ARCHIVED - Transcript, Hearing 27 November 2014
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Volume 4, 27 November 2014
TRANSCRIPTION OF PROCEEDINGS BEFORE THE CANADIAN RADIO-TELEVISION AND TELECOMMUNICATIONS COMMISSION
Review of wholesale service and associated policies
140 Promenade du Portage
27 November 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 service and associated policies
Eric BowlesLegal Counsel
Lyne RenaudHearing Manager
140 Promenade du Portage
27 November 2014
- iv -
TABLE OF CONTENTS
PAGE / PARA
10. Cogeco Cable Inc.811 / 4594
11. Distributel Communications Limited901 / 5107
12. Saskatchewan Telecommunications969 / 5543
- v -
PAGE / PARA
Undertaking877 / 4942
Undertaking 901 / 5100
Undertaking 956 / 5462
Undertaking 964 / 5514
Undertaking 968 / 5534
Undertaking 995 / 5682
Undertaking 1007 / 5763
--- Upon resuming on Thursday, November 27, 2014 at 0900
4589 LE PRÉSIDENT : À l'ordre, s'il vous plaît.
4590 Donc, Madame la Secrétaire.
4591 LA SECRÉTAIRE : Merci, Monsieur le Président.
4592 Alors, première présentation du jour par Cogeco Câble.
4593 Madame Dorval, je crois que vous allez présenter vos membres du panel avant de débuter votre présentation. Allez-y, vous avez 20 minutes.
4594 MME DORVAL : Bonjour. Monsieur le Président, Madame et Messieurs les Conseillers, merci de nous donner l'occasion de vous présenter le point de vue de Cogeco Câble à l'occasion de cette audience publique portant sur les services filaires de gros et les politiques connexes.
4595 Mon nom est Nathalie Dorval, Vice-présidente, Affaires réglementaires et droit d'auteur, Cogeco Câble.
4596 À ma droite, Philippe Jetté, Premier vice-président, Chef de la Direction Technologique et de la Stratégie, Cogeco Câble.
4597 À ma gauche, Michel Messier, Directeur principal, Affaires réglementaires, Télécommunications, Cogeco Câble.
4598 Et, à sa gauche, Leonard Eichel, Directeur principal, Ventes en gros et TPIA, Cogeco Câble Canada.
4599 De manière générale, Cogeco considère que le cadre réglementaire des services de gros établi en 2008 est toujours approprié et que la définition de service essentiel demeure pertinente.
4600 Notre présentation portera donc principalement sur :
4601 1) l'encadrement réglementaire du service d'accès Internet haute vitesse de gros, incluant les installations de fibre jusqu'aux locaux de l'abonné; et
4602 2) les approches pour la tarification des services de gros.
4603 The retail market for high-speed Internet services has changed significantly since 2008. Characterized by multiple service providers bringing pricing discipline, innovation and consumer choice to the market, competition in the retail Internet market remains strong, diversified and unquestioned.
4604 In fact, despite the strong rivalry that exists between the cable carriers and the telephone companies in the retail high-speed Internet market, the market share of independent ISPs has almost doubled in five years, reaching 9.2 percent at the end of 2013.
4605 Moreover, the substitution of wireline broadband services by mobile broadband services is an increasing reality in Canada and will continue to take root in the years to come, boosted by the increased capacity of wireless networks and the accelerated adoption of new wireless devices such as smartphones and tablets. According to comScore, about 4 percent, or 1.3 million, Internet users in Canada are now relying exclusively on mobile wireless broadband services to access the Internet.
4606 The wholesale market for high-speed access services has also changed during this five-year period, stimulated by strong demand from the independent ISPs in a context of declining growth rates for the combined residential high-speed Internet subscribers of the cable and telephone companies.
4607 Indeed, as reported by all major cable carriers, the growth in demand for third-party Internet access service has increased significantly. For example, the number of TPIA end users now connected to Cogeco's network is about 10 times higher than what it was in 2008 and this number is increasing steadily and rapidly.
4608 Furthermore, despite the fact that the retail Internet market is becoming a mature market, it is noteworthy that the wholesale market continues to grow supported by the strong growth of independent ISPs. Indeed, while the annual growth rate of the combined residential subscribers of the cable and telephone companies declined from 7.5 percent in 2008 to 1.7 percent in 2013, the independent ISPs experienced a compounded annual growth rate of 17.1 percent between 2009 and 2013.
4609 In 2013, in light of these changes both in retail and wholesale high-speed markets, Cogeco decided to embrace this demand and to increase its competitive presence in the wholesale high-speed access market through improved cooperative business relationships with the independent ISPs.
4610 To this end, Cogeco has intensified its contacts with independent ISPs, improved its internal provisioning processes in order to better serve its TPIA customers, proposed on its own initiative a rate reduction this year of over 30 percent to its capacity- based billing rate and has started concluding negotiated off-tariff arrangements.
4611 However, in order to be more competitive and responsive to the needs of its wholesale customers, more tariff flexibility should be allowed to wholesalers. The approval process for tariff modifications does not allow for the implementation of rate reductions or the introduction of new terms of service in a timely manner. Furthermore, this regulatory process does not promote constructive business relationships. Rather, it perpetuates adversarial relationships.
4612 While negotiated off-tariff arrangements are available to the parties, a regulatory framework that promotes commercial arrangements would certainly be more appropriate at this stage of competition in the wholesale high-speed market, while contributing to the establishment of a sustainable competitive WHSA services market in the long term.
4613 In this regard, Cogeco does not agree with the approach proposed by CNOC for the implementation of more stringent regulatory measures to the provision of WHSA services such as the implementation of an equivalent of inputs framework.
4614 First, as the existing framework has allowed independent ISPs to increase their share of the residential high-speed Internet market year after year over the past decade, there are no significant deficiencies in the provisioning of TPIA services that would justify the implementation of such a complex, costly and burdensome framework.
4615 Second, the adoption of this proposal would be clearly counterproductive as it would contribute to the current regulatory dynamic which is oriented toward the reliance on regulatory measures rather than bilateral negotiations.
4616 Dans le contexte actuel, force est de reconnaître que les pressions concurrentielles présentes dans les marchés des services Internet haute vitesse de détail et de gros sont telles qu'une certaine libéralisation du cadre réglementaire des services d'accès haute vitesse de gros serait justifiée.
4617 En clair, Cogeco recommande la mise en place d'un cadre réglementaire « ex post » au moyen de tarifs négociés plutôt que réglementés. Cette mesure permettrait de mieux soutenir le marché des services d'accès Internet haute vitesse de gros qui s'est progressivement établi. Un tel régime, fondé sur des mesures efficaces et proportionnelles aux fins du maintien et de la croissance de ce marché, serait plus cohérent avec les instructions du gouvernement relatives à la mise en oeuvre de la politique de télécommunications.
4618 Dans cette perspective, nous sommes d'avis que les services d'accès haute vitesse de gros devraient êtres reconduits sous la catégorie des « services non essentiels obligatoires et conditionnels ».
4619 Le maintien de cette classification garantirait qu'un verrouillage du marché ne puisse survenir durant cette période, c'est-à-dire que les grossistes mettent fin à leur offre existante de service d'accès Internet haute vitesse de gros. Ainsi, les consommateurs continuent à bénéficier d'un choix diversifié entre plusieurs fournisseurs de services Internet haute vitesse dans le marché de détail.
4620 En fait, bien qu'une proportion croissante des consommateurs utilise exclusivement les services mobiles à large bande pour accéder à l'Internet et que cette tendance devrait vraisemblablement s'accentuer dans les prochaines années, Cogeco reconnaît que les services mobiles demeurent actuellement complémentaires aux services filaires Internet haute vitesse pour la grande majorité des consommateurs.
4621 Bien que ces derniers évoluent très rapidement, nous sommes d'avis qu'à ce jour les services mobiles ne peuvent encore être considérés comme faisant partie intégrante du marché pertinent des services Internet haute vitesse de détail. La présence concurrentielle des fournisseurs de services Internet indépendants doit être garantie dans l'intérêt des consommateurs.
4622 Ceci dit, Cogeco ne demeure pas moins convaincu que le régime d'approbation tarifaire en place peut et doit être remplacé par un régime réglementaire fondé sur l'obligation de négocier en raison de l'accroissement des pressions concurrentielles dans les marchés de détail et de gros des services filaires d'accès Internet haute vitesse. À cet effet, Cogeco demande donc au Conseil de s'abstenir de réglementer les tarifs de ces services de gros.
4623 Un tel régime permettrait, selon nous, la négociation d'ententes de service mieux adaptées aux besoins de chaque client, favoriserait l'établissement de relations d'affaires fournisseur-client susceptibles de perdurer à long terme et d'ainsi favoriser une concurrence durable dans ce marché.
4624 Afin de soutenir la mise en place d'un tel régime de négociation obligatoire, Cogeco propose que les mesures d'assistance réglementaires suivantes soient mises en place :
4625 - l'obligation pour le grossiste de rendre disponible sur son site Internet une offre de référence non réglementée faisant état de la tarification et des conditions de service de base relatives à la fourniture du service d'accès Internet haute vitesse de gros; et,
4626 - en cas de mésentente, la possibilité pour chaque partie de recourir aux services de médiation ou d'arbitrage offerts par le Conseil.
4627 L'obligation de publier une offre de référence permettrait d'assurer une certaine transparence et comparaison des diverses offres de gros de base dans le marché. De plus, tout nouveau fournisseur de service Internet indépendant serait assuré de pouvoir bénéficier d'une offre de service de base lui permettant d'entrer dans le marché ou de déployer une offre de services sans avoir à négocier celle-ci, le cas échéant.
4628 Enfin, malgré le fait que les fournisseurs de services de gros n'auraient plus à faire approuver les taux et conditions tarifaires s'appliquant à leurs offres de service sous le régime de négociation proposé, Cogeco soumet que le Conseil continuerait néanmoins de détenir les pouvoirs, nommément en vertu des articles 24 et 27, lui permettant, en situation d'arbitrage, de dicter les conditions tarifaires applicables au cas par cas.
4630 MR. JETTÉ: One of the issues examined in this proceeding is whether independent ISPs should have mandated access to the large companies' fibre-to-the-premises facilities in order to obtain WHSA services. Such an assessment requires striking the right balance between the incentives for innovation and investment in the construction of telecommunications network facilities on the one hand and the benefits that greater competition could create for consumers in the current high-speed Internet market on the other.
4631 At the outset, I would like to briefly comment on the situation for Cogeco. For some years now, Cogeco has undertaken to deploy first-generation FTTP facilities based on radio frequency over glass (RFoG) and DOCSIS technologies, mainly in new neighbourhoods or business parks in limited serving areas.
4632 Under this architecture, the coax portion of the hybrid fibre coax (HFC) network is replaced by a single-fibre optical network which allows Cogeco to continue to deliver the same DOCSIS high-speed Internet services as delivered through its existing hybrid fibre coax access infrastructure. Accordingly, Cogeco has naturally extended the provision of TPIA services to these FTTP-DOCSIS access facilities.
4633 To be clear, Cogeco has not yet started deploying second-generation FTTP networks. The future deployment of next generation networks requires major changes in the way services, including Internet services, would be provided to consumers by Cogeco. In fact, such an undertaking involves more than upgrading our existing cable network. It would require that we essentially overbuild our existing DOCSIS network.
4634 In this context, it would be entirely inappropriate to extend the obligation to provide WHSA services on future generation FTTP access networks to a carrier who, like Cogeco, has not yet undertaken to deploy such facilities. Mandating TPIA services over future FTTP networks under these circumstances would simply increase the investment risks for such an undertaking and would hence, to a certain extent, reduce the incentive to invest in future generation networks.
4635 From a broader perspective, technologies and deployments of next generation networks are in their infancy. This is particularly true for cable carriers when compared to the telephone companies. In fact, when it comes to next generation FTTP networks, there is no incumbent carrier in the Canadian market.
4636 Furthermore, as evidenced by fibre networks deployed by new entrants in the telecommunications market, next generation FTTP networks are duplicable. In short, we submit that it would be best for the Commission to wait and see how competition will evolve under the deployment of next generation networks before ruling on the need to mandate next generation FTTP networks.
4637 Furthermore, it cannot be ignored that next generation FTTP networks are currently deployed in an ever-increasing competitive environment where high-speed Internet services are provided by multiple service providers and where mobile wireless broadband services will likely increasingly be used as a substitute for wireline broadband services by a growing number of consumers.
4638 Therefore, we believe that refraining from mandating next generation FTTP-based services at this time would not result in a substantial lessening or prevention of competition in the Internet downstream market.
4639 For all of these reasons, Cogeco submits that the assessment of the need to mandate next generation FTTP networks should be reviewed in five years. As is currently the case, the facilities subject to wholesale obligations should remain limited to DOCSIS 3 for the cable carriers.
4640 Finally, with respect to the disaggregated Broadband Access Service proposed by CNOC, we remain of the view that there is no significant demand or valid reason for such a change. In short, the deployment of a new network configuration needed to support this service would not only be very expensive and inefficient but would undermine the existing centralized aggregated architecture.
4641 Furthermore, it would be absurd to require cable carriers to implement this new wholesale service barely four year after the Commission directed the cable carriers to reconfigure their TPIA architecture in order to provide aggregated cable-based WHSA service and less than six months after Cogeco's regional points of interconnections were dismantled.
4642 Comme mentionné précédemment, Cogeco privilégie une approche tarifaire des services d'accès Internet haute vitesse de gros fondée sur des négociations bilatérales.
4643 Par contre, si le Conseil décide de maintenir l'obligation d'offrir ces services en vertu d'un tarif réglementé, Cogeco soumet que l'exigence actuelle de déposer une évaluation économique à l'appui des taux proposés, fondée sur les coûts propres à chaque entreprise selon la méthodologie Phase II, devrait continuer à s'appliquer.
4644 Cette approche tarifaire est bien établie et demeure, malgré les diverses critiques à son endroit, l'approche la plus équitable et efficace pour supporter l'approbation de taux justes et raisonnables.
4645 Afin d'alléger et d'améliorer la rapidité du processus d'approbation tarifaire et ainsi encourager la concurrence, Cogeco soumet que toute proposition de réduction tarifaire d'un taux déjà approuvé sur la base d'une évaluation économique devrait être approuvée sans examen, à la date du dépôt de l'avis de modification tarifaire, si elle est soumise à l'intérieur de la période sur laquelle l'évaluation économique est fondée.
4646 Cogeco s'oppose à la proposition de CNOC de former un groupe de travail visant l'établissement d'un modèle unique des coûts pour les services d'accès haute vitesse de gros pour les entreprises de services locaux titulaires et un autre modèle pour les câblodistributeurs en fonction des coûts pour un « exploitant efficace ».
4647 Une telle approche serait non seulement totalement inéquitable, complexe et très controversée, mais surtout elle irait à l'encontre de l'objectif de créer un marché concurrentiel de gros où chaque concurrent détermine ses tarifs en fonction de ses propres coûts.
4648 Cogeco est confiant que ses recommandations sont appropriées aux conditions actuelles du marché et permettront plus de choix dans l'intérêt des consommateurs.
4649 Cogeco remercie le Conseil d'avoir entrepris cette consultation. Il nous fera maintenant plaisir de répondre à vos questions.
4650 LE PRÉSIDENT : Merci beaucoup.
4651 Donc, je vais amorcer les questions dans le dossier. Évidemment, votre participation a été effectivement un petit peu discrète et ciblée. Donc, mes questions vont aussi refléter cette position. Et franchement, ce matin dans votre présentation, vous avez répondu à certaines de mes questions. Néanmoins, je pense qu'il faut clarifier certaines positions.
4652 Nous avons le défi supplémentaire qu'une partie de vos soumissions sont en français et l'autre partie en anglais. Puis malheureusement aussi, souvent, le langage technique est absorbé de l'anglais. Donc, on tentera de ne pas faire trop de violence à la langue de Molière.
4653 Donc, ma première question porte sur le cadre d'analyse qu'on doit appliquer. J'ai bien saisi que vous êtes généralement en accord -- donc, j'en prends bonne note -- avec le test qu'on a élaboré par le passé, et, comme vous savez, on regarde en premier le caractère essentiel des services.
4654 Cela dit, le Conseil parfois a quand même mandaté certains services de gros, même en l'absence du caractère essentiel, pour d'autres raisons motivées notamment par des enjeux de politique publique.
4655 Donc, quand vous dites votre aval du test ou du cadre, ça comprend l'aval de cet aspect-là, que parfois pour des raisons de politique publique, même si le test du caractère essentiel n'est pas présent à 100 pour cent, on pourrait quand même exiger que le service en gros soit mandatoire?
4656 MME DORVAL : Oui, tout à fait, c'est notre position.
4657 LE PRÉSIDENT : Mais vous n'avez pas de suggestion pour améliorer le cadre, vous l'acceptez comme tel?
4658 M. MESSIER : Oui, nous l'acceptons tel quel. En fait, nous comprenons que le cadre de l'évaluation un peu de chaque service, à savoir quel est le cadre réglementaire spécifique qui doit s'appliquer à l'encadrement à la fourniture de ce service, donc, effectivement, il y a plusieurs services, comme vous l'avez dit, pour des raisons de politique, mais aussi pour des raisons liées à la concurrence, à l'état de la concurrence dans le marché, donc, doit s'accompagner des critères qui sont utilisés dans le cadre des critères en fait que le Conseil utilise pour décider s'il s'abstient ou s'il doit réglementer en fait tous les critères qui ont été élaborés dans la décision 94-19, donc, à savoir est-ce que le marché est suffisamment concurrentiel, le marché de gros pour laisser aller.
4659 Mais on pense que la définition comme telle et les classifications demeurent pertinentes pour déterminer si un service quelconque constitue un input... excusez, un intrant qui est effectivement le plus... qui doit être mandaté et rendu obligatoire.
4660 LE PRÉSIDENT : Et on doit regarder non seulement la situation actuelle mais aussi essayer de se projeter dans l'avenir un peu pour voir si la concurrence va être soutenable à long terme?
4661 M. MESSIER : Effectivement, et je pense que la proposition qu'on vous fait ici ce matin contient un peu ces éléments-là. Nous pensons effectivement que pour le service Internet d'accès de gros, si on regarde vers le futur et on anticipe les conditions comme on a fait valoir plus la situation actuelle, nous disons... nous ne sommes pas d'avis que ce service-là devrait être catégorisé dans la catégorie des services dits « phase out », pour reprendre l'expression en anglais, mais plutôt maintenir dans la même catégorie.
4662 Cependant, on pense que des allègements du cadre réglementaire seraient pertinents et même favoriseraient probablement, plutôt que la répétition que d'autres services ont eue, à savoir si on doit re-réglementer après une période de cinq ans.
4663 LE PRÉSIDENT : O.K. Et je vais revenir à vos propositions tout à l'heure pour vous poser des questions sur ça.
4664 MME DORVAL : Si je peux...
4665 LE PRÉSIDENT : Un aspect... Oui.
4666 MME DORVAL : Excusez, si je peux juste ajouter. Évidemment, quand on essaie de se projeter dans le futur, c'est un exercice qui requiert qu'on ait, si possible, des faits, des évidences, une recherche d'informations, et donc, je pense que c'est un exercice qui demande un certain équilibre entre différents éléments à analyser puis que c'est un exercice qui peut être parfois périlleux.
4667 LE PRÉSIDENT : Je comprends bien, mais par la même occasion on doit appliquer un certain jugement, ici au Conseil, et sinon, si on n'avait pas besoin d'appliquer un jugement, on pourrait créer un ordinateur, on met des intrants, puis on a la réponse, n'est-ce pas?
4668 MME DORVAL : Tout à fait.
4669 LE PRÉSIDENT : En ce qui a trait à la définition des marchés des produits pertinents, au mois de mars, le personnel du CRTC vous avait fait parvenir une demande d'informations qui portait particulièrement sur les forfaits. Comme vous savez, les entreprises de communication offrent de plus en plus des offres de marché, de bouquets qui peuvent comprendre télé, Internet, téléphonie.
4670 Bon, vous avez répondu à l'époque que vous ne trouviez pas la question pertinente. Je ne sais pas si c'est la meilleure façon de répondre, une stratégie réglementaire quand c'est le Conseil. Je comprends entre adversaires peut-être, mais voilà! Nous croyons... puis vous avez vu les autres questions qu'on a posées aux intervenants. Nous la considérons pertinente, cette question-là.
4671 Donc, à votre avis, est-ce que les forfaits sont un marché de produits distincts dans le marché au détail?
4672 MME DORVAL : Alors, tout d'abord, lisez dans notre réponse qu'on avait besoin d'un petit peu plus de temps pour réfléchir. Et donc, ce n'était non pertinent.
4673 Et non, on ne croit pas que les forfaits sont un produit différent. En fait, c'est pas une situation d'offrir un des produits en forfait qui permettent d'accroître le pouvoir de marché, selon nous. Ce sont des services qui peuvent être dupliqués, répliqués et c'est facile pour un client d'effectuer une substitution entre différents fournisseurs à ce titre-là.
4674 Donc, on ne pense pas, non que c'est un produit différent.
4675 LE PRÉSIDENT : Hier, je pense que c'était hier. Bell a expliqué que si quelqu'un avait plus de deux services, sur la base du prix au détail, le fait de se retirer du troisième n'aurait pas d'impact sur l'offre.
4676 Dans votre cas, vous faites... c'est quoi vos pratiques au détail?
4677 MME DORVAL : Selon ma compréhension, nos pratiques sont les mêmes. C'est-à-dire que les rabais sont associés à chaque service au sein d'un forfait. Et que si le client « downgrade », excusez-moi, réduit le nombre de services qu'il prend, que ça n'affectera pas l'ensemble du prix de son forfait, mais en fait la promotion qui allait avec ce service-là, avec un des services.
4678 M. JETTÉ : Si je peux ajouter, on est très d'accord avec la vue que les bouquets de services ou le bundle est une stratégie de mise en marché au détail. Ça n'a pas d'impact au niveau des services de gros. Les services peuvent s'acheter individuellement, peuvent se combiner très facilement et la question des bundles est essentiellement une question de mise en marché au détail.
4679 LE PRÉSIDENT : C'est bien pour le côté du « triple play », parce que vous pouvez être dans ce domaine-là. Puis, il y a d'autres enjeux qui se soulèvent pour le « quad play » dans votre cas.
4680 Est-ce que votre position est la même par rapport à un bouquet, l'offre qui comprendrait des services sans fil?
4681 M. JETTÉ : Évidemment, la question sous-jacente est d'avoir accès à tous les produits de façon individuelle pour ensuite les mettre en bouquet au détail.
4682 Spécifiquement, dans la situation de Cogeco, et vous le savez, du côté des services mobiles, le défi est d'avoir accès individuellement à ce service pour l'ajouter à notre bouquet de détail.
4683 Fait que c'est la question de l'accès au service. C'est pas la question de les combiner ou de les associer dans une offre qui est le défi.
4684 LE PRÉSIDENT : Mais vous n'envisagez pas que dans quelques années, ça sera la norme d'offrir les trois services, peut-être même les quatre services et que c'est...
4685 J'aurais pensé que votre position était que vous êtes dans un désavantage concurrentiel si vous n'avez pas accès aux quatre services. Donc, ça sous-tend, donc, que c'est un marché de produits, peut-être distincts.
4686 M. JETTÉ : Évidemment. Et vous avez entendu notre représentation dans l'audience précédente. Nous souhaiterions avoir accès à ces produits-là de façon séparée pour les ajouter à notre offre de services.
4687 Nous avons aussi fait la représentation que dans le futur, nous croyons que ça va être important d'avoir accès de façon individuelle à tous les services pour fabriquer des offres dans le marché du détail qui satisferont nos clients, les consommateurs qu'on a dans nos territoires.
4688 Cependant, au niveau du service de gros, lorsque les services sont disponibles individuellement, chacun crée les bouquets de services de la façon... Parce qu'il n'y a pas simplement une solution technique. Il y a une solution de service à la clientèle, il y a une solution de présentation au marché. Il y a une solution d'établissement des prix. Il y a plusieurs choses à mettre ensemble. Mais l'essentiel, c'est d'avoir accès aux services.
4689 Et dans les services d'internet aujourd'hui, sous une base de gros, Cogeco rend disponible tous les accès de façon individuelle à ce que les compagnies qui veulent acheter les services de gros de Cogeco puissent les acheter de façon individuelle et en faire des bouquets.
4690 LE PRÉSIDENT : O.K. Ça me surprend un peu. C'est tout. Parce que ça me paraît un peu contradictoire avec votre position dans l'autre instance, parce que vous n'avez pas accès à quatre services.
4691 MME DORVAL : Mais, c'est la raison pour laquelle dans l'autre instance on a demandé des mesures pour pouvoir avoir accès au quatrième service et ensuite, pouvoir nous-mêmes faire les bouquets selon la proposition qui nous semble la plus appropriée pour offrir le service à nos clients.
4692 LE PRÉSIDENT : C'est que votre position dans cette instance-là, semblait indiquer que -- je comprends qu'on étudie la question des services de gros. Mais au niveau du détail, je vous entendais dire que les quatre étaient importants pour pouvoir vous positionner dans le marché qui est en pleine évolution des communications.
