ARCHIVED - Transcript, Hearing 3 November 2010
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Volume 6, 3 November 2010
TRANSCRIPT OF PROCEEDINGS BEFORE
THE CANADIAN RADIO-TELEVISION AND
Obligation to serve and other matters (Formerly Proceeding to review access to basic telecommunication services and other matters)
140 Promenade du Portage
In order to meet the requirements of the Official Languages
Act, transcripts of proceedings before the Commission will be
bilingual as to their covers, the listing of the CRTC members
and staff attending the public hearings, and the Table of
However, the aforementioned publication is the recorded
verbatim transcript and, as such, is taped and transcribed in
either of the official languages, depending on the language
spoken by the participant at the public hearing.
Canadian Radio-television and
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
Lynda Roy Secretary
Alastair Stewart Legal Counsel
John Macri Hearing Manager
140 Promenade du Portage
November 3, 2010
- iv -
TABLE OF CONTENTS
PAGE / PARA
ORAL REBUTTAL BY:
MRC Papineau 1148 / 6511
Ontario Telecommunications Association (OTA) and TBayTel 1178 / 6655
Saskatchewan Telecommunications (SaskTel) 1229 / 6942
Bragg Communications Inc. 1273 / 7189
MTS Allstream 1308 / 7397
Barrett Xplore Inc. and Barrett Broadband Networks Inc. 1353 / 7650
- v -
Undertakings can be found at the following paragraphs:
7101, 7571, 7994, 7997, and 8131
ERRATA / ADDENDA
"it would still have the capital"
"it would still have a capital"
"Communications' two businesses."
"communications to businesses."
"transcript to see if we can clarify it more in our written --
UNDERTAKING / ENGAGEMENT"
"transcript to see if we can clarify it more in our written argument."
"here and say, "Just burn the big guys,"
"here and say, "Just burden the big guys,"
--- Upon commencing on Wednesday, November 3, 2010 at 0905
6493 THE SECRETARY : Order, please.
6494 A l'ordre, s'il vous plaît.
6495 THE CHAIRPERSON: Good morning.
6497 This is the reply phase and let me just go over the ground rules for those of you who haven't been here before. We are going to do the same as we did in the high-speed access case, which I think everybody found relatively useful.
6498 So we are going in reverse order of the presenters. We ask you only not to rehash your argument but only to deal with points that came up during the hearing that you disagree with or you want to clarify or elaborate on.
6499 We will then ask some questions of the questioner and we may then -- let's say for argument's sake Monsieur Samson, who is our next one, says something about Bell Aliant, we may say, Bell Aliant, what do you say to that and ask -- and they would ask him, would you please stick to the point in issue, you will have your turn.
6500 Secondly, if somebody else has something they want to add on that very point, put up your hand and we will say, ah, Rogers, what do you have to say to that? Okay?
6501 So it worked relatively well and it is sort of a mixture between normal cross-examination and having a policy discussion and I think it is very useful because that is exactly what we are doing. We want to hear your point of view but we are also in the process of framing new policy. So this sort of group interaction but limited and steered on the issues we find very useful.
6502 So on that basis, let's proceed.
6503 Madame la Secrétaire, quelque chose à ajouter?
6504 LA SECRÉTAIRE : Oui. Merci, Monsieur le Président.
6505 I would just like before we start to -- I will ask you to please turn off your cell phones and BlackBerrys. It is really important this morning because everybody is going to be using the microphones and it is causing interference.
6506 I would also like -- for technical reasons and in order to facilitate the task of the court reporter and the interpreters, I would ask that you mention your name every time you will be asked to make an intervention.
6507 It is also crucial that you shut off your microphone when you are not speaking in order to avoid interference.
6508 Alors, c'est tout pour les petites notes.
6509 Nous débuterons maintenant la phase II de l'audience avec la présentation de la MRC Papineau. Alors, monsieur Samson représente la MRC ce matin.
6510 Je vous demanderais de présenter votre collègue qui est déjà arrivée -- il y a probablement deux autres de vos collègues qui vont vous joindre un peu plus tard -- et par la suite, après avoir présenté votre collègue, vous pouvez débuter votre présentation. Vous avez 15 minutes.
6511 M. SAMSON : D'accord. Merci, Madame.
6512 Monsieur le Président, Mesdames, Messieurs les Commissaires. Je voudrais vous présenter Martine Leduc, qui est directrice d'Intelligence Papineau, qui m'accompagne -- Intelligence Papineau, que nous avions présentée un peu comme organisme d'offre d'Internet haute vitesse dans la MRC de Papineau et dans la MRC des Collines -- et moi-même, Michel Samson, maire de Saint-Émile-de-Suffolk et en même temps, président du comité portant sur l'Internet haute vitesse en ruralité.
6513 Lors de ma présentation à Timmins, vous vous souviendrez que je l'avais préfacée en faisant allusion à une métaphore. Je voudrais juste préciser, dans le cas de cette métaphore-là. En revenant, je me suis rendu compte que j'avais oublié ce qui lui donnait peut-être un relief différent.
6514 C'est que dans cette comparaison entre la rencontre de l'aigle et de la tortue...
6515 Je dois préciser que je suis anthropologue de formation et qu'on nous permet un plus vaste choix de métaphores que la moyenne; comme, par exemple, on ne suppose pas des métaphores pareilles chez nos amis les avocats.
6516 Et cette métaphore-là nous vient d'une légende N'Zipri(ph) de Côte-d'Ivoire où on décrit les liens entre la gouvernance et le quotidien. C'est une très belle légende. Et nous, évidemment, on est du clan de la tortue dans cette légende-là.
6517 Quatre points au droit de réplique :
6518 - Le premier, qui porte sur les argumentations qui ont été présentées par le secteur privé à date et que nous avons entendu encore lundi, d'ailleurs, lundi après-midi. (Je profitais de ce merveilleux service de diffusion simultanée que vous avez sur Internet pour les écouter);
6519 - le deuxième et le troisième, qui portent sur des remarques que vous avez faites, Monsieur le Président, à notre égard;
6520 - et le quatrième, qui porte sur un point sur lequel on aimerait insister, c'est-à-dire la présence de Télébec dans des territoires où Intelligence Papineau a été le premier à développer l'Internet haute vitesse.
6521 Vous avez copie du texte, donc ça sera probablement plus facile pour vous de suivre.
6522 Les arguments du secteur privé : remettre en question toute forme de réglementation du marché de l'Internet haute vitesse.
6523 Les porte-parole du secteur privé des télécommunications se cachent derrière des directives de politiques de 2006 selon lesquelles le message du gouvernement actuel serait à l'effet de réclamer moins de réglementation et plus de concurrence dans le domaine. L'objectif étant, selon ces lobbies, de favoriser le secteur privé et les forces du marché dans des environnements que l'on souhaite de moins en moins réglementés.
6524 Je pense que c'est ressorti d'à peu près toutes les présentations, et particulièrement de celle que j'entendais lundi après-midi, où on revient constamment avec ce type d'argumentaire.
6525 Les mêmes arguments qui prévalaient lorsqu'on voulut convaincre le CRTC de laisser tomber l'approche réglementaire en téléphonie autant qu'au niveau des services de cellulaires nous sont recyclés et resservis aujourd'hui pour faire croire que la concurrence et les forces du marché jouent autant, sinon plus qu'avant, dans le cas d'Internet haute vitesse, même dans les zones rurales du pays.
6526 On nous dit que 98 pour cent des foyers canadiens auraient un accès à Internet et à divers services de téléphonie et que plusieurs milliards de dollars auraient été investis par le secteur privé des télécommunications à cet effet. Pris globalement, cela pourrait paraître plausible, mais lorsqu'on examine point par point les différents volets de cette statistique plutôt ronflante on s'aperçoit qu'elle fausse la perspective du service Internet haute vitesse en ruralité lorsqu'on la noie avec les données urbaines et périurbaines.
6527 Au Québec, par exemple, Internet ne rejoint au mieux que 85 pour cent des foyers et, la plupart du temps, avec des services de mauvaise qualité en ruralité, particulièrement en comparaison avec les milieux urbains. J'ai fait cette démonstration-là lors de la présentation et nous la faisons dans le mémoire.
6528 En bref, on surinvestit dans les milieux urbains et on ne fait que le strict minimum dans les zones rurales. Le secteur privé s'entête à proposer une vision de marché à l'encontre de ce qui est en réalité un besoin de société. (Je faisais allusion d'ailleurs à un outil de société.)
6529 La triste situation des milieux ruraux est littéralement enterrée dans les statistiques et les exemples fournis par les regroupements de télécommunicateurs et ces statistiques ne résistent pas aux données du terrain quant à la disponibilité d'un service Internet haute vitesse de qualité à prix raisonnable en ruralité. Il n'est tout simplement pas au rendez-vous.
6530 Il n'est tout simplement pas, en tous les cas, au rendez-vous dans notre MRC - c'est très clair -- pas plus, d'ailleurs, que dans la MRC voisine qu'Intelligence Papineau dessert actuellement. Je parle de la MRC des Collines, qui était représentée par son préfet, Robert Bussières.
6531 Le discours usuel du secteur privé, comme une itération publicitaire -- ça me faisait penser un peu aux mouettes dans le film Nemo -- répète constamment les expressions " libre concurrence ", " marché " et " force du marché ", " déréglementation ", alors qu'aujourd'hui nous parlons non pas d'un marché, mais d'un outil de société (comme je faisais allusion) au même titre que l'électricité, les transports publics, les médias publics et la téléphonie.
6532 Malheureusement, cet outil de société manque à l'appel dans le développement des régions rurales et rien ne peut pourtant le remplacer quant à son impact. Le réseau routier de la MRC de Papineau sera bientôt renforcé d'une autoroute (l'autoroute 50, qui la traversera d'est en ouest). Quand aurons-nous une véritable autoroute de l'information pour l'ensemble de notre MRC?
6533 Maintenant, une question que le président von Finckenstein nous avait posée sur la norme de vitesse minimale et l'échéance de disponibilité... Nous aimerions préciser notre réponse là-dessus; nous avons eu le temps de la développer un peu.
6534 Et c'est revenu, je pense, dans le questionnement que vous avez proposé aux télécommunicateurs, quant à cette norme minimale -- en tout cas, je l'ai entendu, moi, à quelques reprises.
6535 Nous répondons : 5 mégabits/seconde; et nous répondons 5 mégabits/seconde avec un peu de nervosité, parce que dès qu'on pose une norme minimale, c'est comme si on mettait un plancher que les gens s'empresseront de satisfaire, mais pour ne pas aller plus haut ou plus loin. Donc, c'est avec cette réserve que nous la mentionnons.
6536 Les applications actuelles et celles qui seront offertes dans les mois et les années à venir impliquent au moins cette vitesse de transfert pour être efficaces. J'y faisais allusion; je le rementionne.
6537 Cette vitesse est déjà considérée comme la norme minimale implicite dans les grandes zones urbaines et est en voie d'être dépassée à mesure que l'offre s'améliore par les effets de la concurrence, une concurrence qui ne joue pas à l'avantage des zones rurales.
6538 Les milieux urbains profitent déjà, au moment où l'on se parle, de vitesse de plus de 10 mégabits/seconde et allant jusqu'à 100 mégabits/seconde, dépendamment des types de branchement, avec des offres forfaitaires sans commune mesure avec ce qui est offert dans les zones rurales.
6539 Placer la barre trop basse à cette étape-ci du développement du service Internet haute vitesse ne serait qu'une tentation de médiocrité pour la plupart des fournisseurs traditionnels qui s'en contenteraient dans les zones moins densément peuplées en indiquant qu'ils satisfont aux exigences minimales.
6540 Le CRTC doit aussi prescrire des niveaux moyens de latence, ne dépassant pas 50 millisecondes, plutôt que celles qu'on accepte actuellement dans les zones rurales et qui sont minimalement de 100 millisecondes et souvent beaucoup (inaudible). J'ai vu des latences allant jusqu'à 3.5 secondes dans un régime normal d'utilisation.
6541 Alors, vous pouvez vous... 3.5... Oui, c'est ça : 3.5 secondes. Vous pouvez vous imaginer ce que ça donne au niveau des branchements sur des... ou à partir de logiciels relativement sophistiqués.
6542 Vous mentionniez aussi... Vous demandiez quel serait le délai auquel on pourrait s'attendre. Évidemment. Vous m'aviez anticipé là-dessus. Vous avez dit : Je ne m'attends pas à une réponse nous disant " aujourd'hui ". Vous m'aviez devancé; j'allais vous dire " hier ".
6543 Donc, en 18 mois, là où on réclame cinq ans... J'ai bien entendu " cinq ans " dans les présentations du secteur privé -- je l'ai entendu encore lundi après-midi.
6544 Et je vais vous expliquer un peu pourquoi on mentionne 18 mois. Quelle que soit l'approche technologique et le support technique retenu; qu'on parle d'ADSL, qu'on parle de micro-ondes, norme WiMAX, norme LTE, qu'on parle même de rendement en distribution satellitaire, les vitesses de 5 mégabits/seconde sont parfaitement réalisables et ne supposent pas d'avancée technique qui ne soit pas présentement disponible aux télécommunicateurs.
6545 On n'est pas en innovation, on est dans du matériel connu, on est dans des équipements connus. On est dans des technologies connues qui sont déjà utilisées depuis un certain temps avec beaucoup de succès là où on les utilise.
6546 Les recherches actuelles quant au transport grand volume haute vitesse d'information numérique font état de vitesse de un gigabit/seconde en point à point, sans fil, sur des distances de 100 kilomètres. Et pour des abonnements domestiques de 25 mégabits/seconde dans les réseaux FTTN (Fiber-to-the-Node) et de 100 mégabits/seconde dans les réseaux FTTH (Fiber-to-the-Home) déjà en place. La vitesse de 5 mégabits/seconde est donc bien en deçà de ces nouveaux territoires technologiques de l'avant-garde.
6547 Dans les zones de faible densité de population que sont les environnements ruraux et, tel que proposé par les porte-parole des télécommunicateurs, un délai supplémentaire d'ajustement de cinq ans semble requis -- je dis " est ", mais c'est " semble " -- semble requis pour qu'ils mettent le service haute vitesse rural à niveau, malgré le niveau actuel lamentable de service, attente supplémentaire qui impose une lourde et inacceptable attente -- ou hypothèque, si vous voulez -- et un retard cumulé ridicule à des régions déjà en sérieuse difficulté économique.
6548 Vous aviez aussi fait allusion à l'offre qui a été proposée par Barrett Xplornet Barrett Communications, c'est-à-dire une couverture nationale satellitaire. Encore là, le retour aidant, nous avons eu le temps d'y réfléchir plus, de revoir des offres qui avaient été faites à des municipalités chez nous. J'en ai apporté quelques exemples, si jamais vous vouliez en prendre connaissance. Vous les avez peut-être déjà... en tous les cas.
6549 Les implantations satellitaires d'Internet haute vitesse sont beaucoup plus coûteuses (ça, je pense que ça a été reconnu par tout le monde, autant par vous que par le secteur privé) que les implantations terrestres dans un ordre de grandeur souvent de 10 à 1 par unité térabit de transport de données...
6550 Et j'utilise une unité qui, finalement... le térabit est déjà même maintenant en voie d'être non pas dépassé, mais sûrement facilement atteint au niveau des grandes charges de transport.
6551 Les satellites sont fortement vulnérables aux diverses perturbations ioniques, les plus importantes et destructrices étant les tempêtes solaires sur lesquelles il semblerait que nous n'ayons qu'un contrôle plutôt restreint, y inclus le CRTC. (Je ne pense pas que vous ayez là-dessus beaucoup de choix.)
6552 Leur fiabilité est donc limitée, particulièrement là où il n'y a pas de service alternatif en cas de panne majeure. Si on devait se fier à un réseau satellitaire, vous vous souviendrez, il y a cinq ans, quand il y a eu une tempête solaire majeure, on a même perdu pendant presque deux semaines un satellite de télévision, un satellite d'importance, un des... Anik, je crois, qui est tombé en panne, en fait, qui a été complètement bousillé par cette tempête solaire-là et qu'on a dû remplacer éventuellement.
6553 Les liaisons satellitaires sont vulnérables aux mauvaises conditions climatiques, devenant fortement erratiques durant les tempêtes de neige ou de verglas, pour ne citer que ces conditions défavorables. Parmi les quatre infrastructures de transport de signal filaire, optique, micro-ondes, terrestre ou satellite l'industrie reconnaît elle-même que la plus fragile reste l'infrastructure satellitaire au plan du coût, de la fiabilité et de l'efficacité.
6554 Xplornet, dans les territoires où on la retrouve -- je prends entre autres l'exemple de l'Est ontarien où on a un territoire couvert par Xplornet en distribution WiMAX -- n'a pas fait la preuve que ses réseaux satellitaires et terrestres micro-ondes sont gérés à l'avantage des utilisateurs et en fonction du respect d'une norme de débit constant d'au moins 5 mégabits sans compression. Les pratiques de " throttling ", c'est-à-dire de compression, ont été notées par la plupart des utilisateurs de ces réseaux-là dans le cas du service offert par Xplornet.
6555 Les coûts initiaux d'installation ainsi que d'abonnement annuel des services satellitaires ne peuvent se comparer avec ceux des réseaux filaires ou micro-ondes actuels. Aucune garantie sérieuse de qualité de service et de stabilité des coûts n'accompagne cette proposition un peu magique et quelque peu aérienne. Dans les meilleures circonstances, les régions rurales en verraient les effets au plus tôt dans un an, et possiblement plus, compte tenu des nombreux retards dans ces opérations sophistiquées de mise en orbite d'un satellite. Le satellite n'est actuellement pas au-dessus du pays, à ma connaissance.
6556 Si la mise en orbite satellitaire devait échouer -- ce qui reste toujours une possibilité avec ces jouets de haute technologie -- les régions mal desservies et susceptibles d'être la clientèle privilégiée de pareille couverture se retrouveraient sans option de rechange, sinon que d'attendre à nouveau quelques années de plus.
6557 Et, mon dernier point. Je reviens à la présence de Télébec dans nos territoires, présence qui est à la fois soit souhaitable, soit non pas répréhensible mais difficile à porter.
6558 Là où Intelligence Papineau s'est implantée pour offrir l'Internet haute vitesse dans des zones sans service d'Internet haute vitesse, le fournisseur Télébec intervient maintenant en offrant un service Internet ADSL à forfait incluant téléphonie et interurbains dans des secteurs de concentration villageoise, laissant les secteurs secondaires sans service ou avec un service de moindre qualité, tant au niveau des vitesses qu'on observe -- et j'ai des statistiques pour le prouver -- des vitesses non pas de la haute vitesse, mais des vitesses intermédiaires. On parle de 500 kilobits/seconde, on parle de 250 kilobits/secondes; ça fluctue.
6559 Et la solution la plus misérable, c'est-à-dire celle du branchement commuté à 56 kilobits/seconde, qu'on retrouve encore très fréquemment un peu partout sur le territoire, là où il y a une distribution filaire du service.
6560 Si ces concurrents, que nous acceptons... nous l'avons dit, nous le mentionnons, nous le répétons. Si ces concurrents souhaitent intervenir en concurrence et concurrencer Intelligence Papineau là où cet organisme fut le premier à offrir l'Internet haute vitesse dans des secteurs sans ce service, nous insistons pour que ces concurrents soient obligés d'offrir le service à l'échelle du territoire visé et non seulement dans les noyaux villageois. Je vous donne comme exemple Montpellier, Saint-Émile, Val-des-Bois et Ripon.
6561 Ça conclut ma présentation sur les points que vous aviez soulevés et sur les remarques que nous voulions faire. Le reste, comme vous le comprenez très bien, se retrouve dans le mémoire et dans la présentation que nous avons faite à Timmins.
6562 Je vous remercie de votre écoute.
6563 LE PRÉSIDENT : Merci.
6564 Quand vous parlez de la vitesse de 5 mégabits/seconde, c'est évidemment à télécharger, mais " down "... " down ". Mais les " uploads " -- je crois qu'on dit en français téléverser, quand on parle des " uploads ".
6565 Est-ce que vous avez une vitesse minimale pour ça aussi?
6566 M. SAMSON : Un mégabit.
6567 LE PRÉSIDENT : Un...?
6568 M. SAMSON : Au moins un mégabit/seconde.
6569 En général, ce n'est pas nécessairement au niveau du " upload ", c'est à dire du téléchargement en amont où la demande se fait le plus sentir. C'est très souvent au niveau du téléchargement en aval, c'est à dire le " download ". Mais ça serait un mégabit/seconde, on peut dire, au minimum.
6570 LE PRÉSIDENT : Vous parlez de latence et vous dites que vous avez dans le secteur zones rurales des latences de 100 millisecondes et vous, personnellement, avez parlé de 3 millisecondes de latence?
6571 M. SAMSON : Oui... oui.
6572 LE PRÉSIDENT : Vous avez mesuré ça, ou...?
6573 M. SAMSON : Oui. J'en ai des exemples ici. Je peux vous les donner. Et ce sont des exemples qui ont été pris à Saint-Émile, justement, dans le cas de Télébec. J'ai ici 164 -- là, je peux vous donner des dates aussi -- 12, 10. C'est sur un réseau ADSL, une boucle qui est à peu près à un kilomètre de distance du " node ". Cent soixante-quatre, 206, 200, 208... 165, 604 millisecondes, 272 millisecondes, 210, 123. Hum! Remarquable!
6574 Ensuite de ça, je peux vous en donner quelques autres : 196, 512, 507, 137... Et ça continue comme ça.
6575 LE PRÉSIDENT : Et votre organisation, Intelligence Papineau, vous achetez le service de Télébec ou de Bell Aliant ou de...
6576 M. SAMSON : Non. Non.
6577 LE PRÉSIDENT : Non, non. Je sais que vous... mais vous n'avez pas les fils. J'imagine que vous êtes un wholesale distributor, comme on dit en anglais, que vous achetez d'une titulaire?
6578 M. SAMSON : Oui. Je vous explique comment le réseau est fait.
6579 LE PRÉSIDENT : O.K. Expliquez-moi.
6580 M. SAMSON : Dans le cas d'Intelligence Papineau, nous utilisons les fibres que la MRC de Papineau et que les commissions scolaires ont mises en place.
6581 LE PRÉSIDENT : Ah!
6582 M. SAMSON : On a un supplément de fibres. Donc, à chacun des hôtels de ville, dans le fond, autant qu'à chacune des écoles de la MRC, nous avons des sorties, des points de sortie. Et c'est à partir de ces points de sortie-là que nous faisons la distribution. C'est ramassé, si vous voulez, dans un réseau principal qui passe par le fournisseur Picanoc. Et éventuellement, ça passe par Vidéotron.
6583 Donc, notre réseau n'a rien à voir avec Télébec. Nous réussissons à obtenir des latences de -- j'ai vérifié encore dernièrement -- 80 millisecondes, 100 millisecondes. Des fois c'est plus que ça, je l'avoue honnêtement, mais c'est dans ces registres-là.
6584 LE PRÉSIDENT : O.K.
6585 Madame Lamarre?
6586 CONSEILLÈRE LAMARRE : Merci, Monsieur le Président.
6587 Monsieur Samson, étant donné que c'est la phase de réfutation, je vais me permettre de mettre à l'épreuve certaines de vos positions, principalement celle à l'effet que vous devriez obtenir en milieu rural exactement ce qui se fait en milieu urbain et à un coût semblable, compte tenu que c'est un outil de société -- et ça, je ne le conteste pas du tout.
6588 Je ne conteste pas du tout non plus que ça serait un idéal à atteindre, qu'on obtienne les mêmes services aux mêmes coûts avec la même qualité à la grandeur du pays.
6589 Seulement, pour étayer ça, vous faites référence au fait que c'est au même titre que l'électricité, les transports publics, la téléphonie et les médias publics. Vous avez omis de parler des services d'égouts et d'aqueduc.
6590 Et moi, je ne peux pas m'empêcher de le soulever, parce que dans un cas rural, à Saint-Émile ou ailleurs, normalement, on va avoir le service d'aqueduc dans le village, mais à l'extérieur du village on utilise une autre technologie pour obtenir son eau potable et ses égouts. Alors pourquoi est-ce que dans le cas d'Internet on ne pourrait pas accepter qu'effectivement, il y a différentes technologies qui doivent être utilisées? Il y en a peut-être qui ne sont pas aussi intéressantes que ce qui est disponible dans le noyau du village à l'extérieur du village, sans que ça soit pour autant un désavantage indu.
6591 M. SAMSON : Vous ne retrouverez pas, ni dans le mémoire ni dans nos présentations, de restriction à l'égard de ce que vous soulevez. Pour nous, toutes les technologies sont bonnes dans la mesure où elles donnent les résultats qu'on souhaite. Il n'y a pas de restriction à cet égard-là.
6592 Si je pose des restrictions quant à l'utilisation du satellite, c'est tout simplement pour faire noter que ce n'est pas nécessairement la meilleure technologie et que ça ne devrait peut-être pas être la seule. C'est plus dans cet esprit-là.
6593 Mais pour nous, j'y reviens, on ne voit pas de restriction particulière et on peut très bien être desservi par autant des abonnements filaires que des abonnements micro-ondes que du service satellitaire. Dans le fond, plus la brochette de disponibilité est grande, mieux c'est.
6594 Encore là, j'insiste -- nous l'avons mentionné dans le rapport, dans le mémoire; nous l'avions mentionné aussi à Timmins -- nous ne sommes pas contre la concurrence. Nous la souhaitons, mais nous la souhaitons sur un level playing field. Nous aimerions que ça soit plus dans cet esprit-là qu'elle se fasse. Et si l'offre peut être multiple, tant mieux, c'est nous qui allons en profiter au bout du compte.
6595 CONSEILLÈRE LAMARRE : Donc, au fond, vous êtes d'accord qu'on puisse avoir des disponibilités et technologies qui, sans être identiques, soient quand même être comparables et qu'il y ait quand même un seuil minimal de qualité au niveau du service?
6596 M. SAMSON : Entre autres.
6597 CONSEILLÈRE LAMARRE : Et vous avez raison, on n'a aucun contrôle sur les tempêtes solaires.
6598 CONSEILLÈRE LAMARRE : Maintenant, dernier point : lorsque vous parlez particulièrement du déploiement d'infrastructures que vous avez fait pour Intelligence Papineau et qui était selon moi très inspiré, vous dites s'il y a des concurrents vous voudriez qu'on oblige ces concurrents-là à desservir l'ensemble du territoire... le même territoire qui est desservi par Intelligence Papineau? Donc, autrement dit, ce que vous voulez, c'est qu'il n'y ait pas de concurrence sélective, mais une concurrence globale?
6599 M. SAMSON : Je vous donne l'exemple de Montpellier. A Montpellier, qui était notre premier lieu d'expérimentation en Internet haute vitesse micro-ondes, nous avons réussi à offrir le service autant au niveau du village et des ondes périphériques du village que du Lac-Schryer -- pour d'autres, c'est le lac Scry-yeur(ph) -- en tous les cas : celui-là.
6600 Et quand Télébec est arrivé il y a quelque temps avec une boucle ADSL, vous pouvez comprendre que l'extension du service d'Intelligence Papineau dépassait largement l'extension du service ADSL qui est offert. Et on s'est retrouvé dans une situation où, dans le fond, Télébec venait éponger des endroits de concentration en négligeant les zones périphériques où il y a des gens tout aussi susceptibles d'être couverts.
6601 Ce n'est pas parce qu'un fermier est installé en périphérie qu'il n'a pas le droit d'obtenir son Internet haute vitesse. Puis il ne déménagera sûrement pas dans le noyau villageois pour aller le chercher. Je donnais l'exemple de la ferme Turcot(ph), je donnais aussi d'autres exemples du genre.
6602 Et c'est cette espèce de clivage qui se fait entre les noyaux villageois et la périphérie qu'on aimerait réduire ou éliminer, dans le cas de la concurrence. Le même phénomène se passe à Saint-Émile-de-Suffolk, dans mon village, et il semblerait que ça soit plus la règle, du côté de Télébec, de procéder comme ça que l'inverse.
6603 On a aussi le même exemple à Ripon et on a le même exemple à Val-des-Bois, vous avez des boucles ADSL de distance limitée. Vous êtes en dehors de la boucle : c'est fini, vous n'avez pas le service.
6604 CONSEILLÈRE LAMARRE : Mais si on... On va se placer dans la position inverse. Si on se met à exiger qu'effectivement, lorsque la concurrence arrive dans le noyau du village... qu'on exige que la concurrence soit disponible sur l'ensemble du territoire qui est déjà desservi par Intelligence Papineau -- parce que je veux limiter l'exemple à ça, présentement -- au fond, ce que vous nous dites, c'est que c'est du tout ou rien. Donc, pour le bénéfice de l'ensemble des citoyens sur le territoire, vous seriez prêts à sacrifier la disponibilité de concurrence pour la majeure partie des citoyens?
6605 M. SAMSON : Ce que nous espérons beaucoup plus, c'est que Télébec accepte cette proposition-là et que les autres intervenants l'acceptent en disant " Oui, c'est de bonne guerre. Justement parce que c'est un outil de société nous allons faire l'effort du dernier mille pour offrir ce service-là. "
6606 CONSEILLÈRE LAMARRE : Mais si ça ne se produit pas --
6607 M. SAMSON : Encore mieux : que Télébec propose une alliance avec Intelligence Papineau et qu'on puisse desservir conjointement ces populations-là. Mais là, je rêve.
6608 CONSEILLÈRE LAMARRE : Télébec, là, vous êtes pointé du doigt depuis quelques minutes. Est-ce que vous voulez répliquer?
6609 MR. HENRY: Yes, thank you. It is Denis Henry for Bell Aliant.
6610 Well, first I would start by commending the municipality for their initiative in this. In fact, we did offer to work with them and they chose somebody else, which is fine. That's their prerogative.
6611 But I don't think, with respect, that I need to apologize for serving customers. The services and the prices that we rolled out in Papineau were not targeted. They were the same services and prices that we were rolling out elsewhere in the territory.
6612 It's true we don't serve everywhere with DSL but HSPA is widely available throughout the area in Papineau and you have heard us say that where DSL is uneconomic for us, there are alternatives such as HSPA. And as you pointed out yourself, customers in the core now are getting the benefits of competition. So I mean I think it's -- I'm not sure what more I can say.
6613 CONSEILLÈRE LAMARRE : Je pense que la position des deux parties est claire, à ce stade-ci.
6614 Je n'ai plus d'autres questions, Monsieur le Président.
6615 THE CHAIRPERSON: I would like to hear from Barrett Xplore. You are here because basically the County of Papineau says that you are not a viable offer alternative because of the solar storms and possible destruction, et cetera. Presumably you have some data about the reality of satellite vis-à-vis wireline or fixed wireless.
6616 MR MADURI: Mr. Chairman, let me go through some of those concerns.
6617 THE CHAIRPERSON: Please identify yourself.
6618 MR. MADURI: John Maduri, Barrett Xplore.
6619 THE CHAIRPERSON: Yes.
6620 MR. MADURI: First of all, there is no such thing as snow fade.
6621 The comment about the ice storm could not be more than further from the truth. Reality during the ice storm, the ice storm impacted towers, impacted aerial plant which would have impacted wireless and which would have impacted wireline service. The last time I checked, I don't think the ice storm impacted the satellites in space.
6622 Satellite, we provided reliability statistics at the last meeting in terms of the 99.9 percent. Any individual can always reach out and find specific examples, individual examples, but you know we hold true to that statistic.
