ARCHIVED - Transcript, Hearing 24 October 2011

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Volume 1, 24 October 2011



Proceeding to review network interconnection matters


Outaouais Room

Conference Centre

140 Promenade du Portage

Gatineau, Quebec

24 October 2011


In order to meet the requirements of the Official Languages Act, transcripts of proceedings before the Commission will be bilingual as to their covers, the listing of the CRTC members and staff attending the public hearings, and the Table of Contents.

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

Canadian Radio-television and Telecommunications Commission


Proceeding to review network interconnection matters


Konrad von FinckensteinChairperson

Len KatzCommissioner

Timothy DentonCommissioner

Suzanne LamarreCommissioner

Candice MolnarCommissioner


Cindy VenturaSecretary

Alastair StewartLegal Counsel

Anthony McIntyreLegal Counsel

Robert MartinHearing Manager and Manager, Telecommunications Policy


Outaouais Room

Conference Centre

140 Promenade du Portage

Gatineau, Quebec

24 October 2011

- iv -







1. Bell Aliant Regional Communications, Limited Partnership, Bell Canada and Télébec, Société en commandite7 / 46

2. Saskatchewan Telecommunications112 / 685

3. Canadian Network Operators Consortium Inc.148 / 909

4. Telus Communications Company184 / 1140

- v -



Undertaking27 / 158

Undertaking100 / 588

Undertaking146 / 883

Undertaking176 / 1080

Gatineau, Quebec

--- Upon commencing on Monday, October 24, 2011 at 0900

1   LA SECRÉTAIRE : À l'ordre, s'il vous plaît. Order, please.

2   LE PRÉSIDENT : Bonjour, mesdames et messieurs, et bienvenue à cette audience publique.

3   Je vous présente les membres du comité d'audition :

4   - Len Katz, vice-président des Télécommunications;

5   - Tim Denton, conseiller national;

6   - Suzanne Lamarre, conseillère régionale du Québec;

7   - Candice Molnar, conseillère régionale du Manitoba et de la Saskatchewan;

8   - et moi-même, Konrad von Finckenstein, président du CRTC. Je présiderai d'ailleurs l'audience.

9   L'équipe du Conseil qui nous assiste comprend :

10   - Robert Martin, coordonnateur de l'audience et gestionnaire, Politique des télécommunications;

11   - Alastair Stewart, conseiller juridique principal, et Anthony McIntyre, conseiller juridique;

12   - et Cindy Ventura sera notre secrétaire de l'audience.

13   Le système canadien des télécommunications se compose de nombreux réseaux appartenant à différentes entreprises. Ces réseaux doivent s'interconnecter afin que les Canadiens puissent téléphoner aux clients d'autres fournisseurs de services et recevoir leurs appels.

14   Over time, the Commission has created three separate interconnection regimes:

15   - the regime for wireless calls was established in 1984;

16   - the regime for long-distance telephone calls was established in 1992; and

17   - the regime for local telephone calls was established in 1997.

18   These regimes ensure that calls are transferred seamlessly between networks. They also allow service providers to recover the costs incurred by voice traffic over their networks.

19   La présente instance a pour objectifs principaux de voir :

20   - s'il est possible de simplifier et d'harmoniser les trois régimes;

21   - si des modifications sont requises afin d'améliorer la concurrence au profit des consommateurs et de garantir la neutralité sur le plan technologique.

22   Notre examen s'effectuera à la lumière des changements importants survenus depuis l'établissement initial des différents régimes. En particulier, les régimes se reposent sur un système fondé sur la commutation de circuits qui est en voie de passer de plus en plus à un système fondé sur la technologie par protocole Internet.

23   During the hearing, the panel would like to hear views on a number of specific questions, including:

24   - Does the evolution to Internet Protocol interconnection facilities require regulatory intervention?

25   - Would it be appropriate for the Commission to forbear in the future from the regulation of network interconnection for voice and wireless services as the industry moves increasingly towards an Internet Protocol environment? If so, within what timeframe and under what conditions?

26   - Are measures needed to ensure that independent wireless service providers have the same benefits and obligations as vertically integrated companies?

27   - Should wireless service providers be required to establish direct network interconnection arrangements with incumbent companies in small markets?

28   In addition, in my mind, this hearing also raises the following question: Is the provision of equal access by all wireless service providers at a future date a desirable objective? If so, by what means and within what time frame?

29   I would now invite the Hearing Secretary, Cindy Ventura, to explain the procedures we will be following.

30   Madame la Secrétaire.

31   LA SECRÉTAIRE : Merci, Monsieur le Président et bonjour à tous.

32   Before beginning, I would like to go over a few housekeeping matters to ensure the proper conduct of the hearing.

33   When you are in the hearing room, we would ask that you please turn off your smartphones and beepers as they are an unwelcome distraction and they cause interference on the internal communication systems used by our translators. We would appreciate your cooperation in this regard throughout the hearing.

34   Phase I of this hearing is expected to last four days and Phase II approximately two days. Please note that the Rebuttal Phase (Phase II) will begin on Monday October 31st.

35   We will begin each morning at 9:00 a.m. We will advise you of any scheduling changes as they occur.

36   Please note that there are extra seats in the Examination room where the hearing can be viewed on the TV screen.

37   Please note that the Commission Members may ask questions in either English or French. Simultaneous interpretation is available during the hearing; the English interpretation is on channel 1. You can obtain an interpretation receiver from the commissionaire at the entrance of the Conference Centre.

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

39   Veuillez noter que les membres du Conseil peuvent poser des questions en français et en anglais. Le service d'interprétation simultanée est disponible durant l'audience. L'interprétation en français se trouve au canal 2. Vous pouvez vous procurer les récepteurs d'interprétation auprès du commissionnaire à l'entrée du Centre.

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

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

42   Please note that we will also be tweeting the documents during the hearing at the @CRTCGCCA using the hashtag interconnection ou le mot-clic interconnexion.

43   We will now proceed with the presentations in the order of appearance set out in the agenda.

44   And now, Mr. Chairman, we will start with the presentation by Bell Aliant Regional Communications, Limited Partnership, Bell Canada and Télébec, Société en commandite.

45   Please introduce your colleague(s) and you will then have 20 minutes for your presentation. Thank you.


46   MR. DANIELS: Good morning. Thank you, Madam Secretary.

47   Mr. Chairman and Commissioners, I am Jonathan Daniels, Vice-President, Regulatory Law with BCE, and I am pleased to introduce our panel appearing on behalf of Bell Aliant, Bell Canada and Télébec.

48   Joining me today:

49   - to my immediate right is Denis Henry, Vice-President for Regulatory from Bell Aliant;

50   - to my immediate left is Martin Cullum, Network Technology for Bell Canada;

51   - and to his left, Michelle Bourque, Wholesale for Bell Canada.

52   At the outset, I think it is important to remember that the current local interconnection regime is successful. It has allowed the entry and development of competition in all sectors -- local, toll and wireless -- benefiting both carriers and consumers.

53   Industry participants of all types and sizes have made significant investment decisions based on the current regime. We are not here to design the ideal system from scratch. The various proposals must be evaluated on the basis of net public benefits, given how the networks and interconnection of those networks are structured today.

54   With that in mind, we now turn to the specific questions asked by the Commission in its conduct letter.

55   You asked about the role of the Commission in respect of interconnection.

56   We strongly believe that no regulatory intervention is required to "push" the market towards IP interconnection. Accordingly, we do not propose that the Commission mandate IP-based network interconnection.

57   However, as I will elaborate later, this does not mean that IP arrangements on a voluntary basis should not be allowed. The market will naturally drive this migration without any need for regulatory intervention.

58   Now, to understand where we're coming from, you have to keep in mind that, yes, there has been growth in our IP networks, but that traffic is data traffic, not voice. Today, less than 2 percent of our 9-million wireline voice access circuits are IP. And we're not alone in this as we estimate that wireline voice across the industry is still at least 75 percent circuit-switched, which I will refer to as TDM in this presentation.

59   Our IP voice subscriber base will grow as we roll out fibre to the home. Now, let me explain why. Today we have copper almost everywhere in our territory. We also have broadband in most places. What that means is that technically we could provide VoIP to most of our end users. But we don't. Why not? Because for voice services today TDM over our copper network works perfectly. There are no added benefits to customers and no cost savings that justify making the switch.

60   But as we build FTTH, the situation changes. With fibre going all the way to the home it makes no sense to provide TDM on copper. Therefore, the business case for the rollout of FTTH is really driven by the requirement to offer faster Internet and television services. As such, we are just starting the migration of our wireline network to VoIP.

61   To help with your review, we'll now look at the benefits and costs of mandating IP interconnection.

62   First, the benefits. As your first witness, let me be both provocative and clear: there will not be any benefits to end users from mandatory IP interconnection. Millions of calls between IP voice subscribers and TDM voice subscribers take place every day. Today, the conversion between TDM and IP traffic is done by the IP carriers, and the calls work just fine. The calls would work just the same, no better, no worse, if it were us that did the conversion instead.

63   The benefits of IP interconnection for voice, if any, need both callers to be on an IP access line and also need the callers to have the right equipment. For instance, today, end users on IP and TDM use the same phones. I mean think about it for a moment. When you switch from Bell, which has TDM, as a customer to Rogers wireline service, their VoIP product, you don't just keep your phone number, you actually keep your phone. So these phones aren't uniquely IP devices. There's nothing special that's going on there.

64   But imagine that a cableco using VoIP launches a new IP feature, something that would require that, such as high-definition video-calling. The services could not work when a cable customer calls a Bell customer until that Bell customer was on an IP access line itself and until both customers had switched their regular phones to ones with screens and cameras.

65   It's crucial that we don't mistake IP interconnection, which is what we're here to talk about, with IP retail services. To get the benefits of new IP retail services you need IP access lines at both ends of the call, and when you're talking about interconnection, that means at both ends of each carrier's network. In the context of our wireline network today, that means fibre to the home.

66   And that really is the crux of the issue for us. The ability to enable IP retail services over our FTTH will encourage us to enter into IP interconnection agreements with other carriers. But the reverse is not true. This point bears repeating. Mandating IP interconnection will not speed up the rollout or adoption of end-user IP services.

67   Now, that said, you mustn't take away that absent a massive migration of our TDM retail customer base to IP we will not entertain IP interconnection. On the contrary, there may be circumstances where IP interconnection makes business sense. It could be because the IP interconnection is only first offered in a certain area or through some mutually beneficial financial arrangement that makes sense for both parties.

68   So what we've given you here are our arguments as to why there are no benefits from mandated IP interconnection to us or to end users. But let me turn to the cost because there's also an industry cost reality that has to be taken into account.

69   The main outcome of mandated IP interconnection is really a shift of costs from IP operators to TDM operators, and in fact it's an increase in those costs.

70   Speaking for ourselves, the requirement to offer mandated IP interconnection, wherever demanded, would force us to incur significant upfront capital expenditures. These could reach hundreds of millions of dollars and, it must be stressed, we would see zero return on those investments because making IP interconnection neither brings our subscribers anything nor does it lower our costs.

71   However, the key point is from an industry perspective that shifting the cost burden simply increases the cost to the industry overall -- never mind that VoIP providers have already made this conversion investment.

72   Now, why do I say that? You have to understand that the relative costs of performing IP conversion are higher, other things being equal, when we do it as compared to when an IP carrier does it. The main reason for that is that our networks are legacy TDM, with older equipment and more importantly older systems that were originally designed to go with TDM technology.

73   For instance, it costs us more, on a relative basis, to modify our TDM IS/IT systems to accommodate IP than when an IP carrier builds the equivalent from scratch to fit with IP right from the start, and that's as IP carriers have already done so.

74   So think about it, Rogers launched VoIP even though it had to pay for the conversion of VoIP to TDM. It's safe to assume that the cost savings on its network from using VoIP paled in comparison to the relatively minor costs for it to convert calls to TDM.

75   And now some VoIP providers come to you and want you to mandate IP interconnection, in other words to shift the costs of conversion from them to us. And why not? It will save them money. But it will not save them nearly as much money as it will cost us to set up and do the conversion.

76   I'll now turn to your question about whether network interconnection for voice services should be forborne.

77   Fundamentally, yes, we believe it should be forborne. There are no tariffs for Internet connection -- for example, I'm talking about Internet peering -- and it works today. As such, we believe you can forbear from regulating voice interconnection.

78   But if the Commission is not prepared for this change at this time, we believe the Commission should adopt at least the following test for determining when it should forbear. Now, that test simply asks:

79   - Is the interconnection service a service that only the terminating LEC can provide?

80   Under such a test, local termination, including things like the imbalance tariff between LECs and direct connect between IXCs and LECs, would continue to be regulated. But other interconnection services like Access Tandem, EAS Transport and Transit, would be forborne.

81   Now, I appreciate I've just thrown out a bunch of terms and I don't know everyone's familiarity with them, so we have appended to the back of this opening statement some diagrams which describe these services and we would be happy to explain these services and our logic of why we think they should be forborne during questioning, but I don't propose to do that now.

82   If the Commission believes the simple test we have proposed is the right one, it can review the various interconnection services in its deliberation and make determinations as to which services meet and do not meet that test and issue forbearance as part of its decision in this proceeding.

83   Now, I'm anticipating here but I think some parties are undoubtedly going to argue that the record before you is not sufficient for the Commission to make any specific orders in this regard.

84   Now, if the Commission finds that the record is not sufficiently complete, we see it would have two options:

85   - The Commission could adopt our proposed test in its decision and then hold a follow-up proceeding to apply it to specific services;

86   - or, alternatively, the Commission could expressly defer the issue to its upcoming wholesale review.

87   But independently of the above, if the Commission decides that it must continue to regulate network interconnection, the one thing it should do is to set up a default tariff regime. Let me explain.

88   Each mandated interconnection service would be offered under the existing TDM tariff, but parties would be free to make their own arrangements for IP interconnection -- or for that matter variations of the TDM tariff too -- without Commission approval. The key element is that, outside of a commercial arrangement, everyone will be entitled to purchase the services under the terms and conditions of the default TDM tariff.

89   However, if they choose to enter into a commercial agreement, they are free to do so without Commission oversight.

90   If the Commission chooses to mandate IP interconnection, which I think you know by now we do not support, then the default tariff would become IP and there would no longer be any need for TDM tariffs. As such, we are advocating that there always be a single default tariff, either TDM or IP, but never both, for each interconnection service.

91   So to summarize our position on IP interconnection, there are three reasons why mandating IP interconnection is both inappropriate and unnecessary:

92   - first, there's no customer benefit from mandated IP interconnection;

93   - second, mandated IP interconnection raises industry costs; and

94   - third, there is no market failure requiring regulatory intervention over reliance on market forces.

95   Denis.

96   MR. HENRY: Thank you, Jonathan.

97   Mr. Chairman, I'm going to deal with your questions on wireless.

98   You ask, first of all, if wireless carriers should be treated as equal carriers with the ILECs.

99   Well, in fact, wireless carriers have always had the ability to be treated as equal carriers with the ILECs and the CLECs, including the entitlement to shared-cost interconnection and bill and keep, provided they become wireless CLECs and assume all the responsibilities associated with that, like Fido did.

100   The existing regime, where wireless carriers either become co-carriers by becoming wireless CLECs or remain customers eligible to purchase WAS service, Wireless Access Service, is technologically and competitively neutral, as required by the Policy Direction.

101   Now, wireless carriers have lots of choice for interconnection. They can become wireless CLECs and thereby be co-carriers, they can remain customers and purchase WAS, or they can enter into forborne commercial arrangements with other parties.

102   There is absolutely no public policy rationale for giving wireless carriers who choose not to invest in -- and assume the obligations of either wireless or wireline CLECs -- a shortcut to the interconnection regime applicable to CLECs.

103   If non-CLEC wireless carriers and LECs are to be "co-carriers" or "peers," technological and competitive neutrality and the Policy Direction require that they be subject, to the greatest extent possible, to the very same obligations.

104   Now, the Commission's question does not ask where wireless carriers would interconnect if they were permitted to connect on a shared-cost and bill and keep basis. Now, currently all CLECs are required to connect at what is known as the LIR, the Local Interconnection Region, and wireless carriers who are not CLECs connect at the Local Calling Area, or LCA.

105   Now, if the Commission were to reject our proposal and grant wireless carriers CLEC-like rights but without requiring them to be actual CLECs, then competitive equity demands that wireless interconnection take place at the LIR level and not at the LCA level. Moreover, we don't have systems in place to deal with bill and keep at the LCA level.

106   Now, you also asked about the merits of imposing particular measures to ensure independent wireless carriers have the same benefits and obligations as vertically integrated entities. We strongly believe that no such measures are necessary.

107   If an independent wireless carrier wants an alternative to becoming a CLEC or purchasing WAS, it can purchase transport services from LECs on commercial terms.

108   There is no evidence that LECs, including those with wireless arms, will not sell the required forborne services to unaffiliated wireless carriers. These services are competitive. Moreover, it cannot be presumed that LECs with wireless arms would deny access.

109   We know, for example, that Bell Canada's CLEC operations sold similar services in Western Canada to a wireless carrier unaffiliated with Bell.

110   Similarly, we are aware that wireless carriers have successfully entered into commercial arrangements with unaffiliated CLECs -- some with wireless arms and some without -- in both our Atlantic and Ontario/Quebec territories.

111   These are commercial deals happening today. In any event, in many LIRs there will be LECs without their own wireless operations.

112   It should also be remembered that even so-called vertically integrated wireless carriers are not necessarily wireline CLECs everywhere they offer wireless services.

113   For example, we know there are national wireless carriers who do not have wireline CLEC operations in large portions of Atlantic Canada and yet they do not purchase WAS service from Bell Aliant in all these areas, so they must have reached alternative arrangements with CLECs.

114   Finally, the required forborne services remain subject to subsection 27(2). Thus, if it were to happen that a wireless carrier thinks it has suffered unjust discrimination, it would have recourse to the Commission to address the issue but on an ex post basis.

115   To conclude on wireless, you asked us to comment on WAS forbearance.

116   As we stated in our evidence, we think it is appropriate that forbearance be granted for WAS where at least one CLEC is operating in a LIR.

117   Indeed, where at the very least both a CLEC and an ILEC are operating in a given LIR, competition is sufficient to protect the interests of potential purchasers of WAS, thereby satisfying the forbearance criteria of the Telecommunications Act.

118   Through commercial agreements with either the CLEC or the ILEC, WSPs will remain able to effectively access all end-customers located in any exchange covered by the LIR. With forbearance, we would also be in a better position to negotiate mutually beneficial commercial agreements with WSPs without these WSPs becoming wireless CLECs.

119   In LIRs with no operating CLECs, of course, the WAS tariff would continue to apply until such time as a CLEC begins its operation within it.

120   MR. DANIELS: You asked if wireless carriers in SILEC territories should be required to directly interconnect with the SILECs. No, we don't believe this requirement should be imposed on WSPs.

121   From Bell Canada's perspective, the WSP -- -- that's my term for a wireless service provider -- is a customer who has purchased WAS to deliver its local traffic throughout Bell's local calling area.

122   We should be able to deliver that local traffic our WSP customer generates, the same way we would any other customer, like a bank, terminating local calls with us. And to be clear, WSPs are not allowed to send us toll traffic with WAS service, so there's no issue here relating to the SILEC toll regime.

123   From a Bell Mobility perspective, it would be inefficient to require Bell Mobility to interconnect twice in the same local calling area, once with Bell Canada and once again with the SILEC, when its single interconnection with Bell Canada already works just fine.

124   And it would be needlessly disruptive if Bell Mobility had to terminate its interconnection with Bell Canada to go directly interconnect with the SILEC.

125   But most of all, we fail to see a single consumer benefit from the SILEC proposal. Further, from a network perspective, it would be more costly and less efficient.

126   This concludes our remarks. We welcome your questions.

127   THE CHAIRPERSON: Okay. Thank you for your presentation.

128   Now, first of all, you open up in saying you're speaking on behalf of Bell Aliant, Bell Canada and Télébec. We didn't hear Bell Mobility.

129   Are you speaking on behalf of Bell Mobility too, or not?

130   MR. DANIELS: Yes, we are.

131   THE CHAIRPERSON: Okay. So let me start with the wireless access regime.

132   You, Mr. Henry, somehow answered that question because you keep referring to other commercial arrangements, et cetera.

133   The total wireless access regime is actually peanuts compared to the overall things. I can't use the figures that you filed in confidence, et cetera. But what you and the other integrated companies get from wireless access, if you include the wireless access you get from your own mobility or your mobile -- it's $16 million. It's actually nothing. So these commercial arrangements must be dominating.

134   Most of these wireless carriers, you know, especially the new entrants, how are they actually doing this? How does this work? I mean it obviously doesn't work through the WAS.

135   MR. HENRY: Well, that's part of our point. I think there are lots of options and one of them is for the independent wireless providers to make arrangements with other carriers which we assume have evidence to see that they are in fact doing.

136   THE CHAIRPERSON: They must make them with you too.

137   MR. HENRY: Well, they may make some with Bell Canada where it has a CLEC operation as we know they have. But yes, us, Rogers, other CLECs that don't have wireless operations. So there is --

138   THE CHAIRPERSON: But it seems to me we are looking here at the visible part which is like an iceberg, the piece that's above the water. But there is 90 percent or whatever the percentage is, is below the water. And here the WAS is really just a very small part of the interconnection regime for the wireless carriers.

139   Do you have something else that you can share with us in confidence, for instance what you make on those commercial arrangements in terms of interconnection and wireless carriers? I mean you, Bell.

140   MR. DANIELS: So when Bell Canada, the service that we sell to the wireless providers is west, because that's what we are required to do --


142   MR. DANIELS -- we did. We have in our CLEC operations out west.

143   But I think you are asking about where are we seeing the rest of the revenues? We are not seeing that traffic. It's not coming from -- so we don't have those arrangements.

144   They are making their arrangements with other LECs who send it to us down the bill and keep trunks. So we don't see it as wireless traffic.

145   We used to have a large business. The business on the WAS side has basically disappeared.

146   THE CHAIRPERSON: But Mr. Henry, on page 10 it says "so they must have reached alternative arrangements with CLECs". They could have also reached alternate arrangements with you. That's what I am asking you, have they reached alternate arrangements with you?

147   I know what your income is from WAS. I have absolutely no idea what you are making under those alternative arrangements, if there are any.

148   MR. DANIELS: So they have not because we are not allowed to go off tariff. So we don't offer that service. If we were allowed to go off tariff we would be more aggressive in being able to attract that type of business.

149   But the interconnection regime says today you have to offer WAS and you are not allowed to go off tariff.

150   So they go and it hasn't been a problem to them because they go to the CLECs for it. That's a business that disappeared for us.

151   But, no, we don't have those other arrangements in our ILEC territories, although I do mention we do have it in our CLEC territory.

152   THE CHAIRPERSON: And you have those arrangements in your CLEC territories.

153   MR. DANIELS: So we have provided, as a CLEC offered interconnection agreements like an equivalent of what --

154   THE CHAIRPERSON: That is what I am asking you about.

155   MR. DANIELS: So actually --

156   THE CHAIRPERSON: I would like to get a sense of the size. I am going to ask the other carriers the same thing. I am trying to understand this.

157   Your whole submission you are --basically in your written submission make one of -- say everything is hunky dory, only one change where there is another CLEC you don't -- you can forbear. That's essentially the only thing you want in your written submission. This morning you elaborated but that's still where you are.

158   And I am just saying, you know, I'm trying to get my head around this WAS and the size of it and how big it is, et cetera. There has to be alternate arrangements. Mr. Henry admitted there are. I'm trying to get the size of those. You have them yourself.


159   MR. DANIELS: So we can provide in confidence details of what we have done on the CLEC side.

160   But as I say, in our ILEC territory we don't have any of that arrangement. We don't have that revenue stream. You would have to ask the CLECs when they appear because that's where it all is today.


162   I asked my staff to understand what is the difference between a wireless carrier and a CLEC and why do they not want to become CLECs or why are they so reluctant. The only one who has done it is Fido, to my knowledge.

163   And I have here a document, Madam Secretary, entitled "Summary of Comparative Local Exchange Carrier (CLEC) Obligations".

164   Will you show that, please, to Bell?

--- Pause

165   THE CHAIRPERSON: This is a very tedious and myopic list of all these things. But unless I miss it, and I wouldn't want you to miss it, Mr. Henry, grosso modo, as far as I can see, the only significant ones are 7, 8 and 12 which all have to do with equal access.

166   All the rest of it are sort of either not applicable or they do it or they can do it, et cetera. There is nothing big on this list other than 7, 8 and 12 which all deal with equal access.

167   Now, if I have misunderstood it please correct me.

168   Cindy, would you turn on the copy too or do they have it?

--- Pause

169   MR. HENRY: Equal access would probably be by far the biggest one.

170   The other one that could have significant implications is where they interconnect. The CLECs interconnect at the LIR and the wireless non-CLECs interconnect at the local calling area. So that could be significant, in fact.