4693 M. JETTÉ : Effectivement. Les quatre sont importants. Le taux d'adoption des services mobiles au Canada augmente et ça va devenir de plus en plus important.
4694 Vous nous aviez bien compris quand on a supporté cet argument-là. Cependant, notre argument aujourd'hui dans cette instance et qui est très cohérent avec l'instance d'avant, c'est d'avoir accès.
4695 Aujourd'hui, nous considérons que du côté des services internet, nous rendons possible aux compagnies qui veulent acheter, toutes les composantes du service pour offrir leurs propres services au niveau du détail.
4696 Dans l'instance sur les services sans fil, notre représentation était qu'on ne peut pas avoir accès à ajouter cette composante-là à nos services actuellement. Et c'est pour ça qu'on a demandé des conditions pour y avoir accès de façon à l'ajouter à nos services et offrir quatre services au niveau du détail.
4697 LE PRÉSIDENT : Et pour vous, donc, c'est juste une stratégie de commercialisation. Ça ne redéfinit pas le produit ou le marché de produits.
4698 M. JETTÉ : Exactement.
4699 LE PRÉSIDENT : Merci. Je vais me tourner maintenant vers la fibre jusqu'à l'abonné, le fameux FTTP.
4700 En vous écoutant ce matin, j'ai peur que peut-être que j'ai mal compris vos réponses à certaines questions dans le dossier public. Parce que je vois que vous faites maintenant une distinction entre du FTTP et du FTTP nouvelle génération.
4701 Donc, lorsque vous avez répondu dans les questions, que vous aviez déployé du FTTP surtout dans des nouveaux quartiers résidentiels et des parcs industriels d'affaires, est-ce que c'était FTTP ou du FTTP nouvelle génération?
4702 M. JETTÉ : Nous n'avons pas déployé de FTTP de nouvelle génération.
4703 LE PRÉSIDENT : Mais c'est du FTTP.
4704 M. JETTÉ : Mais, c'est du FTTP de première génération qui utilise la technologie DOCSIS.
4705 LE PRÉSIDENT : Et à la fois en Ontario et au Québec?
4706 M. JETTÉ : En fait, partout dans le territoire de Cogeco.
4707 LE PRÉSIDENT : Et c'est toujours dans votre territoire historique?
4708 M. JETTÉ : Oui.
4709 LE PRÉSIDENT : Pour le système de câblodistribution.
4710 M. JETTÉ : Exactement. C'est dans nos territoires.
4711 LE PRÉSIDENT : Et c'était une décision d'affaires que vous avez prise au cas par cas pour chaque quartier résidentiel ou chaque parc industriel ou est-ce que c'était une décision plus large dans un cadre plus large?
4712 M. JETTÉ : C'est du cas par cas. Évidemment, chaque déploiement a son modèle d'affaires, a son « business case ». Et on a encore certains déploiements où l'équation économique ne satisfait pas tous les paramètres pour déployer un réseau de fibre jusqu'à la maison et où on déploie encore des réseaux avec la norme hybride d'un réseau coaxial et optique ou HFC.
4713 C'est du cas par cas. Il y a des fois qu'il faut encore utiliser les technologies HFC parce que les technologies FTTP sont trop dispendieuses.
4714 Mais lorsqu'on peut se le permettre, évidemment, lorsqu'il y a une marge minimum entre les deux technologies, bien, on va investir dans la fibre jusqu'à la maison, puisque c'est une technologie qui va durer beaucoup plus longtemps.
4715 LE PRÉSIDENT : Donc, vous nous parlez de vos analyses, votre plan d'affaires. Pouvez-vous élaborer un peu sur le contenu de ce plan d'affaires-là, les composantes que vous devez évaluer pour voir si le déploiement a du bon sens?
4716 M. JETTÉ : Bien, je commencerais par vous dire que les composantes, c'est-à-dire les installations d'équipement dans le cas d'un réseau de câblodistribution à la tête de ligne, il y a des équipements qui sont différents, plus dispendieux.
4717 La deuxième composante est l'installation de la fibre jusqu'à la maison. Dans cette composante-là, la majeure partie des coûts sont associés à la main-d'oeuvre.
4718 La troisième composante...
4719 LE PRÉSIDENT : Juste sur ça, est-ce que vos déploiements étaient à la fois aériens et souterrains?
4720 M. JETTÉ : Oui, dans le territoire de Cogeco, on a une grande diversité d'installations aériennes et enfouies.
4721 LE PRÉSIDENT : Et ça, évident dans votre plan d'affaires, ça a un impact sur l'évaluation aussi?
4722 M. JETTÉ : Oui, comme ça a été démontré par plusieurs autres. C'est beaucoup moins dispendieux de déployer des réseaux en situation aérienne.
4723 Et, non seulement l'installation est moins dispendieuse, mais la maintenance aussi, par la suite, est moins dispendieuse.
4724 LE PRÉSIDENT : Bon. Je vous ai interrompu. Quels sont les autres...
4725 M. JETTÉ : Oui, je vais revenir à la troisième composante qui est l'installation, normalement sur le côté de la maison -- je vais utiliser cette image-là -- juste pour installer la pièce d'équipement qui termine notre réseau et l'installation aussi de, en anglais on utilise le mot « drop », mais de la connexion entre le réseau et la maison.
4726 LE PRÉSIDENT : J'ai cherché hier soir pour le mot français, et je n'ai pas trouvé!
4727 M. JETTÉ : Je dois vous dire que...
4728 LE PRÉSIDENT : On va dire « le drop »... « la drop »...
4729 M. JETTÉ : On va le mettre masculin!
4730 M. JETTÉ : Donc, ces quatre composantes-là ont un coût économique, un coût d'installation et un coût de maintenance. Et c'est du cas par cas en fonction de maintenant, la densité du marché qu'on veut desservir. Est-ce qu'on a une maison à toutes les X mètres, Y mètres? Ça change l'économie du marché.
4731 La pénétration de nos clients dans ce marché-là va avoir aussi un impact majeur sur le « business case » si on déploie de la fibre optique devant chaque maison, mais pour seulement aller gagner un ou deux clients. On a tous compris que c'était pas rentable.
4732 LE PRÉSIDENT : Et, sans la dévoiler, est-ce que vous avez un taux de pénétration cible dans votre modèle d'analyse?
4733 M. JETTÉ : Bien, évidemment, là où on a déjà une clientèle, on espèrerait l'augmenter. Là où on arrive dans un marché où on n'a aucune clientèle, ça va être d'avoir une partie substantielle de gains dans cette nouvelle couverture-là.
4734 Ça fonctionne pas nécessairement avec un pourcentage. C'est vraiment du cas par cas en fonction des caractéristiques que je viens d'énumérer, qu'on va retrouver chez nos compétiteurs.
4735 LE PRÉSIDENT : Ça me surprend quelque peu. Parce que, comment pouvez-vous alors, par la suite, calculer la période de retour sur votre investissement?
4736 M. JETTÉ : Bien, en fait, c'est pour a que c'est très, très, très cas par cas, en fonction de la densité des maisons, en fonction de la pénétration de marché.
4737 Mais, il y a un troisième élément, la capacité pour les consommateurs d'adopter les nouveaux services qu'on va offrir. Et évidemment, les services de prochaine génération dégagent de meilleures marges. Donc, la popensité au marché d'adopter nos services est dégager des marges assez fortes.
4738 Et quatrièmement aussi, la vigueur de la compétition dans le marché. S'il y a déjà plusieurs compétiteurs d'installés et qui sont très, très présents d'un point de vue de mise en marché, c'est considéré.
4739 Le dernier élément étant les aspects financiers du coût du capital et des markup désirés.
4740 LE PRÉSIDENT : Pour plusieurs années, lorsqu'on était encore dans le câble coaxial, on disait que souvent, le taux de pénétration dans la province du Québec était moins élevé pour des raisons socio-économiques. C'était pas une question de langue, c'était aussi la richesse en place. Et donc, il y avait peut-être moins d'abonnements.
4741 Vous avez sans doute entendu des commentaires de ce genre par le passé.
4742 M. JETTÉ : M'hmm.
4743 LE PRÉSIDENT : Est-ce que c'est un facteur que vous pouvez constater...
4744 M. JETTÉ : Absolument.
4745 LE PRÉSIDENT : ... encore dans le marché du FTTP?
4746 M. JETTÉ : Absolument. C'est un facteur réel aujourd'hui. Il y a plusieurs -- quand on compare marché par marché, ils ne sont pas tous équivalents.
4747 La capacité d'investir ou de se procurer des services de câblodistribution ou de télécommunication n'est pas équivalente dans un marché à un autre. C'est vrai à l'intérieur du Québec, c'est vrai à l'intérieur de d'autres provinces au Canada aussi.
4748 LE PRÉSIDENT : Et donc, lorsque vous faites l'analyse cas par cas à savoir si vous déployez ou non le FTTP, vous appliquez une analyse sur le contexte socio-économique aussi?
4749 M. JETTÉ : Absolument. Ça rentre dans un des facteurs que j'ai nommés, la capacité de payer, la capacité d'adopter les services marché par marché.
4750 LE PRÉSIDENT : Et lorsque vous voyez cet investissement -- puis on a eu d'autres témoins dire que c'est un investissement considérable en termes de dollars.
4751 M. JETTÉ : Mais, absolument considérable, c'est des...
4752 LE PRÉSIDENT : Et que vous devez par contre faire votre analyse. Parce que vous regardez les situations de marché, par la durée du retour sur l'investissement.
4753 Qu'est-ce que vous utilisez comme la période dans laquelle vous voulez avoir un retour sur votre investissement?
4754 M. JETTÉ : Bien, je pense que tout le monde souhaite d'avoir le retour le plus court possible. Mais, il y a différents étages dans l'offre de service au niveau de l'infrastructure qui est installée pour plusieurs années; d'où l'avantage de la fibre, parce qu'elle dure plus longtemps.
4755 Et, les retours attendus sont sur plusieurs années. Normalement, c'est beaucoup plus qu'une période de cinq ans.
4756 Quand on parle des couches de service qu'on met sur cette infrastructure-là, bien là, c'est en vie avec l'espérance de vie dans le marché du service proprement dit. Ça peut être aussi court que trois ans. Ça peut être cinq ans, ça peut être sept ans.
4757 Fait que c'est une combinaison de l'infrastructure et des services qui sont installés par-dessus l'infrastructure.
4758 LE PRÉSIDENT : Mais pour le côté réseau, c'est beaucoup plus que cinq ans?
4759 M. JETTÉ : C'est beaucoup plus que cinq ans.
4760 LE PRÉSIDENT : Et beaucoup plus que 10 ans?
4761 M. JETTÉ : Ça pourrait être beaucoup plus que 10 ans. Ça dépend de la taille du déploiement. Ça pourrait être même supérieur à 10 ans, 15 ans dans certaines parties de réseau où on sait l'ampleur de la tâche pour aller installer ces infrastructures-là, le peu de capacité qu'on va y installer. On sait que ces installations-là vont durer très longtemps dans certaines parties de nos réseaux.
4762 Il y a d'autres endroits où il y a beaucoup, beaucoup d'utilisateurs. La densité des utilisateurs est très élevée. L'adoption des nouveaux services est très élevée et on sait qu'on va rajouter beaucoup de capacité au fil des années et on va utiliser les nouvelles technologies pour poursuivre le taux de croissance en capacité.
4763 Et ça pourrait réduire la durée de l'investissement, puisqu'on pourrait adopter une nouvelle technologie plus rapidement si le taux de pénétration des services augmente vite
4764 LE PRÉSIDENT : D'accord.
4765 Donc, quand vous dites, vous avez déployé dans des nouveaux quartiers résidentiels, est-ce que c'est des densités... quel genre de quartiers résidentiels que c'est? J'imagine que c'est des quartiers avec des unifamiliales rapprochées?
4766 M. JETTÉ : Oui, exactement. Des nouveaux quartiers résidentiels, des habitations unifamiliales. Ça peut être de la maison unifamiliale ou quelques duplex.
4767 LE PRÉSIDENT : Dans votre description de votre cadre d'analyse, vous parlez souvent de résidentiel. Est-ce que le cadre d'analyse dans les parcs industriels ou les parcs d'affaires seraient identiques, semblables?
4768 M. JETTÉ : Non. Relativement différents. Les besoins du marché à faire ne sont... sont très différents du marché résidentiel. L'adoption des nouvelles technologies dans le marché affaires se fait de façon beaucoup plus rapide, puisque la capacité des réseaux d'affaires est beaucoup plus grande.
4769 Ça fait longtemps qu'on parle d'un gigabyte par seconde dans la fourniture de nos services affaires, alors que dans le monde résidentiel, on est encore à se demander exactement comment la demande va occuper cette large bande qui est installée.
4770 Aujourd'hui, dans l'ensemble de nos réseaux résidentiels, on a beaucoup plus de capacité d'installée qui est utilisée.
4771 Dans les secteurs affaires, souvent, leurs affaires à nos clients vont très bien. Et ils augmentent la capacité rapidement. Donc on investit constamment pour augmenter la capacité, leur donner accès à des nouveaux services sur une base qui est définie par notre clientèle.
4772 LE PRÉSIDENT : Est-ce que c'est fait dans le cadre d'un engagement contractuel à long terme?
4773 M. JETTÉ : Long terme, par opposition au monde résidentiel qui est plutôt du mois par mois, on peut considérer que le monde des affaires est à plus long terme en effet. Il n'est pas rare d'avoir des ententes un an, deux ans, trois ans.
4774 Parce premièrement, le monde des affaires planifie leur propre « business case » et ils veulent avoir une idée de leur coût et une certaine certitude des coûts sur une petite période.
4775 Mais très souvent, on parle pas de longue période qui vont au-delà du un à trois ans.
4776 LE PRÉSIDENT : Mais, ça vous aide quand même à mieux cibler, mieux calculer le risque d'affaires que vous prenez pour le déploiement.
4777 M. JETTÉ : Bien, absolument. C'est un des facteurs du plan d'affaires, puis du « business case » si on sait que le client va être installé avec un revenu sur trois ans. Bien, c'est une donnée plus claire dans notre plan d'affaires et on peut décider d'investir ou de pas investir.
4778 Le retour sur l'investissement devient très clair.
4779 LE PRÉSIDENT : Bon ça, on a décrit vraiment ce que vous faites maintenant dans le domaine de ce qu'on appelle le « green field ».
4780 Est-ce que vous envisagez un jour percer dans le domaine de ce qu'on appelle le « brown field » c'est-à-dire, soit de votre propre réseau ou dans des territoires d'autres fournisseurs?
4781 M. JETTÉ : Bien, parlons de notre réseau. Les plans sont encore en définition.
4782 Dans le domaine du « brown field » où on a des installations HFC existantes, je vais prendre votre question un petit peu à la lettre. Mais si vous me dites un jour, la réponse est oui.
4783 Évidemment, ce jour viendra.
4784 LE PRÉSIDENT : Il va y avoir une question de suivi, par contre. Donc, on peut peut-être l'anticiper.
4785 M. JETTÉ : Je vais l'anticiper.
4786 Mais la capacité et les technologies qu'on utilise aujourd'hui dans le marché résidentiel avec DOCSIS, la famille DOCSIS qui est rendue à sa troisième génération, nous permettent non seulement plus de capacité qui est demandée actuellement par le marché, sur la base des équipements qui sont déjà installés.
4787 Donc, on peut voir les investissements dans les... dans le court terme, dans les prochaines années. Ils vont toujours être sur la base du DOCSIS parce qu'on a encore de la capacité dans ces réseaux-là.
4788 Maintenant, la génération DOCSIS 3.0, a aussi des évolutions connues qui s'en viennent à l'horizon. Donc, DOCSIS 3.0, aujourd'hui, peut faire jusqu'à faire jusqu'à 500 Mbps, disons, entre 300 et 500, dépendant des architectures et des configurations de réseau.
4789 Et la majorité de nos clients aujourd'hui s'abonnent à des services de moins de 50 Mbps, en fait, 99 pour cent de nos clients s'abonnent à des services de moins de 50 Mbps.
4790 Donc, vous voyez qu'on a une marge de peut-être cinq à 10 fois avec la technologie actuelle.
4791 Maintenant, il y a la technologie DOCSIS qui va continuer d'évoluer, qui pourrait nous amener jusqu'à 1000 Mbps ou un Gbps.
4792 On va évidemment considérer ces investissements-là, soit d'ajouter à l'investissement de nos réseaux existants par la norme DOCSIS ou faire des incréments, des ajouts à notre réseau en fonction de technologies vraiment fibrées jusqu'à la maison. Mais ils vont se faire sur le cas par cas. Ils vont se faire sur la teneur et les bénéfices de chaque « business case ».
4793 Fait qu'on pourrait, oui, éventuellement, un jour, allonger beaucoup de portions de réseaux jusqu'à la maison. Mais notre point de départ est une technologie DOCSIS qui a encore beaucoup de capacité avec une prochaine évolution qui est déjà connue, qui ajoute encore à cette capacité.
4794 Fait que vous pouvez comprendre que pour nous, l'avenir, le jour est lointain.
4795 LE PRÉSIDENT : Je comprends.
4796 Je reviens par contre à votre FTTP que vous avez déployé. Est-ce qu'il y a des tierces parties qui ont... est-ce que vous la fournissez, la capacité pour une partie de ces réseaux-là, en gros, à des tierces parties?
4797 M. JETTÉ : La technologie FTTP DOCSIS d'aujourd'hui est ouverte à...
4798 LE PRÉSIDENT : Dans le FTTP que vous avez identifié spécifiquement dans les interrogatoires que vous êtes allé à l'autre niveau pour du FTTP?
4799 M. JETTÉ : Le seul déploiement de FTTP qu'on fait aujourd'hui est avec la norme DOCSIS.
4800 LE PRÉSIDENT : Oui.
4801 M. JETTÉ : Il n'y a pas d'autres déploiements.
4802 La deuxième génération, on ne l'a pas déployée encore.
4803 LE PRÉSIDENT : O.K. Et, celui-là, il est assujetti au régime qui s'applique pour le TPIA?
4804 M. JETTÉ : Oui, le FTTP DOCSIS aujourd'hui...
4805 LE PRÉSIDENT : Oui, oui.
4806 M. JETTÉ : ...est ouvert en mode TPIA à toutes les compagnies qui veulent venir travailler avec nous. Ça fait qu'où on a déployé de la fibre à la maison sur la norme DOCSIS, c'est disponible, c'est ouvert.
4807 LE PRÉSIDENT : O.K. When you're describing the risk factors you're putting forward, I was wondering if, with respect to the mark-up -- again, I understand your point that you would rather it not be subject to mandatory wholesale and that if it was, it would be subject to a different model that you've proposed and we'll discuss that in a moment -- but do you think that there should be as some have suggested a different mark-up approach, a premium because of the nature of the risks associated?
4808 MR. JETTÉ: Yes, you've understood that, in the future, when we deploy a next generation FTTP network, it would be an overbuilt on our existing HFC network.
4809 THE CHAIRPERSON: Right.
4810 MR. JETTÉ: So it's not a case where we're going to add to the existing network, it's a case where we have to continue operating the existing network and overlay a new fiber network on top of it. So that's extremely risky. That means to double the investment, well, double, more than double the investment that your market, that you're making at any market for existing customers.
4811 So, absolutely, the mark-up needs to be different. There's a need for a premium. The risk is considerable. And that's why we haven't started to deploy these next generation overbuilt networks.
4812 THE CHAIRPERSON: In one of the March CNOC interrogs, you made reference to a case in Saint-Hyacinthe to illustrate that you can have more than one FTTP network in the same geographical area. I take it this is not next generation FTTP. Maybe you can give us the details of exactly what you're referring to in Saint-Hyacinthe.
4813 MR. JETTÉ: So I'll just try to come back on the different generations. So for cable, we have a first generation FTTP DOCSIS and we have future next generation that are going to come on the Teleco side. And I'm going to venture in labelling their own generation but they have fiber to the node and they have, as you know, already deployed fiber to the home massively.
4814 So in Saint-Hyacinthe or in many other markets, we are already facing the Telecos investing in their fiber to the home networks. We are also seeing some other ISP's investing in FTTP networks. So I'm not sure if Michel wants to add some...
4815 THE CHAIRPERSON: You referred to three in Saint-Hyacinthe, wanting to know more.
4816 MR. MESSIER: Yes, but in -- I'll try in English -- so in Saint-Hyacinthe --
4817 LE PRÉSIDENT : Non, non, exprimez-vous dans la langue que vous préférez, là, c'est votre choix.
4818 M. MESSIER : A Saint-Hyacinthe, parce que c'est très francophone et c'est de là que je viens, vous avez aussi un fournisseur qui est Maskatel, qui est en fait une filiale, une entreprise concurrente d'une filiale qui est maintenant le Groupe Maskatel, mais qui était Téléphone Guèvremont. Alors, qui a déployé d'abord et au début sur du cuivre, mais qui, dans les dernières années, a utilisé la fibre pour déployer dans son réseau.
4819 Donc, ils ont déployé dans un certain nombre de quartiers, principalement les nouveaux quartiers résidentiels pour offrir leurs services, leurs trois services. Donc, on voit ce troisième fournisseur-là qui est facility base, là...
4820 LE PRÉSIDENT : Donc, dans le cas de Saint-Hyacinthe, c'est résidentiel, le quartier, surtout?
4821 M. MESSIER : C'est résidentiel.
4822 LE PRÉSIDENT : Surtout?
4823 M. MESSIER : Ce que l'on sait, oui, c'est résidentiel.
4824 LE PRÉSIDENT : Et on parle de combien d'abonnés?
4825 M. MESSIER : Pour Maskatel?
4826 LE PRÉSIDENT : Bien, pour ce district-là, parce que vous le mettez en preuve comme étant un exemple où on peut avoir trois réseaux de déployés FTTP. Et je me pose la question : est-ce qu'on peut extrapoler de cet exemple-là pour en tirer une conclusion plus large? Donc, j'aimerais savoir si vraiment...
4827 M. MESSIER : En fait, ce qu'on voulait démontrer, c'est qu'un troisième concurrent présent sur la base de ses propres installations a déployé de la fibre. Donc, c'est donc une -- comme on a dit dans notre mémoire -- donc une installation, un service qui est la FTTP, qu'on peut dupliquer. Essentiellement, c'est la preuve de faire. Et puis c'est retrouvé dans -- si on regarde dans l'annexe déposée par Telus -- on retrouve un certain nombre, je pense 18 entreprises qui ont différents concurrents qui ont déployé de la fibre, vous retrouvez Maskatel aussi.
4828 M. JETTÉ : Si je peux ajouter, nous, dans nos territoires chez Cogeco Câble Canada, à notre connaissance, il y a neuf autres compagnies qui ont fait certains investissements en fibre jusqu'à la maison. Le point de Saint-Hyacinthe, comme Michel l'a mentionné, servait à soutenir la thèse que c'est facilement duplicable.
4829 Mais est-ce que c'est économiquement duplicable? Ça, on ne peut pas en faire la démonstration. Évidemment, on n'a pas les plans d'affaires de nos compétiteurs. Ce qu'on sait, par contre, c'est que ça rend nos propres plans beaucoup plus difficiles en fonction des critères qu'on a discuté un peu plus tôt, on a certaines situations où c'est économiquement non viable et on ne fait pas des investissements de fibres jusqu'à la maison, on continue d'investir dans nos réseaux DOCSIS, HFC.
4830 LE PRÉSIDENT : Donc, vous partagez ou vous ne partagez pas l'opinion que, essentiellement, sur une base nationale, ça va être presque impossible d'avoir plus qu'une connexion FTTP à chaque domicile?
4831 M. JETTÉ : Bien, encore une fois, l'équation économique se résout avec les variables qu'on a discutées plus tôt. Donc, il y a beaucoup d'endroits au Canada où, en fonction de la densité, en fonction de la richesse, en fonction de l'adoption des services, où il pourrait y avoir des business case. Et, vous voyez, il y a déjà dans notre territoire neuf compagnies qui investissent de façon localisée.
4832 Maintenant, si votre question nous amène à avoir des déploiements nationaux, je ne pense pas que ce sera économiquement viable pour plusieurs communautés. Et on ne retrouvera pas une multitude de déploiements FTTP dans plusieurs communautés au Canada. Ça va avec les lois de l'économique, la densité et il y a plusieurs endroits où il n'y en aura pas plus qu'un.
4833 THE CHAIRPERSON: Now, in July, the Bureau address and interrog to you as to whether FTTP was in the same product market as other high speed or lower speed Internet access. And your answer was FTTP is in the same product market as legacy copper, fiber to the node, TPIA and wireless. So that's still your view?
4834 MS DORVAL: It is still our view.
4835 THE CHAIRPERSON: So you would agree that there is some logic to apply the same regulatory framework for FTTP wholesale as one would apply to HSA wholesale?
4836 MS DORVAL: Yes and that's why in our submission we're saying we're asking for an exception based on the fact that we have not deployed FTTP next generation at all. So it would seem counterproductive to us that we be mandated or not only us, but as a principle, that you would mandate something that is so much in its infancy and that has not been deployed.