6623 I emphasize that satellite is used in business and military applications in great part for its reliability, not just its ubiquity.
6624 I think in terms of the issue of the cost of install this is -- we are making the wrong comparison. There was a comment made that the cost of a wireline install or a cost of a satellite install is 10 times the cost of a wireline install. That's completely false.
6625 The reality is we are comparing to a fiction. There is no wireline because if there was wireline there, we would be having an entirely different discussion around competition.
6626 The reality is the best cost -- least cost, best fit technology that actually gets there is satellite. And in great part, the challenge -- and it would be a challenge not just for satellite or wireless, but it would exist for wireline. The great cost issue in installation in the territories we serve is windshield time. That applies to all technologies.
6627 So to say that the cost of satellite is 10 times the cost of wireline is incorrect. The cost of satellite installs, the cost structure that we have is greatly a manifestation of the windshield time factor which impacts all technologies.
6628 THE CHAIRPERSON: And what about the solar storms?
6629 MS PRUDHAM: C.J. Prudham for Barrett Xplore.
6630 These are very rare occurrences and, again, those are factored into the number when we talk about 99.9 percent availability. That 0.1 percent is potentially those storms that you are talking about. They are extremely rare.
6631 MR. MADURI: John Maduri again for Barrett Xplore.
6632 If I could offer, it's really important when we are talking about rural that we reflect the rural realities -- some of the greatest challenges. We operate terrestrial networks in rural Canada and one of the greatest challenges is redundant, diverse, fibre or backbone connection. That is a bigger issue when you are delivering service in rural Canada.
6633 So we can look at the negatives, a specific negative to one technology. It really needs to be balanced out with the challenges that all technologies face when you are serving rural communities and, in particular, access to cost-effective, diverse, redundant backbone.
6634 THE CHAIRPERSON: You heard Papineau say that they feel that the desirable minimum is 5 Mbps down and 1 Mbps up and they feel that, you know, there should be no distinction between rural and urban communities and it's really a social need -- to use their words -- and not only a business need.
6635 If I understand it, your contention is that that can be delivered by satellite.
6636 MR. MADURI: Absolutely -- John Maduri again.
6637 Absolutely, unequivocally.
6638 LE PRÉSIDENT : Monsieur Samson, est-ce que vous avez quelque chose à dire en réponse?
6639 M. SAMSON : Je ne veux pas rentrer dans les données techniques des tempêtes solaires. Je pense que ce n'est pas très utile. Si on veut retourner là-dedans, on ira chercher les scientifiques qu'il faut pour le faire.
6640 C'est beaucoup plus le fait d'illustrer qu'une technologie satellitaire a des faiblesses que d'autres technologies n'ont pas. Je pense que les gens de Barrett ont raison de mentionner que dans le cas de tempêtes ou dans le cas de tempêtes de glace, qu'effectivement, l'ensemble des technologies de services peut être affecté. Elles le sont souvent moins que les technologies satellitaires.
6641 Pour nous, tout ce qu'on dit, c'est que ça ne doit pas être la seule; sûrement pas la seule, et ça ne doit pas être dans une région comme la nôtre, la technologie privilégiée, pour la simple raison que sur l'ensemble du territoire, on a déjà une distribution filaire et, d'ici probablement un an, on aura aussi une distribution micro-ondes grande échelle, partout dans le territoire. Donc, c'est déjà en place ces choses-là. Ce n'est pas comme si nous faisions affaire à des territoires où le téléphone ne se rend même pas. Ce n'est pas le cas. Pas chez nous en tout cas.
6642 LE PRÉSIDENT : O.K. Et si je vous comprends bien, on a écouté beaucoup sur les nouvelles technologies sans fil, HSPA en anglais. Et si avec ces moyens-là on peut vous servir le minimum que vous avez stipulé, ça marche aussi? Vous êtes technologiquement... Vous voulez seulement avoir ce minimum de servir?
6643 M. SAMSON : Oui.
6644 THE CHAIRPERSON: Okay. Len...?
6645 COMMISSIONER KATZ: Thank you, Mr. Chairman.
6646 I would like to hear from Barrett with regard to latency. I believe Mr. Samson talked about latency as well and if we are going to look at alternative technologies one of the issues that he talked about is minimum latency and I don't remember any discussions to date on whether satellite causes longer delays in transmission.
6647 MS PRUDHAM: C.J. Prudham for Barrett Xplore.
6648 With respect to that, we had addressed that in our presentation in Timmins. The natural latency caused by the speed of light is less than 400 milliseconds in respect of the satellite; in other words, less than half a second.
6649 And as we suggested to the Members of the Commission at the time, such latency is, to demonstrate it, comparable to trying to have a cell to cell conversation with someone standing next to you.
6650 We accept that kind of latency in our terrestrial networks in cell to cell conversations. It's not a material issue, we would politely suggest, and we are not at all familiar with the statistics that the gentleman was quoting. They don't, shall we say, mesh with ours.
6651 THE CHAIRPERSON: Okay. Thank you very much.
6652 We will go on to the next intervenor, Madam Roy.
6653 THE SECRETARY: Yes. I will now invite, please, OTA and TBayTel to come forward to the presentation table.
6654 THE SECRETARY: So Mr. Jonathan Holmes will introduce his colleagues for the record, after which you will have 30 minutes total for your presentation.
6655 MR. HOLMES: Good morning, Mr. Chairman, and good morning to the other Members of the Commission panel.
6656 We are very pleased to have this opportunity to present our rebuttal comments to you today.
6657 First of all, we would like to re-introduce ourselves to you. My name is Jonathan Holmes. I am the Executive Director of the Ontario Telecommunications Association.
6658 To my far right is Mr. David Wilkie, who is a Regulatory Analyst at TBayTel.
6659 To my immediate right is Mr. Keith Stevens. Keith is Chairman of Execulink Telecom.
6660 On my left, is Mr. Tracy Cant, Director of Finance and Regulatory Matters at Ontera.
6661 In this proceeding the OTA is representing 19 SILECs operating throughout rural Ontario which together serve approximately 75,000 NAS. The serving territories of these companies range from a single exchange to six exchanges, none of which encompass a major population centre and all of which are designated high-cost by the Commission.
6662 TBayTel's operating territory is a single exchange consisting of 12 wire centres, eight of which are high-cost.
6663 We want to emphasize at the outset that discussing questions such as those posed by the Commission about the basic service objective and deliberating over changes to it to accommodate the requirements of all Canadians for services such as high-speed Internet access are processes that we strongly support. In fact, based on these discussions, we now find ourselves able to support, as the Chair aptly described it last week at Phase I of the oral presentations in Timmins, an "aspirational" objective in this regard.
6664 Contrary to the assertions of the cable companies, this target should be the same for all Canadians.
6665 As we saw last week and this week, the Commission is clearly focused upon and sensitive to the needs of all customers, including rural Canadians. We commend you on your intent to ensure that the remaining few percent of rural customers are served by high-speed Internet. We agree that this proceeding is first and foremost about customers and, as we have demonstrated by a century of service to rural Canadians, we are just as strongly focused on those customers and their current and future telecommunications services needs.
6666 I will now turn the presentation over to Tracy Cant from Ontera.
6667 MR. CANT: Good morning.
6668 Our SILEC members have every day for the past 100 years and to this day honour the regulatory bargain. That bargain respected the fact that for investments being made to serve all customers in their serving area, the SILEC's costs would be recovered. That bargain continues to this day.
6669 By comparison, the cablecos have fulfilled an actual obligation to serve for not one single day of their entire corporate existence. Not a single day's worth of experience under a statutory or regulatory obligation to serve all customers. No requirement to build a business with a non-stop, never-ending duty to stand ready to serve all customers within their operating territories irrespective of circumstance.
6670 So we ask ourselves two simple questions.
6671 First, why would the Commission give serious credence on this issue to a group of companies that have no idea what it means to operate under an obligation to serve?
6672 Second, and conversely, why wouldn't the Commission give the benefit of any doubt that may exist on the obligation to serve to companies like the SILECs that have honoured that obligation for a century?
6673 A CRTC proceeding can be a pulpit for any company to say whatever it wants to about another company's business. Fair game. We understand that. But the Commission is charged with the duty of weighing the evidence and giving credence to parties that know whereof they speak based on experience in the real world, every day, every year when it comes to issues as critical as the obligation to serve.
6674 With respect, the Commission should give the cablecos' evidence on matters relating to the obligation to serve -- things such as how easy it is to honour, how inexpensive it is to meet, how simple it would be to eliminate -- the weight that their evidence frankly deserves: None.
6675 The SILECS have not come to this hearing to tell the cablecos how to run their business, but it may be worth noting that some of the SILECs are in the cable television business too.
6676 Why? Because the cablecos and others have decided that they don't want to serve in these territories, and because of the moral obligation we hold to our customers to give them the quality and variety of services they want and need and that others historically have not been prepared to roll out in our high-cost areas.
6677 And we do know the cable business. We can compare these two businesses, cable and local telephony, and we can confirm, based on real-world knowledge and experience in cable television services delivery, that unlike their position on the obligation to serve in telephony, cable television services are far, far simpler to provide in our territory than is local telephony under an obligation to serve and a stand-ready requirement.
6678 We could build a cable network in the dense hole of our exchange doughnut. How hard is that? We could compete for the low-hanging fruit in that SILEC core. We could provide lower prices if we too could rely on the national base of subscribers and the readily available internal corporate cross-subsidies of the cablecos. That's not hard either. And we could pull up stakes and leave if things don't go well. We could sell to a third party or even abandon the business if it flounders. But we are not the cablecos, and that's certainly not the way we treat our customers.
6679 Furthermore, the cablecos would have you believe that costs of building telephony networks are all in the past and that investments made years ago are fully recovered. They fail to acknowledge that investments by SILECs continue to this day throughout our entire serving area, not just in the doughnut hole, to ensure quality of service and access to all services for all our customers virtually wherever they live in our exchanges.
6680 Without an obligation to serve, and a stand-ready requirement, the SILECs could very easily take the cable company approach and only serve the profitable areas.
6681 Also, the cablecos would have you believe that if the CRTC forbears from regulation with no subsidy in the SILEC hole of the doughnut, the SILECs can increase rural rates to $36 or more.
6682 This is unadulterated nonsense. This would mean the customers in the hole would pay $22 and their neighbours would pay $36. This notion is absurd and it says more about the cablecos than about the SILECs. It reveals how truly unrealistic and detached the cablecos are from the realities of serving rural Canadians.
6683 To reiterate, the cablecos have lived in an environment of no obligation to serve since their creation. They have sought out only the profitable areas within which to provide their services and have routinely avoided the areas where profit doesn't exist or else they have abandoned systems when their profit expectations fell short. Maybe it's a rural way of looking at life, but when we want advice we ask people who know something about what they are talking about.
6684 For all of these reasons, the cablecos' position on the obligation to serve must be dismissed for the rhetorical regulatory gibberish it is.
6685 Now I will turn the presentation over to Keith Stevens from Execulink.
6686 MR. STEVENS: Thank you, Tracy.
6687 Let me paint you a picture. Imagine a high cost exchange. It could be anywhere in Canada. There is a town that is served by one of the cablecos. There is a reasonably large doughnut of sparsely populated farmland around the town. One corner of the exchange is hilly with a river valley. A road runs along the west side of the river for four kilometres where it dead ends. The area along the road is heavily forested with a few marginal farms. The last two farms are about 10 kilometres from town the way the crow flies, but about 15 kilometres by road. There is a 6 pair cable down the road stopping at the third last house. The last two houses are fed via a 2 pair cable. They are fed from a remote about 7 kilometres from town.
6688 Most rural residents have high-speed, but the end of this road is too far. Remembering the cellular coverage map that SaskTel presented in Timmins showing good, fair, poor and no coverage, this area's wireless coverage is poor.
6689 A developer buys the last two farms. The township quickly gives approval for 50 lots located mostly along the road. The township can use the revenue is the reason they approve it quickly.
6690 The developer approaches the cableco. It politely, but firmly, refuses to supply service.
6691 Next, the developer contacts the telco. An engineering study is completed, it determines that the business case with local subsidy included will be at best marginal. Without the local subsidy, there is no business case at all.
6692 There may be two radically different endings to this story depending on whether or not there is an obligation to serve and local subsidy.
6693 If there is an obligation to serve, the telco has to provide service and cannot assess a construction charge. In addition to the provision of voice service, the development would be served via a new remote resulting in high-speed Internet not only for the new customers but also for some existing customers who presently don't have high-speed available.
6694 If there is no obligation to serve the story ends quite differently. Refusal to provide service would be one of the very logical conclusions. Even if the telco was inclined to proceed to support the community, the bank would probably not approve a loan. Remember that cellular coverage is poor. The result would therefore be no telephone service at all.
6695 Considering that the area is heavily treed, and beside a hill to the west, satellite service may not work for those in the valley. Thus no Internet service, not even dial-up access.
6696 The obligation to serve and the local subsidy ensure that all customers within high cost serving areas receive basic service.
6697 I will now ask Dave Wilkie from TBayTel to continue with our presentation.
6698 MR. WILKIE: Thank you, Keith.
6699 We also heard TELUS on Monday say something along the lines of "in high-cost areas we are all SILECs" in response to Commissioner Molnar's observation that there appeared to be no alternative to undertaking cost studies. That's quite the statement.
6700 Even the most cursory glance at comparative NAS numbers between any SILEC and TELUS demonstrates that TELUS is a huge company in comparison to a SILEC such as, for example, Keith's company that has 5,400 NAS.
6701 We noted that 85 percent of Ontarians live in urban areas. We also noted that, with the exception of TBayTel, there are no urban areas in SILEC operating territories. SILECs have no Edmontons, no Calgarys, and no Vancouvers through which they can absorb the impacts of competitive losses in the local market through cross-market subsidization. Our ability to absorb competitive losses is painfully thin.
6702 As the Chairman himself noted in Timmins, the SILECs are not as strongly positioned to compete as the ILECs.
6703 There has been a fair bit of discussion in this proceeding regarding the fact that some SILECs have ventured outside of their incumbent serving territories and offered various services in other markets. I would like to make several observations on this point.
6704 First, some OTA members have received repeated requests from customers of large ILECs with contiguous borders to come and provide SILEC services to them. One OTA member company actually has a petition with 27 signatures on it, requesting that it go north five kilometres and provide ILEC customers with reliable telephone, Internet and digital television.
6705 Why? It's because these customers are tired of asking their existing provider to improve their service. They see the service quality provided by the SILECs, they are tired of being ignored and they want dependable, high-quality service too.
6706 Second, you are well aware of the fact that our subsidy fell significantly between 2002 and 2006 and has been frozen since 2007. We have told you in our evidence that our costs have not gone down over the last four to five years and that our NAS levels are on a slow natural decline.
6707 Our SILEC costs have not declined over the past five years, but our revenues have.
6708 What is a SILEC to do? So yes, some of our companies have expanded. In many cases the markets the SILECs have entered already have two or three competitors. Since we aren't the incumbent in these areas, we have to fight to obtain market share.
6709 More often than not our competitors in these markets include Bell Canada and one of the major cable companies and others as well. We are new entrants with high costs. We have to build out networks.
6710 The returns are not lucrative for these companies, yet the large ILECs and cablecos argue in this proceeding that we should have no share in the rewards, even if we take substantial risks to enter these markets. And they allege, with no basis in fact, that our competitive returns equal or exceed our SILEC shortfalls.
6711 Some parties have argued that the fact that we have expanded should trigger a change in the regulatory framework that currently governs SILECs. "Treat SILECs like the large ILECs", they say! But was the regulatory framework in TELUS' incumbent operating territory changed when it became a CLEC in Ontario? Was Bell Canada's framework changed when it got into the BDU market via ExpressVu? The answer to both these questions is "No".
6712 So we don't know why these companies are arguing that the Commission should change the SILECs framework just because some of our member companies have branched out in the face of declining SILEC profitability.
6713 It was interesting on Monday when one of the cablecos, I believe, mentioned that TBayTel provided a dividend to the City of Thunder Bay last year, as if that too should trigger some change to the SILEC regulatory regime.
6714 I have heard that Bell Canada offers dividends to its shareholders, as does Rogers and some of the other cablecos. We heard that Bell Aliant has returned approximately $700 million to its shareholders, yet we don't hear the cablecos arguing that this should trigger any changes to Bell Aliant's regulatory regime. So why should it be the case for the SILECs?
6715 I will ask Keith to take over from here.
6716 MR. STEVENS: Thanks, Dave.
6717 As we mentioned at the beginning of these rebuttal comments, it is very clear that the Commission is deeply concerned about vulnerable and underserved customers in Canada and we have demonstrated to you that in SILEC operating territories at least, customers are not penalized for living in rural Canada. Our member companies offer services that stand head and shoulders above what the large ILECs provide in their areas surrounding our serving territories.
6718 Despite this, we found ourselves having to listen to happy-go-lucky discussions about what would happen if a SILEC were to be run out of business as a result of changes to the current regulatory regime. Well, we would like to give you our perspective on what would happen to the customers in our serving territories if this happened.
6719 We have repeatedly told you that the services and service levels we offer our customers are far superior to those available to large ILEC customers in neighbouring exchanges. We have evidence that their customers are clamouring for our services.
6720 We have provided you with conclusive evidence that the large ILECs are focusing on urban and sub-urban fibre optic projects and that they are spending very little capital in their high-cost areas.
6721 By the way, they have not disputed this, because they can't. Bell Aliant's equipment in their territories is past historic retirement dates, by their own admission.
6722 So what would happen if a SILEC were to be run out of business by changes to the regulatory regime and the customers forced to move to a Bell Canada or a Bell Aliant?
6723 Would these networks start down the slippery slope of poor quality and poor service levels that their own customers currently complain about to us? Would customer response times slip from hours to days or weeks? We think you know the answer to these questions.
6724 If the position of Bell Canada, Bell Aliant and the cablecos is adopted the next iteration of the Public Notice to review the provision of basic local telecom services in Canada will see many more presentations similar to that made in Timmins by MRC Papineau.
6725 SILEC customers are not penalized for living in rural Canada. They are clear!y satisfied and well served. They have rarely complained to the Commission about service quality, because we serve them with skill and care.
6726 Why would the Commission want to compromise this and why would you consider giving high-speed Internet to these customers with one hand, while threatening the viability of their incumbent service providers with regulatory changes with the other?
6727 I will now ask Jonathan Holmes to change topics and continue on with our presentation.
6728 MR. HOLMES: Thanks, Keith.
6729 When it comes to subsidy, SILECs represent good value for the dollar when compared to a number of the large ILECs. Despite the impression that some parties to this proceeding may have, SILEC subsidy rates are not excessive or over the top. SILEC subsidy rates for example for Band "E" are lower than each of MTS, SaskTel and TELUS BC.
6730 There is a need for the obligation to serve regardless of forbearance status. Quite surprisingly, a number of parties to this proceeding have argued that the obligation to serve can be removed once a particular market has been forborne. However, it seems clear to us that not all customers will have access to a competitive supplier even with forbearance.
6731 We can tell you that in our operating territories, no potential entrant would be able to come in and service any entire SILEC customer base in the same way that the incumbent service provider does. A wireline service provider would not and we don't believe that mobile wireless service coverage or service characteristics are such that the Commission could rely on it to satisfy the obligation to serve or the basic service objective.
6732 The cablecos argued that if the Commission removed the obligation to serve, any carrier with a network already present in the ground would not abandon it. We agree that this would be an extreme circumstance, but we need to at least highlight the fact that one facilities-based CLEC has done so in the past.
6733 Futureway Communications, or FCI Broadband, built a fibre-to-the-home network in the Milton exchange back in the early 2000s and it ultimately made the business decision to exit this exchange. However, we believe that a more likely and more common scenario would be those situations where customers request new lines or builders request network hook-ups for new subdivisions as Keith illustrated earlier.
6734 Without the obligation to serve, SILECs would evaluate these requests on a pure business case basis and if it did not make financial sense it is highly likely that these customers would go unserved.
6735 Finally, we note that most other incumbent telephone companies have argued that the obligation to serve should be removed if there is forbearance.
6736 This request by incumbent companies should cause the Commission concern. The only reason to ask for removal must be a desire to get out from under the obligation to serve.
6737 In forborne markets this will result in up to 25 percent of Canadians not served by a competitor potentially having no service at all.
6738 I will now turn the presentation back over to Tracy Cant.
6739 MR. CANT: In this proceeding we have argued that the Commission should adopt the 2009 SILEC proposal which would see a transfer of implicit subsidies from the SILEC toll interconnection regime to the national contribution fund. This change to the SILEC subsidy regime would meet our continued requirements for subsidy and make the regime more transparent by bringing the implicit subsidies built into toll interconnection out in the open.
6740 Although this proposal would result in the transfer of toll revenue into the national contribution fund, we noted in our opening oral comments in Timmins that acceptance of this idea is gaining ground in the industry.
6741 Proposals to increase the implicit subsidy amounts from the current $5.00 simply do not reflect SILEC reality for these services. The evidence that we have filed in this proceeding indicates that on average across the 19 OTA member companies we represent, and TBayTel, these companies are not even reaching $5.00 per month of revenue, never mind margin. We also heard TELUS on Monday say that the $5.00 is too high and the margins are actually shrinking
6742 Bell Canada is attempting to expand the list of services that pay implicit subsidy. This runs counter to the rationale behind the original decision to impute subsidy from optional local services, that is calling features. The logic was that these services were switch-based and available only from the ILEC.
6743 The OTA and TBayTel are fine with the existing $5.00 per month amount and the Commission should not change it. The evidence would not support any increase at this point in time.
6744 We would also like to clarify that long distance Network Access Charges -- or NACs -- are not a function of which local service provider serves the end customer. Some toll service providers, whether they provide the local service or not, charge the network access fee, not the local exchange carrier. It is a subscription fee called an access charge for marketing, not technical reasons. It is not appropriate to include the NACs in the implicit subsidy calculation.
6745 Moving on, a number of parties to this proceeding have discussed sub-banding. Sub-banding is an idea that could be used to ameliorate the impacts of the doughnut effect in our serving territory, assuming that the subsidy is not portable and the entire subsidy amount is redistributed to the non-core areas of the exchange.
6746 If it could be implemented using a very simple costing exercise, as SaskTel has proposed in the undertaking submitted on Monday, the OTA and TBayTel would have no objections. That being said, if the costing exercise required to redistribute these funds in SILEC operating territories would be large and complex, we submit it would be better to retain the existing SILEC subsidy mechanism.
6747 I will now turn things back over to Keith Stevens to discuss local competition.
6748 MR. STEVENS: Thank you, Tracy.
6749 Last week we presented to you one method in our view that could be used to evaluate whether or not to introduce local competition and where you do, what the conditions should be.
6750 We have taken your questions and comments from our last appearance before you into consideration and we would like to offer up the following revised framework that you could use to introduce local competition in SILEC operating territories.
6751 The OTA would propose simply that local competition not be offered at this time in the territories of SILECs with less than 2,500 NAS.
6752 As we have argued in our opening presentation, common sense must be a factor in this evaluation. By any measure, these companies are small businesses and when stacked up against the carriers that they are facing, they are absolutely tiny.
6753 As you will see in a moment, the OTA is not opposed to local competition; rather, we believe that a Commission review would indicate that there are some cases where, due to the likely financial and operational impact to SILECs and to their rural customers, local competition should not be permitted.
6754 Following on Commissioner Lamarre's question in Timmins last week, the Commission should maintain this moratorium for a four-year period at which time it could re-evaluated.
6755 For those companies with more than 2,500 NAS, we are proposing that the Commission should carry on with the process of introducing local competition that it established in Decision 2006-14.
6756 We note that the cablecos voiced their support for this approach in their presentation on Monday.
6757 After further review we believe that the approach adopted by the Commission in that decision continues to be fair and balanced.
6758 I will now turn the presentation over to Jonathan Holmes who will discuss LNP and a few other issues before he concludes.
6759 MR. HOLMES: We would also like to address the issue of LNP. There has been a great deal of discussion on this matter, but you haven't heard directly from us on the arrangements that we would like to see regarding LNP.
6760 First of all, we believe that LNP -- both porting in and porting out -- should be a requirement wherever local competition is introduced. It only makes sense that we would want the maximum opportunity to win back customers and let them keep their original phone numbers.
6761 With regard to LNP cost recovery, there are some SILECs that still operate switches that are not currently capable of offering LNP and we are in the process of gathering our members' information regarding how much this will cost those companies. This evidence will demonstrate that it will cost different companies different amounts, and for some companies the amount will be significant.
6762 Each company that currently operates a non-LNP-capable switch has some sort of plan to move to LNP capability.
6763 The Commission has two options. It can either wait for these companies to complete their plans or it can permit local competition in these operating territories and require these companies to implement LNP.
6764 If local competition is permitted and this causes the SILEC to incur the cost of advancement earlier than its current plans, the CLEC entering the market should be required to pay for it or the subsidy fund should cover this cost.
6765 As an alternative to LNP, TELUS has suggested that companies could employ something called "fixed call-forwarding." The main disadvantage of this option is that the number is not actually ported and the routing inefficiencies could be considerable. In addition, not all calling features will work seamlessly between service providers.
6766 The OTA and TBayTel believe that the maximum affordable local rate is $30 in SILEC operating territories. This conclusion is based upon the current range of local rates in SILEC operating territories and the size of rate increases that many customers would be facing to get to that level.
6767 It's also untenable for SILECs to raise rates higher than that in the face of price competition from current alternative service providers and if our rates ultimately go higher than $30 it will be harder to compete against a facilities-based competitor in the core and customer loss could be substantial.
6768 That wraps up our rebuttal comments, Mr. Chairman.
6769 We would welcome any questions that you have.
6770 THE CHAIRPERSON: Okay. Thank you very much. You have clearly listened very carefully and responded to some of the issues raised.
6771 On the very last one, on the $30, does that mean that we should also allow the ILECs -- in their various territories they asked for permission to raise their base rate to $36.90. We should allow them to raise it to $30?
6772 MR. HOLMES: From where it now, yes. We think $30 would be an affordable rate.
6773 THE CHAIRPERSON: I seem to recall that Bell Aliant suggested that should be done over a three year phase-in.
6774 So you would see basically everybody in the industry going to a $30 rate?
6775 MR. HOLMES: Yes. With regards to timing it depends on how big the differential is from the existing lowest rate to $30. It could be, you know, $7.00 or $8.00 and I think you probably should step that up as opposed to make one jump.
6776 THE CHAIRPERSON: On the issue of number portability you say:
"...the CLEC entering the market should be required to pay for it or the subsidy fund should cover this cost."
6777 The costs obviously will vary from SILEC to SILEC depending in what stage of technological development they are, and upgrading, et cetera.
6778 Let's say for argument sake Mr. Stevens has already done it in Execulink, so if somebody enters his territory he doesn't get anything, but somebody else who is slow gets the LNP paid by the competitor?
6779 MR. STEVENS: I think that's our position.
6780 I mean, we are really saying the cost to advance it. Everybody has plans to at some time upgrade their switches. It's something we have to do. The old Nortel switches are past their end of life in many cases and need to be replaced. So it will be happening, it's just a matter of costing the advancement.
6781 Another option for the CLEC could be to simply wait for a year or two and it may well happen without cost.
6782 THE CHAIRPERSON: I just don't understand, from a regulatory point, why we would reward the laggards or punish the people who were quick and had foresight and saw this coming.
6783 MR. STEVENS: I guess what we are saying is, they should pay the cost to advance. It's not necessarily the full cost, but the cost of advancing that switch operation. So it's not necessarily rewarding those who have waited.
6784 I think, in most cases, this may be a bit more of a tempest in a teapot. Many companies are there already. The ones that don't may well be those exchanges that are least likely for competition.
6785 I'm sure there will be some examples where it doesn't mesh together as well as we would like, but it's an issue, I think, that should be dealt with as each company comes up.
6786 THE CHAIRPERSON: If it's a tempest in a teapot, why should we address it? Why shouldn't we just say that nothing is perfect, and it will be harder on some people than others, but it's a fact of life?
6787 You know, ongoing technological development is something that you all have to face.
6788 MR. STEVENS: The real challenge is the cost, purely the capital dollars. People have their budgets. We have very limited budgets in SILECs, how much you can spend each year. Projects are often committed to putting cable in the ground for subdivisions, et cetera, which we have to do, and to actually put a new switch in, it's just something that is -- there just isn't money there for that, laying around waiting for that to happen.
6789 It has to be worked out through the budget process.
6790 THE CHAIRPERSON: How would it actually work? Some cable company makes an application to enter that territory, the company needs to upgrade its switches to have local number portability. They would say, yes, that's fine, but our cost for -- 100K or whatever it is -- you have to pay that, and we would make that a condition on them entering?
6791 MR. STEVENS: I think so. I think there would be some negotiation there, too, as well, because it may be a timing issue. Maybe the CLEC is willing to wait for six months or a year.
6792 I think that would be part of the negotiation.
6793 From the SILEC point of view, for some of those companies, the money just isn't there. I mean, the bank -- they already have their capital project approved.
6794 As you know, they have to upgrade -- you know, put cable in the ground when they have new subdivisions, et cetera, and there just may not be the money available to do it, if they want it done in six months or a year. You know, you can't spend the money that you don't have. That is our real concern.
6795 THE CHAIRPERSON: Yes, but I am just trying to visualize the operational aspect of it.
6796 We would say: Yes, you may enter in six months, subject to coming to deal with Execulink as to the cost of implementing number portability.
6797 MR. STEVENS: Correct, yes.
6798 THE CHAIRPERSON: Failure of agreeing on a cost point, we will set the cost?
6799 MR. STEVENS: Yes. They would go through the arbitration process through the Commission or one of those things to work out the details, yes.
6800 THE CHAIRPERSON: Mr. Cant, you seem to be eager to add something to the mix.
6801 MR. CANT: Actually, it's just a recap of the conclusion that we just reached, which is that the existing process under 2006-14 allows for the SILEC involved or the ILEC involved to put forward their proposal for the introduction of local competition, and we would see it working through that process.
6802 THE CHAIRPERSON: Okay. Len, do you have some questions?
6803 COMMISSIONER KATZ: Yes, thank you, Mr. Chairman.
6804 Good morning. I just have a couple of clarifying questions. Your submission is very clear, for the most part.
6805 On page 5, Mr. Stevens, you run through a scenario of a farm that ultimately gets transformed into a community, and you indicate that you cannot assess the construction charge.
6806 It's the very last paragraph on page 5.
6807 It says, "If there is an obligation to serve, the telco who has to provide service cannot assess the construction charge."
6808 Is that a function of our tariffs?
6809 MR. STEVENS: Yes. Actually, I put that in there specifically because I thought there was some confusion the other day about construction charges.
6810 We can only assess a construction charge if it's more than 160 metres from our existing telephone system.
6811 This is going down a road. If you put a house down there, and there is cable going down the road, and assuming that the driveway is not more than 160 metres, we can't charge a construction charge.
6812 COMMISSIONER KATZ: So notwithstanding the fact that the developer has bought the land and is going to trench and everything else, as well, you can't tell him that the cost for you to put your facilities into his trench, or whatever, is going to cost X amount of money.
6813 MR. STEVENS: That is correct, unless it's more than 160 metres away.
6814 COMMISSIONER KATZ: And it is our tariff that pre-empts it.
6815 MR. STEVENS: That's correct.
6816 COMMISSIONER KATZ: On page 7 you make the statement that you have slowly lost some NAS. You say: "Our SILEC costs have not declined over the past five years, but our revenues have."
