Transcript, Hearing 13 February 2024

Attendees and Location

Held at:

Conference Centre
Portage IV
140 Promenade du Portage
Gatineau, Quebec

Attendees:

• Chairperson: Vicky Eatrides
• Members: Adam Scott, Vice-Chairperson, Telecommunications
  Ellen Desmond, Commissioner, Atlantic Region and Nunavut
  Nirmala Naidoo, Commissioner, Alberta and the Northwest Territories
• Legal Counsel: Eric Bowles
  Megan Maloney
• Secretary: Sonia Gravelle
• Hearing Manager: Marianne Blais
• Manager Telecommunications: Adam Mills

Table of Contents

Presentations

1088 National Capital FreeNet

1199 Build Nova Scotia

1268 Xplore Inc.

1380 Bragg Communications Inc., carrying on business as Eastlink

1656 Beanfield Technologies Inc.

1783 Community Fibre Company

1874 Saskatchewan Telecommunications

Undertakings

1640 Undertaking

Transcript

Gatineau, Quebec
13 February 2024
Opening of Hearing at 8:59 a.m.

Gatineau, Québec

‑‑‑ Upon commencing on Tuesday, February 13, 2024 at 8:59 a.m.

1085 THE SECRETARY: Good morning, everyone.

1086 We will begin with the presentation of National Capital FreeNet.

1087 Please introduce yourself and your colleague and you may begin your presentation. Thank you.

Presentation

1088 MS. ROBINSON: Thank you.

1089 Good morning, Madam Chair, Mr. Vice‑Chair and Commissioners. We appreciate the opportunity to speak with you today to address longstanding structural inequities in the wholesale internet market and to help ensure that all Canadians have fast, affordable and reliable access to the internet.

1090 My name is Shelley Robinson and I’m the Executive Director of National Capital FreeNet, also known as NCF.

1091 I am joined by my colleague Andrew Martey Asare, NCF’s Business and Community Development Manager.

1092 Founded in 1992 as a not‑for‑profit dial‑up community platform, NCF was the first internet provider in the region, peaking at more than 40,000 active members, a while ago now. We believe everyone has a right to affordable, high‑quality access to the internet that they understand how to use, while feeling safe online. We also work to advance digital equity, which includes the recognition that the digital divide mirrors and exacerbates other social inequities, disproportionately affecting marginalized groups, including those living on low incomes, Indigenous peoples and people of colour, seniors and people with disabilities.

1093 As a social enterprise, NCF has been a wholesale‑based competitor since 2005. Our core services include selling DSL and cable internet, a lower‑cost internet plan for Ottawa Community Housing tenants, an award‑winning HelpDesk of staff and volunteers, free locally hosted email, and digital skills workshops and online resources, especially for seniors and those on low incomes.

1094 We currently serve more than 4,800 members, more than half of whom subscribe to our DSL or cable services. We are well aware that our subscriber base is basically a rounding error for big incumbents like Bell, especially given the losses that we have sustained over the last few years which we attribute to not being able to offer FTTP services and the shrinking of the FTTN footprint.

1095 We believe, despite our size or maybe because of our size, that it is important to ensure that there are meaningful alternatives to a few big players in the market and that NCF serves as a working model of community ownership despite very challenging conditions. My background is in community radio and just as the community and broadcasting industry is enhanced by having public, private and community broadcasters, ensuring local perspectives and services are still available even when private broadcasters like Bell decide to pull out of communities, we believe it is important to have locally owned community internet providers and a range of for‑profit providers.

1096 MR. MARTEY ASARE: A system with only a handful of incumbents trades the dividend returns of shareholders for the public interest and limits the opportunities for existing providers to grow and new kinds of providers to emerge. This imbalance enables incumbents to restrict access to FTTP networks even as they rip out the copper infrastructure that is left for their competition and to threaten to leave Canadians in rural, remote and Indigenous communities unconnected and under‑connected when regulatory decisions don’t go their way.

1097 This is why we are currently building a free community WiFi network to help those living on low incomes in Vanier, Overbrook and parts of Sandy Hill and Lowertown. We consider this to be the kind of innovation mentioned in the Policy Direction for competition, affordability, consumer rights and universal access, but our plans are also a response to the limitations of the current wholesale framework.

1098 We hope this hearing also meaningfully addresses some of these limitations, resulting in higher quality connectivity without sacrificing affordability, particularly for those most affected by the digital divide.

1099 We appreciate that in the Notice of Consultation for this hearing the Commission referenced how previous regulatory decisions have not had the expected outcomes. The promise of disaggregated access to FTTP and a focus on promoting facilities‑based competition has in fact shrunk real competition and choice. This is in part because wholesale‑based competitors have been limited in what services they can offer and in part because so many independent providers have been acquired by the incumbents. Our concern is not just about the current effects of this growing consolidation of the market but the long‑term consequences for affordability in a market dominated by a few incumbents.

1100 Mandating affordable aggregated access to FTTP facilities will help address the imbalance between what Bell can offer and what wholesale‑based competitors are limited to on FTTN. This is particularly crucial given the speed with which Bell has started decommissioning its copper network.

1101 In terms of FTTP tariff rates, we ask the Commission to consider the submission of Vaxination that speaks to how fibre connectivity is cheaper to maintain than copper and how proposed FTTP tariff line rates that are higher than many current retail FTTP rates suggest a distorted costing process. We also support the submissions of the Public Interest Advocacy Centre and OpenMedia related to predatory pricing.

1102 As part of FTTP tariff rates and to ensure as many Canadians as possible are able to afford to meet the Commission’s Universal Service Objective, we ask that the Commission add a tariff line rate for speeds at or below the Universal Service Objective which matches the FTTN rate for the same download speed.

1103 In reviewing FTTN rates, we also ask that the Commission untie the knot created in the Telecom Order 2021‑181 rate reversal that found “substantial doubt as to the correctness” of the lower FTTN rates determined through the Telecom Order 2019‑288 process, yet also stated that committing significant resources to revising cost studies would “contribute to impeding the ultimate goal of transitioning to the adoption of disaggregated wholesale HSA service.”

1104 Determining the correctness of the current FTTN rates seems particularly important given both that the utility of a disaggregated FTTP structure is in question and that Bell is asking for the FTTN rates to be frozen at their current level. They argue that FTTN has become a de facto legacy service. If this is the case and to ensure expedient decision‑making, we suggest that the FTTN line rates should be changed to match the current $14.11 tariff rate of the 6/0.8Mbps copper legacy service.

1105 Given that many if not most FTTP subscribers choose speeds higher than the current Universal Service Objective of 50/10Mbps, this would encourage Bell to speed up the transition to wholesale FTTP access so it could receive higher tariff line rates.

1106 MS. ROBINSON: Finally, we would like to mention two opportunities the Commission has to ensure affordability for those living on low incomes.

