-632.

4460 I mention this as the Commission's determinations in this proceeding could either allow us to continue down this path or severely hinder this strategy.

4461 Michael will now provide an overview of ACI.

4462 MR. GARBE: Thank you, Rocky.

4463 Accelerated Connections is a mid-sized ISP based out of Toronto. While we serve small and medium sized businesses across Canada, our niche is retail chains and other distributed enterprises.

4464 Our network is comprised of wholesale relationships with the various ILECs across the country. We interconnect with their networks and we bring all of our traffic back to Toronto where all of the networks are aggregated in our data centre at 151 Front Street. In other words, we take the footprints of TELUS, Sasktel, MTS Allstream, Bell and Bell Aliant and create one great big network with a footprint larger than any of them alone.

4465 This is a huge value add for customers looking to create a single national network. The market segment that seems to gravitate towards this type of network the most is retailers. When you shop in your local mall there is a greater than 60 percent chance that store will be on either the Accelerated Connections network or the Radiant network.

4466 Like Radiant, Accelerated also has clients across Canada in the restaurant, finance, petroleum, automotive, and security businesses.

4467 In addition to our data business, Accelerated Connections offers national hosted PBX and data centre services.

4468 I will now turn the presentation back to Chris.

4469 MR. TACIT: Thank you, Michael.

4470 I now want to say a few words about SSI.

4471 Like ACI and TekSavvy, SSI is a privately-owned company. It is northern owned and operated and has been in business for more than 20 years. SSI has offices in Yellowknife and Ottawa. It employs 30 people directly and also employs a network of approximately 50 agents, each located in a Northern community.

4472 SSI's core business is the provision of retail broadband Internet service to the Northwest Territories and Nunavut via satellite and licensed spectrum in the 2.5 GHz range.

4473 SSI's operating territory includes 54 of the most remote communities in Canada. SSI is also the largest broadband service provider in northern Canada. It is the operator of the Qiniq and Airware networks.

4474 SSI has made significant investments in the north via BRAND/NSI programs. All of these programs were accessed through open, competitive bidding process. All of these programs featured matching fund requirements, resulting in the investment of millions of SSI dollars in northern infrastructure. SSI designed, built and operates the networks in their entirety. NorthwesTel, and all other potential bidders, had the same opportunity to bid on these projects that SSI did.

4475 SSI recently invested heavily to establish a new uplink facility in Ottawa for the specific purpose of improving service to north.

4476 I will now address the questions posed by the Commission in the Appendix to its October 8 letter.

4477 One: In which markets should the obligation to serve and the basic service objective apply, if at all?

4478 The ISPs believe that these objectives should apply in all markets. This is so because, as noted in Telecom Decision 2006-15, as amended by the Governor-in-Council, it is clear that even in forborne markets there may remain pockets of uncontested customers for whom the ILEC remains the primary or only LEC.

4479 In fact, the competitor presence test inserted in Decision 2006-15 by the Governor-in-Council could result in uncontested pockets of up to 25 percent of the number of local exchange service lines that the ILEC is capable of serving in forborne exchanges. The numbers in the case of non-forborne exchanges can be much higher, even if some degree of competition is present.

4480 Furthermore, with the increased focus of TSPs on bundling the continued application of the obligation to serve and basic service objective may be the only way to ensure that standalone primary exchange service continues to be provided.

4481 Two: Should only the incumbent local exchange carrier be subject to the obligation to serve and basic service objective where the measures are maintained?

4482 The ISP's answer is yes. The ILECs are the carriers that originally enjoyed a monopoly in the provision of primary exchange service throughout the country and there are still areas in which they, not other TSPs, remain the sole providers of that service.

4483 It is most appropriate for the ILECs to be subject to the obligation to serve. Such an approach is most consistent with subsection 7(f) of the Act and paragraphs 1(a)(i) and (ii) of the Policy Direction.

4484 Since it is the residual market power of the ILECs that makes the imposition of an obligation to serve on them necessary, paragraph 1(b)(iii) of the Policy Direction is not breached when it comes to the imposition of an obligation as a non-economic measure solely on the ILECs.

4485 Three: Can wireless voice service satisfy the obligation to serve and the basic service objective?

4486 No. It's true that over 99 percent of Canadians had access to cellular mobile wireless services in 2008, and 74.3 percent of households subscribed to them. Despite this, Canadians are not disconnecting their wireline primary exchange service to a significant degree, suggesting that cellular mobile services are not typically perceived as full substitutes for wireline services. This is not entirely surprising, particularly in remote and rural areas where mobile wireless coverage is not always available or reliable even when present. Mobile wireless voice services also tend to be more expensive than wireline services.

4487 Four: Should the Commission establish a target consisting of technical specifications for access to high-speed Internet service? If so, what should those technical specifications include and in what timeframe should the target be achieved?

4488 The ISPs do not believe that any specifications should be adopted or can remain fixed for any significant period of time. Technology is simply changing too fast. The demand for greater service speeds is increasing very rapidly and, bundling, including the carriage of IPTV over broadband, is now driving the demand for faster broadband connections even more.

4489 Just as the speeds that are available today were not expected five or 10 years ago, the desirable speed and other characteristics of high-speed Internet access and other broadband service years from now cannot be forecast with any degree of accuracy today.

4490 If such specifications were to be developed, they would quickly become a moving target as consumer needs and technology evolve. In fact, targets established by regulatory fiat rather than market developments can actually lead to sub-optimal investment outcomes.

4491 Five: Should the Commission mandate the provision of access to such a service in areas where it is not provided?

4492 No. The cost is simply too high and the negative impact on the industry would be too severe. The responsibility for funding broadband in areas where it is not provided rests with the federal and provincial governments, which have the ability to allocate general tax revenues to fund such projects.

4493 Six: Should the Commission establish a fund to enable Canadians to access high-speed Internet service in areas where it is not provided?

4494 No. As discussed in our introduction, the state of competition in the provision of retail Internet and other broadband services is already very poor. Burdening non-incumbent TSPs with a portion of the enormous cost required to subsidize access to these service in areas where it is not provided will simply cause many non-incumbent TSPs to exit the market, leading to a significant lessening of competition in the provision of the very services that the Commission wants to promote.

4495 Even the modest target proposed by MTS Allstream in this proceeding of a broadband standard involving download speeds of between 3 and 4 megabytes per second -- which is already considered outdated in many parts of Canada -- could require a subsidy of $9 billion to $15 billion over an eight to 10 year period increasing the present 0.73 percent levy on contribution-eligible revenue to between 3.3 percent and 5.1 percent.

4496 Even if MTS Allstream's revised figures of a $7 billion subsidy translating into a 2.75 percent contribution rate were accepted, this still represents a more than 3.7 times increase in the current contribution rate. And the $7 billion subsidy does not include the current subsidy for the provision of local services in high-cost serving areas which would also have to continue to be recovered as well.

4497 If download speeds of between 10 and 20 megabytes per second required to carry IPTV signals and other advanced applications were subsidized, the cost borne by the industry would be much, much higher.

4498 The magnitude of contribution charges required to fund a meaningful national broadband subsidy program would be a very significant burden for the telecommunications industry, and especially for non-incumbent TSPs providing retail broadband services.

4499 With few exceptions, such TSPs typically operate solely in competitive markets. As a result, their ability to increase the prices for retail services to recover a contribution tax levied on them from their end users is either non-existent or extremely limited. Attempts to do so would lead to significant market share losses in favour of the incumbents that have much greater financial strength.

4500 On the other hand, absorbing the tax is also not an option for non-incumbent TSPs. Doing so would choke their ability to invest, innovate and grow, driving many of them out of the market.

4501 Seven: Should the Commission modify the local service subsidy regime?

4502 Not unless the objective is to phase it out as quickly as possible, with minimal regulatory effort.

4503 The local subsidy has been declining over time. Modifying the subsidy regime in complex ways could have unpredictable consequences for the industry. A process for modifying the subsidy could take a long time and be very costly, based on past experience.

4504 Given that the revenue-based contribution charge continues to fall and is now at modest levels, the objective most consistent with the policy objective would be to focus on eliminating it altogether within a reasonable amount of time, rather than contemplating any changes that could actually lead to an increased subsidy burden on the industry.

4505 The ISPs' answer to the next and final question also applies here.

4506 Should the Commission review costs and/or high-cost serving area definitions used in the calculation of subsidy amounts?

4507 No. Such changes should not be pursued. The existing definitions result in adequate funding for HSCAs and the amount of contribution that is being collected annually is declining, which is consistent with subsection 7(f) of the Act and paragraphs 1(a)(i) and (ii) of the Policy Direction.

4508 Any changes to the contribution regime that could increase local service subsidies run the risk of introducing economic distortions that will deter economically efficient competitive entry into the market or promote economically inefficient entry, contrary to paragraph 2(b)(ii) of the Policy Direction.

4509 We are now going to consider the impact of the inclusion of Internet service revenues in the contribution regime on ISPs?

4510 David will go first.

4511 MR. BUFFET: Thank you, Chris.

4512 Radiant does believe that broadband improvements in high-cost serving areas should be a priority for the federal and provincial governments, using funds raised from general tax revenues. Applying a subsidy regime solely to the telecommunications industry is highly distortional and especially punitive to that sector. As already discussed, the burden would be particularly large for non-incumbent TSPs.

4513 I will be very specific within the context of Radiant Communications.

4514 Based on the assumption that the rules for a broadband contribution fund would parallel those of the current contribution fund and on Radiant's most recent annual financial results, using the current 0.73 percent revenue charge applicable to voice, which is too low to subsidize a national broadband program, would result in a contribution tax to Radiant of $98,051, leading to a financial loss situation and possible job losses.

4515 However, payments at this contribution rate would never sustain the kind of national broadband subsidy program envisioned by the MTS Allstream submission and other participants in this proceeding advocating in favour of such a fund.

4516 If, more realistically, the contribution rate were between the 3.3 percent and 5.1 percent as suggested by MTS Allstream, the contribution tax that Radiant would be forced to pay would be approximately between $443,000 and $685,00 at current revenue and cost levels. Even at the 2.75 percent contribution rate now being proposed by MTS Allstream, which may well be too low, the amount payable would be approximately $370,000.

4517 Radiant would be in a significant loss position. The more than $1 million in CAPEX investment that we have made this year would cease. Our ability to raise capital -- we raised $4.2 million in capital this year -- would disappear. Radiant would very likely cease to exist as a viable business entity and be forced to declare bankruptcy or have to be sold.

4518 In the end:

4519 106 employees would lose their jobs;

4520 Radiant's contribution to the subsidy fund would drop to zero since it would no longer exist as a going concern;

4521 50,000 mid-size Canadian businesses would lose choice, and

4522 At best a duopoly would be reinforced in the Canadian marketplace.

4523 I will now turn the presentation over to Rocky.

4524 MR. GAUDRAULT: Thank you, David.

4525 Should a contribution regime be implemented that includes retail Internet revenues, it would have a devastating long-term effect on TekSavvy's ability to compete, differentiate and invest.

4526 Over the last two years especially, TekSavvy has developed pockets of customer masses sufficient to reach the next level of investment. As a result, TSI is investing in CO-based services, IPTV, voice services and fibre projects.

4527 The kinds of impacts of a subsidy regime such as that described by MTS Allstream, or similar schemes promoted by others in this proceeding, would lead to a cessation of investments and already low margins would be squeezed further. Only incumbents could afford to survive.

4528 The fragile competition present in the market for retail Internet access services cannot sustain such a financial shock.

4529 The risk to Canadian society includes the potential loss of 102 TekSavvy jobs, and more if vendors affected are also counted, as well as the loss of a competitor serving 60,000 Canadian homes.

4530 Michael will now provide ACI's perspective.

4531 MR. GARBE: Thank you, Rocky.

4532 It's difficult for me to add much more to what David and Rocky have already stated. The repercussions for Accelerated Connections are the same. This potential tax -- and let's be clear here, no matter what you call it it is a tax -- will most certainly bring significant hardship to my company as well.

4533 We have existing customers in the retail sector. That sector has not been doing well over the past few years due to the recession. During this very difficult time, retailers have also been forced to go engage in a very expensive credit card industry compliance exercise which has eaten into their profits substantially. If we were suddenly to hit them with a potential increase in our fees of any amount, all of our contracts would be in jeopardy.

4534 As a small businessman running a company that is just starting to see the light of day again after the recession, I'm asking you to not consider adding Internet access to the BSO or Internet revenues to the contribution subsidy mechanism, as that will most definitely cause us all great hardship and potentially put many of us out of business.

4535 Chris is going to wrap up.

4536 MR. TACIT: Thank you, Michael.

4537 The harm that SSI would experience as a result of the application of a contribution tax to Internet service revenues would be similar in its case and would actually prevent SSI from expanding the very broadband services that the Commission wants to see promoted in the north.

4538 The negative effect of such an ongoing tax would not be outweighed by any funding that SSI might be able to draw from the fund for specific projects designed to improve broadband access in its operating territory.

4539 If NorthwesTel were to obtain supplementary funding not available to its competitors for the provision of Internet services or some other form of protection from competition, the situation would be even worse for SSI. Significant efficiencies would be lost and SSI may not be able to stay in business.

4540 Based on all of these submissions, the ISPs' conclusions are:

4541 One: There is nothing wrong with the current obligation to serve, basic service objective or local service subsidy. No change is required.

4542 The most important policy objective should be to keep reducing the National Subsidy Revenue Requirement as quickly as possible in order to free up funds for TSPs to use to invest and innovate.

4543 Due to the technical nature and complexity of the subject matter, the process required to evaluate and implement complex modifications to the local subsidy regime would consume disproportionate resources for the Commission and TSPs for little or no benefit. In fact, if the process were to result in an expansion of the subsidy regime, or increases in the NSR or contribution rate, the result would be very harmful to competition, investment and innovation. That would be inconsistent with maximum reliance on market forces and therefore contrary to the Policy Direction.

4544 If a change to the local subsidy regime is contemplated, it should be very simple, quick and focused solely on eliminating the subsidy entirely as quickly as possible.

4545 Adding Internet services to the base of revenues on which contribution is levied will create significant market distortions. This adverse impact will be felt disproportionately by non-incumbent ISPs and will reduce their ability to climb the investment ladder and innovate. Many competitive TSPs will fail.

4546 Any broadband subsidies should come from general tax revenues to minimize distortionary effects. The burden should not be placed only on the telecommunications services sector, as doing so would create significant distortions and an undue lessening of competition. Such an approach is contrary to the Policy Direction and the Canadian telecommunications policy objectives, viewed in a balanced manner.

4547 The ISPs further caution that the Commission may not have the statutory jurisdiction to levy contribution on Internet services or mandate the construction or expansion of broadband networks. Any attempt by the Commission to impose such requirements could create significant regulatory and legal uncertainty while the underlying jurisdictional issue is being litigated and that would increase the risk profile of the industry.

4548 The impact of this uncertainty would be felt disproportionately by non-incumbent TSPs and that would prevent or retard them from obtaining access to essential capital required to climb the investment ladder.

4549 For all of these reasons, the ISPs urge the Commission to maintain the status quo with regard to the obligation to serve, basic service objective and local service subsidy.

4550 The only possible change that the ISPs would endorse would be a change that could be implemented quickly and inexpensively. with the sole objective of eliminating the existing local subsidy in its entirety as quickly as possible.

4551 Thank you.

4552 THE CHAIRPERSON: So basically your position is leave it be, the status quo is okay. If anything, just get rid of the subsidy?

4553 MR. TACIT: That's correct.

4554 THE CHAIRPERSON: Now, are you in agreement with TELUS who was before you that this is in effect a job done. We don't have to set a target for broadband and all of Canada has access to at least 1.5, et cetera, and in lots of places more depending on what the demand is, et cetera, and really there is no need for us to set a target at all?

4555 MR. TACIT: I guess I would put it a little bit differently than that.

4556 While the conclusion might be the same I think our reasoning is a little bit different and it goes more like this: We don't believe that placing the entire burden of the subsidy on the telecommunications industry is sustainable or in fact beneficial for that industry or consumers.

4557 Having said that, then, if the Commission is not statutorily in a position to do that in a way that advances those policy objectives, then it should not be the one that establishes standards.

4558 If the federal government wants to put up money to fund projects according to a standard that it establishes, great, but there can't be a disconnect between the body that establishes standards and the one that funds it. As I said, because we don't think that can be done in a sustainable way when it's based only on the --

4559 THE CHAIRPERSON: So setting a standard without funding it makes no sense to you essentially?

4560 MR. TACIT: It would certainly not.

4561 THE CHAIRPERSON: Now, all three of you, and you on behalf of SCI, have said how disastrous it would be if would adopt the MTS proposal or a variance thereof. I don't quite understand why. Surely it would be imposed on all the industry and it would be proportionate obviously to their business and their revenues, et cetera. So that would work like a specialty GST tax basically on that industry.

4562 Why would it have a disproportionate impact on your clients and others? I mean it would be basically part of the cost of doing business.

4563 MR. TACIT: Well, to start with your last question first, it's not that easy to pass something like this on to consumers because ISPs typically operate predominantly in competitive markets, so their ability to try and raise rates is very limited. They don't have the same financial strength to attract capital that BCE or TELUS do. That is just a fact of life.

4564 A lot of ISPs operate with slim margins, a lot of them in marginal markets, but they bring that price discipline and innovation to the market that this Commission found to be in the public interest.

4565 So that's why I'm saying that the effect would be disproportionate. I'm not saying the --

4566 THE CHAIRPERSON: I'm not following you. The forborne areas are competitive, the non-forborne aren't, but they are not profit centres. So why would the fact that one is a large corporation and the other one is a small corporation make a difference? It's an initial cost of doing business and would hit everybody equally.

4567 MR. TACIT: Well, let me put it to you, maybe, in a very stark kind of example, which is not an accurate example, but it may make the point.

4568 If BCE's revenues were reduced by 2, 3, 4 or 5 percent, it would still have the capital investment program. If that happened to some of my clients, their ability to invest and continue to grow would simply cease. You can't compare the kinds of companies, of the sizes in the sector that I represent in the industry, with the financial strength of a BCE or a Rogers or a TELUS. It just doesn't work that way. They do not have the same ability to attract capital that the large players do.

4569 So while you may say that everybody is going to take the same percentage hit, the impact on the ability of the smaller players to attract investment would be devastating and not proportionate to what the big ones could bear.

4570 THE CHAIRPERSON: Now, this hearing is all about the remote areas, who feel left behind. The competition doesn't usually reach them.

4571 We heard all last week -- and you probably heard it on the internet -- that we should do something for those areas, that wireless isn't there, it isn't a sufficient substitute, and they feel left behind.

4572 If I accept your submission, it is basically tough luck for them. Is that right?

4573 MR. TACIT: No, we are not saying tough luck --

4574 THE CHAIRPERSON: Well, from us, in terms of -- I know that we say, generally, that government should do something, but I'm talking about it in terms of the CRTC.

4575 MR. TACIT: The problem is -- I think it would be wise for the Commission to start with the proposition of "Do no harm". If, in attempts to cure a problem which is real -- and I have a lot of sympathy with the Commission's desire to address this issue -- it will end up creating distortions that will harm the industry more generally, and take back a lot of the benefits that we have had as an industry over the last two decades, where competition has increased, I think that would be a bad outcome.

