ARCHIVED - Transcript of Proceeding

Volume 9, 4 December 2014

TRANSCRIPTION OF PROCEEDINGS BEFORE THE CANADIAN RADIO-TELEVISION AND TELECOMMUNICATIONS COMMISSION

SUBJECT:

Review of wholesale service and associated policies

HELD AT:

Outaouais Room
Conference Centre
140 Promenade du Portage
Gatineau, Quebec
4 December 2014

Transcription

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

Transcription

Review of wholesale service and associated policies

BEFORE:

ALSO PRESENT:

HELD AT:

Outaouais Room
Conference Centre
140 Promenade du Portage
Gatineau, Quebec
4 December 2014

- iv -

TABLE OF CONTENTS

PAGE / PARA

PHASE II

REPLY BY:

- v -

UNDERTAKINGS

PAGE / PARA

Gatineau, Quebec

--- Upon resuming on Thursday, December 4, 2014 at 0900

10921   LE PRÉSIDENT : À l'ordre, s'il vous plaît.

10922   Alors, Madame la Secrétaire.

10923   LA SECRÉTAIRE : Merci, Monsieur le Président.

10924   We will now hear the oral reply from CNOC.

10925   Go ahead. You have 10 minutes after you introduce your panel.

REPLY

10926   MR. TACIT: Thank you.

10927   Good morning. My name is Chris Tacit, counsel to CNOC.

10928   With me today are William Sandiford, Peter Rocca, Keith Stevens, Marc Gaudrault, Matthew Stein, Paul Andersen, Bram Abramson, Christopher Hickey, Stuart Jack, Markus von Wartburg, Alex Pavlovic, Ricardo de Avillez, and Dustin Chodorowicz who is appearing by videoconference link.

10929   I will now turn the presentation over to Bill Sandiford.

10930   MR. SANDIFORD: Good morning.

10931   Our reply is focused on FTTP access, BAS, ULL forbearance, costing reform, EOI and multicasting.

10932   Incumbent proposals include denial or delay of FTTP and speed-matching. Adoption of any of these proposals would be disastrous for consumers.

10933   There are a growing number of areas where FTTP has been deployed and no copper, DOCSIS or FTTN exists.

10934   As Attachment 1 to this presentation shows, peak connection speeds are growing exponentially. FTTP is required by competitors to meet the demand for high-capacity services.

10935   Without competitor access to FTTP, consumers are denied competitive choice. No speed-matching should be denied.

10936   Mandated FTTP access will not stifle incumbent incentives to invest. Competitors, in their role as access seekers, will actually help expand adoption of this technology as was the case with FTTN. The greater choice in FTTP services provided by competitors will increase penetration, which will then lead to the increased development of services and applications that rely on higher speeds and capabilities. Ultimately, a critical mass of consumers on FTTP will bolster the business case to deploy the technology in areas where it does not yet exist.

10937   The willingness of some competitors to deploy fibre in certain markets should not be used as justification for a regulatory policy that elevates investment objectives above the stimulation of competition. Such a policy is inefficient from a whole economy perspective.

10938   We are skeptical of the notion that FTTP deployments increase incumbent risk that must be reflected in wholesale costing and pricing.

10939   - An incumbent failing to invest in FTTP would not be able to compete with the other incumbent in the same area;

10940   - An incumbent's average cost of capital already accounts for the entire risk profile of the company;

10941   - SaskTel and TELUS admit that they do not use a higher cost of capital for FTTP;

10942   - Cogeco is already connecting wholesale customer end users to FTTP;

10943   - Bell Aliant completely leapfrogged FTTN technology with FTTP; and

10944   - Shaw says that they will continue investing regardless of the outcome of this proceeding.

10945   Nevertheless, if you believe that there is an additional risk associated with fibre builds, that can be addressed through the pricing of FTTP access as we have proposed, rather than through an outright access ban or further "regulatory holiday." This approach has been explicitly adopted in other jurisdictions. The pricing of FTTP access should also reflect the decreased risk associated with competitors acting as a wholesale channel to fill up incumbent FTTP pipes.

10946   Term and volume commitments can also be used to reduce any incumbent risk and wholesale prices. However, an appropriate month-to-month rate structure applicable to the access portion, including the fibre drop, must also be made available. This will ensure that term and volume contracts do not become barriers to entry.

10947   Telecommunications is a scale business and competitors need BAS in order to take advantage of scale efficiencies to serve customers better.

10948   Contrary to some submissions, BAS is required by competitors to:

10949   - deliver higher quality of service levels to consumers through greater control over their networks and underlying costs;

10950   - leverage investment in transport to serve new customers; and

10951   - deploy a variety of features, including multicasting, which serve to optimize end user experiences.

10952   BAS also provides a path to the forbearance of aggregated HSA services where the relevant forbearance conditions we have proposed are met.

10953   The incumbents point out that only six competitors indicated that they would subscribe to BAS. This overlooks the fact that these competitors account for a very high proportion of end users served by independent ISPs. A number of other CNOC members have also indicated that they will seriously consider the business case for using BAS when it becomes available.

10954   For ILECs, BAS implementation is as simple as allowing interconnection at the same existing Ethernet switches used by them to deliver their own Internet and IPTV traffic, as shown in Attachment 2, and similar to how it is done for their other existing services. For cable carriers, BAS is analogous to the disaggregated TPIA service that used to be available.

10955   We believe that the incumbents should be required to tariff BAS quickly in a follow-up proceeding based on anticipated competitor demand. However, in order to mitigate the risk of service deployment, the incumbents would only be required to enable BAS in a given local exchange (or in the case of cable carriers to head-ends situated in such an exchange) three months following a competitor request.

10956   We have listened to the submission of parties on ULL forbearance. 250,000 unbundled copper loops are still in use by competitors and no successor technology platform such as BAS is available today. Accordingly, we believe it would be premature to forbear from the regulation of ULLs, which would force us to abandon these customers. The deployment of BAS would not only prevent competitor assets from being stranded, it would provide a roadmap to an exchange by exchange forbearance of ULLs in the future.

10957   Proper costing is critical to economically efficient pricing of mandated wholesale services.

10958   We are encouraged by the ongoing widespread support for Phase II costing to price these services. No other wholesale pricing method proposed is as pro-competitive and economically efficient when properly applied. Our proposals in this area are designed to make it simpler to apply and speed up service introduction.

10959   The efficient operator model, which the Commission has jurisdiction to implement, drives incumbent efficiency, accounts for scale effects of incumbents and competitors, and can price bandwidth, thereby reducing the amount of work required to price new service speeds. We are asking the Commission to study this model more carefully in a follow-up proceeding.

10960   We urge the rapid adoption of all of the other costing measures we have proposed.

10961   Contrary to the claims of the incumbents, cost of capital is a widely accepted and transparent method of accounting for enterprise risk through factors known as beta and alpha adjustments. This approach can be adapted to the calculation of Phase II costs to account for any unusual risk. It should not be confused with sensitivity analysis as SaskTel tried to do. Markups on Phase II costs should be reserved solely for the recovery of incumbent fixed common costs.

10962   A review of usage-sensitive rates, such as CBB and cable access rates, cannot wait for the outcome of any other proceedings. High usage-sensitive rates constitute a significant barrier. Competitors will not be able provide IPTV services and triple play bundles. The current rate structure will soon exclude competitors from even serving customers that need 25 Mbps.

10963   Rogers claims that CBB rates are too high. They are wrong. They have cited a growth in data of 60 percent per year. Using this number applied to peak capacity, in only five years the average CBB costs for a TPIA end customer on the Rogers network will increase by $159.36 per user relative to the present costs.

10964   Due to the unique circumstances in which those rates were first set, which we have already discussed, a review is required now to ensure that:

10965   - the cost model calculations are based on capacity and not usage-based costing data;

10966   - the cost drivers that have the most impact are reviewed thoroughly and then updated regularly; and

10967   - interveners are able to participate in this process under the expanded disclosure rules set out in TRP 2012-592.

10968   EOI is the surest way to prevent non-price discrimination in the provision of wholesale services by incumbents to their competitors.

10969   Incumbents claim that this will be an extremely expensive process. We would ask that you study the issue before coming to any conclusions on costs and that you compare the costs with the corresponding economic benefits that would be expected, which we believe will be very substantial.

10970   We object to the incumbents' claims that they would have to subject their retail services to their current wholesale processes. Also contrary to incumbent claims, the adoption of EOI is not functional separation nor necessarily linked to it.

10971   EOI is actually premised on incumbents treating customers the same, whether they are their retail customers or those of their competitors.

10972   Multicasting is an essential telecommunications functionality that competitors require to offer consumers competitive IPTV services and triple play bundles. Contrary to incumbent submissions, reserving this functionality for themselves while denying it for their competitors constitutes undue discrimination. We urge the Commission to institute a proceeding as soon as possible to explore the manner in which this capability will be offered in conjunction with all incumbent high-speed access services.

10973   As we have shown in this proceeding, Canadian consumers face high prices, limited choice and low average speeds. We urge you to adopt our recommendations to prevent this situation from getting worse.

10974   Thank you for your attention and the incisive questions you have posed to us in this public hearing. We would be happy to accept any questions that you have.

10975   THE CHAIRPERSON: Vice-Chair Menzies.

10976   COMMISSIONER MENZIES: Thank you. I'll try to make my questions incisive.

10977   Just on the framework, there's an implication in this that your customers -- and just remind me because it's been a while since we spoke. You serve primarily higher-speed customers as opposed to lower-speed?

10978   MR. TACIT: Well, that's the thing, as an association, we represent a diversity of members. Some serve lower-speed, some higher-speed. Marc in particular can address that.

10979   COMMISSIONER MENZIES: Sorry, I'm just trying to get at the --

10980   MR. TACIT: Right.

10981   COMMISSIONER MENZIES: That's fine. I mean I understand that there would be a variety, but --

10982   MR. TACIT: But there are a number who --

10983   COMMISSIONER MENZIES: -- but this seems to be on the need to get that higher speed.

10984   MR. TACIT: Yeah. There are a number who focus on that market explicitly, which is underserved by the incumbents.

10985   COMMISSIONER MENZIES: Okay. I'm just kind of going to paragraph 9 here of your oral remarks:

"...a critical mass of consumers on FTTP will bolster the business case to deploy the technology..."

10986   Now, SaskTel has some experience with this, as you've heard, right, and others have commented along these lines but probably SaskTel most, with the most facts.

10987   The consumer pickup of fibre-to-the-prem where it's available is, you know, only in the roughly 25-percent range, right? Lots of people will take it for trial and then they will go back because their needs are already being met by existing infrastructure, right?

10988   So how will competition, as you suggest -- so if there's more competition for that 25 percent who are picking up, there's going to be a lower return on investment, right? So how will competition drive more build, as you suggest here?

10989   MR. TACIT: I'm going to let Markus answer that one.

10990   MR. von WARTBURG: So that is a little bit of a longer-term phenomenon and one of the reasons why consumers are probably not picking up fibre right now is because they don't see the value of fibre right now. There aren't applications out there for them to need fibre.

10991   So once a significant portion of consumers are on fibre, companies, third-party developers, they find it in their interest to develop applications that use those symmetrical high speeds and so then users may actually be interested in signing up for fibre because these applications exist.

10992   So, in a sense, right now it's this critical mass currently that does not exist for companies to really develop these applications and services that rely on symmetrical high speeds.

10993   COMMISSIONER MENZIES: Okay. It kind of sounds like demand is low but demand will be high once demand becomes high.

10994   MR. von WARTBURG: It is a bit of a chicken-and-egg thing, yeah.

10995   COMMISSIONER MENZIES: Thanks.

10996   MR. von WARTBURG: You need a critical mass.

10997   COMMISSIONER MENZIES: Okay.

10998   MR. TACIT: But you won't get that critical mass unless the price drops and I guess what we're saying is the incumbents --

10999   COMMISSIONER MENZIES: That's what I was trying to get at. If the price drops, how do you invest in build?

11000   MR. TACIT: Well, none of them have said they would stop investing. I think that's the point. They have just said there may be some cases where there would be some delays.

11001   COMMISSIONER MENZIES: Okay. I was just trying to understand that.

11002   And in paragraph 10, I guess, just to make sure I understand this fully, you say:

"...justification for a regulatory policy that elevates investment objectives above the stimulation of competition."

11003   I don't quite understand that from, you know, an economic perspective because I don't understand how you could have -- and I don't think you're quite saying this but I want to give you the opportunity to dispossess me of the notion. But it could be read as if you're saying that -- you're implying that competition can exist without investment.

11004   MR. TACIT: No, I'm not. All I'm saying is that if the Commission were to make a decision that's focused predominantly on investment incentives when the evidence is that there's still going to be the investment for the most part in FTTP because it is where everybody is going and the proof of that is that it's being rolled out, if as justification to encourage more investment somehow, some additional small marginal amount, access is denied, it would have an anticompetitive effect.

11005   So, you know, we're saying the tradeoff really should be in favour of competition because as prices fall, penetration of fibre will actually increase, actual connected fibre as opposed to fibre that passes by homes. So that's the central point. It's a question of where you go on the continuum and so our thesis is really very simple, it's you shouldn't believe that they're going to stop investing. We don't think there's really additional risk. We think the risk of not investing is much greater for them than investing and we see that from several companies that have admitted they don't actually use an internal higher rate of return to assess those projects. But even if you were to believe that there is an additional risk, you can compensate for that in a rate rather than delaying or denying access.