1107 A low‑income subsidy or low‑income tariff rate set for subscribers that meet established means‑tested criteria would enable all providers to offer lower‑cost plans for those that need it most. This is similar to the longstanding Lifeline Program and the pandemic ‑‑ soon to maybe be gone ‑‑ Affordable Connectivity Program in the U.S., which reduces the monthly cost of internet for those who qualify to $30 per month and is portable between providers.

1108 A lower‑cost tariff has precedence in the recent Telecom Order 2023‑348 decision to enable Northwestel to participate in ISED’s Connecting Families initiative. A broader low‑income wholesale tariff rate would enable wholesale providers like NCF to voluntarily participate in the Connecting Families program on the same basis as the incumbents and facility‑based providers or to offer their own lower‑cost programs like those of Rogers and Telus. As it stands, wholesale providers face significant losses if they attempt to offer, for instance, the Connecting Families 1.0 program, which is $10 per month, when the current FTTN rates for 10/1Mbps are $23.79 just for the line rate.

1109 NCF is committed to affordability regardless of the outcome of this hearing, but what could change is our ability to continue operations even after 31 years.

1110 Thank you for the opportunity to present today. We look forward to your questions.

1111 THE CHAIRPERSON: Thank you so much to NCF for being here with us today and starting off day two together. So, thank you for that.

1112 I know the Panel is very interested in having a discussion with you, so I think we will just jump right into it. I will turn things over to my colleague Commissioner Naidoo. Thank you.

1113 COMMISSIONER NAIDOO: Hi. Thank you so much for being here today.

1114 As a not‑for‑profit enterprise in Ottawa, I think we're very interested in your very unique perspective, including your organization's efforts to promote digital equity.

1115 I'm wondering if you can tell us a little bit about who makes up your membership and whether you partner with anyone in particular to support your community access fund.

1116 MS. ROBINSON: Okay. So, our membership, we don't collect kind of, you know, demographic data and the qualifying data for people around their incomes, except if they qualify for the Community Access Fund. So, of the roughly 2,400 subscribers we have right now ‑‑ I just looked it up ‑‑ it always hovers around 300, so it was 299 when I looked yesterday were the subscribers to the Community Access Fund. So those are Ottawa Community Housing tenants.

1117 Anecdotally, we have a lot of seniors, new Canadians, people with disabilities, but the anecdote is based on who comes into the office and sometimes those are the groups who are also most likely to sort of take advantage of those kinds of helping opportunities, so it might distort to some degree who our membership is. We also have folks who really care about local ownership. So, you know, some of those folks are the same people who would shop at farmers' markets. So, you know, we've got the Whole Foods kind of crowd and then we also have some folks who might identify as being from marginalized communities.

1118 In terms of who helps us with the Community Access Fund, it's internally subsidized right now, which is why it's a $25‑a‑month charge for a 6‑meg service and it's unlimited use.

‑‑‑ Off-record Discussion

1119 COMMISSIONER NAIDOO: Yes, go ahead.

1120 MR. MARTEY ASARE: Because it's internally subsidized, our main partner in terms of being able to deliver the Community Access Fund is Ottawa Community Housing, just being able to provide service to tenants of Ottawa Community Housing.

1121 I guess our indirect partners would be our entire membership because, by and large, we make a loss on that plan and so, the rest of our membership is contributing so that we can offer that service. And also, I'll say the volunteers who help support us delivering services for that program also help us in being able to do that.

1122 We would love to be able to provide higher speeds, but we currently cannot. Thank you.

1123 MS. ROBINSON: Perfect. I wouldn't have thought to thank our membership and our volunteers, so I'm really glad you jumped in.

1124 And so, Ottawa Community Housing is a partner in that they provide access to the list of all their tenants so we have that. They're not a financial partner for this.

1125 And so, what I was saying is we offer it for $25 for a 6‑meg service. We're well aware that that isn't as low as for the Connecting Families Program or through Rogers' Connected for Success Program, and yet, the program is kind of co‑advertised by Ottawa Community Housing with the Rogers program and we still get the subscribers.

1126 And we do hear from folks that they want an alternative. Sometimes it's because they're willing to pay a higher price to be with a local provider. Sometimes it's because they might have credit issues with Rogers or other issues that mean that they're not comfortable with Rogers and so they appreciate having an alternative even if it's a little bit more.

1127 And again, we would definitely like to ‑‑ and have tried to price out how we could offer higher speeds for lower rates, and the wholesale rates are absolutely the reason we can't do that.

1128 COMMISSIONER NAIDOO: Thank you very much for that answer.

1129 The Ottawa market includes a fair number of options, I think it's safe to say, when it comes to selecting an ISP. There's Bell, Rogers, their flanker brands as well as other wholesale‑based ISPs. But clearly, NCF seems to complement those offerings and serves a specific segment of the market.

1130 I'm wondering if you can expand on what needs NCF meets that the other ISPs perhaps do not in the market.

1131 MS. ROBINSON: Sure. So, I think the first one that's kind of easy to look is that community ownership piece. So, yesterday during the Manitoba Coalition's presentation they were also talking about like the value of local service, which for sure is something that we're able to offer. And it's community volunteers and our staff, so they also tend to go sort of above and beyond.

1132 So yes, we have people calling about their connectivity questions. We also have a lot of people who will be like: “How do I change my Facebook password?” “Is this ransomware? This message that's spam that says it's ransomware, you know, am I safe to click on it?” “Why isn't my Smart TV working?” You know, like a range of questions that people have.

1133 So I think the local service is part of it, but the community ownership and the not‑for‑profit status means that ‑‑ so, for instance, we haven't changed our prices since February 2021. That's the last time we raised our prices. And that is not just a kind of strategy to kind of look good in the market, but it's because it's reinforced by our not‑for‑profit status and then, again, that community ownership piece. And so, I think that's kind of the core of everything.

1134 And so, we wouldn't want to be a community‑owned not‑for‑profit and then only work to support people who already are well covered by existing other options. I think community ownership is important irrespective of addressing affordability, I do, but I also think that you have a ‑‑ you know, there's a glaring need to address the folks who aren't connected.

1135 And so, for instance, during the Pandemic we worked with another community organization to do a survey of Ottawa Community Housing tenants, and of the two hundred'ish tenants that we interviewed, 23 percent of them had no internet at all. And so, you know, when you're seeing that on a daily basis, then you want to make sure that you're trying to do things to help get those folks connected.

1136 And then again, for us, a big part of this is we have people who turn off their modems because they're nervous about having the internet on when they're not using it. So having that kind of digital skills training available to folks is really important or the people who are not wanting to do online banking or very scared about, you know, using the internet. And then it's not considered in our mind full access because if you're limiting what you're doing online because you're scared or you're not sure, then you don't meaningfully have access, and again, that tends to overlap with marginalized communities. So that's another, you know...