4576 THE CHAIRPERSON: So the problem is real, but it's out of the reach of the CRTC.

4577 MR. TACIT: I'm sorry, I didn't catch that.

4578 THE CHAIRPERSON: You say that the problem is real, but it's out of the reach of the CRTC to do something about it.

4579 MR. TACIT: Yes.

4580 THE CHAIRPERSON: Okay.

4581 Candice, do you have some questions?

4582 COMMISSIONER MOLNAR: Yes, thank you.

4583 I want to begin by ensuring that I understand the operations of your companies. Very quickly, I heard TekSavvy say that you are planning to come forward with a VoIP offering. Do any of the companies today provide voice services?

4584 MR. GARBE: Accelerated Connections provides voice services.

4585 COMMISSIONER MOLNAR: To business or residential?

4586 MR. GARBE: To business and, more recently, to residential.

4587 MR. BUFFET: As does Radiant Communications' two businesses.

4588 MR. GAUDRAULT: SSI does not.

4589 COMMISSIONER MOLNAR: With the exception of SSI, do any of you provide broadband in high-cost serving areas?

4590 MR. BUFFET: Some of our customers have locations in high-cost serving areas.

4591 COMMISSIONER MOLNAR: That you are providing via the GAS tariffs or some other arrangements with the underlying carriers?

4592 MR. BUFFET: The specific example I will use is with Tim Hortons. They have certain locations in high-cost serving areas. We reach those either through satellite or through different technologies, and we blend the price all in.

4593 COMMISSIONER MOLNAR: Now, you did say that you offer some business voice services, so do any of you, then, pay contribution today, under the existing contribution scheme?

4594 MR. GARBE: Yes. When we offer voice services, we are buying PSTN services from another carrier, and they would, in turn, make that payment, and if it's required upon us, we do it as well. It depends how we acquire the lines.

4595 MR. BUFFET: For Radiant Communications, about 95 percent of our business is in internet services as opposed to voice. So, primarily, internet services.

4596 MR. TACIT: TekSavvy does contribute to pay on voice.

4597 Also, in answer to your prior question -- because they didn't get a chance to answer it -- their network can reach any footprint that the Bell, Bell Aliant, TELUS -- and so on -- networks, from which they get aggregated service, can reach.

4598 That includes whatever high-cost serving areas those companies provide service to.

4599 COMMISSIONER MOLNAR: Thanks. That helps me understand a little more.

4600 You answered a lot of questions, and thank you for doing that, in your submission to us. You answered, essentially, all of the questions, except for the SILEC, but I thought that maybe I would focus on those that, potentially, are a little more important to you, and that is expanding the base of contribution to include internet services.

4601 You spoke with our Chair about the issue of expanding the contribution itself to include internet, and I understood your answers, I won't pursue that, but I do want to pursue and understand a bit better the reasons behind your concern with us expanding the base of revenue that is required to support the existing contribution regime.

4602 While I understand why you have concern with expanding that base, I am not certain if I have seen in your submission why you felt it would be inappropriate for that base to be expanded to include internet.

4603 MR. TACIT: Because if you expand the base, I don't think there is any choice but to increase the contribution rate, as well.

4604 Maybe I am missing something --

4605 COMMISSIONER MOLNAR: No, I'm sorry, I think that I may need to clarify my question.

4606 In this hearing there are really two things being asked. One is: Should we expand the contribution mechanism to include support for broadband services. The other, smaller question, is: With the existing contribution subsidy mechanism for voice services, should we expand the base of revenues over which that subsidy obligation is covered to include -- today, internet is exempt.

4607 I understand, on the big question, your position. I want to talk about the smaller question here.

4608 MR. TACIT: Again, it is still going to have a detrimental impact, and it's going to be a financial shock to an industry in which the smaller players are already struggling to maintain that foothold and provide the benefits that the Commission wants to be brought to the market.

4609 You saw how just even applying the .73 percent flips Radiant from a modest profit to a loss.

4610 These are the real impacts that will happen.

4611 COMMISSIONER MOLNAR: Radiant, did you model the impact of expanding the base of contribution paying revenues to include internet?

4612 MR. BUFFET: No, we did not in our forecasting looking forward.

4613 It's not that Radiant disagrees with addressing the digital divide, it's just the mechanism by which you do that.

4614 The digital divide and the information highway and broadband have been likened to the future high-speed traffic, et cetera, highways, looking back historically. So what we are saying is, if you look to the past in terms of the building out of infrastructure across Canada, highways and railroads --

4615 COMMISSIONER MOLNAR: Mr. Buffet, I'm sorry, I am really asking quite a smaller question. You folks were very clear on your view as to whether or not there should be a subsidy put in place, funded by the telecommunications industry, for broadband -- for a broadband program.

4616 MR. BUFFET: Right.

4617 COMMISSIONER MOLNAR: I am not asking that question here. Another question that was asked in this proceeding is: For the existing subsidy that supports continued, affordable access to voice services, should the base of revenues that pay into that subsidy mechanism be expanded to include internet.

4618 The effect of that would, essentially, be to drive that contribution rate down from .73 to something less, because you have expanded the amount of revenue -- or the revenue base paying into that pool.

4619 MR. TACIT: I guess I am not clear on what that would accomplish, other than sort of shocking the ISP industry.

4620 What would that do?

4621 The total revenues would be the same --

4622 COMMISSIONER MOLNAR: What would that do? I don't think I am making this proposal up as I come here; the questions were asked.

4623 It is always put forward that the broader the base, the less distortionary any kind of subsidy is on an industry.

4624 What sticks out quite significantly within the base of telecommunications revenue today, internet -- and I think it's paging, you know -- and, really, put paging aside, but internet revenue is excluded from the base of contribution revenues, or revenues that have an obligation to pay into the contribution pool.

4625 And we see, increasingly, services such as VoIP being used, which pull revenues from the legacy into that broadband or internet pool.

4626 So the question is, why shouldn't the internet revenue be added to the base of revenues that should pay into that contribution fund?

4627 MR. TACIT: Let me answer very briefly. First of all, VoIP revenues do attract contribution. They are not treated as broadband, they are treated as voice, and those who offer VoIP services have to pay a contribution, just like anyone who provides a service using circuit switch technology. So it is already included.

4628 Second, the .73 percent is already a fairly low rate, so the distortionary effect is pretty low. Making a transition to change that to -- I don't know -- .6 or .5 isn't worth the shock effect that it is going to create for the competitive industry.

4629 And, third, we are going to be faced with all the jurisdictional arguments, which could cause years of uncertainty and regulatory risk for this sector, as people argue about whether the Commission has the jurisdiction to do that, because it's not a basic service or whatever.

4630 COMMISSIONER MOLNAR: I accept your first two arguments, I am not sure that the third, the jurisdictional issue, is an issue with whether or not it can be subject to payment.

4631 MR. TACIT: The contribution fund -- the section of the legislation provides that it is to fund the continuation of the provision of basic telecommunications services.

4632 COMMISSIONER MOLNAR: And I am not suggesting that that be changed in my questions here.

4633 MR. TACIT: The point is, expanding the base itself could be construed now as subsidizing internet, as well, if that's what you are getting at.

4634 COMMISSIONER MOLNAR: Okay. I am going to let that go. I am not sure that I understand --

4635 MR. TACIT: We will look at the transcript to see if we can clarify it more in our written --

UNDERTAKING

4636 COMMISSIONER MOLNAR: Okay, thank you.

4637 I am going to move on quickly to a couple of the other things you touched on.

4638 You have said that there is nothing wrong with the current obligation to serve, the basic service objective, or local service subsidy. No change is required. But we have heard the ILECs particularly speaking of the inequitable regulatory treatment, where they are subject to an obligation to serve, and particularly within the forborne markets or within contested markets, and are the only carrier that is subject to that obligation.

4639 So would you agree that the obligation to serve could or should be removed, at least in those areas where there is competition for customers, where there are -- I think the term being used is "contested customers".

4640 MR. TACIT: I suppose, if the Commission had a way of studying that and actually satisfying itself that there weren't significant gaps, or pockets of uncontested markets, fine.

4641 The problem is that there are still pockets. Even according to the Competitor Present Test, there are pockets of uncontested markets. So that creates a need to have the rules continue to apply, even in forborne exchanges, to that extent.

4642 So I can't answer that question today. All I can say is --

4643 COMMISSIONER MOLNAR: But, philosophically -- for those customers where there is a competitive choice, philosophically, it would be appropriate to remove the obligation to serve.

4644 MR. TACIT: Yes, sure. That would be consistent, yes.

4645 COMMISSIONER MOLNAR: Thank you.

4646 And with removing that obligation to serve that they had requested -- or believe it will be an outcome of that, that the obligation to provide standalone PES would be removed?

4647 MR. TACIT: That's a tricky one. I guess, again, the Commission has all of the data from its DCS filings of people to try and figure out to how many people is standalone PES still important, and whether it would still be available if that obligation were removed.

4648 I certainly don't have that data, I don't know what the impact would be.

4649 I think it's certainly important for the Commission to guarantee consumers the ability to continue to get standalone PES. Besides that, I can't comment on the specific data, to suggest how that best should be achieved.

4650 COMMISSIONER MOLNAR: Fair enough. I just wanted to understand if it was, in some way, potentially, a requirement or an advantage to independent ISPs that there be a standalone PES available within these markets, so that you are not competing solely against bundles.

4651 MR. TACIT: I think we are looking at it more from a consumer perspective, frankly, on this particular point.

4652 COMMISSIONER MOLNAR: Thank you. Those are my questions.

4653 THE CHAIRPERSON: Thank you.

4654 Marc...

4655 COMMISSIONER PATRONE: Thank you, Mr. Chairman.

4656 I, too, have a question regarding the issue of including internet service revenues in the contribution regime money -- ISPs. This is just sort of an extension, because I am trying to reconcile the apparent success that your firms are having, insofar as it comes to attracting major clients like Tim Hortons -- and, presumably, the millions of dollars that go with that -- with the deep sense of trepidation over the idea of including ISPs in the contribution regime.

4657 You spoke a little bit about the margins. We would have to be talking about really tiny margins, I guess, for something like this to have an impact.

4658 Can you expand on that for me?

4659 MR. TACIT: Every ISP's case is obviously going to be different, but you saw the real-life example of a publicly traded company that goes from a profit to a loss situation, even by applying today's contribution rate to its internet service revenue.

4660 So, I mean, it's real. A swing of $100,000, $200,000 may not seem like much, but to these businesses that are trying to grow rapidly, some of which are very small, and yet provide market discipline, it means a lot.

4661 COMMISSIONER PATRONE: Is it fair to suggest, as your business cases currently operate, that fair chunks of what would otherwise be termed profit are reinvested into expanding your networks?

4662 MR. TACIT: Absolutely.

4663 COMMISSIONER PATRONE: Given that, are we really talking about, in this case, such a regime having an impact on the rate of expansion of your businesses, rather than actually placing most companies in a position of being in financial jeopardy?

4664 MR. TACIT: I think it amounts to the same thing, because if over time you can't invest, you are not going to just stay where you are. You are not going to be able to compete with those who do.

4665 Technology is moving so rapidly in this sector that you can't sit still and expect to still be there two, three, five years from now.

4666 COMMISSIONER PATRONE: But the margins that you were referring to are really after those reinvestments are made. Is that not a fact?

4667 MR. TACIT: I'm sorry?

4668 COMMISSIONER PATRONE: In other words, at the end of your fiscal year, you have X number of dollars. Chunks of that would be deemed available for reinvestment into rolling out your network, and the profit margin which you referred to would be after those reinvestments are made.

4669 MR. TACIT: There is a link between profitability, cash flow, and the ability to invest, and certainly reducing cash flow by siphoning funds off to a contribution fund would reduce the company's ability to invest and attract capital to leverage their own funds.

4670 That is just a fact of financing --

4671 COMMISSIONER PATRONE: But what I am hearing you say is that it will actually put your companies in a position of, potentially, losing money, rather than making it.

4672 MR. TACIT: In some of them, it will.

4673 COMMISSIONER PATRONE: I don't know if you heard Northwestel's presentation, but I just wanted to refer quickly to page 6 of your oral presentation, where you talk about SSI making significant investments in the north and being able to roll-out a network up there.

4674 Can you address that in concert with Northwestel's concerns about market distortion and duplicate networks rendering business cases uneconomic?

4675 MR. TACIT: Sure. I would love to do that, because I think it's one of the big misconceptions -- and we actually posed an interrogatory to Northwestel in this proceeding, where we specifically asked them: Isn't it the case that, for all this stuff that you claim is duplicate, you could have bid on it, or did bid on it, and you simply didn't win or didn't choose to bid?

4676 In fact, that is the situation. It's not that somebody just came and said, "SSI, we like you better, so here is a chunk of money," there were RFPs, and the federal government and the territorial governments were involved in those, and SSI won those, and had to build its network from scratch. It didn't have a pre-existing network like Northwestel did.

4677 So, in a way, that was found to be the most efficient and beneficial solution for consumers in the north.

4678 And I sympathize to some extent with Northwestel. We know how difficult it is to operate in the north, and we know they do good things up there, but to suggest that somehow they should be protected from competitive bidding processes for government funds, and that this Commission should intervene in that process, we just don't agree with that.

4679 COMMISSIONER PATRONE: Those are my questions, Mr. Chair. Thank you very much.

4680 THE CHAIRPERSON: Thank you.

4681 Tim, I believe you had a question.

4682 COMMISSIONER DENTON: Gentlemen, would you still oppose the subsidy for broadband deployment even if your revenues were not subject to it?

4683 MR. TACIT: Philosophically, what we said applies. If it is going to distort the telecommunications market, it is going to distort the telecommunications market.

4684 We are not trying to pick favourites here and say, "Just burn the big guys," we are saying that it's not a good idea to distort the market.

4685 COMMISSIONER DENTON: Thank you. Those are my questions.

4686 THE CHAIRPERSON: Those are our questions. Thank you very much. You obviously can elaborate in your written reply on some of the things we have posed.

4687 We will now take a break, and we will resume at two o'clock. Thank you.

--- Upon recessing at 1221

--- Upon resuming at 1403

4688 THE SECRETARY: Order, please. À l'ordre, s'il vous plaît.

4689 LE PRÉSIDENT : O.K. Commençons.

4690 LA SECRÉTAIRE : Alors, Monsieur le Président, j'inviterais maintenant l'Union des consommateurs à faire sa présentation par vidéoconférence via le bureau régional de Montréal.

4691 Alors, monsieur Anthony Hémond comparaît pour l'Union des consommateurs.

4692 Monsieur Hémond, s'il vous plaît, vous pouvez procéder avec votre présentation. Vingt-cinq minutes.

PRESENTATION

4693 M. HÉMOND : Bonjour. Je suis donc Anthony Hémond de l'Union des consommateurs.

4694 Alors, dans le cadre de l'Avis de consultation de Télécom CRTC 2010-43, je voudrais revenir sur la réévaluation de l'obligation de servir et de l'objectif du service de base (OSB).

4695 L'obligation de servir et l'OSB devraient s'appliquer dans tous les marchés, qu'ils soient réglementés ou pas.

4696 L'obligation de servir et l'OSB répondent aux objectifs sociaux de la Loi sur les télécommunications, et le Conseil doit prendre les moyens nécessaires à leur atteinte, même si parfois les objectifs sont contradictoires, comme le laisse entendre le Conseil au paragraphe 19 de la Décision de télécom CRTC 99-16 :

" Dans son évaluation des moyens permettant d'atteindre ces objectifs, le Conseil doit tenir compte d'objectifs de concurrence parfois contradictoires, établis à l'article 7 de la Loi sur les télécommunications (la Loi) et décrits ci-dessous : a) favoriser le développement ordonné des télécommunications partout au Canada en un système qui contribue à sauvegarder, enrichir et renforcer la structure sociale et économique du Canada et de ses régions. b) permettre l'accès aux habitants de toutes les régions rurales et urbaines du Canada, à des services de télécommunications sûrs, abordables et de qualité. c) accroître l'efficacité et la compétitivité des télécommunications canadiennes sur le marché national et international. f) favoriser le libre jeu du marché en ce qui concerne la fourniture de services de télécommunications et assurer l'efficacité de la réglementation, dans le cas où elle s'avère nécessaire. h) satisfaire les exigences économiques et sociales des usagers des services de télécommunications. "

4697 Revenons aux origines de l'obligation de servir.

4698 Auparavant partie intégrante des Règlements généraux des compagnies de téléphone qui se trouvaient en situation de monopole, l'obligation de servir a été modifiée dans l'Avis public Télécom CRTC 1985-22.

4699 L'obligation de servir est définie à l'article 3.1 des modalités de service :

" La compagnie doit fournir le service à toutes les personnes qui en font la demande, sauf si: a) la compagnie devrait engager des dépenses inhabituelles que le candidat abonné refuse d'absorber, par exemple, pour obtenir un droit de passage ou entreprendre des travaux spéciaux de construction; b) le candidat abonné a un compte en souffrance; ou c) le candidat abonné ne verse pas de dépôt raisonnable ou ne donne pas d'autre garantie exigée en vertu des présentes Modalités. "

4700 Cette obligation a été modifiée par la suite par la Décision de télécom CRTC 1986-7, Examen des règlements généraux des transporteurs publics de télécommunications terrestres assujettis à la réglementation fédérale, par l'ajout d'un paragraphe 3.2 aux Modalités. Désormais, les compagnies doivent justifier par écrit le refus de fournir le service au client qui demande à bénéficier d'un service de téléphonie.

4701 Le Conseil a, par la suite, dans l'Avis public de Télécom 2003-6, Déclaration des droits du consommateur, et par la Décision de Télécom CRTC 2006-52, Déclaration des droits du consommateur, décidé de clarifier ces modalités de service en proposant l'établissement de la déclaration des droits des consommateurs, dont la partie " Votre droit au service téléphonique local " réaffirme :

" Toute personne au Canada a le droit de recevoir des services téléphoniques locaux de base, selon certaines conditions. "

4702 Toutefois, il faut rappeler que cette déclaration ne s'applique que dans les zones et aux services encore réglementés, et uniquement aux entreprises de services locaux titulaires.

4703 En effet, le paragraphe 35 de la Décision de télécom 2006-52 précise :

" ...que la portée de la déclaration des droits du consommateur a été limitée afin d'inclure des droits associés aux services de détail qui sont réglementés. ... Le Conseil estime qu'en dépit du fait que les ESLC doivent respecter certaines des mêmes obligations que les ESLT en matière de protection des consommateurs, la déclaration des droits du consommateur, tel qu'elle a été élaborée dans le cadre de la présente instance, ne s'appliquerait pas de façon générale aux ESLC. "

4704 On ne peut que constater l'asymétrie réglementaire existant entre les ESLT et ESLC quant à l'obligation de servir et à l'OSB, puisque seules les ESLT sont assujetties à cette obligation. Les ESLC devraient, d'après nous, être, elles aussi, assujetties à cette obligation dans les zones non réglementées.

4705 Le Décret donnant au CRTC des instructions relativement à la mise en ouvre de la politique canadienne de télécommunication déclare :

" 1. Dans l'exercice des pouvoirs et fonctions que lui confère la Loi sur les télécommunications, le Conseil de la radiodiffusion et des télécommunications canadiennes doit mettre en ouvre la politique canadienne de télécommunication énoncée à l'article 7 de cette loi selon les principes suivants : a) il devrait : (i) se fier, dans la plus grande mesure du possible, au libre jeu du marché comme moyen d'atteindre les objectifs de la politique, (ii) lorsqu'il a recours à la réglementation, prendre des mesures qui sont efficaces et proportionnelles aux buts visés et qui ne font obstacle au libre jeu d'un marché concurrentiel que dans la mesure minimale nécessaire pour atteindre les objectifs; b) lorsqu'il a recours à la réglementation, il devrait prendre des mesures qui satisfont aux exigences suivantes : (i) préciser l'objectif qu'elles visent et démontrer leur conformité avec le présent décret, ... (iii) lorsqu'elles sont de nature non économique, être mises en ouvre, dans toute la mesure du possible, de manière symétrique et neutre sur le plan de la concurrence, ... "

4706 Étant donné que l'obligation de servir et l'objectif du service de base répondent aux objectifs de la politique canadienne de télécommunication, notamment les articles 7 a), b) et h) cités précédemment, qui sont de nature sociale, et étant donné que le libre jeu du marché ne peut répondre à ces objectifs, il est du devoir du CRTC de réglementer en instaurant une obligation de servir et un objectif du service de base dans tous les marchés, qu'ils soient réglementés ou non, et qui dans les zones non réglementées s'appliquerait à toutes les compagnies de télécommunications.