11006   MR. GAUDRAULT: If I could add.

11007   It's just the nature of it is -- you know, you're saying in your prior question that they're going to get less revenue and it will affect their incentive, but the reality is that they're not mandated now and yet they haven't built, we're behind by all accounts, and what they need is just more subs. Like adding a sub that's putting 60-80 percent of that dollar is what you need more to justify those builds.

11008   COMMISSIONER MENZIES: The speed-matching decision, didn't it intentionally stop where it stopped in the hope that by leaving some open water ahead investment would occur --

11009   MR. TACIT: Well, I don't know what the intent --

11010   COMMISSIONER MENZIES: -- would follow at an appropriate date?

11011   MR. TACIT: I don't know what the intention was because -- but we know that the record of the proceeding of the speed-matching case was then focused predominantly on FTTN because that was the technology that was at issue and that was the technology that at that time competitors hadn't had access to for some five- or seven-year period since it started being deployed and so that was the urgency of the moment.

11012   What we're saying now is FTTP is that same -- we're in that same situation today and I think if you look at what happened with FTTN you can be comforted that if you mandate FTTP it isn't going to result in some terrible disinvestment incentive. In fact, the opposite will be true, there will be --

11013   The other part of this is we have to remember that there are a lot of parts in this country where copper and -- either FTTN doesn't exist and so when they go straight to FTTP we're going to be completely denied those markets. In MDUs that's happening a lot and in those cases they're even pulling out the copper. Some cities are being overbuilt that have marginal amounts of FTTN. For example, Kingston, Ontario, apparently is going to go all FTTP. So there are all these other places.

11014   Quebec City, they're not maintaining their copper very well in areas where they put FTTP. They're not pulling it out but they're not particularly maintaining it well. We've had reports from members that say, you know, "We can't get loops that qualify anymore even though in theory the service is still there."

11015   So basically, we're going to be shut out of a market. They've already had, you know, a head start in this area and they've done what they've done. We think that the head start should terminate now.

11016   COMMISSIONER MENZIES: Okay. So if access was granted to fibre-to-the-prem in some form, what would be wrong with a structure in which rates were negotiated, backstopped perhaps either -- but backstopped, just leave it at that, where they would negotiate it? Wouldn't that -- by having rates negotiated, wouldn't that incent your members to develop a greater value proposition when they go into negotiations with the providers?

11017   MR. TACIT: I think the best value propositions are those that are created by competitors fighting it out in the marketplace. The whole point of this is that access --

11018   COMMISSIONER MENZIES: I think we agree on that.

11019   MR. TACIT: Yeah.

11020   COMMISSIONER MENZIES: I was just trying to say so what --

11021   MR. TACIT: Yeah.

11022   COMMISSIONER MENZIES: So what I'm saying is that you would be incented to compete for the greater value proposition if --

11023   MR. TACIT: Go ahead, Marc.

11024   COMMISSIONER MENZIES: -- if it was negotiated?

11025   MR. GAUDRAULT: So I think the problem is that we don't have a negotiation position to start from and I think this is where BAS plays a big part in that. If we have a base, then we can say, "Look, we want to go to BAS." And once we're in BAS, we can say, "Look, we want access to fibre or else we kind of have to go and build our own," at which point, "Well, hold on, you already built, why don't you just give me access to that and then I keep servicing my customers."

11026   In a scenario like that you have a direct substitutable thing that you can -- it allows us to play. Right now, I think part of the big issue is that the way things are set up we can't actually effectively compete. We're here, we're in the market, we can compete on services and whatnot, but at the end of the day we're more than that.

11027   And so yes, on one hand, we're service-based competitors but we can and want to be more than that and I think BAS is a big component of that.

11028   COMMISSIONER MENZIES: Okay. Thanks.

11029   MR. STEIN: I think from a CNOC --

11030   COMMISSIONER MENZIES: Go ahead.

11031   MR. STEIN: If I may just add one more point.

11032   CNOC has been trying to negotiate for fibre-to-the-prem access for a very long time and in fact what we're continuously told and put off towards is "Wait until after this hearing. Wait until after this hearing, we'll see if that's mandated. That's not on the table. We're not going to have that negotiation."

11033   In fact, we've made no material headway on that in the years that we've tried since --

11034   COMMISSIONER MENZIES: Yeah. My point was whether if some access was --

11035   MR. STEIN: Backstopped or something.

11036   COMMISSIONER MENZIES: -- made available, wouldn't it be better to have a negotiated rate?

11037   MR. STEIN: Well, perhaps, but I would say that the first step would be to mandate it and then to allow us to negotiate off-tariff rates below that perhaps or in addition to our side and so on.

11038   COMMISSIONER MENZIES: Okay. Thanks. That's what I was looking for.

11039   MR. TACIT: And the reason for that is the imbalance in market power. I think that's the issue. We're never going to be able to negotiate on equal terms for access.

11040   COMMISSIONER MENZIES: Right. Okay. So I just need you to comment then too, without reopening the debate too large, but Bell pointed out for instance -- and I wanted your response on that -- that you say you're not able to compete but they point to a 17-percent market share in Ontario and Quebec and success in terms of that. And those two comments seem inconsistent, so here's your opportunity to tell us why in your view once again Bell is wrong.

11041   MR. TACIT: Bill is going to take that.

11042   MR. SANDIFORD: So Bell points to a 17-percent number where competitors currently are in their market today, up a measly 2 percent from 15 percent several years ago. Nationally that number is 8 percent today according to the latest Monitoring Report, up another measly 2 percent from where it was prior to us getting FTTN access in the speed-matching proceeding, where competitors fell as low as 6 percent.

11043   Many years ago competitors in the Internet access markets enjoyed double digit numbers and when we got locked out of the access to higher speeds we slowly dwindled in market share while the incumbents took advantage of their head starts in these areas to increase theirs, and we dwindled and dwindled down to these single digit numbers nationally.

11044   Since speed-matching has come in over the last two years, we've been able to claw and crawl our way back up 2 percent and hopefully growing, but if we are denied access to FTTP, those numbers will start going the other direction again very quickly.

11045   MR. GAUDRAULT: If I can add also, I think a big chunk of that growth happened in disaggregated TPIA. So by the time aggregated actually rolled in and CBB took effect, we are seeing that the rates are set wrong and at this point in time we are faced with raising rates to our customers and being priced out of competition.

11046   But I think this is a factor of timing. If not for the current setup -- like we have been waiting for rates on 25, 35, 45 Mb for some time now. I think there is a pent-up tension on these rates. I think it has taken the focus away from what ought to be the central focus of this hearing, which is despite having aggregated, it is still not enough for us to really compete.

11047   Even here, you know, the mention of service-based competition, but like we are more -- we are more than that, except that with aggregated that's kind of what is the max we can do.

11048   COMMISSIONER MENZIES: Okay. Paragraph 19, your comment on BAS, is that an adjustment in your position?

11049   MR. TACIT: I'm sorry?

11050   COMMISSIONER MENZIES: Paragraph 19, you say:

"However, in order to mitigate risk of service deployment, the incumbents would only be required to enable BAS in a given local exchange."

11051   MR. TACIT: Yes. This was to address their claims that they would be required to put in a whole tonne of stuff at the outset that would cost them all this money and there would be no demand.

11052   COMMISSIONER MENZIES: Okay.

11053   MR. TACIT: So we are saying let the demand materialize.

11054   I think Peter can say more.

11055   MR. ROCCA: I think there's really been a lot of confusion or misinformation that has come out on what BAS is. You know, the ILECs like to say that it's complex and difficult and unnecessary and expensive, but as we have shown in Attachment 2 that, you know, the framework is there.

11056   I'm not sure if you have had the opportunity to look at this attachment, but this is Bell's actual -- this is an excerpt from something that they submitted. So this is not a CNOC diagram. This is a Bell diagram.

11057   And in this diagram first, I would like to say they show BAS. While it may seem a little prophetic, that is the Bell BAS, not CNOC's BAS. So the BAS there is actually the connection to their aggregated solution

11058   But our proposal is really to connect in the same spot, you know, in the exact same way and to the exact same switch. You know, this is not new, it's not difficult, it's not expensive. This is networking at its most basic. I can see why the incumbents wouldn't want us to have something that allows us to innovate and ties us to their aggregated platform, but it really doesn't benefit consumers and allow us to compete.

11059   COMMISSIONER MENZIES: Thanks. And also --

11060   MR. STEIN: Actually, it reminds me that in human terms or simple terms what BAS really is, is most akin to what we had with the ULL framework in CLECs. The ULL itself, then being that non-replicable last piece at the very, very end towards the customer, that's what BAS is. And the same, we had a CLEC had their switch in their middle mile and all they needed was to then build in a co-locate and then use that ULL. It's the same thing. The ISP has their switch and their middle mile and built in a co-lo and then uses BAS to reach the customer across that last smallest piece. That's all it is.

11061   COMMISSIONER MENZIES: Okay. I also wanted to know, when you say you refer to a quick follow-up proceeding there based on anticipated competitor demand, is that the -- am I going to assume that is the six that you referred to in paragraph 17?

"The incumbents point out that only six competitors indicated that they would subscribe to BAS."

11062   So we are talking about anticipated --

11063   MR. GAUDRAULT: So one of the interrogs that were posed to us was to show demand and I think we have just submitted that. It's significant. Like we are --

11064   COMMISSIONER MENZIES: Okay. That's good.

11065   MR. GAUDRAULT: By the way, sorry, I just want to make -- I noticed there was an error in our submission I want to correct and I want to do it right now just so that the record is clear. In paragraph 27 we said:

"Rogers claims that CBB rates are too high."

11066   It should say too low. Sorry about that. I wish they were claiming that they were too high.

--- Laughter

11067   COMMISSIONER MENZIES: Gotcha.

11068   MR. GAUDRAULT: If I could add, just on BAS, I think the point is that it is the smallest unit that is regulatable. It's the lightest footprint the Commission can have, it's the easiest to cost, it is the least contentious. ULLs is like the most essential part of the whole system.

11069   COMMISSIONER MENZIES: Sure.

11070   Speaking of paragraph 27, I guess, we get in there; it's mostly about CBB rates. But it also kind of -- it has emerged increasingly in here that there are at least three, four separate areas that we are looking at and they can be defined geographically or almost by rate. In the Atlantic it's a much different market than the Ontario-Quebec market which is different from the Manitoba-Saskatchewan market which is different from Alberta-B.C.. But those also seem to be -- I think, to the best of my recollection, MTS does CBB, but in those other markets its flat rate, right?

11071   MR. TACIT: Well, MTS does have CBB and it's the lowest of all, it's basically it.

11072   COMMISSIONER MENZIES: Sorry.

11073   MR. TACIT: MTS does have CBB --

11074   COMMISSIONER MENZIES: Right, and it has the lowest rate.

11075   MR. TACIT: -- and it has the lowest rates but SaskTel and TELUS do not.

11076   COMMISSIONER MENZIES: Right, SaskTel, Shaw --

11077   MR. TACIT: Correct.

11078   COMMISSIONER MENZIES: -- TELUS. And in the Atlantic it's all flat rate, as well, right?

11079   MR. TACIT: Yes.

11080   COMMISSIONER MENZIES: So is the flat rate billing model better for competition or not? Because I mean BCBA, which is really the only voice we have heard from the rest of the country, they don't seem to mind it.

11081   MR. TACIT: But we also have representatives in the West as well. So you know, I think if rates are done correctly I think the most economically efficient model is one that has CBB, but we don't particularly mind the flat rate model as long as rates are set correctly.

11082   I don't think -- if your question is trying to get out why is competition not as developed in other areas as it is in Ontario-Quebec -- I don't know if that's what you're trying to get at, but I don't think -- I think there are two issues that we are trying to bring to your attention.

11083   COMMISSIONER MENZIES: Well, I mean, I guess it's different types of competition, I guess, if you are talking about volume of competitors and that sort of stuff. Because I mean the rivalries between the ILEC and cableco is certainly intense.

11084   MR. TACIT: And yet the Monitoring Report shows that actual retail prices are lower in Ontario and Quebec despite that. I think what you see is a lot of promotional activity out West, but in terms of actual stable retail rates after the promos are over --

11085   COMMISSIONER MENZIES: Yeah. I won't get into that because there are lots of different ways to measure consumer benefits in terms of that.

11086   MR. GAUDRAULT: TekSavvy don't --

11087   COMMISSIONER MENZIES: Anyway, I was just trying to get your comment on the flat rate.

11088   MR. TACIT: The point is, if it's done properly either can work.

11089   COMMISSIONER MENZIES: The only thing that matters is the price.

11090   MR. TACIT: Well, no, it's to get it right. It's not a matter of --

11091   COMMISSIONER MENZIES: I don't want to say "if the price is right".

11092   MR. GAUDRAULT: It's certainly an important part of it.

11093   COMMISSIONER MENZIES: Okay. Can you -- you don't have to do it right here, but if you could provide us with how you calculated that $159.36 at paragraph 27? I think that would be useful.

11094   MR. TACIT: Peter can explain.

11095   MR. ROCCA: I can provide it to you right now, if you would like.

11096   COMMISSIONER MENZIES: Sure.

11097   MR. ROCCA: I even have a spare copy.

11098   So right now based on 1.2 Mb per second, which is the average peak demand per customer on the Rogers networks -- so we are keeping on the Rogers network for this calculation -- it is currently at the current rate of -- CBB rate of $1,400 per 100 megabits. It works out to $16.80.

11099   If you take that and add 60 percent capacity growth, next year is $26.88; the year after $43.01, $69, $110, $176 after five years. And the delta between, you know, today's rate and the $179.16 is $159.36.

