ARCHIVED - Transcript, Hearing 2 October 2014
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Volume 4, 2 October 2014
TRANSCRIPTION OF PROCEEDINGS BEFORE THE CANADIAN RADIO-TELEVISION AND TELECOMMUNICATIONS COMMISSION
Review of wholesale mobile wireless services
140 Promenade du Portage
2 October 2014
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
Review of wholesale mobile wireless services
Crystal HulleyLegal Counsel
John MacriHearing Managers
140 Promenade du Portage
2 October 2014
- iv -
TABLE OF CONTENTS
PAGE / PARA
14. MTS, Saskatchewan Telecommunications and TBayTel852 / 4995
15. Primal Technologies 932 / 5501
16. Bell Mobility 951 / 5600
17. The Public Interest Advocacy Centre, the Consumers' Association of Canada, the Council of Senior Citizens' Organizations of British Columbia, and the National Pensioners Federation1043 / 6252
- v -
PAGE / PARA
Undertaking928 / 5471
Undertaking929 / 5476
Undertaking1002 / 5925
Undertaking1007 / 5968
Undertaking1009 / 5982
Undertaking1011 / 5995
Undertaking1014 / 6025
Undertaking1018 / 6060
Undertaking1025 / 6127
Undertaking1067 / 6365
Undertaking1072 / 6389
Undertaking1078 / 6431
--- Upon resuming on Thursday, October 2, 2014 at 0901
4987 LA SECRÉTAIRE : À l'ordre, s'il vous plaît. Order, please.
4988 LE PRÉSIDENT : Merci, Madame la Secrétaire.
4989 Just before we get started, I just want to welcome to the hearing room a group of about 25 journalism students from the University of Carleton who are here with Simon Doyle, who is, I guess, teaching the course, and they have an assignment here to do following this hearing. So welcome.
4990 So there will be even more scribes following what everybody is saying in the room, but I'm sure they will do an excellent job and base their article on what is actually said in the room and not what comments are made by others who aren't in the room. But in any event, I digress a little bit.
4991 Alors, Madame la Secrétaire, s'il vous plaît.
4992 LA SECRÉTAIRE : Merci, Monsieur le Président.
4993 We will start today with item 14 on the Agenda, which is MTS, Saskatchewan Telecommunications and Tbaytel.
4994 Please introduce yourselves for the record. You have 20 minutes for your presentation.
4995 MR. SHEPHERD: Thank you and good morning, Mr. Chairman and Commissioners. My name is Kelvin Shepherd, President of MTS. To my immediate right is Paul Norris, Vice-President of Brand and Consumer Marketing for MTS.
4996 To my left is Ron Styles, President and CEO of SaskTel; followed by John Meldrum, VP Corporate Counsel and Regulatory Affairs for SaskTel; Dan Topatigh, President and CEO of Tbaytel; and David Wilke, Regulatory Analyst for Tbaytel.
4997 Behind me are Russ Friesen, Grainne Grande and Justin To of Regulatory Affairs for MTS; and Robert Hersche, Regulatory Affairs for SaskTel.
4998 Before I begin with our submission, I would like to take care of a procedural matter. We would like, with your permission if you please, to introduce two pieces of new evidence.
4999 The first is an update to a graph submitted in our August 20th intervention on wireless data rates. The second is a table demonstrating urban versus rural costs in Saskatchewan that we will speak to in our presentation.
5000 THE CHAIRPERSON: Right. Just before we get to that, I take it the information updated wasn't available beforehand and that's why you're asking for it to be added to the record?
5001 MR. SHEPHERD: It's the most recent information we have available, yes.
5002 THE CHAIRPERSON: And what of the other one?
5003 MR. SHEPHERD: The rural cost information, it was further work that we -- as we followed the proceedings we understood there was more questions and information that was desired on that topic. So we undertook to do that work and wanted the opportunity to speak to it with you today.
5004 THE CHAIRPERSON: Okay.
5005 So we'll take that under advisement. Thank you.
5006 MR. SHEPHERD: Thank you.
5007 Thank you for the opportunity to appear before you today. Together we represent three successful regional carriers that provide competitive wireless services to over a million Canadians.
5008 In our submission today we want to emphasize our key message: that the regional wireless markets in Manitoba, Saskatchewan and Northwestern Ontario are different. We regional carriers and the competitive markets that we serve are unique in the Canadian marketplace.
5009 We have successfully competed in the provision of wireless services since its inception in Canada and we are proud of the network, the technology and the retail service packages we are able to offer to the residents in our respective territories.
5010 We are not one of the three national carriers. We simply do not have their size or their economies of scale. We are also not new entrants.
5011 While the public debate on wireless competition seems to focus on the battle between the national carriers and the new entrants in the bigger population centres of Southern Ontario, Quebec, B.C. and Alberta, we note that in Manitoba, Saskatchewan and Northwestern Ontario we are the successful alternative competitive carriers that the federal government and consumers seek.
5012 We draw your attention to the graph attached to our speech. Our respective territories are the most competitive wireless markets in the country. Consumers in our regions, regardless of carrier, can find packages at prices 30-40 percent lower than elsewhere in the country, saving consumers $350 to $400 per year.
5013 But not only do our consumers have better prices, they also have better service. Today, a significant proportion of our customers are on unlimited wireless data plans. The national carriers have no similar offers.
5014 In our respective territories we are also investing significantly in rural network expansion. SaskTel's 4G HSPA+ network now covers over 98 percent of Saskatchewan's population, while MTS' 4G HSPA+ covers over 97 percent of Manitoba's population. Moreover, MTS' 4G LTE network now covers over 74 percent of Manitoba's population, while SaskTel's covers over 56 percent of the Saskatchewan population. And Tbaytel's 4G HSPA+ network now covers over 92 percent of its serving area.
5015 To achieve this, to cover our proportionally larger rural serving areas, the regional carriers have typically spent a higher percentage of capital per dollar of revenue than the other major Canadian telecommunications companies, but we do so because network coverage is important to us. We are the home team.
5016 While we may be smaller and lack the economies of scale of the national carriers, our local presence means we are more closely attuned to the needs of our local customers. Our desire and our ability to serve the broadest possible area, including our most rural and remote communities, has been an important priority for us. This is why we have invested so much in our networks, while other carriers have not stepped up.
5017 I will now turn it over to my colleague Dan Topatigh.
5018 MR. TOPATIGH: Thank you, Kelvin.
5019 We submit to you, Commissioners, that consumers in our territories are better off than consumers elsewhere because of our competitive presence. In our territories, all consumers have access to more choice, lower prices and better service. We regional carriers have made a strong, sustained investment in new technology and broad network coverage within our territories.
5020 Consistent with the policy direction, we emphasize the Commission need regulate only where warranted. Regulation should be targeted. Regulation should seek to correct where market imbalance exists and, importantly, protect where competition is thriving.
5021 Where does market imbalance exist? The record of this proceeding thus far has been clear: It is the national carriers, with their scale, access to devices and network reach in Canada's most populous markets, who are the only choice for national roaming.
5022 The evidence of the new entrants is that with effectively no choice for roaming partners, they were hampered by the national carriers from truly entering into the market.
5023 With respect to the regional carriers and our own ability to achieve fair and reasonable access to roaming, we too faced challenges. Despite our regional network advantage, we had little choice but to go to the national carriers. We needed to negotiate in order to roam in Canada's most populous markets, to obtain international roaming and to achieve expanded access to devices and spectrum. We did, however, have some leverage to ensure that a fair negotiation was somewhat possible.
5024 To be clear though, in a commercial negotiation for wholesale wireless services, be they roaming, device access or the ability to negotiate with international suppliers, the national carriers held virtually all the cards.
5025 It is this imbalance, we suggest, the Commission must focus its efforts on.
5026 But we caution against blanket regulation. Blanket regulation may help consumers in some parts of the country, perhaps the most populous parts of the country, but it could harm the success story that we represent. It could harm the regional carriers' ability to compete with the national carriers and it could harm our ability to invest in rural network coverage.
5027 We are adamant about this point because we are already experiencing the harm caused by blanket regulation.
5028 In seeking to help the new entrants, who are highly unlikely to come to our territory, the federal government's newly implemented legislated cap on wholesale roaming has effectively removed the regional carriers' bargaining power with other carriers. It has allowed the national carriers to immediately gain access to regulated rates on the regional carriers' networks and thus it has weakened our ability to negotiate for international roaming, access to devices and spectrum.
5029 Already having built their own urban networks in our territories, the national carriers can now roam on our rural networks at blanket rates that are not reflective of what it costs to provision rural service. This removes the national carriers' incentives to invest in their own network coverage and weakens the regional carriers' business case for our own rural investments.
5030 I will now hand it over to Ron Styles.
5031 MR. STYLES: Thanks, Dan.
5032 Commissioners, with Bill C-31, the national carriers, with tremendous economies of scale, access to capital and the lion's share of Canada's spectrum, are now able to undercut us in our own markets using our own networks. They now no longer need to build their own rural network, nor use their valuable spectrum. This regime, unless changed, will leave considerable spectrum unused and deny many rural Canadians the benefits of enhanced mobile services long term.
5033 We want to make this point crystal clear: While Bill C-31's legislated cap may help the new entrants in many parts of the country, it is and will continue to do the opposite for competition in Manitoba, Saskatchewan and Northwestern Ontario.
5034 In the longer term, Bill C-31 will weaken the regional carriers' ability to provide a sustainable competitive alternative to the three national carriers. It also advantages the national carriers, not the regional carriers, by eliminating our ability to use our regional networks to negotiate for wholesale services nationally.
5035 We understand the desire of the federal government to promote competition and the success of the new entrants. Indeed, we've proposed that we would offer regulated roaming rates to help the new entrants. However, we must emphasize how important it is that the regulatory framework takes into consideration the real regional competitive variations in the Canadian marketplace.
5036 First, I want to say we do not oppose the existence of MVNOs; however, we oppose the mandating of MVNOs. We strongly disagree with CNOC's position that every aspect of the wireless industry needs to be tariffed and monitored. It is contrary to the policy directive, it goes against the Government of Canada's efforts to stimulate facilities-based competition and it undermines the objectives of enabling additional facilities-based carriers to enter the market. If introduced, the resulting impact will be that carriers will reduce their investment in their network, which will only hurt the Canadian consumer.
5037 Second, policy must be reflective of the differences in costs between urban and rural. In particular, we feel we must respond to claims that rural towers could actually cost less than urban towers. This is undeniably false.
5038 At SaskTel, we compared the cost structure for our urban and rural towers. First, it's important to understand that the costs to build rural towers are in general higher simply because they are stand-alone towers, which have to be much taller than our urban towers. Moreover, there is little opportunity to share space on another tower or building because there aren't a lot of other towers or tall buildings in rural areas. In addition, each tower needs kilometres of new fibre optics to connect it back to the network.
5039 Also attached to our presentation today is a graph which depicts both the average daily number of customers and usage volumes on our urban and rural towers. The comparison is quite stark with our high-cost rural towers, counting their customers in the hundreds versus the thousands for urban sites. Similarly, data usage on many rural towers is in the hundreds of megabits per day versus the thousands and tens of thousands of megabits per day on urban towers. In no uncertain terms, on a per-minute or per-megabits basis, traffic on rural towers is considerably more expensive.
5040 On rural service our key point is this: Commissioners, the regional carriers should not be forced to provide rural roaming service to any carrier at less than what it costs to provide that service.
5041 In our territories, we anticipate that the national carriers will only be roaming in rural areas as some have already built towers in the urban areas where the population and customer demand dictate a business case to build. If we're forced to offer the national carriers regulated roaming rates, it will be primarily in rural locations, and therefore any such regulated access must reflect the higher cost.
5042 Finally, any regulatory action should address only where there is market imbalance and competition is impaired. The Commission must consider the differences in scale, scope and negotiating positions of the different market actors, and regulate appropriately.
5043 We therefore propose the following:
5044 First, access to regulated wholesale mobile wireless services such as roaming should be granted only to smaller carriers, carriers with less than 10 per cent of the national market share based on revenues, effectively, the new entrants and the regional carriers.
5045 The regional carriers would provide the lower, regulated wholesale roaming rate to new entrants and other regional carriers, but the regional carriers should not be forced to grant the national carriers the same regulated wholesale roaming rates.
5046 Wireless wholesale rates between the regional carriers and the national carriers need to be settled by commercial negotiation. Under our proposal, the national carriers would continue to possess significant negotiating power. The regional carriers would continue to have the incentive to negotiate for access to spectrum, access to devices and the benefits of network sharing.
5047 Should the national carriers not agree with the offered rates and conditions, there still exists a mandated directive within our respective spectrum licences to offer roaming to the national carriers, as well as a clear arbitration process should negotiation fail.
5048 Further, the national carriers also have the capital, spectrum and technology to self-supply, should they so wish.
5049 Second, if the Commission does not agree with our proposal, and the regional Carriers are required to offer the national carriers regulated rates, then we submit the regulated rates must be reflective of the proportionate share of the fully allocated costs to provide roaming to the requesting carriers.
5050 Artificially low, regulated roaming rates that are not reflective of the cost to provide rural service will result in the regional carriers subsidizing the large national carriers. This would only serve to harm our ability to sustain competition in our territories in the long run, remove our ability to recover our significant investments in rural coverage and limit rural investment.
5051 Further, if there's to be a blanket regulated rate, we oppose a retail-minus approach, similar to the rate cap approach defined in Bill C-31. It rewards the national carriers, who maintain the highest retail rates in Canada and have the least incentive to lower them. The regional carriers, who operate in the most competitive markets and offer the lowest priced wireless plans to consumers, are the most negatively affected by a retail-minus approach.
5052 A cost-based approach supports continued investment in the new technology and networks required to support consumer needs and provides a proper incentive for all carriers to continue to invest. It also supports the Commission's policy of ensuring the growth of services in rural areas.
5053 I'll now turn things back to Kelvin.
5054 MR. SHEPHERD: Thank you, Commissioners, for allowing us to present to you today.
5055 Let us finish by simply saying this: we support the federal government's and the Commission's intent to ensure there is vigorous competition in Canada's wireless market, but we believe in our territories vigorous competition is already here and present. We are the competitive alternative to the national carriers, and, make no mistake, we compete fiercely. The prices and choices we are offering and the amount of capital we invest in our network are points of evidence that demonstrate how consumers are benefiting.
5056 In your deliberations, we urge you to not damage this success story. Do not harm the competitive balance in these markets that are delivering significant benefits to consumers. It would be a shame if the outcome of this proceeding brought more competition to southern Ontario, B.C. and Alberta, but ultimately reduced competition and choice in Manitoba, Saskatchewan and northwestern Ontario.
5057 Target regulation to where a market imbalance exists. Target regulation to clear cases where carriers have little to no choice and no ability to self-supply. By targeting regulation and ensuring regulation is reflective of true costs, we believe consumers in every province, in urban and in rural areas, will benefit.
5058 Thank you once again, and now we would be pleased to answer your questions.
5059 THE CHAIRPERSON: Well, thank you, and welcome, gentlemen, and Ms Grant, and the back row.
5060 As I said to others, we always welcome the most senior leaders in the various companies who appear at our hearing. It's very much appreciated. Thank you.
5061 I'll pass you on to the Vice-Chair of Broadcasting, who will start off the questions.
5062 COMMISSIONER PENTEFOUNTAS: Good morning.
5063 MR. SHEPHERD: Good morning.
5064 MR. STYLES: Good morning.
5065 COMMISSIONER PENTEFOUNTAS: I don't know if you're -- you're probably excellent network builders and operators, I'm not sure, but you're certainly good listeners because you've answered a lot of the questions that we had prepared for you this morning, which will make it a shorter and probably less painful experience.
5066 COMMISSIONER PENTEFOUNTAS: That being said, if I was to sort of encapsulate your position, and you're asked today, you basically want legislated or regulated rates in place when you're buyers in the roaming market, but when you're sellers you'd like to let the free market decide.
5067 Would I be correct?
5068 MR. SHEPHERD: I think -- let me clarify our position --
5069 MR. SHEPHERD: -- and make it clear what --
5070 COMMISSIONER PENTEFOUNTAS: I won't impose a yes or no answer, I'll let you --
5071 MR. SHEPHERD: Yes, that's right.
5072 COMMISSIONER PENTEFOUNTAS: -- provide it.
5073 MR. SHEPHERD: So our position I think is clear. We suggest that you have to target regulation.
5074 In the case of the regional carriers and the new entrants, who need to see national roaming, we indeed support regulated rates. We believe that that's a requirement. We have a limited ability to no ability, really, to self-supply, we have to seek those rates from national carriers, and we believe it makes sense to target regulation.
5075 In terms of roaming on the regional carrier networks, yes, you're correct: we are saying that should be a commercial negotiation for the national carriers. For other regional carriers and new entrants certainly we believe there would be a similar issue: they would not have the ability of self-supply, so the regulated rates should apply.
5076 But for national carriers, we believe they have substantial leverage and they have substantial alternatives. They have already built out substantial networks in the regional carrier markets, which demonstrates that they can do that, they have spectrum available to self-supply, and they also have significant ability in a negotiation to negotiate with the regional carriers, so we believe there's not need to target regulated rates in that particular case.
5077 COMMISSIONER PENTEFOUNTAS: When you gave us your built-out numbers -- 98 per cent for SaskTel, 97 for MTS, and 56 for SaskTel and 92 for Tbaytel -- are you speaking specifically about your networks or are you including the shared network agreements that you've signed with --
5078 MR. SHEPHERD: Yeah. Certainly each of the regional carriers is in a slightly different business position, and so let me talk to --
5079 COMMISSIONER PENTEFOUNTAS: Can you take them one at a time?
5080 MR. SHEPHERD: Let me talk to them one at a time.
5081 COMMISSIONER PENTEFOUNTAS: Great.
5082 MR. SHEPHERD: I'll talk to MTS, and then perhaps my colleagues can --
5083 COMMISSIONER PENTEFOUNTAS: Kind of like doing four --
5084 MR. SHEPHERD: -- talk to their situations. Yeah.
5085 COMMISSIONER PENTEFOUNTAS: -- four different questioning sessions almost, but -- so go ahead.
5086 MR. SHEPHERD: Yes.
5087 So the 97 per cent of HSPA+ coverage in Manitoba, that MTS's network, that is a shared network that we operate together with our network partner, which is Rogers. So Rogers would have essentially the same coverage. There's some very minor differences, but essentially it's a fully shared network, as is the 74 per cent, approximate, coverage for LTE a shared coverage with Rogers.
5088 COMMISSIONER PENTEFOUNTAS: Okay.
5089 MR. SHEPHERD: Ron, perhaps you want to talk to the SaskTel situation.
5090 MR. STYLES: So in Saskatchewan it reflects simply the SaskTel network. Now in Saskatchewan we have arrangements with both Bell and TELUS that allow them to travel on our network, but we have not included the Rogers network, okay, that operates in Regina, Saskatoon and a number of other centres in Saskatchewan as well.
5091 COMMISSIONER PENTEFOUNTAS: Okay.
5092 In the agreements you have with -- sorry, I'm just going to take note, because there are four of you -- the agreement you said you have with Bell --
5093 MR. STYLE: Bell and TELUS.
5094 COMMISSIONER PENTEFOUNTAS: -- TELUS. That agreement was negotiated without consideration for the caps?
5095 MR. STYLES: Absolutely. It was pre-capped. And in point of fact, it was pre-mandatory roaming.
5096 COMMISSIONER PENTEFOUNTAS: Right.
5097 MR. STYLES: So one of our challenges in what's happening right now, it was negotiated under a specific regulatory regime.
5098 COMMISSIONER PENTEFOUNTAS: Yes.
5099 MR. STYLES: There were gives and takes by both partners. You know, we believe we got an arrangement that works well for us financially as well as from an operational perspective. I believe Bell and Telus would express the same belief about that particular agreement.
5100 The changes that are occurring right now or that have occurred in the regulatory framework have unbalanced that particular agreement. Effectively, you've changed the balance of pros and cons for ourselves especially, and that's one of our quite significant concerns about what's going on right now.
5101 There are definite financial impacts to us from the Bill C-31 rates that have just but put in place, and it really diminishes the kind of benefits that we were getting back from the agreement that we had with Bell and Telus.
5102 COMMISSIONER PENTEFOUNTAS: Okay.
5103 MR. STYLES: I'd like to just touch as well on that 98 percent. My colleagues might want to point this out as well. The 98 percent reflects coverage for where people live. In Saskatchewan we're a vast province. There are large tracts of area or land where essentially there are very few people that live there, if anybody.
5104 However, providing service in those areas is economically sometimes very important. But you need to have a business case to be able to do that. Undermining the business case through capped rates or potentially have something less than cost might mean nothing when it comes to increasing or improving coverage from a -- you know, going from 98 to 99. But it may have a very significant impact when it comes to economic activity.
5105 And I think it's important to distinguish between the two. Thank you very much.
5106 COMMISSIONER PENTEFOUNTAS: So every territory or every region -- we talk about defining geographic markets and product markets. So under the SaskTel position would be almost sort of hyper site specific, sort of going tower to tower, in terms of what roaming and sharing would cost.
5107 MR. STYLES: I think that's a very good observation, okay, and I'll pick a specific community if I can in Saskatchewan. Okay, small community in the southwestern part of the province called Val Marie. It's about 180 kilometres south of where Swift Current is, okay, which people may not have heard of, but that would be a city for us of I think 7,000, something in that range.
5108 To be able to put a tower into Val Marie, you've got to run 180 kilometres of fibre optics. So again, the cost structure -- I think it's pretty easy to see why the cost is high.
5109 Now, if you want to service that particular tower, we have to dispatch a person probably not from Swift Current but probably from Regina, Saskatchewan, and you're talking 300, 350 kilometres to make the trip down and back. So simply the windshield time, the cost of that maintenance is significantly higher than an urban downtown Regina tower.
5110 And again, I think you can pick any number of different communities in different locations to be able to illustrate that.
5111 But the other point when it comes to roaming that I think it's important to understand is you don't roam on a tower. You roam on a network. So you roam between towers. And so if you add the traffic, it adds traffic not just to one specific tower, but to a number of towers.
5112 Again, somebody's travelling through Saskatchewan, they'll travel from the Manitoba border all the way through to Alberta, and they're going to hit any number of towers there. So it's more about network roaming as much as anything.
5113 COMMISSIONER PENTEFOUNTAS: Right.
5114 MR. STYLES: And you need to be careful I think in thinking of it just in the context of one individual tower. I mean, it's good from an example perspective, but it's that broader situation I think that deserves real attention from a regulatory perspective.
5115 COMMISSIONER PENTEFOUNTAS: Now that we're sort of in the process of defining targeting markets and geographic markets, some of that is sketchy. I have a pretty good idea of where you're going to land on both questions, but if you would undertake to answer those questions as requested in the notice, all four of you I guess. I see the heads acknowledging. Three of you, sorry. So MTS, SaskTel, and in terms of --
5116 MR. TOPATIGH: I can comment on Tbaytel. First of all, we're certainly not a provincial provider of service, but our territory covers from the Manitoba border to Sault Sainte Marie. It is environmentally a Tbaytel network, and it is an HSPA network under which Rogers has the rights to roam for their subscriber base on our network.
5117 We often say that that stretch is a 16-hour drive, the size of some small European countries, yet the population of the Don Valley Parkway, so I kind of echo the comments made by Ron in that respect.
5118 COMMISSIONER PENTEFOUNTAS: And that's it. Sorry. MTS Rogers shared network, how much of that build is MTS's as opposed to Rogers?
5119 MR. SHEPHERD: The shared network is exactly that. It's shared. So it's primarily the radio access network portion that's shared. It's not the core. We have our own separate core networks. But call it the RAN as it's commonly called would be shared.
5120 While the arrangement is complex, essentially the principle is that the parties will share the cost on a basis that's proportional to the traffic that their customers generate on the network.
5121 So, you know, it's roughly 50/50, but the cost sharing formula will adjust as one party or the other party puts more traffic on the network. I believe that's a good way to have a shared arrangement, that the parties should share it proportionally to the traffic that their customers are generating.
5122 COMMISSIONER PENTEFOUNTAS: You mentioned Rogers, and Rogers spoke to an issue yesterday in paragraph 20 as it regards the Bell and Telus network, shared network, and, in effect, separating those two networks for the purposes of selling in the roaming market. What would be your position on that issue, and were you, SaskTel specifically, did you have to sort of sign a separate deal, one with Bell and one with Telus? Or was it a global deal?
5123 MR. SHEPHERD: So, Commissioner, maybe I'll start and then certainly on the SaskTel specifics, we can have Ron comment.
5124 COMMISSIONER PENTEFOUNTAS: Sure.
5125 MR. SHEPHERD: I think because each of us has put in already arrangements for national roaming, and clearly some of us are with Rogers. In SaskTel's case they're doing that with Bell and Telus. There are different situations there.
5126 So in terms of whether Bell and Telus should be forced to offer separate arrangements, I think clearly it would be more beneficial to be able to negotiate separately with three national carriers than with two. I think although it's been many years since we had discussions with Bell and Telus on this issue, at the time it was clear we had to negotiate with both of them together. It was not possible to negotiate a separate arrangement with Bell, for example.
5127 So that was our experience at the time, but that certainly is a number of years ago.
5128 COMMISSIONER PENTEFOUNTAS: So it definitely helped the competitive environment in the roaming market?
5129 MR. SHEPHERD: Yes, I think anybody would sort of look at it and think, you know, the choice between negotiating with two and negotiating with three, you'd rather have three options than two. Now, perhaps Ron can talk more specifically to the SaskTel situation.
5130 COMMISSIONER PENTEFOUNTAS: Okay.
5131 MR. STYLES: Maybe I would first note that we have filed an agreement with the Commission, so it is available for perusal. I just need to be careful about how far I go with it given that there's an NDA that covers it. But it is a tripartite agreement between the three of us.
5132 It is more about the exchange of benefits between ourselves and our two partners is really what it is. So it's not a network sharing agreement similar to what you see in Manitoba.
5133 A large part of the reason you need it as a tripartite is the fact that you need to keep all of your technical requirements between the three networks very similar, okay, if you want to be able to exchange traffic.
5134 But essentially it's tripartite. They both signed it. We signed it as well.
5135 COMMISSIONER PENTEFOUNTAS: And you had both representatives of Bell and Telus around the bargaining table.
5136 MR. STYLES: Absolutely.
5137 COMMISSIONER PENTEFOUNTAS: Okay.
5138 You've kind of touched upon this already, but for the purpose of the record, maybe give us an idea of the state of competition in the retail market and how we can apply that in assessing the wholesale market. Lots been said about retail wholesale.