1137 So that's how I think we're different for sure.

1138 Yeah, go ahead.

1139 MR. MARTEY ASARE: I'll say we wear two hats as a not‑for‑profit ISP. We are an ISP, we provide an internet connectivity service. We also are a not‑for‑profit that works in the community and that means that we do a lot of work to help with adoption and so, a lot beyond being able to connect someone, whether it's running workshops, providing digital literacy training. That's work that a typical ISP doesn't care to do. Working with libraries, different kinds of community halls, food banks, et cetera, we do that as part of our mandate. And so, having to wear those two hats is unique and it's something that's needed in the industry.

1140 COMMISSIONER NAIDOO: Thank you. Digital literacy is definitely an important thing.

1141 I wanted to move on to an issue that you found that you're plagued with, that you're having to overcome. You say incumbents aggressively decommissioning their legacy networks means your DSL customers are losing service once FTTP has been installed and because of that, you were saying that incumbents, you think, should be required to give at least six months' notice when they plan to decommission their infrastructure in a given area.

1142 I wondered if you could expand on the extent to which your customers have actually had to migrate to FTTP following the decommissioning of a legacy infrastructure and approximately ‑‑ I don't know if you can answer this, but hopefully ‑‑ how many customers have been negatively impacted.

1143 MS. ROBINSON: Sure. I note when people are up here they're always like “That's a great question” and it's like a reflexive thing but it's also always true when they say it and also when I'm saying so. It is a great question, so thanks for that.

1144 The tangible consequences that we had were sort of accidental, which is that our subscribers who also had Bell wet line sort of telephone service got notices that they were not intended to get ‑‑ Bell has said that they were not intended to get them ‑‑ and so it then sort of implied that they had to transition and our understanding from Bell is that those folks who may have a Bell landline service but are with a wholesale‑based competitor for their internet shouldn't have been affected by this transitioning access letter.

1145 So, we got at least 40 to 50 of our members who got these letters. Then some of them got phone calls. Some of them got an email from Bell that was like, “Oh, sorry, we shouldn't have sent it.” Some of those who got the email then got another hard copy of the email and/or follow‑up phone calls that contradicted the email. So, it was very confusing. So, a number of those folks didn't sort of understand the connection between their landline telephone and their internet service.

1146 So, we had a couple of members who were thrown completely out of service, so called us panicking. And then when we tried to put them back in service, there was a miscommunication because then the Bell portal would say that they couldn't be reconnected, blah‑blah‑blah. So that was a problem.

1147 We lost at least one member who was kind of just, you know, tired of the hassle. There's also the obvious marketing opportunity where maybe people got these letters that, you know, promised them a bright new future and left. We don't know about those folks. So we only know the 40 or 50 who contacted us and said that they got the letters.

1148 And then even for those where we were able to kind of smooth the transition, some of them we were able to sort of do what should have been done from the beginning, which is that they stayed on their wet line landline telephone service, and a lot of them fiercely wanted to protect their copper landline services. One woman had done extensive research on how she could find another copper provider if, you know, Bell was going to force this transition on her. So we were able to do that. And then some folks, we ended up ‑‑ they have the FTTP phone service but we were able to get their DSL FTTN service back in service, but now there's a monthly dry line fee, which is in our case an additional $5 a month.

1149 COMMISSIONER NAIDOO: Right. I wanted to talk a little bit about that. How has this decommissioning impacted your ability to offer more affordable internet services?

1150 MS. ROBINSON: Well, I mean the dry line is then an additional cost that we have to pay Bell on top of that service.

1151 Also, there have been times when ‑‑ I think I described it in one of the submissions. So, we have members who, especially because they're seniors, they will be ‑‑ what are they called, sunbirds, you know, people who go away to Florida and they come back?

1152 COMMISSIONER NAIDOO: Snowbirds.

1153 MS. ROBINSON: Snowbirds. I should have known, Anne Murray. Anyway, so they go away to Florida and then they come back and so they will reconnect their service or they just leave and come back for whatever reason. And so, somebody upon coming back, I think when they left they had a 15‑meg service, and I can't remember if it was 1 or 10 on the upload, and then ‑‑ it might have been 25. Anyway, so we tried and we thought we could get them 10 or something that was still an FTTN rate, and then it was like, “No, that's not possible.”

1154 Then it went down to 6. So that's not a direct result of decommissioning because they shouldn't even have been able to get 6 if there was true decommissioning. But there's a degradation, we're finding, of the speeds available. So, that obviously affects our ability to provide services.

1155 COMMISSIONER NAIDOO: Right. What options then are you able to provide to customers who are no longer served by copper? Are you able to transition them to a cable‑based service or are they ‑‑ do you find that they're compelled to just go somewhere else?

1156 MS. ROBINSON: I'm going to let Andrew answer. Yeah, go ahead.

1157 MR. MARTEY ASARE: We were able to steadily grow in a very competitive market for years offering DSL services. From about 2019 to today, we lost about a third of our DSL subscribers and we've been able to transition only, I think, about 5 percent of our total transcribers to cable services. So most of them, by a ratio of like 9‑to‑1, are leaving and we don't always get to have an interaction with them before they leave. When we do have interactions with them, they're generally saying, “We're sorry, we love you, we've waited, we've had ‑‑ fibre has been coming in forever, but we have to leave.”

1158 COMMISSIONER NAIDOO: I want to dive down a little bit into your suggestion that we started with at the beginning of this, that incumbents be required to give notice when they are planning to decommission infrastructure in a given area. I wanted to give you a chance to put some meat on the bones of that. Like, can you expand a bit on how such a measure would be implemented, who would they be required to give notification to, would it be the CRTC, would it be wholesale‑based ISPs? If you could just expand a bit.

1159 MS. ROBINSON: Sure. Your questions are already sort of more fleshed out to some degree than my proposal would be. I think giving notice to the Commission makes sense and I think either then the Commission making that information available to wholesale‑based competitors or Bell directly making it available to ‑‑ and I'm only using Bell because that's our provider in this context ‑‑ wholesale‑based competitors makes sense. Yeah, how it would be implemented is they have the level of network planning internally to know when they're doing this.

1160 And so, the other issue is, you know, there's kind of like this tech dictum of like “move fast and break things” or “apologize later” or something, right? So that's kind of how it feels sometimes with Bell, right?

1161 So we started having these problems with the FTTP transition with our wet line subscribers. We really flagged it as a problem that we started noticing in like April of 2020‑ ‑‑ I can't ‑‑ time, you know? ‑‑ 2023? Anyway, it took easily six months for us to get kind of even to the point where they sent out the email that said, Oh, we're sorry, you know, to the subscribers, saying, you know, We're sorry, this was incorrect.

1162 So the advance notice is also partly just because it's not just that we find out when it happens, we find out never from Bell, from our subscribers. It takes us a while to piece together that it's not just something else that's happening. And then it takes a while to get any kind of traction with Bell in following up on it. So it's actually like probably a one‑year range from a six‑month notice to the Commission to what we're receiving now.

1163 And they absolutely kind of know what they're doing with their network planning. And it would enable us to then sort of let our members know ahead of time.