4707 Le postulat selon lequel le libre jeu du marché ne serait pas à même de répondre aux objectifs de nature sociale de la Loi sur les télécommunications est issu du rapport du Groupe d'étude sur le cadre réglementaire des télécommunications. On peut lire au chapitre 6 de ce rapport :

" Dans le présent rapport, l'expression "réglementation sociale" désigne les politiques et les pratiques réglementaires conçues pour réaliser les objectifs de politique sociale qui risquent de ne pas être atteints par le libre jeu du marché ou la réglementation économique seulement. "

4708 Si l'on impose l'obligation de servir et l'OSB dans les zones non réglementées aux seules entreprises de services locaux titulaires, le Conseil va créer une asymétrie réglementaire.

4709 Pour éviter cet écueil, il faut dans les zones non réglementées appliquer cette obligation de servir et l'OSB à toutes les compagnies en mesure de fournir le service.

4710 Quant aux zones réglementées, il n'y aurait pas d'asymétrie dans la mesure où il n'y a bien souvent qu'une entreprise de services locaux titulaires ou une petite entreprise de services locaux titulaires. Ces entreprises demeureraient les seules entreprises ayant l'obligation de fournir le service et de répondre à l'objectif du service de base.

4711 Il faut noter également que c'est d'ailleurs une extension de l'obligation de servir à l'ensemble des titulaires que proposait le Groupe d'étude sur le cadre réglementaire des télécommunications dans son rapport, au Chapitre 6 : Réglementation sociale, suggérant même que cette mesure fasse l'objet d'une modification législative.

4712 Nous souhaitons également souligner que cette obligation de servir et l'OSB sont présentés bien souvent comme les équivalents du service universel que l'on retrouve en Europe ou même aux États-Unis.

4713 En Europe, la Directive 2002/22/CE du Parlement européen et du Conseil du 7 mars 2002 concernant le service universel et les droits des utilisateurs au regard des réseaux et services de communications électroniques, modifiée par la Directive 2009/136/CE du Parlement européen et du Conseil du 25 novembre 2009, précise :

" Les États membres veillent à ce que les services énumérés dans le présent chapitre soient mis à la disposition de tous les utilisateurs finals sur leur territoire, indépendamment de leur position géographique, au niveau de qualité spécifié et, compte tenu de circonstances nationales particulières, à un prix abordable. Les États membres déterminent l'approche la plus efficace et la plus adaptée pour assurer la mise en ouvre du service universel, dans le respect des principes d'objectivité, de transparence, de non-discrimination et de proportionnalité. Ils s'efforcent de réduire au minimum les distorsions sur le marché, en particulier lorsqu'elles prennent la forme de fournitures de services à des tarifs ou des conditions qui diffèrent des conditions normales d'exploitation commerciale, tout en sauvegardant l'intérêt public. "

4714 Il n'y aucune échappatoire pour les États. C'est-à-dire que même si les services de télécommunications dans les zones urbaines font l'objet d'une grande concurrence, l'obligation de service universel demeure. Il faut rappeler que le Groupe d'étude sur le cadre réglementaire des télécommunications mentionnait la possibilité de mettre fin à l'obligation de servir et à l'OSB sous certaines conditions.

4715 Nous croyons, comme l'Union européenne, que le service universel ne pourra jamais être atteint par le seul libre jeu du marché. La Directive européenne est claire à cet effet :

" La libéralisation du secteur des télécommunications, l'intensification de la concurrence et le choix de plus en plus vaste de services de communications s'accompagnent d'une action visant à créer un cadre réglementaire harmonisé qui garantisse la fourniture d'un service universel. "

4716 Les services téléphoniques sans fil peuvent-ils satisfaire à l'obligation de servir et à l'OSB?

4717 Pour répondre à cette question, il faut se rapporter à l'essence même de la Loi sur les télécommunications et au principe de neutralité technologique qui la sous-tend.

4718 Dans son Étude du cadre réglementaire des télécommunications au Canada, le Conseil rappelle au paragraphe 49 :

" Conformément à l'énoncé de politique de 1987, la nouvelle législation était principalement axée sur la réglementation des entreprises de télécommunication canadiennes - caractérisées par le fait qu'elles étaient propriétaires ou exploitantes des "installations de transmission" employées, soit par elles-mêmes, soit par des tierces parties, pour offrir des services de télécommunication au public moyennant rétribution. Les revendeurs et autres fournisseurs de services qui utilisaient ces installations étaient largement exclus du champ de réglementation du Conseil, mais, d'après l'énoncé de politique de 1987, ils devaient quand même avoir accès aux réseaux des entreprises de télécommunication à des conditions justes et raisonnables. Or, en venant axer la réglementation sur les services que fournissent les entreprises canadiennes et en élargissant la définition d'installations de télécommunication de manière à y inclure tous les modes de fourniture, la Loi a appuyé implicitement, à l'égard des télécommunications, une approche réglementaire reposant sur la neutralité technologique. "

4719 Dans la Décision de télécom CRTC 99-16, service téléphonique dans les zones de desserte à coût élevé, le Conseil au paragraphe 25 est explicite :

" L'objectif du service de base est indépendant de la technologie utilisée pour l'offrir, et peut changer au fil des ans, en fonction de l'évolution des attentes face au service. "

4720 Ainsi, il ressort de ces constatations que les services téléphoniques sans fil, du simple point de vue de la technologie, peuvent satisfaire à l'obligation de servir et à l'OSB.

4721 Cependant, si le Conseil décide, suivant le principe de neutralité technologique, de considérer que les entreprises de services sans fil sont à même de satisfaire à l'obligation de servir et à l'OSB, le Conseil devra alors réglementer les conditions de fourniture des services sans fil de même que les prix de ces services.

4722 Dans le domaine du service résidentiel, le Conseil a, par le passé, édicté certaines mesures pour protéger les consommateurs.

4723 Nous pensons ici à la Décision de télécom CRTC 2004-31, Modalités de service - Débranchement pour cause de paiement partiel des frais, où le Conseil :

" conclut qu'aux termes des Modalités de service approuvées des entreprises de services locaux titulaires (ESLT), les ESLT ne peuvent ni suspendre ni résilier (débrancher) ou menacer de débrancher les services tarifés d'un client qui a fait des paiements partiels suffisants pour couvrir ses arriérés impayés pour les services tarifés, qu'il reste ou non des arriérés impayés pour les services non tarifés. "

4724 Or, en matière de services sans fil, aucune réglementation de ce type ne protège les consommateurs. Ainsi, advenant les situations où les consommateurs ne disposeraient que d'un service sans fil pour leurs communications, ils seraient alors à la merci des entreprises de services sans fil.

4725 Les compagnies qui offrent des services sans fil ne veulent d'ailleurs rien entendre de ce genre de mesures. Ils ont refusé, au Québec, de conclure un engagement volontaire visant à encadrer leurs pratiques et ont mené un lobby féroce, doublé d'une campagne de peur, contre l'intervention du gouvernement provincial du Québec visant à réglementer notamment les frais de résiliation totalement disproportionnés qu'ils imposaient aux consommateurs.

4726 Le Commissaire aux plaintes relatives aux services de télécommunication a été chargé d'élaborer un code de conduite relatif aux dépôts et aux mesures de déconnexions des usagers de services de télécommunication. À ce jour, l'opposition des compagnies de télécommunication membres du Conseil d'administration du CPRST a fait en sorte que ce projet de Code semble bel et bien enterré.

4727 Advenant que le Conseil considère que les services sans fil satisfont à l'obligation de servir et à l'OSB, alors, le Conseil devra mettre en place les mesures réglementaires nécessaires pour protéger les consommateurs, à l'image de celles qui sont issues de la Décision de télécom CRTC 2004-31.

4728 En ce qui a trait à l'abordabilité des tarifs, il ne fait aucun doute que les services sans fil ne sont pas équivalents aux services filaires résidentiels.

4729 De façon générale, les services résidentiels sont offerts avec la possibilité de faire des appels locaux illimités. Le prix d'une ligne résidentielle au Québec se situe présentement entre 23.35 dollars (Vidéotron) et 24.93 dollars (Bell).

4730 Lorsqu'on examine les offres incluant les appels locaux illimités en matière de sans-fil, la compagnie Public Mobile offre un forfait comprenant les appels locaux illimités pour 24 dollars par mois; ce service n'est cependant offert qu'à Montréal.

4731 Vous trouverez sous le paragraphe 32 une carte qui montre la zone de couverture de Public Mobile uniquement pour la région de Montréal.

4732 Vidéotron offre aussi un forfait incluant un service local illimité, mais qui n'est disponible que dans les régions de Montréal et de Québec.

4733 Sous le paragraphe 33, vous pouvez noter la zone uniquement couverte par Vidéotron actuellement à Montréal, zone urbaine à l'infini; également la zone urbaine à l'infini uniquement disponible à Québec.

4734 Toutefois, le prix du service sans fil zone urbaine à l'infini de Vidéotron est de 42.50 dollars par mois.

4735 En outre, les services sans fil sont généralement offerts dans le cadre de contrats de longue durée, à la différence des services résidentiels habituels qui sont le plus souvent fournis dans le cadre de contrats établis sur une base mensuelle.

4736 Les régions urbaines, comme on l'a vu, sont beaucoup mieux desservies que les régions rurales, où il n'existe aucune offre de services sans fil illimitée pour les appels locaux.

4737 En région rurale, les compagnies Bell, TELUS ou Rogers offrent par contre aux consommateurs l'option " Québec illimité, " appels sans frais dans toute la province. Cependant, ces forfaits sont offerts à des prix qui avoisinent les 60 dollars par mois.

4738 Ce même type de service -- appels illimités à l'intérieur de la province -- est aussi offert pour les lignes résidentielles, mais à prix considérablement moindre : 41.30 dollars par mois chez Vidéotron et 43.83 dollars par mois chez Bell.

4739 Les écarts de prix entre les offres de services illimités au Québec sont donc de l'ordre de 17 à 18 dollars entre le tarif résidentiel et le tarif sans fil. Cet écart de prix d'environ 44 pour cent -- considérable -- démontre clairement que les services sans fil ne peuvent être considérés comme abordables.

4740 Du strict point de vue de l'abordabilité, les conséquences de l'assujettissement des fournisseurs de services sans fil à l'obligation de servir seront désastreuses pour le consommateur. Le prix des services est en effet déjà une des raisons qui expliquent qu'un certain nombre de foyers, en grande majorité constituée de ménages à faibles revenus, sont privés de services de télécommunications.

4741 Selon les statistiques fournies dans le rapport de contrôle d'abordabilité, 110 059 foyers canadiens n'ont pas de services de télécommunications. Le rapport précise que 98,7 pour cent des personnes non abonnées aux services de télécommunications se situent dans les deux plus bas quintiles de revenus. Le plus bas de ces quintiles regroupe à lui seul 86,6l pour cent de tous les non abonnés aux services de télécommunication. Le rapport constate expressément que le bas revenu est la caractéristique principale des ménages qui ne sont pas abonnés.

4742 D'après les données compilées, il apparaît que 56 pour cent des foyers non abonnés ont indiqué que la non-accessibilité économique était la principale raison de leur non-abonnement aux services de télécommunication.

4743 Le détail de cette inaccessibilité économique révèle qu'elle repose, pour 72,5 pour cent des foyers, sur le coût de l'abonnement mensuel.

4744 Si les services sans fil sont assujettis à l'obligation de servir et à l'OSB, le Conseil devrait étudier très sérieusement la question de l'abordabilité de ces services et procéder à la mise en place des mesures spécifiques pour les ménages à faible revenu.

4745 L'établissement du rôle du Conseil concernant l'accès Internet haute vitesse.

4746 Le Conseil doit-il donc établir une cible concernant l'accès au service Internet haute vitesse? Dans l'affirmative, quelles spécifications techniques faut-il inclure et quel devrait être l'échéancier pour l'atteinte de la cible?

4747 Encore une fois, l'approche de la Directive européenne sur le service universel nous semble la plus cohérente. En l'espèce celle-ci précise :

" Le raccordement réalisé permet de prendre en charge les communications vocales, les communications par télécopie et les communications de données, à des débits de données suffisants pour permettre un accès fonctionnel à l'Internet, compte tenu des technologies les plus couramment utilisées par la majorité des abonnés et de la faisabilité du point de vue technique. "

4748 Cela signifie que tous les citoyens ont le droit d'être raccordés à un réseau de communications permettant l'accès Internet, selon les technologies les plus couramment utilisées par la majorité des abonnés.

4749 Si l'on adopte au Canada une telle approche, neutre sur le plan technologique, nous devons souligner qu'actuellement 44 pour cent de la population dispose d'un accès large bande dont la vitesse est supérieure à 5 Mbps, selon le rapport de surveillance sur les communications de 2010.

4750 Cependant, dans quelque temps, nombre d'abonnés auront opté pour les services 10 à 15 Mbps, puisque toujours selon le rapport de surveillance sur les communications de 2010, il s'agit du groupe ayant la plus forte croissance actuellement, 235 pour cent.

4751 L'échéancier qui, selon nous, aurait le plus de sens est d'évaluer à tous les deux ans la vitesse et les technologies qui sont les plus souvent utilisées par la majorité des consommateurs.

4752 Le Conseil doit-il rendre obligatoire la fourniture de l'accès à un tel service dans les régions où le service n'est pas offert?

4753 Nous croyons que le Conseil devrait rendre obligatoire la fourniture de l'accès à un tel service dans les régions où ce service n'est pas offert. Il nous semble qu'aujourd'hui l'accès large bande devrait faire partie de l'objectif du service de base.

4754 L'accès Internet est devenu aujourd'hui une composante essentielle des communications, que ce soit pour le commerce, pour communiquer avec l'administration et télécharger nombre des formulaires demandés, pour transmettre sa déclaration d'impôt, pour chercher un emploi. Il est ainsi primordial pour les régions de disposer d'un accès Internet fonctionnel.

4755 Le Conseil doit-il créer un fonds pour aider les Canadiens à accéder au service Internet haute vitesse dans les régions où le service n'est pas offert?

4756 Devant les difficultés qu'éprouve le Conseil avec l'utilisation des comptes de report pour financer l'accès Internet en région, nous pensons qu'il serait préférable que le gouvernement s'implique financièrement dans le projet de financement de l'accès Internet dans les régions où le service n'est pas offert.

4757 Certes, à l'heure actuelle, le gouvernement dispose de certains programmes. Toutefois, il reste encore nombre de régions sans accès Internet haute vitesse.

4758 Prochainement, tout un spectre de fréquences va être libéré avec la transition à la télévision numérique. Ces fréquences seront certainement mises aux enchères. Ainsi, l'argent qui pourrait être récolté par cette vente devrait servir à financer l'accès Internet en région.

4759 Pour mémoire, les dernières enchères ont rapporté au gouvernement plus de 4 milliards de dollars, ce qui aurait largement permis aux régions de bénéficier d'accès Internet haute vitesse.

4760 Je vous remercie.

4761 LE PRÉSIDENT : Merci de votre présentation.

4762 Vous-même cité dans l'article 2 de votre présentation aujourd'hui l'article 7 de la Loi sur les télécommunications. Vous soulignez c) :

" accroître l'efficacité et la compétitivité des télécommunications canadiennes sur le marché national et international. "

4763 Mais quand même, dans le paragraphe 9, vous dites :

" Les ESLC devraient, d'après nous, être, elles aussi, assujetties à cette obligation dans les zones non réglementées. "

4764 Franchement, j'ai des problèmes avec ces deux constations parce qu'il me semble que ce n'est pas efficace d'avoir des services de base par les ESLT et les ESLC en même temps. Ça va créer beaucoup de capacité redondante. Ce n'est pas une indication d'efficacité.

4765 Pouvez-vous expliquer comment ces deux constations peuvent être faites dans le même mémoire?

4766 M. HÉMOND : Bien sûr.

4767 Dans les zones qui sont actuellement non réglementées, il est évident que nous pouvons bénéficier de services de télécommunication qui sont efficaces. Maintenant, dans ces zones non réglementées, vous avez le choix entre plusieurs fournisseurs de services.

4768 Le but de l'obligation de servir et l'OSB, c'est, effectivement, d'avoir un service de télécommunication, peu importe, à ce moment-là, la technologie dans les zones urbaines, où il y a une concurrence entre les compagnies.

4769 Le but, c'est de permettre d'avoir au consommateur un service, qu'un consommateur demande à une compagnie d'obtenir le service de télécommunication, et en ville, généralement, en zone urbaine, il pourrait à ce moment-là s'adresser soit à une entreprise concurrente ou une titulaire qui fournit déjà le service dans ces zones-là.

4770 La question est, à ce moment-là, dans les zones qui sont actuellement réglementées où il n'y a qu'une seule entreprise, ce serait, à ce moment-là, uniquement celle-ci qui serait assujettie à l'obligation de servir.

4771 LE PRÉSIDENT : Mais est-ce qu'on peut avoir de la duplication, de la triplication des services, à ce moment-là? Et si la compagnie veut le faire pour une raison compétitive, je comprends ça, mais de les obliger de le fournir, je ne vois pas quel but ça sert.

4772 M. HÉMOND : Elles ont, de par leur volonté de se faire une concurrence dans les zones urbaines, la volonté de servir généralement tous les clients en zone urbaine. Donc, le consommateur qui demander à avoir cette obligation de servir, d'avoir le service, à ce moment-là, il l'obtiendrait. Peu importe de quelle compagnie, il pourrait l'obtenir.

4773 Ici, on pourrait mettre en avantage la libre concurrence et le fait que les compagnies dans certaines zones se font une concurrence et permettre, en retournant à l'avantage du consommateur, cette obligation de servir pour lui permettre d'avoir accès à des services de télécommunication, surtout pour les ménages à faibles revenus.

4774 LE PRÉSIDENT : Et, selon vous, c'est efficace de le faire comme ça?

4775 M. HÉMOND : L'efficacité repose sur le fait que, dans ces circonstances, les compagnies se font concurrence dans les zones où il y a beaucoup de clientèle.

4776 LE PRÉSIDENT : Et l'obligation de servir, si je vous comprends bien, vous voulez que nous la recréons d'une façon qui soit technologiquement neutre?

4777 Maintenant, c'est tout basé sur les services en fil, mais vous voulez, si je comprends bien, que nous incluions, à ce moment-là, les fournisseurs sans fil, comme vous dites dans le paragraphe 24 :

" ...le Conseil devra alors réglementer les conditions de fourniture des services sans fil de même que les prix de ces services. "

4778 C'est vraiment un changement assez radical, et nous sommes sous la direction explicite du gouvernement du Canada de seulement réglementer s'il y a un market failure ou si, comme on dit en français, le marché ne fonctionne pas.