5139 MR. SHEPHERD: Yes. So first our belief and I think the evidence we presented shows that there is in fact a vigorous competitive retail environment. We talked about the arrangements each of us might have had with national carriers on network sharing or roaming. But those are really at the network or the wholesale level.
5140 At the retail level we compete vigorously with all the carriers in our markets. I'd point you to the chart that we did provide this morning, which is an update of an earlier chart. I think this shows that plans, that if you go on the website or you go into retail stores and you want to comparison shop, these are what you're going to see.
5141 You're going to see pricing in the regional carrier around markets in Manitoba, Saskatchewan and northwestern Ontario that are on average 30 to 40 percent lower at the retail level than what you might get in Ontario, for example.
5142 COMMISSIONER PENTEFOUNTAS: On the wholesale level?
5143 MR. SHEPHERD: On the wholesale level, in the regional market itself, and I'll talk to Manitoba, and perhaps others can talk --
5144 COMMISSIONER PENTEFOUNTAS: Just to be clear, obviously you're not speaking about retail and wholesale on a national level.
5145 MR. SHEPHERD: No.
5146 COMMISSIONER PENTEFOUNTAS: You're talking about your regions and your territories.
5147 MR. SHEPHERD: We're talking about wholesale within a region.
5148 COMMISSIONER PENTEFOUNTAS: Thank you.
5149 MR. SHEPHERD: Clearly, to begin with, we have in Manitoba a network sharing arrangement. So clearly at that level we've come to an arrangement that, you know, called a wholesale arrangement. It's not wholesale roaming, but it effectively gives our network partner and ourselves equivalent coverage to 97 percent of the population. So very obviously encouraging.
5150 COMMISSIONER PENTEFOUNTAS: So retail is a reflection of wholesale.
5151 MR. SHEPHERD: That's right.
5152 COMMISSIONER PENTEFOUNTAS: They're in lock step.
5153 MR. SHEPHERD: And, you know, if you look at other carriers in Manitoba, certainly Bell is advertising they have the same coverage through a wholesale roaming arrangement, not with MTS but with our partner Rogers. And I believe although Telus doesn't have that coverage today the mandated roaming rules, will access the similar coverage.
5154 So there's clearly roaming options for all carriers, and in the case of TELUS, they have built out a regional network that covers roughly 60 per cent I think today of the population and has made announcements that they are going to invest significant amounts of money to expand it further.
5155 COMMISSIONER PENTEFOUNTAS: SaskTel...?
5156 MR. STYLES: Now, in Saskatchewan I would say the same conclusions apply. So maybe I will focus a little bit more on the evidence behind the conclusions, if I can.
5157 First, we have talked about rates and we have shown you evidence about rates, but I would also point you as well to service. Service amongst the three regional carriers is second to none and, in point of fact for SaskTel, we have now won top -- for the J.D. Power Award for top full service carrier, okay, in Canada. So I think that demonstrates our service levels are very high.
5158 If you look at the kind of plan options that are there, we are the only carriers that provide unlimited data. So again, I think when you look across the board there...
5159 I also want to point to a couple of things that have happened or not happened in Saskatchewan. Maybe first, okay, is Bell. Bell and TELUS have come to Saskatchewan, so obviously there is no impediments to competition in Saskatchewan or they would not have entered the market a number of years ago.
5160 The second part of it really comes back to the whole question of self-supply. These carriers -- these major carriers do have lots of spectrum, they do have an ability to self-supply in a market and, in point of fact, we have a national carrier in Saskatchewan right now that is sitting on roughly 40 per cent of the spectrum and has been sitting on parts of it for over 30 years.
5161 They have made a very distinct decision not to invest, not to supply the market based on business case I assume.
5162 So I think if you look at all of the indicators, the evidence is fairly persuasive that it is fully competitive in Saskatchewan.
5163 COMMISSIONER PENTEFOUNTAS: I was going to ask you who hasn't stepped up, but you have raised it yourself. You made that point in your presentation today.
5164 MR. STYLES: Absolutely.
5165 COMMISSIONER PENTEFOUNTAS: Okay.
5166 Tbay, just briefly.
5167 MR. TOPATIGH: Yes, in our territory, similarly we have an agreement with Rogers that has been filed with the Commission.
5168 Bell and TELUS and their flanker brands are both in the marketplace in our territory and Bell has built network both in the urban area of Thunder Bay and select urban areas throughout the region.
5169 COMMISSIONER PENTEFOUNTAS: The retail market in northwestern Ontario is doing well, and how does that translate onto the wholesale market?
5170 MR. TOPATIGH: From that standpoint, we certainly negotiated an agreement with Rogers at the time that was a strategic business relationship, had a number of different elements encompassed in it; roaming was just one of those elements, but certainly it was a rate that both parties, considering all the other factors, were content with.
5171 COMMISSIONER PENTEFOUNTAS: So again, retail is reflective of wholesale --
5172 MR. TOPATIGH: Yes.
5173 COMMISSIONER PENTEFOUNTAS: -- in your region as well.
5174 You mentioned device on a number of occasions and it was raised yesterday as well. I understand it must be difficult to negotiate for devices with the likes of Apple and others.
5175 Do you want to add a little bit more meat on that bone?
5176 MR. SHEPHERD: Well, we have mentioned in our presentation that access to more than roaming typically has been part of what regional carriers have negotiated with the national carriers and the reason for that is simply one of scale.
5177 Use MTS as an example. We have roughly 500,000 wireless subscribers, smaller in fact than many new -- some of the new entrants would be larger than we are, and so clearly with that base of customers and the type of turnover you would see typically in terms of customers procuring new handsets in a year, our scale is going to limit the range of devices that we can access.
5178 And these situations change, but certainly five years ago I would have said that acquiring key devices and new devices was clearly challenging because of that scale. And so negotiating with national carriers, one of the things we certainly sought was support for that.
5179 And it does vary and we have, in some cases, been able to negotiate with suppliers of devices directly and, in other cases, we have used the strategic relationship we have to source devices through a larger carrier.
5180 So that was one of the things that we sought and, in fact, negotiated as part of those business relationships that we have.
5181 COMMISSIONER PENTEFOUNTAS: Now, device availability gets the client in the door, because in 2014 going forward you can walk in, pick up your phone and come and see MTS or SaskTel and say, hook me up; can you not, or is that too difficult a procedure for the average client?
5182 MR. SHEPHERD: No, I can certainly speak for MTS and I am not familiar with exactly what SaskTel and Thunder Bay are doing, so perhaps I should let them speak to it.
5183 But we do have situations where customers will acquire their own device, they will come to our store and they can activate their device with or without a contract.
5184 COMMISSIONER PENTEFOUNTAS: So the leverage that -- as you mentioned, you talked about leverage and the leverage that the big carriers have, hasn't that leverage sort of left the barn, given that devices are available?
5185 MR. SHEPHERD: I think times change and today certainly with the advancement in technology, regional carriers have had more success in being able to acquire access to devices, but I would still suggest that for a smaller carrier such as ourselves having access to the scope and scale of a national carrier for certain devices is still quite useful and important.
5186 COMMISSIONER PENTEFOUNTAS: And most of your subs still pay off those devices over the course of their two-year contracts?
5187 MR. SHEPHERD: The vast majority of our post-paid customer base that are on post-paid plans do choose a subsidized device and --
5188 COMMISSIONER PENTEFOUNTAS: And that would be what, in the 95 per cent range?
5189 MR. SHEPHERD: I would think that is high, but if you want it I could get you the exact number, but it is certainly a very high percentage of customers that do choose a contract.
5190 And our belief when we talk to them is the price for these devices, unsubsidized, is quite high and becomes a barrier. So many, many customers and certainly a very high percentage do take a contract.
5191 COMMISSIONER PENTEFOUNTAS: And the same is true for SaskTel and Tbay?
5192 MR. STYLES: Absolutely. So I think it applies equally in our situation. I think the aspect of the device access that maybe hasn't received enough attention is price.
5193 It is important to understand that volume, you know, drives down price, I mean it does anywhere in the market, and by being able to work with a national carrier we are able to get, not just access, but lower prices for those particular devices.
5194 In some cases, you know, if you didn't have a national carrier, our volumes simply are not big enough for somebody to be interested, a Samsung or another company.
5195 So there is that aspect I think that needs to be pointed out as well. So there is a financial advantage to it.
5196 But you know, what we are talking about in the context of devices applies equally to any number of other services. As a good example, testing devices. You need to have labs and people that are specialists in being able to test devices.
5197 For SaskTel to be able to put that kind of equipment and those kind of people in place doesn't really make financial sense for us. So by being able to access a national carrier and have them do that for us, you know, there is very distinct financial advantages for us in terms of our operations. That can apply to procurement and a variety of other things that are out there as well.
5198 So you know, it's not just the devices, spectrum, international roaming. For a country like Kazakhstan to pay attention to SaskTel it is difficult, you know, we are not going to be a big player in Kazakhstan when it comes to roaming.
5199 But it is important for us because the machinery industry in Saskatchewan, that is where they sell a lot of their product is to Kazakhstan. So when Cameco, who is not a machinery manufacturer but instead is in the uranium business, when they want to go over and the executives want to be there, they want phones that are going to roam there.
5200 So by being able to tap Bell and TELUS, again, it is a whole range of services, it is many different services that have become very important for our survival and if you don't have something to give, you are not going to get.
5201 COMMISSIONER PENTEFOUNTAS: And as regional players do you feel you are benefitting from the price that scale offers other big carriers; is that being passed along?
5202 MR. STYLES: You know, I would say for us, absolutely.
5203 COMMISSIONER PENTEFOUNTAS: Okay.
5204 MR. STYLES: We would like to drive it further and again, you know, these agreements, they develop over a period of time, we would like to push this quite a bit further, we would, and we believe that the national carriers, as long as we have their attention, are going to work with us on that.
5205 But if we lose anything that we can provide them in the sense of negotiated rates, et cetera, there is no incentive for them to go that route.
5206 COMMISSIONER PENTEFOUNTAS: For regional carriers at the end of the day there are other issues besides roaming caps -- sorry, roaming rates in your negotiations?
5207 MR. STYLES: Absolutely.
5208 COMMISSIONER PENTEFOUNTAS: And those are central to your business model?
5209 MR. STYLES: Absolutely. It is the only way you can keep your costs down and end up in a price comparable situation, okay, with the major carriers.
5210 You can see that with what the rates are in the rate graph that we provided you, you know, in the package, lowest rates in Canada; that obviously means that in our situation we have to match up with the national carriers because we are not price-setters, we are price-takers in the market essentially.
5211 COMMISSIONER PENTEFOUNTAS: All the lights are lit up. Do you want to add something?
5212 MR. TOPATIGH: Yes, I also just want to echo the comment. I think the handsets are certainly one of the biggest factors, but you have to remember, we were all CDMA providers at one point.
5213 We can build the networks, but if we didn't have a sufficient supply of devices, building the network is really going to be secondary.
5214 We also continued to operate a CDMA network while we were all down on HSPA network. So spectrum was another part of the negotiations that were critical from that standpoint as well.
5215 COMMISSIONER PENTEFOUNTAS: Okay.
5216 I want to take you to dispute resolution. You haven't sort of had to worry about that in recent memory, but if the Commission were to feel the need to intervene and given the fact that there is already an arbitration regime in place, Industry Canada has put that regime in place, would there be some concern that there may be some overlap between a Commission regime and the Industry Canada regime that is already in place?
5217 MR. SHEPHERD: Well, let me take a first crack at that and then I know my colleague, Mr. Styles, has perhaps some things he would like to add that are specific to SaskTel's experience.
5218 So in MTS's case, we haven't utilized the arbitration process, we know it is there, so we can't comment from experience on how effective it would be or the issues associated with it.
5219 Certainly I think our own view is, is that whatever process is in place has to be effective and it has to be clear and straightforward. So to the extent there is a single process, it is probably clearer than if there is any overlap or confusion between processes, but, you know, it hasn't been high quite honesty on our mind because we haven't actually had to utilize the process and so, therefore, we haven't really turned our mind to other serious issues with the process.
5220 I believe that Ron may want to comment further on the situation.
5221 MR. STYLES: So, for us, we have had just a little experience with it so far so it's tough to say it works well or it doesn't work well.
5222 I would say there should only be one process. We definitely don't want conflicting jurisdictions, okay, between two different entities and two different processes. At this point --
5223 COMMISSIONER PENTEFOUNTAS: And what would that one process look like?
5224 MR. STYLES: Well, we are comfortable with --
5225 COMMISSIONER PENTEFOUNTAS: If we were to design a superior process. You're comfortable with the process that is in place now?
5226 MR. STYLES: We are comfortable with what's there right now. You know, it seems to make sense and my sense would be that this will develop over a period of time.
5227 But in the end really what you want to do is you want to settle that on a commercial basis. I don't think any of the national carriers that are in the regions want to see things going to arbitration. Arbitration is a very unpredictable approach to things.
5228 And so, there is a -- essentially, there is a sort of a built-in incentive right now in the system, from my perspective, to try to settle. And I think you will see most things being settled.
5229 COMMISSIONER MENZIES: Right.
5230 MR. TOPATIGH: Yes. I would echo those comments. So, we haven't had any experience in the arbitration standpoint from a mandatory tower or from a roaming perspective at this point in time, but I would echo Ron's comments that negotiation in the past has seemed to solve those issues.
5231 COMMISSIONER PENTEFOUNTAS: You raised the MVNO question and your position there is quite clear as well. You don't -- is there any advantage to an MVNO, mandated MVNO no regime in this country in perspective?
5232 MR. SHEPHERD: You know, we look primarily at our own markets. We believe they're very competitive. We think consumers are getting the benefit of that competition and we would point you back to the prices that are in the market, in our regional markets, and so we don't think in those markets an MVNO, from a mandated point of view makes sense. We think it's really, you know, a solution in search of a problem, to be -- to be clear.
5233 And so, that's really what we have to base our comments on is our own markets and our own experience.
5234 MR. STYLES: The only thing I might add to that, you know, if you have a look to the U.S., there are MVNOs down there, it wasn't regulation that put them in place. We looked to other countries as well to see what the experience is there and I believe the country of Belgium has 40 MVNOs, there is no regulatory environment.
5235 They develop where the market requires them, where consumers demand that kind of a service.
5236 COMMISSIONER PENTEFOUNTAS: And in your region there is certainly no needs for them?
5237 MR. STYLES: We don't believe there is. You would have to identify what the problem is and I think, you know, what we have just said about. It's a nice solution, but what is the problem you're trying to address and we don't see a problem.
5238 There is good competition, there is low rates, great service levels, lots of variety and plans, pretty good coverage. You know, you put in a regulation or you put in a policy solution to address the problem and we don't see a problem. So, why would we put in some solutions.
5239 COMMISSIONER PENTEFOUNTAS: Cell phone penetration is not an issue in your region? It's not a luxury?
5240 MR. STYLES: I don't believe so. I don't believe so. I think it continues to develop. You know, we're obviously not at the asian level at this point in time, but it continues to develop.
5241 Some part of those individuals that don't access cell phones has to do a little with coverage, okay. If you are in Northern Saskatchewan, okay, in remote settlements, there is obviously not going to be coverage those sort of things, you probably will move to something like a satellite phone or you do without. So, it's a much different situation.
5242 When you talk about MVNOs, they talk generally about densely packed area, lots of population, and I can understand how the application might fit there, but I believe our penetration anyway is in terms of Saskatchewan, okay, is where it should be, it's going to continue to grow, I believe at some point in time it will be much higher.
5243 I don't believe it will ever hit 100 percent or maybe I should reword that. I don't believe it will ever hit 100 percent of the people that are in Saskatchewan. Okay. It may hit 100 percent because some people have two phones or three phones, but again, different circumstances.
5244 You need to look at the market that you're in and what really applies to that particular market.
5245 MR. TOPATIGH: Yes. And penetration in our area is actually quite successful. You know, it's certainly in the order to 85 percent of all new devices are smart phones and customers are very eager to get that because that's a phone.
5246 COMMISSIONER PENTEFOUNTAS: I am going to bring you back on the network sharing and we talked about MVNOs and I understand your position.
5247 Some unfair observers might say by entering these network sharing new agreements you're kind of cheating the system because you're not really building out. You are not truly investing the sums that should be invested in accordance with your serviced area, the service area of your spectrum. How would you respond to that?
5248 MR. SHEPHERD: I would say that's not the case at all and clearly, speaking for MTS, our network sharing arrangement is a result of our need to seek an arrangement for roaming and other capabilities that we needed to really sustain our ability to compete in the market.
5249 And I think the network sharing arrangement is a result of us seeking national roaming and seeking international roaming and seeking ability to enhance our building --
5250 COMMISSIONER PENTEFOUNTAS: Wouldn't you have more leverage if you built out your entire area instead of entering these agreements?
5251 MR. SHEPHERD: Well, what I would say, and I'll try to say it in the most positive way I can, is that MTS has a track record of having built out its entire region, our CEA network which we built without any sharing arrangement, covered somewhere 97-98 percent of the territory.
5252 Clearly, our plan, when we rolled out our HSPA+ network was to cover a similar territory and I think the network sharing agreement, to a large extent, benefits our partner who had not built out there their network to that degree and really enabled them to build out to a farther extent than what they had previously done.
5253 Now, I think there were lots of beneficial outcomes from that, including greater competition in the market and more choice for customers, so I think it was -- it was a good agreement that actually enhanced the competition in the market, but I would say that the roaming agreement is really a result of our requirement to seek a way to find national roaming and these other scale capabilities and not the other way around.
5254 COMMISSIONER PENTEFOUNTAS: But the more players that would be forced or called upon to share your network and that brings back to the MVNO example, wouldn't that be advantageous in that it would help MTS recoup the cost of that build-out?
5255 MR. SHEPHERD: I think when you look at the -- what we call our sharing arrangement, it's part of a broader arrangement and, in fact, the benefits of the -- one of the major benefits of the shared network is access to the scales and scope economies of the national carrier.
5256 That is not really what is being proposed by MVNOs. I don't think that at the end of the day an MVNO is going to enhance or improve the economics of the regional network in any way and that's, you know, part of our position we say there is a vigorous competition, you've got our shared network with Rogers in the region, you've got Telus building network that they and Bell share.
5257 There is a strong ability to support consumer choice, not just from the -- for major brands, but you have lots of the other carriers with their flanker brands in the market. So, if an MVNO makes sense, then it should make sense on its own merits and not on the basis of having access to some kind of special arrangement.
5258 COMMISSIONER PENTEFOUNTAS: Back on the facilities based front, I mean to be a truly facilities based player, shouldn't you be -- isn't the idea to build out more network instead of building out half a network and jumping on the network that's already in place or the rest of it?
5259 Isn't that the principle behind a truly facilities-based? Isn't that why spectrum is auctioned off?
5260 MR. SHEPHERD: Yes. And absolutely that's the case and you see that in the case of MTS, we have invested in that, we continued to invest in a network that covers the majority, 97 percent plus of the population in a large geographic area. And I think that goes to the core of our argument.
5261 COMMISSIONER PENTEFOUNTAS: But part of that 97 percent is the Rogers network.
5262 MR. SHEPHERD: It's not a Rogers network. It's a shared network and we both share the entire network and we both invest in it and -- but I would go back and I say I agree with your point and I would point to the national carriers and say that's why I don't need access to regulated roaming rates on our network as they have the spectrum and they have the capability to self-supply and build out.
5263 And should they seek not to do that, then it's fine, we will negotiate roaming with them, but they should not have access to a regulated rate to do that because they have those cell supply options and clearly have the spectrum and access to capital to execute them and, in fact, are doing so in a high density population areas where clearly they believe they have a great case to do so and really are seeking to what I would call "cherry pick".
5264 They're seeking to roll out in the rural and remote areas in a very targeted way, utilize essentially the capital and capability of the shared network until they have a business case to build themselves. And I think that's not something that should be supported by a regulated rate structure that allows them to do that.
5265 MR. STYLES: But let me first say I agree with the comments, okay. I think it should be facilities based competition, okay, completely.
5266 In Saskatchewan, that was our competitive advantage when we dealt with the national carriers. We chose to build in places in Saskatchewan whether it's the far north or rural areas, okay, that others would not build because they didn't seem business case.
5267 The advent of mandatory roaming now has whipped away the advantage on us. Our position has been you shouldn't have put mandatory or the government should not have put mandatory roaming in place.
5268 We have invested heavily in Saskatchewan, we have spent $451 million since we started to develop the 4-GLT network in Saskatchewan. For us, and for a province of a million people those are large dollars.
5269 With respect to going forward, with the framework that we are seeing in place today mandatory roaming caps that are based on reach our rates, et cetera, we already know that in 2015 we will not expand coverage anywhere in Saskatchewan.
5270 We will complete coverage obligations that we have from 2013 or 2014, but we will expand no further because there is no longer a business case in it, from what we can see.
5271 A change to the C-31 framework will probably restore our interest and continue to try to expand and to grow our network.
5272 COMMISSIONER PENTEFOUNTAS: So, the caps have been a serious break in facilities based?
5273 MR. STYLES: Absolutely, and they are simply based upon retail rates and not the actual cost. It creates a complete disincentive for new investment.
5274 COMMISSIONER PENTEFOUNTAS: What about the idea -- you mentioned "blended rates" in your interventions here. And what if a rate were created as a regional rate or a rural rate, as an example? How would that affect investments?
5275 MR. STYLES: If you are referring to cross the three jurisdictions that are here right now, I think that would be something we would need to sit down and look at. Each of us are a little different. Saskatchewan is a much more rural than Manitoba for instance and TBAYTEL is even more rural, I think, than Saskatchewan.
5276 COMMISSIONER PENTEFOUNTAS: Right. But certainly never on a retail minus basis --
5277 MR. STYLES: Absolutely not.
5278 COMMISSIONER PENTEFOUNTAS: -- in arriving at caps potentially?
5279 MR. STYLES: It creates the most perverse incentive. For anybody who keeps the rates high they get more money through the cap system. That's as perverse as you can get when what you are trying to do, I believe, is you are trying to get a better situation for consumers.
5280 COMMISSIONER PENTEFOUNTAS: Then you have to get into cost and figuring out costing?
5281 MR. STYLES: Absolutely, which I am not wild about because I don't want indicate that.
5282 COMMISSIONER PENTEFOUNTAS: Yes. I don't think anyone is.
5283 MR. STYLES: But it's much better than a -- that a built-in rate.
5284 COMMISSIONER PENTEFOUNTAS: Retail minus?
5285 MR. STYLES: Absolutely.
5286 COMMISSIONER PENTEFOUNTAS: Your ten percent figure, that's sort of code for the Big 3?
5287 MR. SHEPHERD: The 10 percent, we --
5288 COMMISSIONER PENTEFOUNTAS: That's how you arrived at it?
5289 MR. SHEPHERD: No. We looked at what might be a regional chart and so, we looked at the policy the government has introduced on -- for an investment in telecommunications and it basically talks about a ten percent limit, and that's why we chose the 10 percent. We believe that's an appropriate limit.
5290 We also think it fairly reflects the fact that new entrants are going to fall under that level as well as regional carriers and that's really who we believe that -- when you look at this issue of national roaming and wholesale, don't have the capability to self-supply and, in fact, need to have a mechanism to access service outside the areas that they are serving.
5291 COMMISSIONER PENTEFOUNTAS: Market power, local market power, did you ever give any thought to plank some of those principles as opposed to hopping along the 10 percent number that was raised by --
5292 MR. SHEPHERD: Obviously, we looked at it and we are well aware of concerns some people have brought for, that in our own markets we have higher market share, but I would suggest that market share is not really the thing that you need to look at. You need to look at the dynamics of the competitive environment in the market.
5293 I think, you know, I would point you back to the plans, the retail plans and our evidence that retail plans are priced 30 to 40 per cent lower in each of our markets than other markets and I think as well other aspects of service, the level of investment that's going on in these markets show that they are very competitive markets.
5294 And so, we think you know back to what the appropriate test is, it's the ten percent national test.
5295 MR. MELDRUM: If I could just add something?
5296 COMMISSIONER PENTEFOUNTAS: Sure.
5297 MR. MELDRUM: In the 2008 AWS spectrum auction, we were considering new entrants and could bit on a set-aside spectrum and the Federal Government at that point used the 10 percent threshold test.
5298 COMMISSIONER PENTEFOUNTAS: We are well aware of that threshold. Seamless roaming, just sort of take you there for a minute. Do you want to clarify that position? I didn't see any about it today, but I saw your -- I am going to refer you back to your August 20th intervention, paragraph 54?
5299 MR. STYLES: I guess we were simply referring about to Industry Canada work that's occurred in the past and their view on seamless roaming is not a pre-condition or a requirement for competition and new entrants in the marketplace and we agreed with that ruling.
5300 COMMISSIONER PENTEFOUNTAS: Right.
5301 MR. STYLES: Now, seamless roaming, okay, can be put in place, but it has certain technical challenges with it. It takes longer to put in place and we think those are the -- I don't know, the challenges that go with that particular technology.
5302 COMMISSIONER PENTEFOUNTAS: Don't you need that if you are going to create an environment, competitive environment for new entrants? Shouldn't they be able to offer the same service that the established players are offering?
5303 MR. SHEPHERD: Yes, but again, we believe it's not necessary, we do not have seamless roaming as a company right across Canada. We have it in one location. We find it's not a competitive disadvantage, okay. Our customers don't see a challenge or a problem with that and we are able to successfully sell without having seamless roaming in place.
5304 COMMISSIONER PENTEFOUNTAS: Everyone agrees with that position?
5305 MR. SHEPHERD: Yes.
5306 COMMISSIONER PENTEFOUNTAS: Just briefly on tower and site sharing. You didn't make much mention of it today, but you did speak on it at the time and you felt that any kind of regime would be terribly complicated to put in place? Is it still your --
5307 MR. SHEPHERD: So, for clarification, are you talking about tower sharing?
5308 COMMISSIONER PENTEFOUNTAS: Yes.
5309 MR. SHEPHERD: Okay, yes. No. Like our own experience, I think, across the -- all of us, has been that we haven't had -- we have only a small number of requests for tower sharing. We haven't got a -- had any experience with arbitration on tower sharing. And so, we think the current regime is --
5310 COMMISSIONER PENTEFOUNTAS: Not really an issue in your region?
5311 MR. SHEPHERD: Not an issue in our area.
5312 COMMISSIONER PENTEFOUNTAS: Surely stat sharing is not an issue and tower sharing doesn't seem to be an issue?
5313 MR. SHEPHERD: No.
5314 COMMISSIONER PENTEFOUNTAS: Okay.
5315 Then, there is nothing really you would like to add on that as to whether or not an over site regime would be feasible or not, whether it's complicated or not?