1164 So we have an annual general meeting for our members, and there's this discussion group online where people can talk about things. And so a number of people had received these letters, not contacted the help desk, and then were posting on this internal discussion group related to the annual general meeting, being like, It should be priority number one that we don't lose our service on November 1st as these Bell letters have said. And we had to be like, Okay, please contact us. That's not what's actually happening. But it creates panic in people, because these are essential services. And then they get a confusing letter from Bell, and then they don't know what to do about it.

1165 So even if it means we wouldn't be able to pick up some of those subscribers with a cable service, we'd be able to like talk them through the process. We would have made it so that we don't have to have those folks or us carrying the dry line charges when people switch to FTTP and can't be switched back, effectively.

1166 And so I think how it's implemented, like I said, I think alerting the Commission is the first best step. And then from that, it's kind of, for us, this is why it matters so much.

1167 COMMISSIONER NAIDOO: Thank you so much. Those are all my questions, but I really appreciate your passion.

1168 MS. ROBINSON: Thanks.

1169 COMMISSIONER NAIDOO: Clearly. All right. Thank you.

1170 THE CHAIRPERSON: Thanks very much. Let's go to the vice‑chair.

1171 VICE‑CHAIRPERSON SCOTT: Good morning. So in your intervention, you noted concern about Bell and I think other incumbents offering very low prices, sometimes below the wholesale rate. If we put consumers front and centre, I think there are probably certain consumers that would be quite happy to pay a below‑cost rate.

1172 MS. ROBINSON: I'm sure that's true.

1173 VICE‑CHAIRPERSON SCOTT: And that's probably less true for ‑‑ you know, but obviously, it raises concerns for alternative service providers. Can you just speak for a minute about kind of the long‑term and short‑term implications of low prices and what that ‑‑ what's the down side of the type of concern you're raising?

1174 MS. ROBINSON: Yeah, and I think the short term/long term is the perfect way to see that.

1175 So on a short‑term basis, from a consumer perspective, I think it seems great, right, because you're getting a lower price. It's why are lower prices being offered. And again, I would refer back ‑‑ I say “again”; I didn't refer to them yet ‑‑ but anyway, the PIAC and OpenMedia presentation yesterday, where, you know, when you asked a similar question, it was like, Well, there's, you know, if they're offering FTTP rates that are below the proposed tariff rate, than either the costing is wrong, you know, and it should be lower, or there's predatory pricing.

1176 So the intent of predatory pricing would be that they drive out, you know, most of their competitors. And then when ‑‑ this gets to the short term and then the long term ‑‑ then the long term is that they don't have anyone to compete with, and so those prices no longer need to be low.

1177 And so I think so much of this is about understanding that businesses like make choices kind of, you know, for financial reasons. And so it's clear that if they are offering very, you know, lower rates now, then that's because there's a business incentive. And so the business incentive, you know, would be that they want to have higher prices later, and so the more you kind of clear the way for yourself, then the easier it is later.

1178 Do you want to add?

1179 MR. MARTEY ASARE: Yeah, so I'll add that I am one of those consumers who gets the benefit from that kind of offering. I happen to live at an address that's FTTP only. I cannot get services from NCF. I received such an offer. It was great. I had five price increases in the course of two years, during which time, if I was an NCF subscriber or member, I wouldn't have had a single price increase.

1180 And then also you get into the issue of needing to renegotiate your contract every two years. And most consumers aren't doing that. I am way more knowledgeable than most people, and I'm happy to get on the phone and have a little bit of a tussle and try to get the best price. But I don't think that's the best for consumers either, having that kind of differential pricing, that's very difficult to get. So for most people, inertia sets in, and two years down the line, their rates are double or something much higher.

1181 MS. ROBINSON: Yeah, I was just going to add about kind of promotional pricing in general. So NCF doesn't do promotional pricing. And we also don't have kind of differential pricing.

1182 So I feel like a thing that Canadians love to do is like tell you about the deal they got on telecom services, a lot of Canadians. And again, those are the savvy folks who are going to call every year and, you know, speak to a customer retention agent and they're going to kind of feel like they got a really good deal.

1183 So that's not what my mother‑in‑law does. So I signed my mother‑in‑law up for a bundle with Bell because she didn't want to leave Bell because of her email address. So she signed up for a $99 package. And it's a five meg speed and it is 25 gigs of usage, which was fine until the pandemic came, and then she started using ‑‑ like using her iPad to go to church, basically. And so then her usage went up, and so then she contacted Bell to see if she could sort of go all unlimited or get a higher usage, and it was exorbitantly expensive, because she's not canny. She doesn't know how to negotiate or threaten. She's hard of hearing, so it's even hard for her to have the conversation.

1184 So it looks like it's good, but it's only good for some people. Right? So not everyone gets to take advantage of those kinds of offers. And also, a short‑term window of three months that looks really cheap, sometimes people aren't, again, as great at doing the sort of long‑term math or they stop looking at their bills because they just remember the first price that they paid. And so we kind of think it's a bit of a bait‑and‑switch sometimes.

1185 VICE‑CHAIRPERSON SCOTT: Those are very useful perspectives. Thank you.

1186 THE CHAIRPERSON: Thank you very much. So maybe I could just take the opportunity to thank you again for being with us this morning. We appreciate you bringing your members' perspectives but also for sharing your personal stories with us, so thank you for that.

1187 We'd like to give you the opportunity to conclude with any final remarks or if there's anything that we didn't get to cover in the discussion, now would be a good time to share those. Thank you.

1188 MR. MARTEY ASARE: We thank you so much for listening to us. We appreciate the opportunity to do this.

1189 We really would love to have a way to be able to provide more services to more people in our region. We think that for a while a lot of conversation at the CRTC has focused on people to close the service availability gap, which is very, very important, and we want to get to a hundred per cent service availability across the country.

1190 We think a conversation is coming or should start about closing the adoption gap and that means more than being able to have fibre outside, but there's way more additional supporters needed to get people to actually adopt connectivity. And a provider like NCF does the additional work to meet populations and serve groups that are typically not addressed by for‑profit companies. Thank you.

1191 MS. ROBINSON: I'm just trying to think. So there's so many important issues in this hearing. One of them is obviously about mandating beyond the temporary that has already been mandated FTTP access, and we think that that's really important.

1192 It's really important for the Commission to consider affordability and at the line‑rate level, because I think sometimes we risk kind of saying nice things about making sure that everyone is connected but really making our choices for maybe most people or the people who are kind of most like us or those who want the fastest speeds and those who call every year kind of for new packages and, you know, have these kinds of conversations.

1193 And a lot of folks see the Internet, rightfully, as like in a very utilitarian way. So they don't know the difference between the DSL, the cable, the fibre. They don't even really sometimes understand kind of the dimensions of the speed, usage. They just kind of want something that works, and then they don't want it to cost too much.

1194 And so FTTN rates, we really believe, like, there's an ongoing need for FTTN, even though it's getting harder to offer it because the stuff is being ripped out, or for FTTP at that 50 meg and below level to pick that up. Lots of people can do what they want at a 50 meg speed. Not everybody needs a one and a half gig connection.