11100   Even if you don't accept the rates as high as 60 percent growth, because I think Rogers is playing a little bit of catch-up, you know, in terms of perhaps our customers are a little more leading in terms of the adoption of over-the-top, Netflix, et cetera, but even if you use the CMR rate of 50 percent growth, that number goes from $16.80 today to $110.78.

11101   And even if you wanted to be ultra conservative and say it's only 40 percent growth, you know, that's $74 in five years, or if you take that out over the entire ten-year costing cycle it's $485.95. You know, on a very conservative 40 percent growth over the life of that costing period, you end up with a $485.95, per user, CBB component.

11102   MR. TACIT: Actual cost.

11103   MR. ROCCA: That is the actual.

11104   COMMISSIONER MENZIES: Paragraph -- sorry.

11105   THE CHAIRPERSON: So it's always hard to follow numbers when we are speaking.

11106   I think you said you had an extra copy there. Why don't we just label it as CNOC Exhibit No. 1 and add it to the public record for others to be able to consult it as well?

11107   MR. TACIT: Thank you.

11108   MR. GAUDRAULT: Could I just add that I think we see proportionately a big problem. I think inadvertently it is being registered as all we care about is the price. But I think it's because timing-wise we see a big like, right now problem. I think it is distracting from these other important issues. Whereas otherwise we would be sort of more level-headed on the price part, but like right now there is a serious big problem.

11109   COMMISSIONER MENZIES: Okay, thank you.

11110   In paragraph 16 of your remarks here you appear to sort of dangle a forbearance carrot there in terms of the BAS. But the question that comes from that is when do you estimate the relevant forbearance conditions you propose would be realized?

11111   MR. TACIT: Actually, in major metropolitan areas if we had BAS we think it could happen quite quickly.

11112   COMMISSIONER MENZIES: Five years?

11113   MR. TACIT: Probably even less than that in some major metropolitan areas. If the conditions that we laid out in our forbearance test are examined, we are talking about an area where you have an ILEC, a cable carrier and two parties using BAS. I could easily envision, you know, companies like TekSavvy or Primus, for example, using BAS fairly quickly in major metropolitan areas and once there is a bit of a wholesale market share loss and the market presence is there in the local exchange, which are the other conditions.

11114   The other condition we have added, by the way, is a quality of service for competitors which is similar to what exists in the retail voice world. We don't have that regime. If we could get that regime in place quickly then we could use that as well, because you do have to be concerned about the non-price aspects as well. You can't just sort of worry only about rates and not worry about the quality.

11115   You know, for example we talked about how where they overbuild FTTP the quality of the copper is diminishing and that has all sorts of service implications. But the answer is it could happen quite quickly in a lot of exchanges.

11116   COMMISSIONER MENZIES: Thank you.

11117   I would like you to comment, if you could, please, on the City of Calgary's submission regarding rights-of-way and support structures and to discover if you have any experience in these areas in terms of the availability of support structures being an obstacle to the ability to deploy your own access facilities.

11118   MR. TACIT: Keith is going to take that.

11119   MR. STEVENS: Thank you for asking that. I think the City of Calgary did identify a real issue for new entrants and whether that is not incumbent or even an incumbent going on to poles where they haven't been before.

11120   And it's really -- and this is no one's fault. It's really just a matter of real estate. Hydroelectric polls have of course electrical wires on the top and for safety reasons you must stay a certain distance below those wires and that varies on how much voltage is up there. And of course you need a minimum clearance from below and whether that is -- I mean it's a higher clearance whether you are crossing a road or just going across a lawn, but you have to stay a minimum distance from the ground.

11121   So the difference left between those two spots is where we can put in our utility-type wires, our wires between those. They have to be separated by safety regulations a certain distance apart, a foot or 2 feet apart. So there is only so much real estate, therefore, for poles.

11122   What it means is -- and often two wires is often common that you could put on a pole. If you start trying to put the third wire on, it usually there isn't enough space. The remedy is you have to change the pole, which is extremely, extremely expensive. You have to go down and change all the poles out and, of course, the cost gets passed on to the new person wanting it down the road.

11123   Even the incumbents or the cable carriers have that challenge, too, as well, even into new areas if they are putting a new wire down the street and there happens to be a transformer on a pole. It may mean that pole has not enough space and they have to have it changed.

11124   So we all face that issue, but it becomes particularly acute for a new player going in, because it's not just changing a few poles. It may be changing hundreds or dozens of polls and that can quickly change it from a business case. It makes sense, too. It means a business case that you could never pay back, so that makes it very difficult.

11125   COMMISSIONER MENZIES: Thank you very much.

11126   MR. SANDIFORD: Just one small thing I wanted to add, too, that's also a problem. There are a lot of competitors who are looking at perhaps doing some builds in some of the rural areas to meet the government's current policy objectives.

11127   What we are finding with poles and structures in that area is that we are running into utilities that haven't updated their polls or their pole infrastructure in many, many years. In some cases the poles are unsafe as they sit today.

11128   And when competitors come along and want to access those poles, the answer is, well, yes, you have to replace the whole pole. It's not even a matter of clearance and the costs are absolutely monumental to do so.

11129   MR. TACIT: Peter wants to talk about ducts as well, which is the other part of the support structures.

11130   MR. ROCCA: Yes. So you also have the similar issues or similar -- additional challenges when dealing with ducts. Quite often you try to go into a duct and the incumbent will tell you that it is reserved for future capacity. You will sit there and look at many, many empty ducts and they will tell you that it's congested or reserved for future capacity.

11131   And even when you do get access to the ducts, as Matt pointed out I think yesterday, you know, if there is a point you are trying to get from A to B and they tell you, you know, one of the segments is congested in there, there is no alternative. They don't say, "Oh, but we happen to have lots of capacity in this other manhole. If you go here you have to submit another app. How about from A to B versus this path?" "No, congested." "How about with this path?" "No, congested."

11132   And those are significant costs, too, not only in terms of the resources from our end, but the application fees often end up being a significant portion of the build. We have gone through this a few times and every time the application and engineering and permit fees through Bell have been half the project.

11133   COMMISSIONER MENZIES: Okay. Thanks very much.

11134   I have a question for Mr. Chodorowicz. Your proposal for EOI has been heavily critiqued by other experts from other companies and I haven't yet given you the -- or heard a response. I know it could be a long one, but I'm conscious of time. Could you summarize for me the defence to those critiques?

11135   MR. CHODOROWICZ: Well, to start off with, you know, based on our research we have found -- we have concluded that EOI is the surest way to prevent discriminatory practices and ensure a competitive marketplace. I think some of the critiques that we have seen on the record have been focused on the costs of EOI.

11136   I believe Professor Hahn, on behalf of Bell, put on the record the estimates of the cost of implementing EOI and functional separation in the case of BT in the UK. Those amounts were approximately 150 million pounds. I just want to note that those include both the implementation of the EOI systems and processes, but also the implementation of functional separation, which itself was likely to be a costly endeavour creating a new entity and a brand around that entity.

11137   So while the costs are in the hundreds and millions of pounds, or perhaps in the Canadian context hundreds of millions of dollars, the benefits of the more competitive broadband marketplace are likely to be in the billions of pounds or the billions of dollars. So we are looking at orders of magnitude of difference between the benefits and the costs of implementation.

11138   COMMISSIONER MENZIES: Thank you very much.

11139   MR. CHODOROWICZ: Thank you.

11140   COMMISSIONER MENZIES: So I guess my final question, reserving the right to do more -- I hate to say that. So I guess it's pejorative in a sense.

11141   Do you perceive a time when -- or basically saying if you are looking at a framework -- let me ask it this way. Do you foresee a time when a rate set by the CRTC would not be considered too high by the buyer and too low by the seller?

11142   MR. TACIT: Look, I'm glad you asked this question. Thank you very much, because I do want to make an important point, you know.

11143   The Commission approves a lot of wholesale rates and, you know, while we think there is some tweaking required to costing that could overall improve its precision and efficiency, and especially those areas that have to make it more adaptable to the Internet era that we have proposed, the reality is that many rates are not challenged. The multitude of rates that the Commission sets are not challenged.

11144   There were some unique circumstances that related to the usage sensitive rates, as I have described, which is just a way that a policy and an implementation hearing happened to come together all at the same time and, you know, cost studies were based on a different model than the Commission adopted. So there was that unique circumstance that led to a lot of this controversy. So in the very short term we need to fix that for these rates.

11145   Beyond that, I think we have time to deal with the other costing adjustments which, you know, both sides have various claims and whatever and we think that those should be aired in a subsequent process. But there are an awful lot -- the majority of wholesale rates do not get challenged and are not the subjects of R & Vs. And people say, yes, well, we might have liked it a bit higher or a bit lower, but they live with them.

11146   So I would like to separate out this unique situation that we have that requires urgent attention from that bigger discourse and not have you think that somehow Phase II is a failure because it is going to result in perpetual controversy for every wholesale rate set. That's just not the case.

11147   COMMISSIONER MENZIES: Thank you. Those are my questions.

11148   THE CHAIRPERSON: Thank you very much.

11149   Commissioner Molnar...?

11150   COMMISSIONER MOLNAR: Thank you.

11151   Just in follow up to what you just mentioned, that there is some urgency to CBB and then there should be a Phase II review and fix some of the costing issues, would you see if we were to mandate fibre-to-the-prem that there would be a process to fix the costing issues before establishing a price for that?

11152   MR. TACIT: I think the most urgent thing is to make sure that these existing rates get set properly. I think if you do that you are going to find what the biggest cost drivers are that affect the rates the most. And as a practical solution I would suggest worrying about that first because by the time you do this you are going to know what those are and you will be able to apply them to the FTTP rate process.

11153   Beyond that, FTTP rates should be subject to all of the other fixes over time. But waiting for all of those fixes to happen before FTTP rates are set in some fashion, I don't think would be good for consumers at the end of the day, you know, given all the problems that we have discussed that we won't repeat now.

11154   COMMISSIONER MOLNAR: One other question on the CBB rates. I mean, I have heard you folks. We have heard lots about these rates.

11155   But just a question. This example with Rogers and the fact that peak traffic-- because it is all driven by your peak traffic costs, would increase by 159 relative to the present. Can I just ask, TekSavvy as an example, you don't have a negotiated agreement with Rogers?

11156   MR. GAUDRAULT: No, definitely not. I don't even -- like I don't even -- that has not happened.

11157   COMMISSIONER MOLNAR: Okay.

11158   MR. GAUDRAULT: There has not even been a discussion about it. Like it's just --

11159   COMMISSIONER MOLNAR: Can I confirm you do have one with Bell?

11160   MR. GAUDRAULT: I don't know

11161   COMMISSIONER MOLNAR: I don't need terms and conditions -- or is that a secret, too?

11162   That's okay. That's okay.

11163   MR. GAUDRAULT: Not on CBB.

11164   COMMISSIONER MOLNAR: You don't have one?

11165   MR. GAUDRAULT: Not on CBB.

11166    COMMISSIONER MOLNAR: Okay.

11167   MR. ABRAMSON: TekSavvy is not (off microphone).

11168   Yes, I just wanted to confirm. TekSavvy contractually is not permitted or in a position to discuss that sort of detail.

11169   COMMISSIONER MOLNAR: Whether or not there are -- okay. Fair enough.

11170   MR. ABRAMSON: As you can imagine, we don't always have the greater negotiating power in --

11171   COMMISSIONER MOLNAR: Sure. No, fair enough. I don't want to have anybody go against their agreements or no agreements.

11172   I just have one other question and its related to paragraph 13 of your remarks. So you say:

"Term and volume commitments can also be used to reduce any incumbent risk... However, an appropriate month-to-month rate structure should also be made available."

11173   If FTTP access is mandated, I think you would agree that fibre-to-the-prem is really at a different stage than when we moved into access to fibre-to-the-node because it was available and homes were connected. Here it is a different stage. We have heard that there is a lot of homes -- well, there isn't a lot of homes passed, but of those homes passed many are not connected.

11174   So how does all of that fit in? Just tell me why a month-to-month rate would be an appropriate way of looking at this.

11175   MR. TACIT: Well, I am not so sure that those profiles were all that different if you go back a few years ago when we were being denied FTTN. But let's assume, you know, for the sake of argument that what you say is the way it is.

11176   COMMISSIONER MOLNAR: Well, okay. Put that aside, then.

11177   MR. TACIT: So we will put that aside.

11178   COMMISSIONER MOLNAR: Can we agree that at this point in the build of fibre-to-the-prem there are more homes passed than connected?

11179   MR. TACIT: That's certainly true. We can certainly agree with that.

11180   COMMISSIONER MOLNAR: Right.

11181   MR. TACIT: But so what I'm saying -- what we have said is if there is -- if you find, which we don't think is the case -- but if you find that there is some sort of risk to be accounted for then it should be reflected in a cost of capital.

11182   But there are other countervailing factors that operate the other way to reduce the incumbent's risk. One of them is the fact that wholesale will actually attract more users to their network. The second is the term --

11183   COMMISSIONER MOLNAR: Yes. Maybe let me ask my question again.

11184   MR. TACIT: Yes. Term and volume commitments will also reduce their risk.

11185   So what we are saying is -- I don't know if you recall but, for example, before CBB there used to be term and volume commitments for Bell, and there still is I think for legacy rates. Anyway there were. That was based on these types of commitments, and so on.