5316 MR. SHEPHERD: We don't believe it's really relevant in terms of rural markets, you know, and we really can't comment on the experience elsewhere.
5317 COMMISSIONER PENTEFOUNTAS: I think you have been pretty clear on just about everything. Like I've said, you're good listeners and you have addressed most of the issues that have come to the floor. My colleagues may have question.
5318 Mr. Chairman, thank you.
5319 THE PRESIDENT: Vice-Chair Telecomunications, please.
5320 COMMISSIONER MENZIES: Just a couple of questions.
5321 One is in terms of using your 10 percent. It would just be fixed at 10 percent, not a definition of regional carrier or new entrant then?
5322 MR. SHEPHERD: No.
5323 COMMISSIONER MENZIES: So, if Easlink who has that ambition or Videotron who might have ambitions to become national carriers once they had the 10 percent, the regime changes for them?
5324 MR. SHEPHERD: I think -- let me comment on it. Still today, that's not an issue and clearly we are saying 10 percent is a good bench-mark, but we are clearly saying for new entrants we believe access to regulated roaming is as important to them as it is for regional carrier.
5325 You know, I would say that if a new entrant was successful and managed to grow and achieve more than 10 percent then you might consider whether they need to continue to access.
5326 COMMISSIONER MENZIES: That sort of really cross that bridge when you get to it.
5327 MR. SHEPHERD: Yes, but clearly, we would say they need it today.
5328 COMMISSIONER MENZIES: Okay.
5329 The other thing I was somewhat a little curious about was your willingness to still offer the cost based rates to new entrants in your markets where you have four strong competitors now.
5330 I am assuming you see the opportunity to have -- because if they are cost based rates, I figure out where the revenue is, but you are not -- you don't fear having a fifth or sixth retail competitor in your market essentially?
5331 MR. SHEPHERD: Well, I don't want to get into what I fear or don't fear, the reality is --
5332 COMMISSIONER MENZIES: No, okay.
5333 MR. SHEPHERD: -- we have --
5334 COMMISSIONER MENZIES: You are not opposed to. You have four.
5335 MR. SHEPHERD: I don't know what the right number is. We happen to have four facility-based carriers in our market, we're plus four competing brands, we are competing vigorously, consumers are seeing the benefit, should new entrants decide to expand, you know, that's certainly an option they have and --
5336 But I think our position is clear that we believe in the current situation they would need access to those same types of regulated wholesale roaming rates that the regional carriers need and so, we have been clear in our position that those would be offered.
5337 COMMISSIONER MENZIES: The last question. Did you consider a scenario where you would just ask that your regions be forborne from anything going forward and if so, why did you reject it?
5338 MR. SHEPHERD: Perhaps. I was going to say certainly it isn't something we've -- I know them to actually spend a lot of time thinking about it, but perhaps my colleague may have had more --
5339 COMMISSIONER MENZIES: But you don't have to think about it, I was just asking whether --
5340 MR. SHEPHERD: No. I would say I haven't.
5341 COMMISSIONER MENZIES: Okay.
5342 MR. SHEPHERD: Probably in the context of our position that we brought forward is certainly we are not suggesting forbearance is a solution for everything that the industry is facing.
5343 MR. STYLES: So maybe two or three comments on sort of the last two or three questions and the first is I come to understand that Kevin has a lot of fears and we need to be careful how many we get on the table, okay, but -- forbearance, we would be okay with forbearance.
5344 It's an idea that we talked about at SaskTel and so again, there is many options, many ways to define it, many ways to get at the particular problems and so, you know, it maybe something we would be quite open to be talking a little bit about.
5345 But I do want to point a little bit about the 10 percent limit. It's important to put into context. For individual companies, that would mean a company could grow from our size about four times larger. So, 10 percent is quite a significant threshold.
5346 It's a lot of growth and if you're talking two or three companies, you're talking about taking a lot of market share away from the major carriers or maybe the other regional companies. So, 10 percent is actually a fairly significant bench-mark.
5347 It's not as low as it sort of sounds on the surface when you think about international context, yes, it's not that large. When you think about it in the context of our companies and our growth, it's also important, I think, to put us in context of the new entrants.
5348 Wind itself is larger than any of the companies that are here right now. When people talk about us as being existing companies, regional carriers, I think they get this view somehow that we are very large entities. You know, in the big scheme of things we are not.
5349 Again, Wind is already bigger and they believe they need to get a lot bigger to have the kind of economies, scales, et cetera, that is necessary for their long-term success. So, again, it's always about context I think in any of these discussions.
5350 COMMISSIONER MENZIES: And I understand that and I was just probably thinking too far into the future because companies have been known to privatize and merge and buy each other and all those sorts of things. So, anyway, thank you very much for your time.
5351 THE PRESIDENT: Just to be clear. We have been asking some questions of three companies here. I just want to make sure that when you were answering you felt comfortable with the answers of each other when you didn't have individually the chance to respond to those. Would you all three agree to that?
5352 MR. STYLES: Yes.
5353 I mean, clearly, we have different situations, which we've tried to clarify. But we have a common position, and that's the position that we've put forward.
5354 THE CHAIRPERSON: Sure. And if ever there's a disagreement, as I'm going to ask a few more questions here, please speak up. We don't want to cut this short at all.
5355 Now in your submissions, you make a point about regulation "only where warranted." I think there's tremendous amount of wisdom in that, and it's a bit in that spirit I'm going to ask you some questions.
5356 Bill C-31 created three baskets: voice, data and text. We all know from the wireless proceeding the trends occurring in the wireless business, where, perhaps in the early days of wireless it was all about voice, then text came around and -- but the foreseeable future is all about data.
5357 Would not agree with that?
5358 MR. SHEPHERD: Yes, we would agree. I mean the critical factor -- while you need voice and you need text, the real factor that drives -- is growing and is going to drive the costs for roaming is, in fact, data.
5359 THE CHAIRPERSON: Data. And access to the Internet, among other things?
5360 MR. SHEPHERD: Yes.
5361 THE CHAIRPERSON: By fear of complicating an already complicated issue, do you think it would be an advisable course of action to actually treat those three bundles differently when we look at wholesale, or the practicality of that is overridden by the fact that you probably negotiate those together?
5362 MR. SHEPHERD: Well, you clearly need all three.
5363 THE CHAIRPERSON: M'hmm.
5364 MR. SHEPHERD: I don't think it's -- in today's environment. Now that might change in the very -- I'd say the longer term. But certainly in the next number of years, I don't think there's any view that you would negotiate simply a data roaming agreement. You do need a voice and text, those other elements.
5365 THE CHAIRPERSON: I appreciate that --
5366 MR. SHEPHERD: Yeah.
5367 THE CHAIRPERSON: -- but my point is we have C-31 --
5368 MR. SHEPHERD: Yeah.
5369 THE CHAIRPERSON: -- that's regulated the area.
5370 MR. SHEPHERD: Yeah.
5371 THE CHAIRPERSON: It's regulated voice --
5372 MR. SHEPHERD: M'hmm.
5373 THE CHAIRPERSON: -- it's regulated text and it's regulated data, including the Internet.
5374 MR. SHEPHERD: M'hmm.
5375 THE CHAIRPERSON: People often forget that --
5376 MR. SHEPHERD: Yeah.
5377 THE CHAIRPERSON: -- Parliament has done that.
5378 My point is: should we, therefore, going forward, choose a different course in each one of those bundles from a regulatory perspective? Admitting that you -- from a practical perspective --
5379 MR. SHEPHERD: Yeah.
5380 THE CHAIRPERSON: -- you obviously have to provide all --
5381 MR. SHEPHERD: I think it goes back to --
5382 THE CHAIRPERSON: -- three at one time.
5383 MR. SHEPHERD: There is a practical need. So when you look at the particular specific issues we talk about here in terms of access to roaming, I think if you believe, as we believe, that there is a case for new entrants and regional carriers, there is a requirement to access roaming, it is the entire suite of roaming, I would agree that the data roaming rate is the most critical. But, clearly, ensuring that there's reasonable access to the package of roaming services is a requirement.
5384 THE CHAIRPERSON: Okay.
5385 You all agree with that answer presumably.
5386 I'm going to get you to Bill C-31, and I take your point of when we adopt things we try to, to the extent possible, adapt to the specific facts in the regional operating area. Parliament didn't do that in this particular case, so C-31 doesn't put forward a regime that reflects the specificity that you're putting forward. Yet, presumably, Parliament has representatives from every part of the country.
5387 Now remind me -- I seem to recall that there wasn't a parliamentary committee on C-31 that dealt specifically with this.
5388 MR. MELDRUM: There was at least one meeting.
5389 THE CHAIRPERSON: One meeting.
5390 MR. MELDRUM: Yeah, where they discussed the specifics of that part of the act, yeah.
5391 THE CHAIRPERSON: And did you have a chance to appear in that?
5392 MR. MELDRUM: We did not appear.
5393 THE CHAIRPERSON: Had you sought the ability to appear?
5394 MR. MELDRUM: No.
5395 THE CHAIRPERSON: You weren't invited?
5396 MR. MELDRUM: No, we were not invited.
5397 THE CHAIRPERSON: Nor did you seek to appear?
5398 MR. SHEPHERD: I think for MTS the situation might be slightly different --
5399 THE CHAIRPERSON: Okay, go ahead.
5400 MR. SHEPHERD: -- and perhaps I would ask Justin To, from our regulatory group, just to expand on our participation.
5401 MR. TO: I would say we sought to appear, and we sought to speak, certainly, with our Manitoba MPs and with the minister's office and the Government of Canada. We spoke to them at length, but behind closed doors.
5402 It was a budget bill, and we realized that certain things where we had the ability to change and certain things we did not, and that the form was coming here, as written in the legislation, and so we took the form here.
5403 THE CHAIRPERSON: Right. So you were led to believe that the specificity of your operating territories could be dealt with in some sort of follow-up proceeding before us?
5404 MR. TO: That's right. That was the words we were given by the government.
5405 MR. STYLES: That applies equally to Saskatchewan as well. We did the same thing: we talked with the local MPs, we had meetings down here in Ottawa, and our understanding was, again, there would be an opportunity to get it right, if I can use that phrase.
5406 THE CHAIRPERSON: I won't even ask you if that assumes that C-31 got it wrong, but --
5407 THE CHAIRPERSON: -- let's move on.
5408 Is that the same thing for Tbay?
5409 MR. TOPATIGH: That's right. We did not appear, nor did we have the opportunity to appear.
5410 THE CHAIRPERSON: Okay.
5411 See, the challenge we have is that Parliament's adopted a regulatory regime that does not create specificity for your particular operating territory.
5412 And I don't want to undermine your argument, just it seems a bit of a contradiction: if Parliament didn't do it, why should we?
5413 MR. SHEPHERD: I think the answer to that is Parliament, obviously, you know, wise and considered as they might be, doesn't necessarily have all the facts and all the information that the Commission has.
5414 Certainly I think you're in a position to consider all of those in detail. That's why you're holding the hearing today. Certainly that's why we're presenting our view: is we feel that you have the ability to implement the changes within the overall context of what the government is trying to achieve. I think it's clear, and we support it: they're trying to ensure that there is vigorous competition and that consumers have access to great services and the right pricing.
5415 THE CHAIRPERSON: No one disagrees with that? So you think we're in a -- perhaps have a better position to be able to take the time to look at all the facts, do evidence-based analysis and take your considerations into play?
5416 MR. SHEPHERD: Yeah.
5417 With due respect to the political process, I think the Commission has got the expertise and, through this hearing, has been able to hear from all the parties involved, and should be in a better position to consider the details of what's required to really sustain competition and deliver consumers the types of benefits that in fact we say are being seen in our markets.
5418 To the extent that the regime over the longer term is going to impair our ability to compete in our markets, to continue to invest in rural networks and other technologies, that is our concern: that we believe that the Commission has got to consider that, and should consider that, in their deliberations.
5419 THE CHAIRPERSON: And we should draw no adverse inference from the fact the legislation did not make that distinction?
5420 MR. SHEPHERD: No, I don't believe so. I believe the way the legislation was brought in was the way it was brought in. But I think, clearly, the Commission has got the -- as I say, the opportunity, through this hearing, to fine-tune it and to make whatever changes you believe may be appropriate, given the evidence you've heard.
5421 MR. STYLES: The other aspect to this --
5422 THE CHAIRPERSON: Surely we're -- just for a second --
5423 MR. STYLES: Okay.
5424 THE CHAIRPERSON: Surely we're doing more than just fine-tuning it at this point.
5425 MR. SHEPHERD: And you could make more changes than fine-tuning, I would agree. I think you're hearing, and have the opportunity to address, you know, the fundamental requirements to ensure that there's a competitive wireless market in Canada going forward?
5426 THE CHAIRPERSON: Fair enough.
5427 Sorry, I cut you off.
5428 MR. STYLES: The other aspect to this, I believe, is the fact that particular policy initiatives should fit within a framework. The CRTC has a legislated framework. You know, it is there, you can go see it. So it's a question about taking what I think was an initiative that had a set of policy objectives from the government and trying to fit it back into that particular framework to make sure that the pieces all interface with each other.
5429 Individual policy decisions on their own sometimes, you know, have the right objectives, okay, it's how they're implemented and how they're interfaced with the rest of the regulatory framework. I think this is one of those situations where you're in a position to look at it within that particular framework, and help ensure that the pieces do fit together, and accomplish the goals and objectives of the federal government.
5430 THE CHAIRPERSON: Fair enough.
5431 I believe those are our questions. Thank you very much for -- did you want to add anything?
5432 MR. SHEPHERD: No, just thank you very much for the opportunity and thank you for the opportunity to appear and present our views.
5433 THE CHAIRPERSON: Not at all. Thank you.
5434 MR. STEWART: Sorry, Mr. Chairman --
5435 THE CHAIRPERSON: Oh, yes, legal has some questions. Obviously, I keep forgetting that.
5436 MR. STEWART: Yeah.
5437 THE CHAIRPERSON: Pretty sad. I used to be in that seat and...
5438 MR. STEWART: Merci, Monsieur le Président.
5439 My first question is for MTS, and just a question of clarification.
5440 So if a service provider wanted to roam in Manitoba, it has the choice of doing so in an arrangement with either Rogers or MTS. Correct?
5441 MR. SHEPHERD: That is correct, although in our sharing agreement, because Rogers already has infrastructure and capability in place for roaming, many of those agreements are actually implemented through Rogers. But they do have the opportunity to approach us directly, should they wish to.
5442 Should a party want to roam on MTS versus on the same network, essentially, as Rogers, they have the ability to do that. In practice, most players seeking roaming have actually ended up working with Rogers, but, for example, we do have a separate agreement with SaskTel that is directly with MTS.
5443 MR. STEWART: And does Rogers consult with you when they are approached for roaming arrangements in Manitoba?
5444 MR. SHEPHERD: I would say no. They make us aware of when roaming may be turning up to the extent that we need to do technical work. But if they're approached for a roaming agreement, they negotiate that roaming agreement directly with the party that's approached them.
5445 MR. STEWART: And would you act likewise: would you proceed independently of Rogers and not consult in the way I've described?
5446 MR. SHEPHERD: We could negotiate an arrangement, but typically what we have done is utilized, as I said, some of Rogers' existing roaming capabilities. Because of the nature of the shared network, we often will have to engage them to put a roaming agreement in place, from a technical perspective.
5447 MR. STEWART: Thank you very much, Mr. Shepherd.
5448 I believe, Mr. Shepherd, you said that it is better to be able to separately negotiate with three national carriers as opposed to two. Correct?
5449 MR. SHEPHERD: Yes. I think what I said -- we were asked if it's better for there to be options for a carrier to negotiate with two groups, Rogers and Bell/TELUS -- or three. I think my view would be it's always better to have more choice if you're seeking those types of services.
5450 MR. STEWART: Is that a view that is shared by representatives of the other companies? And I invite Mr. Styles and your colleagues to...
5451 MR. TOPATIGH: Yeah, it's certainly a view that's shared by us, as well. It mirrors that of the retail environment. More choice is certainly beneficial and can, in certain circumstances, provide us with a favourable outcome.
5452 MR. MELDRUM: So maybe in the case of SaskTel you're going to ask us about our relationship vis-à-vis roaming and Bell and TELUS, but in Saskatchewan it would be SaskTel who is the party that people have to deal with to get roaming. That is not something that they have the rights to.
5453 MR. STEWART: Why is that?
5454 MR. MELDRUM: That's the agreement that we had in place. We own 100 per cent of the network and roaming revenues are SaskTel's revenues, not the revenues of Bell or TELUS.
5455 MR. STEWART: So is it essentially for legal reasons that that is the case, as distinct from technical reasons, that --
5456 MR. MELDRUM: It's a --
5457 MR. STEWART: Sorry, if I can -- I'll pursue that -- a carrier could go to either TELUS or Bell for roaming in Saskatchewan?
5458 MR. MELDRUM: It's not a shared network in the same sense that you've heard from MTS.
5459 MR. STEWART: When you say, "It's not a shared network," is it it's not a shared network as expressed in legal terms or in -- is there any difference in technical terms?
5460 MR. MELDRUM: I don't think it's a technical issue. It's the agreement that we negotiated with Bell and TELUS.
5461 MR. SHEPHERD: I think it's a different business arrangement.
5462 I mean just again to, you know, ensure you understand the MTS situation, it truly is a shared network. Both Rogers and MTS invest in it. When it comes to roaming revenue, we share the roaming revenue on a basis that makes sense, in terms of who's doing, you know, most of the work to put the roaming in place.
5463 So the business deal we have in place there was negotiated as part of a larger arrangement, but, clearly, since we're both investing proportionally in the network to carry traffic, it's a different situation, I believe, than SaskTel.
5464 MR. TOPATIGH: And from a Tbaytel perspective, it's also different than the MTS relationship. We have the entire network, we have built it, and anyone interested in roaming needs to approach Tbaytel from that standpoint.
5465 MR. STEWART: Thank you.
5466 You had an exchange with the chair about the impact of Bill C-31, and also with the Vice-Chair of Telecom.
5467 My question is really quite a technical one, and it's with respect to your -- in terms of parliamentary or legal -- a legal term, so they're -- and that is the -- as you know, Bill C-31 establishes caps, and those caps can only be displaced if the Commission establishes an amount there.
5468 Now how would you propose that the Commission act to implement your proposal with respect to a negotiated rate between yourselves and the incumbents?
5469 MR. MELDRUM: Could we undertake to respond to that? I think we want to be quite specific in our answer.
5470 MR. STEWART: Sure.
5471 MR. MELDRUM: Thanks.
5472 MR. STEWART: My next question -- and I've only got two more -- it's really a question of clarification, and it's with respect to SaskTel.
5473 I believe, Mr. Styles, you said that you do have a seamless roaming arrangement in one place. For the record, can you say where and why do you have that arrangement?
5474 MR. STYLES: It's with TELUS, and it's along the Alberta/Saskatchewan border. We share a number of communities. Lloydminster is sort of the best, most well-known one. Seamless was really the only solution to provide both TELUS and ourselves with a solution that worked for individuals that are in those communities, but just in the one location along the border.
5475 MR. STEWART: Just to follow up, was the cost of implementing that seamless arrangement significant?
5476 MR. STYLES: We'd have to undertake to respond to that in a written response. I'm not familiar with the details.
5477 MR. STEWART: Okay, if you would. Thank you.
5478 My last question is with respect to the 10-per-cent threshold that you've identified. You make reference to the 2008 AWS threshold and the rules, but I also note that in the 700-MHz option rules that there was also a qualifier with respect to 20 per cent or more market share in the province or the relevant licence area, which, of course, you would -- means that you would no longer qualify.
5479 Can you comment on that, please?
5480 MR. SHEPHERD: I could be wrong, but I believe the 20-per-cent threshold is actually for the next, the AWS-3 auction.
5481 MR. STEWART: Regardless of which auction.
5482 MR. SHEPHERD: Yeah. Okay, just to --
5483 MR. STEWART: So it's more the threshold.
5484 MR. SHEPHERD: Yes.
5485 MR. STEWART: What I'm trying to do is to -- I mean the 10 per cent is very convenient to --
5486 MR. SHEPHERD: Yeah.
5487 MR. STEWART: -- to you, but the 20 per cent is less so, and can you comment on that?
5488 MR. SHEPHERD: Yes.
5489 No, I mean, certainly we're aware of that. I think I would go back to: 10 per cent is what has been termed as a small carrier.
5490 When we look at the specifics of the services we're talking about, the important thing is not the in-region share. It's not reflective of market share in a particular territory we operate in. The important thing is our ability to self-supply nationally.
5491 We believe that carriers that are at that 10-per-cent level, new entrants, it's clear that they have no ability to self-supply nationally. Therefore, that's the important criteria, not the criteria in the regional area.
5492 In the region, it's clear that the national carriers do have access to significant amounts of spectrum. They've already built a significant footprint of network, they've demonstrated the ability to self-supply, and, as I think we've talked about, they have significant capabilities that they can bring to a negotiation that are of interest to a regional carrier. So the 20 per cent in the region is really not an appropriate test to apply to this particular situation. It may be different for spectrum. That's a different issue.
5493 MR. STEWART: Thank you, Mr. Chairperson.
5494 Merci, Monsieur le Président. Ce sont mes questions.
5495 THE CHAIRPERSON: And I saw heads nodding from the other two carriers, so you would agree with those?
5496 Okay, great. We have to put it in the record, that's all. Thank you.
5497 Those are our questions, so thank you very much. We'll be on a break till 1050.
--- Upon recessing at 1033
--- Upon resuming at 1050
5498 LE PRÉSIDENT : À l'ordre, s'il vous plaît. Order, please.
5499 We will now proceed with the next intervener. So it's Primal Technologies. So, gentlemen, when you're ready, please go ahead.
5500 You have to press the button and the light comes on and we can hear you. Thank you.
5501 MR. CONWAY: Thank you.
5502 Hello. Thank you for having us. My name is Ravindra Conway, CTO of Primal Technologies, and on my left is Greg Carlson, Business Development of Primal Technologies.
5503 So for your own background, Primal is a fully owned Canadian company, operating for more than 15 years. We design and sell software platforms for specialized wireless services.
5504 Primal customers include many regional and small wireless service providers in the U.S. such as Nemont Wireless, GSI and ClearTalk Wireless, as well as service providers in the Caribbean such as CellOne and Islandcom. In total we have about 30-40 customers scattered around the world. Most of our business is related to wireless greenfield operators, providing platforms for billing, voicemail, text messaging and prepaid wireless voice and data.
5505 Primal has a long history of providing real-time applications for managing a carrier's service offerings, often with new and unique combinations to battle entrenched incumbents such as AT&T and Digisol.
5506 We believe our focused involvement in this industry segment, the small competitive carrier, gives us insights into other capabilities that would be attractive to MVNOs and, from our perspective, would be relatively easy to provide if MVNEs were allowed to compete in Canada.
5507 We believe that in addition to fair wholesale airtime rates and pricing for voice, data and text that has been the focus of most of the last two days of discussions, access to the incumbents' network should be included to ensure that delays and extra costs are not passed along to new MVNOs.
5508 This was briefly mentioned in the submission by the Commissioner of Competition and we believe the unbundling of the incumbents being the MVNE and the network operator should be pursued in more depth.
5509 We also believe that access to handsets at equal pricing and timing will be essential for MVNOs to compete. We believe that existing technologies are already in place that could quickly bring competition to Canada and access to the basic building blocks of network service providers would allow a wide range of innovation and competition.
5510 In our previous submission we did submit a PowerPoint diagram and so we would like to expand on that diagram here.
5511 So, at a very high level, most networks look the same. They have devices that subscribers use. There are radio waves using spectrum, which is a critical limited resource. There are towers to hold the radio equipment to communicate with the devices and these cell towers are in turn connected to central office equipment that provides the conduit for connecting to the rest of the world over the PSTN and the Internet.
5512 There are supporting services to manage the subscriber, their relationship with the service provider and finally billing and collection of funds from the subscriber. There are supporting enhanced features such as applications, voicemail, text and picture messaging that complete the services offered to the subscriber.
5513 The wireless network, made up of towers, radio equipment, switching centres, with their connections to the PSTN and the Internet, we have labelled the invisible network.
5514 We have labelled this the invisible network because 99 percent of subscribers are not concerned with which of the global telecom companies provide this equipment.
5515 Furthermore, the average subscriber is not concerned with acronyms such as CDMA, GSM, UMTS, LTE, PDSN, GGSN and the multitude of acronyms that in turn describe each of these acronyms.
5516 This equipment, and their acronyms, are not unique to Canada. This equipment is designed for use globally. The U.S.A, Africa, South America, Canada, it's all the same. This equipment is provided by global telecom suppliers such as Ericsson, Nokia and Alcatel-Lucent.
5517 Because it's deployed globally it is built on international standards and specifications from organizations such as the GSM Association, the IETF and the Telecommunications Industry Association.
5518 Because it is standard, if Canada were to have a fourth carrier, the first task of that carrier would be to build a network that is very, very similar to what Bell, TELUS and Rogers have already built.
5519 Incumbent carriers may be inclined to say that their networks are fragile and inflexible and access should not be permitted. However, our belief is because they are built on standards these networks are designed to interoperate with a wide range of flexibility, capacity and ruggedness.
5520 It is our belief that when this panel talks about enabling MVNEs, it should be to enable the flexibility to access the minimum -- and the key point is just the minimum of access via standard protocols to deliver voice and data through the airwaves.
5521 The other side of the network we have labelled the visible network because it is here that carriers and MVNOs use their creativity to differentiate themselves.
5522 First and foremost is how they charge and rate services, how subscribers are charged for services, for example, charge per byte, charge per megabyte, contract, no contract, pay by the month, pay by the day, date included, text included, et cetera.
5523 The permutations and combinations of these are at the heart of making any carrier successful and needs to be under the full control of the MVNO. This is a primary point because unless the MVNO is capable of creating new packages that the incumbent has not already thought of, they will not be successful.
5524 The creative bundling of the services such as text, content, picture messaging and calling features are the things consumers have already been educated on and allows them to quickly compare the best functionality that meets their needs.