1195 And so I think it's really important for, yeah, when we talk about affordability, considering affordability for kind of everyone who, you know, wouldn't be covered by a lower cost or low‑income tariff, and then also making provisions for the deep affordability for those on low income. So I think that's it. Thank you so much.

1196 THE CHAIRPERSON: Thanks very much, National Capital FreeNet.

1197 THE SECRETARY: Thank you.

1198 I will now invite Build Nova Scotia to come to the presentation table. When you're ready, please introduce yourself and you may begin your presentation. Thank you.

Presentation

1199 MR. VEALE: Okay. Good morning Commissioners, Chair, Co‑Chair. My name's Jonathan Veale. I'm vice‑president of Strategic Infrastructure with Build Nova Scotia. This is Build Nova Scotia's first intervention with the CRTC, so we're excited to be here, and the team in Nova Scotia is listening intently to see how it all goes.

1200 We'd like to recognize a number of other groups that have supported us in the province, most notably the Inverness Connectivity Committee for bringing attention to the topics that are at hand today. And so we're commenting today in support of the proposal. So bear with me as I try and coordinate all the devices, here.

1201 So Build Nova Scotia is a Crown corporation entrusted to deliver strategic economic infrastructure for the province, including fibre and cell connectivity, with several significant infrastructure projects in progress. We want to tell you about both the barriers and the opportunities that we see within the telecommunications space in Nova Scotia.

1202 This is a crucial time for building strategic infrastructure in Nova Scotia and in Canada. It's important that the views of taxpayers and the visitors of Nova Scotia are shared. The CRTC must ensure that the essential services are prioritized and built for all those who need it in an expedited timeline.

1203 The key points today that Build Nova Scotia will address are:

1204 1. Building a fully connected province with the telecommunications industry members that ensures full access to the system over 99 per cent of the time. Customers need to be able to get online during natural disasters and emergencies, which means repairs must be done and completed safely and as quickly as possible. All Nova Scotians, those living in rural and those living in urban areas across the province, must be able to access both fibre as well as satellite and cellular systems. In 2022, the CRTC recognized the new policy direction of the government, which included robust systems and networks, with particular care for emergency services, investments to support these activities in rural and remote areas and to address some coverage gaps.

1205 2. In creating a competitive environment that builds innovation and affordable reliability is key tenets of the system, a system that integrates a variety of competitors and levels of service.

1206 3. Regulatory changes and funding sources that match the current and future needs of Nova Scotia and Canada. Strengthening accountability is defined as a pillar of the CRTC. This requires regulatory frameworks to be transparent, well defined, and include strong communications with all stakeholders.

1207 A Connected Province: Elected officials in Nova Scotia have raised the concept of telecommunications becoming an essential service and viewing these as complementary to the overall economic and social wellbeing of our residents. These essential services support all aspects of the economy, including tourism, education, health care, business and positions the province as a place to be truly open for business.

1208 Fibre to the premise services have long lagged in rural Nova Scotia. The province has invested over $200 million for Internet connectivity into creating a connected province over the last three years and should expect financial support from the federal government for these efforts. In fact, we've moved from 75 per cent coverage over the last few years to essentially 99 per cent coverage across the overall province through these investments. We have further committed a further $47 million targeted to increase cellular infrastructure and reach within the province.

1209 Nova Scotia has shown its commitment to connectivity for rural areas and Indigenous groups. Build Nova Scotia has been hearing directly from communities, residents, politicians, and first responders. First responders have related how much they cannot connect to headquarters and key staff due to a lack of cellular, fibre, or other options due to outages. It's critical for the safety of citizens and these groups to be able to be connected.

1210 Connectivity in terms of both fibre and cellular is critical during natural disasters, and Nova Scotians should expect these services will continue when these disasters happen. Our view is that safety of citizens is paramount, and that's certainly an important lens that we look at this issue.

1211 These essential services are the minimum requirement for people looking to move, travel, and live in Nova Scotia. For rural parts of the province, these services can mean the difference between life and death and the ability to provide and receive health care. They also clearly influence choices around immigration. When we sell Nova Scotia as a place to come live and work and play, it must be given that you will have access to telecommunications and connectivity throughout the province.

1212 Why are we here? Building strong competition in rural areas that is reliable and affordable, the Province of Nova Scotia wants to promote strong competition in the telecom sector to ensure reasonable costs and services for all Nova Scotians. This includes opening the market to new entrants and creating the right conditions for investment in that network. Competition, quality, and service are all factors in delivering strong options for Nova Scotia.

1213 Similarly, Build Nova Scotia supports the interim reduction of existing aggregate wholesale HSA service rates. Similar steps the CRTC took relative to cellular tower access were positive in opening competition for new entrants and existing players wanting to expand their service in our areas.

1214 The CRTC should continue to push established companies to deliver Internet to people living in rural markets while opening the market to competition. While the incumbents continue to access government funding in addition to their corporate investments, there is room for more competition as the province is experiencing unprecedented growth. We encourage more efforts to aggressively open the market, both for Internet as well as cellular services. New entrants would be better positioned to offer successful competitive service if there was a simple process to access for fair cost, manage connectivity from their back end to the termination within a home or premise.

1215 Build Nova Scotia supports the following provisions in terms of Internet, emergency, and cellular services in Nova Scotia: these include fostering a competitive telecommunications sector in Nova Scotia by promoting fair market practices, preventing monopolistic behaviours, and enabling new entrants; encouraging the development of innovative services and technologies by allowing fair competition among telecom providers, ultimately benefitting consumers through increased choice and improved affordability. We encourage the opening of the market to domestic and foreign entrants both for Internet via landline, radio, satellite and for cellular service via MVNO that both own and do not own facilities on the spectrum.

1216 The Province's position includes that we also promote investment in broadband and cellular infrastructure by creating a conducive environment for investment in expanding and upgrading networks. A key issue with having one‑telecom‑only infrastructure in rural areas is that a low return on investment means that there's no business case for other telecoms ever to invest and own infrastructure. This leaves all other market entrants at a competitive disadvantage against the telecom owning the publicly paid‑for infrastructure, as is our case. The likelihood of a smaller competitor setting up their own rural infrastructure is low. The current model of having government funding infrastructure for a telecom can impact competition. The CRTC's approach is appropriate to set up wholesale rates to make access to that publicly subsidized infrastructure fair and affordable.

1217 Recognizing that some of our comments in our submission are outside the scope of the immediate hearing and many of our comments relate to essential services and safety and regulatory changes, we wanted to share some of our points on the record. And if you do have questions on that, we'd be happy to speak to those.

1218 The government's position in Nova Scotia is that more must be done to ensure transparency and visibility of telecoms' performance specifically during emergencies, during natural disasters, cell time uptime must be ongoing and the safety of citizens is paramount. And these services are the minimum requirement for people looking to move to the province.

1219 Again, we do have additional comments on the regulatory framework that we included in our submission that may be considered at another time or through another hearing.