4837 THE CHAIRPERSON: Right. Okay.
4838 MR. JETTÉ: May I add to that?
4839 LE PRÉSIDENT : Oui, certainement.
4840 MR. JETTÉ: In the sense that we're philosophically talking about two things that we put together most of the time, the architecture and the technology, FTTP or FTTN or these architecture definitions don't actually provide any services. It's just a way to use the technology in building networks.
4841 What we should be talking about is really the services that are being delivered to the end-user. In this case, we're delivering Internet access. The service is having access to the Internet. Many other parties in this audience have actually tried to describe that it's an evolution.
4842 So people want faster access to Internet. And as new applications and new content become available on the Internet, it actually makes sense to upgrade your speed and have access to the Internet at a higher speed. But the need is to access the Internet.
4843 THE CHAIRPERSON: So the speed doesn't help to find the product market?
4844 MR. JETTÉ: The speed, it's an evolution. So the product that you're actually subscribing to is the access to the Internet.
4845 THE CHAIRPERSON: Right.
4846 MR. JETTÉ: And over time the speed has to adapt to it. So it's kind of a moving target in a way, but the fundamental service is always the same. You want to access the Internet.
4847 THE CHAIRPERSON: Access the Internet, m'hm.
4848 MR. JETTÉ: The way we use topologies and network architecture or even the media, the coax or the fiber or the copper to render the service should not be how we look at the markets or the regulatory framework. The service is being delivered. As operators, we chose the best technologies and we use the best architecture that we can not only deploy but maintain.
4849 There's a significant cost in maintenance and how we chose to adopt an architecture versus another is after a reflection of our operations and how we want to not only deploy, but maintain those services. So we might go with a DOCSIS, a fiber to the home, a fiber to the node, increase the number of nodes in our network. There's a lot of technology options, but the architecture or the topology of how we organise the technology should not be relevant to define the services.
4850 LE PRÉSIDENT : Et c'est donc probablement pour cette raison-là que, par rapport au sans-fil, vous prenez une position à l'effet que, lorsqu'on regarde l'état du marché soit au détail ou en gros, qu'on doit évaluer aussi le sans-fil comme étant une source pour certains abonnés à l'accès Internet, n'est-ce pas?
4851 M. JETTÉ : Absolument. Les produits sans fil aujourd'hui, hors de tout doute raisonnable, offrent un service de voix, offrent un service de messagerie qui a remplacé les réseaux filaires. Dans l'accès...
4852 LE PRÉSIDENT : Vous avez dit « remplacé » et, dans votre présentation, vous avez dit « complémentaire ». Est-ce que je dois voir une distinction...
4853 M. JETTÉ : Oui, vous voyez, la distinction, les services et les technologies. La voix et la messagerie ont pénétré fortement les services sans fil. La majeure partie des Canadiens aujourd'hui ou une très grande partie des Canadiens utilise les services de voix...
4854 LE PRÉSIDENT : Oui.
4855 M. JETTÉ : ...et de messagerie à partir de leur sans-fil.
4856 LE PRÉSIDENT : D'accord.
4857 M. JETTÉ : Il y en a encore un certain pourcentage qui utilise les services filaires. Maintenant, pour ce qui est de l'Internet et de l'accès haute vitesse à l'Internet, les technologies sans fil progressent rapidement avec LTE, avec LTEA, qui commence à être déployé à certaines parties dans certains pays. Et ça va progresser, ça va continuer de progresser.
4858 Maintenant, pour tout produit, il y a un taux d'adoption. Les technologies sont introduites dans le marché. Un premier 5 pour cent, un premier 10 pour cent des consommateurs les adopte parce qu'elles sont très dispendieuses. A mesure que le taux d'adoption augmente, le coût unitaire diminue. C'est ce qui se passe avec le marché sans fil dans le marché d'accès Internet haute vitesse. On est au début de ce cycle-là.
4859 Donc, ce qu'on dit, c'est qu'on reconnaît qu'il y a déjà certains consommateurs pour qui l'accès sans fil Internet suffit. C'est un produit qui rencontre leurs objectifs et leurs besoins.
4860 LE PRÉSIDENT : Donc, il n'y a pas de substitution pour ces gens-là?
4861 M. JETTÉ : Bien, pour quelques points de pourcentage, pour 3, 4, 5 peut-être 7 pour cent des Canadiens, c'est un produit qui satisfait leurs demandes. Maintenant, on n'est pas rendus à parler d'un produit qui est maintenant un produit de substitution. Mais on voit qu'il s'en vient rapidement. Et, encore là, c'est pour ça qu'on demande d'avoir accès parce que, la question fondamentale, c'est d'avoir accès à un réseau qui n'est pas duplicable facilement.
4862 LE PRÉSIDENT : J'essaie de bien cerner votre position par rapport au sans-fil dans l'analyse du niveau de concurrence. Je vois à certains endroits que vous semblez dire qu'on ne devrait pas... vous disiez tout à l'heure par rapport au filaire qu'on ne devrait pas s'enfarger trop trop dans la technologie sous-jacente parce que c'était de l'accès.
4863 Pour certains abonnés sans fil, c'est l'accès et ils ont accès d'ailleurs à certaines vitesses, peut-être pas les mêmes vitesses, mais j'aimerais savoir, est-ce que vous nous dites que c'est complémentaire en termes du test général ou est-ce que c'est une substitution?
4864 Parce que certains, notamment le Bureau de la concurrence, trouvent que, étant donné la vitesse du sans-fil à l'heure actuelle -- je ne sais même pas s'ils se projettent dans l'avenir, ils ne semblaient pas vouloir faire ça -- et par rapport aux coûts, que ce n'était pas un produit de substitution. Donc, c'est quoi votre position?
4865 MME DORVAL : Donc, je confirme que c'est notre également lecture, c'est-à-dire que, pour l'accès à Internet via le sans-fil, on pense que ce n'est pas encore un substitut, que je dirais que ça risque d'être un substitut en devenir. La raison pour laquelle on dit cela, c'est que, en termes de limites de capacité et de prix, on pense que le produit n'est pas encore équivalent.
4866 Et donc, je pense que comScore, selon les données de comScore, il y a un pourcentage de 4 pour cent des Canadiens qui utilise Internet pour accéder... le sans-fil pour accéder à Internet, mais ce n'est pas une proportion, selon nous, qui fait en sorte que c'est devenu un substitut. Donc, ce n'est pas un substitut dans notre proposition.
4867 LE PRÉSIDENT : A votre avis, quel pourcentage faudrait-il avoir pour qu'on vienne à la conclusion que c'est un service de substitution?
4868 MME DORVAL : Je n'ai malheureusement pas de chiffres magiques à vous fournir. Ce qu'on pense, c'est qu'il faut regarder l'évolution du marché et voir à quel moment l'adoption augmentera parce que les limites de capacité seront moins distinctives enter le wireline et le wireless et que les prix seront plus similaires. Donc, je ne pense pas qu'on peut regarder ça isolément à partir d'un chiffre ou d'un pourcentage.
4869 LE PRÉSIDENT : Le désavantage des chiffres de comScore, c'est qu'ils sont souvent sur une base nationale. Est-ce qu'on devrait peut-être plonger un petit peu plus en détail pour voir qu'est-ce qui se passe dans les zones urbaines comparativement à d'autres endroits au pays?
4870 MME DORVAL : Oui, probablement que ça ferait plus de sens de regarder sur une région plus petite, de regarder sur une base régionale plutôt que nationale.
4871 Mais le fait demeure qu'à votre avis, pour le moment, c'est encore dans le devenir qu'on va le retracer? Bon. Merci.
4872 M. MESSIER : Moi, je pense qu'il faut le regarder par rapport à nos marchés aussi. Comme on n'opère pas les grands marchés urbains de Toronto et de Montréal, il est fort probable que le chiffre cité par comScore soit un maximum dans nos territoire parce que, comme vous l'avez suggéré, les marchés urbains, comme...
4873 LE PRÉSIDENT : Même à Mississauga?
4874 M. MESSIER : Peut-être dans certains. Et, comme Nathalie vient de dire, je pense que ce serait pertinent de regarder à tout le moins sur une base de CMA les différentes pénétrations des différentes technologies. Mais, encore là, je voudrais rappeler que les services sans fil n'offrent pas simplement l'accès à Internet haute vitesse. Ils offrent la voix et la messagerie qui, eux, maintenant, sont des services... qui peuvent remplacer les technologies filaires.
4875 La raison pour un consommateur d'acheter un téléphone cellulaire est la combinaison de ces trois services-là : il veut avoir un service de voix; il veut avoir un service de messagerie; il veut avoir aussi un service d'accès Internet, pour l'instant, complémentaire.
4876 Vous avez décrit dans votre présentation à l'effet que vous offrez maintenant, vous êtes même organisé pour offrir des services d'accès à haute vitesse en gros parce que c'est un endroit que vous voyez un potentiel d'affaires intéressant. Vous avez même fait une réorganisation interne, je crois, à un certain moment donné pour ce faire. Et vous tentez d'augmenter votre présence dans ce marché.
4877 N'eût été de la décision du Conseil de mandater l'accès à ces services, pensez-vous que vous auriez développé cette ligne d'affaires?
4878 MME DORVAL : La réglementation a certainement aidé à motiver le développement des affaires vers la fourniture de services au TPI.
4879 M. JETTÉ : Je pense qu'on pourrait le regarder aussi de la façon suivante. Ça coûte extrêmement cher de construire des réseaux. Donc, s'il est pour y avoir à travers l'accès mandaté un client potentiel entre le câble ou les telco, on préfère l'avoir avec nous pour nous aider à faire les investissements d'infrastructure.
4880 LE PRÉSIDENT : Je comprends bien, mais peut-être que le Conseil vous a aidé à percevoir une opportunité d'affaires.
4881 M. MESSIER : Je pense, exactement, le Conseil nous a aidés à percevoir, en fait, en implantant, en ouvrant le marché au service de gros, c'est bien sûr que ce n'est pas un naturel, surtout au début si on remonte cette année où est-ce qu'on développait le service Internet principalement. Maintenant, on voit un changement dans le marché. C'est ce qu'on a souligné dans notre présentation. Et maintenant on voit plus le bénéfice de pouvoir avoir ces clients-là qui nous aident, dans le fond, à augmenter le nombre de connexions sur notre réseau.
4882 LE PRÉSIDENT : Je comprends bien. Et puis, d'ailleurs, c'est pour ça que je vais vous poser quelques questions maintenant parce que votre thèse de base est qu'il y a une évolution, une maturité dans le marché puis qu'on doit maintenant passer à une autre phase qui porte sur un cadre qui est plus basé sur la négociation, si je comprends bien, négociation de gré à gré entre les parties, d'une part avec l'offre de base -- je ne sais pas si c'est un contrat d'adhésion, mais ça ressemble un peu à ça, une offre de référence, je pense que c'est l'expression que vous avez utilisée -- qui serait disponible sur un site Web de la compagnie. Mais c'est vraiment un take it or leave it. Est-ce que j'ai bien compris?
4883 MME DORVAL : Non. En fait, la proposition, ce n'est pas un take it or leave it. Je dirais que l'offre de référence non réglementée, l'idée qui est associée à ça -- excusez le terme anglais -- pour nous, c'est un back stop. C'est-à-dire que l'idée est de négocier de gré à gré et donc loin d'être un contrat d'adhésion pour être en mesure d'offrir des services personnalisés qui sont mieux adaptés à chacun des clients TPIA qu'on puisse avoir.
4884 Donc, loin d'être un contrat d'adhésion, c'est de permettre une certaine transparence et la possibilité pour quelqu'un qui ne voudrait pas négocier, d'avoir une offre qui est déjà affichée.
4885 LE PRÉSIDENT : Quelqu'un pourrait regarder ça et dire : « Bien, c'est essentiellement un tarif. »
4886 MME DORVAL : Non, dans le sens où la flexibilité qui vient avec une offre négociée est assez différente, ce que j'en comprends d'un tarif qui doit passer par plusieurs étapes avant d'être approuvé, que ce soit en vue d'une réduction de tarifs ou autres. Je pense que Leonard peut peut-être parler de la flexibilité que ça pourrait offrir d'avoir un cadre réglementaire comme ça.
4887 MR. EICHEL: Okay. Yes, sure. So I'm going to respond in the language of Shakespeare because my language of Molière is a bit rusty this morning.
4888 THE CHAIRPERSON: As long as we limit ourselves to those two options --
4889 MR. EICHEL: Yes.
4890 THE CHAIRPERSON: -- I'm fine.
4891 MR. EICHEL: That's fine. For me, as I sit face to face with my ISP customers, I have to make sure that I have some kind of negotiating flexibility. So, for me, having a more flexible regulatory regime is going to help me enormously because I would like to attract as many of the ISP's on to our network on our territory as possible.
4892 Right now, the current method of submitting a cost study, for example, is long and arduous and it's quite complex. Tariff approvals can be long. I would cite for you, for example, in our opening remarks, I made reference to the fact that we made a voluntary price reduction of over 30 per cent. But that tariff was filed in July and still remains to be approved.
4893 So for me, to be able to have more flexibility, to make changes, to react to them, where I get to make sure we are competitive as a wholesaler is quite important for me.
4894 THE CHAIRPERSON: But everyone would be subject to the same rules, so wholesale providers could see each other's; is that correct?
4895 MR. EICHEL: Yes, exactly.
4896 THE CHAIRPERSON: And what impact do you think that would have on the behaviour of the wholesale providers?
4897 MS DORVAL: Well, we really think that it would move the dynamic from a regulatory, I wouldn't say gaming, but dynamic as opposed to a negotiation dynamic. So it would be less confrontational and it really would help people just decide to sit down together and talk when they're in need of something.
4898 THE CHAIRPERSON: Right. Which brings me to the other part of your suggestion, is that when the negotiations are not successful, somehow the Commission would get involved in mediation or arbitration? I guess that's a question.
4899 MS DORVAL: Well, that's correct. I think it could be both mediation and arbitration, and maybe here you can see a parallel with the broadcasting world. So we have not really gone deep down to see how that could, you know, materialize, but yes, I think it should be mediation and arbitration.
4900 THE CHAIRPERSON: And you talked about the need for speed and certainty in decisions and moving on. Assuming there's no negotiation possible under your model, that there's a deadlock and therefore you go into either mediation or arbitration, is the -- l'offre de référence, is that the interim solution?
4901 If you can't agree with somebody for whatever reason, delay may not be to your disadvantage or I take it that any customer is better than no customer, but somebody might wonder whether it's a way for a regulatory game but the other way.
4902 MS DORVAL: I do think that the reference offer could be the interim tariff.
4903 THE CHAIRPERSON: "Tariff" -- entre guillemets -- rate?
4904 MS DORVAL: Non-tariff.
4905 THE CHAIRPERSON: Non-tariff, yes. Okay.
4906 Have you given some thought to how many of these you would foresee? I know you can't foresee for others, but in your circumstance, Ontario and Quebec, would you be hopeful that out of the number of negotiations you do, these would be extremely rare, occasional?
4907 MR. EICHEL: No, I would think they would be more regular than unusual.
4908 THE CHAIRPERSON: More regular?
4909 MR. EICHEL: Correct.
4910 THE CHAIRPERSON: So --
4911 MR. EICHEL: Because I think that when I look at the composition of the ISP customers I have today, each one has different needs and each one is attacking a market in a different way.
4912 THE CHAIRPERSON: Oh, you may have misunderstood my question.
4913 MR. EICHEL: Pardon me.
4914 THE CHAIRPERSON: What you're saying is that there would be a lot of these negotiations that are unique and not using the basic offering that's on your website but I was asking how many do you think would be unsuccessful and would lead to mediation or arbitration.
4915 MS DORVAL: As little as possible (off microphone).
4916 LE PRÉSIDENT : Votre micro.
4917 MS DORVAL: Well, you know, I think that the negotiation solution that we propose, as I said, strikes a bit of a reference with the broadcast world, where, you know, you are our end solution and parties really think twice before we bring any dispute before the Commission. So trying to say how many would that be, it's difficult to say but I would think that it would be the minority.
4918 LE PRÉSIDENT : Lorsque vous envisagez... puis je comprends là que peut-être vous n'avez pas songé aux détails, puis peut-être que je vais vous donner l'opportunité de nous fournir plus d'informations dans un engagement, mais je vais poser quelques questions, puis on va voir si vous avez des réponses.
4919 Est-ce que vous envisagez que le Conseil serait amené à faire de la médiation ou de l'arbitrage uniquement par rapport à un prix ou aussi des éléments non tarifaires, des conditions de l'offre?
4920 M. MESSIER : On pense principalement que ça va être sur la question des prix. Ça pourrait occasionnellement être sur les conditions des services...
4921 LE PRÉSIDENT : Et...
4922 M. MESSIER : ...les conditions de service.
4923 LE PRÉSIDENT : Quand vous dites les conditions, l'architecture aussi offerte par Cogeco dans votre cas, les arrangements spéciaux?
4924 M. MESSIER : Est-ce que...
4925 LE PRÉSIDENT : Parce que ça peut devenir particulièrement complexe. J'essaie d'envisager les ressources nécessaires pour entreprendre votre modèle parce que je ne veux pas être dans une situation où on ne fait que déplacer les ressources et le temps investis dans notre modèle actuel tarifaire, en présumant là qu'on maintient le modèle actuel, versus votre modèle qui, à première vue, fonctionne si tout le monde s'entend, mais qui peut devenir particulièrement lourd s'il y a beaucoup de disputes ou des disputes sur des points d'ingénierie, de prix, de situation unique dans un marché.
4926 M. MESSIER : L'objectif de ce que l'on propose, effectivement, c'est la recherche, dans le fond, de solution qui serait gagnante des deux côtés, avec une base de référence, comme on a dit, qui offrirait dans le fond une certaine protection pour nos clients.
4927 Et si on fait référence, exemple, au service qui est demandé présentement dans la présente instance sur le -- j'imagine que c'est à ça que vous faites allusion -- il faudrait engager les discussions et voir dans quelle mesure, de notre côté, il y a aussi un gain pour le fournisseur de services. Sinon, je veux dire, on ne parle pas d'ouvrir et puis de répondre à toutes les demandes sans... et puis de se retrouver...
4928 Donc, il est possible que... on verra à l'usage selon ce qu'il y aura, mais si les solutions sur les demandes sont d'une telle... qu'il n'y a pas possibilité de trouver une entente qui est gagnante des deux côtés, bien, ça sera à l'usage qu'on verra si le régime fonctionne ou pas.
4929 Mais c'est certain que présentement la dynamique dans laquelle on vit, c'est que c'est un appel toujours dans le fond au niveau du processus réglementaire et c'est là qu'on débat de façon antagoniste. Donc, le niveau de négociation qui s'effectue, alors, il y a peu d'ententes, comme vous avez pu le remarquer, qui sont hors tarif présentement sur le marché, et c'est cette dynamique-là qu'on voudrait voir davantage s'implanter et donc une certaine recherche de solution gagnante des deux côtés, dans notre désir, nous, d'augmenter notre présence dans le marché et espérant aussi recevoir de nos clients des demandes qui sont « raisonnables ».
4930 Et si cette dynamique-là peut s'implanter, bien, je pense que vous serez en meilleure position lorsque les conditions du marché deviendront telles qu'on peut s'abstenir de réglementer, que ceci puisse continuer après, sans générer des craintes que tout s'effondre immédiatement lorsque l'abstention est donnée.
4931 LE PRÉSIDENT : Et dans votre modèle, suite à l'arbitrage du Conseil, est-ce que la décision est publique?
4932 MME DORVAL : Je pense que, encore une fois, dans un cadre parallèle avec la radiodiffusion, la décision pourrait... un résumé, un sommaire de la décision pourrait être public.
4933 LE PRÉSIDENT : Mais pas le détail de... parce qu'il y a des éléments confidentiels?
4934 MME DORVAL : Vraisemblablement pas le détail de... le détail propre à chacune des parties, qui ont été soumis confidentiellement.
4935 LE PRÉSIDENT : Et quel est le fil que le Conseil devrait appliquer dans un cas d'arbitrage? Est-ce que ce n'est que d'amener les parties à s'entendre ou est-ce qu'on devrait avoir une préoccupation de politique publique aussi? En d'autres termes, est-ce que c'est vraiment un arbitrage au sens traditionnel où le Conseil amène des gens à la table parce qu'on veut atteindre un objectif de politique publique ou est-ce qu'on agit plus comme des arbitres au commercial?
4936 MME DORVAL : À notre avis, ça devrait être purement commercial. Et pour les questions de politique publique, je pense que ça devrait être déterminé avant, qu'on comprenne dans quel cadre on agit et que les questions de politique soient appliquées dans nos relations. Quand on connaît quelles sont les lignes qui doivent nous guider, on peut avoir des négociations qui tiennent compte de ces facteurs-là, et donc, si ça devait se rendre en arbitrage, ça devrait être sur une base commerciale.
4937 LE PRÉSIDENT : Ce que vous proposez est un peu un changement de l'approche. Est-ce que vous avez songé, au lieu d'aller immédiatement appliquer tout ça sur une base nationale relativement à court terme, qu'on pourrait peut-être le tester à travers un projet pilote, et comment pourrait-on définir cette zone d'essai?
4938 MME DORVAL : Alors, je dois vous avouer qu'on n'a pas pensé au projet pilote. Alors, si on pouvait y réfléchir et vous revenir, je pense qu'on aurait besoin d'en discuter.
4939 LE PRÉSIDENT : Et la raison que je le soulève, c'est basé en fait sur des discussions que j'ai eues avec d'autres régulateurs dans d'autres juridictions qui envisagent de plus en plus de tester ces solutions réglementaires là pour voir, avant de... parce qu'à un certain niveau, c'est un peu épeurant parce qu'on saute dans l'inconnu, mais on pourrait peut-être tester et peaufiner le modèle en l'essayant pour une période de temps.
4940 M. MESSIER : Pour mieux comprendre ce que vous proposez par projet pilote, est-ce que vous entendez une solution... un projet pilote qui s'appliquerait à l'ensemble des fournisseurs du marché ou ça pourrait être aussi simplement un fournisseur qui dit, moi, je veux vivre sous ce cadre-là, et puis on voit les résultats, la dynamique?
4941 LE PRÉSIDENT : Je suis ouvert à plusieurs solutions, peut-être même des solutions géographiques.
4942 MME DORVAL : Merci. On va prendre le temps pour y réfléchir, s'il vous plaît.
4943 LE PRÉSIDENT : O.K. Understood. So that's an undertaking.
4944 Just one last point on that. Somebody looking at your suggestion -- and maybe this is the point of this backstop you're proposing -- might look at it and say, well, the reason they're putting that forward is because even they don't believe that the market is sufficiently competitive and sustainably healthy and therefore you need this backstop.
4945 MS DORVAL: I think the intent was really not driven by is it competitive or not. We think it is competitive. TPIA or wholesale customers have the ability to choose between cable and telcos and they would have also the ability now to build their own network. So, as we said, we think it's duplicable to some extent. So it's not about competition, it really is about trying to find a solution that we would move the parties away from regulation and incent them to move into a negotiation dynamic, a true negotiation dynamic. So it was proposed in terms of trying to solve or be there as a backstop. Even if someone doesn't want to negotiate they could just take that offer, it's there, and give some transparency. Because if all providers were doing the same, someone could look and see what's out there.
4946 THE CHAIRPERSON: So you don't feel that it undermines your principal position?
4947 MS DORVAL: No, we don't.
4948 THE CHAIRPERSON: Okay. Can I move on to Ethernet? Did you have -- avez-vous quelque chose à ajouter?
4949 MR. JETTÉ: Well, I was just listening and the endgame is obviously to deregulate, so we are proposing something that will actually help the markets move from a current situation with regulation to a completely deregulated market. We think we need some steps on the way, so that's why we are proposing this approach. Perhaps there are others, but the endgame is the regulation because we think, we feel we have evidence today that it's plenty -- there are plenty of options. Competition is vigorous in the marketplace.
4950 THE CHAIRPERSON: Right. Your endgame is deregulation?
4951 MR. JETTÉ: Correct.
4952 THE CHAIRPERSON: Okay. Because you understand that it's not necessarily the Commission. We have public policy outcomes that sometimes require regulation and sometimes no regulation.
4953 MS DORVAL: We just thought it was a prudent approach to deregulation.
4954 THE CHAIRPERSON: I understand the spirit in which it was put forward. It is a transitional way to move away.
4955 Okay. Let me move to Ethernet. Is that okay? So following Decision 2008 you've -- la décision du Conseil de déréglementer, vous avez, si je comprends bien, bien investi de ce côté-là, et maintenant vous utilisez votre capacité pour offrir ce service-là à de tierces parties.
4956 Dans l'instance, il y a des parties qui ont proposé que le Conseil re-réglemente les services Ethernet. J'aimerais voir, de votre point de vue et de votre connaissance, je pense, dans le marché québécois et ontarien, quelle est votre position à propos de l'état du marché suite à la déréglementation et l'offre? Parce qu'on a entendu beaucoup de commentaires que peut-être l'état du marché est différent d'une région à une autre.
4957 M. MESSIER : De notre côté, on pourrait difficilement commenter sur l'état de l'ensemble du marché, mais sur la base de notre propre expérience, ce que l'on voit depuis 2008, c'est que c'est une croissance constante de ce service-là, du service Ethernet, qu'on fournit autant au niveau... à des fournisseurs, des transporteurs ou des providers, et autant du côté retail.