5525 The customer care experience is also a key differentiator. How the subscriber is treated and how easy they can communicate with their service provider is essential, and this back-office infrastructure and business flow is typically the proprietary portion of any wireless provider's business execution.
5526 The retail and marketing options for the MVNO sits outside the technical interactions with the network. So we will leave that outside of our presentation, with the exception of briefly mentioning handsets.
5527 We have seen handsets be the differentiator of service providers in the U.S. and used as a barrier of entry for competitive carriers, and this topic should be addressed in more detail when creating the framework for MVNOs in Canada.
5528 The main point we came here today to highlight is that this infrastructure today can already support multiple brands and MVNEs. We believe that existing technology could be utilized to bring competition to Canada's unique large geography and leapfrog limitations of spectrum scarcity.
5529 Using the industry standard specifications by GSMA and others, protocols like CAMEL and DIAMETER which are already supported in the incumbents' networks, would allow MVNEs to be quickly empowered to offer service.
5530 By allowing a parallel set of services, MVNOs could bring competition to Canada based on creating something unique and not based on building a fourth network that looks very much like the existing three. This has the added benefit to save building more unpopular towers in urban centres and may spur further investment in underserved areas.
5531 Deploying a parallel set of services would have very little technical risk to the incumbents, and the separation of the core network, that invisible network, and their information technology already likely exists in all of these carriers.
5532 This would allow new MVNOs to focus on distribution, marketing, service bundling, niche markets and creating value for subscribers. New MVNOs could compete with better customer service, better rates and better options for their target Canadian subscriber.
5533 I think our motivation to be here was to provide a voice for the MVNOs that don't yet exist.
5534 Thank you very much.
5535 THE CHAIRPERSON: Thank you very much, gentlemen. The Vice-Chair of Telecom will start us off. Mr. Menzies.
5536 COMMISSIONER MENZIES: Thank you.
5537 Perhaps you could clarify for us precisely what you're looking for in terms of regulation.
5538 MR. CONWAY: I think what we are looking for in regulation is that we have seen how the past with the regulations for tower sharing and network sharing really didn't come to fruition as everyone hoped for WIND and Public Mobile and other new entrants, and so we're looking in the next stage, in addition to just, you know, setting the tariffs on voice and data, to mandate that access to these three large networks that could provide service to many other MVNEs could be enabled.
5539 COMMISSIONER MENZIES: So mandated access for MVNOs, MVNEs?
5540 MR. CONWAY: MVNEs and MVNOs.
5541 COMMISSIONER MENZIES: Okay. Thank you.
5542 What are the two or three barriers that currently exist that you would identify for us to target that on?
5543 MR. CONWAY: I think access to spectrum is the biggest barrier. Access to handsets would be the second barrier of entry. I don't have a third.
5544 COMMISSIONER MENZIES: Access to networks or access to spectrum?
5545 MR. CONWAY: I guess it's access to the network that provides access to the spectrum.
5546 MR. CARLSON: If I may, I think for any new entrant coming into Canada through the spectrum auctions, the cost of the spectrum for a specific geographic region is something that has to be financed. So it's not an easy amount of money to come by. So that is definitely a barrier to entry, I mean just in talking about the spectrum.
5547 But I think what our presentation is mainly focused on is at the services level. So aside from what we've been discussing over the last few days on tower sharing, wholesale billing and those kinds of barriers to entry, the other barrier to entry is just being able to offer retail services, to offer price plans, your price plans that you want to as opposed to -- you know, typically the MVNO in the past has had to use the billing system on one of the incumbents' network.
5548 Obviously, the disadvantage of that is the MVNO goes to the incumbent and says, I want to create this price plan. The incumbent is already aware of the MVNO's strategy basically, you know, before the MVNO can even launch.
5549 And I think that's a partial reason why MVNOs worldwide have been unsuccessful, because they haven't been able to put in their own billing platform or put in -- what we're talking about today is put in their own real-time prepaid platform to create the kind of differentiation, to create those monthly plans, to create those daily plans and so on.
5550 COMMISSIONER MENZIES: Have you approached any of the WSPs and looked for a wholesale agreement to have that access? Have you made the effort to become an MVNO and been blocked in some way?
5551 MR. CONWAY: For ourselves, just to be clear, we are not a carrier. We service applications --
5552 COMMISSIONER MENZIES: Yeah. You should be clear on that. You seek to be an MVNE only or do you seek to be an MVNE and an MVNO?
5553 MR. CONWAY: We don't seek to be an MVNE or an MVNO currently or in the past or perhaps not even in the future. We are -- but what we did see in some of these proceedings was these future MVNEs, who do not exist, have had no voice yet, and so going forward, we felt without presenting a platform and an environment for the future MVNEs -- all we have heard from are the incumbent telecom companies and the existing telephone companies and not the entrepreneurial next generation WIND, the next generation Public Mobile that have yet to even think about entering Canada as a competitive landscape.
5554 COMMISSIONER MENZIES: So you are giving your support to the MVNOs and giving us a roadmap as to how that might get there?
5555 MR. CONWAY: Yes.
5556 COMMISSIONER MENZIES: But you're not interested at this time in getting into the business yourself?
5557 MR. CARLSON: No.
5558 MR. CONWAY: No.
5559 COMMISSIONER MENZIES: Thanks. That always helps to understand where everybody is coming from.
5560 I'm curious about the access to handsets point that you brought up and it's been brought up by others. How would you see that working and what's wrong with having an operation where people provide service but not necessarily -- you know, people can go to the Apple Store or whatever and buy their own handset and do it that way? How would you see mandating access to handsets?
5561 MR. CONWAY: I think what we have seen in the U.S., and to use Apple as an example, it came out to the largest carriers first and was not available for purchase at all for small carriers, and the reason for this is Apple and Samsung, they like to sell millions upon millions of handsets.
5562 And if you are looking to buy a million handsets, even for our Canadian incumbents, they are also second on Apple's list to deliver, and new entrants who have less than a million subscribers, Apple and Samsung may not even return their phone calls for years after the product has launched.
5563 And so because of that, because the consumer sees the flashy commercials and wants the iPhone 6, there's very few places to get them until a year down the road, and because of that, as a competitive carrier, if you are offering iPhone 4s, subscribers aren't interested in being on your network.
5564 So we feel that there's -- other than blocking subscribers from getting devices, the incumbents, who can negotiate because they're buying at least a million of these handsets, can buy on behalf of someone who may not be buying a million handsets.
5565 COMMISSIONER MENZIES: I understand your position.
5566 What would you estimate the retail price impact of MVNOs would be on both low and high usage rates in Canada?
5567 MR. CONWAY: Do you want me to answer?
5568 MR. CARLSON: Go ahead.
5569 MR. CONWAY: I think the end subscriber would end up paying less. We have seen innovative carriers in the United States and entrepreneurial carriers have a different philosophy in going to market. Sometimes it would be to target different social groups, sometimes to not spend a lot on marketing but do more of a gorilla marketing campaign and try different aspects so that they can offer competing services at better price points, because their belief is providing the best service without the flash was what consumers wanted.
5570 COMMISSIONER MENZIES: Do the current wholesale rates that have been set by the government create an environment which is more conducive to MVNOs being able to -- well, they do exist to a certain extent, but a greater opportunity for MVNOs?
5571 MR. CONWAY: I think regardless of what the rate is set to, even if it was substantially lower, I think without access to the network, the MVNOs are still handicapped in what types of innovations they can bring. They will always then be in a fight of just trying to undercut or just make a little bit of margin on what that mandated price is.
5572 MR. CARLSON: So just to clarify, if I may.
5573 Hypothetically, if a new MVNO came into the Canadian market today and said to any of the big three incumbents, I want to put my own prepaid platform in your network to talk to your switch, they would all likely -- they might say no, they might say yes, but I haven't seen that happen before and I'm sure there might be some technical barriers -- or not technical, but political barriers to entry. I just haven't seen it.
5574 But technically, it's no different than a regional operator, such as who were on the panel before us, roaming onto Rogers or Bell or TELUS. You know, their systems and their subscribers can roam onto those other operators.
5575 So what we're saying is technically, an MVNO, with the right regulations in place -- and I don't know that those regulations have appeared before, but if those regulations did appear to require an incumbent to open up their network, similar to the unbundling of the local loop that occurred 10-20 years ago, but unbundle the cellular network to support rating for voice, text, data services, text delivery, voicemail, things like that, then that would give the MVNO a little bit more, I guess, strength to battle and to be profitable, have a business that can continue to survive.
5576 And that goes with -- I'm not saying it's one-dimensional. You know, they do need MVNOs, or some hybrid MVNO that may have their own antenna sites but not have their core network could exist as well. But the more regulatory advantages that are bestowed upon them, then they have a better possibility of succeeding.
5577 COMMISSIONER MENZIES: In your written submission you suggested that what was necessary was fair rates for text, data and voice. Can you give us a better idea of what "fair" means? I mean is it commercially negotiated, mandated rates? If so, what sort of rates are you talking about here, to help us understand?
5578 MR. CONWAY: I would preface that I'm not an expert on rates and tariffs.
5579 I think when we say a fair rate, there is a network cost to deliver a text message that is in the fractions of pennies per message. The network operators, the incumbents, do have -- you know, they have spent billions to deliver billions of text messages, so at this point in time the pricing that they are charging, from our viewpoint, is still encompassing a lot of their overhead, a lot of their infrastructure, a lot of their real estate costs, a lot of their advertising costs, and not representing the true network cost to deliver a voice call, a megabyte of data, et cetera.
5580 COMMISSIONER MENZIES: In your written invention, May 14th actually, you said:
"The existing competitive carriers were able to deliver on many fronts. However, the expense and limitations of building wireless coverage over the large geography of Canada has seen the demise of successful competition in Canada."
5581 So, is it your view that the new entrants really won't be able to compete with the large wireless carriers, no matter what?
5582 MR. CONWAY: I think we have seen that the new entrants have not been able to compete for a number of reasons. You know, they started out three or four years ago, they did count on having more access to towers, they did count on having more access to roaming rates so that they could at least build their first footprints, but a lot of times they were forestalled and so that killed their business plans and now they are all struggling.
5583 COMMISSIONER MENZIES: For my last question here, I am just going to articulate a point of view that some hold regarding MVNOs, okay. I wanted to give you the opportunity to respond to it because it comes up explicitly or subtly in certain submissions.
5584 And that's that money is a natural barrier to the entry into the industry, right, because it costs a lot of money, right, to be a wireless service provider. You have to run submarine cables from Cape Breton to Newfoundland, you have to put microwave towers on mountaintops, you have to put diesel fuel around them to maintain them, you have to put satellites on tundra and you have to fly in little small airplanes to Northern Saskatchewan to service and clean up.
5585 So those who hold that point of view would suggest that this is a little bit like the little red hen, where there's not a lot of people around who want to get into planting the wheat or growing the wheat or threshing the wheat or even making the bread but there's lot of people who want to eat the bread, and they see MVNOs on the eating the bread portion.
5586 So I want to give you the opportunity to tell me why those people are wrong.
5587 MR. CONWAY: I think we are now at -- the industry has matured over the last 20 years. These networks have been built out over the last 20 years by the incumbents. Now, the barrier to entry is you cannot come to market with a half-built network.
5588 Twenty years ago you could cover Toronto, you could cover the 401 and begin service and start making money and then slowly build out your network over the last 20 years, and so they had that luxury of time.
5589 So today, a new entrant does not have the luxury of time. They would have to land on the ground and build from coast to coast, you know, on day one before people will even go and try to buy their phone.
5590 And in terms of building yet more networks, we feel that, you know, three networks is enough and the limitation of spectrum is going to be the limiting factor that we cannot create more of.
5591 COMMISSIONER MENZIES: Those are my questions. Thank you for bringing your perspectives and your ideas to the table.
5592 MR. CONWAY: Thank you.
5593 COMMISSIONER MENZIES: It's always good to have as much 360 as we can. My colleagues may have some more questions.
5594 THE CHAIRPERSON: Thank you. Actually, no, we have no more questions for you. So thank you for your participation.
5595 We'll take a break till 11:25, which will allow the next panel to set up, and our intention is to hear Bell Mobility's presentation and then we'll take the lunch break. Thanks.
--- Upon recessing at 1116
--- Upon resuming at 1126
5596 LA SECRÉTAIRE : À l'ordre, s'il vous plaît. Order, please.
5597 LE PRÉSIDENT : À l'ordre, s'il vous plaît. Madame la Secrétaire...?
5598 LA SECRÉTAIRE : Merci, Monsieur le Président.
5599 We will now hear the presentation from Bell Mobility. Please introduce yourselves for the record. You have 20 minutes for your presentation.
5600 MR. OOSTERMAN: Good morning, Commissioners. My name is Wade Oosterman and I am President, Mobility and Bell Residential Services and Chief Brand Officer of BCE still.
5601 It is my pleasure to introduce Bell's panel. To my right is Martin de Gooyer, VP, Roaming and Carrier Relations and beside him, Claire Gilles, VP, Marketing, and to my left is Mirko Bibic, Executive VP and Chief Legal Officer and Kely Hisaki, Senior Manager, Technical Architecture.
5602 And then seated behind me from my right to my left is Ruby Barber, Assistant General Counsel, Serge Bertuzzo, Director, Regulatory Affairs, Barry Chapman, VP, Regulatory Affairs and Margaret Sanderson, VP and Competition Practice Leader at Charles River Associates.
5603 Thank you for having us.
5604 When I consider the key issues before us in this hearing, I keep asking myself, "Do we want to turn into Europe"?
5605 And it is important to ask that question because the quality and reach of our core product, and our core product is our network, ultimately drives benefits on a massive scale for Canadian consumers and businesses alike. So let's look at what we have today in Canada.
5606 We have excellent networks in terms of service availability, upload and download speeds, Smartphone adoption, LTE network roll-outs and investment, to name just a few.
5607 Canada ranks third in the G20 in terms of mobile voice usage per capita, fourth in terms of Smartphone data usage and third in both laptop and tablet data usage.
5608 In fact, the global GSM Association views Canada as part of an elite group of countries it calls "Digital Pioneers", which have the most advanced wireless networks and mobile markets in the world.
5609 Competition in the Canadian market is intensifying to the benefit of all Canadians. Since October, 2012 alone when the Commission last concluded that the wireless market was competitive:
5610 Eastlink launched service and runs ads claiming the "most extensive wireless coverage in Atlantic Canada";
5611 Videotron added about 170,000 subscribers and launched LTE services to 90 per cent of Quebec's population;
5612 Wind added over 230,000 subscribers and has successfully recapitalized;
5613 Carriers have spent in aggregate $5.2 billion in the 700 MHz auctions and LTE services using this spectrum were subsequently launched by Bell, Rogers and TELUS;
5614 LTE network reach increased from 72 per cent of Canada's population in 2012 to 82 per cent today;
5615 Smartphone penetration increased from 51 per cent in 2012 to 76 per cent today and tablet penetration increased by 50 per cent in 2013 alone;
5616 Data use on all devices increased by over 80 per cent between 2012 and 2013;
5617 The Wireless Code was introduced with a variety of consumer protections; and
5618 Industry Canada changed its regulations on spectrum auctions, licence transfers and roaming, all to the benefit of new entrants.
5619 Indeed, the government has publicized the fact that wireless prices have been falling, and we agree. We counted more than 350 price reductions from Bell, Rogers and TELUS in the first quarter of this year alone.
5620 Canadians who value lower prices above all else, above all else, have multiple options. Prepaid service is available at much lower entry price points from a variety of carriers. If post-paid service is preferred, consumers can turn to lower-priced services offered by the wireless new entrants and the incumbents.
5621 New entrant prices offer savings as high as 58 per cent, while incumbents' secondary brands offer savings up to 40 per cent.
5622 Prices in Canada, therefore, are not the real issue. The real issue in Canada is the need for massive investments and that continues to be the case.
5623 Penetration of Smartphones, tablets and other wireless devices will continue to expand and wireless data usage will continue to grow at over 60 per cent annually with no end in sight, as far as we can see. Consumers and businesses will find more ways to use mobile networks and devices in all aspects of life with mobile video consumption, mobile commerce and machine-to-machine communications serving as key growth drivers.
5624 Investment cycle, therefore, never ends. After LTE networks are rolled out to almost 100 per cent of the population, new LTE advanced and 5G networks must be built and, of course, more spectrum will be needed to meet consumers' evolving expectations for wireless service excellence.
5625 A regulatory approach that does not rely first and foremost on market forces and that does not support facilities-based competition will discourage the absolutely critical investment that Canada needs now and in the future.
5626 And we've seen what a lack of investment has done in Europe, and that is why I posed the opening question. The European Commission's Vice-President for the Digital Agenda summed up Europe's situation in this way: Current trends are unsustainable for the sector, and unsustainable for the whole economy. Imagine that. Without the infrastructure to compete, we aren't going anywhere, in any sector. We hurt consumers -- who wants that -- we hurt the economy -- again, not good -- and we hurt our strategic future if we do not act.
5627 And the risks are just as high in Canada. The government's interim price caps take the "buy versus build" network decision that carriers make every day and turn it on its head. As a result, all carriers, including ourselves, are now reluctant to build outside of city cores and in smaller communities because very simply, it's far cheaper to roam on an existing carrier's network than to expand one's own; and if there is no footprint, it's not possible to gain a competitive advantage by building brand a new footprint, so why would you.
5628 So that one decision alone has already eliminated one form of competition, in fact the most important one, our product.
5629 So ultimately investment disincentives will handicap the industry's future performance and Canada's digital economy, as well as jeopardize the roll-out of next generation services in rural Canada. Something that would not be positive.
5630 I will turn it over to my associate, Mirko, to walk through some of the policy implications.
5631 MR. BIBIC: Good morning.
5632 So wireless investments have long been supported by government policies that encourage facilities-based competition and, of course, you have heard others mention that this week.
5633 As far back as 1997, the Commission concluded that, and I quote:
"The full benefits of competition can only be realized with facilities-based competition."
5634 And as recently as June of this year in the Wholesale Wireline proceeding -- and you are going to have your hearing in November -- the Competition Bureau stated that facilities-based competition, again I quote:
"...is most likely to lead to robust and effective long-term competition."
5635 And we know that the government's own 2006 Telecom Policy Direction is firmly anchored to facilities-based competition and a reliance on market forces.
5636 In direct contrast to this clear and principled mandate, some parties have come forward this week seeking mandated MVNO access or ex ante price-setting for wholesale roaming and tower sharing. You should reject these requests.
5637 Starting first with MVNOs. This proceeding is about the state of wholesale competition which MVNO entry can do nothing about. MVNOs do not supply roaming, tower sharing or any other wholesale services to other carriers. On this basis alone, the Commission should reject calls for mandated MVNO access.
5638 Additional regulations that mandate access to MVNOs will further undermine facilities-based competition policies. Under such a regime, facilities-based carriers would be reluctant to invest in network improvements because any resulting advantages must be handed over to MVNO competitors.
5639 MVNO access regulations essentially trade facilities-based competition for competition based solely on price, which is completely at odds with sound government and Commission policy which balances multiple elements for a healthy industry over the long term.
5640 MVNOs are not facilities-based competitors. This was highlighted earlier this week when Commissioner Molnar asked Cogeco about the relative investment they would make compared to a full facilities-based carrier. Our understanding of their model indicates that it would avoid at least 80 to 85 per cent of the costs of building a wireless network. It is a total misnomer to call them full MVNOs or heavy MVNOs, which are terms that have been bandied about this week.
5641 Now, among facilities-based new entrant carriers that have appeared this week the most common issues raised have been rules related to wholesale roaming and tower sharing services. Industry Canada actively regulates these services today, as we know.
5642 Canada's roaming regulations are actually the most rigorous in the world. Very few countries have wholesale roaming price regulations, and where they do, the requirement is typically to negotiate commercial rates. We are aware of no other country that has price caps.
5643 Tower and site sharing regulations are already comprehensive, even specifying the timelines and data requirements for each step in the information exchange between carriers.
5644 To complete the regulatory framework, Industry Canada oversees a mandatory arbitration regime available to all carriers in the event of a dispute.
5645 So operating within this set of regulations, the facts on the record confirm that new entrants are not disadvantaged and there has been no failure in the wholesale market. In fact:
5646 In a few short years, wireless entrants have developed a value proposition that has attracted about 1.5 million subscribers and captured an impressive one-quarter of all net subscriber additions in 2013.
5647 All carriers have secured roaming and now have more than one carrier to choose from.
5648 All carriers have successfully secured access to towers and sites. Eastlink only began offering service in targeted geographic areas in 2013, yet by the end of that year had access to over 230 wireless towers and sites through self-supply or sharing arrangements. At the end of 2013, Videotron and Wind had secured approximately 1,800 and 1,600 towers and sites respectively.
5649 There have been only four roaming arbitrations and three tower sharing arbitrations brought before Industry Canada and, to our knowledge, none required an arbitrator's ruling.
5650 This success hasn't stopped some interveners from calling for more regulation to strengthen their business plans. But the fact that some entrants initially struggled, does not suggest a market failure. Incumbent providers lost money too for many years before they became profitable. This is a common trajectory for most new businesses, not just wireless carriers.
5651 Five years after entering the TV distribution business, Canadian satellite TV providers had a pre-tax loss of $423 million on revenues of $946 million. It wasn't until 11 years after launching service that satellite TV generated a pre-tax profit.
5652 It's unreasonable to expect that multiple suppliers entering a highly competitive, capital intensive, maturing market at the same time and targeting the same price-sensitive customer segments would all become profitable within five years of launch, or that all would survive.
5653 The analysis prepared by the Brattle Group for the Competition Bureau, while flawed, nonetheless demonstrates why there is no need for further regulatory help.
5654 The Brattle Group concludes that a fourth national wireless carrier with the same market profile and capabilities as Verizon -- which generated $81 billion (US) in wireless revenue last year -- would result in only a 1.1 per cent decline in incumbents' prices and only a 3 per cent increase in wireless penetration.
5655 So even if the Brattle Group's optimistic predictions of new carrier impacts are taken at face value, no regulatory action would be required.
5656 History has shown that, without regulatory intervention or further regulatory intervention, the industry will reduce wireless prices by more than 1.1 per cent and increase penetration by more than 3 per cent.
5657 The Wall Report found that prices for the most popular usage baskets declined by about 5 per cent per year between 2008 and 2014 and industry analyst IDC forecasts that wireless penetration in Canada will rise by 10 per cent between 2014 and 2017.
5658 Given the competitiveness of the retail market, new wholesale regulations are not needed and would add unnecessary risk to the future of Canada's world-class wireless industry but we should always be open to improving the existing regulations.
5659 In the Commission's July 31, 2014 unjust discrimination decision on wholesale roaming, it summarized the weaknesses of the current regulations as seen by the new entrants. And the Commission said in the decision:
5660 They, the new entrant in question, also submitted that arbitration is not an appropriate recourse to counter the imbalance in bargaining positions as it is expensive and time consuming. They added that there are no guidelines to determine whether rates are commercially reasonable.
5661 On Monday, Wind reiterated that the arbitration process was unsatisfactory due to, and I quote:
"The lack of guidelines around what the arbitrator should choose as a rate."
5662 To address these criticisms, we've proposed that the Commission play a larger role in the arbitration processes for both roaming and tower sharing. Specifically, in our model, the Commission, rather than Industry Canada's commercial arbitrators, would resolve commercial disputes. This change would make the process less expensive and less time consuming.
5663 We also recommend the development of more detailed guidelines concerning commercially reasonable rates. We have identified several factors to be considered; such as the type, reach and quality of the networks, market precedents, the one-way or reciprocal nature of the arrangement and, most importantly, the risk and up-front investment avoided by the requesting party.
5664 Binding, baseball-style arbitration would replace the current Industry Canada price caps.
5665 We believe this strikes the right balance between relying on market forces and, to paraphrase the Wireless Code decision, carefully tailoring an obligation to ensure it targets the real problem. This, in our view, will best serve the needs of Canadians.
5666 Thank you, Commissioners.
5667 THE CHAIRPERSON: You can well imagine that we will have a number of questions for you, so rather than start and then stop for lunch, we will just take a pause for...
5668 But before you go away, when you say at paragraph 41, "Replace the current Industry Canada price caps", you mean Industry Canada price caps?
5669 MR. BIBIC: That's an error. That's the 27.1 price caps.
5670 THE CHAIRPERSON: Okay. So that is the parliamentary price caps?
5671 MR. BIBIC: Absolutely correct.
5672 THE CHAIRPERSON: Okay. So just so I understand and we can have a better conversation in a few moments.
5673 So why don't we take a lunch break and come back at a quarter to one o'clock.
5674 Is that okay? Thank you.
5675 We are adjourned until 12:45.
--- Upon recessing at 1142
--- Upon resuming at 1245
5676 LE PRÉSIDENT: À l'ordre, s'il vous plaît.
5677 So, Commissioner Molnar will start us with some questions. Sorry; after she has taken a zip of coffee.
5678 COMMISSIONER MOLNAR: Okay. Well, good afternoon. And the good news is I don't have five hours worth of questions, so --
5679 Part of that is where you are here in the process coming in this third or fourth day and a lot has been asked and answered through the process and there is a lot on the record. So, I really am not going to ask questions regarding the retail market and the state of competition. I think there is a full record. I want to focus on the wholesale market.
5680 I want to first though understand something and it came up yesterday with Rogers where when they were talking about the competitive wholesale market, they said that:
"We should require both Bell and Telus to offer roaming across the entire country and this will make the wholesale market even more competitive."
5681 And I just want to understand, based on your arrangement with Telus, where you do and do not offer roaming services?
5682 MR. BIBIC: Okay. Well, I'll turn over to Martin to answer the very specific question, but I would like an opportunity to talk about the specific nature of that proposal and the rationale given for if you'll allow me at some point because it's a fundamental issue.
5683 COMMISSIONER MOLNAR: Well, you know, that's why I brought it up.
5684 MR. BIBIC: Okay.
5685 COMMISSIONER MOLNAR: Because I really did think that you should -- you should have an opportunity.
5686 But also, first, let us understand that of the arrangement, how your network sharing arrangement aligns with where you offer roaming?
5687 MR. BIBIC: Okay. So, we'll answer the very specific questions and at some point I'll respond to the Rogers' proposal which kind of came in the middle of the hearing and there were thousand of pages of evidence and out of the blue this came. So, we'll speak to that.