4779 Est-ce que nous avons des preuves ici que le marché sans fil ne fonctionne pas?

4780 M. HÉMOND : Pour ce qui est de la question, en fait, de l'abordabilité, à ce moment-là, pour les personnes à faibles revenus, oui, il y a un problème. Ces personnes-là, elles, ne disposent bien souvent, quand on regarde par rapport au revenu, de moins de taux de pénétration des services de télécommunication.

4781 Si vous assujettissez, à ce moment-là, les services sans fil à cette obligation de servir, les compagnies vont, effectivement, pousser pour l'adoption de ces services sans fil pour les consommateurs de façon assez générale.

4782 Maintenant, pour les consommateurs à faibles revenus, il faut se focaliser sur la capacité d'avoir ce service sans fil, et l'abordabilité à ce niveau-là est beaucoup plus difficile pour les personnes à faibles revenus.

4783 LE PRÉSIDENT : Ça veut dire l'abordabilité, selon vous, doit être là si on peut arriver au jugement que le marché fonctionne? Si le marché produit quelque chose qui n'est pas abordable, selon vous, le marché ne fonctionne pas?

4784 M. HÉMOND : S'il y a une partie de la population qui n'a pas accès à des services de communication et on les considère comme essentiels, oui, il y a à quelque part dans le marché certainement un problème à ce moment-là.

4785 LE PRÉSIDENT : O.K.

4786 Tim, je crois que tu as des questions.

4787 CONSEILLER DENTON : Monsieur Hémond, est-ce que vous avez devant vous votre rapport, que vous avez soumis au CRTC, de juin 2009?

4788 M. HÉMOND : Oui.

4789 CONSEILLER DENTON : Est-ce que vous pouvez chercher la page 13, s'il vous plaît?

4790 M. HÉMOND : Oui.

4791 CONSEILLER DENTON : O.K. Bien que votre soumission soit basée sur les problèmes des plus pauvres, je vous invite à chercher sur le tableau 1, en 2001, on remarque que dans le quintile 1, ceux avec service de cellulaire sont à peu près 20 pour cent, et cinq ans plus tard, on voit que leur taux d'abonnement a doublé jusqu'à à peu près 40 pour cent.

4792 M. HÉMOND : Oui.

4793 CONSEILLER DENTON : O.K. De la même façon, on constate que dans le quintile 5, les plus riches, un accroissement de 72 pour cent jusqu'à à peu près 90 pour cent.

4794 M. HÉMOND : Oui.

4795 CONSEILLER DENTON : Alors, vous proposez un système de réglementation de service assez compréhensif, mais j'observe que, parmi les plus pauvres, l'abonnement a doublé en cinq ans, et parmi les plus riches, l'abonnement a accru par à peu près 17 pour cent.

4796 M. HÉMOND : Oui.

4797 CONSEILLER DENTON : Alors, ce auquel nous faisons face à la Commission, c'est...

4798 Il y a un problème. Pardon. C'est la censure de l'état.

--- Tone

4799 CONSEILLER DENTON : Bon. Bravo!

4800 Le problème auquel nous faisons face, c'est si nous devrions établir un système de subventions dans l'industrie pour résoudre un problème qui, semble-t-il, est en train de se résoudre. C'est-à-dire que le taux d'abonnement chez les plus pauvres s'accroît, a presque doublé en cinq ans.

4801 Pourquoi pensez-vous que nous serons persuadés d'établir un tel système de subventions pour accroître les abonnements quand les abonnements s'accroissent par eux-mêmes?

4802 M. HÉMOND : Dans le même temps, il faut regarder également que le service résidentiel du plus bas quintile de revenus diminue également, et nous avons de moins en moins de service fixe résidentiel, alors que la baisse pour le plus haut quintile est beaucoup plus relative. C'est-à-dire que dans ce cadre-là, les plus riches ont beaucoup plus de services que les plus pauvres.

4803 Autrement...

4804 CONSEILLER DENTON : Mais c'est évident en soi, oui. Mais vous voyez que dans le quintile le plus riche, avec services wireline -- je ne connais pas le français là -- vous trouvez que le taux d'abonnement a diminué même dans la classe la plus riche, le quintile 5.

4805 M. HÉMOND : Oui.

4806 CONSEILLER DENTON : N'est-il pas...

4807 M. HÉMOND : Moins vite que chez les plus pauvres.

4808 CONSEILLER DENTON : Continuez.

4809 M. HÉMOND : Moins vite que chez les plus pauvres.

4810 CONSEILLER DENTON : Pardon? Encore.

4811 M. HÉMOND : Dans le quintile le plus élevé, la diminution est moins rapide que chez le quintile... le premier quintile.

4812 Ce qu'il faut également savoir, c'est que de nos membres, qui sont des associations de coopératives d'économie familiale, les personnes à faibles revenus qui n'ont... effectivement, bien souvent, quand c'est le téléphone sans fil, ont beaucoup de difficultés avec les téléphones sans fil et parfois changent beaucoup de fournisseur et ont des problèmes de facture.

4813 Donc, uniquement regarder par le taux de pénétration n'est pas une façon appropriée, il me semble, pour, à ce moment-là, évaluer le problème d'abordabilité pour ces catégories de personnes, parce que si on regarde les prix et les constatations dans les autres tableaux qui sont soumis, effectivement, la population vient, dans ces plus bas quintiles, mentionner que c'est le prix mensuel moyen, l'abonnement qui est pour eux un problème.

4814 Ça, on peut considérer que pour le résidentiel, c'est et le filaire avec le sans-fil.

4815 CONSEILLER DENTON : Oui, mais ce que vous proposez, c'est un système de réglementation, une expansion de réglementation pour résoudre un problème qui est, d'abord, un problème d'être pauvre -- on a plus de problèmes avec le manque d'argent que chez les riches -- et ensuite, il n'est pas clair qu'il y a une liaison claire entre le système de subventions et réglementation que vous proposez et la solution que vous cherchez.

4816 Vos commentaires là-dessus.

4817 M. HÉMOND : Il me semble que les personnes à plus faibles revenus ont plus de difficultés avec ces services de télécommunication. Si on ne met même pas en place un système réglementation pour les protéger en cas de débranchement, si on étend l'obligation de servir au service sans fil, les compagnies de télécommunication auront le beau jeu, à ce moment-là, de débrancher dès qu'il y aura un non-payé.

4818 Vous savez très bien que les personnes à faibles revenus, ce sont les plus susceptibles d'avoir des problèmes, à ce moment-là, pour payer leur facture, par la suite des arriérés, et à qui on débranche très rapidement le service.

4819 Ce qu'on constate aujourd'hui dans les associations de coopératives d'économie familiale, nos membres, les ACEF, c'est que parfois les personnes à faibles revenus font face à de gros problèmes avec ces services sans fil.

4820 CONSEILLER DENTON : D'accord. Mais il ne reste pas aussi vrai qu'ils ont des problèmes avec toute catégorie de dépenses, et ce que vous recommandez, c'est une expansion de réglementation dans beaucoup de domaines, semble-t-il, contre le sens de notre directive politique que nous avons reçue, et vous citez la Loi sur...

4821 M. HÉMOND : Il s'agit de réglementation...

4822 CONSEILLER DENTON : Pardon? Continuez.

4823 M. HÉMOND : Il s'agit de réglementation économique... il ne s'agit pas de réglementation économique, mais de réglementation sociale, et le libre jeu du marché ne peut pas atteindre cet objectif. Il me semble que dans la directive, il y a une voie d'action pour le Conseil dans ce cadre-là.

4824 CONSEILLER DENTON : Et pourquoi pensez-vous que le libre marché ne serait pas en mesure d'achever les buts nécessaires et ce que vous cherchez?

4825 M. HÉMOND : Lorsqu'il a été question ici au Québec d'avoir une résolution du problème des frais de résiliation concernant les frais de service sans fil, il y a eu une table de concertation, et de la part des compagnies, on leur a demandé un engagement volontaire pour réduire ces frais de résiliation. Il a fallu l'intervention du législateur pour mettre un terme à ces pratiques et les réduire drastiquement.

4826 Ce qu'on constate également, c'est qu'une compagnie de téléphone vient d'augmenter ses frais d'intérêt pour les impayés à 48,7 pour cent et plus hier. Ce sont des pratiques qui visent effectivement les personnes à plus faibles revenus. C'est quand même des gens qui nécessitent une protection plus accrue par rapport au reste de la population.

4827 CONSEILLER DENTON : Mais il me semble que, selon ce que vous avez dit, vous avez trouvé une solution dans l'action législative du gouvernement du Québec.

4828 M. HÉMOND : Oui, effectivement, pour les matières contractuelles. Maintenant, pour protéger le consommateur dans le service sans fil... On a des mesures protectrices dans les services résidentiels filaires dans les zones réglementées pour éviter les débranchements des consommateurs lorsqu'il y a des impayés.

4829 Ces mesures n'existent pas à ce moment-là dans les services sans fil. Si on pousse, à ce moment-là, l'option des services sans fil, c'est au Conseil, à ce moment-là, de prendre les mesures adéquates, et, à ce moment-là, en quelque sorte adapter cette réglementation aux services sans fil également.

4830 Il y a eu un projet de code de débranchement soumis au Commissaire aux plaintes relatives aux services de télécommunication. Il me semble que ce code ne fait plus l'objet d'actualité actuellement. Donc, il y a des problèmes, à ce moment-là, pour s'entendre et pour arriver à des solutions dans ce cadre très précis.

4831 Si on ne peut s'entendre pour avoir des solutions même avec le Commissaire aux plaintes relatives aux services de télécommunication, c'est au Conseil, à ce moment-là, d'intervenir pour prendre les mesures adéquates pour protéger aussi les consommateurs et répondre aux objectifs de la Loi sur les télécommunications en matière d'abordabilité.

4832 CONSEILLER DENTON : Monsieur Hémond, je suis ici depuis deux ans et je vous ai écouté, je pense, chaque fois que vous êtes venu devant nous, et il me semble qu'on peut s'engager dans un débat plus vaste que nécessaire ici.

4833 Il me semble que vous pensez qu'on peut citer les lois comme s'il n'y avait pas plusieurs objectifs à réaliser et que le CRTC soit en mesure de dire ainsi soit-il et la chose serait accomplie.

4834 Est-ce que vous pensez que notre tâche est aussi simple que ça?

4835 M. HÉMOND : Il est loin d'être évident actuellement avec tout ce qui se passe dans le milieu des télécommunications, et j'ai beaucoup de respect pour votre travail et ce que vous faites au Conseil.

4836 Maintenant, les objectifs, effectivement, je l'ai mentionné dans les observations aujourd'hui, ils sont parfois contradictoires, et il est très difficile de pouvoir les manier aussi aisément qu'il le semblerait.

4837 Maintenant, quand il y a un problème, quand on constate que le libre jeu du marché -- effectivement, il fait partie de ces objectifs -- ne peut atteindre tous les autres objectifs de la Loi sur les télécommunications, il faut les concilier.

4838 Et comment les concilier? Il me semble que l'un des pouvoirs du Conseil, c'est quand même de pouvoir réglementer certains éléments, et on ne demande pas ici une intervention qui nécessite une réglementation totale de tout le service des télécommunications, mais ciblée à certains problèmes très spécifiques, étendre l'objectif de service de base et l'obligation de servir dans le service sans fil.

4839 À ce moment-là, on va avoir, et c'est certain, on le constate déjà avec nos ACEF, des problèmes avec l'abordabilité pour les ménages à faibles revenus. Donc, qu'est-ce qu'on veut faire exactement avec ça?

4840 CONSEILLER DENTON : Est-ce que avez jamais suggéré une définition d'abordabilité? Est-ce qu'aucune définition serait possible à établir?

4841 M. HÉMOND : Il est possible, à ce moment-là, d'établir une définition d'abordabilité pour les services de télécommunication en ne tenant pas uniquement compte du taux de pénétration des services de télécommunication.

4842 CONSEILLER DENTON : Et vous dites que...

4843 M. HÉMOND : Il faut voir en fonction des revenus.

4844 CONSEILLER DENTON : Alors, un pourcentage de revenus établi, par exemple, un pourcentage de revenus dans chaque quintile?

4845 M. HÉMOND : C'est peut-être une mesure, à ce moment-là, d'évaluer, par rapport à chaque quintile, le taux de pénétration, à ce moment-là, pour chacun des services, voir si les plus faibles revenus dans les taux de quintile, comment ils font face à leurs dépenses de télécommunications.

4846 Pourquoi, par exemple, dans d'autres pays, ils mettent en place... Notamment, aux États-Unis, il ne me semble pas que ce soit le pays où la réglementation soit leur apanage ou la volonté de tout réglementer, mais dans les services de télécommunication, notamment les services sans fil, il y a des mesures destinées aux ménages à faibles revenus pour les aider justement à avoir ces services de télécommunication, mesures mises en place à la fois par l'autorité de réglementation et par les états, qui aident, à ce moment-là, les consommateurs.

4847 Il n'y a pas qu'une solution unique qui appartient au Conseil. Ça peut être une solution concertée avec le gouvernement et avec les gouvernements des provinces pour mettre en place les mesures qui pourraient aider ces consommateurs dans le rapport que je constate que vous avez lu avec attention. Effectivement, il y a des pistes de solutions qui sont proposées concernant les ménages à faibles revenus.

4848 CONSEILLER DENTON : Oui. Ce que j'ai un peu de difficulté à déterminer dans vos propos, c'est si vous considérez ou si vous proposez un système, un schéma universel -- ou universel dans le cadre de l'industrie des télécommunications -- ou quelque chose, une subvention plus ciblée vers les pauvres.

4849 Lequel?

4850 M. HÉMOND : Il y a un système... Il y a deux systèmes là dont vous discutez : un service universel, à ce moment-là, pour avoir des services de télécommunication pour tous les citoyens canadiens, tous les résidants au Canada, et des subventions spécifiques pour ceux qui ont des problèmes avec les services de télécommunication, et là, c'est une partie beaucoup plus restreinte de la population.

4851 Je l'ai mentionné tout à l'heure, il y a 110 000 foyers au Canada qui n'ont pas de services de télécommunications. On est au 21e siècle. Il serait bon que ces foyers soient connectés. Donc, ciblons, à ce moment-là, les mesures lorsqu'on veut connecter ces personnes.

4852 Ensuite, si l'on étend au service d'accès Internet, comme il est suggéré et proposé effectivement dans un service universel, voyons à mettre en place d'autres dispositifs pour brancher les régions éloignées.

4853 Notamment, les enchères pourraient... et ça, ça ne dépend effectivement pas de vous, mais du gouvernement et sur le spectre de fréquences qui va être libéré. L'argent pourrait servir, à ce moment-là, pour connecter les régions éloignées, les régions rurales.

4854 CONSEILLER DENTON : Merci.

4855 Et parce que vous êtes bien intelligent, je sais que vous savez que le parlement européen n'a pas de juridiction ici ou la même juridiction que Louis XIV.

4856 Alors, pensez-vous que c'est persuadant de parler des mesures prises par la Commission européenne ou le parlement européen dans ce contexte?

4857 M. HÉMOND : Il y a des choses intéressantes à l'étranger dont on peut se servir qui pourraient inspirer, effectivement, à prendre des mesures qui soient intéressantes.

4858 La définition pour leur service universel, où on n'a pas de cadre de vitesse mais juste cette définition de services qui sont communément adoptés par les consommateurs, est neutre sur le plan de la technologie. On a une longue tradition de neutralité technologique.

4859 Ça pourrait être beaucoup plus intéressant que d'avoir des cibles de vitesse et de se fixer des objectifs à court terme, à moyen terme, à long terme. On réévalue de façon périodique les situations, et ça évolue constamment, ces vitesses.

4860 Les citations de la directive européenne, ce sont les inspirations des éléments qui permettent, effectivement, au Conseil d'avoir une vision élargie de la situation uniquement dans ce cadre-là, pas un calque qu'on doit nécessairement apporter.

4861 Je n'ai pas cité la FCC ou d'autres réglementations en disant qu'on va devoir importer ces solutions immédiatement et de façon si drastique, mais cela fait preuve d'ouverture et de voir les autres éléments qui peuvent être apportés.

4862 Il y a d'autres plans qui ont été mis en place, par exemple, en Australie, mais nombre de parties qui ont apparu devant vous ou qui ont soumissionné des observations et des commentaires que j'ai lus, effectivement, mentionnaient tous ces plans à l'étranger.

4863 Faire une révision de tous ces plans ou autres, je serais revenu vous re-citer également quelle vitesse a été adoptée par le plan australien pour d'ici 2016 ou ce qui a été adopté en Corée du Sud. Ça aurait eu moins d'impact que de se focaliser sur certains éléments très précis qui nous semblent intéressants, notamment dans la définition dans la directive universelle, service universel, qui pourrait être des sources d'inspiration et qui ne sont pas en aucune façon un dictat.

4864 CONSEILLER DENTON : Bon, merci. Merci, Monsieur Hémond.

4865 Ce sont mes questions, Monsieur le Président.

4866 LE PRÉSIDENT : Merci, Monsieur Hémond. Je crois que ce sont toutes nos questions pour vous.

4867 On va prendre une pause de cinq minutes avant de continuer. Merci.

4868 M. HÉMOND : Merci.

--- Upon recessing at 1447

--- Upon resuming at 1458

4869 THE SECRETARY: Order, please. À l'ordre, s'il vous plait.

4870 THE CHAIRPERSON: Commençons, Madame la Secrétaire.

4871 THE SECRETARY: Okay. We will now proceed with a joint presentation by Shaw Communications Inc., Cogeco Cable Inc., Rogers Communication Inc. and Quebecor Media Inc. for Videotron Limited, collectively the Cable Carriers.

4872 Appearing for the Cable Carriers is Mr. Denis Béland.

4873 Mr. Béland, please introduce your colleagues, after which you will have 15 minutes for your presentation.

PRESENTATION

4874 MR. BÉLAND: Good afternoon, Mr. Chairman, Commissioners, Commission staff.

4875 My name is Dennis Béland and I am the Senior Director of Regulatory Affairs, Telecommunications for Quebecor Media.

4876 I have with me directly behind me, also from Quebecor Media, Yannick Boily, Director of Regulatory Affairs, Telecommunications.

4877 Representing the other Cable Carriers on the panel today are from Cogeco, Michel Messier, Director, Regulatory Affairs, Telecommunications; from Rogers we have Ken Engelhart, Senior Vice President, Regulatory; David Watt, Regulatory Telecommunications, and Alexander Adeyinka, Associate Privacy Officer and Chief Regulatory Counsel. From Shaw Communications we have Jean Brazeau, Senior Vice President of Regulatory Affairs. Directly behind Jean is Esther Sno, Manager of Regulatory Affairs.

4878 And also appearing with us, seated behind Ken, is Suzanne Blackwell, President of Giganomics Consulting Inc.

4879 The Cable Carriers provide broadband internet services to more than five million Canadian customers and digital voice services to some three and a half million. The services are available to the vast majority of households in urban and rural communities across Canada. Competition for customers of these services is intense.

4880 The issues in this proceeding regarding the obligation to serve and local competition in small ILEC territories are highly relevant to our companies and how we treat consumer demand and competition in these markets.

4881 The Commission has issued a set of questions that we will address in our remarks. However, two questions in particular have come to the forefront of this proceeding:

4882 First, should the Commission mandate building broadband facilities to unserved areas; and if so, who pays for and who builds the broadband facilities?

4883 Second, should consumers in SILEC territories continue to be denied competitive choice in local telephone service, either directly by prohibiting entry or indirectly through imposing new and extraordinary conditions on entry?