171   THE CHAIRPERSON: Is that significant in terms of customer benefits mostly or is it -- I mean the effects for the customer obviously is if you are connected through LIR and not a local calling area.

172   MR. HENRY: Well, I think it's transparent to the customer.

173   It's a question of all the interconnection arrangements between the carriers and where the trunks have to be built and if we were to move to a LIR regime for wireless non-CLEC carriers.

174   THE CHAIRPERSON: Which is what you advocate as a fall back just this morning, didn't you say?

175   MR. HENRY: Yes, but there are a number, and we have laid them out -- a number of transition costs associated with that because you have to build shared cost trunks in different locations.

176   There is systems work that has to be done. It couldn't be flash cut overnight. So there is a transition period and there is a number of costs.

177   But if you're going to move to allowing them to connect on a bill and keep basis, surely they have to do so on the same basis as all the other carriers or now you are creating even more inequity. They would have a different interconnection regime as to where they interconnect. They wouldn't have to do equal access now. You're really gerrymandering the rules for the wireless carriers.

178   And then of course the other thing they have to do is they would have to have tariffs if they become a CLEC and then they would have to have discrete trunking groups for EAS because right now with WAS, EAS and transiting are included in the tariff. They are not on a CLEC interconnection regime. So they would have to move to that.

179   So there are some implications beyond equal access.

180   THE CHAIRPERSON: My question was why have they not moved? Why have the wireless carriers been so reluctant to become CLECs?

181   As I say, I gave you that list and I asked my staff to identify what is that is preventing them from doing it. They basically pointed their finger at equal access.

182   MR. HENRY: Yeah, I think that's right. I think that's the number one reason.


184   MR. DANIELS: And just, I mean in many ways they themselves haven't become CLECs because of equal access. But they have also got -- been able to get the benefit from the CLEC regime by making arrangements with CLECs or, in a number of cases, they vertically integrated themselves. So they already have CLEC operations.

185   So just from a practical perspective that's, I think -- we're the same. Bell Mobility you know was able to take advantage of our CLEC operations out west.

186   THE CHAIRPERSON: Okay. This is a very technical hearing and I'm a full lawyer. I went to law because I don't techno science or things. So I work with diagrams. My staff has tried to explain it to me.

187   I just want to show you this one -- those two diagrams. I think it's the same that you -- so just we understand and make sure we are working on the same basis.

188   Cindy, would you please? The two pages, the first one is right here. Yes, those two pages. Yeah, okay.

--- Pause

189   THE CHAIRPERSON: The first page with the big red arrow in the middle that shows how wireless access works.

190   And if I understand the second page it's how you will actually work. This is how you do it. So if a wireless carrier can find an alternate arrangement it's what we see in the second page. That's how you in effect connect with a CLEC who then uses existing tariffs, et cetera.

191   In that way you avoid the WAS. Is that correct?

192   MR. HENRY: It looks right to us. I, too, am a non-technical person.

193   THE CHAIRPERSON: Yeah, I have faced 10,000 feet --

194   MR. DANIELS: We thought we were going to be the first ones to pull out a diagram but you beat us to it.

--- Laughter

195   THE CHAIRPERSON: Now, if I understand the second one, that's really how Bell Mobility works, right? That's how you do it. That's why your Bell -- do you pay your -- does Bell Mobility pay Bell or Bell Aliant actually WAS?

196   MR. DANIELS: Bell Mobility pays WAS so it would not do it on figure -- your page 2.


198   MR. DANIELS: It would be one because it buys the WAS service.

199   THE CHAIRPERSON: Even where you have CLEC territories?

200   MR. DANIELS: Oh, I'm sorry. I misunderstood.

201   If you are talking about out west, yes, then where we are not the ILEC.


203   MR. DANIELS: Then we will go into our CLEC operations --

204   THE CHAIRPERSON: -- you, yourself it's obviously useful but it's not what I'm -- I want to see when you are out of territories. Presumably that's how you work?

205   MR. DANIELS: Yes.

206   THE CHAIRPERSON: And what is the sort of underlying rationale for instance, for this regime? Why do you think it works so well? Why do you feel that the wireless carrier should not be created?

207   Like for what they ask for, they basically want to be treated like a CLEC without the coaxial.

208   MR. HENRY: Well, in many ways they have the best of all worlds today. They have choice. They could become a wireline CLEC or invest in a wireline CLEC. Some have done that.

209   They could become a wireless CLEC as we have talked about and there is an investment associated with that, mostly with equal access as you point out.

210   Or they can buy WAS from us or they can go to others.

211   Now, they have chosen not to invest in either becoming a wireless CLEC or a wireline CLEC.

212   You know, those who choose to invest have certain advantages and disadvantages but they shouldn't be penalized and have the advantages taken away from them on the basis they made the investment and the others didn't. You know when you choose to invest there are certain implications of that.

213   I mean I can give you an example going back many years ago in the toll regime where CLECs were allowed to terminate toll traffic over their bill and keep trunks. Now, that gave carriers who had toll operations and CLEC operations the ability to go through their CLEC.

214   THE CHAIRPERSON: Yes, but you said many years ago. Let's talk today. I mean, the interconnection going to wireless carriers is very old. Nowadays, wireless has become an alternate interline connection. You know that as well as I that a lot of people who --

215   MR. HENRY: Right.

216   THE CHAIRPERSON: -- their wireless, et cetera. So wouldn't it be time for us to look at that and look at it?

217   We in effect have to -- we count them as competitors when we make forbearance decisions, you know where there is a wireless carrier or not in an area. So we treat them de facto as competitors. Yet, for interconnections you treat them as customers. I just don't understand why there is a conceptual distinction here.

218   MR. HENRY: Well, we don't treat them -- if they want to become a CLEC they have that choice. They have that choice but they can't have the benefits of being integrated without being integrated.

219   THE CHAIRPERSON: Yes, but they compete with you and you don't offer equal access on Bell Mobility either. But you in effect say, you want to compete with me then you have to offer equal access.

220   MR. DANIELS: Yes, but those --

221   THE CHAIRPERSON: What do you mean "yes"? They are your competitors but yet you want different rules for you than your own mobile arm. That's the divergence I don't understand.

222   MR. HENRY: Well, with respect, I think we want the same rules and the same rules are they have to have either a wireline CLEC or a wireless CLEC, just like others have done. That's the symmetry. It's a pure symmetry question.

223   They compete with us but now they want the advantages without any of the obligations of -- and as you point out, it's the obligation of investing in equal access. They have the option to be pure competitors but they -- it's not good enough.

224   THE CHAIRPERSON: Let me put it another way. Why don't you offer equal access on Bell Mobility?

--- Pause

225   MR. DANIELS: I mean, I think the answer to that is the same reason why we don't see a customer demand and we don't see a need to provide it and it's not an obligation.

226   THE CHAIRPERSON: Don't customers -- are happy if they are paying outrageous long distance charges you have to pay on wireless? I find that hard to believe.

227   MR. DANIELS: Well, I don't think we -- I would agree with you about your characterization of our mobility rates. We believe they are competitive in the market and there is many different alternatives.

228   THE CHAIRPERSON: Not you. I said wireless, just to tickle you out.

229   MR. DANIELS: But I will -- and I guess for my own example, I have a rate plan that treats all of Canada as one rate. So you know there is no difference between local and whatever.

230   So I think the wireless, I think equal access is a function of historical creation that came from the old monopoly days and we wanted to bring down in the wireline world tolls. So you mandated equal access.

231   And then when local competition came you imposed equal access which, in my mind, doesn't really have anything to do with the criteria for local competition. My real question is why is equal access an obligation for anyone today, wireline or wireless?

232   But to Dennis' point, is to the extent that you are going to make this an obligation, it has to be carried out through all providers. That's our position.

233   And I would also point out that if the wireless carrier sees a competitive advantage to doing it, and I think Fido did, then they can do it. And Fido did do it.

234   You will have to ask the other wireless carriers why they didn't do it. We didn't see a competitive advantage to invest and create and make that offering in the market. Fido did.

235   THE CHAIRPERSON: You own Fido now, right?

236   MR. DANIELS: No, Rogers.

237   THE CHAIRPERSON: Rogers, okay.

238   MR. HENRY: It's an important point, though.

239   THE CHAIRPERSON: Sorry, my mistake.

240   MR. HENRY: I just want to emphasize a point that Mr. Daniels made.

241   There is an easy solution to it for symmetry. If you think that equal access is the issue and it's not that important, then eliminate it for everybody.

242   THE CHAIRPERSON: Or impose it for everybody.

243   MR. HENRY: Or impose it for everybody, exactly.

244   THE CHAIRPERSON: Yeah, that was my last question this morning in my statement. I hope you got it.

245   MR. DANIELS: Oh, we did get it. I mean you know --

246   THE CHAIRPERSON: It's not part of this hearing, but it seems to me the logic of what we are doing and you; et cetera, and given the customers' complaints on it. At some point in time we will have to ask ourselves the question: Should we impose equal access on all wireless carriers?

247   Do you want to -- as I say, it is foreshadowing other parts of this but it seems to -- as I was preparing for this hearing and my colleagues, you know, it is a question that clearly comes to the table.

248   MR. DANIELS: Well, I mean, I guess I'll save my argument for later in terms of another hearing, if it ever comes to that, in terms of why I don't think that's necessary.

249   But my argument would really be I don't think it's necessary in the wireline or wireless world. But, to the extent that you have tied the obligation to provide equal access to being a CLEC and getting the benefits, then it has to be technologically neutral. The policy direction requires it.

250   And, in fact, your framework got it right, I think, in that sense, in 97-8 right from the get go.

251   THE CHAIRPERSON: We don't have to impose it, you mean, because competition will basically bring it about?

252   MR. DANIELS: Yes, and I also do believe that -- I'm not quite sure if you have significant local competition why you need to impose it because people have a whole bunch of alternatives for tolls in any event, both on the wireless and wirelines.

253   THE CHAIRPERSON: Okay. Now I just want to make sure I understood the answer on Bell Mobility.

254   On the graphs that I gave you, the second one which shows sort of the wireless working through CLECs, this is in the Bell territory. This is not what Bell Mobility does.

255   Bell Mobility doesn't have the same commercial arrangements with some CLECs and they thereby try to reduce the wireless access. They pay regular WAS for all their traffic to Bell?

256   MR. DANIELS: We only buy WAS regulated off our tariff from Bell Canada in our territory.

257   THE CHAIRPERSON: And you have no arrangement with CLECs in your territory?

258   MR. DANIELS: None.

259   THE CHAIRPERSON: But when you are out of territory you do this in order to avoid the WAS?

260   MR. DANIELS: That's correct.


262   You said we should forbear from WAS if there is another CLEC in the territory. Is it as simple as that? Is there no condition?

263   I mean, when we did forbearance, you know, we were very careful to make sure it is not only there in name, but in fact there is the question of penetration in all of this, et cetera.

264   Did I misunderstand your proposal? Does it just say at the moment there is another CLEC present and there should be forbearance. There are no other tests or would you care to elaborate?

265   MR. HENRY: No, I think you have it right, that is the test, one other CLEC.

266   THE CHAIRPERSON: But, I mean, doesn't it beg the question, does it have the facilities, does it have the capacity, et cetera, to actually be a meaningful competitor to you?

267   MR. HENRY: Well, if it is a CLEC operating, it should have all the wherewithal and all the facilities to provide alternate arrangements to the wireless carriers. And our experience is that they do.

268   MR. DANIELS: In fact, I would add, I think your comment this business has basically disappeared for us as an ILEC because all the SILECs have taken the vast majority of business. But we do appreciate that there may be a particular area where we would be the only provider, and in that case we are saying regulation should continue.

269   THE CHAIRPERSON: Now the other thing that really struck me, why do we have this elaborate regime here for voice? You know, we don't have that regime for data, we have absolutely no regime for data.

270   This obviously begs the question, you know, is there not -- and we have been asked by the government to only regulate where there is market failure or where there is a necessity. What do you see the necessity for this whole regime? Why do we have it on the voice side and not data, especially since data presumably is much bigger nowadays than voice?

271   MR. DANIELS: We don't see it, the necessity. And I guess we put that statement into our opening statement to say that when you look at internet peering, there is no regulation of it, there is no tariffs for it, and it works.

272   So if you ask us, you know, coming at it and thinking justify why we need this there, we don't see -- we think you could forbear and step away from all of this. Having said that, we then came back and said, if you are not prepared to go that far, we have an interim test that we think you should apply to determine what services to regulate and which ones you shouldn't.

273   But to be quite honest with you, when we sat down and talked about this in light of the letter, we said how can we not answer your question the way you just did? Because we reached the same conclusion.


275   Now, we turn to the SILECs. Madame le Secrétaire, I am going to make you walk again. We have two graphs here which hopefully, I think, explain exactly what the issue is.

--- Pause

276   THE CHAIRPERSON: The first one, which has only one black bar going from the yellow box to the grey box, I think that we are now at Exhibit -- let's call that 1A, and the other one 1B, so we know which one I am talking about.

277   On the one that we marked A, that is for situation that exists if you have no competition. If you have competition, B, if I understand it correctly, of a wireless carrier, and enters into a market like this, what it could do, and serve its customers directly.

278   And if there is number portability, they could use still the existing ILEC route from the yellow, to the grey, to the blue, which means that in effect the SILEC will be cut out, it will lose its customer, the number would be ported over to the wireless guy. But to the extent that any calls entering in its territories, they would not be doing any termination.

279   Is that correct?

280   MR. DANIELS: Sorry, can you..?

281   THE CHAIRPERSON: Okay, let's deal with A. Right now a call comes from outside, goes to the CLEC, goes to the large ILEC and to the small SILECs then. Right?

282   Now, if you enter a wireless carrier and he serves somebody in the small ILEC territory and you have number portability, so the small ILEC loses this customer, this customer becomes a wireless customer.

283   And he gets served from, as it was explained to me, and that is why I want to make sure, from the wireless carrier who will work through the -- if this wireless customer calls another customer in the small ILEC territory, they will basically -- the call will not be terminated by them, it will bypass them.

284   That is the concern, is it not? Maybe I am missing...

285   MR. DANIELS: Well, I will answer your question, but let me first agree that we went through -- because of your questions we hadn't closely paid attention to this, so we do go through their material.

286   I think I understand what they are arguing, but I am a little reticent to perfectly describe it, because I think it is best for them to justify it. But I am not sure your characterization at least is correct in terms of what I think the issue is for them.

287   But again, I may be wrong, I mean let them... But, because this is my chance, let me sort of take a shot at it.

288   So, first of all, on your first diagram, I would have to read it a little bit more carefully, but I notice that this seems to suggest a long-distance call. And I think, really, we should look at this issue strictly as a local issue and not talk about toll situations.


290   MR. DANIELS: Because the toll, I don't think that they are talking about a toll situation. There was a concern, and we share it with them, about the toll bypass. Because they have a special regime where they get extra money which is, in our view, beyond the amount it costs them to terminate a toll call, which is really a subsidy that goes to funding them overall. So there is an extra subsidy that happens with toll.

291   We, along with them, have a separate proposal to take that extra subsidy and put it into the contribution fund. That is before you, I think a number of times, but that is a different issue from this proceeding.

292   And I think what we have to focus in this proceeding is a local call, because that is what we are talking about.

293   THE CHAIRPERSON: Okay, yes. Thank you for that correction.

294   MR. DANIELS: So from a local call perspective I think, if we just pretend that this is a local call, I understand this is a CLEC handing off to the ILEC and the ILEC terminates the call to the yellow switch that goes to the SILEC customer.


296   MR. DANIELS: And then when you go to your figure B, is that what we are calling it?


298   MR. DANIELS: So now we are bringing a wireless guy into the picture. And between the SILEC and the ILEC it is a local-calling area. So local calls are free because they are neighbouring each other.


300   MR. DANIELS: So customers are able to call each other without incurring any toll calls, as we understand this scenario.

301   And so what happens is -- let's imagine that this is a SILEC that doesn't have local competition yet, no one entering, so on the one hand you could assume it has all of the customers, but the reality is that a wireless guy can put a tower either in the SILEC territory or in the ILEC territory that reaches the SILEC, it doesn't matter, and would be able to pickup a customer who lives in the SILEC territory and provide their service.

302   And as I understand it, that call, that customer, what you are showing me here is if he wants to call another person in the SILEC territory -- so it is a wireless guy in the SILEC calling a SILEC wireline customer.

303   What will happen is it will go over the wireless network, the wireless network will deliver it through a SILEC or an ILEC, whatever, will get to our switch, and then we, as the wireline ILEC, we will give it to the SILEC on our arrangement that we have for them just as if the call had originated anywhere in our local calling area or our exchange, so there is no distinction being made.


305   MR. DANIELS: And I think their issue is saying we are being cut out of a certain revenue stream here of WAS.

306   THE CHAIRPERSON: Exactly.

307   MR. DANIELS: Well, first of all, welcome to our world, there is no more WAS revenue. We just went through that. This revenue stream that they are concerned about being cutting out, for the most part doesn't exist anymore. So because we ourselves, we will get it from a CLEC -- we will get it, and switch and deliver.

308   The second thing is, when we deliver to them, whatever our arrangement will be with them, we pay them, or we don't pay them if we have a true bill-and-keep arrangement, where there is actually no payments for the cost of termination. Because what they send us, we send them, whatever our arrangement is with them.

309   So what they are saying here is, well, we want to take one chunk of a type of traffic calls that are going down our mutual exchange trunks today and we want to have them have to directly connect so that they have to buy it from us.

310   But we either have a regime with them as an ILEC that compensates them or, in many cases, what we have is we don't pay each other because we send each other traffic. Whatever our arrangement with them is, it compensates them.

311   And so they are looking to say, well, just take a little bit of that traffic away and put it in the SILEC territory, make them come directly to us so I can get some more revenue.

312   But there is no cost that we are talking about here that I am missing. And I want to emphasize that I could be wrong on this, because we studied their proposal over the weekend and trying to figure out where is the extra costs? I see a loss of revenue, which doesn't really exist, which is WAS, but I don't see some extra costs being a burden on them. And maybe if they explain that, I can better understand what the issue is.

313   THE CHAIRPERSON: You are talking about the same thing, I didn't see it. That is what my next question was, where is the extra costs in this? So you don't see it either.

314   Well, we will wait until -- if they come before us and we will... And I am sure there is some, but it just wasn't apparent to me.

315   I am sorry for trying to explain it, first of all, but that is exactly -- looking at this one, that was the issue. And effectively, this red line that goes there seems to me just to be making redundant connection which isn't there right now, right?

316   MR. DANIELS: That was our last line, saying we don't see any consumer benefit from this proposal because consumers get it today and it works, and it would require us to have extra or Allwest to have extra trunks to split the cost, which we don't see makes any sense.

317   THE CHAIRPERSON: Then let's move over to the IP. You are clearly moving slowing from TDM to IP. When do you think you will be there? You must have some internal timeframes and planning?

318   MR. DANIELS: Before I answer that, let me throw a question back at you. Which is to say, are you talking about IP interconnection or IP access? Because we really think it is important to make the distinction between the two.

319   THE CHAIRPERSON: This is an interconnection hearing.

320   MR. DANIELS: Right. So from an IP interconnection standpoint, we think in the near future there are certain areas where it would make sense to start on a commercial basis for us, to look at doing it with other partners, with other carriers.

321   And for that, I'm going to hand it over to Michelle to talk about that.

322   MS BOURQUE: Sure. There are a number of examples of where we might see opportunities to establish commercial term agreements for IP interconnection, so for like services. So Bell Mobility wireless services being able to direct connect with Rogers wireless and being able to share traffic on a direct connect basis. So that is an example of one.

323   Secondly, in an area where we have a geographic density of -- a higher volume of IP traffic origination. So think of our deployment that we mentioned around FTTH in a specific geographic area where you have a higher density or population of traffic that is coming originating IP. And that perhaps might be a benefit in terms of another local regional carrier that we might want to establish an IP interconnection with.

324   So on a scale basis where the traffic volumes from an IP perspective increase such that it might make mutual sense to interconnect on a carrier to carrier basis to deliver that traffic via IP.

325   I think the difference or the concern is around having to pervasively deploy IP enablement across our entire network when you may only see the pockets of IP volume being able to necessitate it.

326   THE CHAIRPERSON: If I understand it, there is a CISC network protocol that is in place since 2008. So presumably, that is what you use when you make the IP interconnection?

327   MR. CULLUM: Yes, that is correct.

328   THE CHAIRPERSON: And let's take the example of Bell Mobility, do you have IP interconnection arrangements with them in place right now?

329   MR. CULLUM: Between the ILEC, Bell Canada and Bell Mobility?


331   MR. CULLUM: Right now it is TDM interconnection.

332   THE CHAIRPERSON: But you mentioned you have one with Rogers. You must have some in place already?

333   MS BOURQUE: Sir, what I mentioned was the possibility of being able to do that where it made the right business sense.

334   MR. DANIELS: We have filed in confidence, in terms of the IP interconnection arrangements, that we do, where we have it today, but none of it is under the regulated services that are at issue in this proceeding in terms of the regulated services that we provide. They are all done under tariff for TDM.

335   THE CHAIRPERSON: Okay. I am sure you have read the proposal by Yak. And they say in their paragraph 29:

"In order to expedite the availability of IP to IP interconnection Yak submits that the Commission should direct the ILECs to make public any IP to IP interconnection arrangements, trial or production, they have in place between their respective CLEC operation and any incumbent LECs. At a minimum, the technical specification used for such interconnection should be published and similar interconnection arrangement should be made available to non-ILEC affiliated CLECs." (As Read)

336   Sounds, at first blush, and that is what I am saying, qualified, perfectly reasonable, et cetera.

337   Is this something you are doing or willing to do?

338   MR. DANIELS: Again, let's break this down a little bit. In terms of we, today, as an ILEC, in terms of the regulated services that we offer, every time we offer -- today, we don't have any IP interconnections, including with ourselves, in terms of the regulated services.

339   So there may be some toll arrangements that we have, there may be some other ones that we have. But in terms of the regulated services -- and just to be clear, because I know people are going to want to say, are you suggesting that we have somehow gone around it, no -- for all of our local termination in our territory, we follow and only do it on a TDM basis.

340   THE CHAIRPERSON: You have no trial or testing of IP interconnection in place right now?

341   MR. DANIELS: For local, none. And I am talking our local wireline access. We did describe, in confidence, some aspect of where that may be different in terms of where it is not regulated which, as you can imagine but --

342   THE CHAIRPERSON: I am sorry, you are drawing a distinction I don't understand. What are you trying to say? What are you doing that you -- obviously you filed it with us in confidence, I am not trying to get you to betray the confidence, I am trying to get you to give me the concept here.

343   MR. DANIELS: Can you give me just a second to figure out a way that I can say it without..?


--- Pause

345   MR. DANIELS: Okay. So, I can say on the wireless side, wireless to wireless there is some arrangements where we have IP basis with our wireless arm. So that is why I am saying it is not involving Bell Canada on the wireline in terms of local interconnection. But on the wireless side there are some IP arrangements.

346   Although, I am being told to specify that it is not SIP-based, we don't follow the exact CISC guidelines for it. So that is the one clarification I am being told.

347   THE CHAIRPERSON: Well, I will repeat my question.

"Yak submits that the Commission should direct the ILECs to make public any IP to IP interconnection arrangements, trial or production, they have in place between the respective CLEC operations and any incumbent LECs." (As Read)

348   So you say that doesn't apply because it is wireless to wireless, neither CLEC nor an ILEC. But you may have some arrangements between yourself and Rogers or whoever. Are these on a trial or in a production phase?

349   MR. DANIELS: No, it is in production. It is not just a trial.

350   MR. CULLUM: Maybe I can just provide a clarification.

351   Right now, from a wireless carrier to another wireless carrier that have got like HSPA networks, they are able to connect at the IP layer because they are using the same vendor. If you have the same vendor, then you are able to provide that IP connectivity. Because right now, to our earlier point, it is non-SIP, it is not standard.


353   MR. CULLUM: In order to provide IP connectivity with other vendor communities, other networks, there would be obviously more development required, and that currently isn't available to us.

354   THE CHAIRPERSON: And when you start connecting wireless to wireline, then it is what you went through in your presentation, you said that means increased cost. Is that increased cost all yours or...?

355   Right now, to my simple mind, a wireless provider would also -- the person who has IP has to convert it to TDM to interconnect with you, right? And you don't want to pickup that cost otherwise you --

356   MR. DANIELS: That is correct.

357   THE CHAIRPERSON: -- have to, in effect, put an IP at your end so that you can receive it from..? That is what it all is about? You will do it where it makes business sense for you?