5688 MR. OOSTERMAN: I think I'll take an opportunity to respond as well to the Rogers' proposal, if I may.
5689 COMMISSIONER MOLNAR: Well, fair enough, but please first let us know --
5690 MR. OOSTERMAN: Absolutely, Martin is going to do that.
5691 COMMISSIONER MOLNAR: -- where you do and don't offer roaming.
5692 MR. de GOOYER: So, at the heart of the matter is that the arrangement that we have with Telus is a network reciprocity agreement, not a network sharing agreement.
5693 Just from what I have been hearing over the last couple of days, I think it's a little bit different than what Rogers may have in place with their network partners.
5694 That word "reciprocity" means that we have a network and Telus has a network and we provide reciprocal access to those networks.
5695 But the bottom line on it is that we can't sell the Telus network to a third party that is not our end customer because it's not our asset. And similarly, they can't sell our network to another party because it is not their asset.
5696 I think that's what it kind of boils down to from a technology perspective, yes, it is possible, but it just is not from a contractual and a property ownership perspective, it wouldn't be right for us to sell their network.
5697 By the way, the same thing applies to the Three Party Agreement in Saskatchewan where we do not have the right to sell wholesale access to SaskTel's network because that is in fact their own asset.
5698 COMMISSIONER MOLNAR: Okay. And just so that I understand then, the spectrum you have within the markets where Telus owns the network is sitting idle?
5699 MR. de GOOYER: That's not correct. We do --
5700 COMMISSIONER MOLNAR: Right, you are using it?
5701 MR. de GOOYER: Well, we subordinate spectrum to each other in markets where that's appropriate and, you know, duly done through Industry Canada.
5702 COMMISSIONER MOLNAR: Okay. And actually, Industry Canada was my next question because it is in fact a condition of licence that you provide roaming, as a condition of that spectrum. And so, this is how this all got a little bit confusing to me.
5703 How is it that it is consistent with your conditions of licence, that you use your spectrum, but don't provide roaming on it?
5704 MR. de GOOYER: So, it's actually completely consistent. The spectrum that we have subordinated to Telus is theirs to use by the term that we have subordinated to them and similarly, the spectrum that they have subordinated to us in other areas is ours to use and we provide roaming on that spectrum to anyone who wants to take advantage of that.
5705 MR. BIBIC: And the subordination agreements must be approved by Industry Canada.
5706 MR. OOSTERMAN: But I think the core -- the core of principle philosophy is so we are going to allow expropriation of others assets. It may be crazy if we allowed Bell to set the roaming rates for Saskatchewan when we own no assets of their network.
5707 That be akin to taking Rogers' suggestion to the fullest and that in the set the roaming rates on Rogers' assets, which I also don't -- I can hardly believe that they would think that would be good.
5708 COMMISSIONER MOLNAR: Well, fair enough, but we are trying to understand this. I mean, the reality is --
5709 MR. OOSTERMAN: No, no. I appreciate it because --
5710 COMMISSIONER MOLNAR: -- you have purchased spectrum, you were awarded that spectrum under the condition that you provide roaming on it.
5711 MR. OOSTERMAN: A hundred percent.
5712 COMMISSIONER MOLNAR: It has come out here that while you provide retail services nationwide -- and you can correct me if I'm wrong -- you do not provide roaming services nationwide?
5713 MR. OOSTERMAN: We provide the roaming services on the assets that we own and that is as part of conditions of the licence.
5714 COMMISSIONER MOLNAR: And have not subordinated them?
5715 MR. OOSTERMAN: No, no. On the assets we own, anywhere we own assets, network assets, physical infrastructure, towers, et cetera, we provide roaming access.
5716 And you have to remember where we do subordinate our spectrum to Telus, in that physical area, anybody has roaming access. They just have to work through Telus, who is also mandated to provide roaming access. So, it's not as if coverage is kept from a requester.
5717 It just means that we negotiate on our assets and Telus negotiates on their assets and SaskTel negotiates for their assets and Rogers negotiate for their assets and it sounds like MTS perhaps gave that right to Rogers in their agreement, but I am not familiar with it, so I can't really give you a precise answer.
5718 COMMISSIONER MOLNAR: Uh-huh.
5719 MR. OOSTERMAN: I just know there are assets. Nobody should have a right to just negotiate that they belong to anybody else other than us.
5720 COMMISSIONER MOLNAR: You want to talk about Rogers' proposal now before we go forward?
5721 MR. BIBIC: Yes, please. Thank you, I mean. So, it sounded like I was going to dance on a procedural point, but I think it's a fundamental procedural point because, first, the suggestion was made after Telus appeared, and we can't speak for Telus obviously and I am sure Telus would have like an opportunity to respond to a fundamental proposal like that.
5722 COMMISSIONER MOLNAR: And, of course, there are -- there is an opportunity.
5723 MR. BIBIC: I know, but oral hearings provide a different kind of opportunity.
5724 COMMISSIONER MOLNAR: Yes. Okay, go ahead.
5725 MR. BIBIC: So, but that's not the biggest point because we are here and we have already answered the questions obviously.
5726 The other point as I think it was, if you look at the first intervention of Rogers. Well, yesterday, the comment was: This can be done and it wouldn't be difficult to do and, in fact, that has been done elsewhere. So, that was kind of the gist of the Rogers' evidence. So, easy to do.
5727 But then, if you look at paragraph 223 of their first intervention, never raised this issue. In fact, they acknowledge the reality of the situation.
5728 COMMISSIONER MOLNAR: I'm sorry. I'm sorry. Just to make sure I am following this conversation, when you've said: "This can be done", what "this" are you speaking of?
5729 MR. BIBIC: Yes, a good point. So, the Rogers panel mentioned that their proposal to force Bell and Telus to sell roaming, wholesale domestic roaming on each other's networks to roaming partners, can technically be done and has been done and there was a -- I don't have the exact words, but a reference that it wouldn't be particularly difficult to do. So, that's the best.
5730 COMMISSIONER MOLNAR: Okay.
5731 MR. BIBIC: Okay. But if you look at paragraph 223 of their first intervention, they acknowledge the reality of Bell and Telus negotiating wholesale domestic roaming on each other's and on our own networks, and they say: "Negotiating two roaming agreements at the same time is not a barrier to entry. It's actually a common business practice in the wireless industry and is done all the time all around the world."
5732 And then, they end:
"There is absolutely nothing difficult or special about negotiating two or more roaming agreements at once, especially in an environment where roaming is mandated with set thin lines."
5733 So, I look at this and they say it's actually easy to deal with the situation we have now and they come yesterday and say: But you can also do this other idea and it's not particularly hard to do either.
5734 So, both proposals, both ideas: negotiate independent with Bell and with Telus or the Rogers' proposal of having each other sell roaming on each other's networks, both address the same issue. According to Rogers, neither one is difficult.
5735 So, doing a cost benefit analysis, if they both address the same thing, neither one is difficult, shouldn't the Commission choose the least disruptive commercial outcome, which is, you know, we have an arrangement, Bell and Telus, where we each have our own property rights to our network, let that proceed because the Rogers proposal from yesterday actually disrupts that commercial arrangement with market forces delivered entirely in order to reach the same result.
5736 So, I mean, this would have been nice to have been tested with them but, you know, the proposal came out yesterday and the Commission didn't get an opportunity to do that while they were on the stand.
5737 The other thing I'll just add to it is, there has been a lot of discussion about how many national roaming up, you know how many national networks there are, you know, and it's kind of -- the label has been assigned to it and I don't think the Commission is being particularly specific because you are still testing it, it is two, you know, is there two? Is there two? Well, there is more than two in every particular area of the country, well, in many areas of the country.
5738 So, if we take Atlantic Canada, Canron and Rogers, Eastlink now and Bell. In Quebec, it's Vidéotron, Rogers, Telus and we can move across the country east to west.
5739 So, there are three roaming options in most parts of the country and, of course, as a roaming partner now your roaming needs are going to be regional. You are going to seek roaming where you need roaming.
5740 We don't have overlapping networks even though we cover 98 percent of the population, but you know, the two percent of the population that we cover is slightly different than the two percent, you know, the two percent that we don't cover isn't exact, it doesn't map up exactly with the two percent that Rogers doesn't cover.
5741 So, we, as Bell, don't have network in Saskatchewan at all. Neither Bell or Telus cover all of Manitoba.
5742 So, even in that context there is not two totally national networks, but in every single region, in many regions, there are actually three and in most there are actually three. I think the Commission needs to keep that in mind.
5743 So, the Rogers proposal would lead to four in many parts of that country. Well, we have heard all week that we don't count -- you know, we don't assess competition on the basis of how many competitors there are. There can be vibrant, wholesale, competition with the three options in every regions.
5744 COMMISSIONER MOLNAR: You have also heard this week and I'll let you speak to it now, that -- when we asked what is the market for roaming, many parties have said it's national.
5745 MR. BIBIC: Margaret, do you want totake that?
5746 MS SANDERSON: So, Mirko would just ask me to start with the answer to this question.
5747 So, when you are thinking about market, markets are typically defined around what the set of close substitutes are from the buyers' perspective and that's going to vary by buyer. So, in the case of roaming, it really depends on where the hole is in your network.
5748 So, as Mirko was saying, that it's going to tend to be a different region or a different area of the country, depending upon what your own particular requirement is as the buyer of that roaming service.
5749 COMMISSIONER MOLNAR: I understand that. So, we are probably not going to define the market on a carrier by carrier basis and essentially what has come out is everybody requires to be able to roam across the nation for their customers to be able to roam across the nation and internationally.
5750 And under that context they say it is national because it isn't -- it isn't local, it is greater than local, right.
5751 So, how do we define it? How should we define it?
5752 MR. BIBIC: Perhaps it needs to be provincial, but if you define it as national, then think of the practical outcomes. Even if you consider the physical network infrastructure operated by Bell and Telus to be one, there is a third of Manitoba where we don't have network, so nationally, we don't provide national in that sense.
5753 Let's talk about Saskatchewan where Bell and Telus don't have network. So, and Rogers doesn't cover every looking cranny on its own either. We just heard they are with Tbaytel, and in some parts with Videotron.
5754 COMMISSIONER MOLNAR: Uh-huh.
5755 MR. BIBIC: So, I think it really has to be that the geographic market is -- I mean it's not each individual subscriber, but it's a -- you've got to aggregate up to really realistically and practically speaking, areas of the country that each provider doesn't cover.
5756 COMMISSIONER MOLNAR: Right. Okay. I get it and I am not sure if you can answer this. I know that I believe we have your agreement. But is there something, is it the nature of the agreement between you and TELUS that would prohibit you from providing roaming on that part of the network that they operate or own, as you want to say it?
5757 MR. BIBIC: Correct. The agreement prevents that on the basis that the TELUS portion that they built is their property, and vice versa.
5758 COMMISSIONER MOLNAR: Okay. I want to talk to you about roaming under kind of two different scenarios where we would find Commission intervention is required and where we would find, as you propose, that little or no intervention is required.
5759 So if we start under the scenario that it is not -- CRTC Commission is not required, the situation, as you well know, is there are legislative caps in place.
5760 Your proposal, as I read today, was arbitration.
5761 I was a bit -- well, I am under the impression, so tell me -- I'm sure you have done a lot of legal work on this as well. But I was under the impression that if we didn't establish a rate, the rates in place remained.
5762 Do you have a different view as to what is contained in that legislation?
5763 MR. BIBIC: I do.
5764 COMMISSIONER MOLNAR: Okay.
5765 MR. BIBIC: It is --
5766 COMMISSIONER MOLNAR: By the way, when I say I'm under the impression, you're a lawyer and I'm not, so you can speak to the lawyers, but I want to understand what you're saying.
5767 MR. BIBIC: No, no. That's my mission every single time I answer.
5768 So the -- first, the caps are in place, 27.1, we all know that, and they're the law and we all comply with them. And the Commission has been given the role to resolve disputes, if there are any, under -- when calculating those caps. So we accept that and we all know that.
5769 That's the first part.
5770 But the Commission -- 27.1 didn't remove or displace the Commission jurisdiction under the Act. You know, the other provisions of the Act remain and your jurisdiction is there, and you have to act under that jurisdiction.
5771 So we have a hearing here which is to -- under the Notice of Consultation which is to assess the state of the wholesale wireless market. And you're inquiring into that and you're building a record.
5772 You actually have jurisdiction under the Act, I daresay a duty, to come to your decision based on the evidence you have before you despite what Section 27.1 says, so I'm giving you a legal answer.
5773 There's a practical outcome to that, I appreciate, but there's a legal answer, too, to start.
5774 So for example, if you assess, based on the record -- and I would submit that the record clearly shows that there is no need for wholesale rate regulation. Section 34 of the Act says you actually must continue to forebear.
5775 So that's a legal decision that would come from your analysis and your overall jurisdiction.
5776 To find that you have to impose a wholesale rate despite the evidence showing that there is a competitive market because 27.1 exists, I think, constitutes a fettering of your discretion.
5777 So the cap is there --
5778 COMMISSIONER MOLNAR: So can I ask --
5779 MR. BIBIC: Yeah.
5780 COMMISSIONER MOLNAR: -- even I understood what you said, and I agree --
5781 MR. BIBIC: Okay, that's good.
5782 COMMISSIONER MOLNAR: -- that we could make the decision and must make the decision to forebear if the conditions require that.
5783 But under your interpretation, would that mean the caps remain until something is done about them?
5784 MR. BIBIC: Right. So that -- you had started there, and so that's the next part of my answer.
5785 COMMISSIONER MOLNAR: Okay, sorry.
5786 MR. BIBIC: So the Act -- you have to read 27.1 of the Act -- of the Telecommunications Act as you see it before you today, but you have to read it together with the Budget Implementation Act as it was passed in June.
5787 You have to read the two together.
5788 Twenty-seven point one (27.1) remains, but the Budget Implementation Act actually says that it can repeal 27.1 of the Telecommunications Act on a day to be fixed by Order of the Governor-in-Council.
5789 It doesn't specify -- the Budget Implementation Act doesn't specify the conditions under -- you know, which would have to be satisfied for Cabinet to decide to repeal 27.1, so nowhere in the Budget Implementation Act does it says only if you set rates will they repeal 27.1
5790 They may, you know, in theory tomorrow, wake up and the sun is shining and decide to eliminate 27.1. It may be because you've set rates. It may be because you've done something else.
5791 And so our proposal is, based on what we've seen on the record, the pain points that we're hearing the new entrants bring forward are the costs of arbitration, in some cases the time lines, which I think can be fixed or have been fixed, but could certainly be improved upon if you think it's necessary, and the guidelines -- the absence of guidelines for rates.
5792 So if you were to accept what we're putting before you today, you would adopt the Bell model. Now you will have done something.
5793 And yes, on the moment you issue your decision, there would be a cap and there would also be this model of arbitration. But we live with that today because we have a cap today and we have Industry Canada arbitration.
5794 So we're somehow managing our way through that as well.
5795 And then we would hope that the Commission would say, based on our decision, we don't think the caps should be in place. We understand that you can't repeal the caps, but you could certainly say that. And we would hope that Cabinet would then say, okay, the Commission's done an exhaustive inquiry, has assessed this and we'll repeal the 27.1.
5796 And Mr. Chairman, it's -- I think it's Section 241 of the Budget Implementation Act.
5797 MR. OOSTERMAN: Yeah, I'm not a lawyer, either, but I do place a great deal of hope in the word "interim" because the cap is damaging for Canada.
5798 And so I would hope that people who are wise and smart and care about Canada would take the necessary steps to make sure the right outcome happens.
5799 COMMISSIONER MOLNAR: So one of the ways the cap is damaging, I guess, is what you've got in your paragraph 19 of your opening remark where you speak about it causing disincentives. It's easier to roam than build.
5800 MR. OOSTERMAN: Correct.
5801 COMMISSIONER MOLNAR: Then you go on to say that the greatest risk -- at least how I read this, the greatest risk is to the least urban, more rural areas of Canada.
5802 And while that -- you know, I can follow the logic of that. I just want to understand, we heard TELUS come forward and admit to where expansion of mobile into rural and remote areas falls within its CAP-X priority, you know, capital plan priority.
5803 So are you folks in a different situation? Are you aggressively building into non-urban areas today?
5804 MR. OOSTERMAN: That absolutely used to be part of our capital priorities because we looked for competitive advantages. And to the extent that we had a spot on the map that we covered that others did not -- it wasn't about getting subscribers in that spot on the map we now cover. It's about getting people, you know, in the urban centres who might some day go there because we never recover the costs of that site.
5805 My least --
5806 COMMISSIONER MOLNAR: Maybe, actually, what I'm asking might be better done in an undertaking because I'm not -- I'm actually kind of looking for figures and facts as to the extent to which you have deployed your spectrum into the non-urban areas today.
5807 MR. BIBIC: I'd like to do it -- part of it now because we're all here and we have an opportunity.
5808 So you know, people criticize the argument of disincentives to invest and claim that incumbents always trot that out and, you know, it -- just trot it out, and of course they're going to have to continue to invest.
5809 Well, there are -- every regulatory decision and every marketplace action by a competitor triggers a need to respond as rational economic actors and, in fact, the caps have had a very direct, specific impact on some of our build decisions, and I'll give you three examples.
5810 One is, we were on a program to build out further network in northern Ontario. We've scaled that back, focusing on the City of Thunder Bay, and in the outskirts we're just going to roam on Tbaytel and rely on their network.
5811 The very same decision has been made in Manitoba. We were on an aggressive expansion program in Manitoba. We're going to stop that and continue to just start roaming.
5812 Now, you know, these weren't decisions made to make a regulatory point. There was no fanfare. There was no press release, you know, the day after the caps came into place. These are just normal, everyday decisions that we make.
5813 There's a third example.
5814 COMMISSIONER MOLNAR: Okay. Give your third example, and then I'll ask my --
5815 MR. BIBIC: Well, I'll move from my third example to one that you're familiar with.
5816 I think three of you were sitting on the panel to review Northwestel's modernization program, and there was an example there where there was a decision made. And Northwestel, when reacting to that decision, just made -- just in terms of one route between, you know, Dawson City and Stewart Crossing, decided to stop the fibre build and continued with microwave, legacy microwave technology because the customers were, of course -- customers, of course, were served. We continued to serve them. We just went about that.
5817 And so it's not we're going to leave the network rust in the fields because there's a regulatory decision, but it affects every single, you know, incremental decision.
5818 And you heard -- I'm not going to repeat what the CEO of Rogers said yesterday in terms of how you go about managing your overall capital spend, but that applies to us as well.
5819 COMMISSIONER MOLNAR: Yeah, and I think it applies to every business. If you only had as many ideas as you wanted, they'd be looking for somebody else to come up with ideas, right.
5820 But can you just confirm what you were talking about with those examples between the time that these caps have come into place and today, you have actually stopped construction?
5821 MR. BIBIC: Yes, in those specific areas, yes.
5822 And there's a third example which I didn't give, which is Highway 155 in La Tuque, where we decided not to erect towers. There's some spotty service there. It was uneconomic to begin with to install -- you know, build more towers there, more infrastructure there.
5823 COMMISSIONER MOLNAR: Had you made any commitments -- maybe the highway is not a good example, but in Manitoba, for example, had you made any public commitments to expanding?
5824 Did anybody know about your plans to expand?
5825 MR. OOSTERMAN: No, that's competitively sensitive, so we try not to give that kind of warning.
5826 COMMISSIONER MOLNAR: It's not so sensitive to not go, though, hey?
5827 MR. OOSTERMAN: Well, it's a practical outcome of the caps. And you know, if you're asking me what is the practical outcome of the caps, if I can't gain differentiation, I'm not going to go spend the money because I never get a return on that farthest site.
5828 My least traffic site that we operate would generate less -- and I mean, if you take our traffic and say that's 25 percent of the Canadian market and you add everybody else's so now we're 100 percent of the Canadian traffic, that site would generate, under current capped rules, less than $20,000 a year. I'm not going to do that.
5829 You know, I do it because I'll get more subscribers in Ottawa and Toronto and Montreal, et cetera, et cetera. Then it kind of makes sense, economically, to do, but not now. If I can't gain an advantage, why would I do that?
5830 And that hurts, obviously, the people that are now without coverage. It hurts investment in Canada. It hurts so many things.
5831 I just think -- I cannot over-state the importance of that. We must encourage investment.
5832 COMMISSIONER MOLNAR: Back to the issue of the caps, the regional carriers were in front this morning and suggested that the caps should apply only for -- you know what they said -- only for carriers with 10 percent or less market share.
5833 What's your thought of something like that? Allow you folks to continue to negotiate amongst yourselves as the larger carriers and provide some protection for the smaller.
5834 MR. OOSTERMAN: Well, somebody called it a convenient threshold to choose and, you know, given that certainly the people on the panel this morning in their own serving areas are north of 50 percent market share, I agree with that categorization of a convenient threshold.
5835 But I think it steps back to something much more fundamental because, you know, in kind of hearing all the testimony back and forth throughout the last three or four days, there are three or four key buckets.
5836 One of them seems to be I just can't afford to do this, I can't compete, I need help.
5837 And the truth is, no, that's not accurate. What's really going on is this.
5838 We have a value proposition we bring to our clients and they, given that, let's say, they have a smaller footprint that they bring to their clients, have a different value proposition. Because their footprint is lower or smaller, their costs are significantly lower so they tend to compete on price.
5839 I think, in our submission, we said the average price that they would offer their clients is 58 percent below ours. So it's a different value proposition.
5840 That value proposition, and in 19 of the top 20 markets in Canada, there are four players, and that value proposition gets one in four subscribers.
5841 COMMISSIONER MOLNAR: Okay. But I think the point --
5842 MR. OOSTERMAN: Oh, sorry. I think --
5843 COMMISSIONER MOLNAR: I get how they compete in the retail market. What we're talking about is how they --
5844 MR. OOSTERMAN: I know.
5845 COMMISSIONER MOLNAR: -- obtain access to --
5846 MR. OOSTERMAN: I know. So I'm going to finish there, trust me.
5847 COMMISSIONER MOLNAR: Okay.
5848 MR. OOSTERMAN: So to me, what's really going on --
5849 COMMISSIONER MOLNAR: I just promised it wasn't going to take five hours.
5850 MR. OOSTERMAN: I know. I know. Okay. That's a lot of weight to place on our response shoulders.
5851 But what's really going on is they're saying, look, I have my value proposition. It's getting one in four subscribers, but geez, I'd like their value proposition, too. I would just like their value proposition without taking on any of the risk of creating that value proposition.
5852 So I don't want to build even though I can. I recognize that these regional players generate well in excess of $1 billion each per year. So I want their value proposition without taking the risk of creating it.
5853 Nothing stops people from buying spectrum in other parts of the country and creating the same scale.
5854 MR. BIBIC: And ultimately --
5855 COMMISSIONER MOLNAR: That's -- that maybe ignores the fact that spectrum today is, in some cases -- not everybody has nationwide spectrum and there is an Industry Canada requirement to provide roaming, so -- and there's caps put in place.
5856 So my only question is, would -- how do you respond to the fact that they've come forward and suggested those -- the caps or whatever rate they may be replaced with apply only to those carriers.
5857 MR. OOSTERMAN: I will say that --
5858 COMMISSIONER MOLNAR: If your response is they should go buy more spectrum -- is that your response?
5859 MR. OOSTERMAN: Well, I think nothing stops them from having our value proposition if they really believe that's the one they want to bring to clients as well. It's possible to get there.
5860 On the specific question of roaming, we do provide roaming to everybody. And on the specific question of the caps, no, I don't think a 10 percent threshold is any kind of reasonable measure.
5861 I do agree, though, with there's a vast difference in costs and what you can recover when you're in rural markets versus urban markets and, in fact, in footprint and out of footprint, and that's where the real value for some of these players comes.
5862 So I think the common -- or the current approach of it's a national average completely ignoring all the elements of value creation is particularly damaging.
5863 MR. BIBIC: I would add that, I can -- I don't agree with this, but I'm imagining that the reason the cap was put in place was in order to provide, in quotes, cost effective roaming to those who need roaming.
5864 I would hope that it wasn't just done in order to, you know, help out particular competitors but, rather, it was a consumer-driven decision whether or not I agree with it.
5865 So if it's a consumer-driven decision, then I would offer to the panel that the 8 million Bell Mobility subscribers are entitled to the same concession as the 1.5 million subscribers in the hands of new entrants. If it's all about the consumer, then -- so that would be one point.
5866 The second point is if you take the particular providers in question on this morning's panel, Tbaytel has probably -- it's not public, but I would -- two years ago it was a monopoly, so I gather their market share is around 90 percent. In Saskatchewan, it's maybe 68 percent, and MTS' market share is north of 60 percent.
5867 So I mean, I understand the narrative that they put forward, which is we are the fourth provider the government is looking for.
5868 Well, in fact, the government hasn't identified which four they want, that they want four. We are the fourth in those territories, so ultimately, if it's down to the consumer, all the consumers should get the same benefits.
5869 COMMISSIONER MOLNAR: Okay. Thanks. I'm going to move on.
5870 Recognizing we haven't made any conclusions yet, if we were to regular wholesale roaming rates, what are your thoughts on establishing in territory versus out of territory rates for roaming?
5871 MR. de GOOYER: I think we recognize the difference between in territory and out of territory roaming. You know, a carrier that has bought spectrum in one region of the country, their need for national roaming likely doesn't go away in the foreseeable future, so out of territory roaming makes sense as mandated.
5872 In territory roaming is something that, at the very least, should be considered differently because, as we've heard several times at the hearing over the last couple of days, you know, that is where the build is focused, is in territory.
5873 And when roaming rates are too low, the build doesn't happen. I think there's several quotes on the record from several of the new entrants that indicate when -- you know, the equation to build is simple. Roam versus build.
5874 If roaming rate is too low, I don't build.
5875 So I think that's the distinction we would draw and I think it's a very valid distinction.
5876 MR. OOSTERMAN: I would actually fine tune a little bit and say in footprint and out of footprint because they have a region that they can serve. If they choose not to build their serving area, and build only the city when their holdings are larger, I don't think they should be discouraged from investing.
5877 So I think you end up with multiple layers of that. It's more complex than in territory and out of territory.
5878 You cannot lose site of the urban-rural split.
5879 MR. BIBIC: And Commissioner Molnar, just -- and I won't belabour it. I'll just make the point that, of course, you asked the question about in territory versus out of territory, and we've answered that.
5880 But if you take a step back, really, if the point is to arrive at the right rate, there's three ways to do it that have been discussed during the hearing.