4958 Donc, pour nous... et nous ne sommes pas... L'autre situation, je pense, que vous devez aussi constater, nous n'utilisons pas les services Ethernet d'une tierce partie.
4959 LE PRÉSIDENT : Mais vous en offrez?
4960 M. MESSIER : Mais on en offre, nous, sur la base de notre propre réseau, oui.
4961 LE PRÉSIDENT : C'est ça. Donc, sur le marché...
4962 M. MESSIER : Donc, nous, la décision, on considère qu'elle a été bénéfique puisqu'on continue à croître dans ce marché-là, sans problème.
4963 LE PRÉSIDENT : Encore une fois, le Conseil vous a aidé à trouver des opportunités d'affaires.
4964 LE PRÉSIDENT : Mais si vous aviez à évaluer le niveau de concurrence dans le marché d'affaires au détail, comment vous caractériseriez ce marché-là à l'heure actuelle en Ontario puis au Québec?
4965 M. MESSIER : À ma connaissance, il n'y a pas un télécommunicateur aujourd'hui qui n'offre pas ce service-là. Tout le monde a un service Ethernet dans son portfolio de produits. C'est un produit nécessaire pour adresser les besoins du marché. Tout le monde a ce besoin-là.
4966 Il y a beaucoup, beaucoup, beaucoup de vigueur à la compétition dans ce segment de marché, et c'est pour ça que je pense que le cadre existant est très approprié. Il y a une gestion de l'offre et de services, et comme il y a beaucoup d'offres et beaucoup de demande, il y a une balance commerciale qui s'établit.
4967 LE PRÉSIDENT : Mais évidemment pour le marché que vous connaissez, soit l'Ontario puis le Québec; c'est ça?
4968 M. MESSIER : Oui, sous réserve du territoire que nous desservons.
4969 LE PRÉSIDENT : Si vous permettez, je vais aller vers le... ça va être le dernier domaine pour moi de questions. C'est le domaine de la tarification, puis, enfin, plus la méthodologie puis l'approche que nous allons prendre.
4970 Par rapport aux suppléments, les markups... Je vais vous la poser en anglais.
4971 Should markups only apply to recover fixed and common costs at all times or do you agree with some parties that in some instances the risk associated should reflect that, should reflect a different markup? I think you started answering that earlier that therefore there should be an exception, right, in certain instances. Is that correct?
4972 MR. MESSIER: It should be considered, yes, the risk of investment, to a certain extent, yes.
4973 THE CHAIRPERSON: So in some instances, not across-the-board. Is that correct?
4974 MR. MESSIER: That's correct.
4975 THE CHAIRPERSON: So which instances therefore would that apply?
4976 MR. MESSIER: When we talk about the new -- the investment in the new generation network which includes higher risk of investment, I think that if we were mandated to offer such services -- wholesale service on a mandated basis, we need to include in the markup a risk -- to consider the risk of investment in such a case.
4977 THE CHAIRPERSON: So in your case, using only your terminology, only with respect to FTTP next generation?
4978 MR. JETTÉ: When new technologies, new solutions are brought to market it shouldn't -- we should stay as far away as possible to regulation because the incentive for innovation is a very strong in the early cycle.
4979 THE CHAIRPERSON: Right, I understand that. We don't have to reargue your entire position. We are down the road of the hypothesis --
4980 MR. JETTÉ: Yes, but I'm going to give you an --
4981 THE CHAIRPERSON: -- you unfortunately were unsuccessful.
4982 MR. JETTÉ: I'm going to give you an example. Not everybody knows that Cogeco was the first company in Canada to launch DOCSIS base in Internet access.
4983 THE CHAIRPERSON: Right.
4984 MR. JETTÉ: We took that risk, we invested, we became the first cable carrier to adopt that new technology. We are not opposed today, as you are hearing in our submission, to today have a mandated framework, but it needs to start with innovation in mind. Then there is a certain degree of adoption in the marketplace and you can open to mandated and with or without tariff depending on the market dynamic.
4985 What we are proposing is that it needs to be in line with the magnitude of the risk in the innovation, the financial and technologically -- the technology risk factor taken. So there is a premium for more risky technology and there should be also a premium for a financially risky investment.
4986 THE CHAIRPERSON: Right. I'm trying to put a box around when that risk premium would be appropriate.
4987 MR. JETTÉ: Well, it's hard to define the new technologies and the innovation down the road, but the best I can offer today is to use those two guidelines: Is the technology risky and is the size and the magnitude of the investment risky?
4988 THE CHAIRPERSON: Okay. You made some comments in your opening remarks about cost studies, so I take it you agree with Bell that if you have recently filed cost studies you shouldn't have to do a different one. We are down the road of the hypothesis that you were unsuccessful and that we are still tariffing the wholesale.
4989 So do you agree with Bell's position that recently filed cost studies wouldn't be -- you wouldn't require a new one if you've filed one recently?
4990 MR. MESSIER: Sorry, can you repeat?
4991 THE CHAIRPERSON: So Bell suggested that new cost studies would not be required when you have recently filed the cost study.
4992 MR. MESSIER: Yes.
4993 THE CHAIRPERSON: I took it that you agreed with that position.
4994 MR. MESSIER: Yes, sure.
4995 THE CHAIRPERSON: Is that not what you were saying in paragraph 43?
4996 MR. MESSIER: Exactly. Exactly. What we said is when we file a custody and if that custody is based on a five-year study period, for example, so the tariff that you will approve based on that custody will be -- will be to recover all the costs during all of that period.
4997 So if we decide to, as we did on our own based on some negotiation -- on our own initiative to reduce that cost, I think we will agree that that tariff will, for a different reason, not recover all the costs that occurred in the cost study, for example for competitive reasons if we want to increase our advantage. So there is no need in that case to refile another custody.
4998 THE CHAIRPERSON: Right. So you do agree with Bell?
4999 MR. MESSIER: Yes.
5000 THE CHAIRPERSON: Yes. Thank you.
5001 And they also propose that such cost studies would not be required when service or demand -- sorry, when demand for the service or the revenues are low. Do you agree with that position?
5002 MR. MESSIER: Yes, no problem with that.
5003 THE CHAIRPERSON: Other than what you've mentioned, those two situations, are you thinking of any other situations where cost studies should not be required?
5004 MR. MESSIER: No, not really.
5005 THE CHAIRPERSON: I'm just trying to understand, with respect to benchmarking, some parties are suggesting that we could benchmark cost against other companies costs. And I note your position against bringing this to -- anything like this to a CISC Committee. I get that, so I'm not suggesting that in my question.
5006 But do I read that you would be open, that that is a proper way of trying to figure out costs by benchmarking against others, or would you rather not at all delve into that?
5007 MS DORVAL: Well, maybe in line with, you know, what Bell said yesterday, it could be used as a guidance. But that would be the purpose of it.
5008 THE CHAIRPERSON: And the sole purpose would be that, that we shouldn't use a benchmark to actually set the cost in a cost study situation?
5009 MR. JETTÉ: No, costing is very complex, as everyone appreciates, but it is also based on very local parameters like geography, like demographics, like the different -- the adoption. What people actually do with the service, they hire -- in different countries they hire the same service but they do different things with them. So it is very local in approach to really find out the right cost and that's why we are suggesting that the current model works for us here in Canada.
5010 THE CHAIRPERSON: Okay. Those are my questions.
5011 I'm checking with my colleagues. Yeah, well, Commissioner Molnar is first, please.
5012 COMMISSIONER MOLNAR: Thank you. I just have one question and it's regarding your proposal that you would negotiate and we would get out of the regulation of wholesale TPIA services. So under your proposal, would you see being able to meet the needs of one of your customers who might want TPIA back at the regional basis versus the fully aggregated basis?
5013 MS DORVAL: On a negotiation basis we would be ready to entertain any discussion about the specific needs of any of our customers. But as discussed, it is a negotiation. So at the end of the game it has to be a win-win for both parties. But the answer is yes, we would be ready to entertain discussion to this effect.
5014 COMMISSIONER MOLNAR: Can you tell me if you have had customers, wholesale customers who have requested that of you?
5015 MR. EICHEL: We have not.
5016 COMMISSIONER MOLNAR: You have not; no?
5017 MR. EICHEL: No.
5018 COMMISSIONER MOLNAR: Okay.
5019 MR. JETTÉ: May I add to this? Of course we would consider any business arrangement that is a win-win for both parties.
5020 But I have listened through the week at the different submissions. My view is that moving from an aggregated point of view again to a disaggregated point of view, many parties don't actually understand the real work and the real cost that this will actually bring back.
5021 I have heard some comments that are totally illogical to me, that the cost of moving back to disaggregated architecture is high. We have actually as an industry simplified everything by coming to aggregated points. It is totally illogical to me the argument that suggests that we are going to reduce costs by moving back to a fragmented architecture.
5022 COMMISSIONER MOLNAR: Fair enough. I'm prepared to accept that the folks who have come forward such as Primus have done their business and it's maybe not illogical to them.
5023 Within the current framework that we have there would be no ability for you to address a request, despite whether or not it's illogical, to go back to a disaggregated POI on a customer basis. Is that how you understand -- I mean, right now you are able to make off-tariff agreements but not off-tariff technical solutions?
5024 MS DORVAL: Yes. I guess we don't feel we have the flexibility to entertain these discussions at this point and for the reason exposed by Philippe. Again it would be -- either if it was under the current system or negotiated system it would need to be a win-win solution for both parties.
5025 COMMISSIONER MOLNAR: Okay.
5026 MR. JETTÉ: Can I just add one more comment about not the new ones, but the real difference between cable architecture and the telco. So perhaps it does make sense for some party like Primus to look at this in a telco architecture and they can find some financial benefit. That, I would agree to that. But my comments were more specific to the cable architecture and how cable is made and that's why I'm coming -- I just can't compute the argument that it would save costs.
5027 COMMISSIONER MOLNAR: Okay. Thank you. That's all.
5028 LE PRÉSIDENT : Monsieur le Vice-président de la Radiodiffusion.
5029 CONSEILLER PENTEFOUNTAS : Merci.
5030 Alors, je comprends votre position, mais je veux quand même poser certaines questions.
5031 Juste pour retourner sur le point en partie que madame Molnar a soulevé et votre proposition de déréglementer.
5032 Le fait qu'il y a un tarif -- puis on peut utiliser le terme « backstop » -- ça ne vous a pas empêché de négocier de gré à gré. Pourquoi est-ce si important de s'en débarrasser de ce tarif, et ça peut bien être un tarif plafond, mais en quoi ça vous empêche de négocier un tarif beaucoup inférieur à ce tarif-là?
5033 MME DORVAL : Un premier élément est à l'effet que dans notre proposition on considère vraiment qu'il y a un marché concurrentiel et qu'on devrait entamer des étapes pour déréglementer. Alors, comme on l'a mentionné plus tôt aujourd'hui, on a opté pour une approche prudente mais qui commence essentiellement par une déréglementation des tarifs.
5034 Le deuxième point, c'est vraiment dans la dynamique de marché. On pense que ça va favoriser une dynamique qui est plus axée sur l'envie de négocier plutôt que de s'en remettre essentiellement à un tarif ou à l'organisme réglementaire pour solutionner les problèmes.
5035 CONSEILLER PENTEFOUNTAS : En bout de ligne, s'il n'y a pas d'entente, vous devez vous remettre à ce Conseil pour régler ces différends quand même?
5036 MME DORVAL : Oui. C'est le même cas dans les négociations d'ententes d'affiliation au niveau de la radiodiffusion...
5037 CONSEILLER PENTEFOUNTAS : Non, non, mais...
5038 MME DORVAL : ...et je ne pense pas que les parties sollicitent la demande du Conseil constamment pour régler les problèmes. Donc, c'est une démonstration que des solutions de négocier existent, et je pense que c'est plus vers cette dynamique-là qu'on pense que le marché devrait aller.
5039 CONSEILLER PENTEFOUNTAS : O.K.
5040 Vous avez, deuxièmement, parlé du fait que dans le domaine -- je pense que c'est le paragraphe 33 -- qu'il n'y a pas de titulaire, there is no incumbent carrier in the Canadian market, en ce qui a trait au FTTP NG. Peut-on dire la même chose pour les telcos et le déploiement du FTTP?
5041 M. JETTÉ : Les technologies utilisées par les câblos et les telcos convergent. Actuellement, la technologie utilisée par une compagnie de câble qui est basée sur DOCSIS est vraiment différente d'une technologie FTTN ou FTTP d'un telco. Mais l'évolution des technologies et l'évolution des architectures fait que dans un futur plus ou moins éloigné, il va avoir une certaine convergence sur les mêmes technologies et les mêmes architectures.
5042 Aujourd'hui, les telcos sont en avant avec une architecture de fibre jusqu'à la maison basée sur la fibre, basée sur des technologies de prochaine génération. Pour les telcos, leur point de départ était fondamentalement différent du nôtre. Avec un système et des technologies très, très basse vitesse, ils ont dû passer à la fibre optique plus tôt que nous et ils sont en avance.
5043 CONSEILLER PENTEFOUNTAS : Mais est-ce qu'ils...
5044 M. JETTÉ : Nous, on a encore beaucoup de capacité dans le système existant.
5045 CONSEILLER PENTEFOUNTAS : Est-ce que cette avance est due à des éléments qui peuvent se retrouver chez une titulaire?
5046 M. JETTÉ : Les éléments...? Pouvez-vous clarifier?
5047 CONSEILLER PENTEFOUNTAS : Qui donne cette avance-là aux telcos?
5048 M. JETTÉ : Bien, leur avance est motivée par justement leur besoin d'adopter les très nouvelles technologies pour livrer des vitesses très supérieures à...
5049 CONSEILLER PENTEFOUNTAS : Je vais re-poser ma question.
5050 M. JETTÉ : Oui.
5051 CONSEILLER PENTEFOUNTAS : Vous dites qu'il n'y a pas de titulaire dans le marché de FTTP NG chez les câblos.
5052 M. JETTÉ : Ah, d'accord.
5053 CONSEILLER PENTEFOUNTAS : Peut-on dire la même chose...
5054 M. JETTÉ : Oui, absolument.
5055 CONSEILLER PENTEFOUNTAS : ...dans le déploiement de FTTP chez les telcos?
5056 M. JETTÉ : Oui, absolument. Mais ils sont en train d'adopter les technologies de nouvelle génération, eux autres aussi. Ils sont au début du cycle d'innovation et de construction. Le taux de... Le nombre d'installations est encore relativement bas. Ils sont dans une période d'innovation et d'optimisation.
5057 CONSEILLER PENTEFOUNTAS : Je comprends. Alors, si on suit cette logique-là, si on doit s'abstenir de mettre en place un régime d'accès obligatoire pour les câblos NG FTTP, est-ce qu'on doit appliquer la même logique au déploiement FTTP des telcos?
5058 MME DORVAL : Notre position est à l'effet que la FTTP ne devrait pas être réglementée ni pour les telcos, ni pour les câblos.
5059 CONSEILLER PENTEFOUNTAS : O.K. Est-ce qu'il n'y a pas -- puis le président a déjà fait mention -- il y a quand même dans votre esprit un modèle d'affaires par lequel le DOCSIS NG ou la FTTP peut faire partie d'un régime d'accès obligatoire où le risque et tous les autres éléments qui ont déjà été discutés peuvent être satisfaits ou comblés?
5060 M. JETTÉ : Je vais... Je pense avoir saisi votre question, et je vais la rephraser juste pour être certain de ma compréhension.
5061 CONSEILLER PENTEFOUNTAS : O.K.
5062 M. JETTÉ : Donc, le risque sur les réseaux de prochaine génération serait bien capturé par le processus existant et on pourrait éventuellement mandater l'accès en gros?
5063 CONSEILLER PENTEFOUNTAS : Et il y a un modèle d'affaires par lequel les câblos et les telcos -- c'est asymétrique entre les deux pour cette génération de technologie -- par lequel l'investissement peut continuer à se faire et les concurrents peuvent vous aider à mettre en place cet investissement, ce déploiement?
5064 M. JETTÉ : Je ne prétendrai pas parler pour les telcos, mais comme ils sont beaucoup plus avancés que nous, l'incertitude a diminué dans leur modèle d'affaires. Avec plus de déploiements et plus d'innovation, ils ont une meilleure compréhension du modèle d'affaires.
5065 Pour les câblos, les réseaux FTTP de prochaine génération sont en étape d'exploration. Donc, je ne pourrais pas vraiment répondre à votre question aujourd'hui puisque je ne pourrais pas définir exactement notre approche technique, nos solutions, notre prochaine génération de FTTP. Donc, c'est une question hypothétique que je devrai remettre à un petit peu plus tard pour y répondre quand on aura une meilleure compréhension de nos solutions.
5066 CONSEILLER PENTEFOUNTAS : Le président a parlé des bouquets. CORC est venu nous dire que les taux de CBB les empêchent d'offrir de la vidéo. Seriez-vous d'accord avec ce constat?
5067 M. JETTÉ : Non, je ne suis pas, premièrement, d'accord avec le constat. Je ne vois pas vraiment l'embûche. Ils ont accès à toute la technologie d'accès Internet pour livrer des solutions, comme IPTV, basées sur l'accès Internet.
5068 Qu'ils n'offrent pas de solution vidéo dans le marché aujourd'hui, pour moi, ça tient plus sur la base d'aller négocier du contenu avec les fournisseurs de contenu, mais pas sur une base technologique de fournir à travers des ententes d'accès Internet. Je ne vois pas la difficulté technique là.
5069 CONSEILLER PENTEFOUNTAS : Ce n'est pas la capacité qui les empêche...
5070 M. JETTÉ : Ce n'est pas la capacité.
5071 CONSEILLER PENTEFOUNTAS : ...et ce n'est pas le coût par bit qui les empêche, mais c'est plutôt les négociations pour du contenu?
5072 M. JETTÉ : Bien, en fonction des méthodologies de costing existantes, tous les joueurs du marché utilisent sensiblement des technologies similaires pour livrer l'Internet. On opère tous à peu près les mêmes solutions, qui sont en fait générées par les équipementiers primaires du marché. Donc, sous cette base-là, comme on a accès aux mêmes pièces pour construire le puzzle, on arrive sensiblement au même coût, dépendant des notions de géographie et de démographie là, où ça change le coût final.
5073 Je ne vois pas la difficulté pour quiconque actuellement dans le marché d'amener une solution vidéo en fonction de la technologie qui est disponible.
5074 CONSEILLER PENTEFOUNTAS : Merci, Monsieur le Président.
5075 LE PRÉSIDENT : Merci.
5076 Je crois que le contentieux avait une question.
5077 MR. BOWLES: Thank you, Mr. Chair.
5078 If it's acceptable, Legal would like to confer with representatives of Cogeco during the next break with a view to establishing an undertaking and we would ask that a representative of Cogeco be available after the resumption of this proceeding in order to state their position on the record with respect to this undertaking.
5079 MS DORVAL: I'm sorry, I will have to ask you to repeat that question.
5080 Me BOWLES : On aimerait conférer avec vous durant une pause afin d'expliquer les modalités d'un engagement qu'on aimerait que vous preniez. Donc, je demanderais, à la suite de la pause, qu'un des représentants de Cogeco soit disponible afin de prendre position sur le dossier quant à l'engagement qu'on discutera.
5081 MME DORVAL : Absolument.
5082 Me BOWLES : Parfait! Merci.
5083 LE PRÉSIDENT : Merci pour ça.
5084 Et en passant, avant que je vous laisse aller, les études ont démontré qu'un « drop », c'est un « branchement d'abonné », puis qu'un « backstop », c'est un « filet de sécurité ». Donc, voilà!
5085 MME DORVAL : Merci beaucoup.
5086 LE PRÉSIDENT : J'aurais dû le savoir avant.
5087 Merci bien. Donc, nous allons prendre une pause et on reviendra à 11 h 05. Merci beaucoup.
5088 MME DORVAL : Merci.
5089 M. JETTÉ : Merci.
--- Upon recessing at 1051
--- Upon resuming at 1106
5090 LE PRÉSIDENT : À l'ordre, s'il vous plaît.
5091 Alors, Madame la Secrétaire, ou a-t-on quelque chose... Oui, on a quelque chose à résoudre par rapport à la comparution de Cogeco avant d'aller au prochain.
5092 Me BOWLES : Oui. Merci, Monsieur le Président.
5093 Lors de la pause, nous sommes convenus avec les représentants de Cogeco pour qu'ils s'engagent à fournir l'information suivante :
5094 - soit l'identité des neuf opérateurs dans leur territoire offrant des services via des installations de fibre jusqu'à l'abonné;
5095 - l'endroit où chacun d'eux opère sur la base de ces installations;
5096 - dans la mesure du possible, les dates auxquelles chacun d'eux a commencé à offrir des services sur ces installations dans les territoires concernés;
5097 - d'indiquer le type de technologie employé par Cogeco dans chacun de ces endroits et la date à laquelle cette technologie fut déployée par Cogeco.
5098 J'aimerais que Cogeco confirme cet engagement. Est-ce que le représentant de Cogeco pourrait s'identifier pour les fins de la transcription et confirmer...
5099 LE PRÉSIDENT : Ca va, Madame Dorval?
5100 MME DORVAL : C'est confirmé.
5101 LE PRÉSIDENT : Merci bien.
5102 MME DORVAL : Merci.
5103 LE PRÉSIDENT : Madame Roy.
5104 LA SECRÉTAIRE : Merci.
5105 We will now hear the presentation from Distributel.
5106 Please introduce your panel for the record. You have 20 minutes.
5107 MR. COHEN: Good day, Chairman Blais, Vice-Chairs, Commissioners and Commission staff. My name is Melvin Cohen and I am here today in my capacity as Chairman of the Distributel group of companies.
5108 With me are:
5109 - Matt Stein, Chief Executive Officer of Distributel;
5110 - Don Cavanagh, Vice-President of Network Services; and
5111 - Anne McMillan, Regulatory Analyst.
5112 I have worked in the telecommunications industry for 37 years. The first 10 were with Bell Canada and the remainder at Distributel. Accordingly, I would like to share a little historical perspective on the considerations that the Commission should take into account when making determinations on the appropriate regulatory treatment for wholesale services.
5113 Twenty-eight years ago the CRTC issued a series of decisions that mandated "resale" of telecommunications facilities. Those decisions were a cautious first step towards fostering competition in telecommunications. The Commission's pro-competitive actions inspired me to remortgage my house for start-up funds, leave my job at Bell Canada and launch Distributel.
5114 My marketplace innovation was to provide an alternative for businesses that leased expensive telephone lines from exchanges other than their own. For example, a business located in Markham might lease Toronto telephone lines in order to get local calling to Brampton, Mississauga and Oakville. My service allowed them to use less expensive Markham lines, yet still have flat-rate calling to and from all the exchanges that were local to Toronto.
5115 Just months after I started the business, Bell Canada applied to the Commission to:
5116 (1) declare that my service violated the new resale rules; and
5117 (2) give them permission to cut my lines.
5118 Regulatory research over the Internet was not possible in 1988, so I spent a month just down the road from here in the CRTC's public examination room preparing my defence while neglecting sales, the lifeblood of the new business. Ultimately, Decision 89-2 allowed me to continue to operate Distributel and inspired a number of others to launch very similar businesses.
5119 This was my first experience with how an incumbent can use the regulatory process to put a competitor on the defensive as well as my first experience of the Commission supporting a resale-based competitor.
5120 In 1993 I found myself again defending my business as spokesperson for an ad hoc group that we called Competitors Heralding Options In Communications Everywhere, or CHOICE. Bell had proposed something called the Community Calling Plan that would have eliminated the very type of long distance calls that the new service providers were addressing. With their market taken out from under them, those pesky competitors would have disappeared.
5121 The Community Calling Plan application had been joined to a Bell Canada general rate case proceeding, which included a very formal hearing complete with expert witnesses being called and cross-examined.
5122 Through the interrogatory process and cross-examination of Bell's rate witness, I was able to demonstrate that the Community Calling Plan would have saved money for only about 20 percent of the affected customers while increasing costs for the other 80 percent. Moreover, those who would have saved something had other options, including the very inexpensive flat rate plans that the competitors were providing.
5123 Fortunately, the Commission saw that Bell's plan didn't really serve the public interest and rejected it. Here again, the Commission's actions led to the survival of choice in the marketplace.
5124 More recent examples of the Commission maintaining the viability of service providers that depend on mandated wholesale were a series of decisions between 2006 and 2010.
5125 The years that followed the Honourable Maxime Bernier's 2006 appointment to the position of Industry Minister is a period that felt to me like the dark ages of telecommunications competition. Reliance on market forces was the mantra of the day and it led to a series of regulatory proceedings that threatened to minimize or eliminate mandated wholesale. Economic "beliefs" were being promoted with religious-like zeal, despite the fact that heavy reliance on market forces is for the most part irrelevant in an industry dominated by huge former monopolies.
5126 2006 and 2007 Commission decisions that had required incumbents to provide wholesale access services at speeds that matched retail were set aside on the grounds that the services in question might not survive a comprehensive government-initiated review of all things wholesale.