11186   So it is a way to reduce their risk as by saying, you know, we are going to commit to longer terms or bigger volumes. I think Marc can --

11187   COMMISSIONER MOLNAR: Just I want you to better maybe --

11188   MR. GAUDRAULT: I think your point --

11189   COMMISSIONER MOLNAR: -- explain to me why a month-to-month arrangement --

11190   MR. GAUDRAULT: Okay. Oh, sorry. I thought you -- so I'm still on the -- you know, like can we agree on, right.

11191   So I agree that today the penetration rate is low into -- like right this minute, it's not a huge, huge significant factor, but I think five years out it will be. I think if we wait five years it's too late.

11192   I think maybe, you know, in the one to two year range I think it will still be sort of but, like, past that I think it's a big deal. We don't get to sit like this very often, right, and talk about this stuff. So I think there is a problem with the span of five years. I think that is a big issue.

11193   MR. SANDIFORD: I think the direct answer --

11194   COMMISSIONER MOLNAR: And that wasn't my question.

11195   MR. SANDIFORD: I think the direct answer to your question is, although we feel that the term and volume commitments can reduce the risk, we still feel that there are some cases by which a month-to-month rate would be necessary for some competitors in that risk can be accounted for in a month-to-month rate.

11196   We think the term and volume commitments would go a long way towards reducing their risk, but we do still think that a month-to-month rate is needed and the risk can be accounted for in that month-to-month rate.

11197   MR. GAUDREAULT: Certainly, if I can -- TekSavvy is less of a risk. I mean we are not going anywhere. We are not a risk to them.

11198   MR. ANDERSON: I guess from an example standpoint, I guess we are trying to give -- you know, when you use the example of a home pass but not connected, it may be that an ISP might want to choose to -- you know, and I understand that there are costs associated with that drop, it may be that much like a cell phone I may choose to pay for all that up front in the cost and enjoy a lower monthly rate or a different monthly rate and, you know, make different terms with my customers.

11199   So I think that -- I don't think it's I think we are looking at that as, you know, can we recover some of those -- we may choose to recover those costs upfront or do it on more of an amortized method.

11200   MR. ROCCA: I think one other thing to remember is that the drop is the smallest component of adding that -- connecting that home and once the home is connected it's always connected. That drop is there for the next 50 years.

11201   MR. STEVENS: Maybe if I could just add one thing?

11202   I mean, CNOC has members from very large to some very small and we are trying to represent all of our members and not exclude them from the future. So if we have -- if we force some of the very small members to volume and term commitments, they could never offer that service. So we are trying to make sure that all of those members have that option to survive in the future.

11203   COMMISSIONER MOLNAR: Okay. Thank you. Those are my questions.

11204   THE CHAIRPERSON: Thank you. Vice Chair Broadcasting will have a question in a moment.

11205   Mr. Abramson, I just wanted to clarify which you had answered about the confidentiality clauses. Are you suggesting that there is a clause that prevents you from sharing information with the CRTC even confidentially?

11206   MR. ABRAMSON: I would have to go back and look at the clauses. I am sure that we would be able to share confidentially the status of those agreements with the CRTC, assuming that, you know, we would no doubt want to confirm the understanding of the clause with any contractual partners that we have to make sure we are not offside them and I'm sure that they, too, would agree that it is appropriate to share it with the CRTC confidentially.

11207   THE CHAIRPERSON: Right. Well, the only way we can test that is by you making an undertaking to answer Commissioner Molnar's question then.

11208   MR. GAUDRAULT: I personally don't have a problem showing you any of that.

11209   MR. ABRAMSON: We undertake to do so.

11210   THE CHAIRPERSON: The allegation was that there was a contractual clause somehow limiting the Commission's access to information, which I think at first blush seems a bit disturbing.

11211   MR. ABRAMSON: We certainly don't wish to limit access and --

11212   THE CHAIRPERSON: I am not suggesting you are not.

11213   MR. ABRAMSON: And we will undertake to file everything. We will undertake to consult with those concerned and ensure that there is no limit to doing so and immediately sharing the results of that with the Commission.

Undertaking

11214   THE CHAIRPERSON: Thank you. Well, we may need to follow up depending on your answer.

11215   COMMISSIONER MOLNAR: Yes. If I could, I did not ask you to file an agreement, I was just asking are you using the tariff or are you under an agreement? So you don't need to, for my part, file any agreements, just answer the question.

11216   THE CHAIRPERSON: Yes, just the question, but you can answer it through an undertaking which then permits you to ask for confidentiality if indeed there is some sort of restriction.

11217   MR. ABRAMSON: We will, I think, undertake to do so. I will reread the transcript very carefully to understand what we have just undertaken to do.

11218   THE CHAIRPERSON: Okay. Just answer the question Commissioner Molnar asked, which you I think felt uncomfortable doing so orally at the hearing.

11219   MR. ABRAMSON: We are very careful to honour all the terms of our agreements with those who control essential facilities.

11220   THE CHAIRPERSON: Understood.

11221   MR. TACIT: Just to clarify what the question is, does it relate to CBB rates specifically or all rates with Bell, just so I understand the question?

11222   COMMISSIONER MOLNAR: No, the question was related to the CBB rates.

11223   MR. TACIT: Thank you.

11224   THE CHAIRPERSON: And it's specific to TekSavvy and the nature of your arrangements. Okay?

11225   So Vice Chair Pentefountas...?

11226   COMMISSIONER PENTEFOUNTAS: I hope you understood what you undertook. I don't know if you can plead temporary loss of facilities under our framework here.

--- Laughter

11227   MR. GAUDRAULT: A lot of NDA issues, not just with Bell, but in general there is a lot of problems around NDAs. I think it's the real issue.

11228   COMMISSIONER PENTEFOUNTAS: Yes. My questions also are all around paragraphs 11, 12 and 13. As it regards term and volume commitments, you mentioned that term and volume commitments help alleviate, reduce some of the risk associated with the cost, especially as it regards the fibre drop which, as we heard, constitutes about a third of the cost, the total cost of bringing fibre-to-the-prem.

11229   So aren't you sort of asking to have your cake and eat it when you are offering longer-term stability and assurances of a longer-term commitment and you also want that short-term, month-to-month?

11230   I understand TekSavvy is not going away. But once the final drop is installed I understand it's good for a billion years, but if no one is on that how do you recoup some of those costs?

11231   MR. TACIT: Bill...?

11232   MR. SANDIFORD: I think that's what we said and what I tried to answer with Commissioner Molnar's question, is that the term and volume commitments would alleviate that risk on a long-term basis, but in the event of a month-to-month scenario a rate structure could be put in place where perhaps a lot of those upfront costs are borne initially and therefore the risk is taken care of by the rates.

11233   COMMISSIONER PENTEFOUNTAS: So you would absorb the entirety of the drop as an example?

11234   MR. SANDIFORD: Perhaps. Perhaps.

11235   MR. TACIT: There are different possible models. One might be a higher monthly rate, then a higher long-term monthly rate. Like there are different ways to structure this and perhaps that is something that could be discussed in a subsequent tariff proposal to deal with how to do this.

11236   All we are saying is that conceptually the Commission has done this in the past. They have had rate structures that differ and it has allowed competition to be accessible to different players of different sizes and that is good for consumers.

11237   MR. GAUDRAULT: If I can...?

11238   COMMISSIONER PENTEFOUNTAS: Sure.

11239   MR. GAUDRAULT: You know, we are giving up something here, too, in this fibre arrangement. Currently we have a modem, right, as the termination device in the customer's house.

11240   In a lot of ways this is sort of -- we are basically talking about a service that has the modem sort of packaged with the service it comes with and it's tailored to their network but like, you know, that is part and part of this whole thing here. So in a lot of ways it's not that different than where we are today. Like, there is a modem today and it was part of the servicing that we sell to our customers, but in the fibre-to-the-prem scenario it becomes the ONT as opposed to the modem.

11241   So in a lot of ways it is the same sort of proposition to the end user. To us it's a matter of, okay, well now we need to deal with the fact that they are going there and the current sort of understanding is that they would go there and install the ONT.

11242   And of course the drop, you know, getting the fibre right to the home from the pole or whatever it may be, that part I think is a bit different. But as far as the ONT, the actual gear that goes into or onto the customer's house, it is kind of similar to right now, like when you plug in your modem it goes into the wall, it is a wired --

11243   COMMISSIONER PENTEFOUNTAS: No, I understand all that, but what are you giving up? You started your --

11244   MR. GAUDRAULT: Well, we are giving something up as well here, like it's not like they are bearing this huge risk that is entirely different than today. Like today, like we have to deal with these modems. We have to provision these. You know we have to source this stuff, right, and whereas now that would shift to them, right.

11245   MR. SANDIFORD: From a control standpoint, ISPs like to control their CPE. There is additional diagnostics we get when we control the CPE.

11246   MR. GAUDRAULT: I would gladly provide the ONT. If we can just set it up like that, sure.

11247   MR. SANDIFORD: We can lose a lot of benefits of that, is what Marc is trying to say.

11248   COMMISSIONER PENTEFOUNTAS: Such as?

11249   MR. SANDIFORD: Statistics information on the ONT, being able to query at its configuration, being able to query it and do its configuration directly without having to go through an intermediary third party which may or may not have access to the features or information that we want, and sometimes perhaps with lengthy time delays to do so.

11250   If we do it ourselves, we go to our team and we say we control this ourselves. If we have to ask the incumbents to do it, there is a cost and time delay associated with that.

11251   COMMISSIONER PENTEFOUNTAS: That's what you are giving up.

11252   MR. STEIN: Just to simplify, those are very important, but all of those things are what help us to control the service and make the best customer experience possible.

11253   COMMISSIONER PENTEFOUNTAS: Okay.

11254   And notwithstanding that control you are still asking for EOI for the services that are already in place?

11255   MR. TACIT: Well, I think one of the important aspects of this is to focus the bulk of the things that matter. So, you know, there are aspects to EOI that are particularly important, which is service quality standards and so on.

11256   We think that having the same processes, timescales and so on is also important. If we were concerned about how to do that most efficiently we could look at doing it mostly for new services and services where there is a tremendous amount of demand.

11257   They haven't built, you know, the FTTP systems very thoroughly, so it could be done much more cheaply there, for example. And we could also do it for FTTN because the volumes are high enough to merit doing it. So, you know, you can take a fine and targeted approach to all of this.

11258   COMMISSIONER PENTEFOUNTAS: You can already address these issues with the Commission right now, could you not?

11259   I will just refer to some of your suppliers. I recall specifically Videotron saying our wholesale customers get the exact same service as our customers get. There is no delay in installation or anything else. I gather that is not your sentiment, right? But there is recourse already in place for that kind of equality and service.

11260   MR. GAUDRAULT: No.

11261   COMMISSIONER PENTEFOUNTAS: There is not, just for the record?

11262   MR. GAUDRAULT: I have been flat out told it's not in the tariff; we don't need to do it. So there is no -- like right now on installations we are like 10 days behind. They can install same day, next day. For us to install, if I wanted to sign you up today you would be online 10-12 days later, something like that. If you have a problem with your modem today it's going to be minimum 48 hours before I even hear back from them, not you being solved, right. So I have gone -- I have had instances where, you know, up to 10,000 of my customers were left offline for up to a week to a month. Like there's just -- there's no recourse. There is quite literally no recourse. It's not in there.

11263   MR. STEIN: EOI is about just a framework or a principle that customers are going to be treated the same. These are all tactical things that fall out because nothing like that exists at the starting point.

11264   COMMISSIONER PENTEFOUNTAS: I understand that. And would you add to that that during that period of delay retention services are off and running to try to keep the customer?

11265   MR. TACIT: Absolutely that's the experience.

11266   MR. GAUDRAULT: Absolutely. In fact, even the new 30 day cancellation thing, right. So okay, so they can --

11267   COMMISSIONER PENTEFOUNTAS: That's not working for you?

11268   MR. GAUDRAULT: Well, no, so that's good, but it's half the problem, right. So even if they can cancel, right, it still takes a long time for us to get them online. So there is a big issue there.

11269   MR. SANDIFORD: As an example to the retention that you just asked about, one of our members recently shared a story with us where they had a service outage with a customer that extended into 21 days and on the 21st day the customer finally said, "You know, I have had enough of this. Rogers seemingly called me last night and they offered me to sign me up and I said yes and they were at my house in 45 minutes and I was online".

11270   So it's of these types of situations that we hear of and occur frequently that lead us to ask for a regime like EOI where we will be treated the same as they treat their own.

11271   COMMISSIONER PENTEFOUNTAS: Sure.

11272   MR. TACIT: And it undermines some of the very decisions that the Commission has been making when we don't have this.

11273   Two examples are the 30-day cancellation and the customer transfer rules. The customer transfer rules operate on a retail-to-retail basis. But ahead of being able to, as an agent, ask an incumbent to transfer service, we have to order the wholesale service and that takes days and sometimes weeks to get in place. So we may say, you know, "Our customer wants to go now". Well, we have to give four, five, 10 days notice to do that. So the retail transfer rule that says two hours becomes meaningless because we can't put that request in for two weeks because we have to do the wholesale stuff up front.

11274   So all of these very good intentions that the Commission is trying to give effect to through things like the customer transfer and the 30 day cancellation are being undermined by the unequal treatment that we receive compared to what they give to their own retail customers.

11275   COMMISSIONER PENTEFOUNTAS: I'm sure your suppliers are taking good note and they will get back to us on those issues. Finally, I just want to speak to paragraph 12. I will quote you here:

"Nevertheless, if you believe there is an additional risk..."

11276   My first question is, do you think there is an additional risk? We have heard an awful lot from the incumbents about the astronomical overwhelming costs of deploying FTTP. We also heard yesterday that the FTTN rates vis-à-vis the FTTP rates, there is a 36 to a 180 percent increase in deploying FTTP. that includes the drop. If you were to subtract that drop, you take a third of that cost off.