358   MR. DANIELS: Well, we will do it where it makes business sense for us and for the others. But I guess what we are trying to say, as we grow our IP access services it makes business sense. So we do some wireless right now.

359   We think wireless would probably be the first place that it makes sense to do it with more carriers, especially because -- I talked to and I gave a wireline description about how we are just rolling out fibre to the home and we have only got 1 to 2 per cent.

360   But on the wireless side next -- you know, we have just started launching -- not just us, LTE and the next stage of LTE is something called voiceover-LTE, sometimes referred to as VoLTE, and so that means that the base of wireless will be IP, SIP-based and it will make sense to look at IP to IP on the wireless side first.

361   THE CHAIRPERSON: You also have sort of fibre to the home major tests in Quebec City if I understand it, et cetera. So it would make it make sense for you perhaps someday when you have wired all of Quebec City to offer IP to IP interconnection in Quebec City?

362   MR. DANIELS: That was the example we gave in our speech, to say it may make sense to do it first on a geographic basis. And part of the reason that it -- of course in terms of the service or features or whatever, that you can add extra once you go IP, once the market gets there, to justify it.

363   But it is also a question of doing it on a targeted basis, we can avoid the huge expense that we are worried about. Because what we are focused and worried about, is spending all of the money to convert our IS/IT systems, because if you mandate it and it becomes a right for anyone to ask for it, even if not everyone converts, the point is we have to be prepared to have it everywhere. And that is a huge IS/IT project within the company.

364   If we can do it in a targeted geographic area or Bell Mobility can skip Bell Canada's antiquated, you know, IS/IT system for TDM, because it doesn't need it, do it directly. That is why we are saying the market is going to move us there. But let's --

365   THE CHAIRPERSON: I am just a bit surprised. If it was mandated, presumably there would be a tariff too, and the tariff then would effectively compensate you for the conversion.

366   So having your competitor pay for your modernization seems to me as being a good deal.

367   MR. DANIELS: So let me break that down in a couple ways. And to do that, I'm going to pull out a diagram, if you don't mind.

368   So if you could turn to Figure 1 of the -- from the Bell Canada submission.


370   MR. DANIELS: And begin -- you all may know this 'cause I know you've had different meetings, but I think as a level setting it's just helpful for us to understand how the tariff works today.


372   MR. DANIELS: Okay? So this is just -- this first service there is local network inter-connection, the Bill and Keep Trunks.


374   MR. DANIELS: So this is just nothing to do with wireless; just a wire line call from a CLEC to a Bell customer. And what happens is there's a shared cost billed; don't need to get into that.

375   But the key point is local traffic goes over what they call the Bill and Keep Trunks.


377   MR. DANIELS: And now, on -- the reality is today that the vast majority of cases, we send more traffic to a CLEC than they send to us. That's true for almost every single CLEC. It may not be true every single location, but on the whole, we send more traffic.

378   Now, there's a significance in that. That's why I had the blue line being thicker than the red line coming the other way.


380   MR. DANIELS: So what happens is that, at the end of each month for a particular LIR, you look and you say how many trunks are there, and what's the imbalance. And if the imbalance is 10 percent, there's a rate, if it's 40, whatever, there's a different dollar figure.


382   MR. DANIELS: So the fact that we send more traffic to the CLEC than the CLEC sends to us means that, generally, we pay the CLEC.

383   So for local imbalance, net -- I'm a big net payer of imbalance. I think we submitted this number in confidence to the CRTC as to what that number is. But I'm happy to -- you know, I can comfortably say on the public record it's -- you know, we pay millions of dollars every year in imbalance, on whole, to the CLEC.

384   Now, that -- the rate for that imbalance tariff is based on our costs, and it's based on our TDM costs. So we did it, and we did a cost study and -- 'cause we do it, but yet, it's the amount we pay to them. So that has two implications by the fact that we pay to them, overall, using our costs.

385   The first one is, to the extent that we're making those payments, and if it's true that IP is cheaper than TDM, then -- so if that's true, which all the parties are saying before you it would be in terms of on the other side -- if that's true, then we're over-paying them for their cost of terminating the calls because even though we don't put in the cost of conversion, we're probably -- it's -- you know, practically speaking, they're getting more money, which costs -- which can compensate them for the extra costs of having to do the IP conversion.

386   So that's Issue No. 1. But Issue No. 2 is, let's say you mandated it and you said okay, Bell, we hear it's going to cost you a huge whack of money. Go and update your studies.

387   This will be the one tariff that we file with a high number where no one is going to complain because when we file a tariff with a high number, they're all going to say, "Great, you've never seen that before". And they'll all go, "Why aren't they complaining?"

388   Because if we file a tariff of a higher number, we pay it. They don't pay it.

389   So that's why I'm -- you don't be inundated with interrogatories or anything like that. Everyone will just want to get it through because the system today as it's set up doesn't compensate us, ultimately, 'cause it treats both carriers as equal as if they have the same costs, and we end up paying from the practical reality of where the traffic goes.

390   THE CHAIRPERSON: Okay, thank you. I understood.

391   Okay. I think those are my questions. Len?

392   COMMISSIONER KATZ: Thank you, Mr. Chairman, and good morning.

393   I want to come back to the position you're taking on IP arrangements. You say in paragraph 5 on page 2 and later on as well that:

"IP arrangements on a voluntary basis should be allowed."

394   How would you see us dealing with claims of undue preference in that environment where parties come in and say, "I can't get the same thing"?

395   MR. DANIELS: Well, so I -- my first standpoint is if you're continuing to regulate this and you have a default tariff for TM and allow other parties, we still think that the Commission would have jurisdiction over 2072 to be able to come in and to raise it. And --

396   COMMISSIONER KATZ: So it gets raised and we have a finding two years downstream that there was benefit bestowed. What recourse do we have?

397   There has been two parties that have benefited --

398   MR. DANIELS: Right.

399   COMMISSIONER KATZ: -- by a non-tariff non-agreement agreement that is better, presumably, or different than the threshold that was approved as a fallback default tariff that you're suggesting be put in place. And now two years later, two parties benefited. A third party did not benefit and has higher costs and may actually be poorer off financially as well.

400   What would we be doing? How would we deal with that issue?

401   MR. DANIELS: I don't -- I think -- I mean, the short answer to that is the same situation that you have today except not for interconnection in terms of allowing off tariff arrangements. And it's a question of what kind of rules you establish beside it.

402   We, personally, think that you're going to actually encourage more arrangements by getting out of the market because if it's mutually beneficial, which -- then you're going to see different arrangements happen all over the place.

403   Now, you're positing a situation where someone is being disadvantaged from it. I don't think that's what's going to happen.

404   Our general approach on this is to try to -- there may be reasons why one party gets an offer that another party doesn't get. Maybe they have a bigger mass, they have different geographic basis. And so I'm not trying to say they're going to be standard arrangements for everybody, but I do believe that you're not really going to see that many complaints.

405   But having said that, you have the ability to intervene and act quickly, as you have done. It doesn't necessarily have to be two years down the road. If that's the concern, set up a regime to allow for quick reviews on this basis.

406   COMMISSIONER KATZ: Okay. So let me give you a potential real-life example, and you actually said it here on paragraph 8 about a potential for high-definition video calling.

407   And that's my concern, the suggestion that innovation may, in fact, be retarded by the fact that one party needs IP to IP interconnection in order to get his product into the marketplace. And for whatever reason, one of the parties simply says, "No, there isn't enough traffic, there's isn't -- it's too high a cost", whatever it is and, as a result, it takes two to tango. And as long as you stay on the same network, whatever that is, the Rogers network, you can get high definition video calling, but if you want to call across to a Wireline customer, you can't.

408   MR. DANIELS: So my -- like taking your example, what we're trying to say is I can understand that from a theoretical perspective. Now let's bring it down to reality.

409   That call, the video telephony example that you're talking the innovation on the Rogers network, even if we have IP interconnection doesn't work until, at our end, our end user has the ability to receive it on an IP basis, which means he's got a VOIP and got the necessary equipment.

410   And that's really the crux of it, that we're not hindering any innovation whatsoever that anyone else wants to do in terms of until we build our own network for our end users. And if it's going to be a problem for us that our end users can't get video telephony -- high-definition video telephony because we haven't built out our network, they're going to switch to Rogers.

411   So it's -- the competitive market is going to force us to do it on the access basis, but I really want to emphasize that's the difference between the retail issue as opposed to the interconnection because if you mandate that we have to do it and so we offer IP interconnection, it is not going to move any faster in terms of what we offer our own customers. All you're doing is moving the cost of the conversion from them to us; nothing more.

412   It's not -- so this isn't an innovation issue. That's really what we're trying to say.

413   COMMISSIONER KATZ: What I hear you saying is if it's good for Bell, you'll do it and you'll create the infrastructure for it because products are available and you're ready to go. But if somebody else wants to offer the service, you're saying it's not going to work anyway, so why bother.

414   The reality is, when you get to the end user and the equipment and the product, we're seeing all sorts of promotions in wireless where you get a free phone for a three-year term, you pay $99, all that stuff will take care of itself.

415   The issue here is not that the consumer doesn't have the product. It'll be there in the marketplace if there's a need for it and there's an innovative product that makes sense. The issue only is will the infrastructure, will the networks -- will the network of networks all be there to support it.

416   And what I'm hearing you say is when you're ready, it'll be there, because you know what's right for the consumers. And I'm not quite sure that Bell should be the only party who has that say in this case.

417   MR. DANIELS: That's not what we're saying because what we're saying is, first of all, it's not when we're ready that Bell will provide it; it's the market will drive it.

418   So if we're -- if those innovations are out there -- we've had IP, VOIP, in the market for a number of years and you haven't seen the innovation across networks at all.

419   Now, I'm not trying to say that there's not a service that Rogers may be able to offer within its own network or something like that. I don't know. But certainly it's not a major marketing push because the push, from a marketing perspective today, is all about it doesn't -- it's easy. Nothing changes. You just save money. That's VOIP today.

420   But I agree with you; there could be innovations in the future. All I'm trying to say is you make it sound like Bell would be holding up Rogers.

421   Whether we offer IP interconnection or don't offer IP interconnection is not going to change anything in terms of what the end user experiences on the Bell network and, therefore, the call from the Rogers customer to Bell. If Rogers has it and Videotron has it and they're -- then they can directly connect and have IP on that basis and have it go through different networks.

422   COMMISSIONER KATZ: If Rogers has to convert that IP call from their customer to TDM to get it to you, then you can't take it to your customer and convert it back to IP because you're saying you don't offer that capability.

423   MR. DANIELS: Well, I'm saying we don't need to convert it back to -- like in order for it to work, the thing that you're talking about, it has to be IP all the way through. So if our customer is TDM, the feature that you're talking about, if it's tied to being IP, will not work until our customer, at his end, is IP, right. And that the whole connection from beginning to end is IP.

424   If it's something that could work from TDM, then it will work over TDM on the TDM connection, so I'm starting from your hypothesis that IP is necessary to make the service work.

425   If IP is necessary to make the service work, then IP has to be from the beginning to the end, the whole way through, in terms of the call. And that means our caller has to be IP that we have to build out fibre to the home.

426   And so I don't -- there's no -- nothing would be happening. There's no -- we're not -- by you mandating IP interconnection, it's not going to make anything happen any faster. Rogers is still going to have a customer who has IP, and Bell will still have a customer who doesn't have IP, so that video telephony -- high-def video telephony won't work until we've upgraded our network to that individual customer to have it.

427   That doesn't mean that Rogers can't call Distributel if Distributel has it, or whoever else it would be in terms of what they directly connect if they want to both be IP.

428   So I really -- I think people are painting a picture here that we're somehow going to hold up innovation. We are not going to hold up innovation. They can still do everything they want. But even if you mandate it, it's not going to be speed up or make one different at all to the benefits to consumers, and that's what we're trying to say because that's not the driving force behind us moving to IP at the access end.

429   COMMISSIONER KATZ: Okay. Let me move to your paragraph 34 where you talk about Bell Mobility's perspective. And you say at the end -- or you suggest at the end that there is an interconnection regime that exists between Bell Mobility and Bell Canada.

430   Is there really an interconnection regime that exists between Bell Mobility and Bell Canada? Do you measure traffic?

431   Do you settle traffic like you suggest settlement takes place on the Figure 1 chart that you talked about?

432   MR. DANIELS: Yes, we do. And I mean, it's an issue for us because we are the only ones who are paying less in terms of at the tariff rate for all of our services, and so yes, in terms of the books between the companies and so, therefore, it's treated as COGS, Cost of Goods Sold -- I'm sorry.

433   But it's treated as an expense to Bell Mobility and it's treated as revenue from Bell Wireline.

434   Now, when you have a consolidated version, they make that disappear, but in terms of the results for the various different business units, when you product it and the EBITDA that each business unit produces, it totally is there and it's an important factor in terms of, in fact, that -- so we definitely -- we treat it, and all the minutes are counted.

435   COMMISSIONER KATZ: Is Bell Mobility a separate corporate entity?

436   MR. DANIELS: Bell Mobility is a separate corporate entity, yes.

437   COMMISSIONER KATZ: It has separate financial statements?

438   MR. DANIELS: I got to be -- I don't know enough to answer -- to be careful in how I answer this. I do know that what we do is we -- on the BCE side, we publish consolidated versions.

439   Bell Mobility is a subsidiary of Bell Canada, and so -- but I'm not -- in -- but when we -- the key point is, when we publish our results in BCE and we say here's our mobility, here's our EBITDA for Mobility, the COGS to Bell Canada is treated as part of that EBITDA revenue. So that's where you could actually look if you went into all the detail and you would see was revenue being there as payments.

440   COMMISSIONER KATZ: Okay. I want to come back to the issue that you talked to the Chairman about with regard to equal access and this so-called regulatory bargain that was created by the Commission in the '90s that basically said if you want to be a WSP, you have a certain degree of flexibility; if you want to be a CLEC, you must meet other obligations as well.

441   And that was an environment where wireless was seen as being a specialized form of telephone service.

442   I think most of the evidence that I read in this proceeding talked to the fact that wireless is now a substitute for wireline and they're basically interchangeable and people are cutting their cord and moving towards wireless only.

443   So that regulatory bargain seems to be something that needs to be looked at again, and obviously there's different positions here as to whether all the forms of CLEC obligations should be maintained, or should some of them go the Bill and Keep but not equal access.

444   And I'm just wondering why this Commission should change the regulatory bargain?

445   The reason the regulatory bargain was instituted in the first place, as I understand it -- and I was on your side back then -- was in order to promote consumer choice. It was to give consumers a choice of more competitors in the marketplace.

446   If, in fact, the carriers wanted to reduce their cost of interconnection, the quid pro quo was there must be some way of the consumer benefiting, and the way they would benefit, hopefully, is by having more choice in long distance that would drive the long distance rates down.

447   We've all heard in Canada how there's articles out there about our wireless rates than other countries in the world. Anybody looks down south, looks at the U.S. as well. Well, in the U.S. there is no long distance and wireless. As I understand it, pursuant to a Macaw deal when they were sold to AT&T, there was an obligation to provide equal access in wireless back in the '90s and, as that evolved, the entire issue of wireless equal access left and you now have postalized rates throughout the United States, throughout North America.

448   So there is no wireless long distance in the U.S. You pay per minute and you pay for whether you're calling across the street or across the country.

449   We don't have that in Canada, and maybe that's probably one of the reasons why, when you look at a consumer bill, it's deemed to be higher than what it is in the U.S. 'cause people look at a long distance minute and see a huge price.

450   And I actually have the rates for Bell Mobility's one minute unpackaged rate for a long distance call from anywhere to anywhere, from Kingston to Ottawa. It's 45 cents a minute in wireless. It's a hell of a lot cheaper on wireline. And that's a function of the market and a function of how the market's evolved as well.

451   But the regulatory bargain that was struck back 15 years ago was at a different time and a different stage.

452   Right now, what's happened is many of the carriers have benefited by the Bill and Keep regime through standardized agreements, either regulated agreements or non-regulated agreements in the Bill and Keep regime. The consumer hasn't benefited. The consumer is paying very high rates unless he opts for a package with a $15 or $10 drop charge on it.

453   And the question is, should that regulatory bargain be revisited?

454   Long question.

455   MR. DANIELS: So I don't -- I'm not going to argue with every single point you've just made there. I don't think we share your view of the facts at all. I don't -- in terms of rates being higher in Canada, I think -- but I think you've heard from Bell Canada enough and other carriers on this. I think there's some big misnomers.

456   I'm going to put that aside. I'm going to go right to you said you don't have that offer.

457   I do. And when I mean I, me as a customer right now, my Bell Mobility product that I have right now is one rate for all of Canada, whether it's local or long distance. It makes no difference. I have one rate for all of Canada.

458   And so competitive offering, I can choose to take it and I can choose not to take it, so -- and I don't -- I can't speak for everybody else, but I think other wireless carriers have similar offers in the market.

459   So that's an option. For those people who it makes sense to do, they pay and sign up for a plan like I do. I travel a lot between Ottawa and Toronto, and it doesn't make sense to worry about when I'm in Toronto, when I'm in Ottawa in terms of the amount I pay, so for me, I'd much rather have one package that treats it as a national rate. That's what I have.

460   COMMISSIONER KATZ: But you're not the average Canadian.

461   MR. DANIELS: And precisely the point is that because the average Canadian probably saves money by not having that arrangement where they have to pay for long distance across the whole country. It's -- the option's open to them. That's the market. So --

462   COMMISSIONER KATZ: The question's a simple one. Should the regulatory bargain be revisited, or not?

463   MR. DANIELS: So I'm not sure when you described it as regulatory bargain that that's the terminology I'd say. I think there's just the options. And the option for the wireless provider.

464   If you are going to eliminate the obligation for equal access giving wireless guys the ability to directly connect on a Bill and Keep basis, then that equal access obligation should disappear for wireline class. If you're not prepared to do that and you're going to expand it, then I guess we have another proceeding to discuss the merits of whether you should have equal access on mandatory on wireless as well as wireline.

465   I think that would be a mistake, but I -- the key point would be due to competitive equity.

466   And I think you had the regime right. You gave the option to the wireless carriers in '97-8, and I don't think it was a regulatory bargain. It was a choice.

467   COMMISSIONER KATZ: And Bell Mobility as a WSP is benefiting by the Bill and Keep regime without meeting the associated obligations that were imposed upon the CLECs at that time.

468   You're getting the benefit of CLEC through your association with the ILEC because they're integrated, and yet you're not -- you don't have the obligation on the other side to provide consumers with the benefit.

469   MR. DANIELS: You're talking, first of all, of out west because we've covered that that's not the case in our ILEC territory. But yes, so benefit of our CLEC operation just as every other wireless provider either does it with their own operation or someone else.

470   To the extent that we even see today that some of the new entrants come to us and buy WAS, they let us know, "We're buying WAS from you now". And I don't want to be specific, but some of them have told us, "We're buying WAS from you now, but just to let you know, that's just until we get the arrangements set up with the CLEC over there".

471   So unaffiliated, affiliated, signing up, whatever, there's --

472   COMMISSIONER KATZ: You're no different than anybody else.

473   MR. DANIELS: Yeah.

474   COMMISSIONER KATZ: Don't get me wrong. You're all benefiting by the regime that's there today through the relationship that you have either with your own ILEC or with the CLEC.

475   What I'm concerned about is the consumer isn't getting the other side of that regulatory bargain that was instituted 15 years ago; that's all.

476   Those are my questions, Mr. Chairman.

477   THE CHAIRPERSON: Okay. Our other colleagues have questions, but I think it's time for a health break. I'd like to take a 10-minute health break.

--- Upon recessing at 1034

--- Upon resuming at 1052

478   THE CHAIRPERSON: Okay, let's resume.

479   I think, Len, you were finished. So over to you, Candice.

480   COMMISSIONER MOLNAR: Good morning. I do have a couple of questions and I want to begin with just a follow-up to something you said, Mr. Daniels, and perhaps this is obvious but not to me.

481   You had said that you are generally a net payor on bill and keep trunks. Do you understand -- could you explain why, if this is a general phenomenon, why is it that you are normally a payor?

482   MR. DANIELS: Let me do my best to try to explain.

483   Because behind the bill and keep is a notion that overall your traffic should be balanced between the two. Now, we've looked at this internally. As you can imagine, when you see a line like that: We're paying what to who, why? At the senior levels, you have to explain.

484   So I think a high-level explanation as to what we think is responsible for that, number one, because of the regime there's an incentive for carriers to attract business that sends more traffic than -- excuse me, that receives more traffic than sends.

485   For example, there are some CLECs out there -- and this is a unique business -- but some who have focused on what we call toll bypass or dial-up Internet. For example, there was one CLEC that had a particular business on that.

486   So there's -- in terms of going and getting customers who actually would receive one-way calls. So if you had a company, a dial-up ISP, then all of its customers would generally call but the dial-up ISP never calls anyone.

487   So there's probably some of that but I don't think that's the bulk of the explanation. It's certainly a portion of it.

488   Probably the bulk of it has to do with that we as the ILEC, being TDM-based and having TDM interconnection, are able to interconnect with all CLECs wherever their local interconnection region -- like in LIR we have all the arrangements with everybody.

489   Whereas the CLECs, as we are out West, as you build out your business, you decide, well, I'd rather use transiting rather than directly connecting, I'd rather use EAS transport, I'd rather use -- or there's toll.

490   There's a number of situations where as a result of the nature of the market you buy other services to get your calls, and as a result, we generally will always send our traffic to wherever we're sending the traffic on a bill and keep basis.

491   But they'll use a number of different arrangements that may make business sense to them to do it, that may not involve the bill and keep because they can save some money elsewhere and so on.

492   So as a result, we send more traffic down the bill and keep trunk to them than they send to us.

493   We've seen a slight decline in that, but we still buy the bulk of the bill and keep arrangements. And when I say a slight decline, as CLECs build out their networks, the net imbalance payments that we're paying on an annual basis are going down but we still are a major net payor.

494   So I hope I've explained it to you without getting into too much detail, and, you know, because we don't look in an know what the actual minutes themselves are, these are our assumptions as to what we think is going on in the market dynamics.

495   COMMISSIONER MOLNAR: Okay, thanks.

496   It's just a bit surprising, and then if you say if could be caused by EAS or local transit arrangements and so on, they would then be a net payor to you for those trunks.

497   And, you know, there are some parties in this proceeding who would say, why don't we just carry it for efficiency purposes all on the same trunks, you know, it's going to balance out financially and it would be more technically efficient.

498   Would you suggest that might be reasonable or at least something, if you were able to make arrangements in certain circumstances, that that could be reasonable?

499   MR. DANIELS: So I don't want to say that any arrangement would be -- you know, say no in terms of whatever is a reasonable arrangement, but in terms of mandated or what the rules should be, we feel quite the opposite.

500   So a service like transit, which basically does not involve our end users but has a call going from one CLEC to another CLEC in the same LIR, local interconnection region, that call, we are mandated to provide it right now.

501   And so yes, you're correct, we do charge for it but it's a service that has nothing to do with our end user. So of course we should charge for it. It's a service that they can avoid by directly connecting and it's cheaper for them to go through us.

502   We personally think -- or not personally. We as a company believe that that fails the test I was talking about, our forbearance test criteria. That's not a service you should be regulating. So quite the opposite.

503   And coming back, I don't understand why the Commission mandates that in terms of saying that it's part of interconnection in terms of mandating it. But to go to the other extreme and say, oh, you should even have to do it for free. It doesn't involve our customers, so why should we have to do it for free.

504   But yes, coming back to the first question or how it relates to your first question, that's an example of where we ourselves would never have to use a transit arrangement down the bill and keep for that type of call because we would be directly connected with virtually every LEC, almost. We're not with every one, but almost with every LEC -- CLEC in our territory, we're directly connected.

505   COMMISSIONER MOLNAR: So let me ask my question maybe more clearly.

506   There are mandated services, and I understand your position that don't touch, it's working and networks have been configured and so on.

507   But would there be anything that would prohibit you in a situation where you are paying for the bill and keep and somebody else is paying for transit or EAS or whatever it might be, where you're both doing quite a bit of work to come to a net sum game, would there be anything today that would prohibit you from coming up to an alternate arrangement such as throwing it all on bill and keep?

508   MR. DANIELS: From a regulatory perspective today, yes, because we are not allowed to go off tariff. So we take that as we're not allowed to make these other types of arrangements.

509   You can in your MALI and have an arrangement -- from a technical interconnection perspective, have a different one.

510   But as we understand the rule today, you are not allowed to make a different financial arrangement, something different from the tariff, by just filing an agreement in the MALI. That's at least our understanding of what the rules are today.

511   We don't believe that should be the rule. We believe very clearly that parties should be encouraged to negotiate and make their own arrangements, whether it be the arrangement that you're talking about.

512   It may make a lot of sense to do that if there's other things that are being offered, if we're consolidating interconnection, anything that would make sense to both parties and work from a technical perspective.