5127 Similarly, a rule that prohibited incumbents from trying to win back local telephone service until competitors had achieved a certain market share, was set aside on the grounds that it was contrary to reliance on market forces and denied consumers access to rivalrous behaviour.
5128 The hidden lie in that phrase always got to me. What really happened, when the incumbents were freed to engage in win-back, was that they were then able to not publicly respond to price competition, instead reserving their best prices for that small percentage of customers who actually threatened to leave them.
5129 So the vast majority of consumers never heard about the better deals while hard-won converts to competitors were readily plucked back through win-back offers, which approach really denied customers access to rivalrous behaviour.
5130 Win-back restrictions have never been reinstated, although they are a meaningful tool to help competition get established, but the Commission has seen fit to allow competitors to cancel service on behalf of their customers, at least giving them a somewhat better chance to retain the fruits of their advertising and sales expenditures.
5131 As for the comprehensive review of all things wholesale, after careful analysis the Commission retained most mandated wholesale services and, finally, in 2010 speed-matching decisions were reinstated. Once more the CRTC's support for competition prevailed and with it consumer choice.
5132 But the CRTC has had to do this in the face of criticism from economic theorists who worry about over regulating, as if that were really a looming concern. It all seems very academic, but not all branches of academia share the same concerns.
5133 It just so happens that my wife is taking an introductory sociology course this semester and she showed me this passage from her textbook.
"Media conglomerates like Bell and Rogers compete against each other to offer the most appealing content at the fastest speeds, but they are united on industry-wide tactics to maximize profit. For instance, both companies strongly favour user-based billing: the more you use, the more you pay. Opponents argue that technology has lowered costs so much that user-based billing is just a money grab by some of the most profitable businesses in Canada, an unfair practice that restricts the poorest Canadians access to the Internet and cellphones." (As read)
5134 Economists, sociologists. While we should be informed by academia, in matters of competition, practical considerations should prevail.
5135 So there's been a history of the CRTC encouraging competition by mandating provision of wholesale telecommunications services and there has been opposition at every stage, but are there really practical alternatives?
5136 One option would be to eliminate mandated wholesale access altogether and let the market revert to a Cableco/Telco duopoly, but sociology 101 teaches us that Cableco and Telco are united on industry-wide tactics, so that doesn't really seem like the right environment to let market forces prevail.
5137 Retail rate regulation could be reintroduced to make a duopoly work, but that would probably require just as much work on the part of the Commission while yielding minimal choices for consumers.
5138 Some type of structural separation might work but, frankly, I don't see an appetite for that here in Canada.
5139 With no practical alternatives, the approach that the Commission has taken over the years does appear to be the best way forward; it fosters innovation, brings price discipline to the market and, most importantly of all, provides consumers with choices.
5140 So let's have a brief look at the marketplace that's evolved. The CRTC's Communications Monitoring Report classifies non-facilities-based service providers as resellers. We're not crazy about that name because it tends to be confused with a re-biller, which is an entity that is pretty well hands off when it comes to operating the services that it sells.
5141 In contrast, service providers like Distributel invest millions of dollars in switching and routing equipment, we use that equipment to operate our own networks and create services that utilize transmission elements that we lease from facilities-based providers.
5142 The reseller moniker has its origins in the resale decisions of the 80s. Since it's the term used to describe us in the Monitoring Report, I'll continue to use it in this discussion.
5143 According to the 2013 Monitoring Report, resellers make up 68 per cent of the 800 plus telecommunications service providers in Canada, yet their combined sales comprise only 3.4 per cent of all telecommunications service revenues. So there are clearly many very small companies involved.
5144 However, the Report also states that the top five resellers alone garnered two per cent of telecommunications service revenues, which would be about $900 million.
5145 My point here is that there are just a handful of companies: Primus, TekSavvy, Distributel, and perhaps a few others, that are the only ones in this category that have achieved a size of some substance, but we are still dwarfed by the major incumbents. If you were to look at a bar chart comparing Distributel's revenues to those of the incumbents, Distributel wouldn't even be discernable above the "x" axis.
5146 This size disparity has tremendous implications. First, it gives the incumbents huge advantages in the marketplace, starting with brand recognition. Every sports fan knows the Bell Centre in Montreal and the Rogers Centre in Toronto. Everyone who watches television in Canada knows about Bell, Rogers and Shaw Media. So when it comes to choosing a service provider, who are the safe bets?
5147 The names that everyone knows.
5148 An incumbent's financial prowess means that it can afford vast amounts of advertising. It can also subsidize customer equipment and offer attractive introductory specials, thereby removing impediments to new subscribers.
5149 Despite all of these advantages, incumbents would have you believe that when it comes to fibre to the premises there are no advantages to incumbency. Yet when a service provider is contemplating deploying fibre to the home or to a building with multiple dwelling units, a critical factor in the business case is the number of takers. Except in the most underserved areas, only an incumbent could expect to reach the required penetration rate.
5150 A second implication to this size disparity is that there are surely limits to the damage that we smaller companies can do to the incumbents. Suppose the Commission went too far in facilitating competition through mandated wholesale and suppose it took the Commission four whole years to detect and correct this error; would the damage to the incumbents be any worse than the damage inflicted on ISPs when they waited four years for matching speeds to be reinstated?
5151 If all resale-based competitors tripled in size over the next four years, they would collectively still only garner 10 per cent of telecommunications revenues, while the top five incumbent TSPs and top five cable companies would still command 88 per cent.
5152 The incumbents can use their resources to produce copious evidence and arguments of the horrors that will follow if the Commission rules too heavily against them but, in reality, they are very robust and quite capable of prospering in the face of smaller competitors.
5153 I'd now like to turn my attention to some additional things that the Commission should consider when regulating mandated wholesale services; specifically, quality of service criteria, pricing and pricing uncertainty.
5154 Quality of service concerns arise from the control the incumbents have as suppliers of the wholesale services. The incumbents can and do give preferential treatment to their own retail customers. Too often we provide a new client with an installation date that conforms to the intervals that the incumbents insist on, only to have the customer call back and cancel because they can get service next day directly from the incumbent.
5155 The Commission's approach should ensure that consumers are treated equally whether they use the services of an incumbent or a competitor.
5156 On the issue of pricing, I'd like to start with a historical example that involves direct connection rates, which are per-minute charges that long-distance competitors pay to access and egress calls to the incumbent local telephone service customers.
5157 The prevailing per-minute rate for the direct connect service had been based on a 25 per cent mark-up and was set at three tenths of a penny for several years prior to Decision 2002-34. That decision lowered the rate on an interim basis to one point two-eight/tenths of a penny at a 15 per cent mark-up, and a subsequent 2006 decision revised the rate retroactively to just under a tenth of a cent.
5158 If you do the math and back out the mark-up, you can compare the rate that was in effect the day before the decision to the actual cost. What it boils down to is that the mark-up that was in effect just prior to Decision 2002-34 was not 25 per cent, but an incredible 256 per cent.
5159 To show the relevance of this issue today, I'd like to read from a letter that I wrote to all Commissioners on February 2, 2012, praising them for approving capacity-based billing that allowed us to introduce the first unlimited cable Internet offering in Quebec.
5160 The letter went on to say:
"Although the November decisions got the structure right, the Commission declined to commit to annual reviews of the rates for wholesale services. This must be corrected. Usage of the internet has been increasing at incredible rates, some 40 per cent per year, as more and more media is consumed over Internet connections. Fortunately, network transmission costs have been dropping at almost the same rate. However, if independent internet service providers have to bear the increasing usage levels without the benefit of the declining costs, their tenure as viable alternatives will be short lived."
5161 That was written almost three years ago, and what it warned of has come to pass. We have seen tremendous growth in usage, but no concomitant reduction in pricing. In fact, our average CBB cost per customer has doubled in the last two years, and this is before we launched our TV service.
5162 My point is that for the mandated wholesale regime to function well, it requires considerable commitment on the part of the Commission to keep wholesale prices in line with costs. I believe that the Commission should establish a regular regime of frequent pricing reviews, with transparent processes that are subject to public scrutiny. If this is made routine, it will facilitate the Commission's mandate of ensuring that prices are just and reasonable, but it will also allow the Commission to avoid another problem area that pertains to interim rates.
5163 If Distributel is paying an interim rate that is subsequently lowered, it means that an infusion of cash is headed our way. Unless a service provider is experiencing a cash crisis, a delay in receiving funds may mean some missed opportunities, but it is generally not devastating. The opposite, however, is a problem. If an interim rate is unexpectedly raised higher, a competitor could suddenly find that they owe a large amount of money to a wholesale supplier and it could be potentially lethal. True, interim works both ways, but consider the relative size of the players to understand how an obligation to pay a million dollars might be a mere annoyance for an incumbent, but a death blow to a small competitor.
5164 So I strongly urge the Commission to resolve as quickly as possible those interim rate issues that have been set aside so that staff could work on the three great hearings of 2014 and, in doing so, consider the unequal impact that a requirement to pay retroactively could have on smaller players.
5165 In conclusion, I want to thank the Commission for allowing me the opportunity to share some of the experience of my career as a competitor in the Canadian telecommunications marketplace, and I encourage you to continue to facilitate consumer choice through bold support of competitors.
5166 THE CHAIRPERSON: Thank you very much. It's surprising you're still here, there's a lot of resilience.
5167 THE CHAIRPERSON: Commissioner Shoan will start us off. Thanks.
5168 COMMISSIONER SHOAN: Good morning. Thank you for being here today.
5169 I have some questions based on your oral presentation, then I'll move to some other questions based on larger policy frameworks.
5170 At paragraph 21 of your oral presentation you noted that when a service provider is contemplating deploying fibre to the home or to a building with multiple dwelling units, a critical factor in the business case is the number of takers.
5171 And then you go on to say:
"...only an incumbent could expect to reach the required penetration rate."
5172 The question is why? If you make the investment to bring fibre to an MDU or to a home, doesn't the quality of that service speak to itself; shouldn't you be able to market your higher capacity and the higher speeds and win customers?
5173 MR. COHEN: I've heard of some doing that with success, where they go into a multiple dwelling unit and then do an intensive marketing campaign in the lobby.
5174 COMMISSIONER SHOAN: M'hmm.
5175 MR. COHEN: Generally speaking, though, unless you have something really, really unique to offer clients, getting people to switch is difficult.
5176 So I mean, I could imagine if we were trying to go in to do a build over into a neighbourhood that already had high-speed cable Internet access or something like that, it would be very difficult to get more than a few percentage of customers, so...
5177 COMMISSIONER SHOAN: Go ahead, Mr. Stein.
5178 MR. STEIN: I was just going to add that I have some experience trying exactly that situation in a dense area such as -- and I'll say a major city.
5179 COMMISSIONER SHOAN: Okay.
5180 MR. STEIN: And in fact, as Mel points out, that's exactly the case. Despite the fact that you've made the investment, you've entered the building with fibre, you've installed the highest speed that is in some cases as little as five and as much as 10 times the speed of the highest speed available in that building and offering the product at a dramatic discount versus the others, still, breaking five, six, seven per cent market share despite an intensive marketing effort in the lobby supported by direct mail.
5181 So I mean, I could go on. It's very, very, very challenging.
5182 COMMISSIONER SHOAN: Okay. And in that situation, Mr. Stein, what was the challenge in your view that you experienced?
5183 MR. STEIN: They are served with something at the time that, it's good enough, it works, they're not necessarily seeking to make a change.
5184 Sometimes -- when they are, certainly they are the first to move, but the good enough momentum, et cetera.
5185 In underserved areas it's a whole different situation. In underserved areas where people are predominantly on dial-up or even over, I'll say some fixed wireless technologies in some really underserved areas, there I suppose it could be quite different as we've heard others talk about earlier in the week.
5186 But in the dense areas where we often market, et cetera, it's just not practical.
5187 COMMISSIONER SHOAN: Okay. And I'll just segue slightly into the issue of bundling.
5188 MR. STEIN: Sure.
5189 COMMISSIONER SHOAN: So in the situation where you string fibre to a building and you're offering access to fibre to the premises, presumably you would have multiple offerings, or perhaps you wouldn't, but would the ability to offer bundled services, either a quad-play or three services; is that a benefit, is that something that you can manage in that situation?
5190 MR. STEIN: So in the experience that I had, we were offering a bundle of voice and Internet and so forth, we didn't have television. Yes, that felt a little bit like running into a headwind, that made it a little bit more difficult, but there were many customers in the building that weren't -- that the bundle wasn't the only thing.
5191 I'd say that it was a component of it, but certainly not the -- I'll say the lack of TV in the bundle at the time was a part, but not the overwhelming part.
5192 COMMISSIONER SHOAN: Okay. And would you say that the lack of the TV offering in that scenario, did it create a different retail product in the mind of the consumer, in the sense that your competitor in the building, who may have had an inferior Internet product, was able to offer a television product at a bundled rate, could that offer be distinguished from yours and be a different retail product in the mind of the consumer?
5193 MR. STEIN: So I guess I'll distinguish. You're talking about in the mind of the consumer?
5194 COMMISSIONER SHOAN: Right.
5195 MR. STEIN: And not in the definitions and not in the, you know, "terms" or the "capitalized terms" and so forth?
5196 COMMISSIONER SHOAN: Right.
5197 MR. STEIN: In the mind of the consumer, the consumer certainly is recognizing that these are three distinct things, but they are, in the case of a bundle, making a purchase decision about that bundle and when they're going to move from it they view breaking apart the bundle as being a) far more complicated than it is; and b) dramatically more expensive.
5198 COMMISSIONER SHOAN: M'hmm.
5199 MR. STEIN: I do remember a situation where we were experiencing customers talking about how this would cause their costs to go up dramatically, despite the fact that we just showed them that, well, no, in fact your pricing is still coming down quite a bit.
5200 COMMISSIONER SHOAN: Right.
5201 MR. STEIN: So in the mind of the consumer, they do value the bundle for a set of reasons that are hard to break up.
5202 COMMISSIONER SHOAN: Okay, fair enough. Would you consider that slower speed retail Internet services, say services of less than 5 megabits, are in the same retail market as services with speeds that are very, very fast?
5203 And I guess a corollary to that question, or a second part of that question is, if you do consider these to be distinct services or distinct markets, should that distinction translate to a difference in the need for mandated wholesale services?
5204 MR. STEIN: Okay. Let me step through that.
5205 COMMISSIONER SHOAN: Sure.
5206 MR. STEIN: And if I missed it -- that was a multi-parter, so if I missed part, just ask me.
5207 COMMISSIONER SHOAN: Sure.
5208 MR. STEIN: So first, should they be treated as two separate services? Yes, they are two separate services, the very low speed and the very high speed.
5209 However, we need to keep in mind that it's a continuum. Where customers are now, what customers expect now, what customers look for is much faster, more powerful than just a few years ago, as we've talked about and that's going to continue.
5210 COMMISSIONER SHOAN: M'hmm.
5211 MR. STEIN: And so for that reason, the fact that they are two separate shouldn't in any way break up or alleviate the very high-speed things from being mandated.
5212 COMMISSIONER SHOAN: Right.
5213 MR. STEIN: Regulatory can't move -- excuse me, I shouldn't say that, perhaps regulatory can move as fast -- regulatory has traditionally not moved as fast as consumers' appetites for change.
5214 So while I would look forward to a time when regulatory keeps up with that, I think we need to remember that we're making decisions not only on what we've seen, but what we know is coming over the next three, five or sometimes longer years.
5215 COMMISSIONER SHOAN: Okay, great. Thank you. Mr. Cohen, in paragraph 25 of your oral presentation you said:
"The Commission's approach should ensure that consumers are treated equally whether they use the services of an incumbent or a competitor."
5216 I assume that's the equality of inputs, equivalency of inputs argument that CNOC raised earlier?
5217 MR. COHEN: That's certainly a great way to do it. There may be others. You know, the important thing for Distributel is that we don't have a disparity, you know, we don't like to have customers call us back and say, oh, you guys, you know, you're making us wait too long, so we just went with blank, you know.
5218 So equality of inputs, it sounds like a great way to do it. I mean, if you're going to have one ordering system and everybody will be using the same system, so...
5219 COMMISSIONER SHOAN: So, how do you respond to the concerns voiced by ILECs and Cablecos that it would be just simply far too difficult, they would have to ascertain their business standards from markets to markets, then determine what competitors do, figure out a way to ensure that there's very little to no distinction --
5220 MR. COHEN: My --
5221 COMMISSIONER SHOAN: Sorry.
5222 MR. COHEN: My response to them would be, get your act together and give us the same quality of performance and then you can save all that money.
5223 COMMISSIONER SHOAN: Okay, thank you.
5224 MR. STEIN: May I --
5225 COMMISSIONER SHOAN: No, no.
5226 MR. STEIN: Do you mind if I just add one thing to that?
5227 COMMISSIONER SHOAN: No, thank you, Mr. Stein.
5228 MR. STEIN: If I understand your question correctly, you're asking if it would be more expensive to have to do; well, does that make sense, if we're asking them to use the same process for their own clients as they use when they're assisting us with our clients?
5229 It's one process. Shouldn't that be more efficient?
5230 COMMISSIONER SHOAN: Okay, fair enough. And if they replied to that argument such that, well, we would have to invest in more resources, you know, expand the capacity of our billing services, what have you; who should bear that cost for those upgrades?
5231 MR. STEIN: Well, there is a costing methodology in place. We're not looking for a free ride.
5232 COMMISSIONER SHOAN: Okay.
5233 MR. STEIN: We're just looking to make sure that our customers are treated the same way that theirs are treated.
5234 As well, if I understand it correctly, the equivalence of inputs or the EOI framework isn't about making sure that one ILEC and another ILEC are both doing it the same.
5235 COMMISSIONER SHOAN: M'hmm.
5236 MR. STEIN: It's that one ILEC is treating their customers and treating competitors' customers the same.
5237 COMMISSIONER SHOAN: In an equal manner?
5238 MR. STEIN: Right.
5239 COMMISSIONER SHOAN: Okay, fair enough. At paragraph 29, Mr. Cohen, you raise the issue that the average CBB cost per customer, or your average CBB cost per customer has doubled in the last couple of years and this was before you launched your TV service.
5240 I'm trying to -- there's two lines of questioning that come from that statement and I can either ask you about whether you're arguing for the BAS service, the disaggregated service so you can manage your CBB costs, or whether you're making the statement that we should review our costing methodology, either insofar as it's not currently working as well as it should, or we should adopt a new methodology.
5241 So can you clarify which of the two arguments you are making there?
5242 MR. COHEN: BAS is a way potentially to reduce the costs. I can't really speak too well to CNOC's issue on that because I haven't researched it.
5243 COMMISSIONER SHOAN: Okay.
5244 MR. COHEN: I don't really know, but I think the idea is that if we have an aggregation network that's bringing everything back to one point --
5245 COMMISSIONER SHOAN: M'hmm.
5246 MR. COHEN: -- and that's so costly, then maybe we could get to a disaggregated way of interacting.
5247 But I think, from Distributel's perspective, we've moved to the aggregated model. Certainly when we were interconnected with Cogeco in only one city and then moved from -- it was Windsor and moved to Burlington which is where they have their aggregated point of interconnection we picked up all of their territory as opposed to just Windsor.
5248 COMMISSIONER SHOAN: Right.
5249 MR. COHEN: Similarly, with Rogers TPIA, we had interconnections to about 20 different head ends and then when we moved to the aggregated, then we were able to serve their entire area.
5250 So I think -- from our perspective, I think it's more the costing, you know, that we've never found the costs that have developed for capacity to be very credible. You know, we --
5251 COMMISSIONER SHOAN: Okay.
5252 MR. COHEN: So that's what the issue is, I think, for us.
5253 COMMISSIONER SHOAN: Okay. Right. And I have some questions with respect to costing here.
5254 I just want to close the loop on the BAS discussion. So what I'm hearing from you is that you have interconnected on an aggregated basis with a couple of service providers and you haven't experienced any difficulties.
5255 I was going to ask you a little bit later in my questioning, that if you had a choice between aggregated wholesale access, HSA aggregated wholesale access and no BAS, or BAS with the phasing out of the aggregated HSA, which would you choose? Is it correct to say you would prefer to stay with the aggregated approach?
5256 MR. COHEN: If it was a dichotomy?
5257 COMMISSIONER SHOAN: Yes.
5258 MR. COHEN: If there was only going to be one or the other?
5259 COMMISSIONER SHOAN: One or the other, what do you choose?
5260 MR. COHEN: I guess we would have to say we chose the aggregated.
5261 COMMISSIONER SHOAN: Okay. Great.
5262 MR. COHEN: However, I think we would avail ourselves of a disaggregated where we had sufficient concentration if it could lead to a reduction in our costs.
5263 COMMISSIONER SHOAN: If they were both mandated you think --
5264 MR. COHEN: If they were both mandated.
5265 COMMISSIONER SHOAN: If they were both mandated do you think it would have a market disciplining effect? It would discipline the market a bit more in terms of ensuring that the aggregated offering is sufficiently appealing such that competitors wouldn't necessarily want to take the more arduous let's say, quote/unquote, task of the disaggregation and interconnecting at different points?
5266 MR. STEIN: I don't see -- no, I don't think so. I don't think it would.
5267 I think in our case we would avail ourselves as BAS, as Mel said. Where it makes sense, where we have strategic resources nearby, we are in the process right now of building a major fibre trunk from 151 Front, 20-some kilometres north --
5268 COMMISSIONER SHOAN: Right.
5269 MR. STEIN: -- directly through the middle of Toronto. There are a lot of COs and regions up there that we have a lot of density with our customer base. For those it makes a lot of sense for us to use BAS as in likelihood it would be cheaper and certainly we would have more control of the service end to end --
5270 COMMISSIONER SHOAN: Right.
5271 MR. STEIN: -- and ideally we would have more capabilities that we could use with it.
5272 COMMISSIONER SHOAN: Okay.
5273 So, Mr. Cohen, to go back to your costing methodology discussion, you mentioned at paragraph 30 of your oral statement that "the Commission should establish a regular regime of frequent pricing reviews."
5274 As you know, our Phase II costing methodology which my colleague, Commissioner Vice Chair Menzies, has noted previously can be cumbersome and arduous, but generally speaking there is not a better approach anyone has recommended. But that often requires five-year costing studies or perhaps even longer. If we were to go down the road of regular regime of frequent pricing reviews, is there an efficient and effective way of doing those pricing reviews that wouldn't necessarily involve a costly and lengthy cost study?
5275 MR. COHEN: I think what I'm contemplating would be something that would be ongoing. Way, way back when I was an employee of Bell Canada there was a department called Engineering Economics. Engineering Economics maintained costing models. So in the marketing department if we wanted to introduce a new service we would go to Engineering Economics and say, "Well, can you do an MPV study for us" and that's what they would do.
5276 I think what I'm contemplating would be where there would be some sort of a build, a construct that said, okay, these are the costing models, you know, and they would be -- all parties would have input into it, you know, the incumbents, the competitors, anyone that had any expertise to lend and those would be resident with the Commission.
5277 COMMISSIONER SHOAN: Okay. And in your scenario they could be updated every three years or whatever period was defined based on changing market dynamics and cost of equipment or what have you?
5278 MR. COHEN: Sure.
5279 COMMISSIONER SHOAN: Okay. Thank you.
5280 Let's move to discussing the essentiality framework. So for a variety of reasons over the years the Commission has mandated access to some wholesale services for reasons other than essentiality; interconnection, public good services such as 9-1-1, support structures and the like. In your view, should the Commission continue to mandate services for reasons other than essentiality going forward or should it expand its approach to essentiality to encompass these services? Do you have a --
5281 MR. COHEN: I think absolutely the Commission should continue to mandate services that don't meet an essentiality test. I think the real test is whether there is going to be choice for consumers in the market and I think that it makes sense for the Commission to mandate its facilities; services in order to make that happen.
5282 So essentiality of inputs is -- I don't know. I mean, I'm not an economist and I'm not familiar with economic theory, but I can tell you that if you want to have competition in some areas you are going to have to mandate things that could conceivably be built by someone else.
5283 COMMISSIONER SHOAN: Thank you.
5284 Let's turn to FTTP. If FTTP access was mandated as a result of this proceeding, what proportion of your current customer base do you estimate would switch to a fibre-based service? I ask that knowing that you have just launched a TV service as well.
5285 MR. STEIN: Well, first I guess I would ask you, on what timeline? I think eventually the answer is most or all, perhaps. But I think timeline is a very major piece of that.
5286 If you mean in the short term, yes, we would have customers that would move to it immediately, such as in areas where there really is, I will say for next-generation high-speed, not in the sense we heard of this morning but in the greater than 5 meg kinds of high-speed. Their options are either 5 meg or less or fibre-to-the-prem. In those cases we would have customers who we currently have on the 5 meg or less move over immediately.
5287 As well, across the rest of the base it would be an over time thing as we sell new services and as they need to move up for more speeds or more services, et cetera.
5288 COMMISSIONER SHOAN: Okay. So some parties such as the Competition Bureau have argued for a moratorium or a pause on any discussion of mandating FTTP until additional study and further research is done. Do you have a perspective on that?