11277   I want first of all your opinion on whether or not you believe there is additional risk, because there seems to be some questioning there following what you laid out in paragraph 11 and, if so, are the costs that much greater in deploying FTTP as opposed to FTTN?

11278   MR. TACIT: On the risk question I think the biggest risk is that I am not deploying and that's why they are doing it. I mean why else would they be doing it when they themselves are saying that their usage profiles are, you know, 25 Mb or 10 Mb per second? They are doing it because they know they absolutely have to do it. So I really don't buy the risk argument at all.

11279   As for the costs, I think that is precisely the type of thing that needs to be sorted out in a follow-up proceeding. I am not going to tell you exactly what I think a cost of an FTTP drop should be or how it should be rated from a regulatory perspective, but I think that if you believe that access is desirable from a public policy perspective we can find our way through a rate process to account for whatever risk you might think there would be if you think there is any and any other costs and we can come up with a creative solution that doesn't constitute a barrier to entry.

11280   COMMISSIONER PENTEFOUNTAS: Some of your members have deployed FTTP? They would be in a position to speak to that then.

11281   MR. STEVENS: I can speak a wee bit too that, if you like.

11282   COMMISSIONER PENTEFOUNTAS: I'm looking straight at you.

11283   MR. STEVENS: I assumed that.

--- Laughter

11284   MR. STEVENS: The cost depends on your design and most of the incumbents are moving from FTTN to FTTP. If they designed the FTTN in mind, knowing they are going to go to FTTP in the future, and many incumbents did that, the costs aren't that much greater to get to the FTTP. If they designed FTTN so it was a throwaway and then overbuild with FTTP all the way back to the central exchange, yes, there is a large cost.

11285   And as I understand, and of course I don't know all the details of every incumbents and their construction plans, some of the incumbents have done the smarter way with FTTP and with sort of a roadmap to get to FTTP and others of course leapfrog right over FTTN and go straight to FTTP. But others have built FTTN as more of a throwaway and then have to rebuild and throw away that system.

11286   So the cost could be -- it's hard to say which cost is right or wrong because they probably are all right and they are probably all wrong.

11287   COMMISSIONER PENTEFOUNTAS: Would it be correct to say that, when you exclude the fibre drop, the costs are not dissimilar?

11288   MR. STEVENS: The fibre drop of course will be very similar for everyone, you know -- of course whether it is aerial or buried -- but the costs will be very similar if it is aerial or buried.

11289   The other costs should be very similar if they are starting from scratch to design FTTP. If they already have FTTP in place where they can incrementally add to it, the costs will not be that significant for FTTP as compared to if you have to build right from the central office an all brand-new plant.

11290   So I'm sorry I wasn't able to help you a great deal there.

11291   COMMISSIONER PENTEFOUNTAS: No, you were.

11292   MR. STEVENS: Okay.

11293   COMMISSIONER PENTEFOUNTAS: I'm sure your suppliers are also taking good note.

--- Laughter

11294   COMMISSIONER PENTEFOUNTAS: Thank you so much, Mr. Chairman.

11295   THE CHAIRPERSON: Thank you.

11296   Legal has a question.

11297   MS DIONNE: Thank you, Mr. Chairman.

11298   With respect to your concerns regarding existing wholesale high speed access rates, can you clarify whether your concerns are with all HSA rates or with only certain components, for example CBB?

11299   MR. TACIT: The concern is with any rates that have a usage component in them. So for example where there is CBB and there is a cable carrier, the access rate also has a usage component to it so we are looking at a review of any usage sensitive rates, whether they are access or CBB.

11300   MS DIONNE: And do you foresee a need for the Commission to review the HSA rates for all carriers subject to an HSA tariff or only certain carriers?

11301   MR. TACIT: I think what would be a good idea is to deal with the usage sensitive cable rates first, because that is the biggest obstacle to competition at the moment. I do think one of the problems we had is that a lot of the -- all of the rates set in 2011, and then whatever the subsequent R & Vs where it happened prior to the Commission's disclosure decision or regulatory policy that provided greater insight into how the incumbents are quantifying and using costs and demands for competitors, and so on.

11302   Since those decisions we have been able to intervene in a much more effective way and we have seen that just -- and I should add, by the way, that it has been like pulling teeth to even get some of them to comply with the disclosure requirements and we have had to make disclosure requests despite the fact that the decision speaks for itself. But where we have gotten the disclosure and they have come back, sometimes in the same disclosure thing they have provided the subsequent tariff notice lowering rates.

11303   So I think, yes, there is a bigger issue there of revising all HSA rates ultimately under the new disclosure rules that haven't been subject to those rules. But I think you have to start somewhere and the most urgent one is the usage-based cable rates, both access and CBB.

11304   MS DIONNE: Thank you, Mr. Chairman.

11305   THE CHAIRPERSON: I believe those are our questions. Thank you very much, gentlemen.

11306   MR. TACIT: Thank you.

11307   THE CHAIRPERSON: We will now hear from Primus.

11308   THE SECRETARY: From Primus.

11309   Just for the record, Mr. Chairman, Cybera and Dr. Rajabiun from Ryerson University will not be appearing in Phase II this morning.

--- Pause

11310   THE SECRETARY: So when you are ready, gentlemen, please go ahead. You have 10 minutes.

REPLY

11311   MR. NOWLAN: Thank you.

11312   Good day, Mr. Chairman, Messers. Vice Chairmen and Commissioners.

11313   My name is Michael Nowlan, Chief Executive Officer of Primus. With me today are Sheldon Pepin, Senior Manager, New Services Introduction; and Ben Rovet, Regulatory Counsel.

11314   I would like to thank the Commission for the opportunity to speak to you today and provide our reply comments.

11315   As our first issue, we would like to correct Bell's depiction of the wholesale marketplace. Bell's panellists described competitors as "business partners" and that commercial negotiations are a "win-win"' for both parties. They say this to try to convince you that the wholesale market is somehow very competitive, and that regulatory mechanisms are therefore not needed.

11316   In our experience, this picture is not accurate. Although we spend tens of millions of dollars per year with the incumbents, we are certainly not treated as true business partners. In normal commercial relationships customers are truly valued and supported by a corporate culture that emanates from top management reinforcing the importance of all customers.

11317   In these proceedings you have often heard the opposite attitude from the senior leadership of the incumbents. It is important to appreciate that since staff often take their direction from top management, it is this less than valued attitude we experience regularly in our dealings with the incumbents. It must be understood that this is not a typical commercial relationship and there is simply no equality in bargaining positions.

11318   Let me give you just one simple example that illustrates this point. One incumbent recently notified Primus of its intent to invoice us close to $400,000 to update its internal records to reflect a recent legal name change within the Primus organization -- $400,000. How can this be called a business partnership?

11319   Our experience as to the inability to negotiate reasonably with the incumbents underscores the danger of premature forbearance. The Commission cannot force the incumbents to negotiate with us in good faith. Where they have leverage, our experience is that the incumbents will exploit it to the fullest -- and even further. It is with this experience very much in mind that we ask you to reverse forbearance of CDN and Ethernet in those smaller geographic markets where competitive sources of supply are not available.

11320   This begs the question of how much competition is enough to merit forbearance -- something you questioned me about last week. More important than the number of suppliers is, frankly, who those suppliers are. Forbearance of the last mile should not be applied where the only alternative suppliers are vertically-integrated incumbents with no meaningful interest in selling to us. Their behaviour reflects their overarching need to protect their many business lines from competition, especially their BDU, broadcasting and media businesses.

11321   The bottom line is that the Commission should examine the specific market conditions to determine whether forbearance would be justified, including whether non vertically-integrated suppliers currently offer wholesale services in such markets and the reliance of those alternative providers on the incumbent facilities. And, of course, the Commission should carefully consider the relevant geographic market that applies.

11322   Moreover, our experience with incumbent negotiations highlights the importance of final offer arbitration for services in the non-essential subject to phase out basket. FOA would serve as an essential backstop that would help address the inequality of bargaining power and encourage the incumbents to negotiate in good faith with competitors like Primus.

11323   The next topic we would like to address is disaggregated high-speed access service or BAS. As we and others have noted, consumers continue to use more and more data each month, and competitors' CBB costs are consequently increasing at a rapid pace. It is therefore becoming increasingly uneconomical for Primus and others to offer higher speed Internet tiers and data intensive services.

11324   As we heard from VMedia the other day, alternative Internet transit costs have declined year-over-year and we would be pleased to supply similar data to the Commission.

11325   BAS will not only promote retail Internet competition, but it will encourage competitive video distribution services. Absent BAS, the Commission's policies of facilitating BDU competition will be undermined.

11326   BAS will also encourage the deployment of more telecommunications facilities. In Primus' case, the introduction of BAS will allow us to immediately leverage our existing network of 83 co-locations and our fibre builds in Ottawa and Vancouver. We will have a strong incentive to further deploy middle-mile and dual-purpose access and transport facilities in addition to significantly expanding our co-location footprint.

11327   You have heard from incumbents that it is technically feasible to deploy BAS, but that there would be significant implementation costs. You should treat these warnings with a healthy dose of scepticism. We maintain that all of these issues relating to costs would be addressed following a proper transparent costing process.

11328   Primus already operates an extensive facilities-based network, which uses collocated facilities and thousands of ULLs to reach end customers. BAS will provide a logical next step for us, one that builds on our co-location infrastructure, and our existing aggregated high speed services to better control costs, service quality and overall customer experience. As we have consistently indicated, Primus most certainly would utilize this BAS service.

11329   We are certainly open to all reasonable measures to minimize the costs of BAS implementation. For example, BAS might only need to be deployed in a central office upon receipt of a competitor's request. However, it is essential that implementation be done on a timely basis.

11330   Bell seems to believe that competitors do not really need BAS because they can effectively compete under the current aggregated model. This is not correct. Although the current aggregated wholesale service has worked acceptably for yesterday's lower speed Internet offerings, aggregated access alone will not be sufficient in the near future as consumers are demanding higher speeds and ever greater capacity. Customer demand for Internet speeds of greater than 20 Mbps has more than doubled for Primus over the last six months, and 80 percent of our Internet sales have been at speeds of 15 Mbps and higher. Introducing BAS will enable stronger retail competition for the benefit of Canadian consumers.

11331   As important as BAS is to our future, unbundled local loops are equally important to Primus today. These ULLs are fundamental to the services that many of our residential and small business customers depend on for both data and voice access. It is essential that ULLs continue to be mandated in both urban and rural markets at cost-based price rates.

11332   Finally, I would like to address the topic of Fibre-to-the-Premises. The incumbents who oppose wholesale FTTP access are presenting the Commission with a very difficult decision. You are being asked to not potentially discourage their incentive to make FTTP investments, a very challenging issue given all their other investment priorities. But no one can properly determine how much of an incentive the incumbents need to build out FTTP in a constantly evolving investment environment.

11333   Even if the Commission eliminates the entire wholesale market, there is still no guarantee that Bell would build FTTP in, say, Windsor, as opposed to investing $650 million to buy some non-facilities based company such as a Glentel, or alternatively use billions of dollars to extend its vertical integration as it did with its purchase of Astral several years ago.

11334   It is simply not possible to predetermine what is the right amount of future wholesale competition that will protect the FTTP investment incentive for the incumbent telcos and cablecos, each with their own priorities and strategies and we do not think that the Commission should even try.

11335   Instead, the Commission should recall its clear requirements in its 2010 speed-matching decision. In order to protect the interests of consumers in Internet competition, the incumbents were required to offer wholesale services on a speed-matching basis. At paragraph 55 of that decision, the Commission stated:

"The Commission concludes that, without a speed-matching requirement for wireline aggregated ADSL access and TPIA services, it is likely that competition in retail Internet service markets would be unduly impaired. In the Commission's view, an ILEC and cable carrier duopoly would likely occur in the retail residential Internet service market, and competition might be reduced substantially in small-to-medium-sized retail business Internet service markets."

11336   The Commission did not restrict speed matching to one type of technology. Any such restriction or exclusion would have been contrary to the principles of technological neutrality.

11337   No evidence has been presented in this hearing that would challenge or question these principles. Accordingly, the Commission should confirm in this proceeding that FTTP access, whether implemented by ILECs or cablecos, is already mandated for wholesale services, and that does not and should not change.

11338   To conclude, we want to thank the Commission for the opportunity to participate in these most important proceedings and we are pleased to take any of your questions.

11339   Thank you.

11340   THE CHAIRPERSON: Thank you very much.

11341   Commissioner Molnar...?

11342   COMMISSIONER MOLNAR: Good morning.

11343   Reply is a great opportunity for folks to clear the record and some of the potential misconceptions that are made. So I appreciate your comments of regardless of them speaking that we are business customers, we are not treated as business customers. So thanks for that.

11344   I wanted to ask you about paragraph 6 in your reply:

"... should examine the specific market conditions to determine whether forbearance would be justified..."

11345   Are you speaking of any service when you speak of the situation or are you speaking of a particular service?

11346   MR. NOWLAN: Yes. I mean this was a principle that we were referring to. So in this case in particular where the original question had come up was with respect to the CDN and Ethernet and so that was -- but it's a principle that applies for all services.

11347   COMMISSIONER MOLNAR: And it's your view that you would need essentially three carriers is where this would lead to I suppose within these marketplaces of Ontario and Quebec, the two vertically integrated, the cable and ILEC? And in your view that is never going to be sufficient for forbearance. You need to --

11348   MR. NOWLAN: Yes, I think we have been fairly consistent on not viewing a duopoly as sufficient competition to really regulate market power on the part of those duopolists.