6817 I thought I heard you folks and others say that because of the new services being introduced, broadband and IPTV, your revenues are growing. Did I miss something?
6818 MR. CANT: What we were referring to, Mr. Katz, is specific to our primary exchange service business, as opposed to the services that rout over those facilities.
6819 So our issue is, because of the relatively fixed nature of the cost for maintaining the loops, as Mr. Choquette discussed in the ACTQ meeting the other day, those costs really have remained the same, or even modestly increased, to continue to offer those services.
6820 MR. STEVENS: If I could add, we serve rural areas, and farms are being consolidated, et cetera, so we are seeing a slow erosion of the customer base in those areas, with houses being abandoned and people moving out.
6821 We do see that. We don't have the growth that we would sure like to see in those areas for revenue.
6822 COMMISSIONER KATZ: But there are situations, as well, when farms get sold, where a developer comes in and puts in 50 homes.
6823 MR. STEVENS: Absolutely correct. As we are representing 20 companies here today, it's not the same story for every company, and we can't pretend that it is. But that is the general trend that we see happening.
6824 COMMISSIONER KATZ: On page 9 you talk about wireless services in the middle paragraph. You say:
"A wireline service provider would not, and we don't believe that mobile wireless service coverage or service characteristics are such that the Commission could rely on to satisfy the obligation to serve."
6825 Are the words "mobile wireless" put in to differentiate it from fixed wireless?
6826 MR. HOLMES: That's correct.
6827 COMMISSIONER KATZ: So you are saying that mobile wireless today doesn't have the characteristics to meet the obligation to serve, and that is because of equal access, or are there other characteristics that aren't available?
6828 MR. HOLMES: There are things like, I think, general quality of service, battery backup from the CO that wireless doesn't have, E911, and basically what we think are higher prices for equivalent services.
6829 COMMISSIONER KATZ: I thought there was E911 throughout the country now.
6830 MR. HOLMES: There is -- I think it's called "Wireless Phase 2", but it's not, I guess, as rock solid or as absolutely dependable as wireline E911 services are.
6831 MR. STEVENS: I am not an expert on wireless, but as we understand the second phase, it requires having access to several towers at the same time and using triangulation to calculate where the person is. If you are only served by one tower, if that's all you have access to, it doesn't help, other than telling you what tower you are being served from. It won't pinpoint the location of the customer.
6832 I guess the other point, too, is to remember the map that SaskTel presented. I think we are concerned that a lot of that map was poor or no service. There were areas that were good, et cetera, but there are spots that aren't, and those are the areas we are concerned about.
6833 COMMISSIONER KATZ: Okay. And with regard to fixed wireless?
6834 I would imagine that some of you folks are looking into it, as well.
6835 MR. STEVENS: We are using fixed wireless to provide high-speed. Bell Canada yesterday talked about using it to serve customers that are hard to reach.
6836 Yes, point-to-point fixed wireless can be very reliable and can work very well, but it is for those unique circumstances where it's not practical to put cable in.
6837 MR. CANT: Mr. Katz, if I could add to Keith's comment, we actually use some fixed wireless to provide service to some of the exceptions, just like Bell Aliant mentioned, in some of our exchanges where customers are located very far out along lakes and on islands and places like that, which cannot be reached, actually, with the wireline service.
6838 COMMISSIONER KATZ: I thank you for identifying the fact that there was one company -- Futureway -- on page 9, that, I guess, chose to exit the exchange, or the business they were in. Do you know whether there were customers -- how we dealt as a regulator and as a country with the customers that were part of that business?
6839 MR. HOLMES: I believe there were customers up and running on the network, but off the top I can't tell you how the transfer process was dealt with.
6840 COMMISSIONER KATZ: Okay. I was just wondering whether they were inconvenienced, whether they were without service, or how that was done.
6841 Those are my questions, Mr. Chairman.
6842 THE CHAIRPERSON: Candice...
6843 COMMISSIONER MOLNAR: We didn't talk about it in Timmins, but I just want clarity on your proposal as it regards transferring the toll interconnection subsidy -- or the implicit subsidy that exists today into the National Contribution Fund. Are you proposing that that be done as part of this process, or within a follow-up?
6844 MR. HOLMES: We took a look at the Public Notice or the Notice of Consultation when it came out, and it asked: Are there any changes that are required or needed to the contribution regime, or the subsidy regime.
6845 And it seemed natural to us that -- you know, we proposed this in 2009, and it was put on hold. This is the place to kind of reintroduce it and hope -- and propose that you approve it.
6846 Other companies in this proceeding have said, "Let's get rid of subsidy altogether," so it seemed to us that it's in the scope for this proceeding.
6847 MR. STEVENS: I would add that if the Commission wishes to do it by follow-up proceeding, we have no objection to that. That would be fine, too.
6848 COMMISSIONER MOLNAR: Okay. Thank you.
6849 THE CHAIRPERSON: I want to go back to the obligation to serve and the costing. You were pretty harsh in your comments about the cable companies.
6850 I thought that when the cable companies were here, they made a fairly logical argument, saying: This is the cost of doing business.
6851 I mean, you have certain costs, you have the network, and obviously you are going to keep it upgraded to make sure that you can serve your existing customers. That is part of your good business practice, you know, to put it forward as a heavy burden that you carry that others don't -- to use their words. They felt that was a wrong characteristic.
6852 Now you, this morning, said, "Don't tell me my business, you're not in it."
6853 Can we bring it down to a substantive discussion, rather than an exchange of accusations?
6854 MR. STEVENS: Oh, absolutely. We are glad you asked the question.
6855 The impression that the cable companies left the other day was that the area outside the doughnut has all -- cable has been built years ago, been paid for, and really all we have to do is sort of collect the money and once in a while do a little bit of minor maintenance. There can be nothing further from the truth.
6856 First of all, the cable hasn't all been paid for. Cables are being replaced. New cables have to be installed for areas such as the subdivision that I alluded to in my illustration. But, also, we regularly find things like a farmer will rent his driving shed, and somebody will put a small business in. It's a very natural, inexpensive building to start a business in, and we will get a request for, you know, five lines in a place where we have two pair of cable being fed down there or -- you know, not enough pairs, so we have to reinforce our plant all the way back.
6857 We are constantly spending money on both upgrading and maintenance.
6858 Tracy may want to add something.
6859 MR. CANT: Just to your first comments, too, about the characterization of the burden being heavy or onerous -- I don't know that that was your word necessarily, but, for us, we view it as we described it here, a moral obligation to our customers.
6860 We are in these communities daily, working in these communities, spending money in these communities, reinvesting what we make into these communities, and employing, frankly, a lot of people in these communities. So we view it as not a heavy burden at all, we view it as our obligation in those communities, to serve those customers.
6861 THE CHAIRPERSON: That's exactly what they said. That is precisely what cable said. That's your normal business, there is nothing extra to it.
6862 MR. CANT: No, I think where I am going to, though, is the cable companies characterizing it as a heavy burden or an onerous burden, saying that we are suggesting that. We are not suggesting that it is a heavy or an onerous burden.
6863 THE CHAIRPERSON: Cable companies, do you want to weigh in on this?
6864 MR. ENGELHART: First of all, a point of clarification. I believe in their comments they said that cable never had an obligation to serve. That is factually incorrect. Cable not only had an obligation to serve, but an obligation to build. All of our licences said that, within our licensed territory, we had to provide cable TV service to any home with either water or sewer service. So we had an actual obligation to build and an obligation to serve, which was naturally removed ten years ago when we became deregulated.
6865 More substantively, I was interested in their comments that cable can pull up stakes, cable can abandon their plant. It's never happened. It's never happened. Cable systems are sold. That's our point.
6866 As you characterized it, Mr. Chair, nobody abandons these facilities when they are built. Of course I know that there is ongoing investment. Of course there is ongoing investment, but they are never abandoned, they are sold as valuable assets.
6867 One other clarification; I believe that my friends made the statement that we argued that they should have $22 rates in the core and $36 in the outer part. I don't believe that was our submission.
6868 Of course, if the rate goes up to $36, it goes up everywhere. I don't think we suggested otherwise.
6869 Just quickly, they made a bunch of points that we wanted to have -- that customers in exchanges outside of their core exchanges want competition. Well, customers in their core exchanges want competition, too.
6870 Execulink is in 31 communities where Rogers provides service. They operate as a CLEC in 28 and as a SILEC in 3. In Woodstock, we have a line down the middle of the road. On one side of the road we can provide Rogers Home Phone, on the other side of the road we can't provide Rogers Home Phone, and it's hard to explain to people on that side of the road why they can't get it.
6871 All we are saying is, there should be a competitive process there, as well.
6872 THE CHAIRPERSON: Maybe you could answer with respect to one guy paying $36 and the other one paying $22.
6873 I assumed that you meant this would be the result of competitive pressure, that inside the doughnut hole you would have no choice but to lower the price to $22, while outside the doughnut hole you would still charge $36.
6874 If I misunderstood that, here is your chance to clarify it.
6875 MR. STEVENS: That is correct, yes.
6876 THE CHAIRPERSON: And this whole idea of bringing the implicit subsidy into toll interconnection, into the subsidy -- the one that my colleague raised -- Bell, did you not say something about that point yesterday?
6877 MR. BIBIC: Could you repeat the question, Mr. Chairman?
6878 THE CHAIRPERSON: The issue of implicit subsidies being built into -- implicit subsidy built into toll interconnection --
6879 Let me start again. They want to change the subsidy regime, as I understand it, either in this proceeding or in a subsequent proceeding, to take into account the implicit subsidies built into toll interconnection, and it seems to me that you raised that very point yesterday, too.
6880 MR. DANIELS: That's correct, Mr. Chairman.
6881 Our position is that toll, first of all, is part of the basic service objective, in terms of access to toll, in the same way that options and features, STS, like call features and so on, is part of -- access to that is part of the basic service objective.
6882 We said yesterday in our opening statement that, in fact, in our high-cost areas, 87 percent of customers take toll from Bell, as compared to only 61 percent taking smart-touch features.
6883 And the last argument that I heard here that the OTA made was a suggestion, which is true, that there are competitive alternatives to toll, and the argument is that options and features are different because they are tied to the actual local service. I think the reality is, in the decision that the Commission made last week -- I think it was last week, or two weeks ago -- you determined that voice mail was to be forborne right across the country, which is an option feature. The basis for making that decision was that there are competitive alternatives, including answering machines.
6884 So I think the Commission has already established the principle that including implicit subsidies from services that you sell -- it's not that it's 100 percent tied to the local service, it's the fact that it is part of the business case of entering, and these are revenues that generally follow with the local service, and they are tied to the business case of actually being able to provide service.
6885 So we don't see any reason why we should be -- why anybody in this country should be subsidizing a carrier who is making money off that customer with services that are part of -- that are included as access to the basic service objective.
6886 That's our position.
6887 THE CHAIRPERSON: Help me out here. Are you and the OTA in agreement or disagreement with each other?
6888 MR. DANIELS: We are in disagreement. OTA, as best as I understand it, is saying "Exclude toll," and we are saying that profits from toll should be included.
6889 MR. STEVENS: I think, Mr. Chair, that maybe Bell missed your question, because your real question is regarding the contribution in the toll interconnection charges right now, and I thought that Bell did support that yesterday.
6890 MR. DANIELS: I'm really sorry, Mr. Chairman, that's correct.
6891 In terms of the toll interconnection, which is completely different -- and I apologize --
6892 Now I understand why people are looking at me on my own team --
6893 MR. DANIELS: -- but not passing me notes --
6894 THE CHAIRPERSON: Okay, let's start all over again.
6895 MR. DANIELS: I will start all over again.
6896 THE CHAIRPERSON: That's the beauty of this whole process, we finally can figure out where people actually stand.
6897 MR. DANIELS: On the toll interconnection -- so we are not talking here about what the customer pays, we are talking about what long distance companies that are delivering toll to terminate in SILEC territories pay. We are in complete agreement with the OTA that the rates charged right now are too high. They have an indirect subsidy.
6898 And in the same way that the Commission removed for ILECs, ten years ago, that toll interconnection -- it used to be that that contribution was strictly based on long distance rates -- in the same way, that has been removed and moved to the subsidy regime directly, so that it's fairly funded by all providers across the country.
6899 That is the proposal, and we support that.
6900 So that would mean reducing toll interconnection rates, so that when we terminate toll in -- when anyone terminates long distance toll into SILEC territories, they pay a rate that is equivalent to what Bell charges for that service, cost-based rates, and the difference, which is about $11 million, would be moved to a subsidy regime, to really be what it's for, which is to support their local subsidies, to support local service.
6901 THE CHAIRPERSON: MTS, did I see your hand up?
6902 MS GRIFFIN-MUIR: We actually don't disagree, per se, with the OTA or Bell. I guess the only issue we would take is the level to which the toll interconnection rates are reduced.
6903 Today they are reducing them to, I guess, the rates of the large incumbents, in this proposal, and all we suggest is that perhaps the cost of toll interconnection into the small incumbents would be a little higher than the cost that, let's say, Bell Canada has. So the amount of subsidy would be a little lower.
6904 Because, in effect, what Bell is arguing for here, and the OTA, is just to take what is an implicit subsidy and make it explicit, and all we are suggesting is to have that explicit subsidy actually be explicit, reflecting small incumbent costs, as opposed to Bell costs.
6905 THE CHAIRPERSON: Lastly, the moratorium that you suggest on SILECs with less than 2,500 -- it would be a four-year moratorium, if I understand it correctly.
6906 MR. STEVENS: That's correct, yes.
6907 THE CHAIRPERSON: Do the cable companies or anybody else have a comment on that?
6908 M. MESSIER : Pour nous, c'est une proposition qui est complètement inacceptable, d'avoir un moratoire sur les compagnies de... petites compagnies de téléphone qui sont 2500.
6909 D'abord, les consommateurs, dans ces territoires-là, connaissent très bien la concurrence dans différents services et s'attendent à ce qu'on puisse leur offrir un service concurrentiel, au niveau de la téléphonie entre autres, pour les consommateurs que nous desservons.
6910 Deuxièmement, je pense que les petites compagnies de téléphone vont de toute façon, de toute manière, faire face à la concurrence apportée par les services sans fil. Donc, l'option d'interdire la concurrence est une option qui n'est pas souhaitable. Les petites compagnies de téléphone doivent dès maintenant s'adapter.
6911 Je pense que la question est plutôt celle des modalités de transition dans ce régime.
6912 LE PRÉSIDENT : On ne parle pas d'interdire, on parle d'une pause temporaire de quatre années, si je comprends bien.
6913 M. MESSIER : Dans l'immédiat, cela revient absolument au même. Qu'est-ce qu'on gagne effectivement dans ces quatre ans-là? Les petites compagnies de téléphone, la concurrence va évoluer, elle va s'implanter au niveau des sans fil; les clients vont être à l'abri complètement... n'auront pas de choix.
6914 Et on fait face, dans certaines situations, à vraiment des... Les consommateurs sont bien au fait de la concurrence qui s'est développée. Ils l'ont vue dans d'autres territoires. Ils nous demandent pourquoi les câblodistributeurs qui offrent dans d'autres territoires ne peuvent pas l'offrir dans celles-ci.
6915 Donc, je pense que la question, c'est plutôt de faire face immédiatement à quelles sont les conditions dans lesquelles les toutes petites pourraient faire face et s'adapter à la concurrence. Donc, nous serions plus ouverts à des modalités de transition qu'à un moratoire complet.
6916 LE PRÉSIDENT : Moi, j'espère que vous voulez élaborer sur ces méthodes quand c'est votre tour.
6917 Peter, do you have a question?
6918 COMMISSIONER MENZIES: I would like some clarification on page 6 of your oral presentation. At the end of your story about the 50-lot subdivision and its service, you say in the second-last sentence that the area is heavily treed and satellite might not work for those in the valley, thus no internet service.
6919 Are you saying that in heavily treed valleys satellite wouldn't be an option for that developer?
6920 MR. STEVENS: I guess there are two points. I wasn't referring to the developer, I was referring particularly to the private homes.
6921 I guess when I said "anywhere in Canada", I really meant -- and this example works best in eastern Canada, because the satellite is going to be over the west.
6922 So if you have a satellite dish -- and this would apply whether it's for internet or for cable TV -- you have to sort of point your dish at the satellite. If you're in a valley and you have to point it west, and there is a big hill behind you, it won't go through the hill. And if it's very heavily forested, it doesn't go through heavy trees very well either. Either one could block the signal.
6923 So some of those homes just may not be able to get access to satellite in that regard.
6924 COMMISSIONER MENZIES: I wouldn't mind hearing from one of the satellite companies on whether they have a view on that.
6925 MR. MADURI: We have currently four satellites that we use. We will be adding two new high-throughput satellites. That's six satellites, in different orbital slots.
6926 A customer needs a shot to the sky. I would tell you that -- if I use the New Brunswick example, where we have loaded, I believe, about 13,000 customers, I believe we have three examples where the tree cover was so dense -- three examples where the tree cover was so dense that we couldn't get through, and what it would have required is cutting a limb or a branch on a tree to get service.
6927 So I find that -- that's incomprehensible, that perspective.
6928 COMMISSIONER MENZIES: I'm sorry, you had three examples where the trees were too dense and --
6929 MR. MADURI: Three examples where the tree cover was so dense -- the location of the home was in an area of such dense tree cover where we couldn't get a shot to the sky.
6930 Again, unfortunately, in those situations, the customer was not willing to do anything in terms of cutting the tree, or cutting a limb or a branch off the tree.
6931 COMMISSIONER MENZIES: Okay.
6932 Do you have anything to add?
6933 MR. STEVENS: I wasn't aware that they have six satellites. I do know that when you are trying to find one, it is sometimes very difficult with the hills and trees, that's all.
6934 COMMISSIONER MENZIES: Okay. Thank you.
6935 THE CHAIRPERSON: Thank you very much. We will take a 10-minute break.
--- Upon recessing at 1043
--- Upon resuming at 1057
6936 THE SECRETARY: Order, please. A l'ordre, s'il vous plait.
6937 THE CHAIRPERSON: It seems we are missing a Commissioner. Let's wait.
6938 THE SECRETARY: All right. Let's proceed now, Mr. Chairman.
6939 THE CHAIRPERSON: Yeah.
6940 THE SECRETARY: We will now hear the oral rebuttal argument from Saskatchewan Telecommunications. Mr. John Meldrum is appearing for SaskTel.
6941 Please introduce your colleagues for the record, after which you will have 15 minutes.
6942 MR. MELDRUM: Mr. Chairman, Commissioners, I am John Meldrum, SaskTel's VP corporate counsel, and today I have with me Kym Wittal, our chief technology officer and Bob Hersche and Andrew McKay from our regulatory group.
6943 It is good to be back before you again on the two very important topics of this consultation, the strengthening of the voice contribution system and the provision of broadband services to the unserved and underserved citizens of Canada.
6944 In Timmins, and here in Gatineau, the Commission has been told that the Policy Directive means the contribution system should be axed and definitely not expanded for broadband and that subsidies are inherently bad. SaskTel's position is that the current contribution system for voice and any expansion to broadband is totally compatible with the Policy Directive. While the Policy Directive does emphasize market forces, it remains subject to the Telecommunications Act itself.
6945 In that regard, the Policy Directive itself states:
"...in addressing concerns with regards to social policy, the Order does not diminish the Commission's commitment to upholding the legislated policy objectives in section 7 of the Act, both economic and social, including the objectives to render reliable and affordable telecommunications services of high quality accessible to Canadians in both urban and rural areas in all regions of Canada."
6946 We believe that both a voice and a broadband contribution system are essential to ensure that rural, remote and First Nations citizens have access to reliable, high quality telecommunications. Both broadband and voice are now as essential as electricity for these residents to participate in today's society, as the Chair acknowledged in Timmins.
6947 Bell and the cable companies have said amongst other things that the contribution regime should not be used as the mechanism for a broadband program. They use the Telecom Policy Review as their basis for this assertion.
6948 Again, this is not what the TPR actually said. I quote from the TPR where it says:
"If inter-service subsidies remain small, like the CRTC's contribution fund subsidies, then economic distortions and inefficiencies are minimized."
6949 SaskTel and others are suggesting to you that a small levy on an expanded base of telecom services including internet and texting and devoted to broadband will suffice to ensure that all parts of Canada are stepping into the digital economy with both voice and broadband services.
6950 Given that all telecom companies, under SaskTel's proposal, would pay a 2 percent levy for both voice and broadband development in rural areas there are no advantages or disadvantages given to any TSP as they continue to develop services in urban areas where market forces are effective.
6951 As we said in Timmins, SaskTel believes that the Commission should consider a plan where initially there would be two parallel but eventually converging support systems, one for voice and one for broadband. I will speak to these two systems separately.
6952 In terms of the voice contribution system, we do not believe that anyone has been able to say that it has not been effective. What they do say is that it is now broken. That is not the case.
6953 Bell and Bell Aliant have taken the position that, if you compare the density differences that exist across the country with the cost differences that also exist, there is a theoretical disconnect and that therefore costs submitted by the western ILECs are wrong. However, Bell Aliant has simultaneously stated that the costs in their own HCSA are understated.
6954 And they go on to suggest that this difference in costs, which does not match the differences in density can be resolved by applying a national average cost amount, a solution which would give no heed whatsoever to density and would likely lead HDR to create another single mode regression line which again would have no relationship to the prescribed costs.
6955 This is absurd logic.
6956 If Aliant's costs are wrong, fix them. There is absolutely no connection to the costs in the west. Our costs are justifiable.
6957 In fact, like MTS Allstream, Bell helped us to develop those costs, and they were reviewed and approved by the Commission with adjustments. Why now are they suddenly wrong or is it simply a case of corporate amnesia on Bell's part?
6958 If Aliant, or the Commission is concerned about the work it might take them to fix Aliant's costs, SaskTel would note that the Commission has information currently before it that should suffice.
6959 Bell Aliant has submitted for Commission approval revised unbundled loop rates, including loop rates for their high-cost bands, and the Commission has conducted an extensive examination of these costs. These costs could be approved as the basis for Aliant's HCSA subsidy requirement.
6960 Secondly, Bell and Aliant have stated that increasing residential rates by some 50 percent and redistributing costs would have no impact on any company and we would all be winners under this type of "rough justice". We agree it would be "rough" but there would be no justice for the customers, the residents of high-cost serving areas who would be most affected by their proposals.
6961 As mentioned by the SILECs and MRC Papineau in Timmins, this level of increase is unacceptable. SaskTel would go further to say that if the Commission were to consider such huge rate increases, then the general public must have an opportunity to comment on the impact it would have on their lives.
6962 Today most HCSA residents do not understand the magnitude of the impact this hearing could have on them. You would need to bring this issue beyond the realm of the regulatory experts as there will be real people impacted.
6963 Other companies have stated that cellular service is now a viable substitute for voice and therefore diminishes the need for a voice contribution system. Again, I would like to remind the Commission of our previous overview of our rural cellular system. In rural areas there are serious and substantive coverage issues due to terrain or distance from towers, there are affordability issues, and there are issues about the entire resiliency of the network.
6964 While TELUS indicates that they have 99 percent cellular coverage, as we showed in Timmins, the real question is at what strength. Is it sufficient to work in a building? Does it only work if you are in a vehicle or does it only work if you are standing on a rock in your backyard?
6965 There are reasons that so few rural residents opt out of the wireline voice system in favour of cellular compared to their urban counterparts.
6966 Lastly, in reference to the voice system, companies have stated that it would simply be too complicated to opt for a system where only the high-cost service area of NAS outside of the doughnut or base rate area would be eligible for subsidy.
6967 Again, as we have submitted in our undertakings from Timmins, this need not be the case. We have suggested that, as an alternative to a full rebanding and recosting proceeding, the Commission could begin the new contribution regime based on the current total high-cost service area contribution amounts per band.
6968 The Commission could take the current subsidy requirements of an entire band for a company, including those NAS within the base rate areas and reallocate those costs to only the NAS outside of the base rate areas. As well, this cost redistribution could be done by ILECs on an optional basis in the event an ILEC for some reason doesn't see the benefits of such a change.
6969 We also note that the doughnut proposal solves a lot of problems we have heard at this hearing:
6970 If it was adopted there would be no subsidy where competition exists, which is in the centre of the doughnut.
6971 It focuses the subsidy for only real high-cost service area NAS, i.e. that area outside of the doughnut.
6972 The obligation to serve should only exist outside of the doughnut.
6973 And in building wireless coverage it is usually located in the centre of the doughnut.
6974 We can't leave the doughnut without commenting on the general lack of understanding by many of the presenters of what rural Canada and, more particularly rural western Canada, is actually like. Several presenters have said that we now need to account for all the additional revenues that we get from wireline services outside of the doughnut.
6975 Make no mistake about it. There aren't any additional wireline services outside the doughnut in rural Saskatchewan. There are no DSL services. There are no IPTV services, just wide expanses of land with residents and reserves getting plain ordinary telephone service.
6976 As to the comments made concerning the development of a broadband system, I would like to make the following responses.
6977 First and foremost, allow me to reiterate our position. The notion that market forces and technology will solve the current disparities between urban and rural broadband speeds and prices is not consistent with how Canada got to the point that it is at.
6978 For example, in Saskatchewan, SaskTel has done very well in bringing 1.5 Mbps to rural and First Nations in Saskatchewan over the last decade but we have only done so with federal and provincial ad hoc government support. Technology and market forces did not get us to where we are at and they won't result in rural areas achieving 5 Mbps at an affordable price. To achieve this, we believe that the Commission can and should take responsibility for broadband in fulfilling the policy objectives laid out in The Telecommunications Act.
6979 Secondly, there would seem to be great confusion as to the technology which will solve the broadband needs of unserved and underserved rural residents. To be clear, there is no one technology. If one technology were the answer for rural areas then believe me SaskTel and all of the other companies here would have adopted it and focused on that technology.
6980 Satellite, fixed wireless, LTE -- which is the next phase of cellular -- various forms of DSL and new fibre options all will have a role to play in achieving what we believe to be the minimum goal of 5 Mbps services for rural, remote and First Nations Canadians.
6981 Unlike many of your previous presenters, we do not believe that creating a broadband plan is impossible or too complicated to implement. The time for monitoring is past. It's time for action.
6982 In simplistic terms we believe that you could set up a system to promote the expansion of broadband to served and underserved areas in the following manner.
6983 First, set the notional target of a minimum of 5 Mbps.
6984 Second, set a reasonable contribution level which will have minimum impact on the industry. We believe that a 2 percent total revenue percent charge to fund both voice and broadband regimes would be appropriate. This is only 1.3 percent above current levels. If applied to the wider revenue base which SaskTel and others has proposed, this would provide some $440 million per year for broadband enhancement and expansion in rural Canada.
6985 Following the setting of the levy, the Commission could ask potential service providers to provide service improvement proposals which could be reviewed by an expert committee with engineering and financial backgrounds. This committee would recommend one time or multiyear financial support for various projects on the basis of certain principles such as higher priority for totally unserved areas, building on existing infrastructure where possible and focusing on the sustainability of the new services.
6986 With an ongoing system of disbursements and projects in place the Commission could then monitor progress to targets and increase or decrease the levy as they deem appropriate.
6987 Setting up this type of system is extremely more efficient than the disjointed programs that have occurred to date. And rather than be paralyzed by analyzing the minutia, the focus can be on the work needed to get to the current target.
6988 Let me close with our two top -- sorry -- our top three differences from many of the incumbent cablcos and telcos before you.
6989 First, the voice contribution system is not broken. It is working very well and it is continuing to achieve its objective.
6990 This system should not be hobbled because the net payers into the system find it an inconvenience. The voice contribution system is not onerous. The cost to the industry has fallen from 4.5 percent of revenues in 2001 to 0.73 percent in 2010 and will continue to fall.
6991 We urge you to stay with first principles. The voice contribution is necessary to maintain the prime objective of The Telecommunications Act which is the maintenance of an affordable telecommunications network for both urban and rural residents of Canada.
6992 Lastly, for the past decade every national report, every political policy statement has indicated the continued need for ubiquitous broadband. The policy goals are clear. The Telecommunications Act gives you the authority to implement these policies and now with this public consultation you have the opportunity to ensure that rural, remote and First Nations Canadians can bridge the digital divide with their urban counterparts.
6993 For SaskTel and for Saskatchewan, the broadband proposals are not about the here and the now. Rather it's about creating the communications network of the future. Every generation has had to confront the challenge of connecting the country and robust, affordable broadband is the answer now, before today's served customers become tomorrow's underserved customers.
6994 While we fully expect to be net payers into a broadband system for at least the near term, we put forward our views on broadband as being the right direction for Canada to meet the challenges of global competitiveness and to harness the benefits of broadband to address many key national issues.
6995 With that I again thank you and we welcome your questions.
6996 THE CHAIRPERSON: I have been hearing so many submissions that, I'm sorry, I don't recall them all. Remind me in section 28 what you are talking about if you say it would supply it on a wider revenue basis, which SaskTel has proposed.
6997 What is the wider revenue base?
6998 MR. MELDRUM: Well, today internet and texting is excluded from the revenues to which the percentage is charged.
6999 THE CHAIRPERSON: And what happened to your proposal that says that in rural areas, in effect, any community more than 50 is considered densely populated?
7000 MR. MELDRUM: Oh, we are still on that page, yes.
7001 THE CHAIRPERSON: You are still --
7002 MR. MELDRUM: Yes. We consider that to be a low-cost area with the exception of basically the Band "G" which is the far north, because we do have far north.
7003 THE CHAIRPERSON: So these are what you call base rate areas, is it?
7004 MR. MELDRUM: Yes.
7005 THE CHAIRPERSON: And so I think the people before you called that a partial rebanding, is what actually -- is what you are doing here.
7006 MR. MELDRUM: That would be the proposal, yes.
7007 Now, we did suggest a way of accomplishing that without a full rebranding proceeding and that's where you take the full amount of the subsidy by company, by band, and just put it over the high-cost locations which are those areas outside of the base rate area, or the doughnut as we have called it.
7008 THE CHAIRPERSON: Yeah. But this is in effect your methodology of identifying the doughnut?
7009 MR. MELDRUM: Yes.
7010 THE CHAIRPERSON: It's anything where more than 50 households are being served?
7011 MR. MELDRUM: Anything more than 50 households is in the, I guess, the "Timbit" as people like to call it.
7012 THE CHAIRPERSON: Yeah, right.
7013 It's strange. You made that proposal. I haven't heard from anybody either attacking it or it seems to have been generally ignored in the whole hearing, or else I didn't -- nobody sort of focused in on your suggestion. Can I hear from some of the other companies what they think about the Saskatchewan approach?
7015 MR. DANIEL: Jonathan Daniels from Bell Canada.
7016 This is a proposed rebanding proposed. I mean what they are talking about, we don't have the ability. We don't have the tools in place. We don't have the information to do this.
7017 In order to do it consistently across the country you would have to have a proceeding to talk about what is the way you are going to do it, how are you going to define it, and that is rebanding. That's looking at doing a complete examination of rebanding.
7018 And even after you complete that, then what you have to do is you have to -- each ILEC would have to build the IT systems to be able to implement it, to be able to track when a customer is in the new band and outside the band.
7019 So we think it is a complicated proposal and we are not in a position. We don't have this information and, in fact, we think it would have to be consistent across all the ILECs to do it. So it would require a follow-up proceeding.
7020 THE CHAIRPERSON: Bell Aliant, you had something to say too?
7021 MR. HENRY: Yes, Mr. Chairman. Denis Henry for Bell Aliant.
7022 We are in the exact same position in all parts of our territory. And in the Atlantic region and the Ontario and Quebec region we do not have base rate areas. So you would have to create them. As Mr. Daniels said, you would go through a huge process to do that.