513   So that's why we believe that -- when we say don't make any changes today, the most fundamental change that we're actually asking for is to allow off-tariff arrangements. So I think that it's not correct to say we don't ask for a change. The biggest change we're asking for is go allow us to make the deals, go allow us, but we're saying you don't have to change any of the existing tariff rules as a result of that.

514   THE CHAIRPERSON: So keep the tariff as a fallback?

515   MR. DANIELS: Absolutely.

516   COMMISSIONER MOLNAR: Okay, thank you.

517   I want to move on to the issue of IP-to-IP interconnection.

518   You pointed out that one of the potential areas where it might make sense is where you would have fibre-to-the-home and offer retail IP-based access services, and I can't help but looking at your partner here, Mr. Daniels, you know, Mr. Henry, you folks have put in a lot of fibre-to-the-home. I remember a tariff filing which suggests you do have a retail IP-based access service.

519   Have you looked at any type of IP-to-IP arrangements within your serving territory?

520   MR. HENRY: Well, let me put it in perspective. As far advanced as we are, and we probably are the most advanced carrier in the country in terms of fibre-to-the-home, but still only brings us -- when Jonathan said 1-2 percent, I think for Bell Canada it was 1 percent, for Bell Aliant it's 2 percent of our traffic is -- our voice traffic is IP.

521   We plan to cover 600,000 homes by the end of next year and we're well into that. We're probably over 400,000 now. But that's still only a quarter of our footprint, and of that quarter of our footprint, it's still only homes past. So you still have to get people to buy your service and in the early years that's slow going and slow penetration.

522   And then you have to -- we are only just now converting them to VoIP because originally the fibre was used for TV and Internet, but the voice was still on copper. So they're only now just converting to VoIP those few customers.

523   And then there's still obviously primarily still calling TDM customers. So it's still on an originating basis. It's still -- even with all the billions of dollars that we're putting into this, it's still only a very, very small portion.

524   COMMISSIONER MOLNAR: Fair enough, but I am thinking -- I mean you have centred on or gone first to the major centres and there are CLECs within those centres who are IP-based as well. So there may be a time in the not-so-distant future where it would be economical for you, as well as the parties you interconnect to, to move to an IP-based interconnection.

525   Is there anything today that would prohibit you from putting in that IP interconnection arrangement?

526   Let's say, you know, EastLink in Halifax -- just I throw it out -- I assume they're IP-based in Halifax, and if you're within that LIR and you have IP-based traffic and you want to share it, is there something today that would prohibit that from going forward?

527   MR. DANIELS: Could you just give me one second because I want to answer in terms of is there a regulatory rule on that? Because we had some discussion and I've got to remember where we landed on this. So give me one second here.

--- Pause

528   MR. DANIELS: Okay. So the answer to this question is we think there may be -- may be -- a regulatory issue today that prevents it, which certainly, as an outcome of this proceeding, could clarify that because I think everyone is in favour of at least having the option. We can argue whether it should be mandated, but everyone -- the option.

529   The way the MALI arrangement works today is there's a requirement in the MALI itself that says that you have to measure imbalance on a circuit-switched basis. And so it's an open question to me.

530   I probably would have given you the view that that's a financial arrangement and probably you can't -- it's something you just file as per the forbearance order and change it if the two parties agree to.

531   But we've seen in this proceeding other parties seem to be suggesting that there's IP interconnections going on on the local side today. So some other parties may take the interpretation that they can amend the MALI and file that with the Commission and get approval for it.

532   But we haven't done that and so I think as a minimum we would all agree in this room that it should be -- you know, there should be no hindrance to it. So we would support making it very clear that you should be allowed to do that.

533   Whether you can to it today or not, that's why I'm saying there's -- I think we've viewed the rules until we saw other people's interrogatories that you couldn't today for local.

534   MR. HENRY: And as to our willingness to do that, obviously we would be the first ones who are -- we would be delighted if we're able to roll out fibre so fast and the take-up is so fast and the volumes are so large that it makes sense. But right now, we're not there.

535   COMMISSIONER MOLNAR: Fair enough.

536   How about from a technical perspective?

537   MR. DANIELS: For that I am going to hand you over to Martin to give you a sense in terms of some of the things.

538   As you know, and we made reference already earlier, it is happening today, but in terms of a standardized version, some of the things that would need to be resolved with CISC.

539   So, Martin.

540   MR. CULLUM: There's two aspects.

541   If we're talking about a mandated IP outcome, then we would be clearly looking towards CISC to be able to start working with the industry on defining the rules of engagement, all of the planning and provisioning guidelines associated with an IP interconnection facility.

542   On top of that, there would then be the development of the technologies to allow that to take place, the associated architecture, where will be the point of interconnection, will it follow the same architecture that we have today or will it be different.

543   And then from there, once the architecture and the technologies have been developed, I would foresee there to be trials to validate all of the systems and architecture deployments that would then precede a production rollout.

544   COMMISSIONER MOLNAR: So if it is not mandated, does that change your requirements and timelines?

545   MR. CULLUM: Very much so. If it's non-mandated and we let the market forces and the business opportunities to allow carriers to connect, then it would be very focused deployments that would be based on the mutual benefits of the carriers that are connecting, similar to what we've seen today with different mobile carriers that have connected at IP.

546   COMMISSIONER MOLNAR: In your view, are there any issues when we're talking IP-to-IP interconnection on any of the public safety or other services? And, you know, I think for example of 9-1-1 or anything like that.

547   On a commercial basis, if you're dealing with this, do you feel confident that those would all be addressed or is that something that needs to be addressed as an industry?

--- Pause

548   MR. CULLUM: So to answer your question specifically, no, there would not be any consumer impacts to being able to take advantage of the 9-1-1 services that are out there today.

549   COMMISSIONER MOLNAR: Okay, thanks.

550   I want to move on to the issue of wireless interconnection. Just to ensure I understand, you said that Bell Mobility uses the WAS service in Bell Aliant's territory; is that correct?

551   MR. HENRY: Yes.


553   Would it be true to say that the WAS service would be a less technically efficient form of interconnection than interconnecting through a CLEC arrangement where you would interconnect at an LIR versus within each local calling area?

--- Pause

554   MR. CULLUM: Maybe could you just clarify the question and why you think it would be less technical?

555   COMMISSIONER MOLNAR: Okay, fair enough.

556   As I understand, the wireless access service, it requires a connection within each local calling area, so you would have dedicated -- and it's a tariffed service, as I understand.

557   So I mean you would have dedicated circuits within each local calling area that are dedicated to the mobility service, versus if you're interconnecting through a CLEC arrangement, you're basically flowing the traffic through the bill and keep and then it's flowing through the regular network on the regular circuits.

558   If I'm wrong, just tell me. It just seemed to me that it would be more efficient to be handing it off and letting it terminate, you know, within the regular ILEC network, which is optimized, I would think, for efficiency, instead of having any kind of dedicated circuits.

559   MR. DANIELS: But I think the connection between Bell Mobility or the wireless service provider and the CLEC is still there.

560   So in your -- your suggestion is that you're going to get a benefit by delivering it from the wireless provider -- and correct me, keep me honest here, Martin.

561   But I think what you're suggesting is by going from the wireless service provider to the LEC, that the LEC can merge it with its other local traffic and send it to the ILEC down the bill and keep. Isn't that a better arrangement, I think is the nature of your question.

562   COMMISSIONER MOLNAR: I'm just talking technically, is it -- you know, is it more efficient, not from a business perspective.

563   MR. DANIELS: No, no, no. I appreciate you're just talking from the technical because of this.

564   But it happens when there is still a connection between the wireless service provider and a LEC; it may be a CLEC in that case. But there is still that arrangement that's still dedicated between the wireless service provider and a LEC.

565   Then when you get into are the LIRs bigger or smaller, and I know that's not the nature of your question but it also goes to this issue as to what's better, I mean they are not the same boundaries, right?

566   So, sometimes LIRs are -- so there may be more interconnections, less interconnections depending because the local calling area could actually be larger than the LIR. So you can have less interconnection there.

567   I mean I think what happens is each WSP makes that determination as to what makes sense. So I don't think there is a WSP that probably is 100 percent using one or 100 percent using the other. They are using WAS in some places when most of the places they are using the CLEC arrangement.

568   COMMISSIONER MOLNAR: Okay. Well, thanks for that because I assumed that it was possibly or that it would be more technically efficient for the WSP to carry the traffic through a local interconnection arrangement versus the WAS tariff. So if that's not the case --

569   MR. DANIELS: Just so I am clear, like, the way it works is that when you are asking about the wireless service provider connecting to a LEC and then the LEC sending it to the ILEC, because that's what I'm -- I guess I'm trying to say is that in -- or are you talking about an arrangement where the wireless service provider becomes a LEC in of itself so that all of its traffic only has one point of interconnection to the ILEC?

570   COMMISSIONER MOLNAR: I don't understand why that would matter.

571   MR. DANIELS: Well, because it's either two connections or one.

572   COMMISSIONER MOLNAR: Oh, exactly. No, I know.

573   But from the point of local connect/interconnection out it shouldn't matter. I do understand that there is an issue by going through a CLEC that you have created another point of interconnection to carry that traffic.

574   MR. DANIELS: So, I guess, when you were asking if it's technically more efficient, were you asking that from us as the ILEC or I was thinking on answering your question as us as the wireless service provider which would have -- and potentially --

575   COMMISSIONER MOLNAR: Yeah, I was asking as the wireless --

576   MR. DANIELS: But if you're looking at strictly from a --

577   COMMISSIONER MOLNAR: -- service provider.

578   MR. DANIELS: Well, then there is debatable points because you would have to go two connections on that as opposed to one where you go directly with the WAS service.


580   Also, just so I understand, you said that outside of the Bell Canada territory which includes Bell Aliant, you generally will interconnect -- Bell Mobility will interconnect through Bell, the CLEC?

581   So Bell, the CLEC, do you offer arrangements to other WSPs?

582   MR. DANIELS: We do. That, I believe, is the undertaking I gave to the Chairman this morning, was to provide the details as to -- because I think what you are looking for from the Chairman's question perhaps is where are those revenues gone from the last? Where is that traffic gone? And I was saying we do it out west.

583   So yes, we; Bell, have offered and do offer. Then we will provide the details of the extent of it in confidence to the Commission as part of an undertaking as to what Bell West, what I'm going to call Bell West -- and we don't use that term anymore but to make it simple -- what arrangements we have had and have right now for providing that service to others. And I'm not talking Bell Mobility because I appreciate you are really focused on other CLECs -- sorry, other WSPs.

584   COMMISSIONER MOLNAR: Okay. And for Bell Mobility, if you are not interconnected through your CLEC operations, you are using the WAS tariff anywhere?

--- Pause

585   MR. DANIELS: I had better take an undertaking on this because I don't -- we are not 100 percent sure. So if I could provide an undertaking to give a response and that way we can, one, be correct and, two, probably give you the particulars of whatever it is in and terms.

586   So just so I'm clear about the question, you are asking as Bell Mobility outside of Bell Aliant and Bell Canada territory but where we don't do we use anyone else as a CLEC? Do we use a different CLEC to terminate our traffic or do we always buy WAS under the ILEC tariff. That's the question?

587   COMMISSIONER MOLNAR: That is the question. My question, essentially, do you use any other CLECs or any other types of arrangements outside of the WAS?

588   MR. DANIELS: Okay. So I will undertake to give you the answer to that. We don't know it right here.


589   COMMISSIONER MOLNAR: Okay, thanks.

590   Those are my questions.

591   THE CHAIRPERSON: Why don't you do that when you are doing the reply phase next week?

592   MR. DANIELS: I'm sorry?

593   THE CHAIRPERSON: Why don't you give that answer in reply phase next week?

594   MR. DANIELS: Okay.

595   THE CHAIRPERSON: Suzanne?

596   COMMISSIONER LAMARRE: Merci, Monsieur le Président. Good morning.

597   Just a couple of points of clarification. I am actually only going to talk about the possibility of forbearing from regulation, wireless access service.

598   So taking you to paragraph 31 of your presentation you do state that:

"We, [the Bell Companies] think it is appropriate that forbearance be granted for WAS where at least one CLEC is operating in a [local interconnection region]."

599   Now, to be clear, would that be irrelevant of the size of the CLEC in terms of number of subscribers or of the size of its footprint?

600   MR. HENRY: Yes.

601   COMMISSIONER LAMARRE: Okay. That's clear.

602   Okay. Taking you to paragraph 34 where we talk about the issue -- where you talk about what the issue may be for a small ILEC. Now, you point and you may have to correct me if I'm wrong here -- so do so gently -- at the end of paragraph 33 you say:

"...WSPs are not allowed to send us toll traffic with WAS service, so there's no issue here relating to the SILEC toll regime."

603   My understanding is that this prohibition is actually part of the current traffic. Am I correct?

604   MR. DANIELS: This prohibition is part of -- I'm not sure what you mean by that question.

605   COMMISSIONER LAMARRE: Well, currently, this is regulated, right?

606   MR. DANIELS: WAS -- our WAS service, yes.

607   COMMISSIONER LAMARRE: Is regulated?

608   MR. DANIELS: That's right.

609   COMMISSIONER LAMARRE: So the fact that toll traffic cannot go through the WAS service is part of the tariff?

610   MR. DANIELS: Yes.


612   MR. DANIELS: Are you suggesting if we have off-tariff would we be able to avoid that? Is that where --

613   COMMISSIONER LAMARRE: Well, my point is it may be an issue if you are talking about forbearing the WAS. Then that prohibition is not there anymore, so it becomes an issue for SILECs.

614   MR. DANIELS: Okay, so let's -- a valid point. I hadn't thought of that one so let me quickly suggest two remedies.

615   One is forbearance under section 24 condition because you can always preserve a condition and saying you are still not allowed to send tolls down that. So that's number one.

616   The real long term solution -- I know it's not part of this proceeding but we, along with the JTF, propose the toll regime for the SILECs has these huge subsidies and we have gotten away from having subsidies on a permanent basis. It really should be part of the contribution regime that's before you, another proceeding to make that determination.

617   That's really the long term solution.

618   But in terms of -- we are very much interested. In fact, we were the ones who applied to the CRTC to try to enforce and stop this tariff that if there is any leakage of toll traffic going down our interconnection regimes delivering it to the SILECs, we are not interested in passing that off.

619   We don't think that should be allowed and we think you could have a forbearance requirement under section 24 which makes it clear until you guys change the rules for contribution purposes and move it to contribution which is where we think it should be. Until that of if that never happens you should still not allow that.

620   I think you have got -- you have the power to do that with a section 24 condition that you can tie towards the forbearance.

621   COMMISSIONER LAMARRE: And you would agree that we use that power if we were to forbear the WAS?

622   MR. DANIELS: Absolutely you would need to.


624   No other questions.

625   THE CHAIRPERSON: Thank you.

626   Tim?

627   COMMISSIONER DENTON: Good morning, gentlemen.

628   The thing that I am really interested to know is, you pointed out in your paragraph 6 that 75 percent of your circuitry is still or your machinery is still circuit-switched and that obviously you are moving to fibre-to-the-home as rapidly as you can.

629   Are you able to give any projections of -- reasonable projections as to when, say, this transition away from TDM to IP will be complete, 95 percent complete for example?

630   MR. DANIELS: Let me first answer in terms of just clarifying because I guess we are not clear enough.

631   Our 75 percent figure there, first of all, is not Bell. It's across the country and there we are just counting mass.


633   MR. DANIELS: Okay. So this is -- just it's not our circuitry for example, because I don't even know if we have a number that could count the amount of circuits that are IP and if you start to do that you would pick up all of our data stuff, and so on.

634   So I just want to be clear of that figure.

635   But as to your question do we have any projected timeline as to what percentage of customers when we will have 95 percent of them on VoIP -- because I think that's what you are asking -- I don't have a figure for you to provide you on that.

636   What I can say is that wireless, I think, is going to happen pretty quickly, you know, wireless. But in terms of fibre-to-the-home it's going to take some time before you get to the point where the vast majority of our customers would be on --


638   MR. DANIELS: Pardon?


640   MR. DANIELS: Like I am not going to make up a number for you here because it's going to be meaningless.

641   COMMISSIONER DENTON: How cautious of you, sir. How cautious.

--- Laughter

642   COMMISSIONER DENTON: One of the things you pointed in paragraph 10 is that you say:

"The ability to enable IP retail services over [fibre-to-the-home] will encourage us to enter into IP interconnections. But, the reverse is not true. This point bears repeating. Mandating IP interconnection will not speed up the roll out or adoption of end-user IP services."

643   Perfectly true, as far as it goes. But would not mandating IP interconnection be part of the process that would enable -- increase the utility of such IP as already exists?

644   MR. DANIELS: I really don't believe that's the case. And I guess that's our message to you.

645   COMMISSIONER DENTON: Why don't you?

646   MR. DANIELS: Because ultimately, if we have a business case that we want to have our end-users have IP to provide a new service or something like that -- and I really -- I talked about it as a new service because again, today, those who are doing VoIP are not providing any new services per se that can't be passed off to our customers that we have seen on a mass market basis.

647   But in the future if there are some new services that we want to offer, then we are going to want to have those IP interconnections at least for those customers so that it can work. Until we have that and until that happens, it just -- whether we have IP interconnection or not, it's not like we are going to go "Oh, good, we can do this because we have the IP interconnection. Oh, we can't do it because we don't have IP interconnection".

648   I mean if there is a business case to do it -- and keep in mind this is a business case for us being able to provide a service that works with other networks, with other carriers who are already having that also have to provide that service in the retail market, of course we are quickly going to make an IP interconnection arrangement to make sure it happens.

649   COMMISSIONER DENTON: So the principle driver then is the rate of the deployment of fibre-to-the-home, is that correct?

650   MR. DANIELS: In terms of on our wireline side.


652   MR. DANIELS: In terms of bringing out VoIP, yes.

653   Although I did say at the beginning, we probably do have the capability today of providing VoIP to the vast majority of our customers over fibre-to-the-node for example and so on, on our broadband network. It's technically possible. It technically can work.

654   There is just no business case to do it because there is no extra special feature functionality. If there is some extra special feature functionality that would justify us doing it, then we would --

655   COMMISSIONER DENTON: I get that --

656   MR. DANIELS: -- we wouldn't have to wait for fibre-to-the-home.

657   COMMISSIONER DENTON: Circuit switching works perfectly for what it was designed to do.

658   MR. DANIELS: Exactly, and that's all that's in the market today, but if there was new service or something.

659   So we are saying that fibre-to-the-home is the main thing that's going to push it out. But that doesn't mean that it's only when fibre-to-the-home is everywhere.

660   Because if there is a new feature or functionality that would make sense like HD -- I'm making it up, but HD video telephony -- if that was -- you know, Rogers was deploying it everywhere and Videotron was deploying it everywhere and Cogeco is deploying it everywhere; the CLECs were deploying it everywhere, and we were deploying fibre-to-the-home and then we felt, hey, we need it in areas where we don't have fibre-to-the-home. We could look at doing that with our fibre-to-the-node.

661   And we would still do -- and then of course we would want IP interconnection so our customers could do it with Rogers' customers.


663   Just in the -- I may be repeating a question in some measure that Candice asked for an engagement.

664   I just wanted to say that the specification of what we are looking for is that Bell Mobility has -- may have negotiated interconnection arrangements that are not WAS and what we are looking for is, if so what are those arrangements, where has it negotiated them in Ontario and points east?

665   So as part of your response, what we are looking for is the negotiated interconnection arrangements that Bell Mobility may have made that are not WAS anywhere it is operating, including Ontario and points east.

666   MR. DANIELS: Just to be clear, on Ontario and points east in terms of on the ILEC side, we are very clear. There are no arrangements. It's all WAS. So it may be different from wireless to wireless is what we said.

667   And then when you go west from Ontario, so where we are not an ILEC those -- that's what I took an undertaking to provide.


669   MR. DANIELS: But I can answer you very clearly today that you know other than the SILEC arrangements which is -- just it's still Bell Mobility --

670   COMMISSIONER DENTON: The answer is, no, there is no such thing. I got it.

671   Good, thanks very much.

672   Mr. Chairman, those are my questions.

673   THE CHAIRPERSON: Okay. Thank you very much.

674   We went a bit over time but we always do that with the first questions. So we will have more questions for you next phase.

675   Let's take a very short break while SaskTel sets itself up. Thank you.

--- Upon recessing at 1129

--- Upon resuming at 1132

676   THE SECRETARY: Before beginning, I would like to just go over the exhibits to make sure that everyone understands how they have been numbered.

677   The first one, "Summary of Competitive Local Exchange Carriers" has been named Exhibit 1.

678   The second which was the chart with the red box and the arrow in the middle, "Wireless Interconnection" has been named 2A.

679   The next one has got the two blue boxes that starts "CLEC with wireless affiliates" has been named 2B.

680   The Rogers' proposal with the blue box has been named 3A.

681   And, finally, the JTF proposal has been named 3B.

682   Thank you.

683   We will now hear the presentation by Saskatchewan Telecommunications. Please introduce yourselves for the record, after which you will have 30 minutes -- pardon me -- 20 minutes for your presentation.

684   Thank you.


685   MR. HERSCHE: Good morning. My name is Bob Hersche and I am the Director of Regulatory Affairs for SaskTel.

686   With me today I have Doug Grant from our Network Planning Division and Andrew McKay, who is also from our Regulatory Affairs Division.

687   Mr. Chairman, Commissioners, I would like to thank you for the opportunity to appear before you today.

688   SaskTel comes before you today with a slightly different perspective on questions being discussed in this hearing. We are by far the smallest major ILEC in Canada but, like most other telecommunications companies, we are trying to rebuild and modernize our network from the ground up.

689   We are attempting to keep pace with several critical challenges including 5 percent per week growth in data usage on our 4G network, the need to develop our next LTE cellular overlay network and the start of our fibre-to-the-home initiative.

690   All of these capital intensive activities are driving us unalterably to the eventual end-state of a completely IP network.

691   Given the overall size of these initiatives, the fact that we have intensive competition in all of our urban areas and we remain the service provider of last resort for deep rural and northern areas, SaskTel cannot afford to launch unproven technologies.

692   Nor can we afford to pay the cost for our competitors to connect to our network before we are reasonably and economically able to accommodate them, especially when such accommodation may result in lower levels of service to our customer because the competitors happen to use "bleeding edge" technology.

693   Competitors will come before you and ask you to mandate the ILECs to connect with them using IP interconnections which have not yet been standardized and doing so at the ILECs' expense.

694   For Saskatchewan consumers this would mean lower grades of service on some calls because of the use of non-standard technologies, and increased costs to SaskTel to subsidize competitors, costs which we would have to look at passing on to people of Saskatchewan. We do not think our customers would be happy in either case. Please allow me to explain.

695   We believe that there are really three questions central to this proceeding:

696   Whether there is need for a new IP to IP interconnection regime at this time;

697   Whether there should be changes made to the current interconnection regime until the industry moves to IP; and lastly,

698   Whether the ILECs should be required to pay for all interconnection.

699   In our view, the answer to all of these questions is "no".

700   All SaskTel's major infrastructure investments and the technology path we see before, prove that we believe IP transport and interconnection is the way of the future. There is no evidence that, as one participant in this hearing claimed, we are trying to stand in the way of progress by keeping TDM switch networks as long as possible.

701   SaskTel has already announced that we are putting hundreds of millions of dollars into IP networks. However, this is a technology evolution and simply cannot be implemented overnight or by some Commission-mandated date.

702   As you are aware, we do interconnect a limited amount of voice traffic on an IP to IP basis. We are only able to do this because we use exactly the same IP standards, protocols and, most importantly, vendors to deliver the service.

703   However, the vast majority of traffic in our network, and in Canada in general, remains based on TDM. SaskTel and any ILEC cannot be expected to reorganize and retool its entire network just because an alternate carrier has decided to that it will enter the marketplace at this time with only an IP solution.

704   In creating their business case for their technology platforms they knew the state of Canadian network and should not expect that an ILEC will compensate them for their business decisions.

705   Companies such as Cogeco have proposed that all companies using IP technology in their networks be required to implement IP to IP interconnections when requested by another carrier.

706   And Rogers has called for all Canadian carriers to adopt a specific CISC SIP protocol and specific IP to IP interconnection guidelines.

707   SaskTel notes that the phrasing used by Cogeco of "all companies using IP technology in their networks" is incredibly broad and inappropriate. The fact that a company uses some IP technology somewhere within their network does not mean that that company is prepared to interconnect on an IP basis.

708   Even if such language were improved, SaskTel does not believe the Commission should mandate IP interconnection at this time, given that we do not fully know at this time the technical requirements of IP to IP interconnection, voice billing principles cannot yet be determined.

709   The Commission should continue to rely on the market and the results of negotiations between parties to effect a gradual transition to IP.