11349   So in the case where you have a non-vertically integrated competitor, particularly, as I say, using the one example in the CDN and Ethernet market services, non-vertically integrated competitor really adds to that competitive force in that marketplace.

11350   COMMISSIONER MOLNAR: Right. So those services, as I'm sure you know well, were forborne on the basis that they are duplicable, not based on the fact that there was sufficient competition. You know, there was no measure of wholesale market share. It was the fact that the service is not essential because it can be duplicated.

11351   You don't agree with the Commissions essential services test, that we should change our test, or you're --

11352   MR. NOWLAN: In that case -- once again, when we were talking about this in this specific example we were referring to, yes, in theory anything can be duplicated. There are plenty of markets where it's not.

11353   So in the case -- that example we were using in the CDN and Ethernet which was creating issues for us competing in the small to medium-sized business segments with multi-locations, it is a national definition of that marketplace.

11354   There were all sorts of smaller communities where it was not competitive and even though it may have met on a national basis, that definition, it was not meeting in the smaller geographic regions. So that's where looking at it that large-scale market definition was not going to meet the needs of the marketplace.

11355   COMMISSIONER MOLNAR: Yes. Okay.

11356   I want to just ask you a question to complete our record as it regards the unbundled local loops. As a significant customer of unbundled local loops I wanted to talk to you about this particularly.

11357   And I recognize that it is not your position that we should forbear from mandating unbundled local loops, but if we were to forbear in certain rate bands, can you comment on how local or business forbearance should inform the decision as to whether or not forbearance would be -- well, I had better read this: Comment on how local or business forbearance should inform that decision given that forbearance in certain markets may have been predicated on competitive access to unbundled local loops.

11358   Now, if I unpack that --

11359   MR. NOWLAN: I'm trying to.

--- Laughter

11360   COMMISSIONER MOLNAR: Yes, okay.

11361   When we forbore from retail business markets the criteria for forbearance was that there were alternative providers, alternative facilities-based providers, more than a single alternative facilities-based provider. That provider could have been somebody -- the facilities-based provider could've been somebody who relied on unbundled local loops to provide local business services.

11362   So we would have provided forbearance to retail business services such as even local telephone service for retail business on the condition that there were alternative providers in that market. Those providers could have been folks such as you who are using unbundled local loops to provide that service.

11363   So the question now is, if we were to forbear from those unbundled local loops, would that affect the forbearance we provided to the retail business services? It's a bit of a circular thing.

11364   MR. NOWLAN: Yes, and it's a circular answer to some degree. Yes, it is possible that it would impact that and it's a -- the aspect is where you -- the forbearance on unbundled local loops today would have a drastic impact on our ability to serve our customers and we don't see there being the ability to come up with a viable alternative for ourselves to continue servicing those customers. So that will impact our ability to serve small to medium-size businesses and our large residential base that relies on that as well.

11365   MR. PEPIN: Just to add to that, I think the answer is, yes, there is a real possibility that it could have an impact on some of the other decisions that have been made for forbearance because with competition existing in the ULL space the market conditions were such that it was viewed as competitive and if you were to remove the unbundled local loops it would no longer be viewed as competitive, or the potential is there that it would not be viewed as competitive.

11366   COMMISSIONER MOLNAR: Okay. Thank you. Those are my questions.

11367   THE CHAIRPERSON: Those are all our -- sorry, legal. I keep forgetting legal.

11368   MS DIONNE: Yes, thank you, Mr. Chairman. I was drafting.

11369   In your presentation you offer to submit information with regard to your transportation costs -- transport costs. Can you undertake to provide your Internet transit and point-to-point transit costs, prices you have paid in the past and the prices you are currently paying for these services, including any terms and conditions?

11370   MR. NOWLAN: We can undertake to submit the prices for such. The terms and conditions as we heard before we will confirm with respect to the confidentiality agreements that are in place for any such services. But yes, we will, in compliance with any potential confidentiality agreements we will comply. We will undertake to do that, yes.

Undertaking

11371   MS DIONNE: Okay.

11372   THE CHAIRPERSON: Just on that, it would be very surprising to the Commission that somebody is entitled to contract out of their obligation to provide Commission information, so you could probably file it in confidence if it is so, but nobody can contract and take away the jurisdiction of the Commission to ask for information. I'm not speaking just to you. I'm speaking more generally.

11373   MR. NOWLAN: No, absolutely. Yes.

11374   THE CHAIRPERSON: Thank you.

11375   MR. NOWLAN: Yes, sir.

11376   THE CHAIRPERSON: Just so we are clear.

11377   MS DIONNE: Those were my questions, Mr. Chairman.

11378   THE CHAIRPERSON: Thank you.

11379   We will take a -- oh, sorry, yes. Commissioner Molnar...?

11380   COMMISSIONER MOLNAR: And I don't think this was just covered, but you had offered to provide some data on transport costs that you have additional data. Would you provide that as an undertaking?

11381   MR. NOWLAN: Yes, we will.

11382   COMMISSIONER MOLNAR: Okay. Was that covered?

11383   MR. NOWLAN: That was just covered there.

11384   COMMISSIONER MOLNAR: Oh, I'm sorry.

11385   MR. NOWLAN: That's okay.

11386   COMMISSIONER MOLNAR: I was busy checking if I had missed it.

--- Laughter

11387   COMMISSIONER MOLNAR: Okay, I'm sorry.

11388   THE CHAIRPERSON: It went by. No, it's okay. It's a long hearing. We are all tired.

11389   And thank you. We have no other questions. It's a good point then to take a short 10 minute break. So we will come back at 10:45. Thank you.

--- Upon recessing at 1033 / Suspension à 1033

--- Upon resuming at 1046 / Reprise à 1046

11390   THE CHAIRPERSON: Order, please. À l'ordre, s'il vous plaît.

11391   Madame la Secrétaire.

11392   LA SECRÉTAIRE : Alors, je vous présente monsieur Jean-François Mezei de Vaxination Informatique.

11393   Vous pouvez y aller. Vous avez 10 minutes.

REPLY

11394   M. MEZEI : Merci pour cette opportunité. Mon nom est Jean-François Mezei de Vaxination Informatique.

11395   Je vais présenter en anglais.

11396   The overall goal is to increase competition to make the market healthier and require the least amount of regulation; this is a long-term endeavour. Matching speeds needs to be given time to work.

11397   The "facilities based" doctrine dates from the last century where a physical cable supported one high-priced regulated monopoly service, either telephone or television. Convergence of multiple services delivered on a single pipe has made this doctrine obsolete. This pipe is a utility built with commodity equipment, with the innovation occurring further out on the Internet. That's where the action is happening.

11398   Since it is not rational for an incumbent to commercially negotiate wholesale rates that help drive retail prices down, regulation remains necessary to discipline incumbents' market power.

11399   The evolution to a service-based economy should move the focus to service-based competition and treat the last mile as an essential non-duplicable utility.

11400   In terms of investment, a shared fibre has lower risk because a greater percentage of homes passed connect to it. Duplication results in fewer homes connecting to each fibre, reducing the justification for investment.

11401   A refusal to share indicates the incumbent expects to recover its investment by serving fewer homes at a higher price, a practice consistent with market power. It is also likely to reduce the number of areas where the investment in FTTP can be justified.

11402   In this day and age, artificially inducing facilities-based competition for the last mile encourages inefficient entry.

11403   In a "service-based" policy, a shared wire will be funded by the combined revenues of many providers, serving more homes and decreasing the risk of non-productive investment.

11404   Shared last mile results in lower but more efficient investment, services more people at lower cost and allows more competition than facilities-based could ever dream of. As Drs Rajabuin and Middleton pointed out, there is no strict correlation between investment levels and network quality. Investment in shared networks is simply more efficient.

11405   If service providers invest in the ONT and UPS in the customer premises, the infrastructure builder is relieved of one-third of the investment burden, making it easier for the incumbent to justify the deployment.

11406   Shared infrastructure means more homes will be served at less cost, ultimately making services more affordable for consumers.

11407   For FTTP now. The regulatory process that will follow an immediate decision to mandate wholesale access to FTTP as well as the time required by the incumbents to implement wholesale provisioning software is already delaying FTTP availability. Adding further delays of three to seven years is not acceptable.

11408   No evidence has been provided that shows any independent FTTP deployment that duplicates an existing incumbent FTTP system.

11409   In most cases today FTTP is being deployed where there is no FTTN. ISPs do not have a choice of 25 Mbps on FTTN or FTTP. They are limited to the barely 5 Mbps service on legacy DSL, if at all, while Bell's ISP business benefits from undue preference, with access to current speeds on more reliable infrastructure.

11410   FTTP is superior to FTTN not only because of higher download speeds but also significantly higher upload speeds and the ability to deliver advertised speeds throughout the footprint, something neither DSL nor FTTN can achieve.

11411   A regulatory policy meant to last many years must rely on principles such as speed-matching instead of setting specific speed limits. Limiting access to speeds based on today's evaluation is tantamount to an implicit forbearance tomorrow when those speeds no longer allow ISPs to compete.

11412   In terms of CNOC's proposed BAS, CNOC failed to provide a detailed or realistic plan. At best, the Commission should spawn a follow-up process to look at the feasibility of this proposal:

11413   - The Commission can ask CNOC how many customers they need to warrant setting up the BAS to one CO and then you can ask Bell Canada how many such COs actually meet that need where you have an ISP with that many customers. And remember, we're talking ISP by ISP, not all of CNOC at the same time.

11414   - Connection to the CO must provide for extraction of a single ISP's traffic from all technologies: DSL, FTTN, FTTP.

11415   - In terms of cable, it is technically not realistic to avoid a significant portion of CBB. So unless CNOC pulls a rabbit out of its hat, the idea should be dismissed.

11416   - Disaggregation must not be mandated on a network-wide basis. This is, however, an opportunity to test the incumbents' willingness to commercially negotiate with the ISPs.

11417   In terms of costing, retail minus turns the ISP into a reseller tied to the incumbent's retail offer. Wholesale regulation based on retail rates ends up indirectly regulating retail. Only cost-based wholesale service enables true retail competition.

11418   In terms of Phase II, the complexity can be reduced by:

11419   - First of all, incumbents should stop gaming their costing numbers;

11420   - Incumbents should stop submitting everything in confidence, forcing a constant stream of requests for disclosure which are endless;

11421   - You can use your new AMPS whenever an incumbent submits in confidence which should not have been according to TRP 2012-592. As CNOC said just earlier, they often still submit in confidence stuff that TRP 592 says should be public.

11422   And a different idea: CRTC should hold seminars to explain the Phase II voodoo magic to consumer groups and wholesale customers to enable more intelligent participation in tariff and costing proceedings. This would also allow some suggestions on how to improve Phase II.

11423   In terms of ULLs, forbearance of the copper should happen only in areas where FTTP has been deployed and is available to wholesale. The quicker the services are moved off copper, the faster the telco can decommission the old copper, which greatly helps justify the investment.

11424   Once a telco shifts customers to FTTP, the shrinking number of copper users eventually makes copper maintenance uneconomical and it makes sense to shut it down. Canadian incumbents have downplayed this because they fear the spectre of decommissioning copper would push the Commission to mandate FTTP.

11425   Once FTTP has been activated in an area, the incumbent should be allowed to stop adding new wholesale users on copper.

11426   As far as the stranded investment argument, one needs to look at whether existing legacy equipment at the CO has been amortized already or not.

11427   Furthermore, in terms of geography, instead of being based on a CO or a wire centre, forbearance should consider technology. A central office such as Hudson, Quebec, covers a wide area of copper but also has Saint-Lazare, which is now being deployed as FTTP. So you can't just go by CO when only parts of the CO have been upgraded.

11428   To conclude, ISPs are in the business of connecting their customers to the Internet. They do not resell anything. To do this, they construct their service from various building blocks, including the existing last mile which is not realistically duplicable and is essential for provision of a number of services to homes.

11429   The Competition Bureau has ruled that the loss of Fido would not significantly alter the incumbent's market power and allowed Rogers to buy it. Perhaps the same logic is being applied with regards to the current competitive impact of the ISPs' 8-percent national market share, which perhaps the Competition Bureau deems is not sufficient.

11430   It is exactly because we are still dangerously close to a duopoly that the efforts to allow ISPs to grow must not stop. These efforts are working in Quebec and Ontario, with some growth, but growing the ISP market to sufficiently weaken incumbents is a long-term endeavour and the Commission must resist the incumbents' call for a duopoly.

11431   The Commission must accept that the last mile is structurally not duplicable and will need to be shared until a major new technology emerges decades from now. Instead of seeking forbearance, the Commission should instead seek to streamline the regulatory process to reduce its burden.

11432   I'll finish by saying instead of judging based on whether something is duplicable, you should judge based on whether something has been duplicated before forbearing.

11433   I await your questions. Three seconds ahead of time.

--- Laughter

11434   LE PRÉSIDENT : Merci.

11435   Commissioner Shoan.

11436   COMMISSIONER SHOAN: Yes.

11437   Thank you. Your submission is very clear. I just have one question.

11438   You stated in your submission that:

"...artificially inducing facilities-based competition for the last mile encourages inefficient entry."

11439   My question is: If we focus on network investment other than the last mile, backhaul, middle mile, is that necessary or something we should also consider?

11440   MR. MEZEI: My feeling is that inducing it when it wouldn't happen naturally is counterproductive. If it's something that happens naturally, then you can foster it.

11441   You know, I have poked some holes into the CNOC proposal. I'm not inherently opposed to the idea of BAS, I just think that it's not quite ready yet. Once they grow, it will come naturally. And we are maybe seeing the germs of this happening in the middle mile.