7023 THE CHAIRPERSON: SaskTel...?
7024 MR. MELDRUM: Oh, sorry.
7025 THE CHAIRPERSON: I'm sorry, let's hear from other comments. TELUS has a hand up too.
7026 MR. ROMANIUK: Orest Romaniuk, TELUS.
7027 We similarly do not believe a rebanding process is required, simply fix the costs and provide or pay the subsidies to those who have the obligation to serve in those regions.
7028 THE CHAIRPERSON: Okay. Now, SaskTel?
7029 MR. MELDRUM: Our proposal is it could be optional. If they don't see a benefit to it then there is no reason for them to do it.
7030 But, secondly, it's interesting that Bell says there is no reason whatsoever; is that they don't have the systems and couldn't do it. Well, they don't need to do it. They don't have any high-cost areas any more that get a subsidy. So it would have nothing to do with them.
7031 THE CHAIRPERSON: Bell Aliant, you seem to take exception to what he just said.
7032 MR. MELDRUM: As opposed to Bell Aliant.
7033 I'm talking about Bell Canada because Jonathan Daniels spoke specifically to say, "We don't have the systems and it would take this huge amount of money". He made it sound like an impossible task. Well, there is no reason for them to have to do it.
7034 THE CHAIRPERSON: Okay.
7035 Peter, you have some questions? Oh, no, sorry.
7037 COMMISSIONER DENTON: I don't have questions, sir.
7038 THE CHAIRPERSON: Okay. Len...?
7040 COMMISSIONER MENZIES: I have got a couple of questions that I will just try to walk through.
7041 One of the things that is frustrating for me here is that so far in this hearing I haven't heard anything and I haven't seen any real data that the process of broadband expansion which is high speed, which has taken place over the last 10 years or so, has stalled and that there is a need -- and therefore there is a need for subsidy.
7042 High speed access was rolled out by most people about 10-12 years ago. The data we have is that 95 percent of Canadians were being served by 2008 and I haven't heard anybody say that it stopped with the market serving it as it is.
7043 I would like, if you can, to address that. Where has it stopped? Where has the market approach to this expansion stalled and failed?
7044 Yes, that's the question.
7045 MR. MELDRUM: Yeah, a couple of thoughts and then I think Bob Hersche would like to add some.
7046 Certainly in the case of Saskatchewan we have reached the 1.5 Mbps but it is as a result of chasing numerous federal and provincial programs and contributions towards getting to that point. But that's not an endpoint to get to 1.5.
7047 That won't be sufficient in another year or two and, in some cases, it's already not sufficient for some of the communities that we even have yet to go to.
7048 I think Bob spoke in Timmins about our expansion of broadband to some of the First Nations in southern Saskatchewan and all that would be approved was 1.5 Mbps by Industry Canada. Well, we haven't even installed it and the bands are coming to us and saying 1.5 isn't going to cut it for education and the band office and administering the services on the reserves.
7049 So I want to make that point, that this is a continuum and we do not see as we look out into the future, a consistent program that's going to allow broadband to continue to expand because it has got to continue to expand. The one thing you know for sure looking backwards, is that the demand for high speed continues to grow and grow and grow.
7051 MR. HERSCHE: If I may.
7052 The other thing, I would like to refer you to Bell's submission just yesterday. They gave two provinces, New Brunswick and Saskatchewan, which actually have reached at least 1.5 some of them, a minimum as they go forward. That's only because those two provinces as provinces stepped up and gave special grants to expand that kind of broadband. This is not a methodology that we can depend on across Canada on how to grow the federal telecommunication system if you are going to reach those kinds of goals.
7053 Also, part of this, as we talk about this, we have reached this over, as John has said, a number of years as we have gone through. It's all hit and miss. We are all looking under the rug for the next program that's going to come along to see if we can find some dollars with somebody.
7054 So what that means is we go ahead for a little bit in a small area of the province and then we sit back again and we let the rest of the world go ahead till the digital divide grows, till there is enough crying from consumers and the regions to say, "Oh, we have to have another program". That isn't the way to create any kind of -- or collapse the digital divide on an ongoing basis.
7055 So really, you are right. The data may not be there in terms of what we have done. It's how we have achieved it and how we are going to go on to the next step.
7056 COMMISSIONER MENZIES: Okay. So, if there was funding provided -- continue to be provided by provincial and federal governments in terms of that, that would continue to serve the closure of the remaining gap?
7057 MR. MELDRUM: Well, it's interesting that the provinces have stepped into really what is federal jurisdiction. I guess they felt they had to, that the federal government isn't leading on this federally-regulated industry and the provinces have put money into it.
7058 I think it's up to the federal government to basically develop the programs and the policies and appropriately fund a mechanism to achieve the objectives in the Telecommunications Act.
7059 OMMISSIONER MENZIES: Okay. That answers that.
7060 My other question is -- I just want to make sure I ask this in a way that makes sense.
7061 In terms of this affordability issue, and we are talking about telephone, your position is that a movement of telephone prices of $10 a month is not affordable for the average person. I understand that.
7062 I'm trying to make sense of it in regard so that we have -- in the sense that we have on one side an argument that says $10 more for telephone isn't something that can be afforded, particularly as you point out, in First Nations. Yet, on the other side, we want a subsidy to expand the broadband network to give people access to something that will cost them $40 or $50 a month which I'm guessing is affordable.
7063 Do you understand what I'm saying?
7064 MR. MELDRUM: Yeah.
7065 COMMISSIONER MENZIES: It doesn't make sense to say on the one hand, people can't afford to pay $10 more for phone but people must be granted access to something that's going to cost them $40 or $50 a month. I mean they either have the money or they don't.
7066 So help me make sense of that.
7067 MR. MELDRUM: I would say for the poor affordability is all about making choices. They only have so much disposable income in terms of what they are going to use it for and what services they are going to get with it.
7068 Somebody who would view $22 versus $36, that $14 difference as being unaffordable, look at what they get for local service. They get to what call, in our case, maybe 1,000 other people for 36 bucks a month. They may look at it and say, "No, I will spend my money somewhere else" just the same as if they looked at broadband and could get connection to the world and all the services that they can achieve through education and health support and social networking. 30 bucks for them is probably affordable.
7069 So it's a question of what they get with it. We are not suggesting that every poor person in Canada doesn't have two nickels to rub together. It's a question of them getting value for the service and then actually taking that service.
7070 COMMISSIONER MENZIES: The most sensible thing would be to take your internet subscription and then add a VoIP on it, wouldn't it?
7071 MR. MELDRUM: It would be, yes.
7072 COMMISSIONER MENZIES: So if you had a subsidy to expand broadband how affordable would you make it for people? What do you charge them right now and what would you charge them if you had a subsidy?
7073 MR. HERSCHE: Normally, we have taken the policy that as we go forward that it's roughly equivalent between rural and urban types of rates for that. So as the market progresses, as the world -- we would look at those kinds of levels so we are not unduly disadvantaging any one level or one area of the country.
7074 COMMISSIONER MENZIES: So people living on a First Nation in northern Saskatchewan would pay the same rate as people living in a posh subdivision in Regina?
7075 MR. HERSCHE: Very similar.
7076 COMMISSIONER MENZIES: Okay.
7077 Those are my questions. Thank you.
7078 THE CHAIRPERSON: Len...?
7079 COMMISSIONER KATZ: Thank you, Mr. Chairman. Good morning.
7080 I want to pick up on paragraph 23 of your submission this morning where you talk about the need to move towards 5 Mbps in rural areas at affordable prices. I recognize that you are suggesting a notional target of 5 megabits throughout Canada for everybody, rural and urban.
7081 We had a discussion last week about affordability and your press release with Barrett that actually quoted a $56.95 price for what you called a "satellite internet service powered by Xplore" which provided 1 megabit -- up to 1 megabit of service for $56.95. Obviously 5 megabits would cost more and so the distinction there was $56.95 was affordable at that level for 1.5 or 1 megabit, but not for 5.
7082 I guess I would ask Barrett the question if they are here in the back room. How far has technology evolved and what is the step-up to get to 5 megabits today with the satellite technology that is referenced in the press release?
7083 MR. MADURI: I am sorry, Mr. Katz. Can I just ask you to -- I want to make sure I have got the question. Can you repeat it, please?
7084 COMMISSIONER KATZ: Sure. On June 9th, 2009 Barrett and SaskTel issued a joint press release introducing SaskTel's satellite internet service powered by Xplore for $56.95. Then actually, I will quote the one line in here that I was referring to:
"SaskTel's satellite internet powered by Xplore provides affordable, fast and easy internet access packages with speeds [up to 1 megabit or] up to 1.5 megabits starting at $56.95 a month."
7085 SaskTel is not coming before us saying that they believe that 5 megabits should be the minimum in this country. I guess my question is, do you have a product that gets to 5 megabits and at what price?
7086 MR. MADURI: John Maduri for Barrett Xplore.
7087 We do have a product that will get to 5 megabits today. I think the most relevant thing is what will we have as we deploy the new high throughput satellites?
7088 I would acknowledge that, you know, today's pricing on existing satellite technology is higher than we would like to be, than I think you would like it to be, and as we move forward we will see pricing on the new high throughput satellites and on all of our satellite platforms that will be much closer to urban on that 5 megabit package.
7089 COMMISSIONER KATZ: What is it today.
7090 MR. MADURI: Today, the actual pricing in a market with no form of subsidy is $299.
7091 COMMISSIONER KATZ: For 5 megabits per month?
7092 MR. MADURI: Correct.
7093 COMMISSIONER KATZ: Okay. So we are all waiting for this new bird to go up and new pricing to come into play?
7094 MR. MADURI: That is correct.
7095 COMMISSIONER KATZ: And you are asking us to make a decision today on something that won't be operational until when?
7096 MR. MADURI: Will be operation mid-2011.
7097 But, Mr. Katz, if I can offer, those investments have been made. At this point I feel a little uncomfortable sharing my pricing strategy with potential competitors. I think this is information that we would be pleased to share with the CRTC in confidence.
7098 Again, you are asking me to basically, in a competitive environment, present my pricing basically into the market to potential competitors.
7099 COMMISSIONER KATZ: No, I just feel that we need to have a full record. And if we are going to make a decision, and this is not a decision just for today, but for several years into the future, especially as we talk about minimum speeds, that we need to have some understanding as to what the likelihood is of Canadians being able to get that as well.
7100 MR. MADURI: Well, Mr. Katz, if I could offer, you have introduced two elements. There are two satellites going up. The decisions have been made, the investments have been made. I am not sure if I updated at the last meeting, one of the satellites has been manufactured, it is in thermal vac and it is getting ready for transport to the actual launch site. So if that is what you are talking about, the likelihood.
7101 In terms of the pricing and affordability, we are prepared to share that in confidence with the CRTC through this hearing or this process and that will afford you the opportunity to understand how affordable our pricing will be.
7102 COMMISSIONER KATZ: Okay, thank you.
7103 SaskTel, just one other question. Paragraph 29 you talk about the SIP program that was administered by the CRTC several years ago and using that as a model going forward for broadband services.
7104 Notwithstanding the reference to SIP, how different is this proposal from what Industry Canada has been doing with regard to their broadband initiative? Have they not been looking at engineering and financial backgrounds of the various applicants and deciding on where best to provide this money through I guess competitive process?
7105 MR. MELDRUM: They certainly have had a process to review the proposals that have come before them. But I think we heard in Timmins where on occasion they put facilities in that didn't make any sense. I think Northwestel had some examples of that, we have had examples of that within Saskatchewan. But yes, they do bring some sort of rigour to applying standards against the applications that they receive.
7106 COMMISSIONER KATZ: But notwithstanding that, you believe we are better positioned to allocate this money than them?
7107 MR. MELDRUM: Well you would also have the source of money.
7108 COMMISSIONER KATZ: If we accept the fact that we are going to go through a contribution regime bump-up?
7109 MR. MELDRUM: Right. An ongoing source of funding, yes.
7110 Bob would like to add.
7111 MR. HERSCHE: Commissioner, if I could add. We also believe that the Commission would a better -- not only to source this funding, but distributor of this funding, as you do through the contribution thing because you will be focusing with a number of factors that are just looking at telecommunications.
7112 Unfortunately, when you run programs through either Industry Canada or the province or however you do it, there are all sorts of other factors that come into bear of how you distribute the dollars, how you do these that aren't related to actually unserved or the kinds of infrastructure you might need. And so we do believe that it would be a cleaner, more focused kind of process.
7113 COMMISSIONER KATZ: How would we respond to provinces who would say that they have already used taxpayer money to fund 100 per cent rollout of satellite services and now their residents are being asked to fund another program for which they have already paid for implicitly once in their own province?
7114 MR. MELDRUM: Well, first movers always take that risk. That is the way it would be with Saskatchewan. We have put a lot of money into broadband, the Province of Saskatchewan. That is the way it is if you want to be a first mover. That is the risk you take when you go ahead.
7115 COMMISSIONER KATZ: Those are my questions.
7116 THE CHAIRPERSON: I would like to go back to a question of my colleague, Mr. Menzies.
7117 The technology here. Are we fighting sort of the last straw here? This is all based on the premise, you have a computer and you have a fixed thing to the internet, et cetera. I think it was Bell yesterday who pointed out that the future may be quite different that, you know, the iPad is basically a computer and a connection in one, with which you walk around, et cetera, and you have wireless access, et cetera.
7118 If we adopt your proposal, are we setting something up which may become obsolete, because the way in future people will have -- rather than, like here, I have computer in front of me which is connected to high-speed, I will have a mobile device, something like the iPad which will only come down in price. And so there is just a question of whether you have HSPA or the next generation thereof.
7119 You know this is, for us, one of the big issues, is we don't want to put something in place -- and the scheme that you suggest undoubtedly would work, but it is essentially based on that essential assumption that we are still in yesterday's world and I am just not sure to what extent that is a good basis to start off with.
7120 MR. WITTAL: Kym Wittal. SaskTel would suggest that this is not a static situation. We have indicated that we think 5 megabits would be a target. We have highlighted to the Commission numerous times that we think that there are multiple technologies today that will serve that or could serve that situation. And in fact, in SaskTel's case, we do use all four of those technologies that have been talked about.
7121 We also have suggested that by no means do we believe that this will stay stationary, that a fixed service will be the only service, that at some point in the future that a wireless service, specifically a mobile wireless service could be the answer. We certainly hope that that could be the case.
7122 SaskTel's situation, we talked about before, that we are not going to go back and replace copper loops with more copper loops, therefore some kind of wireless solution would be good. And ultimately a solution that would allow mobility, allow other things to happen simultaneously as meeting the objectives of the broadband proposal would all be ideal.
7123 I think our big issue today is that is not the case. Right now we do not believe that an HSPA type network or even an LTE type network is the answer that will solve all the issues for all of our customers in Saskatchewan; for some potentially, but not for all.
7124 THE CHAIRPERSON: But doesn't your answer basically suggest that nobody knows how it is going to develop, et cetera, and therefore we, as a Commission, rather than estimating and suggesting a specific way and adopt a specific format should in effect just let the market find the optimum solution and, at best, deal at the margin, where clearly there is going to be market failure rather than trying to adopt a broad scheme like you are suggesting?
7125 MR. WITTAL: Again, I don't think SaskTel is suggesting that any solution is the answer. We are suggesting that multiple solutions will come and, to some extent, market forces or market conditions or even worldwide technologies will come to bear in Canada as they do in other places. We of course will leverage that if it makes sense.
7126 THE CHAIRPERSON: But look, you want me to partially re-band, you want me to increase the contributions to the fund, you want to set a target and you want companies to adopt SIP programs in order to meet those targets and then us to authorize the funds for that.
7127 That seems, to me, like a fairly regimented well-thought-out scheme which will undoubtedly get us there, but it is all based on essentially -- it doesn't make allowances for there to be technological change, innovations, or things to be coming quite differently than the way you laid it out.
7128 MR. HERSCHE: If I may. With the SIP kind of proposals, when they review that, that will be looking at different kinds of technologies that will be, as we do this over time on how to get to various speeds as we go through this over time and the speeds begin to increase, that we are going to deliver to rural areas.
7129 We are saying 5 megabits in the next three years. And we know, as the United States has shown in their universal service, that four years after that we are going to have to have a target of 10 or even more than that.
7130 So we know that there will be new technologies, that there will be different ways of doing it, but it is like what we have been doing in Saskatchewan as we go through this. For example, I gave you in Timmins an example of our First Nations project that we are doing. We are laying fibre to many of those projects, but because of the parameters of the program we are in we are only able to give them 1.5 megabits, putting on the kinds of ends, if you will, that allow 1.5.
7131 The next time to give those people more bandwidth is just putting some -- is refitting some of those fibres, redoing some of those ends. That doesn't mean that I have still got a business case to do it, but it is not as expensive as the first time when I began to lay fibre.
7132 The same is true when you look at the HSPA network and going to LTE. We are building many of the towers and more towers as we begin to do that. Again, going the next step, it may not have a business case to go the next step, but we are not recreating the kinds of base infrastructure again to get there.
7133 So we do see this not as something that is growing, but as something that is building on new technology as it comes along.
7134 THE CHAIRPERSON: My colleagues have a question?
7136 COMMISSIONER MOLNAR: I just want to follow-up as well on the broadband proposal.
7137 You say the time for monitoring has passed and it is time for action. We have heard many people here say essentially, and with some exceptions, but essentially it is job done at 1.5, and so the issue is consumers becoming underserved. And I realize before, you know, we have heard some exceptions to that. But you as well, you are sitting in a province with 100 per cent broadband at 1.5 and higher and you are looking to the future.
7138 So my concerns when you say the time for monitoring is passed and it is time for action, do we have truly all the information we need to setup an efficient and effective broadband program? I mean, do we know all the sources of funding that are available today?
7139 You have been effective in achieving 100 per cent with the sources of funding that have been there today to support extension into rural and remote areas. So why is it we now believe this gap of $440 million per year in funding exists?
7140 MR. HERSCHE: No, we don't know everything and we will never know everything. All the things and all the areas of Canada where there is broadband, we are not suggesting we never monitor, we don't look at it. What we are saying, as many of the people have suggested here, is that we sit back another three years and we monitor it and see in five years if we really have a bigger problem than we have today.
7141 We know that in the next three years that the bandwidth we are going to need is going to expand. We know that the market forces aren't going to work in some of these high-cost areas.
7142 Again, I spent a little bit of time following the U.S. hearings on their universal service. They know that they did not have all the information, but they knew that they had to act and to move ahead.
7143 And that is what we are really saying, is we know that it is going to expand, we know that it is going forward, we don't know all the answers as we go forward and we are not asking that the Commission would know every answer before we do that.
7144 Because as some of the other companies have said, our alternative is just to continue to monitor and when we start to talk to the people in some of our rural areas and say, well, the CRTC is monitoring, and maybe if you get really far behind in a digital divide, maybe we will do something.
7145 COMMISSIONER MOLNAR: Just to be clear, and this was part of my question here, I mean it isn't sit back and monitor. There have been programs in place to extend broadband through the provincial governments, some municipalities, as well as, you know, a number of federal programs, both through Industry Canada and you have noted yourself that you have been going into INAC for funding. Those funding avenues are not removed, are they?
7146 I mean, the potential is we put this money in place and other funding avenues are removed and it is a zero-sum game, and what we have done is made it more efficient and effective because now you are not going to two or three places, you are going to one.
7147 But, like what are you talking about? Is this incremental money or we are just looking at replacing existing funding programs?
7148 MR. HERSCHE: No, we are not looking at incremental money. But what we are saying is that the types of programs, be they provincial or federal, are almost created on a whim. We do not know when they are going to occur and they only occur when the consumer or the residents or, in many cases, the constituents have hollered loud enough that the digital divide is start to really get wide.
7149 What we are saying is we know the long-term problem, we should go ahead and begin, under the Telecommunications Act, to create a mechanism that can smoothly begin to deal with these kinds of issues over time.
7150 COMMISSIONER MOLNAR: So could you possibly agree that monitoring, identifying the issues and the gaps, would be a good first step?
7151 MR. HERSCHE: Monitoring is, again, consistent. But if we are going to just start a new monitoring process and say not do anything for the next three years, that doesn't mean we are stepping towards anything as we do that. In three years we know that that gap will be wider in many areas.
7152 So what we are saying is monitor, plus begin to take some kinds of actions, because we can see clearly where this is going to go in the future.
7153 MR. MELDRUM: I think if you look at the timelines, so three years of monitoring, and then you have a proceeding, and then you eventually get a program, that sounds like five years out to me. I think broadband is much more important to this country than sitting back for five years to actually do something about it.
7154 COMMISSIONER MOLNAR: Those are my questions.
7155 THE CHAIRPERSON: Okay, I don't think anybody else have any -- and the other participants from the other groups don't seem to have any issue with what you are proposing or else -- I see some hands.
7156 TELUS, go ahead.
7157 MR. HENNESSY: Thank you, Mr. Chairman. Michael Hennessy, from TELUS. I couldn't avoid that invitation.
7158 I think, to Commissioner Molnar's question, what I didn't hear is that, you know, as Mr. Maduri has told the Commission now in Timmins and at this hearing, by the time this decision comes out or very close to it, his company will be offering a broadband satellite service with, he says, speeds of 5, 10, 25 Mb to I would think virtually every household or covering virtually every unserved household in the country.
7159 So I think Commission Molnar's question is very valid. It doesn't sound to me like we have a growing digital divide. It sounds to me that within a year we have a very significant part of the solution to the problem.
7160 THE CHAIRPERSON: Okay. Bell Aliant.
7161 MR. HENRY: Yes, Denis Henry, for Bell Aliant.
7162 I just want to respond to one thing, some of the other things we will deal with in our reply. But there was a reference to the TPRP report, which I think was incorrect and out of context. We have the actual reference here and I actually have one of the authors of that sitting beside me, so I would like to hand it over to Mr. Hariton just to explain what the TPRP did say on subsidies for broadband.
7163 THE CHAIRPERSON: Go ahead.
7164 DR. HARITON: If I may, briefly, Mr. Chairman.
7165 In SaskTel's comments they quote one sentence from the TPRP, they say:
"If inter-service subsidies remain small, like the CRTC's Contribution Fund subsidies, then economic distortions and inefficiencies are minimized."
7166 They left out the sentences before that and after that and, with your permission, I will just very briefly give you that.
7167 The paragraph says:
"In general, however, the Panel believes cross-subsidies between classes of telecommunication service consumers are an inappropriate means of achieving policy objectives in a competitive telecommunications industry. If inter-service subsidies remain small, like the CRTC's Contribution Fund subsidies, then economic distortions and inefficiencies are minimized. However, if the Contribution Fund were expanded significantly to finance broadband expansion programs, the price distortions and inefficiencies would increase to an unacceptable level, this would distort markets and result in an inefficient allocation of resources by artificially lowering the prices of some services and raising the prices of others."
7168 I think that the spirit of the TPRP report was very much that what you want to do is get the subsidies funded from as broad a base as possible, which is something we have discussed before.
7169 One last comment I should mention also within the TPRP report, there is an emphasis on community-driven programs that in many many cases what you want is you want the broadband to be suitable to the community's needs. And the community working actively together with various levels of governments is the way to get the most efficient solutions.
7170 I have heard, just now, suggestions that you don't want to have the communities drive the process, you want it driven top down. The TPRP position was very much bottom up.
7171 Thank you, sir.
7172 THE CHAIRPERSON: Bell?
7173 MR. BIBIC: Thank you, Mr. Chairman. Mirko Bibic, Bell Canada.
7174 I take great issue with the SaskTel proposal, have a lot to say, will keep most of it for reply.
7175 The one point I want to make is in respect of the reference that Mr. Hersche made to our opening statement about New Brunswick, PEI, et cetera, having full coverage. Of course that was done in part with provincial government help, but it was done mostly by the private sector.
7176 And that point is entirely consistent with the Bell position from yesterday, which you know very well, which is if we need funding to plug in the gaps where there is no service, government subsidies, in a targeted way, are appropriate.
7177 And Saskatchewan, it seems to me, has done the very same thing, as well they should.
7178 The rest I will leave for our reply.
7179 THE CHAIRPERSON: Okay, thank you.
7180 SaskTel, last word?
7181 MR. MELDRUM: I am just going to comment that we believe the 2 per cent doesn't run afoul of what Mr. Hariton referred to in the TPRP, it is a low enough number.
7182 THE CHAIRPERSON: Okay. Thank you very much.
7183 It is now noon, let's break and will resume at 1:30. Thank you.
--- Upon recessing at 1153
--- Upon resuming at 1335
7184 THE SECRETARY: Order, please. À l'ordre, s'il vous plaît.
7185 THE CHAIRPERSON: Commençons.
7186 THE SECRETARY: We will now hear Bragg Communications Inc.
7187 Appearing for Bragg is Ms Natalie MacDonald.
7188 You may now proceed with your 15 minutes oral rebuttal.
7189 MS MacDONALD: Thank you.
7190 During this proceeding a number of issues have been addressed relating to the obligation to serve, the basic service objective, broadband targets, the subsidy regime and CLEC entry into SILEC territories.
7191 Our comments today will focus on certain questions raised by the Commission during our oral presentation and also issues raised by other participants in this proceeding.
7192 The Commission has asked for comments regarding whether SILECs and CLECs should be treated the same in high cost serving areas and, given the brevity of the rebuttal period, we will address that issue in our closing submissions.
7193 While we do not agree with regulating broadband as part of the BSO, the Commission has inquired about whether targets should be established as a means of monitoring Canada's progress in rolling broadband out to all Canadians. The Cable Carriers have proposed a three tiered target for broadband over a five year period.
7194 EastLink believes this is a laudable aspirational objective. In our case, we do not take issue with this proposal if there is a goal that all Canadians have this level of access by the end of a five year period.
7195 However, individual companies may face some challenges in achieving this. Where it is recognized that in certain communities a particular ISP may not meet that goal, but another ISP in that same community is meeting that goal, then such an approach is reasonable.
7196 Our other concern is the extent of reporting obligations that may be imposed on companies with regard to monitoring broadband activity and those regulations that may be imposed on parties if the aspirational goal is not met.
7197 With regard to contribution subsidies tied to obligation to serve, today, any LEC meeting the BSO receives a subsidy in a high cost serving area. It is not tied to the obligation to serve.
7198 EastLink had proposed that the portable subsidy regime for high cost serving areas be maintained. This means that the subsidy would continue to be available for any LEC entering a high cost area and fulfilling the BSO.
7199 A number of parties proposed that the subsidy regime be modified so that only the incumbent -- whether it be the ILEC or the SILEC -- with the obligation to serve should receive it. They argued that the incumbent should be the only party entitled to the subsidy as part of the regulatory bargain made by the incumbent to maintain the obligation to serve.
7200 There seems to be an assumption that the subsidy has been provided exclusively for the incumbents' obligation to serve. However, this was not the basis for establishing the subsidy regime, nor is it the basis to remove the portability of the subsidy.
7201 In Telecom Decision 2000-745, the Commission acknowledged that the contribution regime should also deliver incentives for competitive entry into high cost serving areas and it determined that the regime should avoid unfair advantages to one service provider over another.
7202 Even in a case where there is competitive entry, the incumbent will continue to receive the subsidies for all NAS that it still serves in both the core and the outlying areas of the exchange, and it will only lose the subsidy for those NAS that the competitor serves.
7203 Additionally, the incumbents have been able to recover their initial investments through service improvement plans and pricing regulation that provides a return on investment.
7204 We agree with the cable carriers that once the incumbent has built facilities and serves those customers it would have little reason to stop serving them in the outlying areas, particularly since most incumbents have also expanded their service offerings over their existing facilities, with additional revenue coming in from those new services.
7205 While the Commission may now be considering whether to tie the contribution regime to an obligation to serve, we think it is important to consider the extent to which such a change in the regime may impact competitive entry in high cost serving areas.
7206 Today, a CLEC entering a high cost area may be entitled to a per NAS subsidy. If a new entrant did not have this subsidy, but was facing a fully subsidized incumbent, then the entrant would not only need to consider the business case and the characteristics of the exchange, but it would also need to consider the fact that the incumbent will receive a subsidy for every NAS in the exchange.
7207 If the exchange is truly high-cost, it should be considered high-cost for all wireline providers, not only the incumbent. If a CLEC can serve the exchange without a subsidy, the incumbent, who has already recouped initial investments for facilities builds, should be able to serve the exchange without a subsidy as well.
7208 If the Commission is willing to grant 100 percent of a subsidy to all incumbents, even where they don't serve 100 percent of the NAS, then a competitor has to question where this will stop if the incumbent faces future financial issues. Will the subsidy increase as financial difficulties of the incumbent increase?
7209 This type of uncertainty creates impacts to investment. Today, competitors have entered high cost areas on the basis that the regime operates on principles of equitable treatment for carriers building facilities and offering services. We think that philosophy should continue.
7210 With regard to LNP costs in SILEC territories, EastLink reiterates our concern about the importance of LNP to ongoing competition. In our experience, the majority of customers want to port their number. As such, any competitor building facilities to SILEC serving areas will not be able to make a business case to serve that exchange if it can only serve a subset of those customers, those that are willing to take a new number.
7211 The SILECs have described LNP as a huge impediment to their ability to enable competition.
7212 The Commission asked us whether a SILEC who is unable to cover the costs of network upgrades to provide LNP should be entitled to maintain the full subsidies until forbearance, rather than permit a portable subsidy regime.
7213 Overall, we don't agree with a principle of handing out a subsidy solution based on the SILECs claims, many of which we feel are exaggerated.
7214 Before considering any solutions relating to subsidies for LNP, it is important to investigate the merits of these claims. The following issues would need to be addressed:
7215 Some SILECs have the experience and the functionality today to allow competition. Ten of the OTA members in this proceeding operate as CLECs. The evidence of the cable carriers showed that 16 out of the 36 SILECs in Canada operate as CLECs. Those SILECs who operate as CLECs already have LNP in place in their CLEC areas.
7216 Additionally, at least four of the OTA SILECs offer wireless voice services. Some of their SILEC switches are LNP capable, or can readily be made capable, they may have switch upgrade plans as a regular part of their business requirement, or they already offer services as a CLEC outside their incumbent markets, with systems in place to ease the transition to LNP without incurring the same costs. In these cases, we do not support subsidies to cover competitive entry costs;
7217 If no additional subsidies were provided, SILECs would need to arrive at other solutions to respond to competitive entry, such as shared facilities, expanding existing services, such as broadband, fibre-to-the-home and cellular, as some of them do today. Providing subsidies to cover these costs reduces the incentive to create other efficient alternatives;
7218 Some SILECs have already enabled competition in compliance with the existing regime. Any future determinations that remove portability of contribution should not be prejudicial to these SILECs who have already had to bear the costs;
7219 As a general principle, EastLink submits that there should be no need to subsidize a SILEC for implementing portability, or any other costs borne by competitive entry. Before denying competitive entry, or considering subsidies to cover any of these costs, all other options should be considered.
7220 With regard to the OTA proposal that we have heard during their oral presentation, they have proposed changes to the regime for assessing whether competition should be permitted in SILEC territories. They initially proposed a two-part test that focused on SILECs with 2500 NAS as a threshold.
7221 While the OTA has modified this to reflect the Commission's concerns about it being subjective, the proposal continues to reflect criteria that will effectively deny competitors entry into a number of SILEC territories where competition should not be denied.