710   Some may suggest that the protocols and guidelines cited by Rogers and others mean we do know the technical requirements of IP interconnection. However, in SaskTel's opinion, interconnection based on those protocols would produce a suboptimal customer experience.

711   SaskTel, in preparation for its fibre-to-the-home initiative, has found that without a TDM workaround a straight IP service does not provide voice services in the manner our customers have come to expect. Specifically, issues have been encountered in the provision of call waiting, selective call accept, 911 call control, and various components of our voicemail service.

712   We have also found that certain services which you have mandated to stimulate competition, such as local number portability and equal access to competitive IXCs still do not meet today's standards when provided over IP.

713   To mandate an IP regime today without considering all of the attributes of the current switch network would in fact minimize toll competition by diminishing equal access.

714   To us, this demonstrates the lack of readiness of IP for use throughout Canada's voice network.

715   Will all of these services eventually work? Of course. We would not be in this field if we did not believe in the ability of technology to eventually solve challenges. What we do not know is when these challenges will be solved, and we do not want to embed technology within our entire system only to find that it does not meet the PSTN standards.

716   For all of these reasons, SaskTel believes that it would not be appropriate at this time to set mandatory implementation timeframes. Standards are still in the state of flux, interconnection protocols need to be standardized and the vast majority of traffic and connections remains in a non-IP state.

717   Should another company connect with us via IP, even using the CISC recommend SIP protocol, voice calls would get through, but it would be impossible for us to guarantee that the features would work in the same way as they had planned.

718   Unfortunately for the end-user or the end-customer, this would translate into finger pointing between companies and a poor customer experience.

719   Having said this, if SaskTel has IP interconnection available at a specific point of interconnection, we will gladly negotiate interconnecting on an IP to IP basis where it is practical with the explicit understanding in any contract that the interconnection may not work for all features and all customers and with a rate which recognizes the risk of implementing technological solutions which may be obsolete once final standards are determined.

720   We firmly believe that the entire industry will eventually and organically migrate to IP over time. The FCC in the United States is trying to grapple with a set date for all of this to come about. Unfortunately, they are finding that the PSTN and the internet are both great networks, but they were built on different premises with different internal priorities and different functionality.

721   Regulation should not demand the use of a given technology until it is proven to be as rock solid for the consumer, as has been the case with the existing PSTN. This is not the case for IP-based voice service.

722   CISC should continue its work and review all aspects of an IP interconnection regime with a view to developing full consensus on these matters. CISC should also ensure that these protocols are supported outside of Canadian borders. We cannot and should not see ourselves as an island as we change the basic precepts of our network.

723   Further, as more and more traffic migrates organically to such arrangements, the significance of the existing interconnection regimes will decline naturally. As IP technology becomes more preeminent legacy interconnections will be phased out. We urge the Commission to allow the market to take its course and not choose specific technologies and protocols.

724   In summary, SaskTel believes that the Commission should instruct CISC to continue its work on defining the standards of Canadian IP to IP interconnection regime.

725   Forcing conversion to an IP regime before a majority of traffic is being handled in this manner will only increase costs to the industry due to potential rework and bleeding edge technology lessons. Unfortunately, these costs will be borne by the customers. Premature adoption of IP due to a Commission mandate will only result in loss of customer functionality as the various network interfaces face technological growing pains.

726   In addition, some of the participants in this hearing have taken the opportunity to use the IP to IP debate to argue for a reduction of their obligations as a telecommunications carrier or to move more of the costs of interconnection to the ILEC. There are a number of aspects to these requests.

727   First, it has been suggested that IP to IP interconnection for voice service should be modelled on the peering of data traffic between ISPs.

728   SaskTel wishes to stress the difference between internet traffic peering and voice interconnection as they exist today. Voice interconnections are made between two companies with clearly defined and understood technical specifications, a high level of reliability and compensation between the parties in the event that one party is attaining the majority of the benefit from the interconnection.

729   Internet peering, on the other hand, is done on a best-efforts basis. Using this model for peering Voice IP data traffic would not be appropriate. Voice traffic requires more than just best efforts.

730   Those that confuse IP with the public internet also suggest that the points of interconnection should be public peering locations in order to keep costs as low as possible for the competitor. This is a very Toronto-centric view of the world. SaskTel believes that default public peering POIs would not only add additional costs to the interconnection, but it would also add a level of uncertainty to the quality of the IP's voice interconnection.

731   Such a centralized peering model would have an impact on packet loss, latency and jitter due to the vast distances and, most importantly, due to the number of IP nodes employed along that path between two interconnecting parties.

732   In SaskTel's case the nearest Canadian public peering point is either 2,000 kilometres away in Toronto or somewhat closer at 1,700 kilometres if we go to Vancouver. Depending on where the other interconnecting party is located, there could potentially be another 2,000 kilometres for the signal to reach the peering location.

733   Such a vast distance may contain a number of IP nodes, and the use of a large number of IP notes could lead to delay exceeding the maximum 150 milliseconds, thus resulting in a substandard audio signal which would negatively impact the customer experience for end-users of both SaskTel and the competitor.

734   Further complicating the issue, current ISP peering models measure only the IP packet traffic exchanged between parties and do not concern themselves with the application being delivered by those packets; voice in this case.

735   Because Voice IP packets do not identify which party originated the call, and because for any given voice call the data flow between service providers would be roughly equivalent. It is not possible to measure just the IP packets for a given voice call and also not possible to use this data to calculate and bill for traffic imbalances.

736   Therefore, service providers originating more voice traffic would be clear beneficiaries of these arrangements unless an imbalance compensation arrangement is devised.

737   The amount of voice originating from a carrier is a clear indicator of the benefit that carrier is obtaining from the interconnection since, with the exception of toll-free calling, they bill their end-users for this traffic.

738   It is only fair that those who benefit most from an interconnection arrangement should pay more of the costs which are caused by that traffic.

739   SaskTel submits that the POIs should remain at the LIR level and that IP to IP interconnection, when it is implemented, should be based on peer to peer interconnection and not on third party public exchanges.

740   This type of interconnection should not be an arduous requirement in Saskatchewan, there are only eight LIRs in the 660,000 square kilometres of the province, and it is necessary in order to guarantee that the quality of voice interconnection exceeds that of the public internet.

741   On some of the CLEC obligations, it has also been suggested that existing interconnection regimes in the public switched network should be changed to either shift the cost of the ILEC or relieve certain competitors from the essential obligations associated with becoming a CLEC. These arguments for the reduction in costs and obligations for specific companies has taken a variety forms.

742   The most common theme would seem to be the suggestion that wireless service providers should not be treated as a customer of the ILECs just because they have a different network topology. The principle of technological and competitive neutrality is usually used in conjunction with this argument.

743   SaskTel agrees with the principle of equal treatment of carriers regardless of technology or their category. What is often not associated with is argument for special treatment of wireless services providers are the responsibilities that go with the delivery of service.

744   SaskTel believes that should parties be granted co-carrier status, they should indeed be co-carriers or CLECs, and that they should be required to fulfil all of the obligations that come with such status as well as participating in the benefits of being a carrier.

745   We would point out that these obligations have not proven to be extraordinarily onerous for wireless service providers wishing to connect as co-carriers. Rogers, through their Fido brand, is a wireless CLEC in Saskatchewan, is treated as a co-carrier and fulfils their obligations as a CLEC.

746   Newer entrants wishing to enter the market should not be given equal standing just because they find that meeting some of the obligations, such as equal access, is not included in their business plan.

747   The Commission has found that these obligations are indeed appropriate. And the exist of unique benefits to obtaining CLEC status is the only tool you have to ensure that carriers assume the obligations.

748   Should, however, the Commission deem it appropriate to lift certain obligations for wireless service providers and yet allow those wireless service providers to take advantage of a favourable interconnection pricing regime, then regulatory symmetry requires that those obligations be lifted for all, including ILECs.

749   It is our belief that lifting these obligations at this time would not be in the best interest of customers regardless of the technology used for the delivery of voice services.

750   Another major theme is that traditional compensation models should be changed to have ILECs convert IP traffic to TDM at their expense or otherwise pay to accommodate any type of external connection.

751   In SaskTel's opinion, we or any ILEC should not be required to pay for equipment which is not part of or essential to our network. In other words, the company or competitor who would be the prime beneficiary of interconnection should pay for the cost of interconnection proportionate to that benefit.

752   SaskTel as an incumbent does not have the capacity to replicate the technology of every company who wishes to interconnect. Our technology, which is for the time being TDM-based, is known. Our technology path and eventual conversion IP is also known. In the principle of fairness alone SaskTel should not be required to supplement the business plans of others.

753   Lastly, should the Commission not change the status of wireless service providers or provide for more amenable interconnection costing, some companies have asked the ILECs to re-cost the rates to attach to the PSTN. This would not be a valuable use of the scarce resources of either the industry or the Commission. Undertaking a new costing exercise for the older interconnection regimes would have little benefit to the telecommunications system or to the marketplace.

754   By the time a full re-costing was completed and the results approved by the Commission, IP would in all probability be the predominant mode of interconnection. And in the case of SaskTel, the exercise of re-costing certain components of these regimes would require expenditures which in all probability would be larger than the funds exchanged in the act of interconnection itself.

755   When the marketplace is already going to take care of an issue, why force companies to essentially waste money and time in looking at historical issues?

756   The Commission should look to interconnection models of the future rather than wasting cycles re-examining the models of the past.

757   In the future, SaskTel believes that it is not yet time to mandate the use of IP interconnections when the majority of customers in Canada are served by TDM. We question the wisdom of introducing regulation mandating a technology which, at the present time, cannot serve the needs of the majority of the customers.

758   We understand that when competition was first introduced ILECs were hobbled because they had a head start. As we move to an IP world, that head-start philosophy is over. We recognize that IP is the way of the future, but we have an entire network based on TDM which we must manage and change.

759   As we change our network more customers will gradually be served by IP. As IP interconnections are made available on our network and the technology is hardened, it will be to our own best interest to negotiate IP interconnections.

760   There would seem to be little need for a rule mandating IP interconnection when it will just happen naturally.

761   In conclusion, SaskTel would like to make our response to the questions raised by the Commission in its organization and conduct letter.

762   We do not believe the natural evolution from circuit switch to IP interconnection facilities requires regulatory intervention.

763   We do believe the transition to IP-based network interconnection should be commercially driven.

764   We do not believe that the Commission must forbear from the regulation of traditional network interconnection for voice services at this time. However, we also do not believe the Commission needs to impose regulation on IP to IP network interconnection for voice services. In other words, consideration should be given to an evolutionary regime.

765   The current regulatory structure for circuit-based would be grandfathered and the Commission would allow market-based negotiations between parties to establish IP to IP network interconnection for voice services.

766   We believe that IP technology is too immature to be regulated, and that as this technology matures the market will create enough interconnection options to discipline service providers.

767   The Commission should only intervene if there is evidence of market failure at some future date. We do not believe that wireless carriers should be treated as equal carriers with the ILECs and, therefore, be entitled to cost-shared interconnection with bill and keep unless those wireless carriers meet the obligations of a LEC.

768   We do not believe that any additional measures need to be taken to ensure that wireless carriers have the same benefits and obligations regardless of whether they are independent or part of a vertically integrated telecommunications entity. There are options in the marketplace.

769   We agree with Bell Canada, that it would be appropriate for the Commission to forbear from regulating wireless access service in a LIR where a CLEC is operating within that LIR.

770   We have no SILECs operating in our territory, and we offer no opinion on whether the existing rules should be modified to require wireless carriers in small ILEC territories to establish direct network interconnection arrangements.

771   In summary, SaskTel submits that the existing regulatory regime for interconnection should not be consolidated into one regime. The existing framework continues to deal with a variety of companies existing in the marketplace. IXCs, wireless service providers, CLECs, and ILECs today co-exist and create a robust competitive network.

772   While each cites a range of irritants or attempts to reduce overhead costs by avoiding obligations, SaskTel sees no evidence of market failure which would justify imposing a new single regime under the banner of IP.

773   The IP network and the technology itself are not ready for an IP interconnection regime. IP technology is in the state of rapid evolution. Simply put, IP is has not proven itself that it is a total nor adequate replacement for TDM.

774   As IP evolves, it will surely demonstrate that it is able to meet the expectations of our customers and our competitors. However, insistence by an interconnecting carrier on the use of IP may require the unplanned and unneeded advancement of expensive upgrades which go beyond the ability of a small incumbent, such as SaskTel, to respond in a timely or an economically efficient manner.

775   In closing, we ask the Commission to recognize that the market is working, and to allow it to continue to work without imposing technology guidelines, which in all probability will be changing faster than regulation can adjust.

776   We are in vesting in IP. We have followed the international standards adopted by major vendors. We are adapting to the new telecommunications environment as quickly as we are able, and we are asking you to allow us to continue.

777   Thank you very much.

778   THE CHAIRPERSON: You were here this morning when Bell was before us. And on this whole IP their argument was basically costs. And, you know, they will do it when they are ready with it and they don't see why they should do it ahead of time, with no benefit to customers and considerable cost to them, et cetera.

779   But you are making quite a different point here. You are saying that technology is not ready and that there is going to be -- you know, you compare it to peer, which is best effort, the standards aren't ready, you are going to have latency problems, bla bla bla.

780   I don't quite get it. I mean, the others who are advocating IP to IP interconnection, surely they would have the same issues with their customers. How come they are willing to take the technological risk and you are suggesting that they are too great to be taken at this point in time?

781   MR. HERSCHE: I think there is two things. We do agree with Bell, that adjusting to this will be very costly, if we are all of a sudden to move this. But we are spending those dollars as we move to fibre-to-the-home and run these through.

782   But we have gone through, as we are going for fibre-to-the-home, we have been looking at a number of these features and we have not been able to at this point to bring this to our satisfaction to be able to replicate what we have in the PSTN.

783   THE CHAIRPERSON: But there is some working IP interconnection at this point in time. Wireless-to-wireless, for instance, working, and I gather people are going to have various arrangements, so I just don't --

784   MR. HERSCHE: In -- we are -- for example, as I said in our submission, we are interconnecting wireless on IP to IP, but we're only able to do it because we're running the -- exactly the same features. We're running the same vendor.

785   And each vendor today interprets this -- some of the IP protocols in a slightly different manner, so because we're doing -- we have the same vendor, we're able to do this.

786   So there -- sometimes we can work; sometimes we would be able to work it out with someone else, but what we're asking is that we don't mandate that. Let us work it out with someone who comes and we may be able to work it out; we may not, depending on what kinds of features they want to provide and how they want to provide it. And we can do that on a commercial basis.

787   THE CHAIRPERSON: Okay. Suzanne, do you have some questions?

788   COMMISSIONER LAMARRE: I'm going to dig a little bit more into that, if you don't mind.

789   And starting from, you know, the end of your presentation when you say on paragraph 46:

"As IP evolves, it will surely demonstrate that it is able to meet the expectations of our customers."

790   Which expectations of your customers would not be met right now if we were to mandate those IP interconnections?

791   MR. GRANT: Some of the additional types of services -- the basic services seem to be working properly in the case of our fibre to the home, but there are certainly some features, as we had indicated in here, the -- some call waiting, selective call acceptance, 911 call control and some components of the voice mail.

792   What we're finding is that because we have different vendors in our own internal networks that, at this point, we're finding that some of those features do not work the way the customers have been experiencing them today. So what we're trying to do is find the solution so that they will have the same customer experience and the same recognition of all those features.

793   We just have problems of getting all those working today.

794   COMMISSIONER LAMARRE: Okay. And one way of getting there would be better standardization of those protocols; correct?

795   MR. GRANT: Sorry. Can you say that again?

796   COMMISSIONER LAMARRE: In order to get there where you can actually have the IP connection allow for the exact customer experience that your customers are currently having, it would be through enhanced standardization.

797   MR. GRANT: It would be through good understanding of the services that are being delivered today and what that translation is and to get the machine language -- probably that's the best way to describe it -- to make it work so that it simulates.

798   That simulation is not totally 100 percent there. We're -- our customers are so used to the TDM network, the switch network that is flawless. It's been working for many, many years.

799   Will we get the IP and those services working? Absolutely. We have to. But today, we're not there and we're going to rely on CISC and those standards to help drive the full industry to that standard service delivery that is error free, if you want to call it that.

800   COMMISSIONER LAMARRE: And in relying on CISC, will that be enough to get you there?

801   MR. GRANT: CISC, but industry vendors will have to -- North American-wide, particularly in Canada, we believe yes, it will. And all vendors have an interest to make sure that --

802   COMMISSIONER LAMARRE: Their own standard is being picked.

803   MR. GRANT: I'm sorry?

804   COMMISSIONER LAMARRE: That their own standard is being picked.

805   MR. GRANT: No.

806   COMMISSIONER LAMARRE: Not necessarily that their standard is actually adopted.

807   MR. GRANT: Well, I mean, all the vendors want to, want to build to a standard so that you can have midstream interconnectivity.

808   Unfortunately, today, as we indicated, that's not the case, and that's why we need to have CISC have those guidelines so that the vendors can build to that standard.

809   COMMISSIONER LAMARRE: Okay. Well, moving on, I must say that the way I read your position right now is that you're telling us that what we have in place right now works fine. It doesn't need any modifications. And if I have it correctly, it's quite an unusual position.

810   Usually we're criticized with what we have in place.

811   So bear with me as I go through those, you know, possibilities of modification.

812   When you're talking about bleeding edge technology, what are you exactly referring to?

813   MR. HERSCHE: By bleeding edge technology, it would depend on -- and even this morning, some of the new people thought of services and said, "Oh, what happens if this kind of service comes in and we do these kinds of things?"

814   We just can't randomly -- if someone came to us with high-def voice -- whatever that is -- we wouldn't necessarily be able to accommodate that in our network today. Not because we wouldn't want to translate it. We just -- our system is built on a TDM system and it would not be able to accommodate those kinds of changes.

815   In answer to that same thing, will we be able to do this in the future, we're building and we're changing that around as fast as we can, but today, we don't have that. So bleeding edge is as we begin to work that forward.

816   COMMISSIONER LAMARRE: Now, you make the point that you're not, you're not delaying the conversion of your technology from TDM to IP just in order to slow down competition coming into your market. You make that point quite clear.

817   But for sure, you are taking in consideration that lifespan of your equipment and, you know, the business case that you have to make.

818   So how do we come to a point of balance where we let the market forces go but, at the same time, we make sure that they go fast enough?

819   And I'm going to tell you where I'm coming from here so you know why I'm concerned.

820   When you look on the broadcasting side and we look at the digital transition, you know, we had to push, as a Commission, quite hard to get broadcasters to go the digital way and because the business issue was getting in the way.

821   So how do we not let it get in the way here?

822   MR. HERSCHE: Oh, I think the largest evidence and what's going to move that market along is our customers, and I would assume the customers of virtually every ILEC, are demanding more and more bandwidth every day. So we have, in terms of responding to that, it's a trend almost universal.

823   As we go out there, we've already said we're going to fibre the home. Once we go to fibre the home, we are in an IP regime.

824   So we will not be slowing that down because we have to accommodate the demands of our customer. As an -- so we've already announced, as you will, that we're going to be doing our -- all of our major centres probably over the next five to eight years will all be -- have fibre to the home.

825   As Mr. Henry mentioned before, that doesn't mean that everyone's going to take that service when they're there. But we will be providing those services in the next five to eight years.

826   As that works out, then we have to solve the kinds of problems that they -- that Doug was talking about as we go forward.

827   We don't want to have, as we would have today -- if I did that today, I'd have to have TDM work-arounds for some of those features, and the voice. I don't want to have those. I mean, that costs me money as I begin to go out there.

828   So I'm -- I am responding to the customer and in that direction, so there'd be no -- there's no reason for me or it's not economical for me to just sort of sit on my TDM and network and say nobody can come to me.

829   MR. McKAY: And I think the point Mr. Daniels was trying to make is that what you're discussing here is just the hand-off, is just the interconnection. So even if you mandate an IP interconnection of some type, that doesn't make us go plough our fibre, so all of our customers still have what they have. And only some type of a new application or developments in the market make us actually bring service to those customers.

830   COMMISSIONER LAMARRE: Okay, I get that.

831   Now, in your presentation you also make the point that, currently, TDM is very reliable as opposed to VOIP, which is provided on a best effort basis.

832   Now, is that your position, that currently if you get your voice connection, your voice phone service from a VOIP provider that it won't be as reliable as if you get it from somebody who's providing it on TDM?

833   MR. GRANT: I think what we're suggesting that it's -- VOIP traffic can be reliable if it is managed by the -- in our case, the carriers as -- I'll call it a closed type of managed network. But if you are wanting to move the voice traffic using the public internet, the public internet between routers, between points of interconnection are, in essence, not managed, and it's a best effort for the data that's moving back and forth.

834   And the voice must be in a situation where it has priority of the bits travelling, and the internet as we know it today does not have that capability.

835   MR. HERSCHE: It's really a comparison of -- use SKYPE as an example. When you're off on -- why hasn't SKYPE been adopted across the whole network? Well, it hasn't because it doesn't have the same kind of quality.

836   You have all sorts of little problems with it yet as you go forward because it's not managed. It's not what we have as a PSTN. And we believe that that's what customers want at this point, is that kind of quality.

837   COMMISSIONER LAMARRE: Just a point of clarification on the -- and actually, it's because I don't know the answer, so that's why I'm asking the question.

838   On paragraph 32, you're talking about the delay for voice being the maximum of 150 milliseconds. Now, obviously that's a physics issue, but is that delay also mandated currently?

839   MR. GRANT: No, it's not mandated.


841   MR. GRANT: It's just simply a TETGO requirement for switching.

842   COMMISSIONER LAMARRE: Okay, thank you.

843   So otherwise, we'll all get annoyed with the phone calls we get. Okay.

844   Now, as far as wireless is concerned, you're a wireless provider. And I'm sure that your clients can get calls and make calls outside of Saskatchewan, or otherwise, you know, it would defeat the purpose.

845   So currently, those interconnections are not -- sorry, are regulated and you seem to be satisfied with the way it's regulated, so what can you offer us as far as your experience in that regard that could be improved, if anything?

846   MR. McKAY: So you're asking what could you improve on the wireless interconnection regime?

847   We have no options at this time.

848   COMMISSIONER LAMARRE: You like it the way it is.

849   MR. McKAY: Yeah.

850   COMMISSIONER LAMARRE: Okay. So let me put the question the other way around.

851   If we were to deregulate, what inconveniences would you get out of this?

852   MR. McKAY: If you were to deregulate wireless, or -- sorry.

853   COMMISSIONER LAMARRE: Interconnection regime for wireless.

854   MR. McKAY: For wireless.

855   COMMISSIONER LAMARRE: Forbearance, sorry.

856   MR. McKAY: Forbearance.


858   MR. McKAY: On the WAS services?

859   COMMISSIONER LAMARRE: Yes. What would be the inconveniences for SaskTel?

860   MR. McKAY: It's a fairly minor issue for SaskTel.

861   MR. HERSCHE: Because we're only -- sorry. Because we're only within the province in terms of most of our activities, it really is a minor issue for us on that.

862   Also, the other carriers, you know, we have competition there. As you know from the evidence we had before, there's extremely little -- you know, we talked about the wireless access services. All of the wireless service providers made alternate arrangements in Saskatchewan or are -- in the case of Rogers Fido, their CLECs.

863   So we, as SaskTel, would not notice a substantial difference.

864   COMMISSIONER LAMARRE: Okay, thank you.

865   Those are all my questions.


867   COMMISSIONER KATZ: Thank you. Good morning.

868   Is SaskTel Mobile a separate corporate entity of Saskatchewan Telecommunications?

869   MR. HERSCHE: No, it's -- we -- it's integrated into the company.

870   COMMISSIONER KATZ: It's all one company.

871   MR. HERSCHE: Yes.

872   COMMISSIONER KATZ: So you don't have separate calculations for your interconnection regime, you don't look at the imbalance between calls going in from a mobile and coming out?

873   MR. HERSCHE: No.

874   COMMISSIONER KATZ: Okay. Do you provide equal access on wireless today?

875   MR. HERSCHE: No.

876   COMMISSIONER KATZ: So you're able to take the benefits of a Bill and Keep regime, it's all integrated, but yet your consumers, your customers aren't seeing the other side of that bargain that I referred to this morning with Bell.

877   MR. HERSCHE: The -- each of our competitors -- we -- I believe our customers are seeing the benefits of competition. As I said, all of our -- the alternative wireless service providers have various arrangements that they make on this.

878   Our customers or our citizens have a lot of options of what they can do.

879   COMMISSIONER KATZ: If we just look at a one-minute long distance call from Regina to Saskatoon on wireline and on wireless without any packaging, buying unlimited usage, is there a difference in the permitted call rate?