1220 Funding for cell towers and fibre expansion is a federal responsibility. Nova Scotia has stepped in to address this significant gap, as I mentioned, moving from 75 to 97 to essentially 99.9 per cent coverage, when you include our new cellular program. There's a lack of communications options within the province for first responders and rural Nova Scotia in terms of access to fibre and cell networks. New funding can help address this from the federal government. The Province has identified a few areas in terms of regulatory changes that I've spoken to already. These would create positive opportunities if considered as part of your overall regulatory framework.

1221 In summary and to conclude, Nova Scotia is committed to building a fully connected province; however, we need financial and regulatory support from the CRTC to ensure success in terms of variety of projects and services aimed at improving Internet and cellular coverage for Nova Scotians, particularly during emergencies and in crisis. Nova Scotia needs CRTC leadership to create a competitive environment using the levers there at your disposal. And lastly, Nova Scotians need the CRTC to advocate for regulatory change that will positively influence the telecommunications industry to support transparency, robustness, and availability of networks.

1222 Thank you for your time.

1223 THE CHAIRPERSON: Thank you very much to Build Nova Scotia for participating in the proceeding and bringing these views forward on the public record. Thank you also for being here with us today.

1224 So I will turn things over to Commissioner Desmond to start the questioning for the Commission. Thank you.

1225 COMMISSIONER DESMOND: Good morning, Mr. Veale. Thank you so much for being here. And I just want to start by commenting I appreciate that you did raise points about emergencies. Just this morning, I was listening to the news, and they were talking about the difficulties in Nova Scotia over the last year as it relates to forest fires, floods, and now snowstorms in Sydney. So I'm very much aware of the challenges that Nova Scotia is facing and some of the challenges around connectivity.

1226 And of course, your intervention does highlight the challenge of connecting all Nova Scotians to high speed Internet services, and that of course is a goal of the CRTC. But at the same time, you do favour wholesale competition as a means to ensuring affordable services.

1227 I'm just curious if you could expand a little bit more in terms of the argument that incumbents have made that if we were to provide for wholesale access, this would in turn limit the areas where they could deploy fibre, and that this would of course impact the rural regions in particular. So how can we ensure that there is a continued business case to invest in networks, particularly in the rural and remote areas?

1228 MR. VEALE: It is a challenge, and it's a very difficult challenge that we've been grappling for the past few years. For the last three years, three years ago, we had a 103,000 civic addresses across Nova Scotia that did not have access to really any form of Internet, and it was a significant challenge. We've since closed that gap down to 10,000 remaining, and these are essentially the last mile of connections that we need to make.

1229 That was accomplished in spite of the fact of ‑‑ in spite of having the existing market that we do have in terms of a lack of investment from the sector entirely. The public sector stepped in and addressed that market failure. The Province invested upwards of $200 million. We've received partner funding and leveraged that funding of around $190,000, most of that coming from federal sources as well.

1230 So I think that either way, you don't get a solution. You don't get investments. So currently, that's being addressed through investment. We've largely been able to close the gap, so we've... our priority has been accessed. That seems to be a very critical starting point, now we need to move towards competition, which will start to address continuity, safety, reliability, certainly cost, and then future integration.

1231 And so, it is a long game, in terms of the regulatory efforts that need to be made. Do I address this issue?

1232 COMMISSIONER DESMOND: Okay, thank you. Now, I wanted to just speak briefly about if there should be any limitations that should be imposed if the Commission were to mandate access.

1233 Some of the incumbents have suggested limitations around how many households would need to be connected before they would have to open up their systems, whether or not there should be a head start rule. I'm sure you've seen some of those suggestions on the record.

1234 Could you share your views with respect to whether incumbents, such as Bell, or even maybe Eastlink, should have access to an aggregated access service? And what impact would that have on your plans, in Nova Scotia?

1235 MR. VEALE: I think another really good question. We haven't contemplated that, I guess, in detail. At this point we're very keen to see competition come to market and just create those opportunities so that our customers in Nova Scotia aren't captured by essentially one player and some portions of the market, and subject to very high prices.

1236 So, I think that at this point we are opened to potential possibilities and I'm not saying that limitations aren't maybe ways that you can achieve and balance the competing interests, I think at this point... you know, creating opportunities for more entrance is the priority, and hopefully that will evolve from... you know, virtual operators to potentially operators that are also making investments in the system as well.

1237 COMMISSIONER DESMOND: Okay. So, just to be clear, what I'm hearing you say is that you haven't really thought through limitations in particular? Is that...

1238 MR. VEALE: Yeah, in that context, that's right.

1239 COMMISSIONER DESMOND: Okay. I did have one other question as it relates to your PowerPoint presentation, and I think it's at slide 5. You talked about the need to facilitate competition, but at the same time provide reasonable prices and ensure there's innovation.

1240 So, could you just speak a little bit more about that balance, the balance between ensuring that the incumbents can continue to innovate, with the need for reasonable prices?

1241 MR. VEALE: Yeah... I think... I think that probably the best way to say that is... or say our position, is that we think by having more competition it will increase the pressure on incumbents to essentially offer more competitive pricing, and so at this point that has really been our priority, is to create that... those conditions, essentially, within the market.

1242 COMMISSIONER DESMOND: Thank you so much. Thank you, Madam Chair.

1243 THE CHAIRPERSON: Okay, thank you. Thank you, Commissioner Desmond.

1244 So, I will turn things over to my colleague, Commissioner Naidoo.

1245 COMMISSIONER NAIDOO: You say you need wholesale access to incumbent FTTP, however, at the same time, you mention that Nova Scotia needs more funding to support the extension of networks to underserved areas.

1246 Incumbents have said to us that they will cut investments in rural, remote Indigenous communities if we were to mandate FTTP access. So, I'm wondering what your response is to that.

1247 And a second part to that question would be... you know, what limitations do you think could be... would be appropriate to achieve a balance?

1248 MR. VEALE: Yeah... well, we've been very appreciative of our partnerships on a variety of fronts with the telecoms, and whether that's on the fibre that we've had a lot of success on... and I mentioned, we're at a different point than perhaps other parts of the country, in terms of covering those gaps, and we've largely addressed a lot of those rural gaps and now we're just focusing more on our challenging areas, and we have agreements in place to address those areas.

1249 The terms of those agreements have typically involved having upwards of 90 to 100 percent public funding, depending on the location and the context, and so I guess if the... if messages are being communicated in the context of Nova Scotia, essentially eliminating further investment, I would say that we have largely made those investments ourselves, and so we've addressed that market failure internally, in the province, and so we're... I guess we're just on a different point in our development or around fibre.

1250 So, that could be an issue elsewhere but that's not an issue in our context, in terms of fibre.

1251 COMMISSIONER DESMOND: Thank you very much.

1252 THE CHAIRPERSON: Okay, thanks very much. Let's go to the Vice‑Chair.

1253 VICE-CHAIRPERSON SCOTT: Good morning. So, we've actually seen in Atlantic Canada those small ISPs that use wholesale services with a greater market share than we're seeing in the rest of Canada.