7222 The OTA's initial proposal would allow the SILECs to deny competitive entry in one exchange even if they operated in a much larger exchange nearby. A much larger incumbent exchange, I should clarify. Their new proposal appears to count all NAS across their incumbent territory. We weren't clear on this, but I think that is the case. We think this is an approach in an appropriate way of tracking the NAS rather than on an exchange basis.
7223 While the Commission may be sympathetic to some very small incumbents, for example those with less than 2,500 NAS, we think that even in those cases there may be factors to suggest that these SILECs are still equipped to face competition.
7224 If the Commission is looking to establish a simple approach to determining CLEC entry into SILEC territories, then we propose that the current regime continue to apply to the vast majority of SILECs, which would result in competitive entry.
7225 For those that claim to be ill-equipped to face competitive entry, we propose that the Commission consider establishing criteria that illustrates an ability to compete, with a prima facie presumption in favour of CLEC entry.
7226 In our view, the existence of any two of the following conditions, should support a finding in favour of allowing competition. We list those as being:
7227 The SILEC having LNP capable switch or access to such a switch that is LNP capable; it operates as a CLEC; if it offers high-speed; IPTV; cellular services; or has built out fibre-to-the-home; if it has sharing arrangements for key equipment and/or facilities that would ease competitive entry; or the SILEC serves at least 2,500 NAS across its serving territories.
7228 If a SILEC has less than 2,500 NAS and does not meet at least two of these conditions, then we would be open to the Commission considering alternate solutions regarding CLEC entry.
7229 Notwithstanding our comments about a willingness to find some solution, in conclusion, we cannot help but think that all of this debate about CLEC entry into SILEC territories and the concerns about the SILECs not being able to face competition are somewhat of a red herring.
7230 It seems inconsistent that in this proceeding we are spending a great deal of time discussing the move toward cellular service as a substitute for wireline telephony and yet we are concerned about the SILECs facing entry by competitive wireline CLECs.
7231 If the Commission believes that it is inevitable that the vast majority of consumers will eventually use wireless or alternative technology as a substitute for wireline telephony, then are we right to deny access to CLECs in SILEC territories today? Isn't this just delaying the inevitable? Will we increase the subsidies to SILECs as more NAS are lost to cellular or to other technologies?
7232 Today the SILECs are trying to deny access to CLECs who have already, in some cases, made significant investments to provide services in their territories, and yet if their business is really at risk if they lose any NAS at all, then the inevitable fact is they will go out of business once wireless substitution becomes more common.
7233 If this is inevitable, and we cannot protect their business forever, why can't CLECs who have already made investments, who provide cable or other services to some of their customers today, be allowed to compete as well?
7234 Thank you.
7235 THE CHAIRPERSON: Thank you.
7236 When you were reading paragraph 17 you said you weren't quite sure how they were counting their NAS.
7237 MS MacDONALD: Right.
7238 THE CHAIRPERSON: Well, here is your chance. They are here, you can pose questions.
7239 Ms MacDonald, ask them the question you want and let's see what they have to say.
7240 MS MacDONALD: So basically it was my understanding in the original oral presentation that the proposal for the threshold of being a small SILEC that would have challenges facing entry would be a threshold of NAS based on an exchange level and in the rebuttal today I wasn't clear on whether the 2,500 proposal was based on total SILEC NAS.
7241 A clarification would be...
7242 THE CHAIRPERSON: Okay.
7243 MR. HOLMES: It's Jonathan Holmes from the OTA.
7244 We have done all our calculations for the small companies under 2,500 NAS based on a total company count. So it's not an exchange. It is not an exchange by exchange for the list of under 2,500 companies -- 2,500 NAS.
7245 THE CHAIRPERSON: How many SILECs do you have with under 2,500 subscribers?
7246 MR. HOLMES: I think the list is nine.
7247 I'm sorry, Jonathan Holmes. The list is nine.
7248 THE CHAIRPERSON: If I understand Bragg's proposal, we would look at those and we would apply the test in 18. If they do two of any of those criteria we would say competitive entry is allowed?
7249 MS MacDONALD: We would say that would be prima facie a presumption that would be made based on those criteria.
7250 THE CHAIRPERSON: When you say "prima facie", what would rebut it?
7251 MS MacDONALD: Potentially there may be that opportunity. We understand that the Commission is interested in trying to arrive at a somewhat simple solution for potentially a complex issue, but I think that our proposal is an attempt to say: Well, if any of these conditions exist in combination, that would really suggest a capability, efficiencies, additional revenues, et cetera, that should be taken into account.
7252 THE CHAIRPERSON: I understand. I like the purity of your approach of offering those criteria and saying any two of them, but then you muddy it up by saying "prima facie".
7253 Why the qualifier?
7254 MS MacDONALD: Well, I suppose we would say if any of those two exist we should be permitted entry.
7255 I guess the reference is really to allow for a specific exceptional circumstance that a party may want to bring forward and so there may be some extremely small SILECs under the 25 range that for whatever reason it's a unique exception.
7256 THE CHAIRPERSON: In paragraph 10 I'm not so sure I understood exactly what you are saying.
7257 You are saying if we don't allow for subsidy portability, so somebody comes in and he doesn't get the subsidy, are you positing the situation that the SILEC would still receive the subsidy for the customer they no longer serve?
7258 MS MacDONALD: So we are saying that under the portable regime that we propose continue that no, if a SILEC loses a specific customer then they wouldn't get a subsidy for that line, they would continue to get it however for all of the existing customers they serve.
7259 THE CHAIRPERSON: Right. And neither they nor the new competitor would get it, or are you suggesting that it should be portable, that the new competitor should get the subsidy?
7260 MS MacDONALD: I should clarify that.
7261 Under the current regime whatever LEC that is meeting the basic service objective would get that subsidy in a high cost area.
7262 THE CHAIRPERSON: Right.
7263 MS MacDONALD: Our proposal also says that once a market is forborne the subsidy would go away. So if the Commission accepts that proposal, the effect of the subsidy even being provided would be only as long as the market doesn't meet the forbearance test.
7264 So yes, there would be a subsidy.
7265 THE CHAIRPERSON: Yes, but those are two separate things, whether you let somebody in or whether the market is forborne.
7266 Surely if you just take the first steps, if you apply into a SILEC market -- let's say for argument sake I accept your test on page 18 and yes, they qualify, so therefore Bragg or EastLink can come in. For every customer that you win, clearly you would not get the subsidy and the SILEC would not get the subsidy.
7267 Is that the approach you are suggesting?
7268 MS MacDONALD: No. Initially on entry the market would still be a non-forborne market.
7269 THE CHAIRPERSON: Right.
7270 MS MacDONALD: So during that period in time the company that is providing the service to the customer gets the subsidy for that customer.
7271 THE CHAIRPERSON: And only when we forbear the market then both of you lost it?
7272 MS MacDONALD: Right. Exactly.
7273 THE CHAIRPERSON: I see. Okay. Thank you.
7274 Candice, over to you.
7275 COMMISSIONER MOLNAR: Thank you.
7276 I'm just going to go through in order of the presentation you have provided here this morning.
7277 One of the things that I am struck with is beginning on item 6 where we are talking about contribution tied to the obligation to serve.
7278 I agree at the time the contribution system was put in place one of the goals of the system was to incent competition into high cost serving areas. I think one of the other sort of underlying assumptions is that was competition that was going to occur over ILEC unbundled loops and so the facilities in place would not be stranded.
7279 So there is a significant change in circumstances since that first subsidy has been put in place. Would you agree with that?
7280 MS MacDONALD: I would agree that there has been a change, if that was the original basis for establishing the subsidy.
7281 COMMISSIONER MOLNAR: I wasn't here at that time.
7282 MS MacDONALD: No, but I would acknowledge that. I had heard that as well and I acknowledge that.
7283 But in terms of a significant change in circumstances, you know, I would say that the industry is changing as well and we have heard over the last two weeks about the fact that many of the incumbents serving high cost areas are also expanding services. So we would say that many of the comments that were made during this proceeding to the effect that a SILEC is not likely to strand its facilities once built makes sense, particularly where they are offering multiple services over them to their customers.
7284 COMMISSIONER MOLNAR: Okay. You have confused me with that response, to be truthful.
7285 The ILECs initially with their obligation to serve end facilities to 100 percent of the customers, under the assumption that you were going to have competition on an unbundled loop basis, those facilities would still be used and there would still be some revenue stream associated with it. So where you had created an investment to serve the entire market you were receiving some return on that investment for 100 percent of the market.
7286 MS MacDONALD: Yes.
7287 COMMISSIONER MOLNAR: Under the situation that exists today there is no return at all once a customer is lost.
7288 MS MacDONALD: And I do agree with the point that if there was an expectation of some recovery, even for the lost NAS because it would be provided over local loops, but I would say today that has been replaced by a situation where the recovery on the investment and any upgrades also comes from revenues from additional services.
7289 So although it may be a different area where that is coming from, those facilities arguably are making more from multiple services now.
7290 COMMISSIONER MOLNAR: I agree that there is more revenue to be derived from a customer over the facilities to serve a customer, but if you lose a customer the facilities are standing idle and if you are going to lose the local service you are unlikely to be using those facilities to be providing high-speed Internet or any of the other services, IPTV or whatever else you have on your list.
7291 Having said that, really my question is: You seem to believe that -- not seem to believe. I think I read the words and I just can't find them here about it would be unfair for the ILEC to receive the subsidy and the CLEC not to receive the subsidy.
7292 My question really boils down to the obligation to serve. We have heard a number of parties say there is a cost to the obligation to serve, not just those that you serve that are potentially in the famous doughnut, but also the obligation to stand ready to serve 100 percent of the market.
7293 You don't believe that is an obligation or maybe would be not symmetrical from the ILEC's perspective?
7294 MS MacDONALD: I guess there are a couple of points there.
7295 One of them is that the subsidy in terms of equitable treatment it really goes to creating a regime where there is an incentive for a competitor to invest, so it's a different analysis that would have to be made if the regime was modified so that it was competing against a fully subsidized incumbent.
7296 Now, having said that I have to point out that our proposal does provide for forbearance once the forbearance test is met and in that case the obligation to serve goes away, as does the subsidy.
7297 So it depends on what the Commission is interested in doing with the outcome of this proceeding. In some respects, if the Commission accepts the proposal with regard to forbearance, then a very aggressive argument that the subsidy should remain portable in those exchanges, it may not really have a lot of merit because the subsidy would only remain portable for a short period of time.
7298 However, I think it's important just as a principle of equitable treatment that a competitor moving into a territory shouldn't have the risk of uncertainty with a regime that would continue to see the obligation to serve as warranting increased subsidies or ongoing subsidies when a new entrant is not getting those.
7299 So I guess the question I would have is where would it stop. If there is an obligation to serve that is deemed important enough to maintain a subsidy, as a SILEC or incumbent loses the NAS numbers are they going to then be entitled to greater subsidies, et cetera, which would really affect an entrant's investment decisions moving into a certain territory.
7300 COMMISSIONER MOLNAR: I perhaps would ask if anybody in the back wants to comment on Ms MacDonald's statement.
7301 MR. BÉLAND: Yes, I would like to. It is Dennis Béland, from Quebecor Media.
7302 I would like to address, in fact, the assertion that has been made several times in this proceeding that when the Commission made subsidies portable back in the late '90s --
7303 COMMISSIONER MOLNAR: Are you speaking to my comments --
7304 MR. BÉLAND: Yes.
7305 COMMISSIONER MOLNAR: -- or Ms MacDonald's comments?
7306 MR. BÉLAND: Both I believe.
7307 The assertion has been made that when the Commission made subsidies portable back in the late '90s that the explicit reason for that was in order to give an incentive or improve the business case of CLECs that would be using unbundled loops to enter the local market. I was at that proceeding, as were several members of the cableco panel and that is distinctly not our recollection.
7308 There certainly may be some references in the record and in the decision to that being a consideration, to that being one of the drivers for wanting the subsidies to be portable, but at the time there was an enormous focus of attention in fact on cableco entry, and cableco entry with their own facilities not with unbundled loops.
7309 THE CHAIRPERSON: With all due respect, your recollection is not determinant, determinant is what the decision decided. So unless you can point me to a paragraph in the decision that says that -- we have to go on the basis of the record of decision, not on what you recollect from the hearing.
7310 MR. BÉLAND: Sure.
7311 Ken, if you want to try...?
7312 MR. ENGELHART: Mr. Chair, there is nothing in the decision to restrict the subsidy to unbundled loop CLECs. Unbundled loop CLECs were at the hearing, cable companies were at the hearing talking about facilities based entry and the contribution was made portable for both of them. So I don't think there is anything on the record to suggest otherwise.
7313 THE CHAIRPERSON: No. If I understood, you are rebutting the inference that the decision decided to make it portable in order to give an incentive to people to come in.
7314 I haven't read the decision, I don't know whether it says that or not. Let's deal with the facts, what did the decision say?
7315 MR. ENGELHART: It said that competition wouldn't be fair for the CLECs, whether facilities-based or otherwise, unless the contribution was portable.
7316 THE CHAIRPERSON: Okay. So that's the decision finding, and we can interpret it however we want to.
7317 Is there somebody in the back?
7318 MR. HOLMES: It's Jonathan Holmes from the OTA.
7319 We would agree with Commissioner Molnar that the subsidy should be focused on the carrier with the obligation to serve and that is prepared to stand ready to end customers.
7320 MR. CHOQUETTE: Roger Choquette, with the ACTQ.
7321 I would simply comment with respect to the submission made by EastLink -- and EastLink has stated this in the past -- I believe they did in Timmins. They always refer to the business case for entry, from the cableco's perspective, and how that is proof that there is definitely a market for competition.
7322 On the other hand, they never refer to the business case associated with the SILEC, in terms of providing them with, essentially, the facilities associated with the absorption of those costs, associated by the SILEC.
7323 I would simply note that, as we mentioned in the presentation that we made yesterday, those costs are significant. I think we quoted to the effect that they represent something in the order of 16 percent of the value of the company, simply to absorb those costs, and I think that that is definitely a consideration.
7324 I would like to also note that at least the ACTQ SILECs have, in fact, filed with the Commission the business case scenarios associated with entry in their markets, for each of our companies, under different cost absorption and market share loss scenarios. It would be interesting to see if somebody like EastLink would be willing to do that, in terms of their business case for entry, and let the Commission make an assessment as to what the difference is and why there is a problem with respect to the SILEC situation today; not so much in terms of granting local competition, which we support fully, but simply in terms of providing the incumbent SILEC the capability to compete on an equitable basis with the new entrant, who is much larger.
7325 Thank you.
7326 THE CHAIRPERSON: Do you want to respond?
7327 MS MacDONALD: I am not proposing to engage in submitting full costs on a business case, no.
7328 THE CHAIRPERSON: Bell?
7329 MR. DANIELS: I am not really understanding this, in terms of what this debate is all about, because it all comes down to this. Cable wants contribution to be portable until forbearance. We say that should be rejected. I think that others have argued that as well.
7330 But it's irrelevant, because cable says once forbearance, and their presence is going to cause forbearance, so there shouldn't be any subsidy.
7331 So, ultimately, this is about the business case. Cable is saying that subsidy should disappear, so they can't base their business case on a portable subsidy, because they themselves are arguing that it should disappear once they enter, because the SILEC becomes forborne.
7332 The original reason in 97-08, whether it was unbundled loops or whether it was other facilities-based providers, I don't think it matters, because the whole point of it was to encourage competitive entry. That was the argument. That's in the decision.
7333 What we are hearing is that no one needs it because everyone is saying, on the competitive entry side, that once it's forborne there shouldn't be any subsidy.
7334 So there is no business case, so I really don't understand why we are having that discussion.
7335 THE CHAIRPERSON: Maybe you can answer that, because he expressed what was my question much more eloquently than I put it to you originally.
7336 MS MacDONALD: Okay. I think the point being that, while it may be correct that a SILEC doesn't enter a high-cost area solely on subsidy, a SILEC would, potentially, be disincented from entering a high-cost area to provide competition if it had to invest in facilities and then have, potentially, the regulatory uncertainty of ongoing subsidization to the incumbent.
7337 We don't think that it would be appropriate, on the basis of an incumbent continuing to be subsidized for 100 percent of NAS when the SILEC is also investing in the facilities, as well.
7338 THE CHAIRPERSON: But there wouldn't be subsidies for 100 percent of NAS, it would be 100 minus whatever customers you stole from them, wouldn't it?
7339 MS MacDONALD: Well, that's what we would say is appropriate, yes.
7340 THE CHAIRPERSON: Yes, that's what you suggest.
7341 MS MacDONALD: But if that wasn't the case and the subsidy was not portable --
7342 THE CHAIRPERSON: Okay. Assume that we buy the first part, that when you come in, to the extent that you win customers from the SILECs, they don't get a subsidy for those. Then I don't see, logically, why your subsidy has to be portable and you should have it, for exactly the reasons that Mr. Daniels has advanced.
7343 You didn't come in there with the hope of getting subsidy; you came in with the hope that the market would be forborne and you could compete.
7344 MS MacDONALD: Yes, but the regulatory regime in place when competitors were moving into these high-cost areas was that it was equitable, and that there was portability of that.
7345 So it may not be the business case of entry, but certainly it would be a different decision. If we had to invest and upgrade our facilities to provide phone service in a high-cost area, we may not choose to enter because of the subsidy, but today we know that we are not going to be competing against an incumbent that is getting a subsidy for 100 percent of the NAS in that area.
7346 And at this proceeding, many of the small incumbents are saying: We don't just want the NAS, we want to recover costs -- competition costs. We want to recover our lost revenue, as well, when we lose those NAS.
7347 I think the point is, where would it end. And that type of uncertainty does impact a facilities-based competitor's desire to enter a territory.
7348 So, in that context, I would say, yes, it would be a sober second look before entering to compete for customers in those territories' competition.
7349 Mr. Daniels was making a valid point, in that if the Commission chooses to remove the obligation to serve and the subsidy that goes with the basic service objective in a forborne market, maybe this discussion is moot, but I am not sure what the Commission's decision will be on that point.
7350 So if the obligation to serve and the basic service objective remains, even after forbearance, then we think the subsidy should be portable.
7351 THE CHAIRPERSON: The obligation to serve and the basic service objective doesn't affect you as the competitive entry.
7352 MS MacDONALD: The basic service objective and the application of the subsidy, as well. We would say that in a forborne market, if the subsidy continues, it should continue to be portable.
7353 THE CHAIRPERSON: Okay.
7354 Candice, did you have another question?
7355 I just wanted to make sure that your question was answered.
7356 COMMISSIONER MOLNAR: My question was answered, and then some others that I never asked were answered.
7357 COMMISSIONER MOLNAR: But I just want to follow up; when you give this position, just to clarify, is that the same position whether it is in an ILEC territory or a SILEC territory?
7358 MS MacDONALD: I believe it is, yes.
7359 COMMISSIONER MOLNAR: So your position is, if you enter a SILEC territory and the market becomes subject to forbearance, or can meet the test of forbearance, that all subsidies be removed?
7360 MS MacDONALD: Yes.
7361 Now, I did say at the oral presentation that the SILECs have a different forbearance test today. So I recognize that there would be challenges in saying that -- you know, there is a second element of the forbearance test for SILECs that allows for forbearance, based on a 50 percent capability of a competitor to serve --
7362 I am not saying that quite right, but a competitor is able to serve 50 percent of the total NAS in the area, if there is indication that the competitor is focusing on the core.
7363 So because of that there would, potentially, be greater pockets unserved, even in forbearance.
7364 So we would recognize that there may need to be some modifications to that for a SILEC territory. It may be increasing the threshold of presence before the subsidy is removed.
7365 THE CHAIRPERSON: Okay. I saw a hand back there.
7366 MR. McKAY: It's Andrew McKay from SaskTel.
7367 We don't have a lot of stake in this game, other than we would like to address the seemingly commonly held perception that as soon as a cableco enters an exchange, it is automatically forborne, and up until now, in the last comment, it seemed to be mostly based on the 75 percent coverage bogey. Perhaps in some territories, but that certainly would not be the case for Saskatchewan.
7368 THE CHAIRPERSON: No, I think we all agree that those are two separate events.
7369 MR. McKAY: Well, I thought I heard it addressed as: They shouldn't have a problem, because as soon as they enter there is forbearance.
7370 That's not true.
7371 THE CHAIRPERSON: Okay. Are there any other questions for --
7372 MR. ROMANIUK: Orest Romaniuk, with TELUS. I have a quick question of EastLink.
7373 Currently, the way the subsidy is calculated, it is based on the costs of the core loops, which are 4,000 metres, and the long ones, which are 11,000 metres, and then you calculate the subsidy.
7374 Would you say that the subsidy should be based on the LEC's specific costs, or the costs of this average of 4,000, where the LEC is, and the 11,000 metre long loops where the LEC is not?
7375 MS MacDONALD: I can say with certainty that I have not had any experience in the costing exercises that were undertaken, nor do I necessarily have a great deal of interest in having to go through a costing exercise.
7376 My understanding of the subsidies that were assessed for small ILECs is that it was a proxy based on national rates, and I really can't speak to that specific question.
7377 THE CHAIRPERSON: Len...
7378 COMMISSIONER KATZ: Thank you, Mr. Chairman.
7379 I want to go back to your broadband targets, actually, where you have, I guess, supported the three-tiered target that the cable carriers brought forward.
7380 What concerns me, quite frankly, is not what the target should or shouldn't be in contested markets where it's competitive, because I have no doubt that it will be very powerful, very strong, a lot of speed and a lot of bandwidth. My concern is more in monopoly markets, and my concern is that, in those markets, there may not be the minimum targets necessary for those Canadians to have access.
7381 So I come back to your confirmation of the cable view, but it doesn't answer my question. What should the minimum be in rural/remote areas for Canadians to be as productive as this country believes all Canadians should be to have access to broadband?
7382 MS MacDONALD: Our support for the position that was filed by the cable companies was really just about our own understanding of kind of where we think we could strive toward those goals, although noting that, in some cases, we would have some challenges meeting some of those, as well.
7383 But I can't really say exactly what would be necessary in a smaller rural community. I would say that I guess this proceeding is to get all of that input, and I know that every ISP that is offering high-speed services is driving forward to increase speeds because of customer demand, so one would expect that moving toward even a 5 megabyte service speed is a step in the right direction, even in those rural communities. A lot of those areas have 1.5 megabytes now, and people in those communities are demanding more than that.
7384 COMMISSIONER KATZ: Surely you and the other companies who are in the business have visionaries and market seers who sort of know where the applications are going to be, what the bandwidth is going to be, because there is a long lead time between seeing what is going to be happening in the medical field or the educational field, and then constructing a business case, and then constructing a capital budget and actually implementing a capital budget.
7385 There is a long lead time here, as well, so I look to you and some of the folks in this room to help us understand what Canadians will be needing in the next three to five or seven years from now in order to do that, and then helping us understand whether it is going to be available in those rural and remote areas for Canadians or not.
7386 MS MacDONALD: Certainly, I can consider that in discussions with our technical people, for closing submissions.
7387 THE CHAIRPERSON: You mentioned that, basically, under 2,500 NAS, you would see them being exempt, and I found out from Ontario that there are nine of those in Ontario.
7388 How many are there in Quebec?
7389 ACTQ, can you tell us how many organizations you have with less than 2,500 NAS?
7390 MR. CHOQUETTE: Mr. Chairman, there are five companies in the ACTQ with less than 2,500 lines.
7391 THE CHAIRPERSON: Okay. Thank you, those are our questions.
7392 Madam Secretary, let's move on to the next intervenor.
7393 THE SECRETARY: Thank you, Mr. Chairman.
7394 I would now invite MTS Allstream to come forward to the presentation table.
7395 Appearing for MTS is Ms Teresa Griffin-Muir.
7396 You may now proceed with your 15-minute oral rebuttal.
7397 MS GRIFFIN-MUIR: Good afternoon, Mr. Chairman and Commissioners.
7398 What this proceeding is fundamentally about is access by all Canadians to basic telecommunications service, and how the Commission can best shape public policy to ensure that Canada keeps pace in the international digital economy.
7399 By way of aide-mémoire, MTS Allstream's central views in this proceeding are:
7400 The current local subsidy regime, on the whole, continues to be demonstrably effective, and we would support removing the ILEC obligation to serve in forborne exchanges and the introduction of local competition in SILEC territories;
7401 To be meaningful, a 21st Century BSO requires broadband access that meets a certain measurable level of functionality;
7402 Government funding and market forces on their own cannot be relied on to close the broadband gap for the currently 700,000 unserved or 1.4 million underserved Canadian households; and
7403 Four, the Commission has the authority it needs to achieve universal broadband access.
7404 With respect to the local service subsidy regime, you have heard from the Bell Group that it objects to using CRTC-approved Phase II costs for the purposes of determining the subsidy requirement; that these costs are just fine for calculating wholesale prices for unbundled local loops, but are inappropriate for calculating the national subsidy requirement. The inherent contradiction of this position is impossible to resolve on any principled basis. The only real explanation for this position seems to turn on whether or not it is beneficial to Bell.
7405 Because if you look back to Bell's final argument in the proceeding leading to the current regime, you will see that Bell strongly advocated the use of Phase II costing for local subsidy requirement calculation purposes.
7406 I am not going to actually tell you what they said, but we have attached it as an exhibit.
7407 Further, in its decision on this matter, the Commission itself concluded that using Phase II costing would:
7408 (a) deliver the appropriate incentives for efficient provision of service and competitive entry in high-cost serving areas;
7409 (b) recognize the important link between the costs used for the purposes of the subsidy calculation and those used for the purposes of setting rates for unbundled local loops; and finally
7410 (c) facilitate cost comparisons for primary exchange residential services among the ILECs.
7411 Yesterday, Mr. Daniels was trying to explain Bell's position on costs and how Phase II costing was fine for wholesale rates, but not so much for the subsidy calculation. In doing so, he only mentioned the first point, and forgot the second point about rate setting for unbundled local loops, and the third point about facilitating cost comparisons among ILECs.
7412 And when you actually look at the costs that Mr. Daniels refers to as appropriate for subsidy purposes, i.e., the costs that were most recently filed by the Bell Companies to support increases in wholesale rates, they are the highest costs among the ILECs in all bands, not just high-cost serving area bands.
7413 Bell's solution to the so-called subsidy problem is to raise rates to the maximum affordable level, and for this they are suggesting a proxy of rates in a handful of exchanges. Our understanding is, that would mean a rate increase in Bands "E" and "F", and I think "G", to $37.80 or $36.20.
7414 I can tell you that in Manitoba that would represent an increase of as much as 71 percent over current rates paid by subscribers.
7415 Bell's explanation for why Phase II costs are inappropriate for determining the subsidy amount is based on the results of a highly simplistic, ad hoc regression model, a model that only has the ability to predict ILEC Phase II costs in high-cost areas within a range of plus or minus $10 to $25.
7416 For example, the model predicts that MTS Allstream's Band "E" Phase II costs lie between $23 and $53, with a statistical confidence margin of 95 percent.
7417 Not only is the model statistically unreliable, but it fails to take into account real cost differences between ILEC territories.
7418 And here I am going to interrupt myself, actually, because in Band "A", in fact, in MTS territory, our unbundled local loop rate is lower than Bell Canada's Band "A" rate, and certainly lower than the Band "A" rate they are proposing in the costs that they have before you today. But it does speak to, maybe, some geographical differences, because we only have Band "A" in the heart of Winnipeg.
7419 The Bell Group has also told you that you do not have jurisdiction to modify the basic service objective to include broadband. To accept the Bell Group's view on jurisdiction would render the Telecommunications Act a relic of the past. Regardless, the Commission has the necessary authority today to define the BSO, to interpret the term "basic telecommunications services", and to fund access to those services if it so chooses.
7420 The local subsidy regime and the contribution formula are sound and effective, and our proof is in the world-class results that the regime has achieved. While we are not opposed to re-visiting certain of the Phase II costs, we think this would be, if we did a whole scale review, costly, time-consuming, repetitive and, ultimately, a poor use of all our time, time that would be better spent focusing on harnessing the public policy infrastructure in order to move closer to achieving a universal broadband objective for Canada.
7421 In terms of universal broadband, the main question for the Commission is whether or not market forces, potentially augmented with some government funding, on their own, are going to bring a functional standard of affordable broadband access to the over 1.4 million households in high-cost serving areas who do not have access to a broadband connection of 3 to 4 megabytes, or even the 700,000 households in our high-cost serving areas today who do not have a connection of 1.5 megabytes.
7422 You have heard from many parties about the delays and patchwork roll-out of broadband services that have, to date, resulted from strict reliance on market forces and government funding. And while we fully acknowledge that technological advances have and will continue to reduce the costs associated with broadband roll-out, these advances speak to the quantum of the subsidy needed to fund the uneconomic portion, not solely to market forces filling the gap. Where there is no business case, there will be no market forces.
7423 You have heard certain claims, like "The job is done", or the job will be done at some point in the very near future, on the basis of market forces and wireless and satellite technology.
7424 Bell acknowledged yesterday that we are potentially at a breakthrough point, where the market can totally solve the problem.
7425 The "do nothing" position which those claims of potential breakthrough are used to support comes with a lot of fine print relating to timing, affordability, capability, reliability, and capacity. But one has to assess the promise of satellite to deliver broadband to the 1.4 million households within a reasonable timeframe with a measure of objectivity.
7426 For example, Barrett Xplore has conceded that it does not have the necessary backhaul and interprovincial transport. Moreover, in order to currently provide its service, it often partners with an ILEC and/or relies on subsidy in the form of government funding to enable it to offer service at rates palatable to customers.
7427 In terms of the claim that the real problem is broadband adoption or digital literacy, and not broadband access, that's the wrong focus, and not something that the Commission has the tools to effectively address. However, availability of a service logically precedes adoption, and solely focusing on adoption would leave the 700,000 to 1.4 million unserved and underserved households behind.
7428 Moreover, as you, yourself, noted, Mr. Chairman, "This is not for us" to deal with.
7429 The opportunity costs of inaction are high. We have a proposal for using the existing regime to roll out broadband access to that remaining segment of the population that the operation of unrestricted market forces will continue to neglect. I would like to make a few comments about that proposal so that the Commission is clear on what it is we are proposing and how our proposal is in keeping with what the Commission and the industry have done in the past.
7430 It is important to understand exactly what we mean when we cite different speeds and population percentages. Only two figures matter, as far as we are concerned. Those are the approximately 700,000 households in high-cost serving areas that are unserved by broadband, with a minimal speed of up to 1.5 megabytes, and the approximately 1.4 million households, which would include the 700,000 completely unserved households, in high-cost serving areas that are underserved by broadband, with speeds of up to 4 megabytes, a speed which most Canadians would likely consider basic if we set the standard today.
7431 It is also important to understand that our functional National Broadband Task Force definition of "broadband" is measurable. Our point in proposing such a definition is to ensure that the Commission can set a standard that providers can meet, while at the same time recognizing that it is the expectation of the Commission that this standard would necessarily evolve over time to keep pace with the rapid change characteristic of telecommunications technology.
7432 Simply having an aspirational target won't deliver the infrastructure required by Canadians throughout our country.
7433 It is also important to recognize that our estimate of the total present worth of achieving the broadband service objective is preliminary. It was necessarily based on the available information, and tabled in the hope that we could have a meaningful discussion about the principle of universality now, followed at a later date by an exploration of the actual mechanics.
7434 And by "mechanics" we mean calculating the actual quantum.
7435 The principle for allocating these funds is based on least-cost technology, which can evolve with technological innovation or change. In this way, the market can determine the most effective way to implement the objective.