880   MR. McKAY: Yes, there is a difference.

881   COMMISSIONER KATZ: What are the two rates?

882   MR. McKAY: I don't have the rates off the top of my head, but there is a difference.

883   COMMISSIONER KATZ: Okay. Could you, for Phase 2, have those rates next week?


884   MR. McKAY: Sure. And you're asking for --

885   COMMISSIONER KATZ: A one-minute call from Regina to Saskatoon --

886   MR. McKAY: No plan, no --

887   COMMISSIONER KATZ: -- no package at all. You're -- you've got a basic telephone service in Regina and you pick up the phone and you make one call to Saskatoon on wireline or on wireless.

888   MR. McKAY: Yeah.

889   COMMISSIONER KATZ: Thank you. Those are my questions.

890   THE CHAIRPERSON: Candice, do you have any questions? No?

891   Okay, then. Before we go for lunch, just tell me one thing. I want to make sure I understand you on IP.

892   You say let us focus on a commercial basis, so are you saying the same thing as Bell, that basically have it as a fallback only, so that people can resort it to if they want to, but if they want to strike a different arrangement, they can do it?

893   MR. McKAY: That is not what we had said. We --

894   THE CHAIRPERSON: That's why I'm asking; to find out what is your position.

895   MR. McKAY: Our position is that you leave the existing TDM-based regime in place and let us make commercial arrangements on an IP basis.

896   We had not proposed a default tariff on IP.

897   THE CHAIRPERSON: Could you live with one?

898   MR. McKAY: What are the rates?

--- Laughter

899   THE CHAIRPERSON: Good question. Okay, thanks.

900   Then I think those are all our questions. Thank you very much.

901   I guess it's 12 o'clock. Why don't we have an early lunch?

902   THE SECRETARY: It's 12:18, sir.

903   THE CHAIRPERSON: 12:18. Let's resume at 1:30, okay? Thank you.

--- Upon recessing at 1218

--- Upon resuming at 1330

904   LA SECRÉTAIRE : À l'ordre, s'il vous plaît. Order, please.

905   LE PRÉSIDENT : Commençons.

906   LA SECRÉTAIRE : Merci, Monsieur le Président.

907   We will now proceed with the presentation by the Canadian Network Operators Consortium Inc.

908   Please introduce yourselves for the record, after which you will have 20 minutes for your presentation. Thank you.


909   MR. TACIT: Thank you.

910   Mr. Chair and Commissioners, we are very pleased to appear before you today in this very important proceeding.

911   My name is Chris Tacit and I represent CNOC. Seated to my right is Bill Sandiford, Chair of the Board and President of CNOC, as well as President of Telnet Communications.

912   In this proceeding, the Commission is examining what, if any, changes should be made to the local, wireless and toll network interconnection regulatory regimes.

913   CNOC's membership consists of wireline carriers that compete predominantly in the operating territories of the large ILECs. For this reason, CNOC's comments and responses to the Commission's questions will be limited to a consideration of the regulatory regimes applicable to local and toll network interconnection in the operating territories of the large ILECs.

914   In the balance of this presentation, we will:

915   - respond to those questions posed by the Commission in its October 12 letter insofar as they cover the scope of CNOC's submissions;

916   - summarize the modest changes that CNOC is proposing to the local and toll interconnection regimes; and

917   - present CNOC's view of how IP-to-IP interconnection should be implemented.

918   Before we discuss these matters, we would ask the Commission to bear two important principles in mind when considering the submissions made by all participants to this proceeding.

919   The first principle is that due to the ubiquitous nature of the ILEC networks, robust regulatory regimes are still required to ensure that competitors can interchange traffic with the ILECs if local and toll competition are to be encouraged.

920   ILECs do not have the incentive to facilitate local and toll competition, and for that reason network interconnection related to these classes of services must continue to be mandated.

921   This is not an area that can be governed by market forces if competition is to thrive. The increasing use of IP-based network interconnection technology does not alter this situation.

922   This reality is confirmed by Decision 2008-17, in which the Commission confirmed its preliminary view that such interconnection services should be mandated. Nothing has occurred since then that would justify a different conclusion today.

923   The second important principle is that, pursuant to the Policy Direction, any changes that the Commission does make to these regimes should be made with a view to ensuring that the interconnection arrangements are technologically and competitively neutral.

924   This is also a point that the Commission made in Decision 2008-17 and we fully agree with it.

925   What this means in practice is that the same policy objectives and rules that exist today should be applied regardless of whether network interconnection is implemented via TDM or IP technologies.

926   The framework established by these two principles leads to the following answers to the first three questions posed by the Commission in its October 12 letter:

927   - Does the natural evolution from circuit-switched to IP interconnection facilities require regulatory intervention?

928   The answer is an unequivocal "yes." As I mentioned earlier, ILECs do not have an inherent incentive to cooperate with their competitors when it comes to interconnection matters. For this reason, continued regulatory oversight is essential.

929   - Should the Commission mandate IP-based network interconnection and establish basic rules or should it be commercially driven?

930   IP-based network interconnection must be mandated and corresponding basic rules are required. This is necessary in order to overcome the ILECs' reluctance to cooperate with respect to such matters and also to ensure that the principles of technological and competitive neutrality are observed when IP-to-IP network interconnection is implemented.

931   - To what extent, if any, should the Commission forbear from the regulation of network interconnection for voice services, et cetera?

932   For the reasons already provided, no forbearance should apply to network interconnection for voice services.

933   In accordance with the scope of CNOC's participation in this proceeding, we are not offering any views on the questions posed by the Commission with respect to wireless carrier or small ILEC network interconnection issues.

934   Bill will now summarize the changes that we are proposing to the local and toll network interconnection regimes and will then go on to discuss CNOC's views of how IP-to-IP network interconnection should be implemented.

935   MR. SANDIFORD: Thank you, Chris.

936   In CNOC's view, the existing regulatory regimes for local network interconnection and toll interconnection should not be consolidated into a single regime. The rules for each regime were established to pursue certain policy objectives which have not changed.

937   However, CNOC is proposing a few modifications to the existing local and toll network interconnection regimes. These are:

938   - CLECs and ILECs should each be responsible for their respective multiplexing and demultiplexing costs whether interconnection is completed through shared-cost facilities or through leased facilities. A CLEC is a co-carrier regardless of whether leased or shared-cost interconnection facilities are deployed.

939   - For the same reason, facilities leased from an ILEC for local network interconnection should be made available at one half of the normal tariffed rates for such facilities.

940   - CLECs and ILECs should be permitted to use bill and keep trunks for EAS traffic outside the LIR. This will permit more efficient use of bill and keep trunks and will reduce the costly invoice setoff exercise that takes place between LECs today in respect of bill and keep imbalances and invoices for EAS transport.

941   - In order to improve the efficiency of existing interconnection arrangements, CNOC also recommends that the routing of toll transit traffic should be permitted on shared-cost facilities that are employed for local network interconnection.

942   - The MALI (version 29.1) should be updated to include traffic imbalance compensation for IP-to-IP bill and keep traffic.

943   - TDM-based local and toll network interconnection will persist for many years to come. Such arrangements must not be eliminated or forborne.

944   CNOC further proposes for IP-to-IP network interconnection to be implemented according to the following process and rules:

945   - ILECs should be required to make public any IP-to-IP interconnection arrangements (trial or production) they have in place between their respective CLEC operations and any of the incumbent LECs. At a minimum, the technical specifications used for such interconnections should be published and similar interconnection arrangements should be made available to non-ILEC-affiliated CLECs.

946   - The CISC NTWG should be directed to review the technical specifications and the test cases used by each of the ILECs for IP-to-IP interconnection and provide a report to the Commission recommending the technical specifications and test cases that should be used for IP-to-IP interconnection by non-ILEC-affiliated CLECs for interconnection with ILECs within three months of the date the Commission renders its decision in this proceeding.

947   - LECs and IXCs having Canadian telecommunications service revenues that are equal to or greater than $10 million should be required to interconnect with other LECs and IXCs upon receipt of bona fide IP-to-IP interconnection requests, under the guidelines published by the CISC NTWG and approved by the Commission. Such Canadian carriers with legacy networks must be responsible for converting voice IP traffic destined to their end users into TDM format.

948   - In order to facilitate IP-to-IP interconnection, the ILECs should be required to propose a rollout for IP-to-IP interconnection for voice services that LECs and IXCs could choose to employ on a voluntary basis in a manner similar to the rollout process that was employed for the rollout of local number portability. The rollout should begin in the most populated exchanges/LIRs/access tandem areas and should take into account the demand of other local and toll service providers for the service.

949   - All Canadian carriers with voice IP networks should be required to adopt the recommendations in CISC NTWG Report NTRE039C as it may be further amended. Such amendments may occur as a result of the review of the technical specifications and the test cases used by each of the ILECs for IP-to-IP interconnection, as previously discussed. The report should also be updated to include the latest SIP standard available in the industry in order to avoid premature obsolescence of IP-to-IP interconnection arrangements. For example, the latest SIP standard is known as SIP-I, yet NTRE039C has not been amended to reflect this reality.

950   - All Canadian carriers with voice IP networks should be required to adopt the guidelines developed in the CISC NTWG Report NTRE046 as they also may be further amended from time to time.

951   - The CISC NTWG should continue to work on the technical aspects of IP-to-IP interconnection on a proactive and ongoing basis. Some of the issues that need to be addressed and that have been identified by Rogers in this proceeding include: (1) the development of next generation 9-1-1; (2) establishment of quality of service and performance parameters; and (3) geographic number portability and the development of a public ENUM infrastructure.

952   - Tariffs are required to define the rates and terms applicable to mandated IP-to-IP interconnection arrangements. This essential aspect of interconnection cannot be left to negotiations.

953   - The requirement for LECs to maintain at least one POI per LIR should be retained in an IP environment. CNOC agrees with Rogers that the POI routing and switching diversity principle affirmed by the Commission in Telecom Decision 2006-35 should also continue to apply.

954   - The cost recovery of IP facilities employed for the provision of local and toll interconnection services should be treated in the same manner as TDM facilities employed for the same purpose and treated under existing rules, subject only to the amendments to these rules proposed by CNOC that would allow certain EAS traffic and toll transit traffic to be carried over local interconnection facilities.

955   - CNOC supports additional alternative voluntary arrangements among LECs for voice interconnections that are modelled on the peering of IP data among ISPs. In such cases, it would also likely make sense for peering POIs to be established in third-party locations. Such arrangements would be negotiated.

956   Chris will now conclude our presentation.

957   MR. TACIT: Thank you, Bill.

958   In this opening presentation we have described a principled approach to assessing the changes that are required to the existing local and toll network interconnection regulatory regimes to facilitate competition for the benefit of consumers.

959   The existing regimes do not require major overhauls or any consolidation. The changes that CNOC has proposed are modest, easy to implement and aimed at increasing the efficiency of the existing regimes. CNOC's approach is also entirely consistent with the requirements of the Policy Direction, including the requirements for technological and competitive neutrality.

960   CNOC has also proposed a road map for promoting IP-to-IP interconnection that is also consistent with the existing interconnection regimes and the Policy Direction.

961   We hope that the Commission will accept CNOC's proposal.

962   This concludes our presentation.

963   THE CHAIRPERSON: You were here this morning. You heard both Bell and SaskTel and they basically gave us a lot of explanations, both from a business and technological point of view, why IP-to-IP interconnection is not here. Yet, you just laid out a very detailed road map in effect for IP-to-IP interconnection.

964   How come you are seeing this so differently than them? Aren't you both interested that your customers when they go on IP they do not suffer any diminished or deterioration of service?

965   You heard SaskTel say, you know, basically the technology is not there and we don't want to see a jitter or latency or whatever.

966   So who are we to believe? What's going on here?

967   MR. TACIT: Well, I will start this, and Bill may chime in as well after.

968   I think it's important to realize that when it comes to interconnection, just as the Commission recognized in the recent 2008-17 Decision, it is necessary to have these services in order for networks to talk to each other and the end users of different network providers to talk to each other.

969   Now, what happens is that in the incumbent networks there are a lot of different vintages of technology. Clearly, they have an incentive to progress things in a very incremental fashion in terms of their own self-interest.

970   They aren't necessarily interested in promoting the kind of innovation that typically takes place at the edges of the networks and is brought by their competitors, because by doing that, there would be pressure on them to make increased investments and --

971   THE CHAIRPERSON: That is the business end. I understand that, why they have no incentive, but I was talking about the technological one.

972   MR. TACIT: So one of the answers to that is that IP technology is by definition going to evolve. If we wait for it to crystallize in some firm fashion before we take any action, we're going to be waiting for a long time.

973   A lot of this is software-driven and, you know, it's going to be evolving and we have to stay current with the standards, just as the competitors do.

974   MR. SANDIFORD: To add to Chris's comments and directly address a couple of points in your question, I think a lot of the competitors will look at some of the IP technologies as not new. You know, the presentations this morning made it sound like the IP technologies were new, not stable.

975   In the case of our company we've been using IP voice technologies since 1998. Sure, they changed, evolved over time, but they've certainly been around for a significant period of time and they're stable.

976   The other issue that, as you mentioned, was brought up this morning was that the ILECs that spoke this morning would lead you to believe that there's no true value to an IP-to-IP interconnection because their end user is still on a TDM service and at the end of the day their end user is not going to get the additional value.

977   What they forget to tell you, unless they want to talk about imbalance regimes, is that competitors who use these interconnection services to transit to other networks will pay them a great deal of money for.

978   So in the case of my company at Telnet Communications, if I have a customer that's on an IP service and they are making a phone call to a Rogers customer which is ultimately on an IP service as well too, that transits the interconnection facilities that goes to the ILECs.

979   So essentially, we do have a bottleneck in the middle or a breakdown in innovation in the middle where the ILECs force us to convert that back to TDM. If we had an IP interconnection facility it would go end-user to end-user as IP, just not to their end-users.

980   THE CHAIRPERSON: Yeah, on page 5, second to last bullet you say:

"Tariffs are required to define the rates and terms applicable to mandated IP-to-IP interconnection arrangements."

981   And then your last bullet on page 6 says:

"CNOC supports additional alternative voluntary arrangements among LECs for voice interconnection that are modeled on the peering of IP data among ISPs."

982   Am I right reading that basically the tariffs would be a fall back?

983   MR. TACIT: No.

984   THE CHAIRPERSON: Reading those two paragraphs together, either you have tariffs and they are mandatory or they are tariffs and they are sort of optional in case you can't cut a deal.

985   MR. TACIT: So what we are saying is that when it comes to following the methodology and the principles and the rules that were established in the TDM world, the tariffs should govern that and those should be the arrangements and the only arrangements that exist.

986   However, where companies --

987   THE CHAIRPERSON: You are not talking about TDM. You say "mandated IP-to-IP interconnections".

988   MR. TACIT: No. So what I am trying to say is that the rules that were established, established a certain framework and approach to these things.

989   We want to see that approach and framework continued in an IP world including a tariff structure and all of the same principles that we have today.

990   But we recognize that in some cases there may be some private peering arrangements possible or other types of arrangements possible that parties could enter into. We don't object to those necessarily but as far as the principled approach is, we want it to be unique and accessible to all.

991   THE CHAIRPERSON: I'm sorry. My brain is too small to understand that.

992   Is this mandatory or not?

993   MR. TACIT: Yes, it is mandatory.

994   THE CHAIRPERSON: In that case why can't -- I don't understand what are the additional alternative ones which are based -- made outside the tariffs?

995   MR. TACIT: For different kind of architectural approaches that people might want to try, parties may want to try with each other.

996   THE CHAIRPERSON: So they are going outside the working group.

997   MR. TACIT: Right, exactly. Other things they might want to do that are not -- have not been mandated by the Commission and work through CISC, exactly.

998   THE CHAIRPERSON: Why would you need to -- need that? Why would you --

999   MR. TACIT: Well, it's not a matter of need.

1000   THE CHAIRPERSON: No, no, I mean what Bell, I understood, basically said, fine, if you absolutely have to mandate some tariffs, start up some tariffs but they should be a fall back. They shouldn't be mandated.

1001   Why couldn't you live with that?

1002   MR. TACIT: No, we can't have a mere fall back because what will happen is that the largest of the parties will make arrangements among themselves out of their economic self-interest, which is fine but it will basically shut out all other competitors.

1003   THE CHAIRPERSON: I see, okay. Thank you.

1004   Candice, you have some questions?

1005   COMMISSIONER MOLNAR: Thank you.

1006   Can I begin with your IP road map? There is a number of items you identify on this road map

1007   What kind of timeframes are you thinking are reasonable to put together these standards and so on?

1008   MR. TACIT: So what we propose to begin with is that fairly quickly after the decision there would be a requirement for the ILECs to make a disclosure of these IP-to-IP interconnection arrangements that they are using and feed that into a CISC process which we would hope would be completed within about three months of the date that the Commission renders its decision in this proceeding.

1009   And, then, after that I think it would be hopefully a fairly quick process once those are in place to start mandating IP-to-IP interconnection in accordance with the result of whatever part of that report the Commission ultimately endorses.

1010   So that, you know, I guess we would have to see, depending on what that report actually produces, I think more precisely what's required, but I would hope that it wouldn't take more than maybe another three to six months after that before we start seeing something happen.

1011   And again, we know that this would have to be rolled out in a staged basis.

1012   You know, we thought back to the way that the Commission implemented local number portability which was an equally big undertaking and had to be done over a period of time. And I remember being involved in that process and in the CISC groups and all of that. You know, there was a staged rollout, an orderly staged rollout that was developed to deal with this.

1013   So I think we need to do it in a sort of an orderly way. But certainly my hope would be that within a year from the date of the decision we could have all of this in place. That would be my hope.

1014   And of course you know, we would have to see when the details come in whether that's realizable or we need a bit less or a bit more time, ultimately in the Commission's discretion.

1015   COMMISSIONER MOLNAR: Okay. Can I ensure I understand where you say that there would be this rollout and that LECs and IXEs could choose to employ on a voluntary basis, when you say that do you include in there ILECs?

1016   MR. TACIT: Well, we are suggesting that once the ILECs are actually mandated to do it, then a question of how it happens geographically is the part that has to be done in an orderly way. So hopefully they and us will come together, make some proposals as to, you know, you might do the GTA first, Montreal and so on, just like with the LNP rollout process.

1017   So that's what we are suggesting. Is that clear enough?

1018   COMMISSIONER MOLNAR: I want to make sure I am understanding as well what you are suggesting. I mean the ILECs who have been before us so far have said there is virtually no access lines that are on IP today.

1019   So are you proposing this rollout where it's truly IP-to-IP where you are terminating end-to-end and an IP service or circuit or call, voice call or are you proposing what you are calling IP interconnection to essentially the interconnect IP and then the ILEC converts it to TDM?

1020   MR. TACIT: Well, initially, I mean, the focus is on network-to-network interconnection. That's number one. So we want that enabled.

1021   I think what will happen once that happens is competitors who can put in their own IP access lines will be in a position to start providing the additional innovations that this network interconnection provides. And I think you are going to start seeing the ILECs rollout the access, the IP access much more quickly.

1022   It's akin to what happened when the wireless networks you know went 4G. All of the devices became available and so on.

1023   It's not the phone that drives the network. It's the network that drives the equipment and the demand.

1024   COMMISSIONER MOLNAR: Yes, but I am just trying to understand if we are truly talking IP to IP or if we are talking about essentially moving the obligation for conversion to TDM.

1025   We are talking here -- you are talking about IP to IP.

1026   MR. TACIT: Yes.

1027   COMMISSIONER MOLNAR: Where there is enough IP traffic to support IP interconnection.

1028   MR. TACIT: Right.

1029   MR. SANDIFORD: To further --

1030   COMMISSIONER MOLNAR: I want to -- okay. Go ahead.

1031   MR. SANDIFORD: To further what Chris said, you know, I want to really try to drive this one point home.

1032   The ILECs this morning were saying, and you used the words moment ago that there is virtually no access lines that use IP technology. Virtually none of their access lines use IP technology. In the case of our company we have no access lines that use TDM technology. We are 100 percent IP access lines.

1033   Speak to the cablecos and ask them what percentage of theirs are TDM technologies. The cablecos, particularly Ontario, have a massive amount of the residential service market for access lines. I think they are going to tell you that it's all based on IP.

1034   So don't allow the ILECs to say that there is no access lines on IP to fool you. I mean none of theirs. Everybody else's is.

1035   COMMISSIONER MOLNAR: So that actually leads into my next question because you gave the example about using local transit to get from your IP network to potentially a cableco network.

1036   And I'm wondering what would prohibit you from making that IP interconnection directly to the cableco and why is it you need to use the local transit to make that arrangement?

1037   MR. SANDIFORD: It's clearly a business case decision.

1038   So in the case, I can speak for example, our CLEC which is a very small CLEC, the actual management and infrastructure and manpower to manage various and all the different interconnections with all the different other CLECs that are out there could potentially be overwhelming at our size.

1039   So for us, we had to weigh the decision on is it a better decision to pay for a single local transit service that goes to the ILECs and we'll compensate them, handsomely, I might add, to look after those arrangements for us, or do we approach all of the other networks individually and negotiate with them and turn up some sort of an interconnection between them?

1040   What we have found was that it wasn't economically sensible for us to do so both from a -- and I think that they would find the same thing, especially some of the bigger LECs like the cable carriers. They would look a network similar in size to some of the smaller CLECs and say, "I really just don't want to deal with the management overhead of dealing with that interconnection. I'll pay to send it a different route".

1041   COMMISSIONER MOLNAR: I am going to ask the question and I'm going to suggest you wait till rebuttal.

1042   But as you know when Bell was in front of us they suggested that local transit could be forborne, and it's probably something you should deal with in your next stage in front of us.

1043   MR. TACIT: We will.

1044   COMMISSIONER MOLNAR: Yes, because it's not obvious why if you have an IP interconnection -- to me, not obvious to me -- why if you have an IP interconnection and some of the other carriers in that market have an IP interconnection, you wouldn't make that your primary source of interconnection and then transit to the TDM network some other way.

1045   So just maybe next week is a good time.

1046   MR. TACIT: Yeah, we were planning to deal with that issue in any event, so thank you for that.

1047   COMMISSIONER MOLNAR: Okay, thanks.

1048   I'm going to go back to some of the specifics that you have put as it regards the existing interconnection arrangement.

1049   I just want you to help me out in understanding or scoping this issue for me. Your issue relates to where instead of using shared cost facilities you are using leased facilities. Is that common for your members to use leased facilities instead of shared cost facilities?

1050   MR. TACIT: Bill is better for this.

1051   MR. SANDIFORD: Yeah. I think it's quite common. We have several members that make use of leased facilities as opposed to shared cost/build facilities.

1052   You know, in the example of -- I'll use our company again, Telnet Communications, as an example, we have a variety -- a number of interconnections. None of them are built on shared cost facilities, with the exception of one or two of them where we make use of the interconnection in our co-locates where we are co-located in the ILEC's central offices.

1053   In all other cases we are making use of leased facilities.

1054   COMMISSIONER MOLNAR: Is that a business decision on your part that it's cheaper to lease than to go into the shared build?

1055   MR. SANDIFORD: Yes. I think it's a business case, a business decision. Once again, we are a smaller CLEC and I have found in my personal opinion that the shared cost facilities only start to make sense as you scale in size.

1056   So when you are smaller and when you are getting started out, the least cost route is certainly more attractive when your trunk routes are that much smaller.

1057   It might cost you a few hundred dollars a month to lease a couple of DS-1s at a leased cost arrangement, but when you talk to the ILEC about doing a shared cost build in that LIR, you are talking numbers $40, $50, $60,000 for capital build-outs. So in that case a leased cost arrangement might make sense.

1058   As it scales and your interconnections grow to multiples of DS-1s or DS-3s or whatever, well, then the costs become to the point where, well, maybe it's time to make those capital decisions and invest in them and go with the shared cost/builds.

1059   Many LECs, including our members and other LECs that aren't a member of CNOC, have made those decisions and they have transitioned from lease cost situations to shared cost situations as the networks grew.

1060   COMMISSIONER MOLNAR: Okay, thank you.

1061   I know you said that you are not wireless carriers, but I wondered if any of your members as CLECs have made commercial arrangements with wireless carriers.

1062   MR. TACIT: I actually don't know the answer to that question because that would be their confidential information. I don't think unless it was required for us to be provided that information if we would have been. I don't know.

1063   And if it is, it's probably confidential information. We would have to respond in confidence.


1065   MR. SANDIFORD: I honestly don't know.

1066   MR. TACIT: But in --

1067   COMMISSIONER MOLNAR: I wouldn't ask you for any particulars but --

1068   MR. TACIT: Right.

1069   COMMISSIONER MOLNAR: -- we are interested in understanding the arrangements by which the wireless carriers are interconnecting with the wireline voice. And so if you have anything that you can undertake to find out or share with us we would appreciate that.