1254 Yesterday, we spoke to the Competition Bureau, who is... you know, one of the groups that made that finding. They're having a difficult time appeasing why that is... you know, some people are theorizing it's the nature of the competitors in the market. The Bureau even suggested it might be... you know, related to the preferences of Atlantic Canadians.

1255 Do you have thoughts on why we're seeing wholesale perform better in Atlantic Canada, versus the rest of Canada?

1256 MR. VEALE: Yeah. I guess the key thing for us is that Nova Scotia is primarily an infrastructure developer and so that's sort from the main lines that we're looking at it, and we participate in the market and we intervene to... you know, address some of those gaps. So, that's sort of along the lines that typically look at things.

1257 I mean, it's certainly possible, and what we've heard from the thousands of letters that we received on this issue, many of them go to you, I guess, as well, and... because we see them and we refer them to you.

1258 But what I would say is that... you know, we do have a different economic situation on... in our part of the country and so perhaps there's a higher sensitivity with consumers, and so pursuing a more affordable option at the CRTC has made it available in other ways and could make available. In terms of fibre, it's probably a significant factor for many people.

1259 I think that... we've received a lot of correspondence in the last year about concerns about the performance and pricing and reliability and continuity of services provided by the existing incumbents, and a number of people have indicated they'll... even though they know they're still buying from the same... you know, provider... underlying provider, they would rather work through a wholesale option, essentially.

1260 VICE-CHAIRPERSON SCOTT: All right. Thanks very much.

1261 THE CHAIRPERSON: Okay, thank you very much. So, we would like to turn things back over to you for any concluding thoughts.

1262 MR. VEALE: Thank you for providing us with the opportunity and I hope that we'll be here more and more frequently, and able to intervene.

1263 In the future, if the... if the Committee has hearings around emergency preparedness, public safety, rural cellular expansion, those would be topics that we would be very keen to contribute on. Those are very pressing issues for the province of Nova Scotia. We have significant gaps in coverage and we have... there's a significant public interest in addressing those issues as well.

1264 On this particular topic, as I mentioned, we support increasing competition in Nova Scotia, and creating... you know, a better environment, in terms of access, in terms of pricing and reliability.

1265 And so, thank you for the opportunity to speak today.

1266 THE CHAIRPERSON: Thank you so much for being here with us.

1267 THE SECRETARY: Thank you. I will now invite Xplore Inc. to come to the presentation table.

Presentation

1268 MR. JAMAL: Good morning, Madam Chair, Mister Vice‑Chair and Commissioners. My name is Rizwan Jamal, Chief Executive Officer with Xplore, and with me today are... to my right, Cindy Wallace, Regulatory Counsel, and to my left, Paul Cowling, Chief Legal and Regulatory Officer.

1269 Xplore welcomes this important review and we encourage the Commission to seize this chance to kick‑start competition for the benefit of Canadian consumers and businesses.

1270 Canada's broadband market is dominated by large incumbents who are amongst the most profitable telecommunications companies in the world. We agree that the Commission intervention is needed, to improve choice and affordability for all Canadians, especially those in rural, remote and Indigenous communities.

1271 As Canada's leading rural network builder, Xplore understands the needs and importance of rural and remote Canadians. Even more than urban Canadians their day‑to‑day lives depend upon reliable and affordable connectivity. Canada's economic growth also depends upon the success of our rural and remote communities, whether in agriculture, mining, energy or the deployment of artificial intelligence for these or other sectors. Our productivity in society depends on innovative digital infrastructure being available beyond our cities and suburbs, it all starts with connectivity.

1272 For decades Xplore has been a pioneer in connecting rural and remote Canada by investing hundreds of millions of dollars and innovating with various platforms, to respond to evolving customer needs and technological shifts.

1273 We are currently transforming our business as we launch and expand our new fibre network. In October we finished installing nearly 3,000 kms of fibre in rural Quebec, bringing gigabit speeds to tens of thousands of households. This is just the beginning, as we drive forward with fibre projects across the country, in partnership with federal and provincial governments.

1274 Xplore is unique, as a small facilities‑based competitor operating at the national level. With a rural focus, building scale is more challenging for us than for urban providers. Our target customer base is a fraction of the total Canadian population and that said, our prospective customers are spread out in hard‑to‑reach places.

1275 To connect them, we face a substantial investment burden, even with the incentives from government sources. Scale is certainly a barrier for us, but we face other barriers as well, including reasonable access to transport facilities. Anti‑competitive pricing is a hallmark of transport access in rural and remote communities. The ongoing struggle to access transport jeopardizes the financial viability of our new builds and existing operations. We are small, we are focused, we are nonetheless ambitious. By building extensive fibre networks across several provinces Xplore will bridge the digital divide and lay a foundation for Canada's economic and social progress.

1276 MS. WALLACE: In rural and remote Canada broadband competition has come from investment and innovation. Over the past few years government and regulatory funding has helped companies, including Xplore, make investments in rural communities that were otherwise not viable.

1277 However, these funding partnerships do not eliminate risk. Payback periods are long and highly uncertain. At the same time, for Xplore, new sources of competition have emerged in the form of incumbent fixed wireless networks and Low Earth Orbit satellites.

1278 These pressures amplify the scale barrier Xplore is trying to overcome, as we continue to build our business through ongoing investment. Unlike the incumbents Xplore does not have the study and substantial revenue of a densely populated urban market to backstop our expansion.

1279 A competitive telecommunications ecosystem in rural Canada needs facilities‑based providers with scale, to offer meaningful and sustainable alternatives. The wholesale fibre framework can and should encourage this outcome, rural Canada lives, urban and suburban communities in competition, and more fundamentally, in broadband availability itself.

1280 The framework can address both challenges by incenting competitive fibre investments and addressing the scale barrier. Specifically, a lower wholesale rate should be available to non‑incumbents making substantial fibre investments in rural and remote areas. This is immediately accelerate investment in competitive fibre facilities beyond our cities. Over the long term it will provide Canadians with sustainable choice, affordability and differentiated innovative services, all that into a competitive investment.

1281 The success of the wholesale framework hinges on timely and reasonable rates. While Phase 2 costing provides the foundation for rate setting, checks and balances are needed to ensure competition in the downstream market.

1282 A retail minus reasonableness test should be adopted, and for competitors making substantial fibre investments in rural and remote Canada, a lower benchmark, and therefore a lower overall wholesale rate should apply.

1283 Videotron suggested a benchmark of 15 percent below retail. For non‑incumbents, making substantial fibre investments in rural and remote areas the benchmark should be a further 10 percent lower, for a total of 25 percent below retail.

1284 This retail minus benchmark can also be used as the interim rate, so that wholesale access is not bogged down in the delays that have historically plagued Phase 2 cost and processes.

1285 This approach will go a long way to adjusting the scale barrier that limits the availability of competitive services in rural, remote and Indigenous Canada.