7436 Therefore, if the promises of technology hold true, the costs will be lower than our initial estimate based on the publicly available deferral account information.
7437 In fact, to illustrate, in 1993, at the time of facilities-based long distance competition, the initial local service subsidy requirement was set at $3.3 billion. After only five years, the local service contribution requirement was reduced to about $800 million per year, and was funded through long distance service rates alone.
7438 Today, the total local service subsidy is considerably less than $200 million. Establishing a broadband subsidy requirement at 700 million a year would not be unprecedented. In fact, it would be less or potentially much less than what has been required in the past to support local service in high-cost serving areas.
7439 Finally, it's important to understand what our proposal will cost the end-user. The proposal we presented in Timmins -- increasing the revenue pool by 30 percent and increasing the current contribution rate by about 2 percent -- would result in an approximately 2 percent increase to a customer's bill. That's about a dollar a month on a $50 dollar a month bill or two dollars a month on a $100 a month bill, less than the increase in local service rates if the Bell Group's proposal is accepted.
7440 As you have heard in this proceeding, there is often a big difference between theoretical speeds and actual speeds. We think that the Commission should carefully consider whether some of the justifications for inaction are theoretical or real.
7441 I will conclude by summarizing what we believe are the two basic options facing the Commission:
7442 Choice number one is to take action now on the basis of a demonstrably effective regulatory regime to address the broadband access gap; measure progress against set goals that favourably positions Canada for international leadership.
7443 Choice two is to "wait and see", to do nothing now on the basis of an uncertain promise of theoretical speeds in the face of known capacity, reliability and occlusion constraints and very high prices and then to measure progress against the status quo and to scramble to fix the problem if it turns out that market forces fail to live up to the promise.
7444 Our view is the Commission should act now and adjust the regime as we go forward, rather than do nothing now and be forced to react.
7445 We have a subsidy regime that works; boundaries of high-cost areas that essentially overlap with those for the purposes of broadband, and the jurisdiction to bring the BSO into the 21st century.
7446 The question is, which position do we want to be in two years from now? Re-evaluating the goal we articulated here today and beginning to implement or re-evaluating why it was we did not act.
7447 Thank you.
7448 THE CHAIRPERSON: Refresh my memory. In Timmins did you suggest a goal for broadband? I mean there seems to be a bit of a consensus among people who want 5 Mbps. Is that where you came down too?
7449 MS GRIFFIN-MUIR: Actually, we said 3 to 4.
7450 THE CHAIRPERSON: Yes. Okay.
7451 And those numbers 700,000 unserved and 1.4 million underserved, which I understand includes the 700,000 unserved one, where do those numbers come from?
7452 MS GRIFFIN-MUIR: They come from the record of the proceeding actually.
7453 THE CHAIRPERSON: Okay.
7454 I am glad you raised the issue of costs and pointed out that -- you make the suggestion that Bell has under-represented the Phase II costs and they serve three purposes, as you suggest in paragraph 6.
7455 Mr. Daniels, since you are actually being quoted in here, maybe you want to comment on it. When I asked you that question yesterday you went so long and answered that these are really quite different matters. Yet, MTS now actually quotes a decision which suggests that these costs were developed precisely for the purpose that we are talking about.
7456 MR. BIBIC: Mr. Chairman, I will take the first crack at that, and then I will turn it over to Mr. Daniels if you wish.
7457 What I want to say is that MTS is actually misrepresenting our position and what Mr. Daniels actually said. Our starting position in all this isn't that we should adopt something other than Phase II for contribution purposes. That's not what we said at all.
7458 We said; instead, focus on number one, forbearance. Hence -- in other words, no contribution in forborne areas and then focus on raising the price to an affordable level.
7459 Our position is not we fix all this by going to something other than Phase II costs for contribution. That did not come out in MTS' statement there and I think it's critical.
7460 As for the appropriateness of Phase II for contribution, we also did not say yesterday as I recall that Phase II is inappropriate. We said that there is uncertainty as to which costing methodology one would use for contribution because even in the Commission's own unbundled loop examination there is -- you know we filed Phase II costs. Then Commission staff asked us about embedded costs. Then they asked us about hybrid.
7461 So the point we were making yesterday was there is an uncertainty and it would take time to go through it.
7462 THE CHAIRPERSON: Not quite. I mean that's not -- you can look at what people said but I did ask Mr. Daniels specifically the question, "Shouldn't the same costs be applied for unbundling loops as well as for subsidy?" And he said, "No, they are really quite different", et cetera.
7463 And yet, here I am now being quoted a decision which actually stated that Phase II costs were developed for that precise purpose.
7464 MR. DANIELS: Mr. Chairman, it is Jonathan Daniels for Bell Canada.
7465 So I appreciate the chance to clarify.
7466 What I said yesterday or, at least, what I hope I said yesterday is that around the world when they are setting subsidies different possible approaches can be used. And what the Commission did and used -- and this is consistent with our submission -- is when they set the subsidy regime that we have today in 2000, it was based on the premise of encouraging competitive entry and ensuring equity there. It's similar to the point I made before.
7467 And, in fact, I think what we are saying, and what MTS is pointing out in paragraph 6 is exactly what I was saying before, that initially when the Commission originally set a contribution it was one theory which was done on a rate of return basis. Then, when they created local competition they came and reassessed how they are going to determine what the subsidy regime should be.
7468 And as you can see looking at these three elements here, the first two elements deal specifically with saying, "Hey, let's set the subsidy regime using worrying about encouraging competitive entry". The first one is about efficient provision of service. That's what I was talking to you yesterday.
7469 The second one is about setting rates that are similar to unbundled local loops, which I think goes to Commissioner Molnar's suggestion that the original approach that we are dealing with in terms of the subsidy regime in Canada today, was driven by trying to match them up, unbundled loops to the amount of subsidy because we want to have it that a competitor will be incented to enter.
7470 So if you put -- if you look at those two together, that's about competitive entry. It's our submission that competitive entry is no longer the reason. That's not the goal that the Commission should be using when establishing subsidy.
7471 So it's true that the Commission did adopt a Phase II approach. But we are saying if you accept the premise of my earlier comment, which is no one needs it as a competitive entry -- that's the basis -- then we shouldn't be using the methodology that was designed specifically to encourage competitive entry. I think what this paragraph highlights is that the 2000 approach was designed to do that.
7472 Now, again, I agree with -- of course I agree with my boss.
7473 MR. DANIELS: But I agree with what Mr. Bibic said. We are not -- I haven't come forward and said there is a different methodology and you should definitely use this one. Because our actual approach is to get away from a costing methodology and avoid the issue of should it be Phase II, should it be embedded, should it be the hybrid approach that's being contemplated in the unbundled loop decision.
7474 I hope that clarifies my position, but I do believe that what we said yesterday is consistent with exactly what is here in paragraph 6.
7475 MS GRIFFIN-MUIR: I think, Mr. Chairman, your question was dealing with a paragraph from the Bell submission that talked to Phase II as entirely appropriate for establishing wholesale rates but not necessarily for the subsidy.
7476 THE CHAIRPERSON: I am just looking.
7477 MS GRIFFIN-MUIR: Unfortunately I don't have it with me.
7478 THE CHAIRPERSON: But even if one were to accept these costs, which we do not, it is unclear whether these would be the right costs to use. They are based on Phase II costs as a costing methodology which you believe is appropriate to set wholesale rates but not necessarily subsidies. That's what you have put in your submission and that's what I asked you about.
7479 And I asked you -- I said I found this very difficult to accept and you have now explained it. Right now I understand your assertions that, you know, it was originally -- well, I don't know what to make out of it.
7480 Essentially, are you standing by what MTS says this morning when they are quoting the decision in paragraph 6 that in effect, yes, they were designed also for the purpose of subsidy calculations? You may disagree with us using them but you don't dispute that that's what they were originally designed for.
7481 MR. DANIELS: I agree, and in fact in our submission what we put in, in detail, was that the history originally, before this decision of 2000, it was rate of return.
7482 When the Commission had set the subsidy regime in 2000, it was specifically designed to encourage competitive entry in high-cost areas, a goal we think the evidence has shown is no -- you know, that entry is not based on that so that's not the basis for doing -- that's not a reason to continue to use Phase II costs, per se.
7483 That's the issue. So the original reason that they established the methodology was to encourage competitive entry in high-cost areas and that goal -- we are getting competitive entry but it has nothing to do with the subsidy so let's not blindly adhere to saying, oh, that's the right way to do the costs. That's our point.
7484 THE CHAIRPERSON: And while you have the mike would you comment on paragraph 8, which just says that when you talk about costs you are talking costs in all bands, not just high-cost serving bands. Is that true?
7485 MR. DANIELS: So I guess my first comment is we did not say that the costs that we are referring to are appropriate for subsidy purposes.
7486 Our position, again, is we have not put forward any costs appropriate for subsidy purposes. We focused on the fact that you can solve this through a rate solution which -- and the implicit subsidy.
7487 However, it is true that using Phase II costs we have updated and filed costs for all of our bands, saying that those costs are understated as they are approved today for wholesale rate purposes. That is correct.
7488 THE CHAIRPERSON: Good.
7489 Now, MTS, if I understand it, you really have -- part of your submission is if we let market forces work we are going to have spotty access, spotty advances to broadband in those areas where there is no business case. As you put it, there will be no market forces and there will be no development and we should use the existing model.
7490 If we use the existing model what does it mean to the average consumer? If your figures are right and we need to raise $800 million you say it will mean -- for a Bell customer you say it will mean if he has $50 one dollar more, or two dollars if it is a $100 bill.
7491 Now, is it any customer or a Bell customer?
7492 MS GRIFFIN-MUIR: No. We are just looking at overall, just taking a high level look at what that increase means to the revenue overall. We are looking at our own customer in that instance.
7493 THE CHAIRPERSON: Right.
7494 MS GRIFFIN-MUIR: So we are just looking at the percent change from the existing contribution rate of 0.73 percent to something -- about a 2 percent increase.
7495 Now, what we are also saying is you have a regime and absent some more focused plan to rollout broadband, just reliance on market forces will result in some -- I mean some are already served, obviously.
7496 THE CHAIRPERSON: Right.
7497 MS GRIFFIN-MUIR: And not everybody.
7498 THE CHAIRPERSON: So basically you are saying -- this is only for high-cost serving areas to begin with -- if we were to establish, let's say 5 Mbps by whatever date we say, and we say we expect market forces will take us there, in high-cost serving areas they will probably will not, by definition. So therefore, we must ascertain what the amount is.
7499 Let's say it's $800 million, as you suggest, and therefore we use the existing mechanism and we explain to the general public that that will mean that you will face a one or two dollar increase in your bill, depending how big your bill is right now.
7500 MS GRIFFIN-MUIR: Well, if it flows directly to the customer, yes, that would be the case today. It doesn't --
7501 THE CHAIRPERSON: Why would it not flow directly to the customer?
7502 MS GRIFFIN-MUIR: Well, it would probably be spread over the base of customers but, yeah, I mean that's what happened with the toll network access fee.
7503 THE CHAIRPERSON: And how does satellite get into this mix? How would satellite provide us -- access this fund?
7504 MS GRIFFIN-MUIR: Okay. Well, the way we look at the basic service objective is that it is technologically neutral. So if the least cost technology is satellite or wireless you could actually fulfil whatever the obligation is using that technology.
7505 So if it makes the most sense from whatever affordability standard that is established, that's the kind of technology you would use, so that we are not advocating a particular use like DSL.
7506 For example, in the deferral rollout for Bell Canada, you have just agreed they can use HSPA.
7507 THE CHAIRPERSON: Yes.
7508 MS GRIFFIN-MUIR: I mean if we accept the deferral account for what it is, it is a subsidy and they are using wireless to meet whatever their requirements are to roll broadband out to those communities. They have to.
7509 THE CHAIRPERSON: Yes. I guess my problem is the satellite providers right now are not sort of part of the whole system. So how would they access it? That's what I was asking.
7510 You know if Barrett comes forward and says, "I'm serving all of these people, et cetera, you know in this high-cost area. I'm the only way to serve them is through satellite. How do I access the fund?"
7511 MS GRIFFIN-MUIR: I guess, well, it would have to be the way they partner today with ILECs.
7512 THE CHAIRPERSON: It would have to be through partnerships with ILECs, so as part of an ILEC serving --
7513 MS GRIFFIN-MUIR: That's how they are serving today, yes. I mean that's what we would propose.
7514 THE CHAIRPERSON: Okay.
7515 Candice -- no, sorry.
7516 Peter...? I'm sorry. I saw a hand up there.
7518 MS PRUDHAM: We just wanted a clarification of what MTS just asked there or their statement. Are you suggesting that we only serve through ILECs today?
7519 MS GRIFFIN-MUIR: No. Actually, I'm not suggesting you only serve through ILECs today.
7520 What I am saying is our proposal -- it's in -- I'm answering the question in the context of my proposal, sorry, which is if the ILECs are given the obligation to rollout broadband to high-cost serving areas, only the ILECs would have access to the subsidy, i.e. it would be different from the portable subsidy that we have for basic service today.
7521 And that if Manitoba, in Manitoba we used Barrett to reach some of our customers, it would be through a partnership with us that you would have access to the subsidy.
7522 MS PRUDHAM: So just to be clear, our technology is good enough but it's the fact that we are deploying it, that's the problem.
7523 MS GRIFFIN-MUIR: No. Actually, what I -- I'm just saying if there is an obligation given. I didn't even say your technology is good enough. I can't comment. It was all hypothetical.
7524 MS GRIFFIN-MUIR: But if, in fact, the Commission were to accept our regime our proposal is if we, the ILECs, are given the mandate to rollout broadband and the obligation then we, the ILECs, are the ones who are entitled to the subsidy fund.
7525 THE CHAIRPERSON: Barrett?
7526 MR. MADURI: Mr. Chairman, there has been a lot of comments from MTS about real versus theoretical, about this approach on -- this do nothing approach. They surely can't be speaking about Barrett Xplore because we are real. The satellites are real.
7527 Let's take occasion to look outside of Canada to see what is happening in Australia, in the United States, in Europe. There are seven high-throughput satellites coming into deployment commencing in 2010. I emphasize Europe with a much better population or a higher population density than Canada.
7528 The satellites are real. The contracts are signed. They are financed. We are making payments. We have two of the world's leading satellite technology companies as our partners, Hughes and ViaSat.
7529 The first satellite is built. It is built and it is ready for launch, for the launch site. The launch date is set. The system testing is completed and, in fact, I would encourage anyone who is interested and has never seen a satellite launch before, you can join me in Kazakhstan in spring.
7530 The satellites are real. We are real as a company.
7531 I want to make a second point here with respect to, you know, I guess this simplistic approach that's being taken. I guess I ask my colleagues at MTS as to whether they have given consideration to the vast number of rural broadband service providers that operate today in these low-density markets.
7532 Please don't trivialize the tasks of layering in a broad subsidy program on top of a complex fabric of rural broadband service providers, literally hundreds of them.
7533 Industry Canada through its Broadband Canada initiative, undertook a rigorous and, I would say, a challenging mapping process to avoid overbuilding existing networks with public subsidy. Again, this is not a trivial task.
7534 THE CHAIRPERSON: While you have the microphone, John, do you concur with MTS that if we -- and I posit "if" -- we adopt this scheme along the lines that MTS have proposed, your access to it would be by virtue of a partnership with an ILEC?
7535 MR. MADURI: I don't think -- I mean I haven't -- I guess I just don't make the club. I mean we have made -- we are making the investment. That's what I really struggle with.
7536 When we talk about doing nothing, you know, we are making the investment.
7537 THE CHAIRPERSON: It wasn't my question. You know, I appreciate that and you made your point and I think we all heard it.
7538 My whole point was if there was a subsidy scheme -- and clearly you who will provide access to some people who can only be served by satellite, I just couldn't see how you would in the existing subsidy scheme, how you would have an entry point except through a partnership with an ILEC.
7539 MS PRUDHAM: C.J. Prudham, for Barrett Xplore.
7540 THE CHAIRPERSON: Yes.
7541 MS PRUDHAM: I think why we are struggling so much is, as we have said many times, we are already there. So it would seem antithetical to us to have to partner with a third party to serve a person at one address and, you know, half a kilometre down the road we serve them directly.
7542 To us, we just can't even figure out how we would layer that into our business.
7543 MR. MADURI: Mr. Chairman, as well, I think we had mentioned in our presentation in Timmins, we have over 700 dealers, 2,800 certified installers. We are represented in every nook and cranny of rural Canada.
7544 So I'm not sure I understand why we wouldn't have our channel partners, our dealers who are rooted in these communities, selling to and having firsthand experience with the customer.
7545 THE CHAIRPERSON: Okay.
7546 The hand down the left -- yeah. Yes.
7547 MR. HENNESSY: Thank you, Mr. Chairman. Michael Hennessy with TELUS.
7548 I think we take quite a bit of exception to the plan for the following reasons.
7549 I think if you exclude most technologies that can be substitutes and if you roll back the clock so that the only way a competitor can operate in the market is through a partnership with an ILEC, then it is very likely that you can slowly build up the subsidy to get to the billions of dollars that MTS is talking about and, luckily for MTS, at that point they become the only one that would be likely in a position to actually get the billions of dollars or hundreds of millions in their territory.
7550 That makes to us absolutely no sense because it rolls back, you know, 20 years of public policy in terms of promoting choice, promoting facilities-based entry and creates a subsidy target that on its face is ludicrous given clear evidence of supply already in the market to meet the social goal of universal access.
7551 THE CHAIRPERSON: Okay.
7553 MS GRIFFIN-MUIR: Actually, just -- sorry, just before you go on.
7554 I think there is a misunderstanding of what we are saying here. Obviously, if Barrett is there and Barrett is serving -- and there was no intention in our proposal to disparage Barrett in any way. Either Barrett got there through some sort of subsidy, through some sort of partnership or because there was a business case to do so.
7555 Those territories wouldn't be up for subsidy, period. Somebody would be serving them and we wouldn't have the obligation, MTS Allstream or any other ILEC, to serve; similar to what we are proposing for the local -- basic local subsidy regime that exists today. I mean if there was competition there.
7556 There is one thing, though, I will say about Barrett. I frankly didn't totally understand what TELUS was saying.
7557 Right today they have 135,000 customers. So it's really a question of the customers they are not serving, and what they are saying is we are going to launch and be able to serve. And that's what we are talking about, something that is in the future and not something that's happening right now. It's about the parts of Canada that won't be covered by anybody.
7558 MS PRUDHAM: C.J. Prudham for Barrett Xplore.
7559 With great respect, that's the same thing to suggest that MTS should be confined to exactly where its wires are today and not be permitted to go one step further.
7560 COMMISSIONER MENZIES: Okay, yeah. We will stop there for now.
7561 I just want to quickly divert over to the -- and then we will come back to this, but your position on local competition in SILEC territories, is that unlimited? Are there any fences on that at all?
7562 MS GRIFFIN-MUIR: No. I mean, I respect the fact that there might be smaller incoming carriers who will have more difficulty.
7563 I understand what they are saying in terms of loop length requirement you know, if you are very close and you receive a subsidy as a new entrant into their territory. But I would have to say ultimately that's always been the argument against competition.
7564 COMMISSIONER MENZIES: Yes, okay. I just wanted to clarify on that.
7565 Now, I just want to come back again. The Chairman asked about the numbers of 1.4 million underserved and the 700,000 unserved. You responded that that was on the record of this hearing and I am just wondering if you can point specifically to that, because we kind of tried to dig that up and can't find it.
7566 The reason I ask is that I think the Broadband Canada program began, and that was before they funded programs, with the number of 450,000 unserved households.
7567 We have got nothing, nowhere else to go.
7568 MS GRIFFIN-MUIR: Thank you.
7569 Okay. We have from two sources; the Monitoring Report which gives us the 700,000 and then there were interrogatories from the ILECs, like each of the ILECs responded that gets us to the total of 1.4.
7570 COMMISSIONER MENZIES: Okay. So we can track that back.
7571 MS GRIFFIN-MUIR: Yeah. Actually, off the top of my head I can't tell you the interrogatory response but -- okay, and neither can those guys back there, but I will undertake to tell you.
7572 COMMISSIONER MENZIES: If you would undertake to dig it out and find it because it's --
7573 MS GRIFFIN-MUIR: I will.
7574 COMMISSIONER MENZIES: -- you know a couple hundred thousand here or there is kind of a significant difference. There is no point in -- well, it's always helpful to have the facts, I suppose.
7575 In terms of the funding of this -- just so I can understand, you are talking about raising and spending $700 million a year for 10 years. Correct?
7576 MS GRIFFIN-MUIR: Yeah, that's the estimate we derived based on public information. So what we, Bell and TELUS had put out in terms of broadband rollout for the deferral account.
7577 COMMISSIONER MENZIES: Okay. And that money would come from people from all parts of Canada; right, equally at 2 percent, right?
7578 MS GRIFFIN-MUIR: It would be -- that's ultimately what we are saying it might trickle down to. But how it would work is, in our proposal, the same way the regime works today.
7579 COMMISSIONER MENZIES: The reason I ask is it's a sort of a question similar to the one that Vice-Chair Katz asked this morning.
7580 When you look at the numbers and these were actually, I think, from a filing by you in 2009, the summary of funding programs to support broadband, there is quite a bit of difference in provincial funding. There is about roughly $600 million in federal funding.
7581 It all adds up to $1.4 billion that the government has spent so far, which has got us to even using your numbers, I think there is 12.4 million households in the country -- that has got us to 11.7 million households, $1.4 billion, and it takes -- and it's going to be very expensive by your estimates, $7 billion, to take us the rest of the 700,000.
7582 And I'm wondering how fair that is or how it would be viewed.
7583 For instance, Alberta has spent $202 million through the SuperNet and rural connections program. Saskatchewan has spent $207 million, the Yukon has spent $17 million and Manitoba, for instance, has spent $47 million.
7584 So citizens in different parts of the country have invested through their government at higher levels. And I am wondering what the rationale is now for your neighbours in Saskatchewan having to pay a higher subsidy to assist with Manitoba's expansion?
7585 MS GRIFFIN-MUIR: Well, I guess there is a couple of things. But first and foremost, the way we looked at it was really developing some sort of public policy around broadband infrastructure.
7586 Second, Saskatchewan themselves has conceded that in some instances -- and that would includes ourselves with even private money -- we have rolled out broadband to a greater or lesser extent.
7587 But in all cases, we are talking something up to 1.5 Mb, which is a little different from talking about having a national policy to get us to a transmission speed over a 10-year period, that it would be comparable to what you would need to have an effective digital economy, urban and rural.
7588 So it is more a public policy issue. Rather than saying, okay, X dollars has been spent to date to bring us to 1.5. I mean, that is the transmission speed we are talking and whether or not that is adequate.
7589 COMMISSIONER MENZIES: Right. But I guess, what I am trying to get at is a bit of a discussion regarding if $1.4 billion from a variety of sources, you can call it patchwork on the one hand and the other hand you could call it targeted, seems to have effectively -- plus private sector response to market forces has built a network that serves 11.7 million homes.
7590 What proof is there that, I ask SaskTel, that that isn't actually a pretty good system? When you have a 11.7 million households in a period of 10 years, why do we need to change the system that has served us reasonably well? Obviously, there are issues or we wouldn't be here. Why would we completely change the system to do the last 450,000 or 700,000?
7591 MS GRIFFIN-MUIR: Okay. Well, really it is an issue of public policy and infrastructure and how we want to fund it going forward. So if other countries are thinking that $1.4 million at 1.5 to zero is not enough and they should have a broader policy around that, and maybe 10 years is too long, then the Commission can develop some sort of public policy and we are presenting a mechanism how they can achieve that.
7592 COMMISSIONER MENZIES: Are we talking really about a capital program or an ongoing operational --
7593 MS GRIFFIN-MUIR: Well, it would probably encompass both. But I would imagine that the ongoing operational would diminish over time.
7594 COMMISSIONER MENZIES: So 10 years from now, say it is set at 20 megabits and in 10 years from now isn't somebody going to say, oh, let's take it to 50 and keep the program going? Doesn't it become like a permanent ongoing operational subsidy rather than a..? Let me put it this way, does it change from building the highway to maintaining the highway?
7595 MS GRIFFIN-MUIR: It would probably include that over time, but I think you would be progressively looking at it. I mean, we have gone quite a number of years with the local subsidy regime for the existing universal service.
7596 COMMISSIONER MENZIES: Okay, thank you.
7597 Just on the affordability issue of fixed line rates, you are concerned, you say here, of the -- in Manitoba that would represent an increase of 71 per cent from current rates paid by subscribers. Given that, in part, we have just been talking about extending a system, creating access to internet which will cost people $40 or $50 a month, what is the argument that says that an increase of $15, $10 a month in phone rate is unaffordable?
7598 MS GRIFFIN-MUIR: Actually, I am not making that argument, I am just saying this is what it represents. If you want to be covered by subscriber rates, our rates over three years, which is not insubstantial to the customer, the Commission would be saying back it is about a $3 to $4 increase per year for the next three years for our customers in Bands "E", "F", "G".
7599 COMMISSIONER MENZIES: You are okay with that?
7600 MS GRIFFIN-MUIR: No, I don't think we are okay with that. I am just pointing out it is not insignificant, whereas Bell is suggesting it is insignificant.
7601 COMMISSIONER MENZIES: Okay. You are not okay with it, but you are not not okay with it?
7602 MS GRIFFIN-MUIR: What I am saying is, sure, we could do some of it with an increase. Is $3 to $4 a year in high-cost serving areas a reasonable increase or affordable for those customers? In all cases, no, probably not.
7603 COMMISSIONER MENZIES: Okay. Do satellite providers constitute a commercial threat to your business?
7604 MS GRIFFIN-MUIR: No. I think there is maybe some misunderstanding. But no, we are not thinking of them as a commercial threat.
7605 COMMISSIONER MENZIES: There was a question addressed before, because I was just trying to understand --
7606 MS GRIFFIN-MUIR: They would be a competitor. I mean, they could be a competitor in some of the communities they are serving. Barrett could speak to whatever their business case is there. But they may have rolled out just like any other rural high-speed internet service provider. They may or may not be a competitor. They may be the sole provider.
7607 COMMISSIONER MENZIES: Right. But if you had a subsidy to reach that provider, then you could reach them and get their business, right?
7608 MS GRIFFIN-MUIR: Well, we are not talking about where somebody is, we are just talking about rolling out where they are not.
7609 COMMISSIONER MENZIES: Well, that is where his business is, is where... Now, you talking about somebody who is unserved, right?
7610 MS GRIFFIN-MUIR: I think what you are saying is should we just wait and..? I mean, that is the debate we are having, whether they rollout or we do or not rollout.
7611 COMMISSIONER MENZIES: What I am really trying to get my head around is why -- the frustrating thing has been the lack of hard data to show that the system that has been working has failed. And it is much easier to, at least for me, can't speak for all of my colleagues, but it is much easier to understand the need for a new approach if there is some hard data to look at that is saying that the system that developed with some stimulus, but primarily on its own for the last 10 years has stopped working and won't extend to the remaining 700,000 or 450,000 people.
7612 MS GRIFFIN-MUIR: Well, I guess it is, as I said, a question of public policy. But I think it is really a question to decide whether on its own where there is no business case, so there are still pockets that are either unserved or underserved, whether a financial commitment will be made by somebody to go into those areas.
7613 So what we are grappling with and obviously many countries are grappling with, not just Canada, is whether what has happened thus far over the last 10 years with $1.4 billion of public funding is adequate, and that has got us to $1.4 million. So in areas where it is not economic to provide basic local service, who is going to rollout broadband?
7614 And there is no plan in front of you that I am aware of by anybody. There are those who are saying, we are coming to this moment. But I don't think anybody has said, and I am sure they will if they disagree with me right now, I have a plan and here is how I am going to do it.
7615 COMMISSIONER MENZIES: I mean, I agree. It is an assumed truth and it is widely held, it was just the lack of data on it that I was kind of pushing for to see if there was any out there that would help us at all.
7616 I think, yes, the Chairman was kind enough to deal with the Phase 2 matter.
7617 I thought I saw a hand back there earlier.
7619 MR. BIBIC: Mirko Bibic, from Bell.
7620 Commissioner Menzies, I do want to raise a few points in respect of paragraph 27 of the MTS piece and it relates to a couple of questions you asked, but I am happy to wait until you finish here.
7621 COMMISSIONER MENZIES: I am good, go ahead.
7622 MR. BIBIC: Okay, thank you.
7623 The end of paragraph 27, you just asked it a few moments ago, MTS Allstream says, hey, look, what is the problem with raising a customer's bill by $1 a month or $2 a month on a $100-bill to fund broadband in unserved areas? Heck, this is less than the increase that Bell proposes in terms of local service rates.
7624 Well, there is a huge difference between those two, and they can't be compared. Because to raise a local telephone customer's rates for local service means that that customer is paying a higher rate, yet affordable, for receiving that service him or herself. That is quite a different story than saying a customer is going to absorb a rate increase to fund, frankly to enhance, the broadband networks of MTS and SaskTel in Manitoba and Saskatchewan.
7625 So this brings me to my next point which also relates to the question you asked, Commissioner Menzies, which is you started exploring what I call the distributional inequities, but you started exploring how a Saskatchewan customer would feel about seeing a rate increase to fund MTS's network in Manitoba. And that is what I call a distributional inequity.
7626 So the concept I agree with. The facts are that SaskTel customer wouldn't be funding broadband in Manitoba, it is in fact customers in urban areas of Ontario and Quebec that would be enhancing the networks of SaskTel under the SaskTel proposal and MTS under the MTS proposal. Because here are the numbers, these are the hard numbers under the contribution regime. Today, Bell pays $64 million a year into the contribution regime at a rate of .8 per cent.
7627 If that rate were to go up to 2.7 per cent, as suggested by MTS, Bell customers would suddenly be paying $214 million and would be drawing a pittance out of that in order to enhance broadband networks in Ontario and Quebec in our area. All that money would be going -- well, most of it -- to fund the deployment of broadband in Manitoba and Saskatchewan. And that, in my view, is a huge distributional inequity.
7628 Thank you.
7629 THE CHAIRPERSON: SaskTel, you had a hand up there before and he ignored you. Is there something..? Okay.
7630 But one thing is, we are all talking about the cost of outlay and I guess we have no way of putting -- but the whole idea of connecting everybody to broadband, et cetera, is in order to not having huge opportunity costs missed or the social cost of having people not having the access to the internet. Anyway, that is what we heard from MRC Papineau, et cetera, that, you know, if you do not give a certain part of the country access to high-speed internet you are actually retarding the development, you cause out-migration of youth and all of that.
7631 But in our proceeding here, I don't see how any one of you have addressed that point, nor do I think that we can because it is --but isn't that part of the background to the MTS proposal? They basically suggest we need to have equal access of course to avoid those missed opportunity costs or the social costs that come from uneven access, et cetera, or do I misunderstand you?
7632 MS GRIFFIN-MUIR: No, no. Actually, it is a question of public policy. So it is a question of do we have an efficient instrument to implement this? And taking into consideration that Bell no longer likes the subsidy regime, that is how there is universal basic service to begin with and it was averaged over rates.
7633 So all we are saying is if we want to have a basic service objective and we are discussing it today, yes, we think it only makes sense that it includes access to broadband. And the proposal really is to address making sure it is comparable access in urban and rural.