1070   MR. TACIT: We will ask the members. We will ask the members --

1071   COMMISSIONER MOLNAR: Thank you.

1072   MR. TACIT: -- and get back to you.

1073   But just to clarify, the response you are looking for is a global response of whether yes or no or are you looking for particulars?

1074   COMMISSIONER MOLNAR: Well, if you can provide us -- as great of detail as you can provide us with information --

1075   MR. TACIT: Okay.

1076   COMMISSIONER MOLNAR: -- whether or not they have provided those sorts of interconnection arrangements and in what territories.

1077   I don't know that this is a -- I'll ask the question and you can take it back or not.

1078   MR. TACIT: Yeah.

1079   COMMISSIONER MOLNAR: Whether they have ever been approached and not provided those arrangements would be interesting to me as well.

1080   MR. TACIT: Thank you.


1081   COMMISSIONER MOLNAR: Okay, thank you. Those are my questions.


1083   COMMISSIONER DENTON: Mr. Sandiford, maybe it was a throwaway line but I just want to unpack it for a moment. You said there something in the nature of there is a breakdown of innovation when you are required to translate your traffic to a TDM.

1084   Can you unpack that and explain?

1085   MR. SANDIFORD: Sure. Native IP-to-IP services and the applications that get offered over them in voice or the quality of the voice whether it be low-band or lower quality voice or high definition voice, varies drastically in an IP world. There is lots of different services that are available.

1086   As soon as you bring in the concept of converting that back to TDM, you potentially lose any of those efficiencies or any of those benefits.

1087   So using high definition voice, for example, if I'm a carrier that has an IP-enabled network and I have a customer that has a service that I provide to them -- which I do have, by the way -- that makes use of high definition audio and I make a call and I transit it out into the network and I'm hoping to get to a user on the other end of another LEC that has the same services and the same high definition audio, and I have to convert it back to TDM in the middle, it's lost.

1088   All their benefits in the innovation and the benefits that come from those services are gone as soon as it converts back to TDM.

1089   COMMISSIONER DENTON: So doesn't this contention crash into the more fundamental problem that the innovation from end to end is dependent upon the extent of the deployment of IP-capable transmission to all the way through the system?

1090   It isn't just a question of the translator if there isn't -- if there is TDM anywhere in the system you don't get these possibilities for innovation?

1091   MR. SANDIFORD: That's correct.

1092   COMMISSIONER DENTON: Okay. So then is there some reason to think that we should try to get rid of TDM in the centre when it's not yet deployed at the periphery -- when IP-capable transmission is not yet deployed at the periphery?

1093   MR. SANDIFORD: Once again, I'll say I answered Commissioner Molnar and for the Chairman -- not deployed by the ILECs.

1094   I mean it is deployed in our networks today. It is deployed at the periphery. We do have customers with end-points that are native IP and available to take advantage of all these rich services.

1095   We would love the ability for those services to make it end to end, as opposed to just calls to other customers on our own network.

1096   MR. TACIT: And just one addition to that.

1097   We are not proposing a forced phase-out of TDM. We are just -- what we want is to have available IP to IP, not to force anybody off of TDM or to give up TDM. We just want the option to be able to make that choice and direct that our traffic be routed in that way.

1098   COMMISSIONER DENTON: In other words, you cannot request that your traffic be routed through IP interfaces. It is taken and translated to TDM and you don't have a choice, you are asserting.

1099   MR. TACIT: Correct.

1100   MR. SANDIFORD: Correct.

1101   COMMISSIONER DENTON: How does this lack of choice arise, policy or technology?

1102   MR. TACIT: I think a bit of both. I think it's -- you know I have long been an advocate of the need for the Commission to proactively require incumbents to keep their standards up to date, their interconnection standards.

1103   I'm happy to see that this proceeding is taking place because I think it's an opportunity for that to happen. So I think there hasn't been any specific mandated policy around this evolving technology until now.

1104   And, as I mentioned earlier, the ILECs have no particular incentive to roll it out, to create competitive pressures on themselves in so doing that's going to require them to make investments.

1105   By the way, when I say require them to make investments, we are also not suggesting that this is going to be a free ride. I mean there will be ways to compensate them for this, just like there were ways to compensate them when they rolled out LNP and other features.

1106   So it's not about a free ride. But they really don't have the incentive to do this. They have to be coaxed into it.

1107   MR. SANDIFORD: To further Chris' point, specifically to your question, when he said a bit of both with regards to policy and technology, my view on that is policy for sure, technology only insofar as the fact that those that have chosen not to deploy it.

1108   The technology does exist. It is mature and it is stable and it could be deployed. There are those who have chosen not to.

1109   MR. TACIT: Yes, that's right.

1110   COMMISSIONER DENTON: So what then would you make of the statement by SaskTel as follows, simply put:

"IP has not proven itself, that it is the total nor adequate replacement for TDM."

1111   MR. SANDIFORD: To put it nicely, I would encourage them to lift their head and take a look to what all the analysts in our industry say where our technology and our businesses are going. We are going IP. It's very clear. The trends are there to prove it.

1112   I don't know how it could be proposed that it's not there and we are not going in that direction. It's foreign to me.

1113   COMMISSIONER DENTON: Apparently.

1114   Thank you, Mr. Chairman.

1115   THE CHAIRPERSON: Thank you, Tim.

1116   What is the market failure under our direction -- it says don't regulate unless there is market failure. You tell us to go and mandate prices for IP-to-IP interconnection. What is the exact market failure that you think compels us or allows us to step in?

1117   MR. TACIT: Sure. Well, the market failure that is evolving very incrementally is the lost innovation you know that is also the objective of the policy direction.

1118   The problem is that network evolution is not a static thing. If the Commission in 2008-17, as I think wisely decided, that interconnection has to continue to be mandated -- in fact, I remember in the initial public notice the Commission went so far as to initially classify network interconnection as essential.

1119   In that sense it may not be essential in the pure economic sense of the word but it certainly is essential in terms of allowing evolution of innovation to take place which creates competitive pressures. So it's a gradual erosion.

1120   It's not like you know we are going to be back to a monopoly tomorrow. But Canada's position as a technological leader, ability to enable our economy, these things are all going to erode incrementally without staying up to date as far as the standards go and making sure that the latest standards are applied.

1121   This happens to be the technology of choice right now.

1122   THE CHAIRPERSON: What you are describing may very well be desirable economic policy. I'm not so sure I would characterize it as market failure.

1123   Wouldn't market failure be that there is -- such technology is available but it's being withheld or it's not being sold? It's only sold to their counterparts.

1124   MR. TACIT: Correct.

1125   THE CHAIRPERSON: But I haven't heard any evidence of that. I mean, they are using it. They are using it on wireless to wireless. They are running trials, et cetera.

1126   It's their judgment -- let me just be devil's advocate here. It's their judgment that it's not ready for primetime so to speak, and that more testing and more standardization is required.

1127   MR. SANDIFORD: So I would say to that that the market failure doesn't only exist in the event that they are withholding it so that they can sell it to their own customers, but also if they are withholding technologies in a way so that it can't be sold to or benefited by any customers because said technologies have to transit their networks, once again going back to my high definition audio example.

1128   THE CHAIRPERSON: Okay. Thank you.

1129   Suzanne, did you have a question?


1131   THE CHAIRPERSON: Okay, those are our questions and thanks very much.

1132   MR. TACIT: Thank you.

1133   THE CHAIRPERSON: Let's take a 10-minute break and then we will deal with, I believe, TELUS.

1134   Right? Yes.

--- Upon recessing at 1413

--- Upon resuming at 1423

1135   LE PRÉSIDENT: Commençons.

1136   LE SECRETAIRE: Merci, Monsieur le Président.

1137   Before beginning, for the record, Yak Communications Canada Inc. and WIND Mobile will now be making a joint presentation, and they will be appearing on Wednesday where Yak is currently scheduled to appear on the agenda.

1138   And now, Mr. Chairman, we will hear the presentation from TELUS Communications Company.

1139   Please introduce yourselves for the record, after which you will have 20 minutes for your presentation. Thank you.


1140   MR. WOODHEAD: Good afternoon, Mr. Chairman and Commissioners, I am Ted Woodhead, Vice-President, Telecom Policy Regulatory Affairs with TELUS.

1141   On my far left is John Mackenzie, Senior Regulatory Advisor, TELUS. On my immediate left is Zouheir Mansourati, Vice-President, Network Technology and Planning. And on my right is Orest Romaniuk, Vice-President and Controller, Finance.

1142   We thank you for the opportunity to present at this proceeding.

1143   TELUS recognizes the importance of this proceeding, the value in voice communications telecommunications is being able to connect your telephone line so that you can speak to any other subscriber served on any other telephone network.

1144   This is why interconnection is fundamental. It enables all subscribers to be able to call all other subscribers regardless of geography, network or technology.

1145   A vast amount of CRTC telecommunications policy and tariff history stems from interconnection decisions going back to 1978 that have sought to balance the interests of carriers with obligations to serve competitors and customers.

1146   Interconnection tariffs represent the cumulation of decisions intended to ensure universally affordable and accessible service, a fair return on investment for carriers that have an obligation to serve, and the promotion of competition and choice through access to bottleneck facilities at just and reasonable rates.

1147   It was with this careful balancing effort that the Commission was able to develop an interconnection regime that allows Canada to have one of the most affordable and ubiquitous local telephone services in the world. Therefore, any changes to the current regime must be carefully considered.

1148   It is important to remember the guiding principles stated by the Commission when it ordered interconnection between local exchange carriers and set out the requirements as to how carriers are to interconnect.

1149   In Decision 97-8 the Commission established a framework for efficient interconnection arrangements that balanced the interests of consumers, local competitive entrants, toll competitors, and the ILECs with a regime that maintained universal access to affordable telecom services.

1150   In that regard, the Commission specifically turned its mind to the circumstances of wireless services providers, for example, within the interconnection regime.

1151   At paragraph 6 of Decision 97-8 the Commission stated:

"This framework encourages efficient interconnection arrangements while remaining neutral in terms of technology. Thus, for example, should a wireless service provider wish to become a competitive local exchange carrier, it will be subject to the same terms and conditions set out in this Decision as wireline CLECs as long as it accepts the obligations applied to CLECs by the Commission in this decision." (As Read)

1152   Therefore, the current interconnection regime already balances the interests of customers and carriers of all types and, of no less vital importance, the technological and competitive neutrality of the regime.

1153   By changing any particular aspect of the interconnection regime the Commission risks altering this balance, thereby potentially affecting the desired outcomes of affordable voice telecommunications and technological and competitive neutrality.

1154   As a result, any proposed changed to the interconnection regime must be considered in the context of the frameworks for interconnection of different classes of carriers. These include the frameworks for interexchange carriers, IXCs in Decisions 79-11 and 92-12, and for WSPs in Decisions 82-14 and 84-10, all leading to the current regime stemming from 97-8.

1155   With that in mind, TELUS will provide its position on each of the questions that the Commission has asked in its organization and conduct letter.

1156   Zouheir.

1157   MR. MANSOURATI: The first set of questions relate to whether any voice interconnection rules should be changed as the telecommunications networks move to IP-based technologies.

1158   These questions have been posed because the current interconnection regimes are based on circuit-switched technology. The implied message is that circuit-switched interconnection must represent an outdated form of interconnection, depriving Canadians of the benefits of IP networks. The fear is both misplaced and contradicted by the facts.

1159   First, all carriers, whether incumbent, competitor or new entrant, are currently investing in wireline and/or wireless networks that are IP-based.

1160   IP-packet-based technologies are the way of the present and of the future and the interconnection regime has not inhibited these investments, not in the least. In fact, incumbent and entrant carriers alike have and will continue to make investments in access edge and core IP-based networks and equipment irrespective of the interconnection regime with the full knowledge that circuit-switched interconnection is the default standard for voice interconnection.

1161   TELUS has invested and continues to invest aggressively to develop and to deploy wireline IP access, edge and core networks, and wireless IP, 3G and 4G networks to address end-customer demand.

1162   When making these investment decisions we were never deterred by the nature of the voice interconnection regime, and we don't believe that anyone else should either.

1163   However, even with the progression to IP networks, the fact remains that the vast majority of TELUS wireline customers and TELUS wireless customers are using circuit-based voice services. This fact holds true across Canada. Consequently, the overwhelming majority of Canadians continues to obtain its voice communication services on circuit-switched access technologies, be it wired or wireless.

1164   It would be misleading to claim that circuit-switched interconnection will mean that Canadians are left with inferior telecommunication services. It is true that IP networks enable the provision of telecommunication services that are not possible in the circuit-switched network.

1165   However, these services such as high-speed data and video are not affected by the voice interconnecting regime and their usage will not change as a result of this proceeding. This interconnection proceeding is solely about connecting different carrier networks for the carriage of voice services.

1166   IP interconnection does not change the nature of voice services, because it does not facilitate any higher grade of voice service that is not already possible today.

1167   The voice service that will be carried between network providers is based on the service available on circuit-switched technology. As a result, circuit-switched interconnection does not deprive any carrier from providing any voice service it wishes to offer to its customers nor does it have any bearing on customer access to IP-based data services. In short, consumers will not obtain any benefit from an IP-based voice interconnection regime.

1168   Orest.

1169   MR. ROMANIUK: Thank you, Zouheir.

1170   TELUS's position is that in the near term circuit-switched technology should remain the default interconnection regime. As the migration to IP-based networks proceeds, it will naturally be in the interest of all carriers to develop and negotiate IP-based interconnection.

1171   As a result, market forces will drive carriers to negotiate the IP interconnection regimes that they desire. If market forces do not deliver that result, then it is reasonable to assume that the regulator may be required to intervene and determine interconnection terms and conditions.

1172   However, it is premature to try to define or establish IP rules based on the current regime. The natural evolution of networks to IP will mean that all carriers, including TELUS, will see greater opportunities to connect with other networks based on IP technology.

1173   The market will dictate the need for IP interconnection and, accordingly, the Commission does not need to impose rules at this time.

1174   Allowing the marketplace to evolve is also competitively neutral because no carrier is forced to prematurely enter into an IP interconnection agreement. Given this, at some point in the future, as more and more customers rely on IP-based access for voice services, the Commission might wish to examine whether it must intervene to make IP interconnection the default form of interconnection.

1175   However, until that time, there is no reason for the Commission to impose IP interconnection regulatory rules.

1176   Ted.

1177   MR. WOODHEAD: The Commission has asked that we consider to what extent voice interconnection services can be forborne. There must be a mandated interconnection regime to ensure that all carriers have the right to connect their networks with others, allowing all consumers to communicate with each other independent of technology.

1178   However, only one regime needs to be mandated. It is TELUS's position that the default regime should remain the circuit-switched method that is in place and used today by all carriers in Canada. As a result, IP interconnection can be forborne.

1179   If as a result of a future regulatory forum IP interconnection becomes the regulated regime for interconnection, circuit-switched interconnection can be forborne.

1180   The Commission has also raised some questions regarding the extent to which the wireless interconnection regime can be changed. Once again, it is important to remember the context as to why the local interconnection regime and the wireless interconnection regimes are different.

1181   The LEC regime was created as a means to facilitate competition for local exchange services so that customers would have their choice of local service operator. The obligations that attached to LECs recognized that customers, when choosing their local service provider, should be able to obtain the same type of service from any LEC provider. Therefore, if any carrier wishes to obtain LEC interconnection rights it must fulfil the same obligations that all other LECs fulfil.

1182   Since Decision 97-8 wireless carriers have always had the option of obtaining shared cost interconnection with LECs by accepting the same obligations that all other LECs undertake. There is no reason to allow a WSP to take the benefit of shared cost interconnection and at the same time not be required to assume all of the same obligations that other LECs have.

1183   Allowing asymmetrical treatment in this manner would be neither competitively nor technological neutral and would favour wireless technology over wireline.

1184   Most of the discussion in this proceeding regarding comparative obligations of CLECs and WSPs is focused on long-distance equal access. However, this is not the only obligation that WSPs do not share with CLECs. CLECs also have an obligation to interconnect with other LECs, WSPs and IXCs as reflected in the CLEC model tariff, including shared cost interconnection with other LECs.

1185   They also have the obligation of separating outgoing traffic by terminating carrier and by terminating switch, that is high-usage bill and keep trunks.

1186   And lastly, tandem calls where high-usage bill and keep trunks do not exist.

1187   In TELUS's view no wireless carrier should get the benefits of LEC-shared cost interconnection without meeting all of those associated obligations.

1188   Conversely, should wireless carriers be able to obtain shared cost interconnection but be relieved of any LEC obligation, that relief should also be applied to all other LECs.

1189   The Commission has also asked how wireless carriers could obtain the same benefits and obligations as other carriers irrespective of whether they are vertically integrated.

1190   However, whether a wireless carrier is vertically integrated or not is irrelevant to the benefits and obligations of shared cost interconnection. This is because a vertically integrated telecommunications entity has no inherent interconnection advantages over a non-vertically integrated wireless carrier.

1191   Effectively, interconnection allows and ensures that a carrier's customers can communicate with customers on another carrier's network with the same level of technical quality regardless of whether one carrier is vertically integrated or not. There may be economies of scale in vertical integration, but that does not affect the ability to interconnect or the quality of the connection.

1192   It is also important to recognize that TELUS and other ILECs must fulfil obligations that standalone wireless companies avoid. These include obligations to serve in high-cost areas and wholesale and retain tariff obligations.

1193   In any event, all wireless carriers, irrespective of whether they are vertically integrated or not, choose how they wish to interconnect. If they choose to become a wireless LEC, they can utilize shared-cost interconnection directly with any other LEC.

1194   Alternatively, if they do not choose to be come a wireless LEC wireless companies can also obtain shared-cost interconnection indirectly through a partnership with a LEC, affiliated or otherwise.

1195   Finally, they can interconnect as a customer of a LEC by using the wireless access service tariff.

1196   TELUS itself continues to lease wireless access services in many areas. All of these interconnection mechanisms are in use today. Accordingly, there is no shortage of options for WSPs across the country in virtually any exchange, irrespective of whether they are vertically integrated or not.

1197   Bell has requested that wireless access services be forborne in exchanges where there is another CLEC present. TELUS does not agree. Access to WAS services should be available as an alternative for those WSPs that do not wish to implement shared cost interconnection. As a result, WAS should be made available via mandated rates.

1198   In the event that the Commission were to determine or consider that WAS tariffs should be forborne, TELUS could agree to a forbearance order in that respect capped at the existing rates.

1199   Having said that, ILECs and WSPs should be free to negotiate off-tariff arrangements for WAS services. This will allow the ILEC to compete with CLECs for the provision of WAS services, increasing the reliance on market forces, but would ensure that all WSPs will continue to have tariffed access to WAS.

1200   The Commission has also asked whether wireless carriers should be required to interconnect directly with the small ILECs. TELUS does not provide any comments on this issue at this time, but reserves the right to address the issue in its oral rebuttal.

1201   To conclude our opening statement, we would like to summarize our position on each of the questions asked by the Commission.

1202   Question 1: Does the natural evolution from circuit-switched to IP interconnection facilities require regulatory intervention?

1203   No. Most carriers are already moving to IP technologies and networks. This is happening without regulatory intervention, and this technological change has not been impeded because of the circuit-switched interconnection regime. For end-customers, a voice call is exactly the same, whether delivered using IP interconnection or circuit-switched interconnection.

1204   Question 2: Should the Commission mandate IP-based network interconnection and establish basic rules or should it be commercially driven?

1205   IP interconnection does not need to be mandated. If carriers wish to interconnect on an IP basis they can negotiate such an arrangement. TDM remains an well understood, widely available interconnection technology capable of carrying today's voice interconnections, and is the predominant method to provide voice service for customers in Canada.

1206   Question 3: To what extent, if any, should the Commission forbear from the regulation of network interconnection for voice services?

1207   At the present time, with circuit-switched interconnection in place, IP interconnection can be forborne. Once IP networks become the predominant means of serving voice customers, the Commission can then examine whether IP interconnections should become the default mandated regime. That would mean that the tradition circuit-switched interconnection could be forborne.

1208   Question 4: Should wireless carriers be treated as equal carriers with the ILECs and therefore be entitled to shared-cost interconnection?

1209   If any carrier wishes to obtain LEC interconnection rights, it must fulfil the same obligations that all other LECs fulfil.

1210   Question 5: What measures need to be taken to ensure that wireless carriers have the same benefits and obligations?

1211   A vertically integrated telecommunications entity has no inherent interconnection advantages over a non-vertically integrated wireless carrier. All wireless carriers, irrespective of whether or not they are vertically integrated, choose how they wish to interconnect; either via a shared-cost interconnection with an ILEC as a wireless LEC directly, indirectly a LEC, affiliated or otherwise, or as a WSP using WAS services.

1212   Question 6: Would it be appropriate for the Commission to forbear from regulating wireless access service?

1213   TELUS does not believe that WAS should be forborne with the caveats that I included earlier. WSPs should continue to have the choice of determining if they wish to obtain shared-cost interconnection provided they meet all of the LEC obligations or to obtain interconnection services via the WAS tariff. However, ILECs should be permitted to offer WAS at off-tariff rates in all locations.

1214   Question 7: Should existing rules be modified to require wireless carriers in small ILEC territories to establish direct network interconnection arrangements with the small ILECs?

1215   As I said in the earlier part of this statement, we have no comment on this issue at this time.

1216   With that, this concludes our opening presentation, and we are pleased to take any questions you may have.

1217   THE CHAIRPERSON: Well, thank you for your presentation.

1218   In paragraph 19, page 10, you say, "..vertically integrated telecommunication entity has no inherent interconnection advantages over a non-vertically integrated wireless carrier." I find that statement stunning.

1219   MR. WOODHEAD: Sorry, could you just --

1220   THE CHAIRPERSON: Paragraph 19, page 10, middle of the paragraph. You say, "This is because a vertically integrated telecommunication entity has no inherent interconnection advantages over a non-vertically integrated wireless carrier."

1221   MR. WOODHEAD: That is correct.

1222   THE CHAIRPERSON: TELUS Mobility either connects with TELUS, presumably using the WAS tariff and paying -- you pay yourself, or if you are outside TELUS's territory I presume you do it through a CLEC that is owned by TELUS?

1223   MR. WOODHEAD: In territory we would use the WAS tariff of TELUS the ILEC, out of territory we either use TELUS the CLEC interposed between us and the regional ILEC or we lease WAS from an ILEC or another CLEC.

1224   THE CHAIRPERSON: Right. But started out this morning, the amount of money that you spend on WAS for TELUS Mobility is very small.

1225   MR. WOODHEAD: Other people's WAS?


1227   MR. WOODHEAD: Is smaller than what we pay inter-corporately in territory. Perhaps Orest may want to --

1228   THE CHAIRPERSON: I mean, I am not trying to disclose any confidential information here, but if I understand most of your Mobility tariff gets interconnected either with TELUS directly or with TELUS as a CLEC, and there is a very small amount where you actually pay a WAS tariff to somebody else.

1229   MR. WOODHEAD: Correct.

1230   THE CHAIRPERSON: Right.

1231   MR. WOODHEAD: But I think, if I may --


1233   MR. WOODHEAD: -- the history of the WAS tariff is rather interesting. And I think you have been alluding to this this morning and early this afternoon. And really what I think you are trying to get at is where did all of the WAS revenues go and what happened there.

1234   THE CHAIRPERSON: No. But, I mean the WAS -- but originally established, made a lot of sense. But now that, you know, when it is 10 years, 14 years later, you have a totally different constellation. If you are an independent wireless carrier, the only way you say, well, become a CLEC. Becoming a CLEC means you have to offer equal access. TELUS Mobility does not offer equal access.

1235   MR. WOODHEAD: But that is incorrect.

1236   THE CHAIRPERSON: TELUS Mobility --

1237   MR. WOODHEAD: Sorry, I think that is incorrect, sir.

1238   You could become a wireless LEC, in which case you would have to, you know, bear the burden of the equal access obligation, like Fido did back in -- prior to the time that Rogers purchased it or you are affiliated with another LEC.

1239   So, for example, let's look at WIND Mobile and Globalive. I actually looked at, or actually John looked at on my request, their affiliate CLEC certifications prior to the launch of WIND some three years ago or whenever it was.

1240   And they have an affiliate LEC, Yak, that entered in Toronto and I believe it is Oakville, Hamilton, Calgary, they have believe entered in Montreal where WIND isn't present. But not coincidentally, they have entered as a LEC in those exchanges where WIND has launched, that is another way. You don't necessarily have to become a wireless LEC.

1241   THE CHAIRPERSON: Yes, but you took another one which effectively is integrated. I mean, the way WIND and Yak --

1242   MR. WOODHEAD: But it is not affiliated is what your point was. You were saying to me that because it is --

1243   THE CHAIRPERSON: If you are an independent -- you are a non-vertically integrated wireless carrier, all right? And you say several times in your submissions, so did Bell and everybody else, listen, all you have to do is become a CLEC. If you become a CLEC, then you have to offer equal access.