4884 The Cable Carriers believe that the answers to these two questions must be "no".

4885 First, no new regulatory regime is required to achieve ubiquitous broadband. Market forces will continue to ensure that broadband services are widely available. A new regulatory regime for delivering broadband would create unnecessary risks of duplication and inefficiency. Depending on which proposal is considered, a broadband program could impose significant costs on the industry, and ultimately consumers.

4886 This new regulatory intervention in the competitive internet market would be contrary to the Policy Direction. The Commission's current role should be limited to setting broadband targets, notably in terms of access speed and coverage that will guide Canadians and Canadian policy makers in assessing the progress we are making in attaining our broadband availability objectives. The assessment would be supported by the Commission's existing monitoring activities.

4887 Second, we believe strongly in the benefits of competition and that all consumers, including those in SILEC territories, should have choice in telecommunications services. We urge the Commission to keep the terms and conditions for local entry as these were set out in Telecom Decision 2006-14, nearly five years ago. Imposing new and extraordinary conditions on prospective competitors would create significant and unwarranted barriers to entry. The Commission should reject calls for competitors to compensate the SILECs for the costs of competition.

4888 Les câblodistributeurs sont très préoccupés par le fait que les propositions mises de l'avant par certaines parties auraient pour résultat une augmentation de la réglementation et une diminution de la concurrence, ce qui serait contraire aux instructions en plus d'avoir pour effet de saper l'objectif initial de la présente instance.

4889 L'objectif de la présente instance est de passer en revue les mesures réglementaires mises en oeuvre par le Conseil afin de déterminer si oui ou non elles se conforment aux instructions.

4890 La pertinence d'un recours accru aux forces du marché a été reconnue dans le cadre d'une suite d'instances découlant de l'adoption des instructions grâce à laquelle le fardeau réglementaire a pu être substantiellement allégé.

4891 L'approche préconisée par les câblodistributeurs dans le cadre de la présente instance cherche donc à s'appuyer sur ces précédents en mettant l'emphase sur une réduction de la réglementation ainsi que sur un recours accru aux forces du marché et ce, en conformité aux instructions.

4892 En premier lieu, nous proposons de réduire la portée de l'obligation de servir en la limitant aux marchés non concurrentiels. En effet, l'imposition d'une telle obligation dans les marchés concurrentiels est inutile.

4893 En deuxième lieu, nous proposons de simplifier le régime de subvention local en l'abolissant au sein des marchés concurrentiels et en réduisant les montants de subvention destinés aux marchés non concurrentiels restant. Une telle diminution aura pour effet de réduire les interférences avec les forces concurrentielles du marché.

4894 En troisième lieu, nous proposons d'introduction sur les territoires des petites ESLT d'une concurrence locale basée sur les modalités actuellement en vigueur et ce, aussi rapidement que possible.

4895 Ken...?

4896 MR. ENGELHART: There is ample evidence that the private sector, supplemented by targeted public programs, is achieving the goal of ubiquitous broadband.

4897 The Cable Carriers are leaders in the broadband internet services market. Collectively, our companies have invested several billions of dollars to make broadband services available across our networks.

4898 Today, some 11.5 million homes have access to cable broadband services. This represents more than 98 percent of all households served by our networks. These figures illustrate the Cable Carriers' commitment to achieving broadband service ubiquity.

4899 There are several other suppliers of broadband internet services. The ILECs have extensive networks delivering broadband service and compete in many of the communities served by cable broadband. Mobile wireless service providers have invested in HSPA» networks and can now deliver broadband capability to 93 percent of Canadians.

4900 Fixed wireless terrestrial facilities are also used for broadband in smaller communities. Satellite-based internet services currently make broadband available to virtually all Canadians and will be upgraded in the near term which will further enhance the service.

4901 Privately-funded initiatives, supplemented by various public sector programs, have already made broadband service available to 95 percent of households. This is based on terrestrial networks alone. Mobile and satellite-based service will extend coverage to all households.

4902 The use of satellite-based broadband internet service has been endorsed in other countries as an efficient and effective alternative to terrestrial networks in more rural and remote areas. Australia and the United States have acknowledged satellite's role in this regard. Like Canada, these countries have remote communities and areas with very low population density that may be underserved by wireline facilities.

4903 An expectation that wireline broadband facilities can be extended to every household in these areas is neither realistic nor economically feasible. It is also not technologically neutral.

4904 Concerns have been raised that satellite does not offer the same speeds as some urban-based networks, and can be constrained by capacity limitations. Barrett Xplore, a leading supplier of these services, has indicated that these concerns are being addressed through investment in next-generation satellites. Wireless providers are already offering HSPA» services with 21 Mbps throughput, and much higher speeds are in the near term product road map. This is a powerful demonstration of the effectiveness of market forces.

4905 There may be a few instances where market forces are not sufficient to deliver broadband service. Government programs are working to fill in these gaps, and have established partnerships that build on the success of market-driven investments. At the federal level, Broadband Canada will contribute $225 million to fund broadband projects. Some $123 million in funding has already been committed to more than 70 projects that are expected to serve 220,000 households.

4906 Provincial government initiatives are expected to complete the task of achieving full service coverage in Saskatchewan, the Maritime provinces and much of eastern Ontario.

4907 Market forces, supplemented by targeted government-supported projects, are delivering broadband services. It is an effective two-pronged approach that makes efficient use of private investment and public sector funding.

4908 Some proposals in this proceeding contemplate creating a substantial broadband subsidy that would be funded through contribution levies imposed on the telecommunications industry.

4909 The Telecommunications Policy Review Panel Report cautioned against levying a broadband subsidy on the industry.

"...cross-subsidies between classes of telecommunications service consumers are an inappropriate means of achieving policy objectives in a competitive telecommunications industry."

"...if the contribution fund were expanded significantly to finance broadband expansion programs, the price distortions and inefficiencies would increase to an unacceptable level."

4910 Levying a substantial broadband subsidy on the industry would reverse the progress that has been made in reducing the burden of the contribution regime. Our proposals in this proceeding would streamline the subsidy regime and result in further reductions in contribution. This is more in keeping with the objectives of the Policy Direction.

4911 A common misconception that has permeated many of the filings and discussions at this hearing has been that the ILECs, large and small, bear a heavy burden for fulfilling their "obligation to serve" as it exists today.

4912 Their shouldering of this alleged burden has led to calls for significant regulatory changes ranging from exclusive access to local service subsidies to outright prohibitions on competitive entry in the smaller SILECs' territory. The doughnut effect has become the metaphor for this burden.

4913 The truth is the existing obligation to serve is not the onerous burden that these parties claim. The obligation only requires offering service to customers where facilities exist. It is not an obligation to build facilities. This obligation really amounts to little more than doing what any rational firm in any competitive market does each and every day -- getting customers to use and pay for the services provided over the existing facilities. There is no evidence that any rationale telecom company would stop providing service where facilities exist.

4914 Now, there may be evidence that some of the facilities in the less dense parts of the incumbent territories, or the less dense sub-sectors of some incumbent exchanges, were more expensive to construct than elsewhere. But these are sunk costs. They were paid for either under the old rate of return regime, or as part of compensatory Service Improvement Plans approved under price cap regimes.

4915 Either way, there is no evidence whatsoever to indicate that these facilities represent an ongoing financial burden.

4916 On the contrary, all available evidence suggests that these telecom facilities are highly valuable. The fact that competitors are unlikely to enter these markets makes these more valuable not less.

4917 In this regard, it is worth noting that in 2006 when BCE decided to create an income trust, a vehicle generally reserved for entities that produce large and predictable amounts of cash flow, it did not select its urban properties for this purpose. It packaged its rural properties instead. Bell Aliant has generated cash distributions in excess of $700 million annually ever since.

4918 Other recent examples showing the high value placed on rural wireline network assets include the acquisition of the SILEC "La compagnie de Téléphone Warwick" by Sogetel in 2009, and Kenora Municipal Telephone System (KMTS) by Bell Aliant in 2008. A less recent example is BCE's acquisition of Northwestel in 1988 for which it paid $200 million, or more than $3,000 per customer, notwithstanding the very remote territory served.

4919 In short, we urge the Commission to look with great scepticism upon claims that the ILECs, large or small, somehow bear a heavy burden for operating in geographic market segments that have yet to see any significant competitive entry. Being a monopoly provider in the telecommunications business, even on a geographically-limited basis, is not a bad way to make a living. Incumbency has its advantages.

4920 Michel...?

--- Pause

4921 M. MESSIER: Les petites entreprises de services locaux titulaires, les ESLT ont soutenu que permettre la concurrence locale dans leurs marchés minerait leur viabilité financière et pourrait mettre en péril leur capacité à fournir des services locaux.

4922 Leurs prétentions sous-tendent que la concurrence dans le service téléphonique de base leur causera de sérieuses pertes financières et ne leur laissera d'autre choix que de quitter le marché, entraînant ainsi la perte du service local pour certains consommateurs.

4923 Rien ne prouve que ce risque soit crédible.

4924 Les petites ESLT ont démontré qu'elles avaient les ressources financières pour être de forts concurrents. Ils ont l'avantage de la titularisation tout en étant les premiers à commercialiser ce groupement de services dans leurs marchés.

4925 De plus, les petites ESLT reçoivent un appui financier additionnel du Fonds de contribution national soit des versements de 23$ millions annuellement en subvention. Des versements qui sont demeurés fixes au cours des cinq dernières années, indépendamment de la fluctuation des taux, des coûts et du nombre de lignes d'accès résidentielles.

4926 De surcroît, les petites ESLT, au cours des années qui ont suivi la décision relative à la concurrence locale, ont mis en oeuvre diverses mesures afin de se préparer une concurrence. Elles se sont étendues au-delà du coeur de leurs marchés et de leurs territoires. La vaste majorité offre aux consommateurs de leur territoire titulaire un forfait de services de voix, d'Internet et de télévision. Plusieurs sont également devenues des concurrents dans les collectivités adjacentes pour ces services.

4927 Les petites ESLT ont investi substantiellement dans leurs réseaux. Ces actifs génèrent un rendement significatif pour les petites ESLT et ne seraient pas abandonnés. Tel que nous l'avons mentionné précédemment, dans l'éventualité très improbable qu'une petite ESLT doive quitter le marché, une autre compagnie en achèterait les actifs et continuerait à fournir les services.

4928 Il existe dans l'industrie un marché viable pour les actifs de télécommunication. Force est donc d'admettre que la pérennité du service local au sein des communautés n'est pas réellement en danger. Les avantages de la concurrence l'emportent amplement sur n'importe lequel des prétendus risques allégués par les petites ESLT. Autant pour les petites ESLT que pour les consommateurs de leurs territoires. Il n'y a aucune raison irréfutable de réfuter aux consommateurs des territoires des petites ESLT l'exercice de leur choix en matière de service de télécommunications.

4929 Le cadre défini par le Conseil pour la concurrence locale dans les territoires des petites ESLT a pris en compte leurs circonstances propres tout en adaptant les règles appliquées aux grandes ESLT. Bien que ne s'opposant pas en principe à la concurrence, en augmentant les coûts les entreprises de services locaux concurrentielles ESLC, les petites ESLT ont formulé des propositions qui auraient pour effet d'exclure l'entrée en concurrence. Les petites ESLT ont proposé que plusieurs conditions soient ajoutées aux modalités de la concurrence. Parmi les changements proposés, est l'exigence que les ESLC compensent les petites ESLT pour les coûts que les petites ESLT encourraient pour l'implantation de la concurrence locale tels que la connexion à leur réseau à un point d'interconnexion, l'acheminement des appels, la tarification, le groupe de service aux transporteurs, le soutien réglementaire.

4930 Les coûts de transférabilité des numéros de téléphone ont aussi été signalés comme l'un des coûts que les petites ESLT souhaitent recouvrir auprès des concurrents. Une part significative de ces coûts découle des anciens commutateurs qui auront éventuellement besoin d'être modernisé dans le cadre du déroulement normal des affaires. Avancer la date de remplacement bénéficiera aux petites ESLT, en plus de leur permettre d'être capable de transférer les numéros de téléphone. Il n'y a aucune justification valable d'exiger d'une ESLC d'être responsable des coûts de mise à jour des anciens commutateurs.

4931 La transférabilité des numéros de téléphone doit être implantée pour rendre la concurrence locale efficace. Au minimum, les petites ESLT doivent implanter la fonctionnalité d'exportation.

4932 Ces propositions doivent tout simplement être rejetées.

4933 Pour lancer leur service local dans de nouvelles zones, les ESLC doivent recouvrir leurs propres coûts. Si elles avaient à défrayer les coûts des ESLT, en plus de leurs coûts, les ESLC seraient sérieusement désavantagées. La mise en place de barrières à l'entrée mettrait à risque les chances de toute concurrence locale dans les territoires des petites ESLT. Cela ne serait pas neutre sur le plan concurrentiel, comme l'exige les instructions.

4934 Les petites ESLT seraient ainsi fortement encouragées à gonfler les coûts à recouvrir auprès des ESLC. Compenser les petites ESLT améliorerait leur performance tout en affaiblissant leurs concurrents.

4935 Mettre en oeuvre cette proposition augmenterait significativement l'incertitude entourant les coûts d'entrée des ESLC et exigerait une intervention réglementaire accrue.

4936 Depuis que le Conseil a permis la concurrence dans les territoires des petites ESLT, celle-ci n'a été introduite que dans trois cas au cours des cinq dernières années: NorthernTel, Peoples, et TBayTel. Pourtant, plusieurs autres collectivités pourraient bénéficier de la concurrence.

4937 Comme indiqué à l'annexe 3 de l'avis 2010-43, au moins une douzaine de requêtes d'entrée en concurrence de la part d'ESLC sont toujours en attente. Plusieurs ont été déposées il y a maintenant deux ans.

4938 Les câblodistributeurs sont parmi les compagnies qui veulent entrer en concurrence dans les territoires des petites ESLT sur la base du cadre réglementaire établi dans la décision 2006-14.

4939 Le Conseil et les parties en cause ont eu largement la possibilité de passer en revue ces requêtes d'entrée en concurrence ainsi que les plans de mise en oeuvre des petites ESLT. Toutes les informations pertinentes ont été soumises et aucune procédure supplémentaire n'est requise.

4940 Dès la fin de cette instance, le Conseil doit approuver, aussitôt que possible, l'entrée en concurrence locale dans les territoires des petites ESLT. Pour chacune de ces requêtes, des décisions séparées pourraient être simultanément émises lors de la publication de la décision sur les autres aspects de la présente instance. Les avantages de la concurrence ne doivent pas être refusés plus longtemps aux consommateurs des territoires des petites ESLT.

4941 Jean?

4942 MR. BRAZEAU: Competition provides the Commission with the basis and the opportunity to reduce regulation. This minimizes interference with market forces and further increases competition. All telecom markets benefit from this shift -- from traditional wireline local voice to advanced broadband internet.

4943 The Cable Carriers are concerned that proposals to fund broadband expansion and alter competition in SILEC territories will result in increased regulation to the detriment of competitive market forces. This would be contrary to the Policy Direction and would undermine the original purpose of this proceeding.

4944 The Policy Direction requires the Commission to remove regulations where markets are competitive. Further, regulations should only be retained when these are the only means of addressing a problem within a market.

4945 The Cable Carriers' proposal focuses on reducing regulation and increasing reliance on market forces. This is consistent with the Policy Direction and the government's broader telecom policy agenda to decrease the regulatory burden.

4946 Under our proposal, regulations respecting the obligation to serve, local service subsidies, and the basic service objective would be lifted in all markets where there is at least one independent facilities-based alternative available to consumers. This would include those markets where the Commission has forborne from regulating retail local exchange services and those served by wireless facilities-based service providers.

4947 As stated earlier, we do not consider the existing obligation to serve to be a significant burden, as it requires merely a willingness to serve customers along existing lines of supply. This being said, in the interest of regulatory symmetry, we propose to eliminate the existing obligation to serve in all competitive markets. There is no reason to believe that any consumer will lose access to affordable telephone service as a result of this change.

4948 Narrowing the obligation to serve to only non-competitive markets satisfies the criteria of the Policy Direction. It results in more efficient regulation proportionate to its purpose, while avoiding unnecessary interference with competitive market forces.

4949 To complement our proposal for streamlining the obligation to serve, we also propose to eliminate the local service subsidy in all competitive markets.

4950 The local service subsidy was created to bridge the transition from monopoly to competitive markets. However, once competition has taken hold, subsidies distort prices and interfere with market forces. Subsidies should not be used in any competitive market.

4951 Under our proposal, local service subsidies would remain available only in non-competitive high-cost serving areas. In practice, the ILEC would be the most likely recipient. Entry by a second provider would make the exchange competitive and consequently neither the CLEC nor the ILEC would be entitled to the subsidy. This ensures the regulatory measure remains symmetrical and competitively-neutral.

4952 Some parties have argued the local service subsidy should continue in competitive markets but the subsidy would only be granted to the ILEC. The rationale for this proposal is that only the ILECs have the obligation to serve and therefore only they should receive the local service subsidy.

4953 The Cable Carriers are opposed to this proposal. First, as we have already observed, the existing obligation to serve is an illusory burden.

4954 Second, providing the subsidy to the ILEC alone would not be competitively neutral and would distort competition.

4955 If the Commission accepts our proposal, the first step would be to remove the local service subsidy in all forborne high-cost serving areas. The second step is to identify any additional exchanges that are served by at least one independent facilities-based competitor. These exchanges would then be removed from the subsidy regime completely.

4956 However, if the Commission retains the local service subsidy in competitive markets it must remain available to all ILECs operating in the market. There are three reasons why this should be the case.

4957 First, to do otherwise would be inequitable.

4958 Second, eliminating portability would advantage the incumbent and promote inefficient competition.

4959 Third, it would give the ILECs an incentive to inflate the subsidy.

4960 We propose to further streamline the local service subsidy by reducing the size of the subsidy paid for each residential line served in high-cost areas. The subsidy should be adjusted to cover the difference between an affordable rate and the cost of providing the service, minus revenues from calling features.

4961 The affordable rate can be determined by observing the rates that have been approved for residential local exchange service. These rates range from $20 to $36 per month.

4962 If a rate is affordable for some residential customers, it is equally affordable for others.

4963 The subsidy should be further streamlined by imputing a greater share of revenue generated by calling features. The current subsidy mechanism assumes only $5 per customer. This amount has not changed in 10 years.

4964 The Commission has collected detailed information from the ILECs showing the margin on local calling features. This information should be used to make appropriate adjustments and bring the subsidy amount into line with current figures.

4965 These changes to the local service subsidy regime will improve its efficiency and minimize the burden on the telecommunications industry. Our estimates suggest this will reduce contribution by $50 million or more annually. The Commission can implement these changes readily with minimal further process.

4966 Other proposals to revamp the local subsidy are based on a complete reworking of the definition of what qualifies as a high-cost serving area.

4967 Past experience has shown it is very difficult to find an objective, transparent and uniform basis for defining high-cost serving areas.

4968 The Cable Carriers do not believe these proposals would be effective in streamlining the subsidy regime or simple to implement.

4969 Denis...?

4970 M. BÉLAND: En guise de conclusion, nous aimerions répondre de façon succincte aux questions mises de l'avant par le Conseil à sa lettre du 8 octobre dernier, laquelle lettre traitait de l'organisation et du déroulement de la présente instance.

4971 Première section : réévaluation de l'obligation de servir et de l'objectif du service de base. Quant à la première question du Conseil, nous sommes d'avis que tant l'obligation de servir que l'obligation du service de base devraient être abolis au sein des marchés concurrentiels, c'est-à-dire tous les marchés où l'on peut retrouver à tout le moins un concurrent indépendant doté d'installations, y compris un concurrent sans fil. Ces deux obligations réglementaires ne seraient donc maintenues en place qu'uniquement au sein des marchés où la concurrence est absente.