11442   COMMISSIONER SHOAN: Can you explain? You just said you don't think it's quite ready yet. What do you mean by that?

11443   MR. MEZEI: In the size of the ISPs, and this is why I ask for you guys to actually collect information as to how many customers do they need to justify a connection to a CO and how many such COs would actually be involved. This will give you an idea of how widespread or serious the middle mile competition is. It may be just a few token efforts here and there. Wait five years when the ISPs grow and that idea may actually grow to something that's worth really looking into. It should be looked at perhaps as a pilot project right now, more than a mandating or a policy.

11444   If you induce this now and de-induce aggregated or raise the rates or whatever, you have a whole bunch of ISPs who are not ready for disaggregated who will be pushed out of business and at this point in time I don't think the market, the competitive market is big enough that you can afford to push out the small guys because combined together they represent still a force that you don't want to. Furthermore, the small guys are the ones who grow and you have to give them a chance.

11445   So it's too early at this point to start forgetting about aggregation. I'm not saying you should block disaggregation but you must not lose the focus that aggregation is still necessary to allow growth, especially outside of a couple -- Bell mentioned six, I don't know the exact number but it's a handful -- of a couple of central offices, which, by the way, is only on DSL.

11446   In terms of cable, I've looked at the architecture. It just does not make sense. And Rogers mentioned 80 percent of the CBB costs are between the remote head-end and the end user. So if they go to the former POIs, they will only serve 20 percent of CBB. Are they still interested in doing this?

11447   You know, so big picture, it's a good concept but it may not be ready for it yet.

11448   COMMISSIONER SHOAN: Okay. So you just raised the issue of a potential pilot project. If you would like to file some further -- what that would look like, some further information on what that pilot project would look like in your reply, that would be appreciated.

11449   MR. MEZEI: Okay. In the reply as opposed to --

11450   COMMISSIONER SHOAN: Oh, pardon me.

11451   THE CHAIRPERSON: In the update of the 12th of December.

11452   COMMISSIONER SHOAN: The 12th of December, yes.

11453   MR. MEZEI: Okay. Okay.

Undertaking

11454   COMMISSIONER SHOAN: Those are my questions, Mr. Chairman.

11455   THE CHAIRPERSON: Thank you.

11456   Monsieur le Vice-président des Télécommunications.

11457   COMMISSIONER MENZIES: Hi. Just a couple of questions.

11458   I'm unclear, in your presentation in terms of the evolution to a service-based economy, where the incentive would be to invest in structure.

11459   MR. MEZEI: The incentive is there because even though -- let's assume just for the sake of discussion that Bell were structurally separated into Bell Wire and Bell Service.

11460   COMMISSIONER MENZIES: Let's not assume that.

11461   MR. MEZEI: Well, it's just to make my argument here.

11462   COMMISSIONER MENZIES: Okay, try that, but I really want to know what we can do with what we have now.

11463   MR. MEZEI: Yes, but the reason I want to say that is just to show that there's two parts of Bell basically, the wire part --

11464   COMMISSIONER MENZIES: I see. I understand.

11465   MR. MEZEI: The Bell Wire part, the wireline part has business and the more business it puts onto its wires, the more money it makes and the easier it is to justify the investment. Now, in a structurally separate theory, Bell Wire would benefit its shareholders the more business it has.

11466   Now, in the case of reality, obviously there is a conflict between BCE having both Bell Wire and Bell Retail. There's conflicts between the two where Bell Retail wants to have the whole pie.

11467   From your point of view, you have to decide whether you want a duopoly or not and if you tell Bell that no, you must share it, Bell will seek to have the maximum amount of users on its cable, the same way that it does now but it just wants its own users.

11468   I don't think it has any impact because at the end of the day when you pass 100 homes with your fibre you want to connect as many of those homes as possible. And one of the big differences between last century and this century, last century when Bell strung copper it knew it would give telephone service to 100 percent of the homes, or 99.99 percent of the homes. Right now, especially in areas where it has not upgraded, it's lost a lot of market share to cable. So when it strings fibre to a village that's currently massively cable, it has to regain those customers. Hence, the risk. The fact that it's shared with ISPs or not makes no difference to that risk. They have to regain those customers.

11469   COMMISSIONER MENZIES: Right. But it's only of value to shareholders if all those customers using the system are -- if you're making money from them, right? I mean if you have a lot of customers and you're losing money on every customer, there's not much value to shareholders in that.

11470   MR. MEZEI: I don't think Bell has ever said that it was losing money on wholesale. And if you were to do an interrogatory --

11471   COMMISSIONER MENZIES: Right. So --

11472   MR. MEZEI: -- to ask about the profit margins --

11473   COMMISSIONER MENZIES: -- that's what I'm trying to get at, is where is the benefit to consumers? Where is the downward pressure that you assume will be on retail rates for consumers?

11474   MR. MEZEI: Because on a cost-based system, you -- especially a company that has market power can exert far more than 30 percent profit margins. And there's efficiencies also. Small companies tend to be more efficient than large companies and so on and so forth, customer service. There's a whole range when you --

11475   Again, using that structurally separate aspect, if you look at the Bell Retail side, it's a very large company and the Bell Wire side is perhaps much more efficient. So when you take your wholesale GAS service and you regulate with the cost, you're looking at only one area of Bell. You're not looking at the bloat and the market power side of Bell Retail. You're looking only at the wireline. So you can have rates that better reflect the cost, the true cost, which removes all the bloat and stuff that happens at the Bell Retail side. So it does make a big difference.

11476   And, you know, yes, we are seeing the pressures from CBB rates that now are hindering ISPs, but when they came out, especially in video territory when they first came out they were much lower and the small ISPs really gained a lot of customers on that. They really did grow. So there is -- and they were able to offer lower prices.

11477   And in 2013 when you had all the RNVs for -- the original 703 decisions came out I think in February -- that's when the incumbents, fearing additional competition from the ISPs, started to reintroduce unlimited plans. So there is an impact. There is a competitive impact that we're seeing and it is working but we have to keep it working.

11478   COMMISSIONER MENZIES: Okay. I mean notwithstanding concerns about future developments in terms of that, primarily in the regional markets of Ontario and Quebec, the competitors, you know, have good market share. I mean it was described earlier as only 2 percent growth, but if you're going from 6 to 8 percent, that's 33 percent growth. If you're going from 15 to 17 percent, that's not insignificant growth in terms of that.

11479   Part of the question that comes up is in terms of the role in the economic ecosystem that companies play, and certainly ensuring equality of opportunity is one thing but of concern becomes a structure that would ensure equality of outcome, right, that there has to be something in there. I'm just using that to frame the question.

11480   How many competitors -- and we're theoretically here -- would be most efficient from an economic perspective: 400, 40, 4, 60, in terms of that? Would it not make more sense in essence for the competitor market to merge and acquire each other to the extent that they would be more powerful entries?

11481   And if you say we need time to let them develop, well, if they've developed to 17 percent of the market, what do you think the appropriate theoretical share they should have should be?

11482   MR. MEZEI: Okay. Seventeen percent -- let's assume it's 17 or 15 or in that ballpark in Ontario and Quebec. It's an interesting number because as a global one it shows there is some competition, but of course when you break it down per ISP it drops down quite significantly per ISP. And as you raise, it does raise a problem where the ISPs are too small to each do all the stuff.

11483   What might have been interesting for CNOC in the case of BAS for instance, to use a specific example, it might have been interesting if CNOC had come to you and said, "We're creating a CNOC Corp., a non-profit organization where we will do the aggregation to the various COs and serve all our ISPs as a non-profit organization." You know, if they were to group together for the aggregation portion and still remain independent ISPs at the retail section, I would applaud that and I think a lot of people would applaud that.

11484   That would provide a means to -- and the only means to a possible third wire if that were ever to happen, if all the competitors together were to share the infrastructure, and that would be -- but this was not proposed. They proposed that a couple of ISPs might connect.

11485   And so in terms of size of ISPs, I don't know from a regulatory point of view that you can do anything about this. I think you have to let the market play.

11486   And, you know, the CBB rates came into effect -- matching speeds came into effect in February 2012, despite the whole process having started in 2008, the first matching-speed decision. You have to give it time. I think it's a little premature right now to start to change the direction.

11487   COMMISSIONER MENZIES: Okay. Thank you. Thank you very much.

11488   LE PRÉSIDENT : Merci.

11489   Monsieur le Vice-président de la Radiodiffusion.

11490   CONSEILLER PENTEFOUNTAS : Merci, Monsieur le Président.

11491   Merci, Monsieur Mezei. Vous avez le don d'une certaine clarté dans vos interventions, puis c'est grandement apprécié.

11492   CNOC comme organisation à but non lucratif, c'est une idée assez intéressante, j'avoue.

11493   Ceci étant, j'aimerais attirer votre attention à la page 3, à l'avant-dernier de vos points :

« Si le fournisseur de services investit dans l'ONT/UPS, le bâtisseur d'infrastructure est relevé d'un tiers du fardeau d'investissement, ce qui rend plus facile la justification du titulaire d'investir dans le déploiement. » (Tel que lu)

11494   M. MEZEI : Oui.

11495   CONSEILLER PENTEFOUNTAS : Nous avons déjà entendu de la part de Bell, et peut-être d'autres, que le fibre drop constitue un tiers des coûts. Bon, si on tient compte -- puis corrige-moi si je me trompe -- l'ONT/UPS n'est qu'un sous-segment ou une sous-partie de cette fibre drop. Alors, de dire qu'un tiers des coûts seront enlevés des coûts totaux et des risques pour les titulaires, n'êtes-vous pas en train de tirer l'élastique un petit peu trop?

11496   M. MEZEI : Non.

11497   CONSEILLER PENTEFOUNTAS : O.K.

11498   M. MEZEI : Parce que le fibre drop en tant que telle...

11499   CONSEILLER PENTEFOUNTAS : Oui.

11500   M. MEZEI : ...le câble...

11501   CONSEILLER PENTEFOUNTAS : Oui.

11502   M. MEZEI : ...coûte moins cher à la fibre qu'il coûte au cuivre...

11503   CONSEILLER PENTEFOUNTAS : O.K.

11504   M. MEZEI : ...à cause du FlexNAP qu'ils utilisent pour les plugs. C'est vraiment plug and play.

11505   CONSEILLER PENTEFOUNTAS : Mais l'ONT/UPS fait...

11506   M. MEZEI : Fait une grosse partie.

11507   CONSEILLER PENTEFOUNTAS : ...une certaine partie du fibre drop dans son ensemble?

11508   M. MEZEI : Une très grande partie.

11509   CONSEILLER PENTEFOUNTAS : O.K.

11510   M. MEZEI : Une très grande partie.

11511   Et ça, ça été noté, en passant, en Australie dans le projet NBN, que le parti d'opposition, une fois qu'il a été rendu au pouvoir, a essayé de détruire. Les coûts du fibre drop, ça été confirmé que c'est l'équipement dans les maisons qui est le plus grand coût et non le fil en tant que tel. Et ça, c'est dans un pays où une grande proportion des fils sont sous la terre. Et même à ça, dans le fibre drop, la plus grosse partie du coût, c'est l'équipement dans le customer premises, l'ONT et l'UPS.

11512   CONSEILLER PENTEFOUNTAS : Et si on sépare le coût entre le fibre comme tel et les matériaux dans la résidence, l'ONT comptera quel pourcentage de ça?

11513   M. MEZEI : Je n'ai pas le chiffre pour vous. Je pourrais faire des recherches dans un undertaking, si vous voulez, des recherches sur... en demandant à des personnes qui ont fait ces recherches-là, mais c'est une...

11514   CONSEILLER PENTEFOUNTAS : Mais si vous n'avez pas ces données-là, comment êtes-vous en mesure de nous dire...

11515   M. MEZEI : Parce que tous les messages qui ont été émis concernant les installations de fibre ont toujours dit que la grosse partie de l'installation du drop, c'est l'équipement dans la maison. Alors, je n'ai jamais eu de confirmation du pourcentage exact, mais j'ai toujours eu le même message que c'est toujours l'ONT et l'UPS qui coûtent le plus cher.

11516   CONSEILLER PENTEFOUNTAS : En tout cas, si vous êtes pour mettre de l'avant que c'est un tiers des coûts, ça serait bien d'avoir une référence ou preuve à l'appui que c'est le cas...

11517   M. MEZEI : O.K.

11518   CONSEILLER PENTEFOUNTAS : ...chiffrée.

11519   M. MEZEI : O.K.

11520   CONSEILLER PENTEFOUNTAS : Deuxième point qui m'a frappé, page 6, en bas de la page, vous parlez d'ouvrir le processus aux clients de gros, la participation intelligente sur les tarifs et les coûts, et la détermination de ces coûts-là, qu'il faut consulter... est-ce que c'est le public en général? Y a-t-il quelqu'un qui peut nous apporter plus de renseignements, de détails sur la façon de déterminer le coût de ces infrastructures-là?

11521   M. MEZEI : O.K. La raison que j'ai fait cet argument, quand j'ai commencé à m'impliquer dans le CRTC, j'avais parlé à monsieur Lawford de PIAC, qui m'avait donné une bonne instruction de comment ça fonctionne, et il m'avait parlé essentiellement que Phase II, personne ne comprend ça, c'est très compliqué et que ça prend vraiment... il y a deux ou trois spécialistes au Canada qui connaissent ça, et évidemment les compagnies titulaires.