5881 There's let the parties negotiate backstop by some form of arbitration. There's Phase 2 costing. There's retail minus.
5882 And we really, really do think that the first, the commercial negotiation with arbitration, is the quickest and most effective and least intrusive way to get to that ultimate end result.
5883 COMMISSIONER MOLNAR: And what do you think is the next between cost-based and retail minus?
5884 MR. BIBIC: I think the next -- a very, very distant second for us is cost-based, but I think it's just going to bring in a whole bunch of difficulty and time.
5885 It's going to take time, obviously, to set cost-based rates. You're going to get into issues, you know, what's incremental, what's causal, what's historical, what's embedded, all those discussions that you really don't need to get to in a market like this one as opposed the wire line context where you have a known universe of buyers and sellers and not every roaming arrangement is commoditized.
5886 You know, it's not like, say, gas access, right.
5887 COMMISSIONER MOLNAR: I think it's fair that we understand your preference for negotiated --
5888 MR. BIBIC: Right.
5889 COMMISSIONER MOLNAR: -- and the reasons why.
5890 But I did hear you support the notion of making a distinction between in footprint and out of footprint, and I hope there's somebody who understands the difference to me, but I'll use your words, in footprint.
5891 And is your view that the rate in footprint should be higher? Is that what you were suggesting?
5892 MR. OOSTERMAN: The opposite.
5893 COMMISSIONER MOLNAR: Oh, it should be lower.
5894 MR. OOSTERMAN: Yeah, the opposite.
5895 I think all of it should be subject to negotiated settlement between the parties. I think anything other than that is enormously damaging to Canada. I'll say again.
5896 COMMISSIONER MOLNAR: Okay. Yeah, you --
5897 MR. OOSTERMAN: Yeah, I'll keep saying it, too.
5898 COMMISSIONER MOLNAR: You said it again.
5899 MR. OOSTERMAN: Every time you ask, I'll say it because it's so important to this country.
5900 COMMISSIONER MOLNAR: Okay. Thank you.
5901 MR. OOSTERMAN: But on that specific item, lower in than out.
5902 COMMISSIONER MOLNAR: Thank you.
5903 Videotron had requested or made a submission in its May intervention asking the Commission to remove restrictions that prevent it from commercializing its service in areas where it's not yet started to deploy network.
5904 MR. BIBIC: It's an absolutely terrible idea, and it's contrary to the whole notion of encouraging people to build networks. It's just a bad idea.
5905 You -- just even take roaming and the seamless handoff issue.
5906 We heard Wind say quite clearly -- it was in their opening statement -- the absence of seamless roaming has created an urgent need for us to expand our network. That's a good thing. That's a good thing.
5907 And the same thing with the Videotron proposal is essentially mandated resale, which is -- which isn't going to support the development of wholesale competition. And there's an absence of -- there's no absence of retail competition, so we totally disagree with that idea.
5908 COMMISSIONER MOLNAR: Okay.
5909 You brought up the issue of seamless roaming, and, as you know, there's parties here who have requested that.
5910 Could you tell us how significant is the cost of implementing seamless roaming within your network?
5911 MR. de GOOYER: Why don't I just start on the seamless roaming question.
5912 So, firstly, while there's been lots of discussion about seamless roaming, we haven't really seen any evidence at the hearing of customer issues around seamless roaming or market share impacts due to the lack of seamless roaming. So the issue is lots of commentary, but there actually isn't much evidence on the record from anybody.
5913 The comment I would make on seamless roaming is that --
5914 COMMISSIONER MOLNAR: Because the question is the cost.
5915 MR. de GOOYER: Right. The cost is one part of it --
5916 COMMISSIONER MOLNAR: But that's my question.
5917 MR. de GOOYER: Okay. I will ask --
5918 COMMISSIONER MOLNAR: You have made your submission, you made your comments --
5919 MR. de GOOYER: Yeah.
5920 COMMISSIONER MOLNAR: -- and now you're answering my question.
5921 MR. de GOOYER: Yes. I just wanted to put the context of how we would do seamless roaming before we actually get into the cost, if that's okay, if you'll give me that leeway. Otherwise, I'll pass it over to my colleague to focus just on the costs. Or would you like the bigger picture --
5922 COMMISSIONER MOLNAR: Well, why don't you folks --
5923 MR. de GOOYER: -- of seamless roaming?
5924 COMMISSIONER MOLNAR: -- do this as an undertaking, if you don't mind, and add in what are the costs, and you can put in your context in there.
5925 MR. BIBIC: Okay.
5926 COMMISSIONER MOLNAR: Is that okay? Thank you.
5927 I want to move on to the area of tower and -- I'm not going to say the name -- or towers, et cetera.
5928 How do you define the market for towers and site sharing?
5929 MS SANDERSON: Again, because that's going to be based on what the buyer's looking for, they're going to be quite localized. They're probably going to be at a city level, maybe even narrower than a city, potentially thinking about things in the context of, say, downtown urban areas might be different than the outskirts of city.
5930 Basically what you're going to be looking for is looking for the set of towers that are a good substitute for whichever one you're thinking about, and that's going to vary by location and by purchaser.
5931 So when you have -- I mean you can see right away this becomes impractical --
5932 COMMISSIONER MOLNAR: Okay.
5933 MS SANDERSON: -- because you have too many that you have to think about.
5934 COMMISSIONER MOLNAR: I have to say, you know, folks here know I live in Regina, and if I make a decision, I'm making a decision within my local market based on the conditions in my local market. That doesn't make the wireless market Regina, right? We have defined markets in ways that are reasonable aggregations.
5935 So I get you make a tower decision tower by tower, but what is the relevant market, from a regulatory perspective?
5936 MR. OOSTERMAN: But it's difficult --
5937 COMMISSIONER MOLNAR: What is a reasonable relevant market?
5938 MR. OOSTERMAN: Well, it's difficult because -- go back to an example in the U.S. MetroPCS focused only on city coverage. They did not care about towers outside urban areas.
5939 COMMISSIONER MOLNAR: Do you folks have a rate card for towers?
5940 MR. OOSTERMAN: They're tower by tower, I believe.
5941 COMMISSIONER MOLNAR: Do you have a rate card?
5942 MR. BIBIC: We have a rate card.
5943 COMMISSIONER MOLNAR: Would you have it -- have you filed it, or would you be prepared to if you have not?
--- Off microphone
5944 COMMISSIONER MOLNAR: Okay, we have your rate card. So we'll look at that to know whether or not it's actually tower by tower or if there's some aggregations that may occur.
5945 You know, we heard about it. We heard how complex it is. They're all structured -- or, sorry, engineering structures. I get it.
5946 MR. BIBIC: We don't need to have, you know, a hard debate on this.
5947 COMMISSIONER MOLNAR: M'hmm.
5948 MR. BIBIC: We understand and know, for practical purposes, as a regulator, you may want to aggregate up. But just recognize that it can't possibly be provincial. Because if you want to build network in Montreal, what good does it do to have a tower up in Saguenay?
5949 But we agree with -- we don't dispute -- first of all, we accept that there's mandated tower sharing, and we actually understand the reasons why. We accept that there's arbitration, and we think the process should be improved.
5950 Now what we also think -- there was a suggestion made maybe yesterday, I think it was the Vice-Chairman Pentefountas made it, about what about a -- you asked Rogers -- a template agreement? We actually support a template agreement. I think that's a good idea.
5951 We asked the Commission to do that in a municipal access context with the model MAA. That's worked out well. I think we could do that, and just leave the rate blank, and then have the rates set by the model we have today, in the hands of the Commission, in other words, as you know, arbitration with guidelines.
5952 COMMISSIONER MOLNAR: Okay.
5953 When you establish rates, do you have what are called premium charges? I think it's WIND who put it in their May 15th submission the fact that some incumbents' rate cards contain a premium rate.
5954 MR. BIBIC: I believe -- and Serge can correct me if I've got this wrong -- but I believe that when we negotiate with a provider like WIND, what we ask them to pay us is what we're willing to pay them to access to their towers.
5955 COMMISSIONER MOLNAR: Hmm. Okay.
5956 Okay. As you said reciprocal, so you would pay -- and you would pay to them what they would pay to you, that's what you just said?
5957 MR. BIBIC: Yeah, for similar -- I believe for similar types, et cetera.
5958 COMMISSIONER MOLNAR: Right.
5959 MR. BIBIC: But, yes, we agree to pay them what they pay us.
5960 Now in our guidelines we propose that the Commission, you know, accept the notion that volume may matter, quality may matter, urban versus rural may matter. That might spell a shift, but right now what we offer them is what we're prepared to pay for access to theirs.
5961 COMMISSIONER MOLNAR: M'hmm. Okay.
5962 I'm well aware of your perspective on how the rate for each specific tower should be established, but there are parties who have suggested that it be tariffed.
5963 I think that in your submissions you talked about the complexity of establishing the rates for towers as a product to be tariffed. Videotron and Eastlink have suggested that it is possible to aggregate them based on similar characteristics -- maybe you do as you do on your rate card, I have to take a look at it.
5964 If we were to create a tariff for tower and site sharing -- and this is an if, but if we were -- what would you propose as broad categories when establishing the tower and site sharing rates, for example, types of towers, types of antennas, and so on?
5965 This can be undertaking, if you want to take it away and reply to this.
5966 MR. BIBIC: Absolutely. We would like to do it --
5967 COMMISSIONER MOLNAR: As an undertaking?
5968 MR. BIBIC: -- to do it that way. Yes.
5969 COMMISSIONER MOLNAR: Thank you.
5970 And maybe the rest of these will be undertakings as well, then.
5971 How do you respond to Videotron and Eastlink's proposal that the costing principles that apply to support structure services would be an appropriate approach?
5972 Do you want to reply --
5973 MR. BIBIC: Yeah, but -- I will reply in an undertaking, but I didn't understand the question.
5974 COMMISSIONER MOLNAR: Oh.
5975 Videotron and Eastlink have proposed that we use the support structure approach to establishing rates and tariffs for towers, that they're similar in their nature and characteristics and similar --
5976 MR. BIBIC: Okay.
5977 COMMISSIONER MOLNAR: -- costing should be used --
5978 MR. BIBIC: I understand.
5979 COMMISSIONER MOLNAR: -- or principles of costing. As you know, it's not a phase two cost.
5980 MR. BIBIC: I understand it's not, no.
5981 COMMISSIONER MOLNAR: So that's the undertaking.
5982 MR. BIBIC: Okay, we'll take that.
5983 COMMISSIONER MOLNAR: Okay.
5984 Finally, which wireless carrier should be required to establish tower and site sharing services tariffs?
5985 MR. BIBIC: We'll take that in an undertaking, but I would add today to that, which is -- if I could draw a parallel between this and support structures now, not in terms of the actual costing methodology, but that they're tariffed. So in the wireline pole example, or sit context, our poles, our support structures are regulated, and everyone gets a regulated rate, so, you know, all ILECs, but there's a limited universe of, you know, providers of poles.
5986 It's essentially hydro companies and telecommunications companies, and in all cases you know you're going to get a tariffed rate. It happens not to all be regulated by the CRTC. Hydro utility regulators regulate the price for those. So, at the end of the day, they're all treated as public good, just from a different regulator, so...
5987 But in the context of towers, I would just ask the Commission to consider, if you look at the record, there are, I think, between -- you know, there's some -- I think there's some kind of data accuracy issues on the record, in terms of -- I think some people classified sites as owned, when I believe -- we believe they may not be owned.
5988 But in any case, probably between 4,000 and 6,000 towers and sites aren't owned by wireless service providers, so the Commission can set -- you know, tariffs for access to those from the WSPs, the wireless service providers, but that still leaves a universe of 6,000 that will not be regulated.
5989 And then may I just say the model -- the model's working and I don't -- I haven't seen on the evidence, really, that the fundamental pinpoint is that it's not costed and that this model that we have today can't work. Now I'm not going to repeat everything that Ken said yesterday --
5990 COMMISSIONER MOLNAR: Yeah, fair enough.
5991 MR. BIBIC: -- but I agree with it.
5992 COMMISSIONER MOLNAR: It was an if question, so I appreciate your perspective --
5993 MR. BIBIC: M'hmm.
5994 COMMISSIONER MOLNAR: -- and if you would answer. Thank you.
5995 MR. BIBIC: Will do.
5996 COMMISSIONER MOLNAR: Thanks.
5997 On the issue of sites -- and we had a bit of a discussion about access to buildings as well -- do you have exclusive access arrangements?
5998 MR. BIBIC: No.
5999 COMMISSIONER MOLNAR: You have none?
6000 MR. BIBIC: No.
6001 COMMISSIONER MOLNAR: Okay.
6002 So if we were to determine in some way that it would be important that there be no exclusive access arrangements for the locations of the wireless equipment -- and I'm sorry I've lost the word right now, but you know what I'm talking about -- that wouldn't be a problem to you?
6003 MR. BIBIC: Yeah, for towers. And I believe that Industry Canada rules prohibit that in any case.
6004 COMMISSIONER MOLNAR: Not for towers, I'm talking about anywhere --
6005 MR. BIBIC: No tower, oh.
6006 COMMISSIONER MOLNAR: -- where you're putting your equipment, essentially sites' building.
6007 MR. BIBIC: In any case, that's -- we'd be fine with not having exclusives in that regard.
6008 COMMISSIONER MOLNAR: Okay, thank you.
6009 I'm going to ask you one last question. At the risk of you going off, again, because certainly your position is clear, but I asked it to Rogers and I want to give you the same opportunity, because, once again, there's a lot of important people in front of us, and, clearly, this is an important hearing to you as a consequence of that.
6010 I asked him: well, what is the worst possible outcome that you're concerned may occur from this, recognizing the scope of what we're looking at here within this, right, roaming, towers, other wholesale services? What is your greatest concern here?
6011 MR. BIBIC: I'm going to rank order them in two groups: group A, mandated MVNOs and mandated resale, and group B is ex-ante price setting for roaming, wholesale domestic roaming, and below that ex-ante price setting for tower sharing.
6012 COMMISSIONER MOLNAR: Okay.
6013 MR. BIBIC: The first group is just fundamentally inconsistent with facilities-based competition. You've heard us on that, so I won't --
6014 COMMISSIONER MOLNAR: We've heard you.
6015 MR. BIBIC: -- but you understand.
6016 COMMISSIONER MOLNAR: Thank you. Those are my questions.
6017 THE CHAIRPERSON: Mr. Menzies, Vice-Chair.
6018 COMMISSIONER MENZIES: Just a couple of questions. Thanks.
6019 You mentioned in your presentation today that you had counted more then 350 price reductions since the first quarter of 2014 -- or in the first quarter --
6020 MR. OOSTERMAN: Right.
6021 COMMISSIONER MENZIES: -- of 2014 on.
6022 MR. OOSTERMAN: Yeah.
6023 COMMISSIONER MENZIES: Would you mind filling us in or filing with us the analysis you did to come up with that statement? I mean you can tell us now if you want, if you have it here.
6024 MR. BIBIC: Okay.
6025 So our May 15th submission had a sample, and we'll file the rest of it to complete the universe.
6026 COMMISSIONER MENZIES: Okay.
6027 I just wanted to get some comment from you about seamless roaming, in terms of it's been brought up as an issue by new entrants and they've expressed some frustration with their subscribers losing their calls as they move from their network into yours.
6028 Could you give us your perspective on that problem, and whether there's a cost to it, whether it's offered as part of the -- whether seamlessness is something that's discussed in wholesale roaming arrangements or...fill us in, please?
6029 MR. BIBIC: Okay.
6030 I'll take it from kind of a reg policy point of view, and I'll be very quick, I promise.
6031 But WIND filed unjust discrimination complaints on this issue against Rogers, and it was dismissed on the basis of an absence of evidence. I think that was in 2011. They filed a review and vary application and it was dismissed, the appeal, on the basis of a lack of evidence. I'm actually heartened by the fact that the chairman continually reminds that you're an evidence-based decision-making body.
6032 And then just to very specific point, Vice-Chairman, they have come forward and have made the claims that they have, but I would have thought it would have helped or assisted the Commission if they had come forward and said, "Okay, here are the evidence of dropped calls as a result of this issue. Here's the evidence of our inability to market to subscribers. Here's an analysis of how subscribers we've lost as a result of this very specific issue."
6033 So, again, you know, we're here three years later and there's still no specific evidence. It would be more convenient, but I don't think that there's any evidence to support issuing a rule to mandate seamless roaming, keeping in mind that it's not a norm around the world. You can find one or two instances, but it's not a norm around the world to facilitate seamless roaming.
6034 COMMISSIONER MENZIES: Sure. I understand your position, but does it happen or not? And when it happens, why does it happen --
6035 MR. OOSTERMAN: Sorry does what happen?
6036 COMMISSIONER MENZIES: -- if it happens?
6037 MR. OOSTERMAN: Dropped calls, when you --
6038 COMMISSIONER MENZIES: Yeah, between --
6039 MR. OOSTERMAN: Yes. But the remedy at hand for them is to build their network.
6040 COMMISSIONER MENZIES: You know, on a wholesale customer's --
6041 MR. OOSTERMAN: Right.
6042 COMMISSIONER MENZIES: -- network moving --
6043 MR. OOSTERMAN: Sure, it would happen. Their remedy is to build their network out. That would take care of the problem.
6044 COMMISSIONER MENZIES: That's similar to TELUS's position, then, I take it.
6045 MR. OOSTERMAN: Yes. And, you know, they have mandated tower access, and honestly...
6046 COMMISSIONER MENZIES: I understand. Thank you. I know your position on that now.
6047 My question is this: how many of your mobile customers subscribe to at least one additional service that you offer, in other words, how many are bundled to customers: that they have a cellphone, plus they're a BDU subscriber, they have a cellphone, plus they're a home phone subscriber?
6048 MR. OOSTERMAN: Since I'm running both sides, I better see a lot of hands up on this panel.
6049 But, you know, the bundling issue was a red herring. We do not offer bundling in B.C. and Alberta and Saskatchewan and Manitoba, we compete wireless alone.
6050 COMMISSIONER MENZIES: Yeah, you're competing as a pure play and those are just --
6051 MR. OOSTERMAN: We are, and TELUS doesn't have bundling in Ontario and Quebec and in many other parts of the country, and they compete. So it is entirely possible to compete stand-alone, pure play wireless.
6052 COMMISSIONER MENZIES: Thank you. I don't have any more questions.
6053 THE CHAIRPERSON: But there are places you do bundle --
6054 MR. OOSTERMAN: Sure.
6055 THE CHAIRPERSON: -- and the Vice-Chair asked you a question.
6056 MR. OOSTERMAN: Oh, yes, I'm sorry.
6057 THE CHAIRPERSON: So what's the answer? How many? How many --
6058 MR. OOSTERMAN: How many --
6059 THE CHAIRPERSON: The percentage.
6060 MR. OOSTERMAN: -- of people. Oh, we'd have to file that in an undertaking.
6061 THE CHAIRPERSON: Okay. Thank you.
6062 I think I have a few questions for you, and this will be it.
6063 Just to be clear, the discussion you had at the beginning on the Rogers' idea that they raised in their oral intervention, and you were discussing that with Commissioner Molnar, you're not suggesting that you haven't, nor will you have, a fair opportunity to respond to that argument, are you?
6064 MR. BIBIC: No, we'll respond to it, but...I personally believe that these -- you know, when we're in hearings they matter, and we appreciate the opportunity to be able to speak directly to panellist -- to Commissioners --
6065 THE CHAIRPERSON: Right.
6066 MR. BIBIC: -- and some parties then get an opportunity to do that. But we will respond, clearly --
6067 THE CHAIRPERSON: Well, they're big players. They can make their own arguments, right?
6068 MR. OOSTERMAN: Well, sure.
6069 THE CHAIRPERSON: But you feel that you've had your fair opportunity to respond to that, and you will have another opportunity in the reply stage.
6070 MR. BIBIC: We're having an opportunity to respond to it today, and we will again.
6071 THE CHAIRPERSON: Okay. And that will be fair, will it not?
6072 MR. OOSTERMAN: Absolutely. It's fair. You know, we'd, frankly, hoped that there wouldn't be a need to discuss it further, because the whole idea of letting a third party set a negotiation for assets I owned seems so far removed from what should be done --
6073 THE CHAIRPERSON: I take your point. I just want to make sure --
6074 MR. OOSTERMAN: Okay.
6075 THE CHAIRPERSON: -- people feel that they're being treated --
6076 MR. OOSTERMAN: Yeah, totally.
6077 THE CHAIRPERSON: -- fairly, that's all.
6078 MR. OOSTERMAN: A hundred per cent.
6079 MR. BIBIC: In that sense, yes.
6080 MR. OOSTERMAN: A hundred per cent.
6081 THE CHAIRPERSON: Okay.
6082 From a procedural, administrative law perspective --
6083 MR. OOSTERMAN: Yes.
6084 THE CHAIRPERSON: -- that's all I'm suggesting.
6085 MR. OOSTERMAN: Absolutely.
6086 THE CHAIRPERSON: Okay? Whether you think that it's a good idea, we've heard you, and we've given that opportunity.
6087 In your submissions, and again in your oral presentation, you know I just point to paragraph 10 of today, and talk about making a case, basically, that there is no problem, and therefore there is no need for a remedy. I understand your position. The problem is we do have out there a parliament.
6088 We have institutions, right? That's the way this country works: a Westminster-styled government, where parliament's adopted -- the government has proposed to Parliament legislation through the Budget Implementation Act, and that's been enacted. Parliament's voted that and Canadians from time to time get to vote who represents them.
6089 So, in a sense, you're asking us to second-guess that legislation, aren't you?
6090 MR. BIBIC: No. The legislation is the law, and it was enacted by the government based on its assessment of the issue.
6091 Section 27.1 does not, as I mentioned earlier, in response to Commissioner Molnar's question, doesn't remove your jurisdiction and your authority to decide the issue before you based on the evidence before you. What we're putting forward as a position is that the overwhelming preponderance of the evidence is that no additional wholesale regulations need to be put in place.
6092 THE CHAIRPERSON: Right, and that we, as an arm's-length body, should come to our conclusion and exercise our jurisdiction.
6093 MR. BIBIC: Absolutely.
6094 MR. OOSTERMAN: Correct.
6095 MR. BIBIC: And we don't view that as necessarily second-guessing the price cap. You may choose to do that as well, and suggest that 27.1 should be removed by Cabinet, but that'll be their decision.
6096 THE CHAIRPERSON: Right.
6097 Now people often talk about arm's length. Oddly enough, when you're at arm's length, it doesn't mean you can't touch. In fact, the whole legislative framework provides for the Commission to receive certain policy directions from the government. Section 12 allows our decisions to be brought to the attention of Cabinet, or Cabinet itself, of its motion, can review and vary our decisions or ask us to reconsider. Indeed, at the end of this process, the decision we'll make could very well be subject to Cabinet review.
6098 You would agree with that, would you not?
6099 MR. BIBIC: Oh, I do.
6100 THE CHAIRPERSON: Okay.
6101 So keeping that regime in the background, I'm trying to further explore what Commissioner Molnar was trying to explore earlier.
6102 I get your point that the Budget Implementation Act has a mechanism coming into force and a coming-out-of-force mechanism that, in a sense, could wipe out -- Cabinet would have to decide this -- to wipe out the entire section 27.1 regime. That's what you were referring to?
6103 MR. BIBIC: Correct.
6104 THE CHAIRPERSON: Okay. And I understand your argument, but I can't even speculate whether or why they would do that at a particular point, but I guess it will be a decision made at some point in time.
6105 What I'd like to explore with you, though, is what your position is, and how we could dovetail, or not, with 27.1(5), the new provision, that says that, "The amount established by the Commission" could prevail to the -- I'm cutting some words out here -- would prevail "to the extent of any inconsistencies." So in other words, if the Commission sets an amount, it vacates the legislative cap.
6106 Is that how you would read that?
6107 MR. BIBIC: Yes.
6108 THE CHAIRPERSON: Okay.
6109 MR. BIBIC: But --
6110 THE CHAIRPERSON: Okay, but.
6111 MR. BIBIC: Yeah, I do. But my submission to you is the following: if the Bell proposal is essentially non-price fix to the issues we think have been identified --
6112 THE CHAIRPERSON: Right.
6113 MR. BIBIC: -- and you have not --
6114 THE CHAIRPERSON: I'm getting to that.
6115 MR. BIBIC: Okay.
6116 THE CHAIRPERSON: I'm getting to that.
6117 MR. BIBIC: So I'll hold, then.
6118 THE CHAIRPERSON: And my question is: the word "amount" is a legislative word, but we haven't actually at any point -- the Commission's never had to pronounce itself what an "amount" is. We have legislation that talks about what a rate is, but amount is an open texture.
6119 Do you see no way that your proposal can co-exist with 27.1s -- 27.15, sorry? In other words, that you would have a mechanism -- you said commercially -- let me flip to it exactly. You talked about a commercially negotiated roaming rate, and here we are talking about roaming obviously, but then there would be a potential for arbitration.
6120 Is there no way to get that to lead to, even arbitration, to an amount that is maybe not known but discoverable?
6121 MR. BIBIC: I agree with that.
6122 THE CHAIRPERSON: So there is a way to achieve your objective without us necessarily relying on the BIA Act, the Budget Implementation Act and that other mechanism you discussed earlier?
6123 MR. BIBIC: Correct.
6124 THE CHAIRPERSON: So we could -- do you have any specific wording that you might want to propose to us how we can get, were we to agree with you -- I am not saying we are.
6125 MR. BIBIC: M'hmm.
6126 THE CHAIRPERSON: But were we to agree with you, that your proposed way forward, how we would dovetail it within 27.1(5)?
6127 MR. BIBIC: We will respond in an under -- we agree that they can dovetail and we will think that through and give you an answer in writing.
6128 MR. BIBIC: And the other option, of course, is the operation of the coming into force option and then --
6129 THE CHAIRPERSON: Then there is no doubt.
6130 MR. BIBIC: Correct, I agree.
6131 THE CHAIRPERSON: Well, there is no doubt, but there may be a period of uncertainty.
6132 MR. BIBIC: Correct. And even if there was certainty, there would be a gap between the time the decision is made by the Commission and the new rules come into force, whatever they are, and Cabinet --
6133 THE CHAIRPERSON: Right.
6134 MR. BIBIC: Right.
6135 THE CHAIRPERSON: But by doing it, and here is the point, if the Commission were to agree with your position or any other position, if you do it under 27.1, in light of section 12 of the Act, we would have finality within a 12-month period of time, maximum, because Cabinet appeals occur within 12 months.