5289 MR. STEIN: Yes, I do. I don't think that makes much sense. We are experiencing the next major advance in technology right now with fibre-to-the-prem. It doesn't make sense to go back to the model that we had with matching speeds where, "Let's hold that back for a while". It just doesn't seem reasonable to me.
5290 We have situations right now where we have customers who have been happily with us for years who are switching not because of anything that we did, but just because we are simply unable to provide the speeds in those areas that others have put. These are not little streets here and little streets there. We are talking entire communities or entire communities where copper is just no longer being serviced properly.
5291 COMMISSIONER SHOAN: Okay.
5292 MR. STEIN: So it doesn't make sense to wait any longer. It is already being built and the rate that it is being built that at is very, very quick.
5293 COMMISSIONER SHOAN: Okay.
5294 MR. COHEN: I would like to add something to that also.
5295 You know, when we talk about equivalency of inputs, if the carriers know that they are going to be mandated to provide wholesale access to fibre-to-the-premises, then perhaps as they develop their systems for managing that they will include the requirement that they are going to be able to serve wholesale customers as well and then we won't get into that disparity where we have, "Oh, but our systems aren't made to build that and it is going to cost so much money to do it".
5296 If they understand that it is coming from the beginning, then they can plan for it and make it far less expensive.
5297 COMMISSIONER SHOAN: Okay. Thank you very much.
5298 I would like to turn to unbundled local loops. Are HSA services in the same relevant wholesale market as unbundled local loops?
5299 MR. STEIN: I'm not sure that we have an answer on that.
5300 COMMISSIONER SHOAN: Okay, fair enough.
5301 MR. STEIN: A sufficient answer for you. Unbundled local loops are not really our bailiwick.
5302 COMMISSIONER SHOAN: Okay. I was going to ask you whether or not we should stop mandating ULLs, but if you don't have a position on that we don't have to go down that road.
5303 MR. STEIN: We don't really have a position on that. We do have some ULLs for sure, but it has never formed a major push for Distributel so we would prefer just not to take a position on that.
5304 COMMISSIONER SHOAN: Okay. In terms of network investments that Distributel makes, I was hoping you can give me a bit more information on that. You mentioned that you had done quite a bit of middle mile network investment.
5305 MR. STEIN: Yes.
5306 COMMISSIONER SHOAN: Do you do very much last mile investment at all or is it typically focused on middle mile routing and switching?
5307 MR. STEIN: Not to date, but we have been considering and exploring it.
5308 COMMISSIONER SHOAN: Okay, fair enough.
5309 MR. STEIN: Yes.
5310 COMMISSIONER SHOAN: And you operate -- how many employees do you have, full-time employees do you employ?
5311 MR. STEIN: In the range of 400.
5312 COMMISSIONER SHOAN: Four hundred (400), okay. Great. That's great.
5313 Those are my questions, Mr. Chairman, thank you.
5314 THE CHAIRPERSON: Okay. Well, we will start with the Vice Chair Telecom.
5315 No, that's fine.
5316 COMMISSIONER MENZIES: I have some questions so I am better informed about the nature of your company. Have you invested in facilities? In other words, have you built any networks? You have been in fibre. Have you done any fibre-to-the-prem yourself?
5317 MR. STEIN: We have not done fibre-to-the-prem, but we are right now in the middle of or in the process of constructing a major fibre network in Toronto. It's going from 151 Front directly north, right through the downtown core.
5318 COMMISSIONER MENZIES: Okay. And why are you doing that?
5319 MR. STEIN: To build out some new capabilities for us, some new things that we could sell in the enterprise market, perhaps in anticipation of access to a BAS kind of framework to gain access to better costs by reaching one of the incumbent cable carriers in the Toronto area that we can reach in the north end of the city and bring our costs down there.
5320 COMMISSIONER MENZIES: Okay. I just wanted to kind of unpack again that paragraph 25 that Mr. Cohen read from your oral presentation. When the issue was that when a customer set a date and the customer calls back and cancels because they can get service the next day directly from the incumbent, what's wrong with that? Why can't you give service next day?
5321 MR. STEIN: Well, in that specific case we are talking about a customer who may have called, who has placed a request maybe to buy a service from us. We have standard intervals that we are given that are very strict, you know take for example, 10 to 14 day installation times, but the incumbent themselves offers in retail next-day installs. We don't have access to --
5322 COMMISSIONER MENZIES: So you only have actual -- wholesale access to a 10 to 14 day and they have retail access --
5323 MR. STEIN: Yes. Each carrier is a little bit different. So I'm using one example of a 10 to 14 day window kind of thing, or a 10 day installation window, that kind of stuff, but in many cases the same incumbent who has, say, a 10 day lag for install offers next day in retail.
5324 COMMISSIONER MENZIES: Okay. I understand. Thank you.
5325 Bell, Videotron and I believe Cogeco as well have all pointed to the growth of the competitor sector in Ontario in particular, but in Quebec as well in recent years and that -- are they correct? Has there been growth in your sector? Has your company been growing?
5326 MR. STEIN: I don't think we can speak to the sector. So, yes, our company --
5327 COMMISSIONER MENZIES: Okay. But have you been gaining market share?
5328 MR. STEIN: Yes. Well, I would say we are gaining customers. I haven't done the exact calculation on what -- yes, I would say we are gaining market share.
5329 COMMISSIONER MENZIES: So your company is growing --
5330 MR. STEIN: We are growing.
5331 COMMISSIONER MENZIES: -- and it's healthy and it's providing a good return to its shareholders?
5332 MR. STEIN: Well, yes. You said --
5333 COMMISSIONER MENZIES: There is never enough for shareholders.
5334 MR. STEIN: -- I mean you've got a number of things.
5335 COMMISSIONER MENZIES: I know that.
5336 MR. STEIN: Certainly there is never enough. Yes, certainly in my position I regularly have a conversation with shareholders about how they would would like it to be more, but we are healthy. We are certainly not rolling in it, if that's your question.
5337 COMMISSIONER MENZIES: No, no. I mean because part of it is just when you look at --
5338 MR. STEIN: Yes.
5339 COMMISSIONER MENZIES: -- I think, you know, part of what we are trying to do here is understand everybody's role in contributing to the objectives of the Telecommunications Act, right?
5340 MR. STEIN: Yes.
5341 COMMISSIONER MENZIES: It's not really about making sure Distributel is in itself healthy or even Bell in itself is healthy. It's making sure that the overall ecosystem is working and the entities, to the extent that we have to worry about them, are making a contribution to the telecommunication's ecosystem.
5342 So that was kind of segueing into my last question, which is, what is your contribution? How would you articulate the necessity of your contribution to the achievement of the objectives of the Telecommunications Act?
5343 MR. COHEN: What choice?
5344 COMMISSIONER MENZIES: Choice, okay.
5345 MR. COHEN: That's the biggest, I think.
5346 COMMISSIONER MENZIES: And what do you have to offer that improves the choice, right? I mean the choice of three things that are identical isn't necessarily a choice, right, because I mean you were talking about the challenge of having to have something really unique, right, when you go into sell people on that sort of stuff and to me that's kind of the purpose of a sector like that. That is supposed to be the crucible for innovation where people have to have something really unique in order to compete, right, and you kind of look sometimes because an economics study shows that larger corporations are less likely to produce innovation. So it's kind of like you look for guys like you, so like how do you innovate? How do you contribute?
5347 MR. COHEN: Well, I think we have done a lot of interesting things over the years. Sometimes it's just a price packaging. But, you know, for example I mentioned that as soon as the UBB was replaced by CBB, we offered an unlimited cable Internet service in Quebec and no one was doing that before. That's just an example.
5348 But, you know, there's also -- there's another aspect of choice which is, you know, when I go to return my digital box to the cable store and they say to me, "Well, we can't cancel your service because I can only downgrade you" even though I'm standing there at their store with their box, "No, you have to call in and speak to our retention department". You know, and your frustration level goes through the roof. You have an alternative. You know, next time you say, "Well, when I move, I'm not going to go with that company". So that's the kind of choice too that's out there. Even if the services look a lot alike, just to be able to deal with someone else.
5349 COMMISSIONER MENZIES: Somebody who cares more? I mean customer service is what I'm getting out of that, improved competitor levels of customer service.
5350 MR. STEIN: Well, I think -- well, we talk about customer service, value. These are very important, they are very important probably right across our industry. We have introduced a number of innovations. Certainly, one recently was the launch of the TV service that we brought to market. I'm not familiar with any company anywhere near our size that has brought as broadly TV service to market like ours other than the incumbents. So I think that's a pretty major innovation. It's very recent as well.
5351 COMMISSIONER MENZIES: Okay. Thanks very much. Those are my questions.
5352 THE CHAIRPERSON: Vice Chair Broadcasting...?
5353 COMMISSIONER PENTEFOUNTAS: Thank you.
5354 Briefly on BAS again, I understand your position. I understand CNOC's position. The position of the providers is quite clear. They decry sort of a catastrophic future given the fact that the costs and the imposed changes to their network would be overwhelming and efficient, would not work for the competitors, nor would it work for the incumbents, and add to the fact that we just directed -- encouraged, but actually directed the providers to reconfigure their TPIA and provide an aggregated cable-based WHSA, on the face of it, it would seem objectively to be a compelling argument against your proposition and CNOC's.
5355 How would you respond to that?
5356 MR. STEIN: I will let CNOC answer for their position, but ours is that if it were available we would take advantage of it when it made sense to do so. We would use it.
5357 COMMISSIONER PENTEFOUNTAS: But would it make sense to do so?
5358 MR. STEIN: Yes. Yes, it would.
5359 COMMISSIONER PENTEFOUNTAS: Are the costs of changing -- it would?
5360 MR. STEIN: Yes, it would.
5361 COMMISSIONER PENTEFOUNTAS: And the argument made by the providers of the service that it's highly inefficient, ridiculously expensive that would not make sense for anyone to open BAS up?
5362 MR. STEIN: Well, first of all, we don't know what the cost will be. We will have a costing exercise. That will really show us all what the costs are. That is, first of all, on the costs. And as for it being inefficient, that simply -- that just doesn't make sense from a network building standpoint. It just doesn't
5363 When you think in terms of the costs that we incur today, such a major portion is now moving to the capacity side. The capacity side is largely indicating sort of across the network, the part that perhaps and some more would be addressed by BAS, the usage aspects of the network. It simply doesn't make sense that it would be more expensive to offer it that way. As somebody who has built networks for coming up on 20 years, that just doesn't hold water.
5364 COMMISSIONER PENTEFOUNTAS: And to change their network in midstream like that, you don't see the difficulty?
5365 MR. STEIN: No, I don't. I simply don't.
5366 COMMISSIONER PENTEFOUNTAS: And the downside for them if they build and no one comes?
5367 MR. STEIN: Well, I think you are hearing a lot of people saying they will come. I think we have heard from others that they will do it. You have heard from us that we will do it. I think the risk -- I think perhaps there is some math that could support whether there was risk or not, but I just don't see it.
5368 COMMISSIONER PENTEFOUNTAS: Then given your experience in networks and building networks, you don't see it. The math doesn't support their claims?
5369 MR. STEIN: No, it absolutely does not.
5370 COMMISSIONER PENTEFOUNTAS: Okay. The majority of your clients have availed themselves of a certain speed, I gather 99 percent of your clients are under 50 MBS?
5371 MR. STEIN: Yes, it sounds right. I would have to go look a the numbers. I don't know them off the top of my head, but that sounds quite reasonable.
5372 COMMISSIONER PENTEFOUNTAS: Well, the demand right now is what, at 30, at 20, at 10, at 40? You must have some idea?
5373 MR. STEIN: We are seeing it in the 10 to 20 range would be a sweet spot --
5374 COMMISSIONER PENTEFOUNTAS: In the 10 to 20 range?
5375 MR STEIN: -- that people are really sort of calling and asking for.
5376 COMMISSIONER PENTEFOUNTAS: Right.
5377 MR. STEIN: But I think part of that as well is that our higher speeds are -- the amount of usage or the capacity that is drawn at the higher speeds is so high that unfortunately it's very difficult to make an attractive package relative to the promos and so forth that you see out there from incumbents. So it gets -- on a by percentage basis it's tougher to compete at those higher speeds and remain profitable.
5378 So therefore for us, I don't think we are as attractive. I don't think the model lends itself to being as attractive at the higher speeds with the current price of CBB the way that it is.
5379 COMMISSIONER PENTEFOUNTAS: And under the current regime under your access to FTTN or TPIA, you can easily offer your clients 50 -- up to 50 or even higher?
5380 MR. STEIN: Yes. Under FTTN we are offering the 25s and 50s. Under cable we are offering 150, 30, 60.
5381 COMMISSIONER PENTEFOUNTAS: Given that --
5382 MR. STEIN: And of course lower.
5383 COMMISSIONER PENTEFOUNTAS: Given that, why is FTTP or next-generation, as was mentioned earlier by one of your providers, Cogeco this morning, why is it so important to Distributel to have access to FTTP and/or next gen DOCIS?
5384 MR. STEIN: Yes. I found that discussion quite interesting this morning.
5385 You know, the idea that its fibre-to- the-prem the old way, not fibre-to-the-prem the new way, because it is still fibre-to-the-prem going all the way to the prem. The fibre gets all the way to the side of the prem and they put an inexpensive device on the outside of the house rather than a slightly less inexpensive device.
5386 I'm not sure if it's still okay to do that on TPIA and how it is still okay for them to do that why it's all of a sudden next-generation to do it with an ONT as opposed to an RFoG converter.
5387 COMMISSIONER PENTEFOUNTAS: Notwithstanding that argument, you can get up to 150 on TPIA, you can get up to 50 with the telcos --
5388 MR. STEIN: Yes.
5389 COMMISSIONER PENTEFOUNTAS: -- why do you need FTTP to compete?
5390 MR. STEIN: Because customers are heading there. That's where it's all going. That's where -- first off, where you can get FTTP from the telcos, very often you cannot get 25s and 50s. You are on 5 or 4 or 1 or nothing. Well, no -- yes, a little bit of nothing.
5391 COMMISSIONER PENTEFOUNTAS: But aren't you already on 5s and 10s?
5392 MR. STEIN: Yes, we have a lot of 5s, not 10s. We have -- there are lots of places where there is on the cable net -- or on the phone -- I will say on the phone DSL network you're at 5 and there isn't necessarily FTTN all the way up to 25s and 50s, but there is fibre-to-the-prem.
5393 COMMISSIONER PENTEFOUNTAS: Okay. Videotron could offer you that capacity today?
5394 MR. STEIN: In those -- I mean, I would have to look at an exact overlay. I think in some of those cases Videotron would be offering a higher-speed service.
5395 COMMISSIONER PENTEFOUNTAS: Yes, but how far away is the need for higher speeds for Distributel?
5396 MR. STEIN: It's now.
5397 COMMISSIONER PENTEFOUNTAS: Notwithstanding the fact that 99 percent of your clientele is at 20 Mb per second?
5398 MR. STEIN: Well, I'm not sure they are at 20, for example, but they are certainly not at the 50s, and so on. No, it's now, because the new customers are ordering faster services. The new customers are seeking the higher speeds. We have a lot of customers, though. It will take a long time for that whole base to move.
5399 COMMISSIONER PENTEFOUNTAS: How far away is that, Mr. Stein?
5400 MR. STEIN: For the whole base to move?
5401 COMMISSIONER PENTEFOUNTAS: A big chunk of the base.
5402 MR. STEIN: If fibre-to-the-prem were available to us today, I think we would see some moving almost right away. I think I would be guessing or speculating. We might see similar penetration sort of to what the telcos are seeing relative to our base size, kind of thing there.
5403 COMMISSIONER PENTEFOUNTAS: Right. But forget about the future today. How many of your clients are at 50 MBS?
5404 MR. STEIN: Not a lot.
5405 COMMISSIONER PENTEFOUNTAS: You must have some idea.
5406 MR. STEIN: At 50 or higher maybe a few percent.
5407 COMMISSIONER PENTEFOUNTAS: Okay. And 98 percent of your clients would be at 20 or lower?
5408 MR. STEIN: Twenty (20), yes.
5409 COMMISSIONER PENTEFOUNTAS: Right?
5410 MR. STEIN: Yes.
5411 COMMISSIONER PENTEFOUNTAS: Okay. So the need for much higher speeds is easily five years away?
5412 MR. STEIN: No, I would say the need is much sooner than that. The need broadly across every piece of our footprint in every region, that is going to take a while.
5413 COMMISSIONER PENTEFOUNTAS: Okay. My colleague, Chairman Menzies, spoke to the fact that you are getting market share as an industry?
5414 MR. STEIN: M'hmm.
5415 COMMISSIONER PENTEFOUNTAS: Well, you are or you aren't?
5416 MR. STEIN: I spoke to our case, not the industry.
5417 COMMISSIONER PENTEFOUNTAS: Yes.
5418 MR. STEIN: In our case I suppose so. We are gaining market share, but we are not talking --
5419 COMMISSIONER PENTEFOUNTAS: Is that what you tell your shareholders, "I suppose so"?
5420 MR. STEIN: No, but I would be more prepared to go through the very specific case. Yes, we are gaining market share, but not in a leaps and bounds kind of way. Saying that we never get any market share, I wouldn't want to leave you with the impression that we are growing by 50-60 percent or something like that.
5421 COMMISSIONER PENTEFOUNTAS: Well, the overall market was at 6 percent in 2011 when we last had -- when we had the CBB/UBB hearing and now we are at 9 percent. Would you agree with that?
5422 MR. STEIN: I believe those numbers are accurate.
5423 COMMISSIONER PENTEFOUNTAS: Okay. So there is 50 percent growth in three years in market share?
5424 MR. STEIN: I think I have read that, yes.
5425 COMMISSIONER PENTEFOUNTAS: Well --
5426 MR. STEIN: Yes. That's in the CMR, I think.
5427 COMMISSIONER PENTEFOUNTAS: You're not a layperson. I mean you follow these things closely.
5428 MR. STEIN: No, no, that's absolutely right.
5429 COMMISSIONER PENTEFOUNTAS: Okay.
5430 MR. STEIN: But I could go to the CMR, but I'm pretty sure that's correct.
5431 COMMISSIONER PENTEFOUNTAS: Okay.
5432 MR. STEIN: I'm not disputing it. I'm just saying I --
5433 COMMISSIONER PENTEFOUNTAS: No, but you would follow it. I mean you --
5434 MR. STEIN: No, no, that tracks with what I understand, yes.
5435 COMMISSIONER PENTEFOUNTAS: Okay. And would you agree with Bell's assessment yesterday that in their region, sort of Quebec and Ontario, the independent ISPs have reached a 17 percent market share?
5436 MR. STEIN: I just heard that. I actually wasn't aware of that, but I heard that this week.
5437 COMMISSIONER PENTEFOUNTAS: And that wouldn't make sense with what you are seeing on the ground?
5438 MR. STEIN: To be honest, I was quite surprised when I heard that. I can't dispute it. I have no idea if it's accurate, but I -- in fact I made notes on it. Wow! I had --
5439 COMMISSIONER PENTEFOUNTAS: Well, most people would agree that the independent ISP market is a Quebec-Ontario-based market. You would agree with that?
5440 MR. STEIN: I would agree with that.
5441 COMMISSIONER PENTEFOUNTAS: There is very little of that going on out west of Ontario, right, just sort of the Quebec City-Windsor kind of corridor, which is where it's all concentrated. You would agree with that?
5442 MR. STEIN: Yes.
5443 COMMISSIONER PENTEFOUNTAS: Right. So if they are at 9 percent and you completely exclude, almost completely exclude the rest of the country and Eastern Canada, the math would come together, would it not, since those are the two most populous provinces in the country right now?
5444 MR. STEIN: Yes. I tried to do a little bit of math on it after I heard it yesterday.
5445 COMMISSIONER PENTEFOUNTAS: It would make sense?
5446 MR. STEIN: I tried to figure it out and I wouldn't say that I immediately was poking holes in it. I was surprised by the number. I hadn't heard it, though, before.
5447 COMMISSIONER PENTEFOUNTAS: Well, it would make sense if we are 9 percent nationwide with very little presence west of Ontario and east of Quebec, that wouldn't be that far off if you do the math?
5448 MR. STEIN: Yes. Just to clarify, I'm not disputing that number.
5449 COMMISSIONER PENTEFOUNTAS: Okay.
5450 MR. STEIN: -- I'm saying that I hadn't heard it before.
5451 COMMISSIONER PENTEFOUNTAS: And is your ARPU growing, Mr. Stein?
5452 MR. STEIN: A little bit, yes.
5453 COMMISSIONER PENTEFOUNTAS: A little bit.
5454 MR. STEIN: Yes.
5455 COMMISSIONER PENTEFOUNTAS: What you want to share that confidentially with the Commission?
5456 MR. STEIN: Sure.
5457 COMMISSIONER PENTEFOUNTAS: So you will undertake to provide your ARPU growth?
5458 MR. STEIN: We will undertake to share with you our ARPU over --
5459 COMMISSIONER PENTEFOUNTAS: The last five years as an example?
5460 MR. STEIN: Yes.
5461 COMMISSIONER PENTEFOUNTAS: You would have that? CRA would request that you would have that minimally.
5462 MR. STEIN: Yes.
5463 COMMISSIONER PENTEFOUNTAS: I mean it's like pulling teeth, I mean I --
5464 MR. STEIN: No, no, I'm not trying to avoid your question. I'm just thinking about do I have that right available. Yes, I will pull that together, for sure. Absolutely.
5465 COMMISSIONER PENTEFOUNTAS: The modern world, programs, computers.
5466 MR. STEIN: Sure.
5467 MR. COHEN: Commissioner Pentefountas..?
5468 COMMISSIONER PENTEFOUNTAS: Yes, sir.
5469 MR. COHEN: I am the major shareholder of Distributel.
5470 COMMISSIONER PENTEFOUNTAS: Okay.
5471 MR. COHEN: -- so when you ask about what he tells the shareholders, okay, I'm just -- no, no, I wanted to be clear.
5472 COMMISSIONER PENTEFOUNTAS: I know you are not a publicly-traded company and that's why I'm not going there.
5473 MR. COHEN: Okay. No, no, but also I will tell you that our growth has not been spectacular and I am disappointed in it and that's one of the reasons why Mr. Stein was appointed as CEO, because I'm hoping he can do a better job than I did.
5474 COMMISSIONER PENTEFOUNTAS: You can file this in confidence. Your growth or your EBITDA is not growing to your satisfaction? Your sales or your EBITDA is not growing?
5475 MR. COHEN: Our profits are not growing to my satisfaction.
5476 COMMISSIONER PENTEFOUNTAS: Okay, great. Thank you so much.
5477 Merci, Monsieur le Président.
5478 THE CHAIRPERSON: Thank you.
5479 Commissioner Molnar...?
5480 COMMISSIONER MOLNAR: Thank you.
5481 I appreciate, Mr. Cohen, that you have come here and you have talked about the practical realities of operating and not economic theories or otherwise.
5482 I also want to just get a sense as to the practical realities. You made a mention of interim rates and the uncertainty that exists with that and what impact that would have on your business. You gave some examples of how you faced regulatory uncertainty over the years. So how important for you is regulatory certainty?
5483 MR. COHEN: On a scale of 1 to 10, I would give it a 7. I'm not quite sure, you know, that --
5484 COMMISSIONER MOLNAR: I mean, let's put this in the perspective that this is, you know, we are going to re-look every five years. We are going to re-look every five years and proposals that have come forward to look at the state of FTTP in five years, rather than have some confidence that the regulatory environment will not change significantly, so people can establish their networks, their business plans and so on in greater than five year intervals.
5485 MR. COHEN: I think my comments were addressed more towards just pricing issues, you know, where we have a rate that is made interim and it is sitting for a couple of years and we don't know if we are going to suddenly be hit with a big bill or if we are going to get a little windfall, you know. Certainly we can take the windfall, but the big bills is a concern.
5486 I think we have seen some issues -- some instances where pricing in the marketplace seem to be very variable among, like, companies simply because they were treating the costs that they had differently. Some were anticipating that the costs were going to go up because a tariff had been filed with a higher rate and some were anticipating that it wouldn't go up. And so I guess it just leads -- it just leads to some real uncertainty, you know.
5487 Are we going to price low because we have to match our competitors, even though we anticipate that we are going to be operating at a loss? Or or do we price based on the filed tariff, you know, and just hold the line and not grow because we may have to pay that money back and if we don't collect it now, we won't be able to later. That's the kind of uncertainty that I'm talking about.
5488 COMMISSIONER MOLNAR: Okay. Not uncertainty as to whether or not there will still be a wholesale regulatory environment?
5489 MR. COHEN: I say a little prayer every night that the mandated wholesale won't stop.
5490 COMMISSIONER MOLNAR: As you know, the mandated requirement today is speed matching and it's based on the Commission's determination that the existence of competitive service providers such as yourself is an important element of a vibrant competitive intranet, retail intranet market, so knowing there is today a requirement for speed matching and it is not -- it is not based on the technology, it is across all technologies, so one might argue that that is already in place for FTTP. Because I don't know whether it has been excluded from the requirement from speed matching for the Internet services.