11522   Et j'ai réalisé au fil des années qu'effectivement c'est le cas, non seulement parce que nous, on ne voit que des hash signs quand on lit les soumissions, mais aussi parce qu'il y a une grande complexité derrière, dans la façon que c'est calculé, les amortissements, et caetera.

11523   Donc, au point de vue de qui ça bénéficierait, ça bénéficierait au monde comme moi, comme PIAC, OpenMedia, et aussi CNOC et les autres, parce qu'eux aussi, Phase II, c'est quelque chose qui n'est pas exactement bien défini. À moins de lire des grosses bibles, et caetera, avoir un séminaire où on pourrait demander des questions, où ça nous est expliqué, nous aiderait beaucoup pour comprendre comment ça fonctionne.

11524   Parce que de mon point de vue, on voit les cost studies en hashtags de Bell rentrés, et tout ce qu'on voit après ça, c'est les tarifs sortir du CRTC, et comment ils arrivent de l'un à l'autre, on n'a absolument aucune idée.

11525   CONSEILLER PENTEFOUNTAS : Et ces consultations pour les gens qui sont impliqués dans l'industrie et également le public en général pourraient nous aider à trouver des solutions ou des suggestions... ça peut générer des suggestions pour améliorer la détermination des coûts dans un modèle Phase II?

11526   M. MEZEI : Oui. Écoutez, vous avez posé la question, comment est-ce qu'on peut améliorer le costing dans nos processus et réduire le fardeau de faire le processing de toutes ces soumissions-là. Un des problèmes, c'est que c'est difficile de donner des suggestions quand on ne comprend pas la magique qui se passe entre la soumission de Bell et l'émission d'un tarif. Si on comprenait mieux qu'est-ce qui se passe entre les deux, à ce moment-là, on pourrait faire des suggestions.

11527   CONSEILLER PENTEFOUNTAS : Mais le coût des matériaux, par exemple, est disponible?

11528   M. MEZEI : Bien, pas à nous, parce qu'on ne connaît pas quel... Souvent, le type d'équipement que Bell soumet nous est caché.

11529   CONSEILLER PENTEFOUNTAS : O.K.

11530   M. MEZEI : Et ça, c'est une des choses que j'avais faite dans ma première présentation, c'est que ces équipements-là ne devraient jamais être cachés, même si le prix est caché, l'équipement au moins pour qu'on puisse vérifier qu'ils utilisent des équipements récents.

11531   CONSEILLER PENTEFOUNTAS : Mais l'équipement comme tel, il n'y a pas 200 fournisseurs de ces équipements-là.

11532   M. MEZEI : Ah, non. Écoutez, on peut trouver le prix au détail; ça, c'est facile.

11533   CONSEILLER PENTEFOUNTAS : Oui.

11534   M. MEZEI : Mais quand on ne connaît pas... quand on ne sait pas, par exemple, que Bell vient d'installer des Juniper E320, on ne peut pas juger si Bell utilise des équipements récents ou non, parce qu'on ne connaît pas le numéro de modèle, qui, pour nous, sont souvent cachés.

11535   Donc, c'est vraiment une question... pour nous aider à vous aider, on devrait avoir une éducation sur comment vous fonctionnez essentiellement. Et je ne parle pas d'audience publique formelle, je parle d'un séminaire un moment donné dans une de vos salles de conférence, où vous expliquez comment ça fonctionne.

11536   CONSEILLER PENTEFOUNTAS : Et la confidentialité de certains de ces coûts-là, est-ce qu'on doit tenir compte de ça ou non?

11537   M. MEZEI : Bien, écoutez, dans un séminaire, oui. Écoutez, vos lois de confidentialité sont assez strictes. Mais du point de vue d'un processus en tant que tel, ma solution... Je comprends que Bell ne peut pas -- bien, je dis Bell -- les titulaires ne peuvent pas donner les coûts spécifiques qu'ils ont négociés avec leurs suppliers, mais ils peuvent donner un coût, par exemple, le prix de liste.

11538   CONSEILLER PENTEFOUNTAS : Mais ces coûts ne sont pas déjà disponibles si tu regardes sur les sites des fournisseurs?

11539   M. MEZEI : Oui, mais on peut... Écoutez, on peut téléphoner le fournisseur puis leur demander, "Écoutez, un 320 avec deux cartes Ethernet de telle chose, ça coûte combien?"

11540   CONSEILLER PENTEFOUNTAS : Voilà!

11541   M. MEZEI : Le prix de liste, O.K. Mais ça nous sauverait du temps... Au point de vue si on a un tableau avec le prix, tout ça, on peut regarder pour voir si ça du bon sens ou non.

11542   CONSEILLER PENTEFOUNTAS : Bon, ce n'est pas tout à fait une consultation publique, c'est plus de vous donner accès à comment on arrive à certains coûts?

11543   M. MEZEI : Oui. Oui. La suggestion du paragraphe en bas de la page, c'est vraiment de nous expliquer comment vous travaillez pour qu'on comprenne mieux le processus.

11544   CONSEILLER PENTEFOUNTAS : Bien, c'est plus que ça, mais ça va.

11545   M. MEZEI : O.K.

11546   CONSEILLER PENTEFOUNTAS : D'après ma lecture, mais ça va. Merci beaucoup.

11547   LE PRÉSIDENT : Merci. Ce sont nos questions.

11548   M. MEZEI : Merci.

11549   THE CHAIRPERSON: We will hear from the final intervener now.

11550   THE SECRETARY: Yes.

11551   I would now invite the Competition Bureau to please take place.

--- Pause

11552   THE SECRETARY: Please go ahead when you're ready.

REPLY

11553   MR. HUGHES: Thank you.

11554   Thank you, Mr. Chairman and all the Commissioners. My name is Patrick Hughes and I'm a Senior Economist at the Competition Bureau.

11555   Accompanying me here today is Mr. Derek Leschinsky, our counsel from Competition Bureau Legal Services.

11556   We are here as representatives of the Commissioner of Competition, who has intervened pursuant to section 125 of the Competition Act in the Commission's review of wholesale services and associated policies.

11557   The Commission is examining significant questions in its review. The Bureau supports your objective in facilitating competition in retail markets to provide Canadians with increased choice. From the Bureau's perspective, regulatory measures in wholesale markets can address the retail market power. We also acknowledge the important role that the Commission's framework for wholesale telecommunications services plays in achieving benefits for consumers.

11558   Recognizing our shared objectives of ensuring efficiency and adaptability in telecommunications markets, providing consumers with competitive prices and product choices, the Bureau appreciates the opportunity the Commission provides to contribute to these proceedings.

11559   We will be succinct in our reply today.

11560   As previously noted, section 125 of the Competition Act guides our position in this proceeding. Pursuant to this section of the Competition Act, our role is to make representations and call evidence before you in respect of competition. We have done so making recommendations to promote economically efficient outcomes that benefit consumers.

11561   The Commissioner of Competition acknowledges that the Commission will consider additional policy objectives in its review, such as maintaining public services such as 9-1-1 and optimizing the use of support structures such as poles and conduits. These objectives are beyond the scope of the Commissioner of Competition's submissions.

11562   The Bureau has extensive experience in analyzing and predicting competitive effects. Based on this experience in administering and enforcing competition law in parties' written submissions, the Bureau has made the following recommendations:

11563   - first, that the Commission not mandate access to unbundled local loops and that the Commission not mandate access to fibre-to-the-premise facilities at the present time; and

11564   - second, when assessing existing high-speed services, the Commission should apply the factors set out in our intervention in the Commission's wireless wholesale proceeding and consider whether vertically integrated incumbents have an incentive and ability to engage in vertical foreclosure strategies.

11565   We have not recommended regulatory outcomes for existing high-speed services. We have stated the basis for these positions on the record of this proceeding and I will not repeat these reasons here today as the foundation for our position is well set out on the record.

11566   Having followed the oral hearings of this proceeding and reviewed the transcripts of the witnesses' evidence, we are now in a position to confirm the parties' oral testimony does not provide a basis for the Commissioner to depart from, or elaborate on, his previously stated recommendation.

11567   Our purpose in attending here today is to assist the Commission in addressing questions that may have arisen during the course of the oral hearing. We would be more than pleased to answer any questions you may have in this regard.

11568   This concludes our reply. Thank you again for providing us the opportunity to address the Commission once again and answer your questions.

11569   THE CHAIRPERSON: Well, thank you very much. Your reply has been succinct but I think our questions will also be succinct because I don't think we have nay. Thank you very much for your presentation.

11570   So thank you, but don't move. We're just going to close it up.

11571   Normally, the secretary is there to do some final comments at the end. I think she would probably remind everyone that their undertakings are due on the 12th of December and that they should be filed accordingly.

11572   So, Madam Secretary, I've just -- perhaps you could --

11573   THE SECRETARY: That's okay.

--- Laughter

11574   THE CHAIRPERSON: Did you have anything else to add, other than the 12th of December date?

11575   THE SECRETARY: The final written submissions.

11576   THE CHAIRPERSON: And the final written submissions are due on -- refresh my memory.

11577   THE SECRETARY: On December 19th.

11578   THE CHAIRPERSON: There we go, December 19th. So thank you very much.

11579   So I just have a few closing remarks before we put this to an end.

11580   Avant de conclure cette audience, j'aimerais remercier un certain nombre de personnes qui ont contribué à son bon déroulement.

11581   Premièrement, je voudrais souligner le travail des interprètes et des sténographes. Grâce à eux, nous pouvons nous comprendre et aussi revenir sur tout ce qui a été dit pendant l'audience.

11582   Je voudrais aussi souligner le travail de l'équipe de CPAC qui a diffusé cette audience sur le site Web de CPAC.

11583   As well, not everyone can attend our hearings or participate in them directly, so it's important that we thank the reporters, bloggers and Twitter users who bring our hearings to a larger audience.

11584   Je voudrais remercier mes collègues au sein du panel, qui ont fait beaucoup de recherches et de lectures afin de se préparer pour cette audience. Leur dévouement est grandement apprécié.

11585   Je voudrais aussi reconnaître la contribution des employés du CRTC, que ce soit à partir de cette salle d'audience, de notre quartier général ou de nos bureaux régionaux. Ils fournissent des conseils experts afin de soutenir le rôle décisionnel du panel et nous aident quotidiennement.

11586   Par contre, et finalement, je voudrais aussi souligner qu'un de nos collègues, et surtout un pionnier des audiences publiques du CRTC, Claude Perrier, prendra sa retraite en janvier 2015.

11587   Claude has provided technical support to the CRTC for nearly 35 years, including support for public hearings over the past two decades. He has been involved in one way or another with over 110 oral hearings.

11588   It's hard to fathom in today's digital world but many years ago you would have seen bookcases full of binders behind us at the panel here that contained copies of all the interventions. Some of you may remember those days. The technology requirements at those hearings consisted mainly of microphones and speakers.

11589   Over the years several technological enhancements have been made to improve Canadians' access to our hearings and to reduce the use of paper, including making documents available online, audio streaming proceedings from our website, video and teleconferencing to allow remote participation from our regional offices and, more recently, introducing Skype to facilitate participation from just about anywhere in the world.

11590   Claude ensured that all these improvements were implemented in a seamless manner not only in this hearing room in Gatineau but at hearings across Canada. He has attended most of them over the past 20 years.

11591   Finally, Claude always did whatever was necessary to ensure that all technical requirements were in place to ensure the seamless flow of our hearings. He was a great help to Commissioners, the public hearings team, staff and Canadians in general.

11592   Donc, un grand merci et toutes nos félicitations, Claude. C'est une retraire entièrement méritée.

11593   Claude, on behalf of us in this room and your colleagues listening in at the Commission offices across the country, let me say you will be missed.

11594   This fall the CRTC embarked on its most ambitious regulatory agenda in recent memory. This hearing was the third major proceeding to review and renew the regulatory framework for communication services in Canada. Just like three periods in a hockey game, they were separate but intrinsically linked: television, wireless, Internet. More and more, these services are integrating one with the other and we must look at that system as a whole.

11595   The Commission had adapted how it holds hearings with people like Claude Perrier. It must also adapt what it decides based on this new technological context. What has not changed is that Canadians must be the ultimate winners at the end of these three periods.

11596   The Commission held these evidence-based proceedings to make sure that Canada's communication system not only adapts but embraces these changes. We must all boldly embrace the future with renewed confidence.

11597   Sustainable competition in the communication services market is imperative so Canadians can benefit from a dynamic, affordable and high-quality system for years to come, one in which they have access to compelling content as well as the choice of innovative wireless services and Internet services wherever they live in Canada.

11598   We now have an important series of decisions to make and rest assured, all the information submitted will be taken into consideration.

11599   Again, I would like to remind you that undertakings for this hearing are due on the 12th of December.

11600   And in closing, I just want to thank you all and the hearing is now adjourned.

11601   THE SECRETARY: Mr. Chairman, if you allow me.

11602   THE CHAIRPERSON: Oh! Okay, we're not quite adjourned.

11603   THE SECRETARY: Not that I wanted to have the last word.

--- Laughter

11604   THE CHAIRPERSON: Okay.

11605   THE SECRETARY: But we just forgot to mention that final comments, including an executive summary, are not to exceed 25 pages.

11606   THE CHAIRPERSON: Okay. So that was in the Order and Conduct letter as well.

11607   THE SECRETARY: Thank you.

11608   THE CHAIRPERSON: So thank you very much.

11609   So with all that being finally concluded, the hearing is now adjourned.

11610   Merci beaucoup.

--- Whereupon the hearing concluded at 1128

REPORTERS
Kristin Johansson
Jean Desaulniers
Jennifer Cheslock
Monique Mahoney
Karen Paré

Date modified:

2014-12-04