6136 MR. BIBIC: I understand.
6137 THE CHAIRPERSON: I mean, I am sensitive to the requests sometimes of companies that require regulatory certainty.
6138 MR. BIBIC: Understood. And just to get to the point I was going to make, that the proposal that we have put forward I think is one that can be implemented without the Commission needing to make a finding of unforbearance, so to speak, in the wholesale market because essentially it is letting the parties set the rate.
6139 The Commission will choose one of the two rates that the parties put forward, so it is not rate-setting in that sense.
6140 THE CHAIRPERSON: Right.
6141 MR. BIBIC: So I think it has that advantage as well.
6142 THE CHAIRPERSON: You are arguing that on the whether to de-forbear or not we can make that decision. But I am asking you within the context of 27.1, which is another issue.
6143 MR. BIBIC: Correct. And I am saying that I agree with that, and I am also saying that our proposal doesn't require you to make a decision as to de-forbear or not because it is a non-price term and you have already retained your jurisdiction under forbearance to impose conditions.
6144 THE CHAIRPERSON: Right. Although, you would at least want us to make a decision to confirm that we are not --
6145 MR. BIBIC: That is exactly what I am saying.
6146 THE CHAIRPERSON: -- regulating. Okay. You don't want us to remain completely silent, leaving doubt on that as well.
6147 MR. BIBIC: Correct.
6148 THE CHAIRPERSON: Okay, I just wanted to make sure.
6149 I am going to pass it off to legal, I haven't forgotten this time, if they have any questions.
6150 MR. STEWART: Merci, monsieur le président.
6151 I believe some of you were in the room this morning when Mr. Meldrum described what I seem to recall was that Bell -- and correct me if I am wrong -- roams on SaskTel's network in Saskatchewan, or words to that effect.
6152 Do you agree with that statement?
6153 MR. OOSTERMAN: I agree it is Saskatchewan's, or SaskTel's network, yes, if that is your question.
6154 MR. STEWART: My question is, do Bell customers roam on SaskTel's network when in Saskatchewan?
6155 MR. de GOOYER: So we have access to SaskTel's network through the tripartite agreement that Mr. Meldrum discussed this morning. It is done through a MOCN arrangement rather than through roaming.
6156 MR. STEWART: So you would disagree with how -- if I have interpreted, if I remember Mr. Meldrum's comments accurately, you would disagree with the way he has characterized the Bell actions?
6157 MR. de GOOYER: So I don't fully recall the exact wording, but what I am stating right now is the nature of the agreement, which I think in all intents and purposes, is the same as what Mr. Meldrum said this morning.
6158 MR. STEWART: Okay. Now, as I understand it, Bell Mobility operates and provides services in certain parts of Saskatchewan and has customers in Saskatchewan; is that correct?
6159 MR. de GOOYER: That is correct.
6160 MR. STEWART: Okay. Now, obviously if Bell Mobility were merely roaming you couldn't commercialize your services in Saskatchewan; is that correct?
6161 MR. de GOOYER: That is correct.
6162 MR. STEWART: So in order to assist the Commission, what is your response to the proposition that what you do in Saskatchewan is really equivalent to what a full MVNO operates as?
6163 MR. de GOOYER: So I think our relationship in Saskatchewan with SaskTel on the network is a wide-ranging commercial relationship. We operate our own core network and we connect to the SaskTel radio network and it is part of the overall tripartite agreement.
6164 MR. OOSTERMAN: And may I add as well that there is an exchange of value between the two organizations where we bring unique attributes, and I think you heard some of them this morning, and they bring unique attributes, primarily the network, and so it is an exchange of value that creates an environment that is positive for both entities.
6165 That is very different from an MVNO which, frankly, is nothing more than a distribution channel and if, in fact, that distribution channel is viewed as valuable by the carrier, there will be MVNO agreements; and if that distribution channel is not viewed as valuable by the carrier, then they shouldn't be forced to deploy it.
6166 MR. STEWART: Okay. But what is the difference in technical terms between a full MVNO as has been described by, for instance, Cogeco, and how you operate in Saskatchewan, because essentially you are accessing SaskTel's RAN and --
6167 MR. OOSTERMAN: Well, the fact --
6168 MR. STEWART: Go ahead.
6169 MR. OOSTERMAN: There is an exchange of value that doesn't exist in the Cogeco example. That is as simple as I can make it.
6170 MR. STEWART: So it comes down to an exchange of value, but from a technical standpoint, is there any difference?
6171 MR. de GOOYER: It is not the same from a technical perspective at all. We operate our core network which every single call that is placed by a Bell subscriber in Saskatchewan gets connected to the Bell network for completion, a connection to the ending party, whether that's, you know, a voice call, SMS or a data connection.
6172 Under an MVNO that is very -- in fact I don't know of any circumstance where that is done, where an MVNO operates their own core network. That is a core network element that, you know, is not covered by an MVNO.
6173 MR. STEWART: You have read the Cogeco proposal, I take it; correct?
6174 MR. de GOOYER: I have. And the far end of the heavy MVNO, you know, to my recollection, doesn't envision that full network element of completing the full call connection such as we do.
6175 The nature of our agreement in Saskatchewan is, we share or we have access to the radio network, not to the rest or other parts of SaskTel's network. Those are all things that we provide on our own.
6176 MR. STEWART: Because my -- if Cogeco or any full MVNO were to provide the backhaul facilities, the core network, then that would approximate to what you are doing in Saskatchewan, absent of course the reciprocal aspect; is that correct?
6177 MS HISAKI: I think there are similarities to what you are talking about. I think with Cogeco's proposal it is not entirely clear, you know, what they are actually offering to provide, but I think in general there is similarity to the architecture.
6178 However, there would be likely some very localized services and interworking, right, that they would require based on, you know, the localized area that they are serving.
6179 So yes, I would say in general, but we would need to understand more about what that model looks like.
6180 MR. OOSTERMAN: I do think it is, as well, worth nothing the difference between a Cogeco and the way MVNOs have been discussed.
6181 You know, Cogeco had an opportunity to bid for spectrum, instead chose to spend its money south of the border on a cable company, and so you would have thought, well, if I really want to get into wireless I wouldn't have made that particular trade-off, I would have acquired spectrum and competed.
6182 And so it really seems back to me a case of there is a value proposition I like, I just don't want to take the risk to get there, so let me ride on somebody else's back.
6183 You know, contrast that with a typical MVNO. A typical MVNO has become a distribution channel of choice for some markets around the world and typically those are set up when a carrier has a specific market segment that they are interested in and the MVNO has a more effective way of reaching that particular market segment than the carrier themselves, so they get appointed as, in effect, a distribution channel for the carrier.
6184 Lots of reasons why that would happen in many markets. In Canada, our distribution strategy is, in Bell's case, I can't speak for anybody else, but fairly well developed. We reached the segments we want to reach through the channels we have in place and I just can't imagine an environment where as a carrier you'd be forced to deploy distribution channels that added no value to you.
6185 MR. STEWART: Okay, thanks. At a very high level, can you describe the difference between your agreement with TELUS on the one hand and the tripartite agreement, I understand, that you have with SaskTel on the other hand?
6186 MR. OOSTERMAN: At the highest level there is no difference, it's an exchange of value. The value exchange is obviously different between TELUS and SaskTel, but at the highest level, that is the common glue that binds those agreements together.
6187 MR. STEWART: And from a technical standpoint, is it -- and I don't want you to, of course, disclose confidential information -- but can you describe what differences, if any, exist between those two agreements?
6188 MR. de GOOYER: Well, at its heart it's, we provide reciprocal access to our networks. So Bell got access to the SaskTel network and SaskTel got access to the Bell network.
6189 And likewise, TELUS and SaskTel also traded access to their respective networks.
6190 MR. STEWART: Okay. So when SaskTel customers are in Bell's territory -- Bell Mobility's territory, are they roaming or are they not?
6191 MR. de GOOYER: So when -- SaskTel doesn't sell outside of Saskatchewan, so they are roaming outside of Saskatchewan. SaskTel doesn't have any of its own customers in Ontario, for example, so they are in fact roaming.
6192 Some of our customers when they go into Saskatchewan, you know our Ontario customers, for them it would be akin to roaming, but our customers in Saskatchewan, it's not roaming.
6193 MR. STEWART: Okay, thanks.
6194 Again, to assist the Commission, where I am personally confused with respect to the roaming and the tower sharing commercially reasonable rates and your request that the Commission might provide some guidelines, and the Commission might also become involved in the arbitration process, to what extent do you see that as complimenting Industry Canada's regime as distinct from, in effect, replacing it?
6195 MR. BIBIC: So the Industry Canada regime already contemplates that the CRTC has the authority to do a number of things, right, may consider applications relating to rates and terms for matters such as roaming and tower sharing, so Industry Canada certainly contemplates that we one day could have ended up here with the CRTC being engaged on the issue. So that is not a barrier.
6196 I think we just have to be practical at the end of the day so two regimes could co-exist and then agree with Ken Engelhart yesterday who said, you know, I think parties will just basically choose one or the other. That could be a temporary issue, and I don't think people will go forum shopping.
6197 Number one, you could say in your model that if you go over there, don't come here, you can't do it the other way around, but you can certainly speak for yourselves.
6198 And I would think that if the Commission adopted a model like the one we are proposing that we would certainly undertake discussions with Industry Canada to ask whether or not we needed dual models and Industry Canada could -- and I can't guarantee this and neither can you decide for them, I understand that -- but Industry Canada could certainly start a consultation to decide whether or not their private arbitration model still needs to be in place.
6199 But if as a new entrant, say the other model isn't working for them, and I do think the Commission could be quicker and less expensive, then I would expect folks to come here.
6200 MR. STEWART: Thank you. Just one last question and it is a question to you, Mr. Bibic.
6201 Did I understand you correctly to say that the Commission could forbear with respect to section 27.1?
6202 MR. BIBIC: No. Yes, that was -- I am glad you asked that because I was going to ask for -- that is not what I meant, I was going to ask to engage the Chair again because the wheels have been turning since we had our exchange.
6203 I am actually saying the opposite. I am saying that based on the evidence there is no reason to unforbear, but that is not an issue because our model allows the parties to set rates, not the Commission, and the Commission to choose a rate that the parties have put forward, if it needs to go there.
6204 And therefore, you could adopt that model without unforbearing and our submission is that you should not unforbear because the evidence is that there is a competitive market given the existing state of wholesale regulations today.
6205 MR. STEWART: Thank you. And obviously you will be describing that in greater detail as part of the undertaking, but essentially, as I understand it, you are saying that the Commission could do this through a section 24 condition; is that correct?
6206 MR. BIBIC: The Bell proposal could be adopted through a section 24 proposal -- condition, yes.
6207 MR. STEWART: Okay, thanks. Oops --
6208 THE CHAIRPERSON: Sorry, go ahead.
6209 MR. STEWART: Je m'excuse, monsieur le président.
6210 This is definitely my last question and that is, the Commission -- staff at least is unclear and the Commission would be interested in knowing a little bit more as to how Bell Mobility subscribers operate -- get service in Manitoba. Is it through the TELUS infrastructure and, if so, is that again roaming or is it through other arrangements?
6211 MR. de GOOYER: TELUS operates their network in Manitoba and we access that through the network reciprocity agreement in the same technical way that we access their network in Alberta and B.C.
6212 MR. STEWART: Okay, thank you very much. Merci, monsieur le président.
6213 THE CHAIRPERSON: Merci. Monsieur le vice-président...?
6214 COMMISSIONER PENTEFOUNTAS: Merci, monsieur le président.
6215 I understand your argument as it regards Cogeco, but how is what you are doing in Saskatchewan different from Videotron's desire to commercialize outside of service area?
6216 MR. OOSTERMAN: I am not sure I understand, but I think Videotron would be perfectly capable of reaching its own agreement on a network sharing agreement if they had elements of value they could bring to the other party.
6217 COMMISSIONER PENTEFOUNTAS: Aren't they in essence an MVNO in that context?
6218 MR. OOSTERMAN: No, I don't think so. I think there is a big difference between a network reciprocity agreement and an MVNO.
6219 And again, I will say that an MVNO is nothing more than a distribution channel and historically they have gotten their start by serving a market segment that the existing carrier couldn't on their own, or they could serve it more cost effectively than the existing carrier, and that is assuming the existing carrier had an interest in pursuing that segment.
6220 So there is a massive difference.
6221 MR. BIBIC: They are polar opposites.
6222 MR. OOSTERMAN: Yes.
6223 MR. BIBIC: And the reason they are polar opposites lies in one word, mandated. That is the difference.
6224 COMMISSIONER PENTEFOUNTAS: Setting the mandated idea aside and speak to commercializing outside of area. They have no spectrum outside of their area -- if they can come to an agreement with others that have a network outside of their service area, you would not have a problem with Videotron commercializing?
6225 MR. OOSTERMAN: No --
6226 COMMISSIONER PENTEFOUNTAS: Beyond their service area borders, if you wish.
6227 MR. OOSTERMAN: Not at all. If Videotron can reach a commercially negotiated agreement which typically happens when both sides contribute value, it makes it very difficult if one party does not, then of course.
6228 I think what we are not in favour of is a mandated, "you must make your network available", even when there is no exchange of value.
6229 COMMISSIONER PENTEFOUNTAS: And if roaming was mandated they would be able to do that more easily, obviously.
6230 MR. OOSTERMAN: Roaming is mandated and they do roam and --
6231 MR. BIBIC: No, they can't do that because Industry Canada rules prohibit mandated resale despite the existence of mandated roaming. That is a rule we support.
6232 So we are not opposed to MVNOs or resale or any of that, it is the --
6233 COMMISSIONER PENTEFOUNTAS: The mandated part.
6234 MR. BIBIC: -- mandated element.
6235 COMMISSIONER PENTEFOUNTAS: Okay, thank you.
6236 THE CHAIRPERSON: I just want to clarify the arbitration of the dual regimes that could exist and co-exist.
6237 Would both parties have to agree, potential parties to an arbitration? Let's say we were to create a regime, would both parties have to agree to come to the CRTC, or would each one of them have a veto to bring them to the other -- the Industry Canada one?
6238 MR. BIBIC: Again, we can't -- you know this, the Commission can't amend the Industry Canada rules, but I think it would be within your jurisdiction to say if one party wants to come forward you will take it on.
6239 THE CHAIRPERSON: So you would be okay with that, if one party decided here, you wouldn't be in a situation -- see, some have argued that the cost and delay of the Industry Canada process may be a barrier to them to actually follow through that remedy and, in fact, there may be advantages for the other party to drag it on because time then plays to the party who feels agreged.
6240 MR. BIBIC: Yes, we wouldn't have brought it forward if we weren't sincere about it.
6241 THE CHAIRPERSON: Right.
6242 MR. BIBIC: We would accept that, even if we didn't want to.
6243 THE CHAIRPERSON: But you understand, arbitration, normally both parties have to agree.
6244 MR. BIBIC: We would be fine with the rule if one party -- it could be us -- but if one party wants to go to the Commission, then the other has to go along.
6245 THE CHAIRPERSON: Okay, understood. Thank you.
6246 Those are our questions. Thank you very much.
6247 So we will adjourn until 2:30.
6248 Thank you.
--- Upon recessing at 1410
--- Upon resuming at 1430
6249 LA SECRÉTAIRE : À l'ordre, s'il vous plaît. Order, please.
6250 LE PRÉSIDENT : Merci, Madame la Secrétaire.
6251 Alors, les prochains intervenants, s'il vous plaît.
6252 MR. LÉGER: Good afternoon, panel, Commission staff.
6253 Before we begin, I just wanted to draw your attention to the fact that we will be delivering a portion of our submission en français. For the convenience of parties who may be following from the written version, we've included the English version of what we'll be saying in Italics and in square brackets.
6254 We apologize to the translators. We hope this will not disrupt them but we thought this might be more convenient for people following in the written document.
6255 THE CHAIRPERSON: Thank you, that is very helpful. We appreciate it.
6256 MR. LÉGER: So good afternoon, once again. My name is Jean-François Léger. With me is Geoffrey White. We act as counsel to the Public Interest Advocacy Centre, the Consumers' Association of Canada, the Council of Senior Citizens' Organizations of British Columbia and the National Pensioners Federation -- together "the Groups."
6257 Nos propos aujourd'hui portent principalement sur les thèmes suivants :
6258 a. Le Conseil ne devrait pas accepter les prétentions des principales compagnies titulaires que le marché des services sans fil mobiles de détail est caractérisé par un degré de concurrence adéquat et que le Conseil devrait par conséquent ne pas intervenir dans le marché des services de gros;
6259 b. Alors que la promotion de la concurrence au détail, et non pas le statut quo, est une politique poursuivie par le Gouvernement du Canada, et ce depuis plusieurs années, la mise en oeuvre de cette politique s'est avérée problématique, compte tenu des défis qui caractérisent l'accès aux services sans fil de gros. Une concurrence accrue dans le marché du sans-fil est avantageuse pour les consommateurs; et enfin,
6260 c. La principale question devant le Conseil dans cette instance est donc de savoir si le marché des services de gros est suffisamment concurrentiel pour protéger les intérêts des clients des services de gros.
6261 This proceeding represents the first instance in which the Commission has had the opportunity to conduct an in-depth examination of the wholesale mobile wireless services marketplace. The Commission's decision to do this is, in the Groups' view, timely.
6262 Bell, Rogers and TELUS have devoted considerable effort in this proceeding to promote the idea that the retail mobile wireless marketplace is subject to intense competition. The competitiveness the incumbents refer to consists primarily of retail competition between Bell, Rogers and TELUS.
6263 The incumbents argue that in light of this competition between the large incumbents, the Commission should effectively ignore the wholesale services marketplace.
6264 The Commission forbore from regulating retail mobile wireless rates over two decades ago. Whether there is sufficient competition in the retail market is not what the Notice of Consultation put into issue in this proceeding.
6265 That being said, the marketplace for mobile wireless services has changed over these two decades. One important change is that a number of attempts have been made by the Government of Canada to promote more competition. To this day, the government continues to express the view that it wants more competitors to vie for consumers' business in the mobile wireless marketplace.
6266 Despite the government's efforts in the mid-90s and again in 2008 to introduce greater choice for retail consumers, most new entrants have been either absorbed by one of the incumbents or have otherwise been driven out of the marketplace or are now seriously threatened.
6267 Only firms associated with strong incumbents such as Quebecor's Videotron and Bragg Communications' Eastlink brand appear to have experienced success. Yet, even these firms face significant challenges as they consider expanding their served locations. In their submissions to the Commission in this proceeding, these and several other providers have argued in favour of a more effective mandated regime for access to roaming and towers.
6268 The central issue before the Commission in this proceeding, therefore, is whether the marketplace for wholesale wireless services is sufficiently competitive to protect the interests of wholesale customers.
6269 MR. WHITE: For a number of years, Industry Canada assumed the mantle of managing the wholesale services marketplace by mandating roaming and tower services, with an expectation that parties would offer, in relation to roaming services, for example:
"commercial rates that are reasonably comparable to rates currently charged to others for similar roaming services."
6270 When problems with the roaming and tower-sharing frameworks and dispute resolution process came to light in a consultation on revisions to these wholesale frameworks, Industry Canada said that the CRTC has:
"the authority to set rates and conditions for the provision of telecommunications services within the jurisdiction of the Telecommunications Act [...] and may consider applications relating to rates and terms for matters such as roaming and tower sharing."
6271 The large incumbents have argued that the Commission should stay away from the wholesale services marketplace and let parties negotiate their own commercial arrangements, and it seems the Commission may be exploring using "nudging" to try to bring about better access arrangements. The Groups do not think this is appropriate.
6272 Despite the representations made by the large incumbents concerning the success of commercial negotiations, the record of the proceeding which led to the Commission's unjust discrimination/undue preference decision (2014-398) suggests that commercial relationships between the well-established incumbents and their smaller competitors are characterized by significant imbalances in bargaining power.
6273 The focus of that proceeding was specifically on roaming but the public record of that proceeding as well as that for the current proceeding suggest that significant imbalances in bargaining power generally characterize relationships between the incumbents and their smaller competitors. Representatives of entrant service providers in this proceeding provide numerous examples of instances in which the incumbents have successfully exploited the imbalance.
6274 In contrast, asked for examples of how they compete with one another for wholesale business, the incumbents have largely remained silent, and instead tried to focus on the retail market. Competition beyond the incumbents benefits consumers.
6275 M. LÉGER : Même si nous croyons que le Conseil devrait concentrer son attention dans cette instance sur la concurrence dans les marchés de gros, nous sommes également conscients de l'étendue des responsabilités du Conseil conformément aux dispositions de la Loi sur les télécommunications et des Instructions.
6276 Dans ses remarques d'ouverture dans cette audience, le Président déclarait que dans cette instance le Conseil tient :
« à s'assurer que les Canadiens puissent profiter d'un système de communications de classe mondiale pour plusieurs années à venir -- un système qui leur donne accès à du contenu captivant et à un choix de services sans fil... novateurs... »
6277 In the course of preparing our written submissions in this proceeding we conducted a simple survey of retail mobile wireless offerings available to Canadian consumers. We examined advertised service offerings from wireless service providers in Halifax, Montreal, Toronto, Winnipeg, Regina and Vancouver. We simply drew information from service providers' websites at a given point in time.
6278 Now, the Groups acknowledge that this analysis was limited in scope. The Groups also acknowledge that such a survey could only provide, at best, a form of snapshot at a single point in time. The Groups acknowledge as well that a consumer shopping for service, equipped with the benefit of time, patience and negotiating skills, may be able to negotiate a better deal than what service providers post on their respective websites.
6279 However, viewed as a point-in-time snapshot of retail market conditions in several markets, the Groups' scan provides a reasonable basis to conclude that the availability of choice in the form of alternatives to Bell, Rogers and TELUS yields greater benefits for consumers than reliance solely on the incumbents. Competitors to the incumbents or their affiliates offer innovative service arrangements, including better pricing and more accommodative data allowances.
6280 As the Commission considers the potential benefits offered by a marketplace served by wireless service providers other than just the incumbents and their affiliates, the Groups also invite the Commission to bear in mind that independent competitors offer alternatives to the incumbents' focus upon bundled offerings.
6281 While bundled arrangements may result for consumers in lower rates in comparison to these service providers' rates for individual services, the incumbents' ability to bundle enables them to tie down customers in complex multi-service contracts. The presence in the marketplace of independent suppliers such as, for example, Globalive's WIND brand offers consumers alternatives and flexibility.
6282 Now, with respect to Canada's telecommunications policy objectives, experience since the Government of Canada licensed spectrum to smaller competitors in the mid-1990s and again in 2008 suggests that in the absence of mandated wholesale service offerings, for example in relation to roaming and tower and site access, it is far from certain that Canadian consumers will continue to have access to alternatives to Bell, Rogers and TELUS. The Groups question whether such an outcome would be consistent with the Commission's policy mandate.
6283 The Telecommunications Act and the Policy Direction guide the Commission as it considers whether to step into the wholesale mobile wireless marketplace.
6284 The promotion of a marketplace which maximizes consumer choice is consistent with several of the policy objectives set out in section 7 of the Act, notably those described in section 7(a), (b), (c), (f), (g) and (h).
6285 A telecommunications system which safeguards, enriches and strengthens the social and economic fabric of Canada should promote a vigorous and dynamic competitive marketplace in which a range of WSPs vie for consumers' business, not just Bell, Rogers and TELUS and their respective affiliates.
6286 Vigorous and dynamic competition between a range of service providers, including smaller competitors, creates and maintains incentives for service providers to innovate and to pursue affordability for telecommunications service users.
6287 Telecommunications policy should enhance the efficiency and competitiveness of Canadian telecommunications, not just ensure that only Bell, Rogers and TELUS and their respective affiliates successfully compete in Canada's retail marketplace.
6288 As the Groups' analysis suggests, a telecommunications marketplace which enables competitors and not just the incumbents and their affiliates to compete for consumers' business is likely to better serve the interests of all telecommunications users.
6289 Similarly, the Policy Direction tells the Commission to rely on market forces to the maximum extent feasible as the means of achieving the telecommunications policy objectives. The Commission has been directed as well to use measures that are efficient and proportionate to their purpose and that interfere with the operation of competitive market forces to the minimum extent necessary to meet the policy objectives. Competition from firms other than the vertically integrated incumbents promotes the operation of market forces.
6290 The Groups also draw the Commission's attention to paragraph 1(b)(iv) of the Policy Direction, which invites the Commission, in relation to network interconnection arrangements or regimes for access to networks, including support structures, which in the Groups' view includes towers, to ensure the technological and competitive neutrality of these arrangements or regimes to the greatest extent possible to enable competition from new technologies and not to artificially favour either Canadian carriers or resellers. Wholesale access to roaming and towers under reasonable conditions promotes these objectives.
6291 Now, with reference to the marketplace for specific wholesale services, in this proceeding the large incumbents have argued that their smaller competitors should be able to self-supply facilities or to negotiate supply agreements with other carriers. The record of this proceeding, however, suggests that the large incumbents significantly understate the challenges facing smaller competitors.
6292 In the Groups' view, the record of this proceeding suggests that market conditions for wholesale services such as roaming and access to towers warrant the establishment of a regulatory regime to ensure that access is provided on reasonable terms.
6293 MR. WHITE: Regarding roaming, access to roaming is essential in order to successfully compete. Unless an entrant acquired the use of spectrum across all of Canada, it is inevitable that some sort of roaming arrangement will be needed. Even the incumbents appear to have entered into extensive roaming arrangements.
6294 Industry Canada has also opened up roaming on most bands to all players on the basis that roaming is beneficial to all wireless service providers. At the same time, Industry Canada recognized that roaming providers would benefit from the revenues generated by roamers and there would be an incentive for roaming users to build out their own networks, using their own spectrum, to avoid that cost.
6295 Whether the national marketplace for roaming services should be divided on the basis of specific geographic boundaries is less clear as the Groups do not have access to roaming agreements carriers have entered into. Based on our understanding of supply and demand for roaming, we would expect that the geographic market for roaming would tend to be provincial. Wholesale roaming customers should enjoy flexibility in the selection of roaming services they require as their networks evolve.
6296 With respect to access to towers and sites, the Groups note that in their submissions they have addressed both as if they are within the same product market. The Groups have done so on the basis that sites and towers are used to locate antennae equipment.