4972 Cette réponse s'applique également à la deuxième question puisque la seule entreprise de téléphonie locale présente dans un marché non concurrentiel est l'ESLT. L'approche que nous préconisons est de nature symétrique puisque ni l'ESLT ni l'ESLC se verrait imposer ces obligations réglementaires dans un marché concurrentiel.

4973 En ce qui concerne la troisième question, nous sommes d'avis que les services de voix sans fil sont en mesure de satisfaire à l'obligation de servir et à l'objectif du service de base, tel qu'indiqué par notre définition d'un marché concurrentiel.

4974 Deuxième section : établissement du rôle du Conseil concernant l'accès Internet haute vitesse. Quant à la première question du Conseil, si le Conseil est d'avis qu'il pourrait être bénéfique d'établir une cible pour les services à large bande, nous proposons ce qui suit: que les fournisseurs de service canadiens et les gouvernements s'engagent à rendre disponible d'ici cinq ans un service Internet haute vitesse de 100 Mbps à 75 pour cent de la population, de 10 Mbps à 90 pour cent de la population et de 5 Mbps à 100 pour cent de la population.

4975 I will repeat this in English for English-viewing audience.

4976 Section Two: Determining the role of the Commission with respect to high-speed internet access, regarding the Commission's first question, if the Commission is of the view that there would be a benefit from setting a broadband target, we would propose the following:

4977 That Canadian service providers and governments undertake within five years to make 100 Mbps available to 75 percent of the population, 10 Mbps available to 90 percent of the population and 5 Mbps service available to 100 percent of the population...

4978 Nous répondons à la deuxième question en affirmant que le Conseil ne devrait pas mandater la fourniture de services à large bande dans les zones non desservies. Nous sommes très confiants que les initiatives du secteur privé et public permettront d'atteindre les cibles que nous venons de proposer. Un nouveau programme n'est pas requis et serait injustifiable selon les instructions.

4979 Pour ce qui est de la troisième question, nous répondons qu'un fonds destiné à soutenir un programme d'expansion de la large bande n'a pas de raison d'être, pour des motifs identiques à ceux sur lesquels notre rejet de l'idée même d'un tel programme est basé.

4980 Section 3, reassessing the local service subsidy regime. In response, technicians' first question, we support streamlining the local service subsidy regime in two key areas. First, the eligibility for subsidy should be targeted to non-competitive high-cost serving areas and removed from all forborne and otherwise competitive markets.

4981 Second, the quantum of the subsidy should be based on the highest affordable rate and an increase in the value of the margin from local calling features.

4982 Regarding the second question, a review of the costs and definition of high-cost serving areas should not be pursued. This would be unnecessarily complex, costly and time consuming.

4983 Section 4, re-examination of local competition in the territories of the small ILECs. In response to the Commission's first question, we urge the Commission to implement local competition in the SILEC territories as quickly as possible. The benefits of competition are significant and the risks claimed by the SILECs are unfounded. The existing terms and do not need to be tilted in favour of the SILECs any further.

4984 Finally, regarding the second and last question in this section, our proposals regarding the obligation to serve and local subsidy should be applied to all incumbent territories. The reduced regulatory burden would benefit consumers and service providers alike. However, there may be some SILECs for which it may be appropriate to phase in the changes to the local subsidy over a three-year period.

4985 In conclusion, the cable carriers urge the Commission to remain focused on the original purpose of this proceeding, namely to fulfil the requirements of the policy direction by promoting competition and reducing regulation. We believe that our proposals provide a coherent and practical approach for achieving these objectives.

4986 Thank you.

4987 THE CHAIRPERSON: Thank you for a very clear and precise presentation of the issues and your answers. We agree it was not a different question, but we certainly know where you stand.

4988 So I was struck, you really, like others before you, make the point that wireless is very much equal to wireline right now and we should treat them as equal, et cetera. But none of you have gone the next logical step in saying you really should really right the basic service obligation and the obligation to serve in a technologically neutral way.

4989 I mean, leave it up to us as incumbent or as telephone service providers, and all of you are telephone service providers and wireless providers, to decide how we serve our customers. But it is all written in wireline language and yet you say wireline is an appropriate alternative.

4990 Isn't it time for us to look at that and say, look, we are facing a new world, a new universe, whatever you want to call it, and let's rewrite the BSO and the obligation to serve in a technologically neutral way and let us figure out, as industry, how to serve it rather that it is written in wireline and you say it actually does apply to wireless, but there is some question. If you believe that, wouldn't that be the logical next step?

4991 MR. BÉLAND: Let me begin, first of all, by saying that we definitely do believe that wireless is a substitute for wireline. And to give you a sense of where at least I am coming from on this, I have been doing this business now for 14 years, since 1996, and my first job was in fact with a wireless new entrant called Microcell/Fido.

4992 The wireless is like the Rodney Dangerfield of telecommunications, it never gets any respect. And if I go back over 14 years I can list for you all the reasons people have put forward for why wireless is not a substitute. At the very beginning it was voice quality. Well then digital technologies came along, that fell by the wayside.

4993 Then wireless didn't offer enough minutes, well then large minute bucket came along and that fell by the wayside. 911 was not very good and now we have Phase II wireless enhanced 911 mandated and implemented in Canada. Now we are hearing that it doesn't work in basements. Well, Mr. Engelhart or any of our panel members will describe to you, if you wish, some of the new routers that are available on the market to make it work in basements.

4994 THE CHAIRPERSON: Please, say it to the box--

--- Laughter

4995 MR. BÉLAND: But, the point I am making is over a 14-year period in which I have been working in this business I have seen reason after reason for why wireless is not a substitute and they all fall away, and ultimately it is customers that -- it is Canadian consumers that make the decision and they are making the decision in large numbers as you all know.

4996 Now, moving to the issue of the basic service objective and the suggestion that it is written in wireline language, that is actually a surprise to me to hear that because, again if I go backwards in my own career, I spent a couple solid years of my professional life being the person that handled the regulatory issues for Microcell to become a wireless CLEC.

4997 Microcell became a wireless CLEC, it satisfied the basic service objective, including making equal access available and it even collected subsidies as a result in certain exchanges.

4998 So I am not sure I agree with the premise that the basic service objective, as it is written, is wireline specific or that it needs to be changed.

4999 THE CHAIRPERSON: So if we would propose to write -- you don't accept my premise that it is written in wireline language?

5000 MR. BÉLAND: No. Microcell Connexions/Fido is a wireless carrier that satisfied it and became a CLEC and received subsidies, so I think the proof is there.

5001 THE CHAIRPERSON: I understand, but by the same token then, if we did undertake that and re-wrote it in a technologically neutral fashion you wouldn't have any objective, because you will say it is already there. So fine, if you want to clarify it go ahead and clarify it.

5002 MR. BÉLAND: If the proposal was made to re-write it somehow, and I haven't seen what the proposal would be and of course we would be willing to undertake an assessment as to whether that is technology neutral.

5003 I don't know if any of my colleagues want to add anything to that.

5004 MR. ENGELHART: I agree with everything Dennis has said. To pick up on Commission Molnar's two issues, one is equal access and the other was unlimited local. So as Dennis has said, to be a CLEC today you have to offer equal access. So under the BSO as it is written today equal access is part of the requirement and wireless CLECs do meet it.

5005 Wireless CLECs don't provide unlimited local. I don't think you need to add that to the requirement because some customers will choose to have not unlimited for the benefit of mobility, but I would note -- I don't have any props with me, Mr. Chair -- but I would note that the hub that you have heard a lot about today, for the Rogers' hub you have to buy the data, but then once you buy the data for $25 you get unlimited voice, and that includes enhanced voicemail, call display and call waiting.

5006 So in that case wireless customers who have bought a device that is designed for home usage do get unlimited.

5007 THE CHAIRPERSON: No, but you have heard here that lots of people think, unfortunately, even in forborne areas there can be up to 25 per cent of territory that is only served by one competitor. That is all in terms of wireline, and wireless obviously it is -- so following that logic and you want us to say no basic service obligation or no BSO for those areas or alternative you say, fine, it's there, but it's the same for both of them to sort of take care of those 25 per cent. They can have wireless, the same thing that the have in wireline.

5008 That's why I have asked the question to Dennis before, it seems to me if I accept your premise it leads me to the necessity to re-write the BSO in technologically neutral language.

5009 But, I mean, let's not beat that point. You don't agree I gather?

5010 MR. ENGELHART: Yes, I think it is technologically neutral for the reasons that Dennis gave. But if you wanted to include unlimited, that would be an expansion of the definition of BSO, which I don't think is necessary. But if you felt that it was appropriate, then wireless carriers could make the decision whether to offer those products or not.

5011 THE CHAIRPERSON: Exactly, yes.

5012 Now, the second point which you actually made, Mr. Engelhart, is that there is some areas let's be honest that they cannot be served in any other way than by satellite, especially for internet access. And this has been recognized in other countries and certainly given our geography and topography, we have to do the same.

5013 We have heard a lot of evidence about that. And we also heard the very encouraging evidence from by -- the next generation can offer up to 10 megabytes, et cetera. The problem is all of this is the initial start-up costs, the implementation costs, et cetera.

5014 Do you feel we should devise a subsidy for that so that -- to put those areas on the same foot every -- you know, how don't know how many people, I don't know what the amount is, also a quest who would fund this. But essentially, it is a very small percentage.

5015 We have, as TELUS said this morning, a real success story in Canada, et cetera. To deal with that small area could one not -- should one not face it outright an settle it? Let's determine who these folks are, they can't be served by satellite and the real major impediment is the initial start up cost, which is somewhere between $500 to $700.

5016 MR. ENGELHART: Yes, I think I agree with you in principle, but we think that you don't want to anticipate a problem before it exists. A lot of these services are fairly new. So our proposal is we have set some targets for five years, the commission will come back in five years, they will say, well how are we doing with those targets?

5017 If at that five-year review it seems to you that well, look, there is a problem with satellite, the problem is with the initial start-up costs. Why don't we subsidize that out of the contribution fund? That seems sensible.

5018 So I think it might be an appropriate solution, but I don't think you should prejudge that it is going to be a problem and we should give the market five years to sort it out first.

5019 LE PRÉSIDENT: Et Monsieur Messier, dans le paragraphe 47, vous dites «la transférabilité des numéros de téléphone doit être implantée pour rendre la concurrence locale efficace» et après ça, «Au minimum, les petites ESLT doivent implanter la fonctionnalité d'exportation.»

5020 Franchement je ne sais pas le sujet duquel vous parlez. Qu'est-ce que la fonctionnalité d'exportation? C'est quelque chose autre que la portabilité des numéros locals.

5021 M. MESSIER: Seulement le «portal». (Sans microphone) ...en anglais serait «portal». Tout simplement de pouvoir laisser aller le numéro au concurrent, tout simplement.

5022 LE PRÉSIDENT: Oh! C'est...

5023 M. MESSIER: ... s'il veut pas implanter...

5024 LE PRÉSIDENT: C'est l'expression, en français, de dire «local number portability»?

5025 M. MESSIER: C'est comme ça qu'on l'offre.

5026 Pas la transférabilité au complet, mais seulement la fonctionnalité où est-ce que vous avez donné à certains comme option de simplement laisser aller le numéro mais ne pas l'implanter dans... Pas dans les deux sens, seulement dans un sens.

5027 LE PRÉSIDENT: Ah! C'est un sens?

5028 M. MESSIER: Oui.

5029 LE PRÉSIDENT: Et c'est moins cher si on le fait--

5030 M. MESSIER: Bien, c'est une option que vous aviez déjà proposé de laisser aller. Donc on pense que c'est le minimum, parce que la réalité est qu'une grande proportion de ce que l'on vit comme expérience avec les clients c'est que les clients en grande majorité décide de garder leur propre numéro de téléphone. Donc, l'expérience du client, c'est... face à la concurrence pour exercer son choix, ce qu'il veut c'est pouvoir garder son numéro et l'amener avec lui. Donc, on se dit au minimum, cette fonction-là devrait pouvoir exister.

5031 LE PRÉSIDENT: Et si nous imposons cette application aux petites ESLT, ça veut dire en réalité pour eux un coût mineur, si on le compare avec l'implantation de la portabilité des numéros totale?

5032 M. MESSIER: Je pense que c'est le but exactement, oui.

5033 LE PRÉSIDENT: Est-ce qu'il y a...?

5034 M. MESSIER: Mais j'ai pas fait de... Je ne peux pas vous donner les coûts... Je ne sais pas si quelqu'un ici, mais...

5035 LE PRÉSIDENT: Une estimation? Est-ce que c'est 50 pour cent moins cher, 20 pour cent moins cher ou quelque chose comme ça, vous savez, la différence entre une imposition de portabilité des numéros totale ou seulement la fonctionnalité d'exportation?

5036 M. MESSIER: Le meilleur estimé qu'on pourrait donner, peut-être... Mais comme ça, on n'a pas--

5037 LE PRÉSIDENT: Peut-être dans votre réponse...

5038 M. MESSIER: ...On peut regarder pour le...

5039 LE PRÉSIDENT: ...en écrit, vous pouvez nous donner une estimation.

5040 M. MESSIER: D'essayer de regarder cette question, oui.

5041 THE CHAIRPERSON: Okay.

5042 Rita, I believe you have some questions.

5043 COMMISSIONER CUGINI: I do, thank you. Just a few follow-up questions as well as some questions of clarification.

5044 I will start with continuing on the subject of wireless. I know you want us to say that wireless today is a substitute. And when I look at your written presentation you say, "The level of wireless-only households in Canada will reach 25 per cent in 2012 and 37 per cent by 2015."

5045 So you are obviously not subscribing to a preponderance test in order for the industry to claim that wireless is in fact a substitute for wireline?

5046 MR. BÉLAND: (Off microphone)

5047 COMMISSIONER CUGINI: More than 50 per cent.

5048 MR. BÉLAND: Preponderance test, that you would effectively be imposing by a preponderance test not just that it be a substitute but that it would takeover from wireline. And I don't think that is a reasonable test because the notion of substitutability is not that everyone makes the leap in changes.

5049 The notion of substitutability in economic theory, in competition theory is that enough people make the leap, are willing to make the leap to discipline the provider of the other service, in this case the wireline service. So I don't think you need a preponderance test.

5050 COMMISSIONER CUGINI: And your position is that enough people have made that leap today?

5051 MR. BÉLAND: That clearly many are making it. If we look at tendencies, in the United States in particular, many more will make it. It is even a point of note that the percentage of people who have jumped and become wireless only is even higher in lower-income sectors than in higher-income sectors, so there is lots of evidence that Canadians are making the choice.

5052 COMMISSIONER CUGINI: And of course the reason in particular for the low income is that they just prefer to pay one bill and the two for --

5053 MR. BÉLAND: Of course. And why not get mobility while you are paying one bill?

5054 COMMISSIONER CUGINI: Right.

5055 And it is the reason why you are saying that the obligation to serve should be removed in those markets where there is one facility-based competitor?

5056 MR. BÉLAND: Yes, to be blunt, we just don't think anything is going to happen when you remove it.

5057 COMMISSIONER CUGINI: When you remove?

5058 MR. BÉLAND: When you remove the obligation to serve in those areas, the wireline network will still be there, they will still have a very high interest in getting paying subscribers on it, as many as they can, and the presence of the wireless alternative will be disciplining them in terms of their pricing and other behaviour.

5059 COMMISSIONER CUGINI: And that is of course different when we compare it to the forbearance test and so I just want to ask you why it is that you are asking us to I guess streamline, for lack of a better term at this point, that test when we already have a test in place for determining forbearance. Doesn't that add another layer of complication?

5060 MR. BÉLAND: Streamlining is one word, taking the logic to its logical conclusion is another way to express it. Basically, what we are saying is once a market is competitive you don't need these rules.

5061 COMMISSIONER CUGINI: I understand that, but what I am saying is that we already have a test in place to determine that a market is competitive. You are now asking us to take it a step further and say, that is fine and therefore that market is forborne, but where it is not you only want us to look at the fact that there is one facilities-based competitor in order to take away the obligation to serve. Why not just apply the same test?

5062 MR. BÉLAND: It is an additional test. But Jean I believe wants to comment.

5063 MR. BRAZEAU: Just a quick point. I think we would certainly be prepared to have, like in the forbearance test, a certain percentage of, you know, people being served or potentially being served by the facilities-based carrier as one of the criteria for removing the obligation to serve.

5064 So it is not just that there is one tower there and is only a possibility of, you know, 5 per cent of the subscribers being served by that market, we are certainly prepared to have a minim addressable market condition apply to it.

5065 COMMISSIONER CUGINI: And do you have a proposal to make to us now on what that would be?

5066 MR. BRAZEAU: Well, in the forbearance test it is 75 per cent and, you know, if it is a little higher than that that is also acceptable to us.

5067 COMMISSIONER CUGINI: Okay, thank you.

5068 On the issue of broadband I am sure you followed our discussions in Timmins and we talked not only of download speeds but of upload speeds as well. Do you think that in the target as proposed by you there should be a minimum requirement for upload?

5069 MR. BÉLAND: We discussed that. The download is certainly more predictable in terms of what appear to be the trends, the applications are more clear as to what people are doing with download, in particular video and that sort of thing.

5070 Upload, in our view, remains considerably more unpredictable just in terms of understanding what people are using it for and what they intend to use it for. Predominance of peer-to-peer or gaming or those sorts of things. So frankly, we didn't want to venture onto that front.

5071 What you generally see in the marketplace and you have seen for years now is that providers will step-up their upload speeds at a certain rate in step as they are stepping up their download speeds. But we didn't have any specific quantitative targets to suggest to you there.

5072 COMMISSIONER CUGINI: So is that a case where market forces will take care of what the consumer requires in terms of upload speeds?

5073 MR. BÉLAND: Yes. If the companies are making the effort to achieve these objectives in download, we would be quite confident that they would be also trying to follow consumer trends in upload.

5074 COMMISSIONER CUGINI: And when I look at your targets, as major cable carriers am I safe to assume that you are pretty close to the 5 mbps download, of providing that today to your customers?

5075 MR. BÉLAND: Well, I will take the three targets, in fact in reverse order. The 75 per cent 100 megabit target, if you look at where the cable carrier services are today, we are pretty close to 75 per cent availability of 30-50 megabit services, the companies around this table. You put them all together, we are offering today 30 to 50 to pretty close to 75 per cent of Canadian households.

5076 So what we would need to do then to achieve our target here is to push some fibre, in particular, further into our networks, expand capacity and bump that 30-50 up to 100, and we think that is a reasonable objective over five years. It is within sight. All of these objectives that we have set here we think they are realizable objectives.

5077 As for the 10 megabit and 90 per cent coverage, in that case the cable carriers alone today with our 10 megabit services, we are probably in the low 80 per cent range, so we are getting close and there is a way to go. We don't think that we will necessarily be able to pull that off all by ourselves. So that might be possible within five years. But of course, there are other networks that exist that could hopefully lend a hand.

5078 As for the 100 per cent objective and the 5 mbps, as the Chair stated a little while ago, cable is never going to do that all by itself, let's be frank. But with what you see coming along first from HSPA and then LTE networks on the wireless side, and the satellites that are being launched that Barrett has discussed so much, we think that objective as well is an attainable objective with enough private sector effort and potentially some public sector very targeted initiatives for the extremely remote places.

5079 COMMISSIONER CUGINI: Then, with all of that effort toward the 5 megabit can you please explain to me why it would be unrealistic for us to set a target at the 5 mbps speed for -- set an upload target as well?