1244   Yet none of you, whether it is TELUS Mobility, Bell Mobility or so offers equal access. So in effect, this is a condition which made a lot of sense in 1997, but it is questionable what that means now because it puts them at a distinct disadvantage if they want to become a CLEC.

1245   Now, they can work around it, presumably, if they want to, but at a cost by affiliating themselves with some other CLEC.

1246   MR. WOODHEAD. Okay. That's one of -- yes, they have three options, I grant you. And if -- so to your point, you're suggesting -- I assume what you're positing is that they then become -- or have access to shared cost interconnection without the equal access of --

1247   THE CHAIRPERSON: You're saying -- and I'm taking issue with --

1248   MR. WOODHEAD: And I'm suggesting --

1249   THE CHAIRPERSON: -- to saying that a vertically indicated mobile carrier has no advantage over a non-vertically. And it seems to me, no, the non -- the vertically indicated one can take advantage of its parent or of the CLEC of the parent if you don't have that.

1250   And the big result of that is you avoid equal access, unless I'm missing something here.

1251   MR. WOODHEAD: Well, I guess I was -- perhaps I was reading too much into what you were saying, then.

1252   Indeed, if you invest in facilities and setting yourself up as a CLEC and you have an affiliate wireless operation, there are benefits that flow from that as opposed to in Canada today, as I understand it, there then would be two independent, in your definition, wireless carriers who have -- I presume have chosen to partner with another LEC or they could take the WAS tariff of the ILEC.


1254   MR. WOODHEAD: And you were trying to suggest, then -- and I'm not -- I'm just trying to understand your point.

1255   THE CHAIRPERSON: Sure. Absolutely.

1256   MR. WOODHEAD: You're trying to suggest that because of these advantages of having invested in CLEC facilities and expanding their operations into a CLEC, other -- as opposed to becoming a wireless CLEC or wireless LEC, that that advantage could be overcome by broadening shared cost interconnection without equal access to them.

1257   Yeah, I could. I guess I'm just -- that would be another option, but they have two other options available to them, one of which I suspect they are taking, and there goes your WAS revenues because they're partnering with some other unaffiliated LEC.

1258   THE CHAIRPERSON: Well, you see, that's what -- you're putting your finger on it. I'm trying to figure out whether it's just a non problem, as you suggest, or is it actually, you know, they're driven to -- they clearly want to use as little as possible and they certainly don't want to offer equal access so that basically you drive them into an affiliation with a CLEC.

1259   MR. WOODHEAD: Well, I mean, on the record of this proceeding, I read with interest, for example, so Wind would suggest that yes, they want shared cost interconnection but they don't want equal access.

1260   Well, they don't want equal access because it's a revenue stream that they enjoy, but they would like to lower their costs of interconnection by virtue of getting shared costs overtaking the last tariff. I think that's essentially --

1261   THE CHAIRPERSON: Yeah, but you enjoy that revenue stream, too, as TELUS Mobility. That's my whole point.

1262   If you take your example, you compare Wind to TELUS Mobility, you are both --

1263   MR. WOODHEAD: In some locations; not everywhere.

1264   THE CHAIRPERSON: No, no. Of course not. But you are -- yes, you don't -- you either pay the work to yourself or you go work through the CLEC, so you're in a much better position than they on this point, so I can understand why they say, you know, saying make us be -- we can became CLECs, that's really an empty right because the price for doing that is way too high. it would have to mean offering equal access which nobody else offers.

1265   MR. WOODHEAD: No. See, I guess I'm -- perhaps I'm not articulating it, sir.

1266   In my example -- like without butting heads with you again on this, the --

1267   THE CHAIRPERSON: We're both trying to get our point across.

1268   MR. WOODHEAD: The Wind Globe Alive example, and not to continually use them, but that is an example of a wireless carrier, a new entrant wireless carrier whose parent happens to have a small CLEC operation which, I don't know, but I -- presumably, and it's not coincidental that they have entered in exchanges as Wind has rolled out, that they are using to obtain those benefits without Wind having to assume the equal access obligation.


1270   MR. WOODHEAD: There are two other examples, and I was trying to get at where you're coming from, are Public Mobile and Mobilicity.

1271   THE CHAIRPERSON: Right.

1272   MR. WOODHEAD: They don't appear, as far as I know, to have parent CLEC operations. And I think that's what -- where you're getting at.

1273   THE CHAIRPERSON: That's where I'm getting, exactly.

1274   MR. WOODHEAD: And I'm suggesting to you that I don't know that you need to unpack and untie and pull bits and pieces of the interconnection regime -- or change them, sorry, in the way that we're talking so that shared cost interconnection is given to all WSPs irrespective of their ability or interest in implementing EA because they have another option other than WAS which I suspect they've taken, which is to be partner with whomever. I don't know.

1275   It could be Allstream, it could be Bell, it could -- the CLEC. I don't know who it is. But I suspect they're doing that because it's cheaper than taking WAS. And that is why you have seen in the interrogs.

1276   And when I -- you know, frankly, when I was looking at our own responses, the precipitous decline in WAS revenues is because everybody else is either partnering with, acquiring or starting their own CLEC operations.

1277   THE CHAIRPERSON: Okay. But you've -- surely you can count partnering with a CLEC or partnering with yourself, which is what TELUS Mobility is doing, or Bell Mobility is doing, is a different financial proposition. So therefore --

1278   MR. WOODHEAD: I agree. I agree.

1279   THE CHAIRPERSON: Are you saying that there are no benefits out of integration?

1280   MR. WOODHEAD: I don't think that there are -- I think that there are benefits of integration that relate to having spent -- if you're going to spend money on doing this, and I -- that's -- I understand that that's where you're getting at.

1281   But in our case, we have engaged, as Bell and MTS Allstream have, we have engaged -- and others, frankly -- have engaged in a national build program moving from Alberta and British Columbia and eastern Quebec to cover all of Canada and we have built out CLEC facilities and entered as a CLEC.

1282   And yes, part of that -- the benefit of those investments have accrued to TELUS Mobility because we have been able to then enjoy the shared cost interconnection that the CLEC gets without having to necessarily -- or without having to do EA.

1283   But I guess my -- you know, I don't -- yes, is that an advantage? Sure. But you know, we've invested heavily to get that advantage.


1285   Len, you have some questions?

1286   COMMISSIONER KATZ: Yes, thank you, and good afternoon.

1287   I'm going to try and follow up on those issues you were just talking about with the Chairman as well.

1288   Outside of your operating wireline territory, which is predominantly British Columbia and Alberta, what arrangements do you have for interconnection?

1289   Do you, in fact, interconnect on the wireless side or do you use Bell Canada's joint network that you have to settle your interconnection traffic?

1290   MR. WOODHEAD: I'm not -- which network are we talking about now?

1291   COMMISSIONER KATZ: Wireless network. You've got a national wireless network --

1292   MR. WOODHEAD: Yes.

1293   COMMISSIONER KATZ: -- jointly with Bell Canada.

1294   MR. WOODHEAD: Yes.

1295   COMMISSIONER KATZ: And presumably, it interconnects across the country.

1296   MR. WOODHEAD: Yes.

1297   COMMISSIONER KATZ: I'll hypothesize that everything that's in TELUS's telephony operating territory interconnects into TELUS's territory, everything in Bell Canada's interconnection Bell Canada's, and then there's some sort of arrangement in Saskatchewan and Manitoba that you folks have.

1298   MR. WOODHEAD: John, do you know?

1299   I mean, I would -- the -- in ILEC territory, we would interconnect through the WAS tariff, TELUS's WAS tariff. In -- outside of territory, we would use the CLEC to interconnect, interpose the CLEC. And where we are not a CLEC, we would take WAS from Bell --


1301   MR. WOODHEAD: -- or others.

1302   COMMISSIONER KATZ: There's an interrogatory that you responded to as part of this proceeding, and hopefully you have it. It's TELUS MTS Allstream 30 June-104.

1303   MR. WOODHEAD: That may take me a sec here.


1305   MR. WOODHEAD: I have it. It's Tab 29, guys. It's MTS -- oh, sorry. Is it a MTS to TELUS?

1306   COMMISSIONER KATZ: It's called TELUS (MTS Allstream) 30 June 104. So I guess it's an MTS Allstream interrogatory to TELUS.

1307   Have you got it there?

1308   MR. WOODHEAD: Is it 104, sorry?

1309   COMMISSIONER KATZ: Yes, 104. The question is:

"Confirm whether your company has or your member companies, as applicable, have been refused the right to interconnect its IP network to other Canadian carriers' IP networks, and describe the circumstances of your company's request and the other carriers' denial."

1310   Do you have that?

1311   MR. WOODHEAD: I do. Can I just --

1312   COMMISSIONER KATZ: Yeah, I'll let you read it.

--- Pause

1313   MR. WOODHEAD: Okay, I'm ready.

1314   COMMISSIONER KATZ: Okay. In the third paragraph, there's an answer that reads as follows:

"TELUS's regulatory affairs department has had no occasion to address a refusal to interconnect of the nature described in the interrogatory."

1315   That's a very narrow answer to a very broad question, and I guess I'm trying to understand whether -- if the question -- well, the question was a broad question. The answer is very narrow.

1316   If I was to say would that same statement hold if you said all of TELUS's operations have had no occasion to refuse anybody?

1317   MR. WOODHEAD: I will check here with Mr. MacKenzie, but I believe the answer is -- there's no attempt to deceive here, or narrow it. The -- we have never been refused, but I'll just check that.

--- Pause

1318   MR. WOODHEAD: We have not raised it and been refused as a company.

1319   COMMISSIONER KATZ: Okay. Thank you.

1320   I want to come back to the issue of IP to IP interconnection. And the position you're taking is allow TDM to be the default, let IP evolve and mature to a point where if it becomes a standard, then establish it as a default.

1321   Is that your position, basically?

1322   MR. WOODHEAD: It is, other than we don't quibble that it will become the standard. And perhaps Zouheir has something to add there.

1323   COMMISSIONER KATZ: Okay. In your remarks on June 2nd, 2011, which is very much akin to what you've presented here in paragraph 5, in response to that whole IP issue, you state:

"TELUS proposes that suitable demand for such services must be present, that standard tariff procedures would be used for the approval of the rates, terms and conditions of such service and that any LECs offering such a service would be fully compensated through tariff charges."

1324   What do you mean by "suitable demand"? Is there a threshold here that you're talking about?

1325   I've heard others this morning talk about standards and the need for standards to develop. Here, I don't see an issue of standards; I see an issue of demand.

1326   So are you saying the standards are fine, everything's fine, just the take-up has not materialized yet and when it does take up, you see this becoming the de facto standard? And if so, what is that suitable demand? Is it 10 percent, is it 20, is it 51?

1327   MR. WOODHEAD: Mr. Edora behind me here indicates that this statement refers to only for IXEs and WSPs. It's carrier customers, not co-carriers.

1328   COMMISSIONER KATZ: I'm sorry. I don't understand, then.

1329   MR. WOODHEAD: Okay. So the current regime is -- interconnection regime is that there's -- there are three different regimes for LECs as co-carriers and then there's an interconnection regime for IXEs as customers and WSPs as customers. And this was in reference to customers.


1331   MR. WOODHEAD: It's not about LEC to LEC interconnection.

1332   COMMISSIONER KATZ: Okay. So if it's not between LEC to LEC, let's say it's customer to LEC, what is suitable demand? What is it you're looking for before you entertain an application by a customer to have an IP to IP connection?

1333   MR. WOODHEAD: We actually have an IXE, if you -- in one of our interrogatories. There is a foreign IXE or a couple of foreign IXEs, I believe, John, where we have an IP interconnection with them.

1334   I don't know, I don't know that I can answer you. I can undertake to answer you, but I don't know that I can answer you that it's -- what granular level of demand, if it's a commercial arrangement that they came to us with.

1335   We have made -- we have a trial -- just to get back to your point before we clarified that this wasn't about LEC to LEC. We have a lab trial with a CLEC in our region where we are in the early stages of testing LEC to LEC IP interconnection and we, as a CLEC, interconnect with a customer and accept their IP traffic and do the conversions for them, for which they pay.

1336   COMMISSIONER KATZ: You said it's a foreign carrier. I'll come back to the question and say, how about Canadian carriers.

1337   And in concert with that, the response to the question I just asked you, were you ever approached by a Canadian WSP, I guess, customer looking for IP to IP connectivity?

1338   MR. WOODHEAD: We have an arrangement with Bell Canada and SaskTel to do -- nothing to do with voice, incidentally, which is not done on an IP to IP basis. It's a voice -- sorry. It's a circuit-based service. But all of the data stuff is IP to IP. No one else.

1339   COMMISSIONER KATZ: Okay. Mr. Mansourati, you gave a compelling argument for why there is no impact on voice quality with TDM versus IP.

1340   There were discussions this morning about innovation and stifling of innovation. And everything that you've presented this afternoon all was caveated with the word "voice" throughout that whole three paragraphs that you presented to us.

1341   Is there any implications on -- from your perspective on the limitation of innovation by not promoting IP to IP as quickly as you're suggesting, anyways?

1342   MR. MANSOURATI: No, and you need to look -- if you step back and look at the various infrastructure media that allow you to carry voice, I can show you that there is an evolution towards voice over IP in each one of them at different places.

1343   So while innovation is not being stifled, we have to also recognize that innovation goes through cycles and it needs to come to a standard maturity in a sense and have interoperability established.

1344   And before I get there, I will suggest that you have CISCs as a good agent or a good tool to track and see how well progress is being made on inter-operability specifically, be it at the national level or at the international level.

1345   So I'll come back to that in a minute, but let me start by talking about the copper, the fibre and the licence spectrum approach.

1346   If you look at the copper side today, you will see that most of our customers are TDM -- have TDM voice plus HSIA plus, in some cases, IPTB services.

1347   In the fibre case, we offer voice over IP because it makes sense, and you understand that in any greenfield area today we're deploying fibre to the home.

1348   On the licence spectrum side, if you look at 3G, 4G networks today, although voice is packetized, it is essentially a circuit-based service and it is treated as such on the access side even though, after that, it is packetized to be transported and a decision is made within the core of the network as to the direction of that service.

1349   If it's going to a voice over IP customer, then it's packetized and addressed as such. If it's going to a copper customer, it goes as TDM. If it's going back to the wireless network, it goes back as a circuit-based service.

1350   If you follow the LTE evolution today to LTEA and you look at voice over IP over LTE, that, in my opinion, is one of the accelerators of the adoption of voice over IP in addition to fibre to the home.

1351   So there are sort of market agents that are accelerating the introduction of voice over IP on the access side regardless of whether the interconnect is IP to IP or TDM.

1352   So there are certainly advances that are happening. We are playing an important role in those, and we are participating in 3G PP standard fora. We are participating also in ITU cases in order to ensure that we are adopting the standard approach to doing it, for example, in the case of VOLTE, voice over IP over LT.

1353   And when the time is right and the standard is mature, we will enter into interoperability with various service providers around us in order to ensure that this will work.

1354   So there are three elements that -- on which -- three infrastructure media, if you like, on which the voice over IP could be carried. The two of them that are accelerating adoption of voice over IP are fibre and licence spectrum.

1355   COMMISSIONER KATZ: Okay. And I thought I heard Mr. Woodhead say that you do have IP to IP connectivity on the wireless side with SaskTel Mobility, or SaskTel, and Bell Mobility, or Bell Canada?

1356   MR. MANSOURATI: Yeah.

1357   COMMISSIONER KATZ: And presumably, you'd entertain anybody else seeking the same thing under the same terms and conditions as long as the technology was the same and I guess there were some caveats in there somewhere.

1358   MR. WOODHEAD: And assuming a commercial arrangement could be reached.

1359   COMMISSIONER KATZ: Okay. Those are my questions, Mr. Chairman.

1360   THE CHAIRPERSON: Candice?

1361   COMMISSIONER MOLNAR: Thank you.

1362   You commented that at any time there need only be one mandated interconnection regime, and today it should remain the circuit switched regime and in the future it, at some point, will become the IP-based interconnection regime, if I understood you correctly, that would be mandated.

1363   MR. WOODHEAD: That's correct. There should only be one mandated regime at a time.


1365   One of the things that I'm trying to sort out in my head because I heard, I think, from you and certainly from others before that we should allow commercial arrangements to proceed and if companies can reach commercial arrangements on IP to IP interconnection, if it makes sense, to allow that to go forward now and continue on and essentially a forborne nature or whatever that might be, off tariff arrangements, however that might be.

1366   But what I'm wondering is if we go ahead with IP-to-IP interconnection to be in commercial arrangements now and at some point in the future it becomes the mandated interconnection arrangement, and the rules, if you will, of those mandated interconnection arrangements don't align with the commercial arrangements in place, what do we do about that?

1367   Like does it make sense to let this all just sit for now and let all these commercial arrangements build up and then try to superimpose on top of it at some point in the future a set of rules that might put in place different rules for points of interconnection or rates or terms or something that don't align and do that in the future versus do it early, you know, and let commercial arrangements evolve under a known set of rules?

1368   MR. WOODHEAD: I think the former. But just to clarify, our position is that you should go with the -- you should maintain the existing TDM interconnection regime as it is today and allow people, as they are doing, to make commercial arrangements on IP-to-IP.

1369   If you choose not to do that, which I don't recommend that you do this, but if you were to, in my view, prematurely mandate IP-to-IP interconnection, then conversely, you need to forbear from TDM interconnection, and parties should negotiate any, you know, hangover transitional TDM arrangements.

1370   In that respect, and it's sort of -- Commissioner Molnar, although you didn't say this, I think it's implicit in your question and it certainly has been raised by some of the other parties and particularly the CNOC panel that was just up, that somehow we have some, you know, innovation-stifling agenda here and that we are going to delay at all costs IP.

1371   In addition to all of the things that Mr. Mansourati just took you through, there's another development that nobody has raised.

1372   In the ILEC architecture, predominant switching technology is DMS. In our case it's DMS and GTD-5 switches, TDM-based switches.

1373   The manufacturer and Genband, the company that took over that part of the business from Nortel, have served notice that they will not support these switches beginning December 31st, 2016.

1374   So for those that worry that we are going to sit atop our DMS switches, twiddling our thumbs, there's an externality here that will require that we get to it.

1375   COMMISSIONER MOLNAR: I just want to assure you that I wasn't asking you a question suggesting that you were stifling innovation.

1376   I was asking a more perhaps simple question in that it's not obvious to me that the rules for IP-to-IP interconnection follow the same rules as the TDM as it regards such things as points of interconnection.

1377   It's not obvious and so what has been suggested is that we maintain the rules we have in place and allow commercial arrangements on the IP side to be created as is reasonable.

1378   But is there some risk that at the end of this when IP becomes the predominant form of interconnection, it's the predominant form of access and so on, that we have in place a number of IP interconnections that will then not align with what ultimately becomes the mandated form?

1379   I guess my concern is we're doing this transition from TDM today to IP in the future and we haven't defined the future. But you say, well, ultimately, you will need to.

1380   MR. WOODHEAD: No.

1381   COMMISSIONER MOLNAR: It will be the mandated form of interconnection.

1382   So at what point do people know the rules as it regards what that mandated form of interconnection will be?

1383   MR. WOODHEAD: I guess then you have misunderstood me because I'm not presuming that you need to mandate anything. Actually, the opposite.

1384   I'm presuming that the industry, as it would in CISC or wherever, commercial negotiations, will sort this out. It will occur vis-à-vis standards developed internationally, best practices between carriers, and I'm not presuming that there needs to be a mandate.

1385   What I'm suggesting is that this will happen, it is happening, carriers are doing it and you may not need to mandate it, and hence, I'm suggesting that you forbear from it and allow carriers to do this until such time as there seems to be some pressing need for you to intervene, which I don't think those conditions are present.

1386   COMMISSIONER MOLNAR: I guess I understand your position.

1387   THE CHAIRPERSON: Okay. You mentioned that you have some IP-to-IP interconnection trials with another LEC or with Bell Canada.

1388   MR. WOODHEAD: It's not a trial yet. We are in discussions with a CLEC in our territory to do an IP-to-IP interconnection lab-to-lab just to see how the systems join together.

1389   The problem is -- so, for example, let's just go back and look briefly, if I may, at the Bell or SaskTel or TELUS thing that's under way and it's in production.

1390   The thing that makes it easier, as Mr. Mansourati explained to me this morning, in that respect is the equipment manufacturers that we are using are identical and so the protocols are the same. So we have no concern and that works fairly well.

1391   Where you sometimes get a disconnect -- and I'll pass it over to Mr. Mansourati because he's far more articulate on this than I am -- but when you're dealing with different core network things and IP equipment manufacturers between networks, that's where the problem occurs and that's what we're testing.

1392   THE CHAIRPERSON: I understand that. You heard me this morning quoting Yak and let me quote it again. Here, they said:

"In order to expedite the availability of IP-to-IP interconnection, Yak submits that the Commission should direct ILECs to make public any IP-to-IP interconnection arrangement, trial or production..."

1393   Here we're talking about a trial.

"...they have in place between their respective CLEC operation and any incumbent LEC. At a minimum, the technical specifications used for such interconnections should be published and similar interconnection arrangements should be made available to non-ILEC-affiliated CLECs." (As read)

1394   Obviously what they have in mind is you are at the cutting edge, you're experimenting with it, you know, whatever knowledge you gain, whatever experience you gain should not only be your property but be shared with others in order to drive the IP-to-IP interconnection, that everybody benefits from it.

1395   MR. WOODHEAD: Depending on -- I mean I don't know. I understand what they're saying broadly.


1397   MR. WOODHEAD: I don't know exactly what they want to know. Do they want to know exactly how my network operates and for us to publish it far and wide? I don't know that we would necessarily be interested in that.

1398   THE CHAIRPERSON: Let me put it the other way around. Once these trials are completed, what are you going to do with them? What are you going to share? Other than you and that CLEC with whom you are doing this trial, how are they going to benefit from the experience that you have out of this trial?

1399   MR. WOODHEAD: Perhaps I'll pas it over to Mr. MacKenzie. I don't know. He's more familiar with the early stages of this.

1400   MR. MacKENZIE: We haven't really concluded anything like that. We are participants in the CISC. That, we believe, is the forum for all the issues that might come up. If we thought that there was an issue, that there was something wrong with the CISC standards, I imagine I would raise it there. I don't think it has anything to do with --

1401   THE CHAIRPERSON: Well, we're going to hear from Yak this week, but I would suggest for next week's reply you address it.

1402   You are telling me: Sit back, don't do anything, let it work out commercially, the companies, it's going to be in their interest to work these things out.

1403   If I take that, what assurance do I have -- which is clearly what the others are saying -- that whatever comes out of this is going to be universally changed and therefore accelerates the adoption of the IP-to-IP interconnection?

1404   MR. WOODHEAD: I think that's a fair point, Mr. Chairman. I do.

1405   THE CHAIRPERSON: I don't want you to answer off the cuff. Just think about what you could do to address it.

1406   MR. WOODHEAD: Well, just -- and we can certainly address this later if you like.

1407   THE CHAIRPERSON: Right.

1408   MR. WOODHEAD: And it's not off the cuff because I've been thinking a little bit about this.

1409   Obviously, the CISC has been looking at IP interconnection and there's some gaps and some things left that need to be discussed, and it won't be solved certainly by people like me. It will be engineers from the various parties.

1410   And if Yak or Wind or whoever is speaking there has issues, I would encourage them, as we are members of CISC, to come there and hash that out. I think that's one thing that the Commission can facilitate.

1411   I think also, without being -- like the characterization "sit back and relax," I'm not exactly taking --

1412   THE CHAIRPERSON: I am being colloquial.

1413   MR. WOODHEAD: Yes. Fair enough. Fair enough.

1414   So the CISC activity and I think the Commission, if it was to do what we're suggesting, that you should have another look at this in, you know, a two-three-year timeframe and let's see where we're at with it.

1415   Then, you know, you can benchmark how many of these agreements have you got, how commercially successful has it been, are there levers that the Commission needs to pull, frankly.

1416   THE CHAIRPERSON: Okay. Thank you very much. I look forward to hearing from you next week then.

1417   I think that completes it for today, Madame?

1418   THE SECRETARY: Yes, it does, Mr. Chairman.

1419   THE CHAIRPERSON: And what time do we meet tomorrow morning?

1420   THE SECRETARY: We will resume tomorrow morning at 9:00 a.m.

1421   THE CHAIRPERSON: Okay, thank you.

1422   THE SECRETARY: Thank you.

--- Whereupon the hearing adjourned at 1524, to resume on Tuesday, 25 October 2011 at 0900


Johanne Morin

Karen Paré

Jennifer Cheslock

Monique Mahoney

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