7634 THE CHAIRPERSON: Bell, did I see your hand up?
7635 MR. BIBIC: Yes, thank you. Bibic from Bell here. Thank you, Mr. Chairman.
7636 We don't dispute the public policy importance of this debate. In fact, we led our opening statement with it yesterday. For us, though, there are a number of questions. It is the source of funds and we do not believe that the source of funds should come from a contribution regime like this, and that is picking up from the answer I just gave.
7637 The other key question is where? We certainly do not believe that funds, wherever they come from, should be used to serve areas, for example, that Barrett Xplore is already serving and they certainly shouldn't be used to enhance SaskTel's network from 1.5 megabits per second to 3 or 4 megabits per second.
7638 SaskTel was able to get to 1.5, you know, through marketplace activities and provincial government funding I would imagine and they can continue to do that to get to 4.
7639 And then the third question is who should get the funds? And we certainly do not agree with MTS that, you know, Bell customers should have to ramp-up their contributions from $64 to $214 million a year and that only MTS would get the funds in Manitoba.
7640 So, to us, it is not a question of disputing the public policy merits of the debate for plugging in the gaps where they actually exist, it is the source of funds, where and who gets it.
7641 THE CHAIRPERSON: Thank you.
7642 I think this is a good time to break. Let's have a 10-minute break before we go to the next intervener.
7643 MS GRIFFIN-MUIR: I just wanted to point out that the source of our numbers, we actually did provide our source at the bottom of Exhibit A to our submission in Timmins.
7644 THE CHAIRPERSON: Okay, thank you.
7645 Let's take a 10-minute break.
--- Upon recessing at 1517
--- Upon resuming at 1530
7646 THE SECRETARY: Order, please. À l'ordre, s'il vous plaît.
7647 THE CHAIRPERSON: Okay. Commençons.
7648 THE SECRETARY: We will now hear the joint oral rebuttal argument by Barrett Xplore Inc. and Barrett Broadband Networks Inc.
7649 Please introduce yourselves for the record and proceed with your 15 minute presentation.
7650 MR. MADURI: Thank you.
7651 Good afternoon Mr. Chairman, Commissioners and CRTC staff.
7652 My name is John Maduri. I am the CEO of Barrett Xplore Inc. and President of Barrett Broadband Networks Inc. As was the case in Timmins, I am joined by our Chief Legal Officer, C.J. Prudham and our outside regulatory counsel, Laurence Dunbar of Fasken Martineau.
7653 Thank you for the opportunity to present again today.
7654 The first point that I would like to address in my presentation is that satellite is unequivocally part of the equation for rural broadband.
7655 At the outset let me say that I am very gratified by the support that many other parties to this proceeding have expressed for the proposition that in order to serve 100 percent of the population of Canada with affordable broadband some portion of the population will have to be served by satellite. It is simply not realistic to expect wireline or even wireless to be extended to serve every remote part of this country.
7656 Mr. Chairman and Commissioners, your exchanges with a number of parties over the past few days have confirmed this point, including with companies like Ontera and SaskTel that have their own plans to build out fibre and wireless services.
7657 Unlike some of these parties, we do not see satellite as a stopgap measure or as a second best solution. As with television, satellite will be a permanent Internet solution for many Canadians and it will provide a service that is comparable to what is available in urban markets.
7658 The topography of this vast country, and the extremely low population densities in large parts of it, make this inevitable.
7659 However, it is not just the remote areas of Canada that have low population densities.
7660 In this regard, I would like to correct the record regarding something that was said about Barrett's contract with the City of Ottawa and that that contract does not include satellite service. I am referring specifically to paragraph 2458 of the transcript.
7661 In fact, we do serve the rural areas within Ottawa's City limits using a combination of fixed wireless and satellite services. Even in this area that is within the boundaries of Canada's fifth largest city, it is not economically efficient to serve 5 percent of the customers in this market without using satellite, so we serve 95 percent with wireless and 5 percent with satellite.
7662 The important thing is that no one gets left behind, everyone has Internet access. This underscores our point.
7663 The same is true of the provinces New Brunswick and Saskatchewan that have achieved 100 percent availability. This could not have been done without satellite.
7664 The pictures appended to the oral presentation of Northwestel at the Timmins public hearing should make this very clear. The geography, the climate and population density of many regions of Canada make the use of broadband satellite inevitable.
7665 However, satellite is not a bad thing. With the advances in capacity and the cost of new satellite technology, satellites will deliver, as early as next year, a broadband service that is comparable, both in terms of capacity and price, to urban areas of Canada.
7666 I have one final point to make with respect to our satellite platform. On reading the transcript, I'm not sure that I was as clear as I should have been respecting our ability to offer the same Internet speeds in northern and southern Canada.
7667 When we start introducing the new high throughput satellites, these satellites will provide much greater capacity in the southern half of Canada, where most Canadians live. This will free up a considerable amount of capacity on our existing satellite that covers the whole country.
7668 What this means for the northern areas of Canada is that we will be able to offer the same service packages and speeds to these regions as we offer in southern Canada.
7669 The second point, regarding service targets: What kind of data speeds can we deliver on our satellite platforms?
7670 Last Tuesday in Timmins I spoke of Barrett's plans to offer broadband service packages of up to 10 megabytes for residential customers and up to 25 megabytes for business customers starting in mid-2011 using high throughput satellites. This remains our plan.
7671 Notwithstanding this commitment, I was reluctant to agree with the Chair's idea of setting minimal aspirational targets for broadband speeds in Canada in the way that some other countries have done.
7672 Since the hearing in Timmins I have received considerable input from our Barrett team members, our partners, our dealers with the request or with the input that we should be taking a leadership position on the issue of targets.
7673 Mr. Garneau yesterday got the ball rolling with possible targets of 1.5 megabytes nationally by 2014 and 4 megabytes by 2020.
7674 We at Barrett can commit to you today that as early as next year we will start offering our customers speeds of 1.5, 3 and 5 megabytes per second, at their option, on a national basis. These service packages will be available to 100 percent of Canadians at the end of 2012. Again, this is a minimum commitment.
7675 As I said at the Timmins public hearing, we are already looking beyond high throughput satellites to the next evolution of that technology and looking at the investment decisions that are required to continually advance the technology.
7676 The third point on affordability. Obviously achieving 100 percent broadband availability or access is not a great achievement if the service is not generally affordable.
7677 At the Timmins hearing I indicated that Barrett intends to introduce service packages that are comparable in terms of monthly rates to service packages in urban areas.
7678 I also indicated that one of the benefits of satellite technology is that the cost of the communications portion of the service is the same for urban or rural areas. This is why satellite provides an economically viable way of serving rural and remote areas.
7679 Since then, a number of parties at this proceeding have commented on the upfront cost of CPE, customer premise equipment, associated with acquiring satellite services. So I'm talking about the satellite dish, the associated electronics, the installation cost that the customer must purchase to use the service.
7680 Mr. Chairman, I believe that you, as well as a number of parties, have referenced a total of up to $700 to cover these costs, including installation and thus the related windshield time.
7681 Like other electronics and satellite-related costs, these upfront costs have dropped since they were first introduced, and they will continue to drop.
7682 Commencing next year, seven high throughput satellites will be launched worldwide. This will spawn an exponential increase in the volume of broadband satellite receivers being manufactured. This in turn will decrease the price or the cost to us of this equipment. This is something that can be expected to happen in the same manner as it has happened for other electronics, DTH dishes, cellular telephones and HDTVs.
7683 Two years ago the typical cost of equipment and installation was $700 or more. Today, we offer the upfront costs, or installation rates and CPE at a price of $550. In areas where we have promotions, this price is somewhere between $300 to $450 and in areas where we are working with provincial or regional governments to improve affordability, the price is $99 for CPE and installation. Again, I emphasize that is satellite. We are actually free in some markets on our wireless service.
7684 The point is, the average customer pays less than $500 for customer premise equipment and installation today and we believe and are confident that that will continue to decline over the coming years.
7685 The answer to the issue of installation costs is that we do not expect them to be a barrier to affordability and that price will continue to fall over time.
7686 If I could just pause there and ask you to turn to, I think it's pages 9 to 12, we have included some diagrams and photos that speak to the market we serve.
7687 The first example is in a location called Red Sucker Lake. It is in the Province of Manitoba and this is -- I think I had mentioned when we were here with you last that we have examples where dealers batch up customer requests in very remote communities, fly into the community, stay a few days, perform the installations and basically serve customers in that manner in the most remote parts of this country.
7688 That is exactly what happened in Red Sucker Lake. We had initial community interest, the dealer did their marketing, their sales effort into the community and identify, I believe it was 39 new customers that were interested in the service, they flew in, completed the installations and all of the work to get the customers up and running.
7689 These installations were completed at an average cost of $300 or less. I will emphasize in this example that there was no subsidy involved from any regional, provincial or federal government.
7690 The other example that we have here that is on page 10. What we have on page 10 is an area in Québec, I think the most northern tip of the Province of Quebec, and again a very similar example in terms of a remote community we are serving.
7691 So you have the map on page 10. On page 11 you can see we are serving a number of homes with satellite. The dishes that you see there are satellite dishes.
7692 On panel 12 I had to show you that there is a lot of snow there.
7693 MR. MADURI: Point four, subsidy programs.
7694 As you know, we do not favour the creation of a new CRTC-sponsored subsidy program. We believe that there are thoughtful, well-designed, and targeted subsidy programs that have already been initiated at various levels of government. These are serving to accelerate the achievement of 100 percent availability and should be allowed to run their course. It is our strong view that it would be counterproductive to layer a new subsidy program on top of the various programs that are currently in place.
7695 To their credit, most of the ILECs have not asked the Commission to create a new plan.
7696 The proposal by MTS Allstream stands out in stark contrast.
7697 We see the MTS proposal as a deferral account proposal times 10.
7698 Mr. Chairman, last Tuesday you told us that the deferral account was a bad idea and that's why you got rid of it. If the deferral account was a bad idea, the MTS proposal is a terrible idea.
7699 $7 billion; $10,000 subsidy per subscriber. So if we were using the Sucker Lake example for those 39 customers it would have cost $400,000 in subsidy to serve them.
7700 Only the ILECs get the subsidy; higher contribution rates; and a new tax on retail Internet services at a point when we are trying to get all Canadians, that significant portion that aren't subscribing in urban as well as rural to subscribe to the service.
7701 I hope I don't have to say too much more about this. The proposal I believe speaks for itself.
7702 The cost is truly beyond outrageous and the proposal lacks any sort of vision. That same $7 billion would allow you to give every one of those 700,000 unserved Canadian households a 30 megabyte per second service with equipment and installation for free using satellite.
7703 Instead, MTS would prefer you ask them to spent $7 billion on wires. The sad part of their proposal is that even with a $7 billion of wires, you will probably still need a satellite to fill in the inevitable gaps in coverage.
7704 I point to the Australian example again where with $40-plus billion to get to 90-plus percent and the balance even with that significant investment, the need for satellite and wireless.
7705 We trust the Commission realizes that their proposal is not a real solution. It is just a $7 billion attempt to retrench an ILEC monopoly that would kill off all private investment in the rural and remote markets, markets that are already served by companies such as ours.
7706 In conclusion, Mr. Chairman, I believe that the public process has been a valuable exercise. I hope that it has given the Commission a better idea about the lay of the land, what has been achieved and what we still need to do.
7707 I think that in the end, you will find that Canada stacks up very well against the rest of the world when it comes to broadband availability. I also think you will find that we have a much greater diversity of carriers in the broadband market than do many other countries, and that we are using a variety of platforms, technologies to get the job done.
7708 We have a significant degree of competition in the market and this will serve Canada well in continuously moving the yardsticks on price and data speeds.
7709 As I mentioned in Timmins, the focus of our broadband dialogue is on availability of broadband in rural Canada.
7710 As our collective confidence grows in the ability to achieve 100 percent availability, we must turn our attention to the challenges of creating awareness of the benefits; encouraging adoption, and deriving advantage from broadband applications, the three As. With 20 percent of households not owning a computer, 30 percent not subscribing to broadband services, 100 percent availability is less of a victory.
7711 I know that adoption and digital literacy are not the CRTC's jurisdiction, but if there is anything that the Commission can do to liaise with the other levels and agencies of government to advance this cause, I urge you to do so. In a way 100 percent access is the easier of the primary building blocks for a digital economy to achieve. Digital literacy and adoption are essential to drive down the cost of broadband expansion and to achieve a digital economy. Ultimately these issues need to be successfully addressed if we are to advance or achieve our true potential as a digital nation.
7712 Thank you and I welcome questions.
7713 THE CHAIRPERSON: Thank you.
7714 My colleague pointed out to me that on the picture for Red Sucker Lake you have underneath there "Xplornet partners with DTH Cable TV".
7715 Could you elaborate on that?
7716 Interestingly enough, I asked Bell before this meeting whether the DTH they provide can also be used for Internet access. They told me no, it's a different technology and it's a problem.
7717 So what are you doing here? Who are you partnering with and what are you doing
7718 MS PRUDHAM: I believe what we are doing is working with the same distributor or channel partner if you like that's in Red Sucker. So it's the same dealer if you like. It is different technology. It is a different --
7719 THE CHAIRPERSON: All right. And it's different dishes?
7720 MS PRUDHAM: Yes.
7721 MR. MADURI: Yes. What we were trying to speak to --
7722 THE CHAIRPERSON: So if the person in Red Sucker Lake wants to have cable and wants to have Internet, they are going to have two dishes.
7723 MS PRUDHAM: Yes.
7724 MR. MADURI: Yes.
7725 THE CHAIRPERSON: What you are doing is the same installer may install the two?
7726 MR. MADURI: It speaks to the fact that, again, we always talk about getting the technology there. The bigger challenge which relates to the install is the windshield time, having channel partners, installers, sale -- people who can sell, install and continuously support the customer.
7727 So the example there is we are leveraging channel partners who sell related and similar services. So TV is one. We have a lot of our dealers who are also the local computer jockey. If you think of it like the rural Geek Squad. So in essence a critical part of getting to these rural communities is that sales force, installation, support.
7728 THE CHAIRPERSON: Yes. But I happen to be both a satellite customer and one of your customers --
7729 MR. MADURI: No.
7730 THE CHAIRPERSON: Yes.
7731 MR. MADURI: Oh, sorry, you are.
7732 THE CHAIRPERSON: I am. Don't tell me what I'm not, I do know I am.
7733 MR. MADURI: Yes. We appreciate that cheque every month, yes.
7734 MR. MADURI: Yes. Sorry about that.
7735 THE CHAIRPERSON: I paid the same chap twice to come to my house, first to install the DTH, second to install satellite and so each time it cost whatever the individual charge.
7736 Now, if I lived in Red Sucker Lake and I wanted to have the two, I gather he would charge me one trip and one installation cost.
7737 Is that what you are talking about?
7738 MR. MADURI: For both services?
7739 THE CHAIRPERSON: Yes.
7740 MR. MADURI: No. I think the key point we were trying to make here is that, again, it just speaks to how we execute in the marketplace. We use a variety of channel partners, some sell -- some are just Xplornet, sell broadband, a lot, I would say a significant majority, sell computer -- service computers, the local rural Geek Squad type of provider, and then satellite TV. So it's just the breadth of the channel we were speaking about.
7741 THE CHAIRPERSON: You don't bundle with DTH, do you?
7742 MR. MADURI: Not today, no.
7743 THE CHAIRPERSON: You could have a joint venture with Shaw or with Bell.
7744 MR. MADURI: It's a great idea!
7745 THE CHAIRPERSON: No, I mean presumably those folks want -- I mean I can't imagine why they would only want one and not both. Anyway, so there's that.
7746 Now, as far as the upfront installation cost of the CPE, I wish it was $500.
7747 This is your --
7748 MR. MADURI: I wish I didn't pay that $1,000 for that DVD player, how many years ago.
7749 I mean it's the same -- Mr. Chair, it's the same challenge. I mean it's a volume issue. It is a volume issue. It's a volume issue on the customer premise equipment, it's a volume issue in terms of the cost of bandwidth.
7750 THE CHAIRPERSON: I gather you have deals with serious provinces and municipalities to subsidize in effect the installation?
7751 MR. MADURI: There are some, but the vast -- there are some agreements at the regional, provincial, and now with broadband in Canada federal level. We have done a lot -- frankly I would say the majority of what we have done we have done without subsidy.
7752 THE CHAIRPERSON: For instance, you mentioned Ottawa where we are living and 5 percent of greater Ottawa is being served by satellite so a deal that you struck presumably with the City of Ottawa.
7753 MR. MADURI: Correct.
7754 THE CHAIRPERSON: And presumably in order to make this saleable and attractive to the folks concerned there has to be some subsidy element for the CPE.
7755 MR. MADURI: Correct.
7756 THE CHAIRPERSON: And essentially you are urging us not to adopt a subsidy program, but let the market work together with whatever level of government is willing there to help you to overcome these sort of initial installation costs.
7757 That must be the biggest barrier that you have?
7758 MR. MADURI: Well, the lower the -- we have seen it in the marketplace, the lower the upfront cost, the faster the rate of adoption.
7759 So we are incented. We are incented -- when the satellite goes up, Mr. Chair, you know, it's up and we have fixed costs. We want to load that satellite as quickly as we can.
7760 So we are very focused on the ways, whether it's how we bring down the cost of equipment -- and I think we could share with the Commission is confident some very creative things we have done in terms of the cost structure of the CPE.
7761 We are looking at ways to get more channel, to actually -- in the way that they did in Red Sucker Lake -- batch up activations in remote communities, but it is in our economic interest to get the upfront cost as low as possible, again using innovative procurement methods, innovative installation approaches, channel approaches, to load that satellite as quickly as possible.
7762 THE CHAIRPERSON: Are you the only one who provides this or do you have competitors?
7763 MR. MADURI: There are other providers. Well, in a lot of our markets with satellite we compete with other wireless providers.
7764 THE CHAIRPERSON: Satellite. Only satellite?
7765 MR. MADURI: There are other satellite providers in Canada, at least three that I can think of, OmniGlobe, Galaxy, SSI Micro in the north, so there is at least --
7766 THE CHAIRPERSON: And they all have a global footprint for Canada?
7767 MR. MADURI: I'm not familiar with the full extent of their footprint.
7768 MS PRUDHAM: I'm sorry, we don't know their full extent of their footprint, we just see them in specific markets from time to time.
7769 THE CHAIRPERSON: What satellite do they use?
7770 You have your own satellite, if I understand it, or are you renting a satellite or how does it work?
7771 MS PRUDHAM: We lease our satellites, yes.
7772 THE CHAIRPERSON: You lease your satellites.
7773 So the one you are talking about that's going to be launched next year, you lease space on it, it's not only you who is going to be on that satellite?
7774 MR. MADURI: No.
7775 MS PRUDHAM: Yes. It's much more detailed. Essentially we own one of them. It is a capital lease arrangement.
7776 The other one is a lease, but we have 100 percent of the Canadian capacity on both.
7777 MR. MADURI: Think of the satellite as a condominium structure over North America, we own floors 1, 2 and 3 and we have an American partner in each case that owns floors 4 to 12 that reside over the U.S. market.
7778 THE CHAIRPERSON: Right.
7779 MR. MADURI: So we own the floors over Canada, they own the floors over the U.S.
7780 THE CHAIRPERSON: But you are using a Canadian spot and the American tenant presumedly pays a huge part of the cost; right?
7781 The satellite up there in the sky is in a space reserved to Canada by the ITU?
7782 MS PRUDHAM: Sorry, there are specific orbital slots. So yes, the satellite between the other company and us, in each case we have obtained the necessary orbital slot for it to appear. I think for example one of them is in the Isle of Man slot, it's not necessarily specifically the Canadian slot.
7783 THE CHAIRPERSON: I see. Okay.
7784 Now, I am surprised that you haven't said that -- you represent here before us that this solution really to get Canada -- let's say for argument sake a 5 megabyte universal access -- is satellite and you can do it and, et cetera, where we don't have to have a fancy subsidy program based on this existing mechanism, et cetera, you can reach them and you are doing this partially.
7785 The biggest step is the upfront cost for customers, the $700 or $500, whatever it is.
7786 Wouldn't part of the answer then be have a subsidy program to deal with that initial cost?
7787 MR. MADURI: I think what we have said is there are existing programs at the regional, provincial and federal level that are just getting underway. Those programs will bridge us to a point and after that point what we are saying is that it will be sufficient scale. We see sufficient scale not just in our deployment, but globally, because we are not -- the cost structure on the customer premise equipment is not a Barrett-specific issue, it's an industry issue. With seven new satellites that have 10 times the capacity of the historic satellites, we are going to see a dramatic increase in the number of those units being manufactured.
7788 THE CHAIRPERSON: And therefore the unit costs going down.
7789 MR. MADURI: That will drive -- so the existing programs -- I emphasize, we have programs regionally, municipally, federally, provincially, they are just getting underway and what we believe is those programs will bridge us to a point where good economics, economies of scale will help drive down the cost of the customer premise equipment.
7790 The one challenge that faces any technology in this market is windshield time and that's just something that whether you are a wire provider or a wireless or a satellite provider we just have to be creative about because the distances are significant.
7791 THE CHAIRPERSON: Yes, but the $500 that you are talking about, what percentage of that is windshield time and what percentage is equipment?
7792 MR. MADURI: Well, we in fact subsidize both. I don't know how I would allocate it.
7793 We subsidize -- we in our cost structure -- much in the way that the cellular companies subsidize handsets we would subsidize both components. Our goal is we have a total cost -- something again I think we would share with you in confidence -- we have a total cost and we basically subsidize that --
7794 THE CHAIRPERSON: Surely the installation cost, that you must know what -- that's what I'm --
7795 MR. MADURI: I absolutely know what it is. Absolutely. I know what it is and I know what the CPE is and, as I said, I think we would be deleted to share that with you in confidence.
7796 When you say how much do we subsidize one item or the other, I don't know that it really --
7797 THE CHAIRPERSON: I don't want to know how much you subsidize, I want to know what the installation cost is because, as you just told me, the equipment costs go down. As there are more users the unit costs will go down, I doubt that the installation costs will go down.
7798 That was my question, how much of those $500 --
7799 MR. MADURI: Yes. The installation costs, again we would be prepared to share that in confidence. It varies depending on the installation. If I'm serving a rural area outside of Ottawa, that would be one cost; if we are doing this example in Sucker Lake it would be a vastly different cost.
7800 THE CHAIRPERSON: Okay.
7801 Rita, you have some questions?
7802 COMMISSIONER CUGINI: Just a couple of follow-up questions.
7803 Just so I have a clear in my mind -- and hopefully it will be the last time you will have to answer these questions about equipment costs -- but these subsidy programs that are available, they are strictly for that equipment, it's not for -- they don't subsidize in any way the monthly bill that the customer receives?
7804 MR. MADURI: The subsidy programs that are in place today that we see across Canada are predominantly one time and I don't know that they have -- I think there is a subsidy of, say, $400 per customer. If that's what the math works out to, that we have, you know, $1 million a subsidy and we have to get to, what is it, 2500 customers, $400 per customer, that's the calculation.
7805 I don't think any of them really specify if it's for equipment or if it's for installation or ongoing, you get a one-time subsidy and it has to support your business case to deliver service in perpetuity to that market.
7806 COMMISSIONER CUGINI: Okay. Thank you. I understand now.
7807 You did say it in Timmins, you repeated it here this afternoon, that of course the focus of your broadband dialogue is on availability of broadband in rural Canada.
7808 We have talked a lot during these proceedings about unserved and underserved Canadians. Based on the numbers that you have heard over the last few days, can you give us, even if it's an approximate, what percentage of unserved and underserved Canadians do you currently serve?
7809 MR. MADURI: We serve today with -- I think we have offered that we serve 135,000 customers, existing customers -- 135,000 or 140,000; our wireless tower is roughly 600 pieces of vertical real estate, probably have a footprint of roughly 400,000 -- 400,000 households. So if all of them were our customers, if we had 100 percent subscription, which would be a great thing,and they all went to Barrett -- and we know there are other competitors in these markets -- then we would have 400,000 customers.
7810 So again, 135,000 total customers, our wireless footprint has coverage of about 400,000 households -- and we can get a specific number for you -- and then on satellite we cover the full breadth of that underserved, unserved market.
7811 I hope that answers your question.
7812 COMMISSIONER CUGINI: I guess what I'm getting at is at what point can we stop using these terms? If we combine what you provide to Canadians with what everybody else is providing to Canadians, at what point in time can we say that -- well, at what point in time can we say there are no more unserved customers?
7813 MR. MADURI: No, that's a good question.
7814 I would say that end of 2012 with our second launch we will have enough capacity. I think we have coverage today, I hope I was able to describe the last meeting. We have coverage, what we need to do now is inject more capacity into the network so that we can serve customers.
7815 The unfortunate thing is, we are here because of our size and scale that we can actually afford to be here and we can afford to be presenting our company and we see this as a very important place to be when we are talking about rural broadband. There are hundreds of rural broadband service providers who, maybe they are not aware of this proceeding or they just make a determination that they just can't afford to be here, but we are not the only service provider that uses wireless or satellite.
7816 In the province of Alberta I think you spoke to the SuperNet initiative. After SuperNet was launched 50 new rural broadband service providers came into the market and I think there are probably 50 or 60 still in the market executing with anywhere from 1,000 to 8,000 customers.
7817 So I want to emphasize, it's not just -- I think we trivialize this if we -- you know, what's happened in the marketplace in the last five years with wireless and satellite if we really don't give consideration to the fact that there are hundreds of these players.
7818 I emphasize, I would encourage you to have that conversation with Industry Canada. I know that the Americans, when they developed their national broadband program, got off to a great and exciting start with $7.2 billion for the U.S. market and what they missed was that they had to undertake a very rigorous, detailed, exhausting mapping process because, in their view -- and I think it's the right approach and I think in Industry Canada's view -- you can't overbuild a private investor -- you shouldn't overbuild a private investor with public capital.
7819 So, in closing, it's not just Barrett.
7820 COMMISSIONER CUGINI: I have just one last question.
7821 On page 3 of your presentation you said you:
"...will be able to offer the same service packages and speeds to these regions as we offer in southern Canada."
7822 You said you will be able to offer what you offer in northern Canada:
"...the same service packages and speeds to these regions as we offer in southern Canada."
7823 Where do you draw the border between northern and southern?
7824 MR. MADURI: If you remember that -- great question.
7825 If you remember the map that I showed you, first and foremost we should have done it as a build-up slide, but basically the first employment, Anik F2, provided full ubiquitous coverage of Canada. Then, as time went on, we layered in beams to put capacity where we needed capacity.
7826 And so I think that created some confusion that we were just going to serve the southern part of Canada, as depicted by those new satellite beams. We were going to serve only those markets with the new high throughput satellites.
7827 What I was trying to say today is that as we inject that capacity into the market, move customers off existing platforms, add new customers to the new high throughput satellites, we will free up capacity to serve the far north where densities are exceptionally low, like we are talking one home, two homes per square kilometre versus in some of the southern parts, even in rural we have got 10, 15 homes per square kilometre.
7828 COMMISSIONER CUGINI: And how far south is your southern Canada border?
7829 MR. MADURI: Right to the U.S. border.
7830 MS PRUDHAM: Yeah, we go right to the border.
7831 I think if --
7832 COMMISSIONER CUGINI: But in terms of the customers that you will be targeting is really the question.
7833 MS PRUDHAM: I mean, we do -- if you look at one of the most southern parts of Canada, we go right down to Essex County in Ontario. There are people on satellite down there.
7834 MR. MADURI: Is your question more one of are we looking to go into urban? I think the answer is "no".
7835 We have got lots of potential and depending on whose estimate you believe, whether it was the 700,000 or the 1.4 million, we have got lots of market potential to serve and our focus would be to get to those customers as quickly as we can and load them as quickly as we can.
7836 COMMISSIONER CUGINI: Okay, thank you. These are my questions.
7837 THE CHAIRPERSON: And if I understood you correctly in Timmins, you said that at the speeds at which you deliver it can also be used for telephones so if somebody wanted to buy themselves a monitor or something and plug it into their computer they could use the connection to talk.
7838 MR. MADURI: They do that today. We have 2,000 customers, I think, on our own service.
7839 THE CHAIRPERSON: Yes.
7840 MR. MADURI: And we have -- I don't have it as walking around information, but we do have lots of customers who use over the top, you know, non-Barrett branded VoIP solutions.
7841 THE CHAIRPERSON: All right.
7843 COMMISSIONER PATRONE: Thank you, Mr. Chairman, and good afternoon.
7844 At the risk of beating this to death I just have one more question regarding the subsidy programs. On page 6 you speak about "would be counterproductive to layer a new subsidy program on top of the various programs already in existence" and you spoke about some of the programs that are already out there and the fact that some had already begun or that had just begun.
7845 Do you have any even rough timeframes around the duration of these programs, going forward?
7846 MS PRUDHAM: It does depend on a number, though.
7847 If you were to look at, for example New Brunswick, which started a little over -- almost two years ago now, the physical construction portion of that finished in June. There was a fixed wireless component. The satellite portion has been going on since February 1st of 2009.
7848 We are ramping or loading, if you like, throughout that period. The total amount of the subsidy has been paid. We essentially have five years to work our way through and achieve the maximum penetration that we can in terms of getting people to adopt services.
7849 If you look at the Ontario OMAFRA-type programs, for example, with our fixed wireless as opposed to satellite but just to give you the same sort of idea, you are again usually looking at less than a year's worth of actual work in the marketplace and then it's a five-year monitoring program if you like, to see the results.
7850 COMMISSIONER PATRONE: So in New Brunswick and Ontario, if I hear you correctly, there is a five-year span in which you expect that those subsidies are going to be in place?
7851 MS PRUDHAM: No, no. Sorry, just to explain.
7852 COMMISSIONER PATRONE: Did I mishear you?
7853 MS PRUDHAM: They are one-time subsidies so there is a fixed amount given to us.
7854 COMMISSIONER PATRONE: Per customer.
7855 MS PRUDHAM: And off we go to attempt to achieve as much as we humanly can.
7856 MR. MADURI: If I could offer just for further clarification?
7857 COMMISSIONER PATRONE: Sure.
7858 MR. MADURI: Take New Brunswick as an example. There is a fixed amount of subsidy, one time. We have completed the network build -- you said June of last year.
7859 MS PRUDHAM: June, this year.
7860 MR. MADURI: Or June of 2010. We have loaded to date 13,000 customers in an area with 39,000 previously unserved households. There is no more money coming to Barrett; done. We are finished.
7861 COMMISSIONER PATRONE: So okay.
7862 MR. MADURI: We will continue to load. To be clear, though, we will continue to load customers because we want to, because we put in the network.
7863 COMMISSIONER PATRONE: The subsidy will be no longer available?
7864 MR. MADURI: There is no more subsidy. We are finished.
7865 It's our job now to continually expand the network, load customers, and we are delighted to do so because with that funding we have built a significant wireless network and we made available a significant amount of satellite capacity.
7866 COMMISSIONER PATRONE: When you say one time only are you -- could you explain that a little bit?
7867 MR. MADURI: Yeah. There is a quantum of funding.
7868 I think it's public information?
7869 MS PRUDHAM: It's $13 million.
7870 MR. MADURI: $13 million.
7871 COMMISSIONER PATRONE: This is New Brunswick or --
7872 MS PRUDHAM: New Brunswick.
7873 MR. MADURI: New Brunswick. It worked out to $400, roughly $400 per household or $300 -- $333, thank you -- that was paid over certain milestones in the contract.