6297 In light of what they expect to be significant contrasts in relation to supply and demand conditions, the Groups would invite the Commission to consider establishing distinctions between geographic markets based on economic and demographic considerations.
6298 Parties' comments suggest that supply and demand conditions differ significantly between urban locations, in which a choice of rooftop locations may be available, and rural locations, in which the construction of an additional tower may not be possible for economic reasons or because of regulations in relation to the duplication of towers.
6299 Regarding incentives to construct network facilities, the large incumbents have asserted that they may reduce network investments and may not update their networks if wholesale services are made available at mandated rates.
6300 The Groups question how such assertions are consistent with the view these same carriers have repeatedly expressed that the retail mobile wireless marketplace in Canada is highly competitive. In a retail marketplace in which the ability to successfully compete is synonymous with network investment, if Bell, Rogers and TELUS intend to retain their existing retail customers and to gain new ones, the Groups submit that these service providers should be investing in their networks.
6301 There appears to be little likelihood that regulated wholesale rates would compel these carriers to stop investing in their networks. We note in this respect that regulated rates are not synonymous with providing service at a loss. There is ample precedent for the Commission recognizing elements such as business risk when it sets wholesale rates.
6302 The Groups also note in this respect that the large incumbents have made similar threats in the past. The availability of matching Internet access speeds does not appear to have led to decisions on ILECs' and cable companies' part to cease deploying advanced network facilities.
6303 The Groups invite the Commission to consider how important the deployment of high performance wireless networks is likely to be for Bell, Rogers and TELUS if they are to succeed in an increasingly data intensive marketplace as they market ever more powerful smartphones, tablets and other video devices. The importance of these networks, the Groups submit, is further emphasized as the vertically integrated incumbents market mobile wireless video as an integral part of the bundles they offer their customers.
6304 MR. LÉGER: To conclude therefore, the Commission has expressed the view on numerous occasions over the years that its role should be to protect competition, not individual competitors, and the Groups agree.
6305 Mandated wholesale access to roaming and tower-sharing is not being requested as a first resort but instead a last resort. Given the experience with the new entrants since 2008 and problems with roaming and tower-sharing and Industry Canada's recognition of the role the Commission can play in actualizing Canadian spectrum policy goals, the Groups believe that your intervention to set wholesale rates for roaming and tower/site access is necessary now.
6306 Measures such as cost-based rates for roaming and tower-access are not policies which would protect individual competitors. They would promote competition. Unless the Commission considers that for a substantial proportion of Canadian consumers competition between the three large incumbents is all the competition these Canadians should expect, then the Commission should be considering improvements to the wholesale services the incumbents offer.
6307 Subject to any questions you may have, these are our remarks.
6308 Thank you.
6309 LE PRÉSIDENT: Merci beaucoup. Le vice-président des Télécommunications commencera les questions. Merci.
6310 COMMISSIONER MENZIES: Thank you. I have a few questions to get through.
6311 What have you found to be the most compelling evidence put forward on this file that supports your conclusion that market power exists in the retail market?
6312 MR. LÉGER: Sorry, in the retail market?
6313 COMMISSIONER MENZIES: That market power exists in the mobile market. I'm sorry, I misspoke.
6314 MR. LÉGER: I apologize for doing this, but our take on it is that the issue before the Commission in this proceeding relates to the wholesale market. We are not arguing that any particular carriers have market power in the retail marketplace, we acknowledge that the Commission has forborne from regulating retail services and it did so 20 years ago.
6315 COMMISSIONER MENZIES: Okay. Let me redo this.
6316 MR. LÉGER: Okay.
6317 COMMISSIONER MENZIES: I need your views on this and your response to Rogers' statement at paragraph 26 of its 15th May.
6318 The questions identified in 2014-76 imply a focus on assessment of competition in wholesale markets for purposes of determining the requirement for regulation of wholesale markets. However, the first question that must be asked and answered in any assessment of the requirement for regulatory intervention in wholesale markets is whether the downstream retail market is competitive.
6319 Competition in wholesale markets is not a measure of the competitiveness of retail markets, nor is it a necessary condition for competitive retail markets, in fact there are numerous examples of highly competitive retail markets for which there is no upstream wholesale market at all, let alone a competitive upstream wholesale market. Bell and TELUS have made similar arguments.
6320 So how should the state of competition in the retail market be applied in the Commission's assessment of whether the wholesale market should be regulated?
6321 MR. LÉGER: I guess our approach to this is that we look at what the Government of Canada has been trying to achieve for a number of years and it has repeatedly stated that -- it has not said, at least to our knowledge, that the retail marketplace is not competitive. What it has said is that it is desirable from a public policy standpoint that there should be more competition and so --
6322 COMMISSIONER MENZIES: I will take it that your opinion on the most compelling piece of evidence in terms of the establishment of the competitive situation in your view is the opinion of the Government of Canada?
6323 MR. LÉGER: Well, it's partly that.
6324 The reason I'm hesitating to address this directly is that there is evidence -- we have read surveys, the Commission prepares its own studies -- that Canadians are paying more for cellular service than perhaps they should be. Now, what should they be paying? Well, that's a very difficult question to answer.
6325 But having said that --
6326 COMMISSIONER MENZIES: How can you say they are paying more than they should be if you can't tell me what they should be? That's where I'm confused.
6327 MR. LÉGER: We looked at the Commission's own studies, for example, which look at where Canada stands internationally and we are not in last place, but from a service pricing standpoint, and I include in that data allowances for example, Canada is at best a middling performer.
6328 COMMISSIONER MENZIES: Where should we be? Because part of the ask here is that we look at setting rates that would change things, right, so what I need to know -- what's helpful in being able to do that, what the Panel needs to know is what is your view on where we should be and what sort of rates would it take to get there?"
6329 MR. LÉGER: You are asking me for what should retail rates be?
6330 COMMISSIONER MENZIES: I'm asking you actually to go back to your summary, to be fair. You were talking about where Canada's standing was internationally in terms of price.
6331 MR. LÉGER: Right. Right.
6332 COMMISSIONER MENZIES: So let's just stick with that, because that was what you had introduced there.
6333 MR. LÉGER: Yes. So our view --
6334 COMMISSIONER MENZIES: So where should Canada be?
6335 I understand that you don't like where Canada is, where would you like Canada to be?
6336 MR. LÉGER: Well, we would certainly like Canada to be at a much higher level in those international classifications.
6337 Do we think Canada should be -- of 30 nations should Canada be second, third fifth? Well, I mean --
6338 COMMISSIONER MENZIES: What should it be?
6339 MR. LÉGER: I guess what we are saying is --
6340 COMMISSIONER MENZIES: Well, give me a range where it should be. Should it be sixth to tenth, should it tenth to fifteenth?
6341 MR. LÉGER: Well, given the importance of wireless communications for Canadians -- and we believe the very, very high level of importance of wireless communications as the economy evolves, we think Canada should be striving to be right up there. Whether it's first, second or third it's hard to tell, but we think Canada should be a leader and not a middling performer.
6342 COMMISSIONER MENZIES: So top three in terms of affordability based on the OECD top 24 or something like that? Is that what you're looking at?
6343 MR. LÉGER: That would be a desirable objective.
6344 COMMISSIONER MENZIES: Thank you.
6345 MR. WHITE: May I? May I just --
6346 COMMISSIONER MENZIES: Please, go ahead.
6347 MR. WHITE: I don't think we have given you as full an answer on the question of what is the best evidence that the Commission has on the record in terms of the retail market or the wholesale market.
6348 But this line of questioning, Commissioner Menzies, about how do we look at the retail market and how do we link it back to the wholesale market, I think Mr. Tacit for CNOC answered that question and the Commission has looked at that in 2008-17 when you were looking at the wholesale market, which was what this proceeding is about. That's where you look at market power and you look at what's happening at the wholesale level to determine what should happen at the retail level.
6349 The way some of the incumbents have approached this issue is, they are looking at the retail level and using that as the basis to say -- it's a backwards approach, saying the retail is fine, therefore don't touch the wholesale argument. We think that is the reverse approach.
6350 But if you do want to have the discussion on the retail pricing, which Mr. Léger is engaged in, we don't think that is sufficient.
6351 Bell talked about 300 price cuts this morning and undertook to explain those a bit better and they cited the Wall Report, but the Wall Report also provides some interesting examples of how new entry in certain markets results in lower prices as well.
6352 So those are my remarks on that.
6353 COMMISSIONER MENZIES: Okay. I was just assuming that because you are a consumer organization that your interest was in the retail outcome, right, for consumers and that you were representing subscribers, individuals as opposed to what I guess would be corporate consumers operating at the wholesale level.
6354 MR. LÉGER: And that is a correct description, but we --
6355 COMMISSIONER MENZIES: Hence my interest in your analysis of retail.
6356 MR. LÉGER: So at this point we see opportunities for Canada to improve its performance in the delivery of retail services through improvements in the delivery of wholesale services which enable a more vibrant or more vigorous dynamic competition.
6357 COMMISSIONER MENZIES: What would be the two or three most important factors for the Commission to examine an assessment of the competitiveness of the retail market?
6358 MR. WHITE: You have heard this phrase "network price and device", but if you look at pricing and you look at the trends, including recent rate increases that take the price of a basic entry level Smartphone data plan -- which could be 500 mg or maybe a gig -- that's a moving target, but those have gone up $5.00 in one year, but on those three scores we think there is considerable room for improvement.
6359 But again, we are in retail world right now, but the interests of these groups today is the focus on the Commission's analysis on the wholesale market and wholesale consideration is driving that downstream competition.
6360 COMMISSIONER MENZIES: Would you consider the Saskatchewan and Manitoba markets to be competitive?
6361 MR. LÉGER: They appear to move competitive at this time than markets in Ontario for example.
6362 Are they more competitive? Well, the data that we provided, the survey that we conducted, seems to show -- but again, I provided a number of caveats in relation to the data that we provided and we recognize that there are a lot of factors to be seen there, but that data seems to show that in those locations, and those provinces are an example, where you have more competitors, there are attractive service offerings.
6363 Now, can that change? Can that be made better? That's an open question. We think so.
6364 COMMISSIONER MENZIES: Sure. I mean, it's probably unfair for me to ask you to do it right away, but maybe as an undertaking could you comment on the data that was supplied in the MTS page in their summary this morning, the figures that show the 1 gigabyte data plan prices and it shows a significant difference in price between Saskatchewan and for instance and Manitoba and Tbaytel territory versus Maritimes and the Max data plan prices, 10 gigabyte unlimited, those prices?
6365 MR. LÉGER: We will be pleased to do that.
6366 COMMISSIONER MENZIES: Because if you are looking at consumer outcomes, that would be of interest to us to know your position on the Manitoba and Saskatchewan markets.
6367 While I'm there, what are your thoughts on the regional carriers submission that companies, new entrants and the regional players essentially be relatively exempt from roaming rate regulation for all those companies with less than 10 percent of revenue market share?
6368 MR. LÉGER: I think it was Bell that observed that there is a certain self-serving aspect to that. Tbaytel would clearly benefit from this. I think that all of those parties actually would benefit.
6369 I'm not sure at all that for consumers in Tbaytel's territory that that would deliver any benefit. I think we can include MTS and SaskTel in that description as well.
6370 COMMISSIONER MENZIES: Okay. What about new entrants? Because my understanding of the arguments in favour of roaming rate regulation was that they -- I guess you could say they were self-serving in the essence that for the new entrants, it gives them better rates than they would pay without regulation.
6371 So should they be given a leg up, a hand up in terms of their level of market penetration?
6372 MR. LÉGER: I think the comments we have made or the written comments we have submitted have really focussed on regulation in relation to incumbents.
6373 So as far as entrants are concerned, we participated in proceeding, I think it was last year, regarding Northwestel and one of its competitors pointed out that it was a small entrant and that it had entered into an arrangement -- I believe it was a roaming arrangement -- and that there was great concern that this was turning out to be a very, very costly proposition for it and that the carrier, which was an incumbent, was drawing considerable benefit.
6374 Our sense is that the rules for roaming at a time when carriers are just deploying their networks is really designed to assist competition and so designed to assist the deployment of services by new entrants and not principally by carriers who are already well-established.
6375 COMMISSIONER MENZIES: So the 10 percent level would work for you?
6376 MR. LÉGER: Frankly, the proposal, we have seen it, we are aware of it.
6377 COMMISSIONER MENZIES: I guess not.
6378 MR. LÉGER: We don't know that it's -- you know, it's a number, but how meaningful it is, we don't know.
6379 COMMISSIONER MENZIES: Okay. I see.
6380 You have addressed to some extent the arguments put forward, by incumbents primarily, that wholesale rate regulation would negatively impact build and innovation to the detriment of consumers.
6381 Rogers produced some information yesterday in, I think it's paragraph 35 of their submission yesterday, which detailed the impact in Europe. They said there:
"With wireless revenues declining, European wireless operators have been unable to invest to capture the benefits of the mobile data revolution. The inflection point was the introduction of the iPhone in 2007, yet in its wake the difference between European and Canadian investment levels has been staggering. Wireless CAPEX overall has fallen in Europe since 2007, while growing by 40 percent in Canada over the same period. Only 5 percent of wireless connections in Europe were on LTE at the end of 2013, compared to almost 30 percent of connections in Canada and the U.S."
6382 Are they wrong?
6383 MR. LÉGER: We are not saying that they are wrong, we do question the comparison between what has happened in Europe over a decade and a half I guess and what is at stake in this proceeding, which is principally access to towers, whether or not at mandated rates, and access to roaming.
6384 COMMISSIONER MENZIES: What should we be examining?
6385 MR. LÉGER: Two services.
6386 COMMISSIONER MENZIES: What specifically should we be examining in the difference between Europe and Canada if we were to analyze Rogers argument in terms of that? What portions of those would be of interest for us in digging into to find out whether they are really an appropriate comparison or not?
6387 MR. LÉGER: There is a considerable difference in history of service development in Europe. I am reluctant to answer that off-the-cuff because we can do it as a --
6388 COMMISSIONER MENZIES: Maybe it would be fair if you would take that as an undertaking?
6389 MR. LÉGER: Yes.
6390 COMMISSIONER MENZIES: Come back and point out to us the specific areas about which you have your doubts.
6391 So in paragraph 42 of your August 20th filing you indicated that mandated tower sharing and mandated site sharing are necessary to avoid continuation of a pattern of new entrants coming into the market, struggling and then eventually being consumed or absorbed by larger players.
6392 Incumbents say it is overly complex and would be overly complex and would delay builds that already suffer from delays if we were to do that.
6393 What's your response to that?
6394 MR. LÉGER: There is ample precedent for the Commission setting rates for services. We don't think we have seen any evidence that these rates have caused them to stop building.
6395 The Commission has set rates in the past for support structures, it has set rates for access to, for example, central offices. In the local exchange market, network components -- much more extensive unbundling than what is being sought here was obtained and we are troubled with this notion that the establishment of rates that enable them to recover their costs and where we have recognized the Commission may want to provide some form of mark-up to recover additional components, including risk, would preclude construction of facilities.
6396 COMMISSIONER MENZIES: So you are in favour of the establishment of tariffs. If, say, we agreed -- not that we have, but say we were to -- which wireless carriers and why would be required to establish tariffs?
6397 MR. LÉGER: Again, our focus here is really on the supply of incumbent facilities. So incumbents in any given location -- and I realize that in some cases incumbents could include both Rogers and Bell Mobility -- but incumbents would make their services available in the same manner that TPIA for example and high-speed access has been made available in the Internet marketplace.
6398 COMMISSIONER MENZIES: So would you assume SaskTel and MTS to be incumbents in their markets?
6399 MR. LÉGER: Correct.
6400 COMMISSIONER MENZIES: Do you think we should adopt regulation mandating, or even regulation that would foster the development of MVNOs?
6401 MR. LÉGER: We, as consumer advocates, like and want to see more competition.
6402 That being said, we have been listening carefully to the arguments that have been put forward by a wide range of participants in this proceedings raising concerns about -- I guess I will call it a resale-based competitive solution.
6403 That being said, again, we are proponents of competition, but we are also proponents of viable, durable competition.
6404 And we are also sensitive to the fact that carriers such as Eastlink or Vidéotron have invested considerable amounts in spectrum to start off with and then in networks, so we are a bit nervous. I would not say that we would stand here -- and we have not said that, stand here and oppose the establishment of MVNOs, but we think that this may be a bit early in the development of wholesale service arrangements for that to be the solution, particularly if that is a solution that is put forward in preference of other alternatives such as making roaming or access.
6405 COMMISSIONER MENZIES: So in that you differ from Union des consommateurs?
6406 MR. LÉGER: I think we are perhaps a little bit more reticent about MVNOs than Union.
6407 COMMISSIONER MENZIES: A lower level of enthusiasm, to be --
6408 MR. LÉGER: Yes, that's a good way of describing it.
6409 COMMISSIONER MENZIES: If you could only pick one, what is the most important single regulation we could create that would lead to your preferred outcomes?
6410 MR. LÉGER: I think we believe that a cost-plus rating for roaming would be at the top of our list.
6411 COMMISSIONER MENZIES: Have you done an analysis that gives a conclusion regarding what would be the net financial benefit to consumers if that action was put into place?
6412 MR. LÉGER: We have not. And, frankly, we have discussed doing that, but we have no way of calculating. Without knowing exactly the outcome of what would be proposed and then of understanding what the impact would be on carriers, frankly, we just don't know how we would evaluate that.
6413 COMMISSIONER MENZIES: Were there any hypothetical models that have been done or that are on our record that you could point us to?
6414 MR. WHITE: We can point to and, I think, provide an analysis that relies on secondary sources. I know that's not preferable to the primary sources.
6415 But what we are getting at here in this effort to bring about more competition, which is partly driven by what Industry Canada has done in terms of its licensing of spectrum and giving the mandate and then saying, "Okay, CRTC, if you want, or if you think it's necessary under your Act, you can set the rates for that."
6416 The evidence we have is what is the effect when new entrants come into a given market with that spectrum and what has been their experience in negotiating these two fundamental things that the groups are asking for, which is the cost-based rate -- cost-plus rate for roaming and towers. What has been the effect on those competitors when the rates have been as high as they have been reported to be?
6417 We are saying -- and this would be in our analysis -- the experience has been that those rates have been so high that those competitors who have established a bit of a beachhead in certain markets are now struggling.
6418 So we are saying that the number one fix you can do is make that right, complete the equation that Industry Canada has set up, provide that rate and then the effect will be more sustainably seen in those markets and all the competitors to build out their networks, as they've claimed they wanted to do.
6419 COMMISSIONER MENZIES: Sure.
6420 Just to preface the next question in terms of that, being able to find examples of that --because the purpose of -- the global purpose of what we do is to ensure a high quality of service at accessible prices, affordable prices, whatever it is. Price and quality are essentially the two things, which I think are probably objectives that most share because that's what best serves people in Canada, right?, that they have good quality services and that they can afford to pay for them.
6421 That's why, in order to do that, facts are useful things. That's what I'm trying to get to, in terms of what we can work with.
6422 Would you be willing to get back to us and point us to some analyses on impacts of roaming rate regulation on, you know, a net financial benefit in the marketplace or a net -- and maybe a net infrastructure benefit, because those are two of the key things: the quality of what people can access, and the price at which they can access that quality?
6423 MR. LÉGER: We can certainly do some research.
6424 COMMISSIONER MENZIES: Or even point us to research.
6425 I understand with your organization that, you know, resources for those sorts of things --
6426 MR. LÉGER: I was going to say we're concerned --
6427 COMMISSIONER MENZIES: So if you could even point us, for instance, to a jurisdiction that has implemented some of the remedies that you suggest we impose that we might look to as an example and see if it is or isn't a good fit with Canada and see what the outcomes were that would be great.
6428 Is that doable?
6429 MR. LÉGER: We'll do our best.
6430 COMMISSIONER MENZIES: Okay. That would be as an undertaking?
6431 MR. LÉGER: Yes, sir.
6432 COMMISSIONER MENZIES: Okay, thank you.
6433 Those are all my questions. Thank you very much.
6434 MR. LÉGER: Thank you.
6435 THE CHAIRPERSON: Would you agree that competition is not an end in itself, that it's a means to an end?
6436 MR. LÉGER: Yes, we -- yes.
6437 THE CHAIRPERSON: And that, in fact, what we're looking for, ultimately, is a better consumer experience in this particular area --
6438 MR. LÉGER: Okay.
6439 THE CHAIRPERSON: -- would you agree?
6440 And then that consumer experience goes beyond just price, there's the quality, reliability of the network.
6441 Would you agree with that?
6442 MR. LÉGER: It's a factor. We agree, there are a number of factors --
6443 THE CHAIRPERSON: Right.
6444 MR. LÉGER: -- but that's where I guess we come back and we say: that's where choice benefits consumers.
6445 We recognize that some consumers might be perfectly happy with their current service provider. We've also seen in the last few years that lower cost service providers, who perhaps provide leaner service offerings, also have a market. What we favour is, again, a marketplace that maximizes choice for consumers. But we're not looking for an end state to tell you, "Well, here's" -- you know --
6446 THE CHAIRPERSON: Right.
6447 MR. LÉGER: -- "Consumers should be paying x dollars a month." That's where market forces, which I think the Commission has acknowledged, should be driving the market. That's where market forces come into play.
6448 THE CHAIRPERSON: I appreciate that. I'm just trying to understand, you know, your perspective on some of the evidence we've heard so far, particularly from the incumbents that are saying there's a risk for the Commission to get it wrong -- and they point to the European experience -- that too great of a rush, perhaps, to have lower prices may have an unintended and unforeseen consequence on the broader consumer experience, which is not just the price, but also making sure that the networks are upgrading their quality, they're reliable, when you take out your phone you get a dial tone, all those sorts of -- and you get high-speed in terms of data, all those sorts of things.
6449 I know you've done some surveys to find out -- and I take your point that, you know, they're imperfect, all surveys are, but they only take the snapshot in time, as you've said, and it's very difficult to figure out what people -- that people don't think a few years out, in four, five, six years down the road, and that the consumer experience may actually suffer in terms of -- perhaps not in price, but certainly quality.
6450 MR. LÉGER: I'm sorry, and your question is?
6451 THE CHAIRPERSON: My question is: when you look at a consumer and you come to our hearings to advocate consumer issues --
6452 MR. LÉGER: M'hmm?
6453 THE CHAIRPERSON: -- do you consider things more than price?
6454 MR. LÉGER: Absolutely.
6455 THE CHAIRPERSON: And where's your evidence of that?
6456 MR. LÉGER: That we consider things more than price?
6457 THE CHAIRPERSON: Yes. When you put questions to consumers --
6458 MR. LÉGER: Right.
6459 THE CHAIRPERSON: -- about what they're looking for from their communication system, do you help them understand that the quality of the network may be directly proportionate to the amount they're paying today for a reliable system in three, four, five years' time?
6460 MR. LÉGER: Well, when we've asked consumers or we've looked at consumer research, we're basically measuring consumer attitude in time. Do we ask consumers, "Geez, Mr. or Mrs. Consumer, do you recognize that if" -- you know, "if you have more competition today there may be fewer competitors in five years from now?," I have to admit to you I'm not aware of any time when we -- and, again, we could do research to find out if anybody else has asked that question, but I'm certainly not aware of that type of question being asked.
6461 The research we do is typically based at a particular time. The argument that quality will go down is really an argument that's been made by the carriers -- or by the incumbents, I should say, and it's...
6462 THE CHAIRPERSON: And you're not persuaded that any of the evidence of what may have happened in Europe, perhaps through populist policies that, you know, are promising short-term prices?
6463 MR. LÉGER: And we're conscious of what's happened in Europe, but we -- again, we look at what's at stake here or what's on the shopping list, I guess, that the Commission is looking at, and we see considerable differences between, again, the establishment of a regime of roaming rates, which just makes it possible for a carrier to obtain roaming services, and, number two, a regime which makes it possible for carriers to be able to access towers without having to negotiate for -- you know, for -- we've seen the numbers -- for, you know, two years.
6464 So from that standpoint, we are aware that in Europe there were policies that seemed to be designed to undermine the ability of carriers to build a very, very high degree of regulation, but we look at these and they seem to be somewhat irrelevant to what -- to history here or to what we think is likely to happen in Canada.
6465 We're not proposing to the Commission extensive regulatory regimes in relation to, you know, mandating extensive unbundling and making rates available -- service available at very, very excessively low rates. We're not proposing -- in fact, we're not proposing any rates at all. We're simply inviting the Commission to consider the possibility of rates that start at cost.
6466 We would expect that there would be proceedings at that time for the Commission to establish those rates, and we're not before the Commission proposing any specific rating proposal at this time. We expect that that would be a further stage.
6467 So when we compare -- the comparison with Europe is, yes, a cautionary tale, but it -- frankly, it's vastly beyond what we consider that we're asking the Commission to examine.
6468 THE CHAIRPERSON: Mr. White.
6469 MR. WHITE: I think we've taken the undertaking to look at the comparative analysis between Canada and Europe, but I would, in remarks, like to just bring the focus back to the Canadian context.
6470 Certainly there's more to this -- the value proposition than price, and we're not -- we don't deny that there are other factors: network quality -- so "price device network" is the term that's been floated around here. That ultimately goes to value, and it goes to your monthly bill that you get in the mail or, if you get it by email, electronic billing, and simple statistics like the StatsCan year-over-year price increase of about three times inflation, 7 per cent for telephone services, simple facts like across-the-board rate increases for the 500 megabit entry-level smartphone plans, those are things that -- as consumer advocates and groups for the public interest, those are the things that we look as evidence that this isn't working as well as it could, in terms of having a competitive marketplace that bring prices down, that offers lower cost alternatives.
6471 I mean a live example of that, and this is factual, is what happened in the case of Public Mobile and its acquisition by TELUS. I believe the Competition Bureau -- or the Commissioner of Competition, as sort of a condition of acquisition said, "You've got to maintain the very entry-level basic talk-and-text plans for people who are exposed financially so that they can have that.
6472 So those are some of the indicators that we're looking at. It's Canadian in focus, but we'll do that international analysis for you.
6473 THE CHAIRPERSON: Okay. Well, thank you. Thank you for that.
6475 No questions from legal. Okay, that's great. Thank you.
6476 Well, that completes our intervenors for today, so we're adjourned till 9 o'clock tomorrow morning.
6477 Thank you.
--- Whereupon the hearing adjourned at 1532, to resume on Friday, October 3, 2014 at 0900
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