5491 From a practical perspective, if we were to make a determination or confirmed the determination or otherwise that the speed matching requirements apply regardless of technology, and we essentially left everything else in place -- I understand you don't like the CBB rate. Nobody likes the CBB rate, but kind of put that rate aside for a minute just from a practical perspective. If we were to simply state that speed matching is a requirement regardless of technology and made no other changes, could you function for a period of years under that arrangement?
5492 You have mentioned yourself that at this point there is not a lot of customers at the higher speeds over fibre-to-the prem. If we were to -- you know, if we were to relook at this in the five year timeframe, but just until we did that look, I mean we could make no determination. We could go through a huge process to determine how to make fibre-to-the-prem available under a resale wholesale arrangement or we can simply provide some certainty that speed matching stays in place and not go through a huge effort of costing, and so on, to try and price it.
5493 You maintain -- I mean, it can be made available at potentially the same aggregation point as what's available to you today. You are looking at me in some question.
5494 MR. COHEN: I'm just trying to figure it all out. Like the thing is, I guess it's a big pricing element.
5495 COMMISSIONER MOLNAR: All I'm saying is, really, all it would be as you have CBB rates from the different companies, so where that company is offering some of those services over fibre-to-the-prem, fibre-to-the-home, whatever you want to call it, it doesn't matter. Like, you will still just get speed matching at a point of -- at your existing point of aggregation at the price that is there today.
5496 MR. COHEN: Well, the CBB price would be the same, but what would be the per subscriber price? I don't know that --
5497 COMMISSIONER MOLNAR: Well, for a period of five years, what's the real risk if we just use the prices that are there? You said there are not a lot of customers.
5498 MR. COHEN: But we do have a --
5499 COMMISSIONER MOLNAR: Do you want to think about this?
5500 MR. COHEN: I think so. But if I can just ask a question just to clarify?
5501 Are you wondering if it would be possible to use the existing frameworks, the existing capacity, the existing access frameworks, et cetera, to leverage speed matching to suggest that we could get this speeds and capabilities of fibre-to-the-prem via the speed matching; if so, would we be open to that? I think we would be open to that, yes.
5502 COMMISSIONER MOLNAR: Well, you know, everyone is saying there is a lot to wait and see about with fibre-to-the-prem. Whether there will be distinct product markets, how much it will be deployed, and so on and, perhaps, you know, you can either wait and see and say nothing is available in the interim or you could wait and see and say speed matching continues to apply.
5503 MR. COHEN: Commissioner Molnar, I think that would be great. But the thing is we were already faced with one change in technology, fibre-to- the-node, and told that it was something different and therefore we don't have access to it. So I think it would require the Commission to say, yes, you also have access to fibre-to-the-prem. You know, there is no --
5504 COMMISSIONER MOLNAR: No, I am saying that. I'm just saying could we just practically, just for a short period, an interim period rather than sorting out all the details as to what fibre-to-the- prem is, just use an interim basis and say speed matching, you know, is required.
5505 MR. COHEN: Yes. I think the big question mark in my mind is around the access component and how the differing technology that backs it would somehow turn into a dramatic access rate that just made it unusable. But if we assumed that the rate was reasonable and the same framework was in place, I don't see why that would be a problem for a short time.
5506 COMMISSIONER MOLNAR: I do appreciate there is an outstanding issue as regards whether or not there is a drop there, and that's a big issue.
5507 MR. STEIN: Right.
5508 COMMISSIONER MOLNAR: But outside of that, I mean, I'm just wondering if there is a way that there is an interim period that, sort of an interim solution that wouldn't preclude you from continuing to offer services at the higher speeds.
5509 MR. STEIN: Right.
5510 COMMISSIONER MOLNAR: If you want to think about it more and provide more comment, you are welcome to do that.
5511 MR. STEIN: Thank you.
5512 COMMISSIONER MOLNAR: Okay. That's all I have.
5513 THE CHAIRPERSON: Okay. So you will do that as an undertaking?
5514 MR. STEIN: Yes.
5515 MR. STEIN: I'm currently thinking about how I'm going to work through that. But, yes, I will take that as an undertaking, yes.
5516 THE CHAIRPERSON: It's 12th of December. I mean it's not today.
5517 MR. STEIN: It's coming quick, yes. Absolutely.
5518 THE CHAIRPERSON: All right. I have one question and I'm struck by your call for us to be practical rather than theoretical in some of our decisions. And I think I may have seen you in the audience when Cogeco was presenting and their model for high-speed access of a backstop on the webpage of what they are ready to offer with negotiated arrangements and if they don't work, well, the mediation/arbitration by the Commission. What is your view on that approach?
5519 MR. STEIN: So unfortunately I was here and I did listen to most of it, but my little tool kept cutting out so I missed little bits here and there. But as I understood it, I'm not sure how we would make sure that it was reasonable or that it was cost-based. We are in favour of continuing with the current model that is a cost-based model.
5520 We have not had the kind of success negotiating those kinds of things that would make us feel that that's likely to materialize something that we could really leverage, so I'm not terribly in favour of the short version.
5521 THE CHAIRPERSON: Okay, good. Thank you.
5522 Legal may have a question, I believe.
5523 MR. BOWLES: Yes. Thank you, Mr. Chair. I have basically a three-part question.
5524 I understand that you stated that network transmission cost have decreased just as much as growth in -- as traffic growth has increased and I believe you stated that was 40 percent. Firstly, and I apologize if you have stated this, but can you provide a timeline that governs that statement?
5525 MR. COHEN: Well, that was in a letter in 2012 and I can't recall where I got the 40 percent growth on usage, but I know that we did a little exercise going back 15 years of what we were paying, for example, for a T-1 circuit from Montréal to Toronto which T-1 is like 1.54 Mb, and then we compared it to a quote that we had for a 10 Gb circuit between the same two places and worked out the growth rate or the decrease in cost and it came out very similar.
5526 MR. BOWLES: So essentially it was a 15 year timeframe?
5527 MR. COHEN: Well, the decrease --decline in costs was based on that, yeah. It was -- you know, it wasn't a precise study. We looked around at our own cost and we read a few papers or articles about network costs dropping.
5528 MR. BOWLES: Okay. Secondly, can you clarify what specific network transmission costs you were referring to?
5529 MR. COHEN: Well, one of them was the one I just mentioned. The cost of a facility between Montreal and Toronto was one, but I think --
5530 MR. BOWLES: Was it a transit facility?
5531 MR. COHEN: No, it wasn't Internet transit. Well, you know -- is a bit is a bit. Like it was a TDM circuit that we were originally looking at. There were -- I don't think we had -- Don, maybe you could answer better for the
5532 MR. CAVANAGH: It would have been for transport facilities between locations primarily, but similar cost reductions have happened on other services, like Internet transit that an ISP would use and there is lots of public data showing that decline as well, but our study had been transport facility between cities.
5533 MR. BOWLES: And picking up on that last point, and this is the last leg of the question, can you provide any evidence in support of these statements on the decrease in costs relative to the increase in traffic growth, perhaps in the form of an undertaking?
5534 MR. CAVANAGH: Yes. We could probably do that, yes.
5535 MR. BOWLES: Thank you. That's all.
5536 THE CHAIRPERSON: Thank you. Unfortunately you are leaving with some homework, additional homework. I appreciate that sometimes for smaller participants that's a burden, but it's also very important for us to have an informed record.
5537 Thank you, those are our questions. We will take a break, a lunch break this time, and come back at 1:30 if that's okay. Thank you.
--- Upon recessing at 1220
--- Upon resuming at 1330
5538 LE PRÉSIDENT : À l'ordre, s'il vous plaît.
5539 Madame la Secrétaire.
5540 LA SECRÉTAIRE : Merci.
5541 We will now hear the presentation from SaskTel Telecommunications.
5542 Please introduce yourselves for the record first and you have 20 minutes. Go ahead.
5543 MR. MELDRUM: Good afternoon, Mr. Chairman, Commissioners. My name is John Meldrum and I am Vice President, Regulatory and Corporate Counsel for SaskTel.
5544 With me today, on my right, is Brian Eltom, Assistant Vice President responsible for SaskTel's fibre-to-the-premise program.
5545 And to my left is Andrew McKay from our Regulatory Department.
5546 We are pleased to come before you today to represent SaskTel in this important hearing. Topics being addressed in this proceeding will shape the telecommunications industry and impact the direction of our company for years to come. Decisions you make will impact our future investments and the services we provide to our customers.
5547 You asked us about the current wholesale services framework and whether modifications should be made.
5548 In SaskTel's opinion, there is no urgent need to modify the current framework. Retail markets are very competitive, new services and faster speeds are being made available to consumers, and both we and our competitors are just beginning to lay the groundwork for future innovation.
5549 We have adapted our processes to the framework you created in Decision 2008-17 and Regulatory Policy 2010-632. To us, the important thing now is that you do not make radical changes to that framework. If the telecommunications industry in Canada is to continue to develop, regulatory certainty is critical.
5550 In our opinion, reversing decisions made by the Commission only a few short years ago would be detrimental to the health of the robust high-speed marketplace. In 2010 you decided that the time was not right to mandate wholesale access to fibre-to-the-prem networks. Although these networks are finally being deployed in certain areas of the country, they are still by no means ubiquitous, services are still evolving and the business case for continued deployment is far too fragile for you to change your determination at this time.
5551 We disagree with parties who believe you should reverse decisions related to high-speed data services, decisions reaffirmed as recently as 2012. For a number of these services, although your decisions were announced in 2008, the decision has only been effective for around a year and a half.
5552 Companies making the large investments required in the telecommunications industry must have certainty that regulatory frameworks will be applicable for some period of time so that they have a chance to recover these investments. Without sustained periods of regulatory certainty, no market participants will be willing to take the risk of large investments, whether in network deployment or in service development.
5553 In this respect, we note the recent announcement by AT&T in the United States that it will "pause" its gigabit Internet rollout in response to statements made by President Obama. We don't note this with respect to the specific issue under discussion but rather to underscore how sensitive this industry is to the uncertainty of the regulatory environment and how tenuous is the business case for bringing forward new technologies.
5554 Certainly, radical proposals such as CNOC's equivalency of inputs regime must be rejected. Such a regime would cost the industry millions of dollars and detract all companies' efforts from serving customers, introducing new technologies and services, and continuing to compete vigorously.
5555 Brian will now describe SaskTel's fibre-to-the-prem program and the fragility of the business case that supports it.
5556 MR. ELTOM: Thanks, John.
5557 SaskTel's program is a 10-year program designed to pass 246,000 homes in Saskatchewan's nine major cities by 2020. Our program is targeted entirely at residential neighbourhoods and customers. There are some businesses in these neighbourhoods and we will serve them over fibre-to-the-prem, but they are not the primary target market.
5558 The business case supporting our continued deployment of fibre-to-the-prem is positive -- but marginally. The $670 million investment we initially modelled had a slightly positive NPV that was based on retaining retail revenue for voice, Internet and IPTV. Changes in the regulatory environment which impact these revenue assumptions will result in SaskTel revisiting the business case, which will likely reduce our build.
5559 Although this level of investment may seem small to certain companies, to a company like SaskTel this level of capital investment represents a very large risk. In fact, this is the largest capital project in SaskTel's history.
5560 Because of this, our fibre-to-the-prem budget and program must be reapproved by our Board of Directors annually. Our experiences in the first two years of the program have already led us to extend the overall length of the project by three years, to refocus entirely on residential areas, to change from placing drops to every home we pass to only placing drops when service is ordered or when we can achieve a sufficiently high penetration rate in the MDUs we pass. All of these reductions to our original plans come before the imposition of any mandated wholesale access.
5561 Our fibre deployment differs from that of other companies because the majority is actually a rebuild of neighbourhoods we already serve with IPTV and with fibre-to-the-node.
5562 When we pass homes in these neighbourhoods we find many customers are already satisfied with their service, be it cable, our own fibre-to-the-node or another alternative. Fibre-to-the-node does not provide the top speeds available over fibre-to-the-prem or DOCSIS 3.0. However, most customers don't currently demand these top-end speeds. These customers are not willing to pay more or to have their lawns disturbed for fibre services which they do not see as valuable. So while we pass many homes, many will never be connected.
5563 Because of this the business case relies on revenue saved by not losing customers to our competitors. This makes the rebuild of such an area much less profitable than the expansion of service to an area not currently served with IPTV. And we stress that the saved revenue we are counting on relates to three services: traditional telephony, Internet and IPTV. Any mandated access rates which don't acknowledge this make our business case for further expansion even less appealing.
5564 Our deployment also differs from, and is more expensive than, deployments that are almost exclusively aerial. Nearly half of our build is in neighbourhoods where the network is buried.
5565 Building in buried neighbourhoods with existing service is challenging. We need to be extremely careful due to existing buried facilities. There is also a limited season in which the ground is easily accessible and strong competition for third-party drilling resources used for buried cable. Our costs to pass a home with buried fibre are triple our costs in an aerial neighbourhood.
5566 Even after our network passes a premise, the cost of installing a drop between that network and the customer premise is over four times higher in buried areas than in aerial areas. There is a much higher risk of significant customer disruption from placement of a buried drop than there is from an aerial drop. Customers take a lot of pride in their yards and they don't want us messing them up with a backhoe -- not even for 260 Mbps Internet. Frankly, the most effective way we have found to place buried drops for this high-tech service is the low-tech solution of men with shovels. But this is far more expensive than hanging cable from poles.
5567 All of these things factor into our future plans for deploying fibre. Sure, we will finish the areas of Regina and Saskatoon that we are working on and perhaps do additional neighbourhoods in those cities, but in less dense locations, continued deployment is very risky and any rules you introduce which reduce the expected revenues in our business case may cause us to cancel deployment. We have already investigated fibre builds in a number of smaller communities and the case for expansion just wasn't there.
5568 Bell Aliant indicated to you that they were forced to re-evaluate their fibre business case and halt deployment in a city as large as Sault Ste. Marie. Sault Ste. Marie is larger than any municipality in Saskatchewan, with the exception of Regina and Saskatoon. With the marginal nature of the business case for expansion exemplified by Aliant's decision, our additional challenges and now potential regulatory action, further expansion of SaskTel's fibre-to-the-prem network is indeed at risk.
5569 I now turn it back to John.
5570 MR. MELDRUM: Thanks, Brian.
5571 Brian described the additional costs and challenges faced when placing buried fibre and he mentioned that almost half of our overall projected build is buried. I should note that most aerial portions of this build are already complete or soon will be. Therefore, the next stages of our fibre-to-the-prem build, if they indeed happen, will involve more and more buried network, with the last three years being almost entirely buried. So the business case for continued expansion is even more fragile than the overall case.
5572 But there is more than the chilling impact on fibre-to-the-prem construction that you should consider. Retail markets that would possibly be supplied by any wholesale services you mandate are already competitive. As the Competition Bureau said in their intervention:
"Facilities-based competition has taken a firm hold in Canada. The vast majority of Canadian residences, as well as many businesses, are now served by two facilities-based competitors, and competition between ILECs and cable companies is generally vigorous."
5573 The Bureau goes on to conclude that:
"ILECs do not possess market power in markets for residential services."
5574 We believe that all the competitive factors which led to the Bureau's recommendation with respect to residential services are also present for fibre-to-the-prem. The cable companies who provide the facilities-based competition for residential wireline markets also provide direct competition to all services which ILECs can provide over fibre-to-the-prem. We see no reason that fibre-to-the-prem should be considered essential.
5575 Wireless options are also a real alternative for many consumers. The measurement firm comScore reports that almost half of Canadian's Web time is now accessed via mobile devices.
5576 CNOC has placed evidence before you about the so-called high cost of wireless data. However, a number of customers don't need the extreme levels of data used in their examples. And for those who do, in Saskatchewan there are plans with large or even unlimited buckets of data available. Plus, when the customer is already paying for wireless service for other reasons, the incremental cost of adding a data plan becomes lower. Therefore, our view is that changes in relative prices between wireline and wireless data will cause substitution between technologies.
5577 Competition in this market segment is vibrant and there is no retail problem to fix. As the Bureau stated:
"...the CRTC should ... regulate only where the absence of mandated access is likely to lead to a substantial prevention or lessening of competition in these retail markets."
5578 We believe that the only valid conclusion based on this advice is not to mandate wholesale fibre-to-the-prem.
5579 But we are not here just to talk about fibre. I will turn it over to Andrew to talk about other aspects of this hearing.
5580 MR. McKAY: Thanks, John.
5581 SaskTel opposes the creation of an unbundled Broadband Access Service. We simply do not foresee any competitors demanding this service in our territory. As such, we believe it goes against the Policy Direction to require us to expend resources to define, cost and tariff a service that will not be used. On a practical basis, when we create services far in advance of any significant demand, we have found that the processes and procedures created can be outdated and broken before they are ever put to use, resulting in wasted development dollars.
5582 With regard to high-speed business services such as those for which Allstream advocates re-regulation, the Commission should maintain the position confirmed as recently as September 2012 that such regulation is not required. It is ironic that the largest advocate for re-regulation of these services is also one of the largest third-party builders of alternative facilities to businesses and has become so under the current regime. Obviously, that regime is working.
5583 Allstream says: "Yes, but these alternate facilities are not ubiquitous and we can't serve customers over them in every one of the customer locations." Commissioners, the high-speed business market will never be addressed by completely ubiquitous duplicate or triplicate networks. Instead, individual business locations will be connected as competitors like Allstream win their business. We simply don't believe that the lack of a completely ubiquitous third-party network would ever stop a competitor from submitting a bid for such a customer. As a last resort, they can always buy an ILEC forborne service or even resell retail products.
5584 Forbearance for these services, although announced in 2008, only took effect in 2011 for some services and 2013 for others. There simply has not been enough time to declare that this was the wrong decision. And it was not the wrong decision. The business market remains competitive. Allstream and others are indeed building facilities. If the services in question are now re-regulated, especially at mandated low rates, such construction will stop.
5585 You asked us to address approaches to wholesale rate-setting and whether modifications should be made.
5586 Most parties have concluded that Phase II costing is the best option we have for setting rates for mandated wholesale wireline services. SaskTel has certain reservations, especially with the practice of adjusting costing inputs which we provide in good faith. But we don't have any alternative methodology to propose.
5587 Parties that raised objections related to transparency or the validity of data sources have either already had their concerns addressed through relatively recent Commission decisions or have not provided workable alternatives.
5588 We believe that arguments for the use of costs of some mythical "efficient operator" should be denied and companies should be allowed to use true company-specific costs.
5589 Modelled costs should reflect the costs that the company submitting them actually experiences. Companies should not be forced to sell services below cost, especially to a competitor who can then turn around and outbid a company using their own facilities to do so.
5590 Various parties have discussed situations where costing could be streamlined.
5591 We have read proposals that the Commission should waive the requirement to file a cost study when a study for the service in question has been filed in the recent past or when there is little demand or revenue anticipated. We agree with these proposals and we further propose that where minor adjustments are made to a service and those adjustments will not significantly affect its overall costs or profitability, no cost study should be required.
5592 Finally, in those rare cases where a mandated markup is required, we agree with TELUS' proposal that it should be a company and service-specific markup that recognizes the individual circumstances of the incumbent and the risk associated with the service in question.
5593 For small companies such as ourselves, it seems obvious that our percentage of fixed and common costs has to be higher than it is for companies ten times our size. We don't have an exact number for you at this time, and we do support the TELUS proposal, but we also note the inequities inherent in your previous decision to reduce SaskTel's mandated markup level from 25 percent to 15 percent.
5594 John will now summarize SaskTel's positions.
5595 MR. MELDRUM: Thanks, Andrew.
5596 As a company, one of SaskTel's largest threats is the regulatory environment. We see rules being imposed which constrain our profitability on all sides, from wireless to broadcast to more traditional telephony. In this environment, we simply do not have the luxury of continuing to support marginal or perhaps unprofitable business cases and we urge you not to make fibre-to-the-prem one of these cases.
5597 Our positions in this proceeding are clear.
5598 We do not believe any major changes are required to the wholesale services framework and certainly not drastic changes such as those proposed by CNOC.
5599 We believe that access to fibre-to-the-prem networks should not be mandated, especially not at this point in their development, and that if it ever were to be mandated, the wholesale price must take into account the return which network owners need in order to justify the risk that is being undertaken.
5600 We oppose re-regulating wholesale high-speed business data services.
5601 And lastly, we support Phase II costing for mandated wholesale wireline services but believe the Commission should revisit its markup determinations.
5602 With that, we thank the Commission for the opportunity to appear and welcome your questions.
5603 THE CHAIRPERSON: Thank you vey much, gentlemen. The Vice-Chair of Telecom will start us off. Thanks.
5604 COMMISSIONER MENZIES: Thank you.
5605 I'm going to start with BAS. Your position is clear on that but I do need to know what your viewpoint might be if the Commission decides to mandate BAS. Would there be a least disruptive way of implementing it?
5606 MR. McKAY: Well we, of course, oppose implementing it at all, but we would suggest -- we don't have an answer for the technical method at this point, but from a tariff perspective, we would suggest that if it's mandated we not be required to tariff until we get confirmed demand of some amount that makes it worth going through the effort to create a cost study and tariff that may be obsolete before the service is ordered, and we would probably suggest that as competitors request it, if ever, access to certain COs, we have a lead time to provision that CO for the service and not have all 300 or whatever we have pre-positioned.
5607 COMMISSIONER MENZIES: Have you ever had a request for the service?
5608 MR. McKAY: No, we have not and, in fact, the last time BAS appeared it was called ADSL-CO, but it had a different hat, we did at that time survey our existing customers and nobody wanted it.
5609 COMMISSIONER MENZIES: So I think we've at least determined what the market is for that service in Saskatchewan.
5610 Are high-speed services in the same product market as unbundled local loops? What's your position on that?
5611 MR. McKAY: No, we would suggest they probably are not. The only circumstance where an unbundled local loop, in our perspective, has any relation to those services is where there is dry loop provisions as part of our currently mandated fibre to the node wholesale service.
5612 If you were to forbear from unbundled local loops, that component could easily be moved to the ADSL tariff.
5613 COMMISSIONER MENZIES: Sorry, are you talking about the dry loop tariff?
5614 MR. McKAY: Yes. Yes, in our case --
5615 COMMISSIONER MENZIES: In moving that, your suggestion is that if that area was forborne, the dry loop tariff be moved too?
5616 MR. McKAY: In our case, our wholesale DSL tariffs just point to the unbundled local loop tariff.
5617 COMMISSIONER MENZIES: Okay, thanks. I understand.
5618 MR. MELDRUM: Maybe just to add to that, we went back and we've never had a request for a regular unbundled local loop, only the dry ones.
5619 COMMISSIONER MENZIES: So I was going to ask about what you saw the future demand being for unbundled local loops, and you've never had one --
5620 MR. MELDRUM: A regular one, no.
5621 COMMISSIONER MENZIES: Okay. So your forecast for the future would be along a similar line, I take it?
5622 MR. MELDRUM: It could change with the competitive environment, but at the moment we'd have to say zero.
5623 COMMISSIONER MENZIES: Okay. So if we did forbear in that area, do you have a suggestion on an appropriate phase-out period? Bell suggested one year, for instance.
5624 MR. MELDRUM: For us, again, with no existing demand --
5625 COMMISSIONER MENZIES: You could do it tomorrow?
5626 MR. MELDRUM: Yeah.
5627 COMMISSIONER MENZIES: Okay, thanks. Sorry, I didn't mean to put words in your mouth, I just did it, but I'll try not to do that again.
5628 So yes, that sort of answers my next question. So you agree with Bell's position on forbearance.
5629 Do wholesale high-speed CDNN and wholesale Ethernet belong in the same product market?
5630 MR. McKAY: Yes, we would argue they do. They are not exactly the same, but with certain equipment added they are. So if you were to mandate one and not the other at a low price, all the demand would switch. They are substitutable.
5631 COMMISSIONER MENZIES: Thank you. In the event we re-regulated in that area, and I'm conscious of your position on it, but nevertheless for the record, what would the appropriate geographic market for high-speed CDNN and Ethernet be?
5632 MR. MELDRUM: Yeah, we would say regional.
5633 COMMISSIONER MENZIES: And regionally defined as...?
5634 MR. MELDRUM: In our case, by province.
5635 COMMISSIONER MENZIES: Okay, thank you. You make use of multi-casting for your own video services to support bundling; right?
5636 MR. ELTOM: Yes, we do.
5637 COMMISSIONER MENZIES: Okay. Some have expressed the view that if that's not made available to competitors it could constitute an undue preference. Do you have a comment on that view?
5638 MR. MELDRUM: Well, in our case, we're even a little different than some of the other interveners who said, well, they're the second party in or the third party in, we are the fourth party in. In many locations, you've got Shaw Direct, Bell, the cable operator and then ourselves. So we are the fourth to the party.
5639 It would be a strange sort of set of circumstances that bringing more competition to the market gets you to the point of unfair discrimination.
5640 COMMISSIONER MENZIES: Okay, thanks. It's helpful to know the nuances of your market in terms of that.
5641 Now, costing. You're comfortable with Phase 2 as is, but you have some issues around mark-up; is that correct?
5642 MR. MELDRUM: Yes.
5643 COMMISSIONER MENZIES: Is it the 25 to 15 per cent reduction that is your primary issue?
5644 MR. MELDRUM: That would be our primary issue with respect to the existing services, yes, but we have the same 15 per cent mark-up that Bell and TELUS do and they're substantially larger than ourselves, they're over 10 times bigger.