7874 COMMISSIONER PATRONE: Okay.
7875 MR. MADURI: The network is built, 13,000 customers again. We just continue to load because that's a good thing for our business model and a good thing for --
7876 MS PRUDHAM: Perhaps it might be helpful to explain one of the key parts of the agreement with the actual governments. What they are looking for is an affordable package for their citizens.
7877 COMMISSIONER PATRONE: "They" meaning the consumer.
7878 MS PRUDHAM: The consumer, yes.
7879 MS PRUDHAM: So there is a requirement that we cannot price over certain amounts.
7880 COMMISSIONER PATRONE: It is an agreement with the Province.
7881 MS PRUDHAM: Exactly, so that's part of driving down the CPE costs or the install costs or the monthly billing rate.
7882 THE CHAIRPERSON: You are talking about satellite. You are not talking about fixed wireless here?
7883 MS PRUDHAM: I am talking about satellite, yes.
7884 THE CHAIRPERSON: Right.
7885 COMMISSIONER PATRONE: Okay. You mentioned New Brunswick and Ontario. Are those the only provinces where these existing subsidies are in place?
7886 MS PRUDHAM: There is a joint program we have spoken previously about with SaskTel.
7887 COMMISSIONER PATRONE: Okay.
7888 MS PRUDHAM: And obviously the federal broadband program is now in place and that's across the country.
7889 COMMISSIONER PATRONE: That would be part of the $225 million?
7890 MS PRUDHAM: Right.
7891 COMMISSIONER PATRONE: Thank you.
7892 Those are my questions, Mr. Chairman.
7893 THE CHAIRPERSON: Thank you.
7895 COMMISSIONER MOLNAR: Thank you.
7896 I want to begin related to the service targets that you spoke of here today. You mentioned that you wanted to be a leader on this and I think that's excellent. You have offered up speed commitments of 1.5, 3 and 5 on a national basis, is what you say you are able to deliver.
7897 And I just want to confirm that's both with satellite and on the fixed wireless platforms that you have in place today. Yes?
7898 MR. MADURI: Yes, correct.
7899 COMMISSIONER MOLNAR: Okay. Because we did hear some discussion of, you know, builds being at 1.5 and the cost of upgrading that to higher speeds was significant.
7900 But in your case you have either built it to attain 5 Mbps or you don't think that moving from 1.5 to 5 is a significant -- I mean a challenge that would require government support?
7901 MS PRUDHAM: The answer is we built the 5.
7902 COMMISSIONER MOLNAR: Okay.
7903 MS PRUDHAM: So our legacy platforms are in 5. Our new builds obviously go beyond that because we --
7904 COMMISSIONER MOLNAR: Okay. You built your legacy platform at 5 Mbps.
7905 MS PRUDHAM: Yeah, so we can support 5.
7906 COMMISSIONER MOLNAR: Okay, thanks. I didn't understand that before.
7907 As it regards the service targets and you have provided speeds and you heard -- I believe it was yesterday when PIAC was in front of us. They spoke that if there was to be a target established that as well as speeds it should include some specific metrics or requirements as it relates to the quality or the reliability of the service.
7908 And I know you spoke a bit about, you know, 99.9 percent being the satellite's quality metric or availability metric at this time.
7909 What are your thoughts as to our target, if we set one, to also include those as essentially you know part of the definition of what Canadians should expect?
7910 MS PRUDHAM: I think that starts to raise quite a number of engineering issues and factors into the equation because regardless of which platform -- and as I'm processing your question I'm thinking about our different platforms and different -- there are a lot of factors you have to bring together. You would have to look, for example, for the weakest link in each one to make sure it met whatever that requirement was. And I'm sure my colleagues behind me from other companies are doing the same thing, thinking about their different technologies.
7911 So I guess my one pause would be to say it might be a little more challenging to create a metric that works across all of them, all the different technologies that you would have and to monitor that.
7912 COMMISSIONER MOLNAR: If we were to establish such a target, would it be a matter of capital to augment or enhance your network to meet such a target or are there simple limitations that wouldn't enable that to occur?
7913 MR. MADURI: I think one of the realities of rural, you know, unfortunately the orientation that we often have in these discussions is we think of subdivisions or at least we think of an urban construct where there is not -- there may not be as much difference between one installation, the personality -- we think of it like a -- we would say our -- every tower we have and to a great extent installations have great variability. Like if we took a photo of every installation that we had done you would see widely different circumstances in terms of where they are physically located, you know what backbone you can get and a whole bunch of considerations that is much more diverse than what you would see in urban Canada.
7914 So I think that's something that would have to be factored into the determination of reliability.
7915 MS PRUDHAM: But to follow up on your question it's not just capital.
7916 COMMISSIONER MOLNAR: Yes, sorry, I don't think I was speaking of fulfilment here. I was talking about you know assurance, the ongoing provisioning of the service at a certain level, meeting certain metrics of quality, reliability, service and support.
7917 MS PRUDHAM: I guess where I am struggling a little bit you asked if meeting that was, say, a capital consideration. Again, I'm going to our fixed wireless in thinking about this.
7918 It could be the availability of backbone or transit or other things where we are going to a third party provider for that, just as any other rural ISP would be doing for that circumstance. So there are things that start to become beyond your control that make it a bit more of a challenge.
7919 So it's not necessarily solely about our capital. It might be about capital of other people.
7920 For example, we obviously use SuperNet, like the 50-plus WISPs that John mentioned and that's -- you know we can ask for service standards and good things like that, but it's not entirely within our control to make sure they attain those standards.
7921 COMMISSIONER MOLNAR: I am going to move on.
7922 Another thing that was proposed throughout this proceeding, and I know it was a discussion we had with the cable companies particularly, was if there was a target and you know you use what you have offered up here, they spoke of it should be the actual speeds versus the advertised speeds.
7923 Do you agree with that approach? So this target that you have provided, is this actual speed or advertised speed?
7924 MS PRUDHAM: These are the advertised speeds that John spoke to and they are the way we configure our packages. But I guess we are not big on selling or overselling the numbers in terms of what we are promising. We would expect that they would be actual or awfully darn close.
7925 COMMISSIONER MOLNAR: Okay. So no concerns if the target was set at actual?
7926 MS PRUDHAM: No.
7927 COMMISSIONER MOLNAR: Okay. Thank you.
7928 Now, I am sorry, but I am going to bring up the CPE issue one more time.
7929 Mr. Maduri, you said that it's in your economic interest to reduce CPE and if it is a barrier for customers adopting your service because of the high upfront costs, clearly I understand you are driving to take that down.
7930 But one of the things I haven't heard discussed here, and perhaps you have it already, do you have in place some kind of instalment payment programs or anything that would enable customers to essentially pay for that large upfront cost over a period of time and therefore reduce that barrier of upfront costs?
7931 MR. MADURI: We have trialed it. I can't say again that I have got that as walking around information, but we have trialed installation payment plans.
7932 I think that what we are saying, and actually some of our next -- I think we are going to have a promotion out shortly that bundles in hardware, like computer hardware with the install. It's a real -- like the amount would be so small at $300 over -- well, I guess $360 over 36 months, 10 bucks a month, we really haven't seen big movement in terms of the adoption rate.
7933 Perhaps if we bundle it with a computer promotion you know and the installed CPE equipment, that might create more interest and more impact in terms of adoption rates. But at this point what we have seen is not a lot of change.
7934 COMMISSIONER MOLNAR: So you are saying that consumers are not interested in instalment payment programs?
7935 MR. MADURI: Where we have trialed it, just I can't tell you that we have seen a dramatic uptake in the adoption rate.
7936 COMMISSIONER MOLNAR: To the extent that the CPE costs were a barrier for adoption --
7937 MR. MADURI: Yeah.
7938 COMMISSIONER MOLNAR: -- it would be in your interests to put in place programs such as instalment payments?
7939 MR. MADURI: Correct.
7940 COMMISSIONER MOLNAR: And you would do so?
7941 MR. MADURI: Yes, yes.
7942 COMMISSIONER MOLNAR: Okay, thank you. Those are my questions.
7943 THE CHAIRPERSON: Peter...?
7944 COMMISSIONER MENZIES: Yeah, just I wanted to double-check on that one. Whenever I see pictures of northern satellites I note how they are at 45 degree angles to the horizon. Do you go all the way north?
7945 MS PRUDHAM: We go all the way up, basically to Resolute.
7946 COMMISSIONER MENZIES: Okay, and all the way south.
7947 I guess if I was a casual observer listening to this I would be wondering if the CRTC might -- and I am glad you pointed out that there are many, many others; that the CRTC might not be putting too many eggs in one basket, to look at you because you have just been the one here.
7948 How do I put this? Do you make money?
7949 MR. MADURI: We have raised a lot of capital.
7950 COMMISSIONER MENZIES: Okay. So what happens --
7951 MR. MADURI: And you can't raise capital unless --
7952 COMMISSIONER MENZIES: Unless you have a good business plan, yes.
7953 MR. MADURI: -- believe in what you are doing, absolutely.
7954 And I would say if I could just add, through the -- I think it was the first -- was it the first half of -- the last quarter of 2008 and the first quarter of 2009, there are a lot of companies in Canada that couldn't raise money. We continue to raise money for this business.
7955 COMMISSIONER MENZIES: Okay. When does your business plan forecast you making money?
7956 MR. MADURI: In the telecom world the critical stage for an early stage telecom business, our critical milestone is to be EBITDA positive. Our company -- EBITDA defined as earnings before interest, taxes, depreciation and amortization -- we are EBITDA positive.
7957 COMMISSIONER MENZIES: Okay.
7958 MR. MADURI: So if you were to compare that to some of the players in the room who went through that start-up phase of cellular or cable, their first major milestone for a telecom company is to get to EBITDA positive but there will be years, if you remember -- if I could use the Rogers example where Rogers was not profitable, EBITDA positive but not profitable.
7959 So I would say that if I could give you a sense of where we are at, we are in that stage.
7960 COMMISSIONER MENZIES: Okay. How many -- I guess the biggest thing is that looking for further assurance that what you are talking about here on the table is a business, not just an operator, that there is a viable business out there that if you walk out the door and get hit by a bus or your company fails somehow, that there is a business sector out there that is capable of achieving the goal of 100 percent penetration.
7961 MR. MADURI: Well, I am not sure if I want to talk about me getting hit by a bus but --
7962 COMMISSIONER MENZIES: Okay. Let's talk about a mythical figure getting hit by a bus.
7963 MR. MADURI: Let me talk about Barrett and then again, I'm sure you will -- the Commission staff probably has lots of information on the variety of players out there.
7964 But in our case we have a leadership team that includes people who have worked in the C-Suite of some of the largest Canadian telecom, cable companies, satellite TV providers. So it's not C.J. and myself. There is a leadership team with a chief information officer and a chief network officer and a chief operating officer and lots of chiefs. So there is -- we are a substantive entity.
7965 Remember that the network -- the satellites are up. They are up and, you know, new satellites are going up. There is not a lot that's going to stop that.
7966 And the towers are up and more towers are coming into the market. So there is a lot of infrastructure that's in place to deliver to this goal of 100 percent broadband.
7967 COMMISSIONER MENZIES: Okay. And just to help with two more questions, quickly, what is your cost per sub? You mentioned that you were critiquing MTS at $10,000 per under their plan. What does yours compare to that?
7968 MS PRUDHAM: I think there is -- well, zero to the taxpayer, because we are privately funded, versus they are asking -- I don't know what the real cost is. They are asking for $10,000 from the taxpayer.
7969 MS GRIFFIN-MUIR: Sorry, sorry. Just so it's clear that this calculation which is on the record of the proceeding, it is not $10,000 a sub.
7970 This is Teresa Muir from MTS Allstream.
7971 We placed -- based on the deferral account funding, it would come to an average of actually $5,000 a sub, of which MTS Allstream had the lowest per household cost.
7972 Second, it's based on 4 Megs at $50 a month for the consumer where the advertised price of Barrett is for 5, $300, for 1.6 $120.
7973 So I just wanted to clarify before she continues.
7974 COMMISSIONER MENZIES: Okay, thank you.
7975 How much is yours?
7976 MS PRUDHAM: Ours is still zero and theirs is $5,000.
7977 MS GRIFFIN-MUIR: No, excuse me. You have already said you have public funding.
7978 COMMISSIONER MENZIES: Hold on, okay. We are talking about public funding. I just --
7979 MS PRUDHAM: We have zero public funding in Manitoba.
7980 MS GRIFFIN-MUIR: In Manitoba.
7981 COMMISSIONER MENZIES: Let us not get into that, okay.
7982 I just want to know whether -- I don't care if it's $5,000 or $10,000. In terms of this discussion is that more or less than what it costs you? Let's take $5,000 and forget about MTS for a second because that's just going to go sideways.
7983 MR. MADURI: No, no, that is fine.
7984 So to be very clear if we execute --the vast majority of our customers, the 135,000, we have executed without subsidy. If you are asking what our cost per household is or cost per customer that is -- that's our secret sauce. That is private information.
7985 Again, I think we would contemplate -- we would consider sharing that with the Commission in confidence.
7986 In the subsidy programs that we participate in -- I will use New Brunswick -- the cost, the subsidy cost, one-time subsidy cost was $333 per household.
7987 COMMISSIONER MENZIES: Right. I got that.
7988 MR. MADURI: One time, that's it.
7989 COMMISSIONER MENZIES: Yeah.
7990 MR. MADURI: And I would say that if you looked at the vast majority of the programs that we have participated in, it's somewhere between $300 and $400 one-time subsidy to deliver services that would be a minimum of 1.5 Mbps down.
7991 COMMISSIONER MENZIES: Okay. I will leave it to the Chair to grant you confidentiality or otherwise, but it would be interesting to have that information.
7992 And one last question --
7993 THE CHAIRPERSON: Oh, please, everything that you have promised to file is confidential. Please do. You talked before about your forward pricing and the breakdown between equipment and labour, et cetera. The more information we have to appreciate, to be able to assess your enterprise.
7994 MR. MADURI: Yes.
7995 COMMISSIONER MENZIES: How many households, unserved households were underserved? We went through this discussion before about 700,000 unserved, 1.4 million underserved and the Broadband Canada plan said 450,000.
7996 What is your best guess on how many unserved households there are?
7997 MR. MADURI: Again, if I could, I would like that to be something we share with you in confidence. I think that's a pretty material and important part.
7998 COMMISSIONER MENZIES: Thank you. That would be fine, yeah.
7999 MR. MADURI: If I could just offer, one of the most critical things that we have done and I think other rural providers have done is to map the country.
8000 COMMISSIONER MENZIES: Yes.
8001 MR. MADURI: In terms of where it's economic to use wires and where it's economic to use wireless and where it's economic to use satellite.
8002 In fact, we have used that technology in the -- we have made that technology available to U.S. States and I think it might be helpful if we took some of the Commission or Commission staff through that process because ultimately that answers the question of what's underserved, what's unserved.
8003 COMMISSIONER MENZIES: Any information you or anybody wants to provide on that would be most helpful.
8004 That's it for me. I see there is questions and back to the Chair.
8005 THE CHAIRPERSON: Yes.
8007 MR. HERSCHE: Yeah, I just -- sorry. I really wanted to respond when you were talking about driving John Maduri under a bus.
8008 MR. HERSCHE: No, when we are looking at satellite technology and looking at this and whether satellites should be included, satellite isn't the only one technology that we want to -- for underserved and unserved. Satellite is an inevitable part of our tool kit that we need in Saskatchewan going forward. I agree that there is room for expansion in the market for them to do that but it is only part of the solution.
8009 We can't use satellite to serve 5 Mbps for all of the 1.4 million underserved customers. We need a variety of technologies. Barrett Xplore uses a variety of technologies whether it be fixed wireless or satellite or other, and that's what really -- in terms of SaskTel what we are proposing as we go forward.
8010 Satellite -- again, why we see this as a part of that solution is it's also a shared network. So we have to worry about the shared network of what we do to the 1.4.
8011 One of the satellites that you are talking about only has a total capacity of 12 gigabits so as we go on, what we are saying as we talked about this before, is satellite is essential and should be part of the mix as we begin to look at these kinds of things but we have to look. It's not the only technology that we want to work with and develop as we go forward.
8012 THE CHAIRPERSON: Okay, thank you.
8013 There is somebody behind you. There are two of them.
8014 First of all, PIAC.
8015 MR. LAWFORD: Thanks, Mr. Chair. John Lawford.
8016 We just have some questions that relate to the windshield time because that seems to be the largest portion of the installation costs. So I'm going to hand it to Heather.
8017 MS HUDSON: Yes, this is Heather Hudson.
8018 I have a couple of questions on the installation issues and quality of service and then perhaps a modest proposal.
8019 Despite the fact that there are a lot of dealers, as you have said, there are not many dealers or they are not dealers in many remote regions. You have referred to a batch installation of 39 units but how long would an incremental subscriber have to wait in one of those remote communities to get service?
8020 And could you not think about a training program for local installers so that you could just ship the equipment into those remote communities? Because I'm concerned that, yes, you can do a batch but then somebody else gets interested and it's not economical to send your person back in a plane or the dealer back that fast.
8021 The second question I have is what you call windshield time or truck rolls. In a rural as opposed to remote area what's the maximum time that you would undertake that a rural customer would have to wait to have the equipment installed once they had placed the order?
8022 Can you answer those and then I have got another one on quality of --
8023 MS PRUDHAM: Sure. To answer your first question, that is in fact exactly what John was describing in Red Sucker Lake. It's consistent with what we do in every location and community we go into. When we went in there, we did train one of the local folks to do it so if there is a problem there is somebody in their community right there for them.
8024 And we have an extensive dealer network and installers across the country. It's well over 800 dealers that's legal entities when you start adding the number of people to --
8025 MS HUDSON: So how long would the 40th customer in Red Sucker have to wait?
8026 MS PRUDHAM: Probably about five days for the equipment to ship.
8027 MS HUDSON: Okay, and the rural -- and similarly for the person with the windshield time -- the person at the end of the road rather than in a fly-in community from the time they place the order given, as you said, the expense and time of truck rolls?
8028 MR. MADURI: Yeah, I think the example of Red Sucker Lake was the dealer actually scheduled three days to complete the 39 installations. I think it took five days. So I guess if you were number one you were day one and if you were number 39 you were on day five.
8029 MS HUDSON: No, but I'm ordering next week because I think it's really neat and I want it now. So then how long with that would I wait?
8030 MS PRUDHAM: Sorry, I thought we just answered that.
8031 MS HUDSON: Yeah, that's why --
8032 MS PRUDHAM: We trained somebody in the community so it's just a matter of getting the equipment there. It would take roughly five days.
8033 MS HUDSON: Five days.
8034 And similarly, the other question was for the rural person at the end of the dirt road where it's expensive in terms of time to get out, what is your undertaking for installation after the order?
8035 MS PRUDHAM: I guess what we are struggling with is we don't really understand why it's different. If there is a dealer in the community it's just a matter of getting the equipment to the dealer and the dealer's scheduling time with the customer. It's not --
8036 MS HUDSON: So basically the maximum time a customer who has heard about your service and wants to sign up would have to wait maximum of five days to get an installation, is that what you are saying?
8037 MS PRUDHAM: No. I mean, I will be perfectly honest that the longest one I know of is three weeks. But that was because you have to schedule with the customer and it's a matter of finding a convenient time.
8038 You know this isn't months or things like that if that's what your concern is. It is fairly immediate but it is a question of (a) get the equipment there and then; (b) find the time that works with the customer.
8039 MS HUDSON: Okay. When you expand your satellite capacity, as you say with the new high capacity satellites, will you increase your customer service support staff to deal with the potential demand and questions and by how much given, as you say, the great increase in capacity which will stimulate demand?
8040 This is for the customer who has got your package and now has a question or problem.
8041 MR. MADURI: That is a great question. You know through the various stages of getting to today there were days when we worried about how to finance the satellite, doing all the technology trials. You know there have been challenges all along the way. I would say that, you know, one of the most -- the things that keeps me up at night is the whole issue of scalability.
8042 So we have an initiative underway within the company to basically revamp all of our billing, customer relationship management, like CRM, those systems to ensure that we can scale.
8043 Call centres, we have two call centres. They are bilingual, 7 by 24 by 365 days and we know that we will have to add additional staff and we are in two great markets where we have got ample resources, lots of talent and lots of space in the call centres.
8044 So a great question, scalability absolutely a major focus of our leadership team.
8045 Again, on the billing all of the systems that go with supporting customers and the two call centres that we have with the potential need to add a third call centre.
8046 MS HUDSON: Okay, a final question. This is a modest proposal.
8047 THE CHAIRPERSON: Excuse me, wait until it's your turn and then you can make a proposal. As of right now we are just questioning.
8048 MS HUDSON: Okay. Thank you.
8049 THE CHAIRPERSON: I saw a card up there from Execulink in the very end. No? Okay.
8051 CONSEILLÈRE LAMARRE : Merci, Monsieur le Président.
8052 I want to talk about your transfer capacity once you get your satellite launched next year. And thank you for the invitation to come with you and attend the launch. I'm not sure if my budget will permit it.
8053 MR. MADURI: I didn't say was paying, did I?
8054 COMMISSIONER LAMARRE: Really?
8055 MR. MADURI: We need a subsidy program for that.
8056 COMMISSIONER LAMARRE: I'm not sure our Ethics Commissioner is going to appreciate that.
8057 So when you are talking about moving capacity from one satellite to another I understand exactly why you are doing that and the mechanics of it, but to be clear, where do you draw the line between south and north Canada?
8058 MS PRUDHAM: I guess that's just the terminology we adopted for the sake of trying to explain the differences on those maps.
8059 We don't, in our business, draw a line between south and north, no.
8060 COMMISSIONER LAMARRE: You don't, okay.
8061 So can I take for granted that the equipment, the receiving equipment that the customer would pay between $100 and $500, depending on the sales pitch that you are making in their area at one point in time, that this receiving equipment is portable throughout Canada. That is, if I buy it in Montréal and three weeks after I have bought it and I have my subscription with you, the Chairman decides to transfer my office in Povungnituk, I can take my equipment under my arm and I will still have Internet service there?
8062 MS PRUDHAM: It will depend on which satellite. As you saw on the footprints of the different satellites, but certainly for example on the Anik F2, yes, you could be right outside Montréal and you could find yourself in the Northwest Territories and it's the same equipment.
8063 COMMISSIONER LAMARRE : Okay, it's not the same equipment depending -- the same receiving equipment depending on which satellite you are obtaining your service from?
8064 MS PRUDHAM: Correct. As the footprints indicated there are --
8065 COMMISSIONER LAMARRE: Okay. So for those customers that you will be migrating from one satellite to another, what is going to happen to their receiving equipment when you do that next year?
8066 MS PRUDHAM: Oh, there will be a truck roll and a conversion of the equipment.
8067 COMMISSIONER LAMARRE: Is it just going to be an exchange? Bring it in and we will give you a new one?
8068 MR. MADURI: All of those details haven't been worked out. We don't have all of those details. Our marketing team is working through that to figure out what the transitional pricing is, how we are going to do it.
8069 Again, when we are ready we would be delighted to share it with the Commission.
8070 COMMISSIONER LAMARRE: Okay. But keep in mind, please -- and do keep it very much in mind -- that for a customer who has paid for basic receiving equipment to be told that because you are changing your marketing scheme and you are increasing your capacity that they may be a little bit hostile if you try to charge them again.
8071 MS PRUDHAM: Oh, absolutely. That's not the intent.
8072 COMMISSIONER LAMARRE: Thank you.
8073 Those are all my questions.
8074 THE CHAIRPERSON: Okay.
8075 We have heard both this weak here and last week in Timmins from all sorts of people basically saying you are not a viable alternative. We heard it from the Papineau people, we heard it from the Québec people, et cetera, saying that your service is too unreliable and too costly I think is mostly. They mention such things as latency and disruptions.
8076 I would like those people who made those comments this week here and last week to maybe be specific of what your concerns are.
8077 Because from what I have heard from you today it's basically satellite is the answer, you can provide the reliable services anywhere in Canada. There is a problem with the upfront cost which you feel should be addressed by various government subsidy programs. But essentially to the extent that there areas that are not being served right now by telcos or cable companies you can serve them and you will serve them at affordable rates, unless I misunderstood you, which is slightly different from what I heard from other people.
8078 So would those folks who -- is there anybody who wants -- go ahead.
8079 MR. SAMSON: Michel Samson, MRC Papineau.
8080 This morning and in Timmins we didn't mention that the satellite operation of Barrett was something that couldn't cut the ice, we just said that it couldn't be the only one that cut the ice. In this I think we have the same position as with SaskTel.
8081 If we take the issue as where it stands now in terms of cost, in terms of installation costs and in terms of selling a 5 megabyte capacity, we are talking about costs that are way over what actual systems or actual providers can offer.
8082 So it's just in the next three years we are still going to be caught, in our minds, in sort of a marginal usage of satellite technology, but it's surely a technology that has a place even in our community, even despite the fact that we have copper wire almost all over the area and we are also reaching with microwaves, but there are those cases.
8083 THE CHAIRPERSON: Give me a point of reference, Mr. Samson.
8084 In Papineau, 5 megabytes, if I want to buy that from you what does it cost me?
8085 MR. SAMSON: At the present time it's about -- I think it's $42.95.
8086 THE CHAIRPERSON: Okay. Xplornet?
8087 MR. SAMSON: And for a $200 installation cost.
8088 THE CHAIRPERSON: Okay. Go ahead.
8089 MR. MADURI: Those are good comments.
8090 I think what we have to separate on satellite is, you know, I will start with can the technology deliver a 5 meg package? Absolutely. In fact, there is a statistic in the U.S. market, business customers, the number two provider of business enterprise access services -- number one is AT&T, I don't think that would be a surprise to many of the Commissioners.
8091 Number two I would have expected to be Verizon. So again, this is delivering data services to large complex enterprises. Number two I would have expected in the U.S. market to be Verizon. Number two is Hughes, satellite provider.
8092 So satellite has a track record of delivering lots of data and reliably. What we don't like about satellite is the cost structure, the historic cost structure. I don't like it and I suspect you don't, and cost structures without subsidy manifest themselves in pricing that may not be what people want today.
8093 I think the key message that we try to get across is that we have undertaken -- we have done it in Canada, Hughes and ViaSat in the U.S. market, Avanti in Europe, Eutelsat in Europe and a whole host of other players, the next generation of satellite is about not fundamentally changing the technical characteristics of it, it' is to drive down the cost per megabit.
8094 So we keep talking about --
8095 THE CHAIRPERSON: Okay. But today. I'm in Papineau --
8096 MR. MADURI: Today, I think we gave you the pricing.
8097 THE CHAIRPERSON: -- I'm not on this line, I go to --
8098 MR. MADURI: I think you asked me that question this morning and I gave you the pricing, it's not great pricing.
8099 THE CHAIRPERSON: Okay. But what is it? Refresh my memory, 5 megabyte.
8100 MR. MADURI: If we charge retail, and we do discount, but that 5 megabyte plan is $299. But that's not what it's going to be commencing in mid-2011.
8101 THE CHAIRPERSON: Right. Right.
8102 MR. MADURI: Again, that is information -- I have probably over used the term -- we will share with you in confidence.
8103 THE CHAIRPERSON: I appreciate that.
8105 MR. HERSCHE: Again, we have had very good experience with Barrett Xplore in our agreement with them in terms of customer responses, what we have gotten back from the customers.
8106 All I was trying to say before and I'm trying to reiterate here is that satellite isn't the silver bullet kind of thing for all of the underserved.
8107 When I talked about a 12 gigabytes on the satellite, that means that there is about 2,500 simultaneous users sort of all at sort of peak rate theoretically. That will serve a lot of very isolated people, people that cannot get other kinds of services.
8108 I know that Barrett has other satellites, but when we look at the underserved as being 1.4 million, or perhaps we are even overstating that a little bit, as I said before, satellite is a very good part of the toolkit, but we have to look at all of it as we go forward.
8109 THE CHAIRPERSON: Okay. You have made that point now twice. I got it.
8110 Mr. Maduri, what is the maximum number of people you can serve at 5 megabyte next year when you have your extra satellite up?
8111 MR. MADURI: Again, if we could share that with you in confidence.
8112 THE CHAIRPERSON: Not even order of magnitude?
8113 MS PRUDHAM: I think actually we did provide those to the Commission as part of the interrogatory responses. We would be happy to --
8114 THE CHAIRPERSON: I'm not asking -- I just want to know -- it's not the only answer.
8115 MR. MADURI: It is not tens of thousands, it's hundreds of thousands of customers.
8116 THE CHAIRPERSON: Okay.
8117 MS GRIFFIN-MUIR: Mr. Chairman, Teresa Muir.
8118 THE CHAIRPERSON: Yes, please go ahead.
8119 MS GRIFFIN-MUIR: I just want to clarify just in terms of the costs because there seems to be some misunderstanding. So I'm just going to focus on Manitoba because I think that's what Barrett Xplore was doing and I think it goes to the discussion that Papineau was having.
8120 If we just looked at our costs per household from the deferral account in Manitoba, which were actually the lower of Bell and TELUS, they were 3.8 thousand. In this calculation, assuming a $50 per month charge for the customer for 4 meg service. So it's closely comparable or in between the $120 that Barrett would charge today or the $300, depending whether you are getting 1.6 meg or 5 meg.
8121 THE CHAIRPERSON: I'm sorry, I have missed that. I don't understand the point you are trying to make.
8122 MS GRIFFIN-MUIR: Well, I'm really just addressing the fact that they are suggesting -- we are saying is $10,000 per household under our subsidy plan --
8123 THE CHAIRPERSON: Yes, yes.
8124 MS GRIFFIN-MUIR: -- and they are very focused in on Manitoba where apparently to serve Red Sucker Lake they have no subsidy, which is great, just to point out that it's not -- even based on what is publicly available, assuming either a wireless or at terrestrial -- anywhere near 10,000. And the assumption is the price the customer is paying is significantly lower than the price Barrett is charging.
8125 THE CHAIRPERSON: Do you want to respond to that?
8126 MR. MADURI: I think, Mr. Chairman, there is a -- I wish we had brought it with us, there is a graph that we use to explain the cost structure of the various technologies, wired, wireless and satellite over different population densities and I think we have shared that with Commission staff.
8127 You know, we keep talking about what it cost satellite to deliver in some of these markets. The challenge is we are there with the cost structure, subsidized or not. There aren't wires there. If there were wires there the costs would be dramatically higher.
8128 So there is a range of population density and our colleague from SaskTel I think framed it well, there are ranges of -- there are geographic areas in Canada with population densities where without subsidy, penny-for-penny megabit-per-megabit, gigabyte-per-gigabyte, satellite is the least cost technology. All we are saying is, if you are going to -- if we are going to start putting subsidies into the mix we are distorting.
8129 Yes, you could deliver a better wireline service if there was gobs of subsidy against it, but if you applied that subsidy to satellite you would get a better satellite value proposition than wireline.
8130 So it's hard to have that discussion shooting from the hip in this forum without actually being able to put up a diagram. I think that's the point here.
8131 THE CHAIRPERSON: Well, you are going to be here tomorrow, I invite you to bring that diagram and share with us.
8132 THE CHAIRPERSON: Okay. I think that's it for today.
8133 What time do you want to start tomorrow morning, Madame la Secrétaire?
8134 THE SECRETARY: We will resume at 9:00 a.m. tomorrow.
8135 THE CHAIRPERSON: Thank you.
--- Whereupon the hearing adjourned at 1643, to resume on Thursday, November 4, 2010 at 0900
Johanne Morin Jean Desaulniers
Monique Mahoney Sue Villeneuve
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