5080 MR. BÉLAND: Again, it is the same answer. Upload trends, if we speak to our engineers, are much more difficult to get a handle on and to forecast. They seem to be heavily application specific in applications that you are less confident are lasting applications. So we just didn't want to venture in that regard.

5081 COMMISSIONER CUGINI: So there is no minimal level that would be satisfactory for you?

5082 MR. BÉLAND: No, we wouldn't say there's no minimum level, but we are reluctant to put the target explicitly.

5083 COMMISSIONER CUGINI: I mean, I hear you when you say it should not be enshrined in regulation. But when I first saw your targets, the thing that I wrote was, okay, then what? So we set this target, it is not achieved in five years, what are the next steps five years from now?

5084 MR. BÉLAND: Ken?

5085 MR. ENGELHART: Well, I think we would get together in this room, if it is still here, and we would then talk about what needs to be done. So maybe what would need to be done would be, as the Chair and I discussed, a subsidy from the fund for the satellite installation. Maybe we would need to dip into the Contribution Fund and fund some projects. The Commission would do what it needed to do if those targets weren't met. And I am sure people would have different views at the time and you wouldn't be prejudging, but you would solve the problem.

5086 COMMISSIONER CUGINI: Okay. So we will cross that bridge when we come to it?

5087 MR. ENGELHART: Yes, but I mean we think these are eminently achievable, but they are not just nice looking targets. I mean, I think the Commission would undertake to fix the problem if there was one.

5088 COMMISSIONER CUGINI: Of course.

5089 THE CHAIRPERSON: On this upload vision, it really is driven by sort of a social need for a certain program. Telehealth is one that you really need to have a two-way conversation or upload between a surgeon here and a practitioner there, et cetera.

5090 So let's take that example for Telehealth. What would you need by way of upload to have a meaningful Telehealth encounter?

5091 MR. ENGELHART: Typically, our 5 or 10 megabit services by our cable have a 512 kilobit upload. As you know, the cable networks are highly asymmetric and less goes up and comes back. You can bond upload channels together the same way you can bond download channels together and make them faster. And I believe our 50 megabit service is 2 megabits up. HSPA plus networks are less asymmetric so the 21 megabit service is I think 5.5 up.

5092 So for Telehealth and things like that, if it is video, yes, 5 is good, 512 maybe not so good. I think you would need to be -- if you are talking about a video application or -- a photograph would be fine at 512, but if it was video you would want something around 5 I think.

5093 COMMISSIONER CUGINI: Just staying with broadband for one more minute. Your paragraph 22 of your oral presentation:

"An expectation that wireline broadband facilities can be extended to every household in these areas is neither realistic nor economically feasible. It is also not technologically neutral."

5094 Can you explain that to me please? What do you mean by it is "not technologically neutral?"

5095 MR. BÉLAND: Sure. If we are setting an objective, for example, of 5 mbps to 100 per cent of Canadian households, it is inappropriate to say that only one particular type of technology can be used to achieve that objective.

5096 So all we are saying here is -- and in fact, I stated it quite frankly a couple minutes ago, coaxial cable is not going to get to 100 per cent of Canadian households, so you need technological flexibility, technology neutrality in attaining the objective.

5097 COMMISSIONER CUGINI: Okay. Thank you for that.

5098 Your position on the SILECs is quite clear. I don't have any further questions for you there. I am sure that the rebuttal phase will provide them with the opportunity to rebut what you are saying.

5099 But I do want to just -- my final question anyway. When you talk about the rate and you say, "If a rate is affordable for some residential customers, it is equally affordable for others."

5100 And in the paragraph previous to that you say, "These rates range from $20 to $36 a month." Are you saying that the rate could be $36 a month across the country?

5101 MR. BÉLAND: The Commission effectively decided that itself, at sometime in the past this rate of $36 was approved for Val-des-Bois, Quebec. Now, we have heard that there happen to be a lot of cottages in that area, and that may be true, but it is not exclusively cottagers. So everyone in Val-des-Bois who gets wireline phone service pays that rate.

5102 Now, a past Commission made that decision. All we are saying is we think that if that decision was fine for 100 percent of the wireline customers in Val-des-Bois, then that can set a reasonable benchmark for where we would want to go in other high-cost areas.

5103 COMMISSIONER CUGINI: Okay. Thank you very much.

5104 Those are all my questions.

5105 THE CHAIRPERSON: Len...?

5106 COMMISSIONER KATZ: Thank you, Mr. Chairman, and good afternoon.

5107 As I understand it your recommendation to us is to remove access to subsidies in competitive exchanges.

5108 Is that correct?

5109 MR. BÉLAND: That's correct.

5110 COMMISSIONER KATZ: Tomorrow we will be hearing from Bell Canada and, to jump ahead, their proposal is that basically Bands "E" and "F" should be adjusted based on costs, based on revenue, based on implicit contribution in order to effectively remove contribution from Bands "E" and "F".

5111 How different is their proposal than yours? Have you looked at the difference between the way you are coming at this and the way they are coming at it?

5112 MR. BÉLAND: We haven't mapped it out, but I suspect that it's not terribly different, that the non-competitive exchanges you would likely see that a large proportion of them in Band "G" and that's what we are saying should be left with the subsidy and that's what I believe Bell is saying. So they are probably not too far apart.

5113 COMMISSIONER KATZ: Okay. So you are just coming at it from a different perspective, but the reality is they are the same proposal?

5114 MR. BÉLAND: Yes.

5115 COMMISSIONER KATZ: Mr. Béland, you mentioned that you in your previous life, and today Rogers as the owner of the Fido brand, is a CLEC. We heard this morning from TELUS who indicated that they have a brand called Telular I think that's a CLEC as well. That was news to me, quite frankly. We will probably hear from Bell tomorrow that they have a brand that's a CLEC as well, I don't know.

5116 But I guess it begs the question: Are the terms and conditions and prices the same except for that one component called equal access and is this anomaly that we are seeing here basically to serve a consumer you created a brand that is a CLEC that will provide equal access and for the purpose of being a LEC you are better off -- or not being a CLEC you are into a bill and keep regime where from a technical and financial perspective you would rather not have equal access because then you are trading on minutes, as I understand it.

5117 Maybe I'm totally wrong, but I think there is a difference here between how you go to market with a need for equal access and how you settle amongst carriers where there is a bill and keep regime.

5118 MR. BÉLAND: I'm in the odd position of commenting on my neighbour's --

5119 COMMISSIONER KATZ: You are.

5120 MR. BÉLAND: -- brand and business, but given I was there at its birth, the decision that Microcel at least made to become a wireless CLEC was basically a business decision. Looking at a variety of interconnection related charges and the savings that that particular wireles carrier was able to earn on interconnection justified taking on such obligations as equal access.

5121 I hope that answers your question.

5122 COMMISSIONER KATZ: Well, it does, but I will ask a follow-up question then and anyone can answer the question.

5123 You are trying to serve a market, consumers obviously would prefer, where it suits their purposes, to be able to choose an alternate provider for long distance if there is a benefit to them, all other things being equal. So I guess today there is that vehicle in the Rogers stable for those customers.

5124 I guess I will ask Mr. Engelhart, is there a price the customer pays for that? Is there a quid pro quo or is the customer just opting for the Fido service in order to get equal access, but if he chose not to he wouldn't be paying any less in a non-equal access environment?

5125 MR. ENGELHART: Yes. I mean, your previous question to Dennis I agreed with, which was the regulatory tradeoff is if you are a CLEC you get bill and keep, you give up equal access. I agree with that.

5126 It's a way more complicated if you look at the customer, if you look at the Fido brand versus the Rogers brand. Fido customers don't get bundling benefits but they get Fido points. I mean there is a hundred different brand differentiators between those two brands and equal access is one of them.

5127 So in general Fido is a discount brand so I don't think they are paying more for the equal access.

5128 COMMISSIONER KATZ: Than the Chatter brand?

5129 MR. ENGELHART: Than the Rogers brand.

5130 COMMISSIONER KATZ: Than the Chatter brand?

5131 MR. ENGELHART: Chatter is not a CLEC, it does not have equal access.

5132 COMMISSIONER KATZ: It does not. Okay.

5133 So following up on what the Chairman said, we actually redefined basic service objective and took a look at -- I won't say mandating, but serving the customer in a way that he or she always has a choice of having an equal access long distance carrier.

5134 How would you react?

5135 MR. ENGELHART: We have not proposed any changes to the basic service obligation in this proceeding. We have not suggested that wisps that are not wireless CLEC should be entitled to contribution, so that's fine with us.

5136 COMMISSIONER KATZ: Okay. I want to go back to this notion of porting.

5137 I remember in the days of local number portability on the wireline side there was a big issue of cost as well, how do you mandate it. I think at one point in time the industry -- and Mr. Béland I'm looking at you because you were leading that industry initiative, if I remember correctly, on the other side -- was suggesting an evolutionary process where it would be done in two stages.

5138 At the end of the day the CRTC at the time suggested that we would only mandate one-way porting and that is porting out. So that if a customer wanted to leave and there was somebody else there, let the customer decide. If a carrier chose not to have the software to port in, that's his business decision and his cost at the end of the day.

5139 Is that a viable scenario to pursue in the SILEC territories and in those areas where we have heard it's uneconomic to provide number portability?

5140 MR. BÉLAND: Michel might want to comment after. This touches on the discussion earlier about what the porting out function means.

5141 To try to explain it in non-technical terms, there is clearly a material distinction between doing just porting out and doing porting out and porting in and really in a sense what it involves is doing just porting out you are letting go of numbers and this number is going out into the world on its own and carriers are equipping themselves to route to the switch that that number now resides in. You haven't had to invest terribly much in order to do that, you have just let the number go.

5142 Porting in numbers means that you are plugging yourselves in effectively to the porting system where now you are taking numbers from the outside world, you are bringing them into your switch. Your switch needs to know that those numbers are there, they are numbers that used to belong to someone else's NXX, it's a much more involved thing.

5143 So whereas I don't think we can put a percentage cost estimate on it, your recollection is right that porting out is materially less difficult to do than porting in and we think it's definitely an acceptable possibility for a SILEC that claims that the costs of porting in are undue for it.

5144 COMMISSIONER KATZ: Mr. Messier, you wanted to add something?

5145 M. MESSIER : La seule chose que je voudrais rajouter, c'est que je le regarde d'un point de vue consommateur et d'un point de vue concurrent.

5146 Alors, comme disait la grande majorité des consommateurs, les clients qui veulent exercer leur choix veulent conserver leur propre numéro. Je pense que c'est bien connu. Alors, pour les clients de pouvoir... ils se retrouvent donc en position de pouvoir exercer un réel choix, plutôt que simplement être attribué un numéro.

5147 Pour un concurrent, ça donne donc une possibilité d'entrée, pouvoir offrir à tous et en mettant tous les consommateurs aussi sur le même pied.

5148 Maintenant, je pense qu'à long terme, ce sera un choix que les SILECs auront eux-mêmes à faire, en fait, les petites ESLT, puisque, en termes de développement de la concurrence, je pense que le bénéfice, ce soit que ce soit dans les deux sens.

5149 COMMISSIONER KATZ: My last question refers to paragraph 84 of your submission today. As I understand it, you are suggesting that if a target needs to be out there five years you are suggesting 100 megabytes to 75 percent of the population; 10 megabyte throughput to 90 percent and 5 to 100 percent. I will just make the assumption that there are applications out there that will require 100 megabyte throughput in 5 years from now.

5150 Having made that assumption, and if we accept your proposal, are we looking at a have and have-not situation again where in five years from now those people that in those territories that are getting 10 megabyte throughput aren't being able to utilize the applications the same as those people that have 100 megabyte throughput in I guess the big cities?

5151 MR. BÉLAND: We have certainly set up our target such that it's a tiered target, so you are right, if there were strict adherence to this there would be 25 percent of the population that doesn't have the 100 megabyte service in five years.

5152 I think this is first of all just a pragmatic reflection of the fact that in these dense urban areas there are more networks, particularly on the wireline side, even on the ADSL side the loops are shorter, so there is some pragmatic reasons for thinking that the highest speeds might be more available in the denser areas.

5153 That being said, these are targets and it would be entirely conceivable that they be surpassed and that they be surpassed particularly on the availability of the highest speeds.

5154 If you look at some of the -- let's not talk about Barrett's satellite initiatives, but let's talk about Barrett's terrestrial fixed wireless initiatives, they are already talking about doing LTE, if the conditions are right, perhaps even with some assistance, some focused assistance from local governments, you could see those networks taking off and you could see in five years Canada being far in excess of 75 percent.

5155 We chose the 75 percent because we think that's pragmatically attainable based on what we are looking at today, but there is no certainty whatsoever that it wouldn't be far surpassed.

5156 COMMISSIONER KATZ: I was just looking at the stepdown function from 100 megabyte throughput to 10 and it looked like if there were applications that were worthy of 100 megabyte we are creating a have and a have-not situation, that's all.

5157 MR. BÉLAND: You are also looking at demand effects. As 75 percent of Canadians start seeing those applications and start talking to them with the other 25 percent that hasn't seen them yet and there start to be the calls, too, the providers in that other 25 percent of Canada and the demand starts demonstrating itself, I think that will have an incentive effect as well.

5158 COMMISSIONER KATZ: Those are my questions, Mr. Chairman.

5159 Thank you very much.

5160 THE CHAIRPERSON: Thank you.

5161 Candice...?

5162 COMMISSIONER MOLNAR: Thank you.

5163 I'm just going to ask my questions in the order of your presentation here. The first is on paragraph 7.

5164 You have had discussion with a number of my colleagues as it regards setting broadband targets and potentially getting together later if those targets are not achieved.

5165 I just wanted to focus on the last sentence here where it says:

"The assessment would be supported by the Commission's existing monitoring activities."

5166 Do you believe the existing information that is collected for monitoring is sufficient for us to not just understand if the targets have been achieved, but to understand why those targets have not been achieved?

5167 MR. ENGELHART: Mr. Watt, who is besides me, has to assemble that information for Rogers so if I said it's not sufficient I would probably get a swift kick under the table.

5168 But yes, I believe the Commission gets a lot of information. The Monitoring Report is very comprehensive and I think you would obviously want to start monitoring -- if you set these targets you would want to start monitoring your achievement of those targets.

5169 The other thing I think you might want to consider is -- and I might get the kick for this -- you don't want to just look at advertised speeds, I think you want to look at actual attainable speeds by that customer sitting in their rec room. So the targets we are talking about should be what people are actually getting, not just what's being advertised.

5170 COMMISSIONER MOLNAR: So I would think somebody would kick you for making that statement, but thank you for making that statement.

--- Laughter

5171 COMMISSIONER MOLNAR: That is a very valid point and you may have heard me talk to others about when it is difficult and as we move forward it isn't just about initial access to broadband, but it's about upgrading to ensure that broadband speeds -- if we were to accept your target for example -- are able to move from the 1.5 that has been sort of the standard for high-cost areas today to a 5 megabyte.

5172 So we would understand the different components that maybe are in play here as it regards getting there. Do we know enough? Do we have enough information so we can understand whether it is based on customer permise equipment -- and I'm going to use the term last mile, but obviously there are different technologies at play in that -- or whether it's the backbone.

5173 So you believe the information we are collecting is sufficient to know where the issues might be in achieving that speed?

5174 If you want to take this away it is okay.

5175 MR. WATT: I think the best thing would be to -- exactly. We should go back and take a very close look at the informatino collected and get back to you probably in our reply phase. We could even do it at that point fairly quickly or in writing later.

UNDERTAKING

5176 MR. WATT: The other thing I would say in terms of the speed, the attainable, the actual speed, you would have to be looking at that sort of I think on a sample basis. It's not something that could be --

5177 COMMISSIONER MOLNAR: We would want to know the available speed of every customer, Mr. Watt.

5178 That's a joke, for the transcript.

5179 MR. WATT: I know.

--- Laughter

5180 COMMISSIONER MOLNAR: I want to move on to the section "Incumbency has it advantages".

5181 You talk about the doughnut effect and then in paragraph 31 you say that there -- well, essentially that there may be evidence that some of the facilities of the incumbents were more expensive to construct but they are sunk costs and:

"... there is no evidence whatsoever to indicate that these facilities represent an ongoing financial burden."

5182 I wondered what evidence you were thinking that we would need to conclude that there is an ongoing financial burden with that area of an exchange that is discussed in the doughnut effect.

5183 I mean there is certainly evidence in this proceeding and in previous proceedings to talk that loop length and density are key cost drivers. We know key costs are repair, are maintenance, are reinvestment, we know those are all driven by loop length and density, so what evidence do we need to conclude that it is costly to serve outside of the doughnut?

5184 MR. ENGELHART: I guess what we are saying, in its simplest form -- and I think Dennis wants to add, too -- is that once carriers build facilities, cable companies or phone companies, they don't abandon them. I mean the expensive part is building the network, once it's built you keep providing the serving.

5185 The idea that you are going to somehow abandon these facilities -- in the unlikely event that you did, someone else would buy them. So this notion that where these networks are built these poor people are going to have no phone service because their carrier is going to abandon service seems to us to be highly unlikely.

5186 However, our proposal does have the belt and suspenders in there that there is an alternate facilities based provider so in that extraordinarily unlikely event they would have someone else.

5187 But as Commissioner Katz said, it's those Band "G" areas that you could actually imagine somebody walking away from, those areas where you need a bush plane to land there and fix the equipment.

5188 This idea that in the sort of more rural areas outside of Woodstock someone is going to walk away from phone service is preposterous. For the most part the carriers are providing IPTV and Internet and wireless in a bundle and they are going to just abandon these customers? It seems fanciful.

5189 COMMISSIONER MOLNAR: Mr. Engelhart, though, when we are talking about the doughnut effect we are not talking about the people in Woodstock. You know, I'm sorry, I don't know that community well. If I think of communities that I know better, we are not talking about the community. The doughnut effect says the community is not high cost, in fact it's a contestable market. Outside of that community is where it is costlier to serve and there isn't competitive alternatives and there are high costs to serve.

5190 You don't believe that?

5191 MR. ENGELHART: Well, as the TELUS panel explained this morning, sort of 80 percent of the cost is building those initial facilities. Once a telecom network is built, the marginal costs of providing service are quite low.

5192 The way your costing regime works, in the case of Bell anyway, it assumes that those loops are rebuilt every 16 years, whereas Bell's evidence shows that they actually last about 27 years.

5193 So this idea that someone has -- I completely understand why those networks are more expensive to build, I completely understand why they needed service improvement funds or rate of return regulation to build them, but the notion that those people are going to be left without phone service seems to us to be very unlikely.

5194 COMMISSIONER MOLNAR: I'm going to maybe leave this issue because it likely will be addressed in the next phase of our hearing I expect, because I'm not sure if it's just about whether or not those customers will continue to be served, but the obligation, kind of the regulatory bargain that says for those carriers who have an obligation to serve them they should be fully compensated for that obligation.

5195 MR. ENGELHART: Yes. And what we would suggest, say a carrier was getting $6.00 a month contribution, that would go away, but they could raise their rates by $6.00 a month. So we are not saying that the carrier would be worse off, we are saying the subsidy isn't needed and the obligation to serve isn't needed.

5196 The proof of it is you have a competitive carrier in there, who didn't get a subsidy in many cases, providing service.

5197 COMMISSIONER MOLNAR: That carrier being the wireless carrier?

5198 MR. BRAZEAU: Or it could be a cable company.

5199 For example, in Thunder Bay, which is our experience, Shaw is --

5200 COMMISSIONER MOLNAR: Once again, the doughnut effect isn't about where the cable carrier is providing service, it's about where they are not.