5645 We believe our common costs are somewhere around 25 per cent. So basically at 15 per cent, our view is that we are providing those services below cost.
5646 COMMISSIONER MENZIES: So while we're on costing, so we don't hop around too much, in paragraph 44 of your submission you just made you refer to proposals that you agree with.
5647 Could you be specific on those proposals, because there's proposals here by, for instance, TELUS' proposal on the mark-ups should address proportionate recovery of fixed common expenses, network risk, return to shareholders. Is that one of them?
5648 MR. McKAY: So in paragraph 44 we were talking about proposals related to streamlining the costing process. So Bell proposed that if a study had been done within the study period --
5649 COMMISSIONER MENZIES: The exemptions they were talking about?
5650 MR. McKAY: Yes. And then there was the exemptions for small demand or small revenue.
5651 COMMISSIONER MENZIES: Okay. So those were the proposals you were referring to in paragraph 44?
5652 MR. McKAY: In paragraph 44, although we do agree with TELUS' mark-up proposal.
5653 COMMISSIONER MENZIES: Why, the TELUS; what's the nature of your --
5654 MR. McKAY: Well, as John mentioned --
5655 COMMISSIONER MENZIES: Or is it just holus-bolus what TELUS said, we could save time?
5656 MR. McKAY: In the large extent it is, but as John mentioned, we believe that our fixed and common cost percentage is higher than that of others.
5657 TELUS' proposal is that this would be a company-specific number and we agree with that. TELUS also proposes that the riskiness of certain products be reflected in the mark-up level and we agree with that as well.
5658 COMMISSIONER MENZIES: So in terms of those risks, do you have a hurdle rate for various levels of risk? Do you have like a low risk hurdle rate that you use internally when you figure this out, and do you have a separate high risk hurdle rate that you might use when you're assessing the cost of risk internally?
5659 MR. MELDRUM: On occasion, but generally not. When I said on occasion, for example, we have an alarm monitoring company which is in a fairly different business in terms of when they acquire accounts and customers.
5660 For that we do sometimes go at a bit lower risk, but generally with respect to regular telecommunications services, we don't change the risk factor.
5661 If you want to add to that.
5662 MR. McKAY: No, I don't think I would add much to that. Our weighted cost of capital is based on the cost we pay for debt and expected company-wide return on equity. So it isn't changed, but it is factored in in other ways, I guess.
5663 MR. MELDRUM: Yeah. I'd say the risks are outside of the financials, the risks are fully looked at and discussed and now actually a risk analysis is attached to every Board item.
5664 COMMISSIONER MENZIES: So is risk captured in cost of capital entirely, because I know we talked about --
5665 MR. MELDRUM: No. It wouldn't entirely be, no.
5666 COMMISSIONER MENZIES: So that's why we have discussions about extra risk in terms of -- we've had discussions this week about fibre to the prem and that sort of stuff that would have to capture extra risk in the same sense that the mark-up on fibre to the node is 40 per cent with a 10 per cent risk factor.
5667 MR. MELDRUM: Right.
5668 COMMISSIONER MENZIES: Right. So that's what we would we talking about in the event that somebody went with fibre to the premise; you would be talking about a fresh risk assessment specific to that project?
5669 MR. MELDRUM: Yes, for sure. We do consider our fibre to the prem program to be quite high risk.
5670 COMMISSIONER MENZIES: So you would probably be using a different risk hurdle for that program as opposed to some of the other programs they use?
5671 MR. MELDRUM: When we ran the economics, no, but as I say, the risk factors are outside of that.
5672 COMMISSIONER MENZIES: Okay.
5673 MR. MELDRUM: Maybe Brian might --
5674 MR. ELTOM: Yeah, when we do run our economics, the assumptions are sort of what we call, like say the base case or most likely case, and then what we will run is a tornado diagram showing sort of what are the key inputs into that business case to try and assess what that risk would be.
5675 So, for example, whether it's customer revenue, cost. So if those factors go up or down plus or minus 10 per cent that would then give us the risk to our MPV on those things, so that we have an understanding that this is the base case we think is going to happen, however, if one of these factors moves up or down, here's what the impact could be to your MPV.
5676 So that's how we provide that information to the Board to say, here's the inherent risk in the business. We put together a business case we think makes sense, however, there are factors that you are somewhat guessing at, that if we're off plus or minus 10 per cent, here's what the impact could be.
5677 COMMISSIONER MENZIES: Okay. Just to try to -- without getting too far down this, but how would you quantify additional risk for a specific project and how a service-specific mark-up and/or cost of capital could be developed to capture that specific risk?
5678 You can come back to us on that, if you like, take it as an undertaking.
5679 MR. MELDRUM: I think that would be best.
5680 MR. McKAY: Sure, we can undertake that. I would suggest that there is no one way that we quantify it, but we can undertake to provide --
5681 COMMISSIONER MENZIES: Well, you're entitled to whatever answer you want, but it would be good to have one.
5682 MR. McKAY: We'll undertake to clarify that.
5683 COMMISSIONER MENZIES: And you know, take time to give it some thought.
5684 Shaw had submitted that a single mark-up -- I just want to get you -- we've talked about the risk here but it was, in essence, just for the record, do you agree with Shaw's proposal that a single mark-up that applies to all wholesale services fails to account for all the risks associated with investment in services and facilities in a competitive market?
5685 MR. McKAY: Yes.
5686 COMMISSIONER MENZIES: Thank you. And you agreed with Bell on the two exemptions; right, we already touched on that?
5687 MR. McKAY: Yes.
5688 COMMISSIONER MENZIES: Okay. Do you think it's appropriate to use other incumbents' costs for the purpose of benchmarking?
5689 MR. McKAY: Oh, sorry.
5690 MR. MELDRUM: I'll let him go first.
5691 MR. McKAY: For the purposes of benchmarking or understanding that there are differences, that form of a benchmark, it could be appropriate.
5692 For the purposes of setting rates for a different incumbent, no, we don't.
5693 COMMISSIONER MENZIES: Now, I take it you agree with the essentiality test as it is now. And I'm curious to know that in other areas, mandated areas, do you think it would be useful for us to create a set of principles or criteria around those that define how decisions would be made to see what would fit into those areas?
5694 MR. MELDRUM: So as a lawyer I wonder if that actually would help or just introduce more ambiguities. I guess if they were very precise, then I'm sure it would be helpful.
5695 COMMISSIONER MENZIES: Okay.
5696 MR. MELDRUM: Precision can be pretty hard in this industry, it seems.
5697 COMMISSIONER MENZIES: Okay. Do you have any ideas about what they might be shaped around, any suggestions? You don't have to.
5698 MR. MELDRUM: I don't think we do.
5699 COMMISSIONER MENZIES: Okay. Should the essentiality test be applied on a national basis or regional, or otherwise? Québecor, for instance, suggested yesterday that urban/rural was most appropriate.
5700 MR. MELDRUM: I think it certainly depends on the product market. If we're talking about fibre to the prem, I think national almost works because there really are two ubiquitous broadband networks out there already, the cable network and the ILECs network, but in some cases I can see the market segment being much less than that.
5701 COMMISSIONER MENZIES: We've heard the argument here this week, and prior, that low-speed and high-speed Internet services constitute distinct separate product markets. What is your view, are they a single market or are they distinct markets?
5702 MR. MELDRUM: So you're referring to sort of 1.5 megabits versus 260?
5703 COMMISSIONER MENZIES: Yeah, and a number of numbers in between.
5704 MR. MELDRUM: Yeah.
5705 COMMISSIONER MENZIES: We've heard 50, we've even heard 20.
5706 MR. MELDRUM: We do think the discussion that occurred around it being a continuum, so if you're sitting at 5 megabits, well you can either go up or down from there and still end up with what you need, which is access to the Internet.
5707 Same thing if you're sitting at 50 or 100, you can go up or down from there.
5708 There's clearly a large gap between 1.5 and 260 in terms of the capabilities and the waiting times and those sorts of things.
5709 COMMISSIONER MENZIES: Right. Well, part of that view is --
5710 MR. MELDRUM: But, to try and draw a line
5711 COMMISSIONER MENZIES: -- as you were describing your fibre to the home project. You know, you're saying this afternoon that you can build, but there are people who are quite happy with the sort of speeds and the services they're getting over traditional networks and they just don't want their lawn dug up for the sake of the extra speeds.
5712 MR. McKAY: Sure. I mean, I can share with you our experience to date with our fibre build in terms of customer uptake on services that they could not get on our fibre to the node product, and our experience to date has been that only 8.5 per cent of our fibre customers are actually paying for speeds that they couldn't already have gotten on fibre to the node, and of that only .1 per cent are speeds that are over 100 megs.
5713 So you know, right now I would say the majority of our market is still below that 25 megabit threshold by far.
5714 MR. MELDRUM: Like in terms of the number of customers that are actually on the 260 in Saskatoon, you can count them on one hand. In Regina, I think...
5715 MR. ELTOM: Yeah, we have just over 38,000 fibre customers and there would be less than 50 province wide that are paying for 260 megabit service.
5716 MR. MELDRUM: And this is with a lot of marketing effort. It might be worthwhile, Brian, just to describe the effort that goes to a) get people to take the drop and get fibre, the door-to-door sales that we do, you know, and the opportunity to sample the higher speeds.
5717 MR. ELTOM: Yeah, basically what we do is once a fibre neighbourhood is enabled, we contact our customers through direct mail, through outbound calling, through a door to-door sales team, we have promotions. At minimum, a customer can try out the Mach-1 speed which is 100 megabit for no additional cost if they're already at our 5 megabit service.
5718 As well, if you're a non-TV subscriber, we have promotions for customers to try our IPTV service.
5719 And like I said, at the end of the promotional period, even though most customers take advantage of the 100 megabit speed promotion, 91.5 per cent of them pick something less and, like I said, 91.5 per cent pick a speed that they could have gotten on fibre to the node.
5720 So fibre today is not providing a huge lift for us in terms of revenue because customers, quite frankly the majority of them just don't need those speeds yet.
5721 Will they need them at some point? Absolutely, but I think that point is a little ways into the distance.
5722 COMMISSIONER MENZIES: Thank you. Do you think a bundled -- a service bundle constitutes a distinct product market as, you know --
5723 MR. MELDRUM: We certainly don't think so, we think it's a question of price, that the elements of the bundle are readily available in the marketplace.
5724 I can describe the types of bundles that we have if that would help you to understand why we don't see it as a distinct product.
5725 COMMISSIONER MENZIES: I understand. Now, just so we're clear on the specific natures of your market and a lot of the discussions at this hearing are about smaller ISPs and that sort of stuff.
5726 You've talked about not having any regress for unbundled local loops, or high-speed access services.
5727 Do you have any customers --
5728 MR. MELDRUM: We have some, but in terms of market share it's less than one per cent.
5729 COMMISSIONER MENZIES: How many small ISPs are there in your market?
5730 MR. MELDRUM: Five.
5731 COMMISSIONER MENZIES: Five. Okay. Now, if we stopped mandating high-speed services, would you still be offering them?
5732 MR. MELDRUM: That would be our intention.
5733 COMMISSIONER MENZIES: Okay. So going back to your original submission, and you don't need to look it up, but it's paragraph 33 for the record of your January 31st, you said that in the case of fibre networks there is no current incumbent.
5734 And I'm curious because you're not the only one making that argument. But what is your argument in terms of that, because it seems to me that the evolution of technology doesn't really deny the essence of incumbency in that sense.
5735 MR. MELDRUM: I think we're referring to that in the context of building a brand new network. It's not an extension of fibre to the node for us. Maybe for a small operator in a small town that might be what it is, it's just adding fibre to their fibre to the node. That's not the case for us, it's building a brand new fibre network from basically the CO to the customer's prem.
5736 We do try and salvage some excess capacity that exists in terms of the service to the cabinets, but in the end that network continues to operate and that's how you get two networks operating at the same time and it's against that background that we're suggesting there isn't an incumbency because it is essentially a brand new network.
5737 Did you want to add something, Brian?
5738 MR. ELTOM: Yeah, I was just going to add on to your point there around the fact that, you know, in the neighbourhoods we're building from a brownfield perspective, we have fibre to the node running in all of those neighbourhoods. That network needs to continue to run to serve the existing customers while we're building -- not only building the fibre to the prem network, but then as customers start to migrate over.
5739 So we have -- I'm trying to think of the number, we probably have a thousand, you know, DSL cabinets in our nine major centres and I can probably count on one hand how many of them are no longer serving a customer.
5740 So again, to sort of believe that fibre to the prem is just an extension of fibre to the node really isn't true in our case, we are building a brand new network from that central office to the customer's home.
5741 Are there some things like ductwork and things that we can take advantage of? Certainly there are some elements, but the vast majority of the cost is brand-new, which is why our fibre-to-the-prem build is more than three times what we spent to get into the fibre-to-the-node business.
5742 COMMISSIONER MENZIES: Now, you talked about it being too early in the deployment of fibre-to-the-prem to mandate access. If we chose not to, what do you think would be an appropriate period of time? I mean you spoke about having a 10-year plan in terms of your project -- is a 10 year project at this moment -- Bell suggested, you know, in terms of talking about a moratorium five years.
5743 So just what would be a timeline we might put on it? I mean you can say never as a preferred option but, if there was a number what would it be?
5744 MR. MELDRUM: If you are down the path to a number, we thought five years seemed awfully short. 10 years seems too long, so Goldilocks would say somewhere in the middle. Seven years would take us to the end of our build, so we would have been around the seven-year mark.
5745 COMMISSIONER MENZIES: Okay. Thank you.
5746 You said in your original submission -- I just wanted to touch on this -- that there should be some notation. I know we talked about some notation regarding conditions which if they were to change would remove a service from the conditional essential category. Do you recall what you were thinking about when you talked about some notation there?
5747 MR. McKAY: Well, as we understand it, you created an essentiality test which two services fits, but then you believed at that time that there were other services which should be essential until certain conditions occurred. Our suggestion was that those certain conditions be spelled out to make it clear what the path might be for each of those services.
5748 COMMISSIONER MENZIES: Do you have a specific suggestion on what those conditions should be?
5749 MR. McKAY: No, we don't and they would likely vary by service.
5750 COMMISSIONER MENZIES: Sorry, I didn't...?
5751 MR. McKAY: They would likely vary by service, which was in that category.
5752 COMMISSIONER MENZIES: Okay, thank you.
5753 What was the impact of our previous decisions on your fibre-to-the-node activity?
5754 MR. MELDRUM: Well, at that point we were built.
5755 COMMISSIONER MENZIES: Okay, thank you.
5756 The primary motivation for your fibre-to-the-prem build, you mentioned in your oral remarks its competition and others have made the point that its competition against cable companies, right? Is there anything different about -- I mean, given SaskTel's unique structure, is there anything different about your decision making process that brings in other factors other than the assumption around competitions with cablecos?
5757 MR. MELDRUM: I do get the opportunity to sit in on all of our board meetings and there are discussions at the Board from time to time about the public policy benefits that accrue from whatever investment we are doing and, in the end, those actually don't enter into the final decision-making process.
5758 We are expected to be a fully commercial operation. We have to be able to pay our debt and our owners look for a return on their investment that is commensurate with what other telecommunications companies in Canada provide. So while there is lots of talk about the potential benefits to the economy and society and everything else, in the end it does boil down to the numbers.
5759 COMMISSIONER MENZIES: Okay. Thank you.
5760 Is it technologically possible, as CNOC argued the other day, for fibre-to-the-premises to serve customers who prefer multiple service providers without establishing secondary drops or anything like that?
5761 MR. MELDRUM: So we did go back to our engineers and the first response we got was that there are technical problems. We want the opportunity to go back and talk to more than one engineer and understand exactly what they are saying.
5762 We would like to take that as an undertaking because, as we say, the initial take was that it was problematic.
5763 I don't know, Brian, if you want to add to that, but --
5764 MR. ELTOM: Well, I know when we were discussing it last night, I think from a broadband perspective it might be okay. I think where you might get into issues is around the video services because you do need to make sure that when you are providing those signals they are at a constant bit rate or else the picture quality and sound quality can't be impacted.
5765 So if, let's say, the competitor has a different standard for how they deliver that video and audio to the customer's home from our own, I don't know if the ONT in the home is intelligent enough to distinguish between multiple providers. I think that's the discussion we had last night.
5766 I think on the broadband side it's probably okay. I think video becomes a lot trickier because you do need to guarantee the picture quality and sound quality that customers have come to expect. And if we are not all working with the same standard, which I know even as ILECs who are on IPTV, we don't always provide the same standards for how we deliver video, that that can be a problem.
5767 COMMISSIONER MENZIES: Okay. An undertaking on that to get back with more detail would be welcome. So thank you.
5768 Now, it's my understanding that fibre-to the-prem basically provides the same suite of services that DSL-based and DOCSIS-based technologies do, albeit with higher access speeds. Incumbents are required, as you know, to provide speed matching for wholesale high-speed access services. So I would like your comment on the possibility that for technological neutrality reasons why wouldn't incumbents have to make fibre-to-the-prem access available in order to meet speed matching requirements?
5769 MR. MELDRUM: So our view is that that that would be unbundling and we don't think there is the case to be made to have unbundling of fibre.
5770 COMMISSIONER MENZIES: Thank you. Your answers are direct and clear in terms of that.
5771 MR. MELDRUM: I think prairie people tend to be that way.
5772 COMMISSIONER MENZIES: Yes, it's refreshing. Thanks.
5773 In the areas where you have overbuilt existing copper, right, what are your plans for the copper?
5774 MR. MELDRUM: So today we will convert our broadband customers, but our voice customers are remaining on that copper. And at this point in time we do not have a program or even a business case to take the copper out of the network, because we do support our voice customers on that copper network only.
5775 So right now we will continue to have a copper network for our voice-only customers and our goal is to migrate our broadband customers onto the fibre network.
5776 COMMISSIONER MENZIES: I think those are my questions. Thank you.
5777 THE CHAIRPERSON: Commissioner Molnar...?
5778 COMMISSIONER MOLNAR: I want to make sure I understood what you said. Was it your position that you thought the issue of whether or not fibre-to-the-prem should be deemed essential and made available, should be re-looked at in seven years? Is that what you said?
5779 MR. MELDRUM: Yes.
5780 COMMISSIONER MOLNAR: Okay. And you say that regulatory certainty is very important.
5781 MR. MELDRUM: Having the opportunity to sit in on the board meetings, I know that the current regulatory uncertainty causes them a fair bit of angst given the size of the investment. That goes all the way up to the Crown Investments Corporation that oversees all of the Crown Corporations.
5782 COMMISSIONER MOLNAR: Right. So you initiated this build without regulatory certainty, Bell said five years, you say seven years, but essentially it sounds to me like you want to continue in a period of regulatory uncertainty because a decision will be determined later. Do I misunderstand your position here?
5783 MR. MELDRUM: Well, the first preference would be that the Commission decide that unbundling of fibre isn't necessary, but I guess every decision that the Commission makes is subject to changes in the marketplace. I think, as the Competition Bureau commented, concern can arise with two providers if there is an figure is retail competition. So, you know, I guess every decision the Commission makes is subject to a change in circumstances, but to get something definitive is certainly going to be preferred to being in limbo.
5784 COMMISSIONER MOLNAR: Okay. Let me understand how much risk this really is for you as it relates to your fibre-to-the-prem build. If I heard you right, you said at this point, using your fibre-to- the-node you had less than 1 percent high speed access. Is that right? Competitors?
5785 MR. MELDRUM: Oh, yes.
5786 COMMISSIONER MOLNAR: And so why is it you assume that fibre-to-the-prem -- that the regulatory uncertainty around your fibre-to-the-prem build, if when fibre-to-the-node was unbundled the impact was less than 1 percent of market share? What is the big risk with fibre-to-the-prem? Help me understand why it has the potential to be so much more risky than what occurred on your fibre-to-the-node build.
5787 MR. MELDRUM: Well, I think there is two aspects of that. Maybe, first of all, just talk about the fibre-to-the-prem build itself. It is our largest capital undertaking that the Corporation has ever taken. We are essentially bidding the farm on fibre-to-the-prem delivering what everybody hopes it will deliver.
5788 But if you think of the possibilities of technological change, I'm sure as we talk there are hundreds of people that are trying to figure out how to do what fibre-to-the-prem does cheaper and better. You know, there are talks about launching balloons that will provide broadband cheaper. You know, Google has killed many, many industries and this is one of the things they are interested in. So yes, the notion that you have to put all your money in upfront and hope that you won't be passed by technology that's either cheaper or more ubiquitous, is a huge risk.
5789 MR. ELTOM: I could add to that, too.
5790 COMMISSIONER MOLNAR: Those are not regulatory risks.
5791 MR. MELDRUM: Yes.
5792 COMMISSIONER MOLNAR: I understand that making an investment today is a risky endeavour.
5793 MR. MELDRUM: So to go to regulatory risk, the issue is that today there are people here. We have asked ourselves a lot as to why the ISPs that we have seen in this room haven't come to Saskatchewan.
5794 One of the major ISPs in the country is registering as a CLEC. We have no idea what their plans are, because of course they don't share them with us, but I have to assume that they believe that the current framework is something they can make money off in terms of reselling either SaskTel's services or the cable company services. So I think it's just a question of time that the possibility exists that there will be competitors that are reselling services.
5795 COMMISSIONER MOLNAR: Okay.
5796 MR. MELDRUM: And it is public. It's Primus that have registered as a CLEC in Saskatchewan.
5797 COMMISSIONER MOLNAR: I'm going to ask you because I asked the party before you. Our speed matching today does not, as the decision was laid out, directly apply to fibre-to-the-prem, but the concept of speed matching was a policy decision. There wasn't a determination that the fibre-to-the-node was an essential facility and there was a mandate to deliver it to competitors.
5798 So there is this request that we hold off and look at fibre-to-the-prem in the future and whether or not it should be unbundled -- deemed essential and be unbundled. That unbundling enables delivery of a number of services, not just Internet, and speed matching relates to Internet service, right.
5799 So I asked the party before and I would like to ask you as well, if there was a determination to wait until there is more fibre-to-the- prem, you know, deployed, we saw the kinds of services that might be delivered over it. If the decision was to wait, but the speed matching principle was extended to fibre-to-the-prem in the interim, what kind of outcome would you see from that?
5800 MR. MELDRUM: I think that would take us back to our original business case, because that essentially is unbundling and we would have to redo the economics, I would think, and return to the Board Well, we return to the Board every year, but we would return to the Board to have a discussion around exactly where that leaves the program.
5801 COMMISSIONER MOLNAR: Okay. Those are my questions.
5802 THE CHAIRPERSON: I just have one question and it's to get a better sense of your answer with respect to bundles. I understand that you are saying it is not a separate product market and this assumes, and I think this is correct, that bundles in fact give a discount total to each individual service being taken individually.
5803 So is it your position that a hypothetical firm with market power that provides a bundle could not impose a small but significant increase in that bundle cost in a non-transitory way and still remain profitable?
5804 MR. MELDRUM: It sounds like that would be possible, yes.
5805 THE CHAIRPERSON: So doesn't that lead you to suggest therefore that it is a distinct product market?
5806 MR. MELDRUM: I guess only to the extent that the bundle was so attractive that it was dominating the market. I don't think that the bundles that we are using head that way at all and I can describe, like, there are two really separate distinct types of bundles that we have in the marketplace.
5807 THE CHAIRPERSON: Okay.
5808 MR. MELDRUM: One is really almost a loyalty factor where if you don't have television in your bundle you get five dollars of for every service you have over two. The other set of bundles are all around television because that is a very competitive product where we are going toe to toe with Shaw and Access Communications where we will provide an additional incentive to take that bundle that includes television, but for us to increase those prices would be felt due to the presence of Shaw and Access.
5809 THE CHAIRPERSON: So you couldn't do it --
5810 MR. MELDRUM: Ourselves, no.
5811 THE CHAIRPERSON: -- in a non-transitory way?
5812 MR. MELDRUM: Right.
5813 THE CHAIRPERSON: You could do it for a short period of time?
5814 MR. MELDRUM: But not a long time.
5815 THE CHAIRPERSON: But not long?
5816 MR. MELDRUM: No.
5817 THE CHAIRPERSON: Okay. Understood.
5818 MR. MELDRUM: I'm sorry?
5819 THE CHAIRPERSON: Understood. Did you have anything -- I was wondering if you had anything to add.
5820 MR. MELDRUM: No.
5821 THE CHAIRPERSON: No, okay. No, that was -- those are our questions. Legal doesn't have any questions, so we are good. Thank you very much.
5822 I understand that you will be participating in the reply phase through videoconference.
5823 MR. MELDRUM: Videoconference, yes.
5824 THE CHAIRPERSON: Okay. So we will see you then. So thank you very much.
5825 MR. MELDRUM: Thank you.
5826 THE CHAIRPERSON: Thank you. So we are adjourned until 9 o'clock tomorrow morning. Thank you.
--- Whereupon the hearing adjourned at 1430, to resume on Friday, November 27, 2014 at 0900
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