5201 MR. BRAZEAU: Yes, but it's also about you talked about their profitability. Thunder Bay remains a very profitable CLEC, it has increased its dividend to the city of something in the neighbourhood of $50 million, it has expanded its services, it has moved out of territory, so I think they are doing very well.

5202 So they don't certainly suffer from any doughnut effect in Thunder Bay.

5203 MR. BÉLAND: If I may, just a comment on the doughnut effect. We really have a lot of trouble with it. It's clear we don't buy it and one of the reasons is, as you said, we are talking precisely about those territories around the local centre that competitors haven't gone into yet.

5204 So here you have a service provider, the incumbent, who, for all intents and purposes still has a monopoly out there, because that is how we are defining it, it's the area the competitor hasn't gone into. So you have the incumbent, still has a monopoly out there, the costs are sunk, they were paid for through a SIP or rate of return regulation a long time ago, since then they have added services, they are adding value, they are providing bundles, revenues are much higher than they were when there was just one service, and somehow they are complaining about that state of affairs.

5205 A regional monopoly where you just keep adding services and keep adding revenue and the costs are sunk. We don't buy that that is a significant burden. I think they have portrayed that as a burden to you in order to get you to sign onto things like exclusive access to subsidies for them alone, but we don't see it as a significant burden.

5206 COMMISSIONER MOLNAR: Thank you. I think your position is clear. As I said, I expect it will be discussed in later part.

5207 So I'm going to move on to paragraph 46 of your comments speaking about the small ILECs.

5208 I believe I understood that you said advancing the switch replacement would benefit the SILECs.

5209 Did I understand that correctly?

5210 M. MESSIER : Exact.

5211 COMMISSIONER MOLNAR: So could you just tell me what benefit that is to the SILECs?

5212 M. MESSIER : Bien, s'ils ont à moderniser leurs équipements et qu'ils vont chercher...

5213 COMMISSIONER MOLNAR: Sorry, one minute.

5214 MR. MESSIER: Yes.

--- Pause

5215 M. MESSIER : Alors, si le problème, c'est au niveau de la modernisation du commutateur pour faire en sorte qu'il soit en mesure de pouvoir importer les numéros de téléphone et donc faire face à la concurrence, je pense que plusieurs qui sont en mesure de faire ça, certains l'ont fait au cours des dernières années et ont acquis des commutateurs qui possèdent ces fonctionnalités-là pour être en mesure de faire face à la portabilité éventuellement, puisqu'ils le font dans des territoires où ils ont des affiliés qui sont des SILEC.

5216 Alors, dans ces conditions-là, je veux dire, ça va être bénéfique pour eux puisque la concurrence va pouvoir se faire dans les deux sens au niveau de la portabilité des numéros.

5217 COMMISSIONER MOLNAR: It doesn't seem like a very big benefit to be very honest.

5218 M. MESSIER : Ce qu'on peut rajouter aussi, notre point était celui-là principalement qu'on visait, mais si cela leur permet d'offrir aussi d'autres services, d'autres features qui leur permettent d'aller chercher d'autres revenus complémentaires, c'est aussi un bénéfice qu'ils vont acquérir, des fonctionnalités de call forward ou... qu'ils peuvent se mettre.

5219 COMMISSIONER MOLNAR: Okay.

5220 My final question is just one of I want to make sure I truly understand your position and you have spoken about this with others.

5221 If I understand, and I believe it's page 10 on your presentation, where you say that where there is a wireless facility-based service provider we would remove the obligation to serve the local service subsidies and the basic service objective.

5222 Subsidies would be removed when there is one wireless provider, but under our forbearance requirements today, which as you know were defined by the government, rate regulation would not be lifted until there are two providers.

5223 MR. BÉLAND: That's correct.

5224 COMMISSIONER MOLNAR: So that is your position, if one provider is in the market remove rate regulation once there is two?

5225 MR. BÉLAND: We are not proposing a change to the forbearance criteria because, first of all, I don't think it's in the scope of this proceeding.

5226 You have accurately stated the position on the basic service objective and the obligation to serve and the subsidy.

5227 COMMISSIONER MOLNAR: Okay. Thank you.

5228 Those are my questions.

5229 THE CHAIRPERSON: Thank you.

5230 Suzanne...?

5231 CONSEILLÈRE LAMARRE : Merci, Monsieur le Président.

5232 Madame Molnar a fait presque le tour de toutes mes questions, mais il reste quelques-unes.

5233 Ma première question, parce que moi, je vais faire ça dans l'ordre inverse de votre présentation, ne porte pas nécessairement sur le paragraphe 66 mais découle du paragraphe 66.

5234 Je voudrais bien comprendre quelque chose. Lorsqu'un concurrent entre ou déploie, commence à déployer dans un échange quelconque, est-ce que, automatiquement, il devient disponible à tous les clients qui sont dans cet échange-là, normalement?

5235 M. BÉLAND : Quand un concurrent se présente pour la première fois dans une circonscription?

5236 CONSEILLÈRE LAMARRE : Oui.

5237 M. BÉLAND : Normalement, non.

5238 CONSEILLÈRE LAMARRE : Normalement, non. O.K.

5239 Donc, à ce moment-là, ce n'est pas parce qu'un concurrent est dans une circonscription que la concurrence existe dans toute la circonscription?

5240 M. BÉLAND : Il faudrait y avoir un test.

5241 CONSEILLÈRE LAMARRE : Non, non, non, non. Moi, je parle en termes de chiffres absolus. O.K. Laissez-faire le test là. Cent pour cent. Moi, mon test est 100 pour cent.

5242 Ce n'est pas parce qu'un concurrent est disponible dans une circonscription que la concurrence est disponible pour tous les clients de cette circonscription-là. J'ai bien compris?

5243 M. BÉLAND : C'est vrai, oui.

5244 CONSEILLÈRE LAMARRE : Bon. Merci. Comme ça, ça va aller mieux pour mes autres questions. Ça va être plus rapide.

5245 Maintenant, au paragraphe 41, vous mettez de l'avant le scénario, disons, très très pessimiste là, à l'effet qu'une titulaire pourrait être obligée de céder son entreprise, et ce que monsieur Engelhart disait, c'est, écoutez, il n'y a personne là qui va perdre le service du jour au lendemain, il va avoir quelqu'un là pour reprendre l'entreprise, et normalement, ce quelqu'un-là serait, évidemment, le concurrent qui aura si bien travaillé qu'il sera allé chercher presque tous les clients.

5246 Mais dites-moi une chose : À partir du moment où c'est ce qui arrive, il n'y en a plus de concurrence?

5247 M. BÉLAND : Mais dans les faits, vous avez dit que c'est probablement le concurrent qui achèterait les actifs...

5248 CONSEILLÈRE LAMARRE : De la titulaire.

5249 M. BÉLAND : Pas du tout.

5250 CONSEILLÈRE LAMARRE : Non?

5251 M. BÉLAND : Ça serait peut-être une possibilité, mais plus probable, ça serait, par exemple, une autre compagnie titulaire.

5252 CONSEILLÈRE LAMARRE : Un autre concurrent ou une autre titulaire.

5253 M. BÉLAND : Disons que SILEC X fait faillite, n'est pas capable de continuer, c'est tout à fait possible qu'un Télébec ou un Sogetel ou un Bell Aliant ou même un EastLink qui a acheté une couple de SILEC en Ontario, viendrait acheter les actifs.

5254 Tout ce qu'on dit, nous, c'est qu'il y a un marché évident pour ces actifs en regardant les transactions récentes.

5255 CONSEILLÈRE LAMARRE : O.K. Donc, dans le cadre là de ce que vous expliquez aux paragraphes 41 et 42, vous, ce que vous envisagez, ce sont tous ces cas de figures là, que ça puisse être un concurrent qui est déjà là, un concurrent qui est ailleurs ou une titulaire qui est ailleurs, qui puissent reprendre cette entreprise-là?

5256 M. BÉLAND : Je pense que j'irais même plus loin à dire que c'est le plus probable.

5257 CONSEILLÈRE LAMARRE : C'est le plus probable.

5258 M. BÉLAND : C'est exactement... ce n'est pas le concurrent qui achète ses actifs, c'est quelqu'un d'autre.

5259 CONSEILLÈRE LAMARRE : Très bien.

5260 Maintenant, au paragraphe 40...

5261 M. BÉLAND : Je pense que Jean voulait ajouter...

5262 CONSEILLÈRE LAMARRE : Oui. Monsieur Brazeau.

5263 M. BRAZEAU : Seulement un point à ajouter. C'est que l'hypothèse demeure que le marché demeure concurrentiel. Donc, si c'est le concurrent qui achète la compagnie titulaire, donc, ce n'est plus un marché concurrentiel, et donc, la déréglementation ne va plus dans ces conditions-là.

5264 CONSEILLÈRE LAMARRE : Donc, il faudrait, dans ce cas de figure là, re-réglementer le marché; c'est ce que vous dites?

5265 M. BRAZEAU : Oui.

5266 CONSEILLÈRE LAMARRE : Maintenant, au paragraphe 40 de votre présentation, il y a deux affirmations qui me semblent redondantes. Vous me direz si je me trompe ou pas.

5267 Au milieu du paragraphe lorsque vous parlez des petites titulaires, vous dites :

" Elles se sont étendues au-delà... "

5268 Et là, je saute quelques mots.

" ...de leur territoire. "

5269 Et à la fin, vous dites :

" Plusieurs sont également devenus des concurrents dans les collectivités adjacentes pour ces services. "

5270 Moi, je lis ces deux phrases-là, et ça veut dire la même chose pour moi.

5271 M. MESSIER : Exactement.

5272 CONSEILLÈRE LAMARRE : Bon. Alors, " elles " et " plusieurs ", ce n'est pas la même chose. " Elles ", ça veut dire toutes, et " plusieurs ", ça veut dire pas toutes.

5273 Lorsque vous dites " plusieurs ", pouvez-vous me dire précisément à combien vous faites référence qui sont devenues concurrentes dans des marchés adjacents ou autres?

5274 M. MESSIER : Je vais prendre l'exemple de...

5275 CONSEILLÈRE LAMARRE : Non, je ne veux pas un exemple. Je veux un nombre précis. Quand vous dites " plusieurs ", c'est-à-dire combien? Il y a 36 petites titulaires là, si je compte bien, au Canada. Alors, sur 36, combien ont fait ça?

5276 M. MESSIER : Je n'ai pas le chiffre exact.

5277 M. BÉLAND : Je crois que monsieur Watt a étudié la question.

5278 CONSEILLÈRE LAMARRE : Monsieur Watt, voulez-vous nous la donner?

5279 MR. WATT: I don't have an exact number out of the 36. I know, in the sort of Rogers' territory, that Bruce Municipal Telephone Company has become a CLEC out of territory, Execulink is a CLEC out of territory...

5280 CONSEILLÈRE LAMARRE : Donc, écoutez, pouvez-vous vérifier et préciser cette affirmation-là, s'il vous plaît?

5281 M. MESSIER : Je vais revenir avec ça.

5282 CONSEILLÈRE LAMARRE : Merci.

5283 Je vais revenir une dernière fois sur la question de la fonctionnalité d'exportation.

5284 MR. WATT: Excuse me, I actually do have the number. It's 17.

5285 CONSEILLÈRE LAMARRE : Dix-sept sur 36?

5286 MR. WATT: That are CLECs.

5287 COMMISSIONER LAMARRE: That are CLECs, okay.

5288 MR. WATT: Seventeen out of the 36.

5289 CONSEILLÈRE LAMARRE : Donc, vous pourrez peut-être nous fournir les noms avec les chiffres.

5290 MR. WATT: The actual names, certainly.

UNDERTAKING

5291 CONSEILLÈRE LAMARRE : Maintenant, je vais revenir rapidement sur la question de la fonctionnalité d'exportation.

5292 Je pense, Monsieur Messier -- vous me corrigerez si je me trompe -- vous avoir entendu admettre que simplement prévoir l'exportation du numéro, ça empêcherait la titulaire de rapatrier ce numéro-là par la suite. Est-ce que j'ai bien compris?

5293 M. MESSIER : Mais ça ne l'empêche pas. Ça seulement établit le portal. Il faut qu'elle soit équipée pour être capable de récupérer ce numéro-là.

5294 CONSEILLÈRE LAMARRE : O.K.

5295 M. MESSIER : Oui.

5296 CONSEILLÈRE LAMARRE : O.K. Donc, de permettre à un concurrent d'obtenir une numéro de téléphone qui existe déjà, c'est une chose, mais pour vraiment avoir un marché concurrentiel, il faut permettre aussi le déplacement dans le sens inverse parce que le client pourrait être déçu de son nouveau fournisseur?

5297 M. MESSIER : Absolument, et je pense qu'il y a certaines petites entreprises de téléphone titulaires qui l'ont bien compris et qui le disent, qu'ils voudraient l'implanter dans les deux sens.

5298 Ce que nous disons, c'est que la concurrence doit pouvoir s'établir le plus rapidement possible. Donc, si pour certaines petites entreprises titulaires, c'est un coût qui est trop majeur, qu'ils ne veulent pas, ils auraient... au minimum, ils doivent au moins laisser aller le numéro s'ils ne veulent pas, eux, implanter ça. Ça sera leur choix d'implanter ou non...

5299 CONSEILLÈRE LAMARRE : Et de ne pas redevenir un concurrent vis-à-vis le nouveau fournisseur qui s'est établi?

5300 M. MESSIER : Exactement.

5301 CONSEILLÈRE LAMARRE : O.K.

5302 M. MESSIER : Est-ce que c'est une option viable, c'est une autre question, mais ça, c'est leur choix.

5303 CONSEILLÈRE LAMARRE : O.K. Donc, je comprends bien votre position.

5304 Maintenant, je vais vous demander de réfléchir à quelque chose pour votre réplique finale, vos commentaires à la fin de l'audience.

5305 Vous l'avez dit deux fois plutôt qu'une dans votre présentation, et les deux fois en anglais, qu'à votre sens, l'obligation de servir, ce n'était pas quelque chose de si onéreux que ça comme obligation.

5306 Maintenant, moi, je ne peux pas m'empêcher de constater qu'il n'y a personne qui se bouscule aux portes pour être assujetties à cette obligation de servir.

5307 Alors, j'aimerais que vous m'expliquiez comment est-ce qu'on peut réconcilier les deux. Je ne veux pas que vous le fassiez maintenant. Je veux que vous m'expliquiez comment est-ce qu'on peut, d'un côté, dire que ce n'est pas onéreux, et de l'autre côté, ne pas l'établir pour tout le monde.

5308 Ce sont toutes mes questions, Monsieur le Président.

5309 THE CHAIRPERSON: We are having a response time, as you know - this question, undoubtedly, will come up.

5310 Marc, the last question...

5311 COMMISSIONER PATRONE: And I only have one question, Mr. Chair, thank you.

5312 Good afternoon. You addressed earlier, in communities where satellite is the only viable option, the idea of having some kind of subsidy to cover the customer's costs, for those wishing to access such services, and I don't want to put words in your mouth, but I think you suggested that we shouldn't prejudge the degree to which this is going to be a problem going forward, and that we should, essentially, have the targets and let the market play itself out over the course of five years, and then see at the end of that period.

5313 I am wondering if it isn't kind of a safe assumption that these types of costs are going to be onerous, especially in certain areas of the country, and I am speaking of, maybe, the far north, and that by putting it off to sort of monitor the situation, we are essentially delaying the inevitable, which is to look at covering some of those costs in some manner or another.

5314 Could you address that for me?

5315 MR. BÉLAND: I don't think we are necessarily delaying the inevitable, because there are a couple of things, in particular, that could happen in the meantime. One of the things that could happen is, simply, consumer pressure on satellite providers to do something about these costs, and to be creative about them. Just as wireless companies chose, effectively, to go with subsidized handsets, often linked to term contracts, you could imagine that sort of idea permeating the satellite provider space.

5316 The other sort of thing you could see is some targeted local government initiatives in that regard. This is something that we haven't talked much about on the panel today, but our view is that there is an awful lot of creativity and innovation going on even at the level of local governments, looking at what their needs are, looking at what the most prominent barriers are for their local populations, and deciding what they want to support with a targeted initiative.

5317 So I could see some local governments saying that's where they think they can get the most bang for their buck, doing something to help with the acquisition of those upfront installation fees.

5318 So you could see a fair bit of evolution over five years on that front.

5319 COMMISSIONER PATRONE: But you see a scenario where companies would be offering free setup, or a nominal fee for setup, in exchange for a term, a two-year contract or something like that.

5320 MR. BÉLAND: We can't speak for them because -- and other people at this table are satellite providers, but it would seem to me to be one of a series of possible courses of action that might do their business very well.

5321 COMMISSIONER PATRONE: Okay. Thank you very much -- unless you wanted to --

5322 Did you want to address that as well?

5323 MR. ENGELHART: Just a very small point, Commissioner. There is a wireless technology that Ericsson is deploying in Australia, in furtherance of their broadband proposal, called the boomer cell. Cell sites can only go 25 kilometres or so. These boomer cells can go 200 kilometres. Ericsson is quite excited about them.

5324 So there is still some room, even for the areas that can only be served by satellite -- in Australia, they are serving some of those with wireless.

5325 That's another reason why we see various technological improvements coming that are happening so fast that it's hard to judge just where it's all going to settle down.

5326 COMMISSIONER PATRONE: Thank you.

5327 THE CHAIRPERSON: Thank you.

5328 Before I let you go, Mr. Messier, we talked about out-porting this morning when we had TELUS here. They said that there are lesser cost options in total local number portability, and they talked about something which they called forwarding.

5329 Is that the same thing, or is that another --

5330 M. MESSIER : Non, non. C'est tout à fait différent.

5331 THE CHAIRPERSON: So there are various -- because this out-porting seems to me to be fairly unattractive for a SILEC, because they can out-port, but they lose the customer. If the customer wants to come back, they can't reintegrate that number into theirs.

5332 What is this forwarding that TELUS was talking about?

5333 M. MESSIER : Ce que je crois comprendre de la solution de TELUS, c'est une solution qui est vraiment implantée sur une base presque d'exception dans des endroits où les commutateurs ne sont pas du tout équipés pour pouvoir acheminer, faire suivre l'appel.

5334 Donc, ce sont des solutions qui sont intérimaires en attendant une modernisation du réseau. C'est mam compréhension.

5335 MR. BRAZEAU: Just to add, it's just fancy call-forwarding. That's what they are proposing.

5336 And the challenge that we would have with that proposal is that you don't really gain full control of the customer. We have experienced that in the past, and that is always a huge challenge, when you are acquiring a customer, when you still have your competitor controlling that number.

5337 So that would be one of the challenges that we would have.

5338 THE CHAIRPERSON: Okay. Thank you very much.

5339 Mr. Engelhart, bear in mind that in your written reply the two things you undertook to do were to give us -- approaching a number for the satellite font, if there is such an idea, and secondly, if there is some suggestion of what would be the logical minimum upload for 5 megabytes and standard download.

5340 MR. ENGELHART: Yes, sir. Thank you.

5341 THE CHAIRPERSON: Thank you. That's it for today.

5342 Madam Secretary, when do we resume tomorrow?

5343 THE SECRETARY: We resume at 9:00 a.m. tomorrow, Mr. Chairman.

--- Whereupon the hearing adjourned at 1643, to resume on Tuesday, November 2, 2010 at 0900

REPORTERS

____________________ ____________________

Johanne Morin Jean Desaulniers

____________________ ____________________

Monique Mahoney Sue Villeneuve

Date modified:

2010-11-01