1286 Incenting competitive fibre investment will also advance network resilience. Rural Canadians and Canadian businesses need protection from outage causing events, ranging from weather to cyberattack. Building fibre in more communities increases the diversity of networks that are available in rural Canada and reinforces the strength of our overall digital ecosystem.

1287 With respect to a second critical barrier: Access to transport facilities, Xplore agrees with the Commission that a review of this market is needed. Transport is a critical element of our ability to compete and invest, and competitive alternatives in rural Canada are rare. Incumbents charge unreasonable rates.

1288 We see rates in monopoly transport routes that are three times higher than competitive transport routes, or more. Anti‑competitive transport rates hinder smaller competitors, like Xplore, in their efforts to bring stronger competition to local access markets. Even when we overcome barriers and build fibre access networks to customer premises, these networks are stranded if we cannot connect to internet exchange points. It's like building beautiful paved roads in a town but without a highway in our out. Without regulatory action on transport, access regulation may be pointless. The two cannot be considered in isolation.

1289 MR. COWLING: Canadians deserve competitive, affordable and innovative services, and a resilient foundation for their economy. The wholesale framework can and should advance that goal.

1290 The debate over wholesale fibre is to focus on a binary battle between large incumbents and wholesale‑based providers. Canada's telecommunications' ecosystem is and must be more dynamic than that.

1291 The future of telecommunications will not be determined solely by large incumbents and wholesale‑based providers, as Cindy has described, the wholesale framework can be designed to enable smaller network builders to overcome their scale barrier, particularly if their expanding networks to rural and remote areas.

1292 Respectfully, the disaggregated model has collapsed under the weight of its own complexity. After years of struggle the Commission should abandon the disaggregated experiment and mandate access to incumbent wholesale fibre on an aggregated basis.

1293 The evidence suggests that competitive investment drives long‑term sustainable competition and differentiated alternatives. The evidence also suggests that regulation should be targeted in advancing competition. We encourage the Commission to be bold and simple.

1294 All parties agree that regulatory uncertainty is a drain on a system. Long‑term stability is needed to ensure all providers can engage decisively in the market.

1295 This proceeding offers the Commission a chance to embark on a new stable chapter in the history of wholesale access. We can support affordability, competitive investment, rural and remote connectivity and innovation by moving forward with an actionable wholesale framework.

1296 With that in mind, we share the concerns of many other interveners about more drastic measures, like retail regulation. Among other distortions, that would destabilize the economics of network investment by smaller competitors, like Xplore.

1297 While incumbents and wholesale‑based providers undoubtedly play a role, the framework cannot forget the critical role played by competitive network builders like Xplore, especially those of us who are making big bets to bridge the digital divide.

1298 Xplore has led the charge in bringing competitive connectivity and all its economic and social potential to rural and remote Canada. We also face unique challenges, as we transform our business for the future. Addressing the barriers that we and other face will bring better networks and stronger competition to rural and remote Canadians.

1299 Thank you, and I look forward to your questions.

1300 THE CHAIRPERSON: Thank you so much. Thank you for being here. I know that the Panel has a lot of questions and so we really look forward to the discussion.

1301 I'm going to turn to Commissioner Naidoo to start the discussion for the Panel. Thank you.

1302 COMMISSIONER NAIDOO: Thank you very much for being here and for your opening remarks.

1303 You stated in your reply to us that you would like to provide an update to your submissions in light of the Commission's decision to temporarily mandate an aggregated FTTP service to Ontario and Quebec.

1304 So, I wanted to give you that opportunity and I wondered, in what ways did that decision impact Xplore?

1305 MS. WALLACE: Thank you, Commissioner Naidoo, for the question.

1306 I think over the course of this proceeding our views have evolved in the ways that the wholesale access regime can be used to help rural and remote Canadians gain access to affordable options for their internet.

1307 I think that the aggregated access decision that came out in Ontario and Quebec really spurred our thinking, in terms of how it could be used in rural and remote Canada, not just in that area but across the country.

1308 As my colleague said, we have a presence across Canada in... not just fibre, in fixed wireless and other technologies, and we believe that the wholesale access regime can work to our favour across the country, not just in Ontario and Quebec.

1309 COMMISSIONER NAIDOO: Thank you for that. You had... sorry, did you want to jump in?

1310 MR. JAMAL: Yeah. I would also add that... you know, we did highlight in our remarks today that... you know, we are evolving our business. We have new leadership on board and I think that as we've gone through this transition... you know, I think that the biggest thing, as we look out to the future, we do want to make investments. We are small and to facilitate us... you know, moving forward and being successful, I think we've determined, as a team, that scale is critically important to us across the board, if we want to be a national provider, and I think to do so... you know, a very competitive wholesale framework in our minds is crucial to our future success.

1311 COMMISSIONER NAIDOO: So, you had argued in your initial submission that rural areas should be excluded from aggregated HAS services. Have you changed your mind on that, then?

1312 MR. JAMAL: We have absolutely changed our position on that particular point.

1313 COMMISSIONER NAIDOO: What would be the impact to Xplore if the Commission did permanently mandate aggregated FTTP access on those incumbents, including in rural portions of their territories?

1314 MR. JAMAL: I think for Xplore it would be very beneficial if the Commission did make that change. I think that ultimately, you know, for us, you know, we have a plan to invest hundreds of millions of dollars on fibre in rural, remote Canada, in partnership with the Federal and Provincial Governments.

1315 Part of our challenge is scale, and I think that if we want to be able to be competitive from a price innovation perspective, you know, with the incumbents over time, it is absolutely critical for us to gain scale so we can compete with them effectively, and to us, wholesale access will allow us to gain the scale, especially in rural and remote Canada, you know, to ensure that we will be successful over time.

1316 COMMISSIONER NAIDOO: In your view now with your changed position, what impact do you think there would be to consumers if mandated HSA services were not available to rural areas?

1317 MR. JAMAL: My belief would be over time, we would not have sustainable competition in those areas. They would be deprived of the benefits associated with, you know, this access being provided in urban and suburban areas, which would benefit those particular households with additional choice, additional competition, and more affordable prices. In my view, we would not want to deprive rural and remote Canadians of those same benefits that, you know, people in urban and suburban areas would benefit from as a result of this kind of regulation.

1318 COMMISSIONER NAIDOO: Okay. Some parties have argued ‑‑ I’m sure you’ve heard ‑‑ that an expanded mandated wholesale service would disincentivize investment, put more pressure on governments to fund rural deployments. Xplore has, based on recent public announcements, received over half a billion dollars in public funding, with fibre projects underway or recently announced in most provinces. What conditions do you think would incentivize a facilities‑based provider like Xplore to continue to invest in rural areas?

1319 MR. JAMAL: You know, I think, you know, the ‑‑ the first condition obviously is we have to be able to get a return on the invested capital that we are deploying across the board. Our shareholders, stakeholders are looking for a return on their investment. So, that is absolutely a prerequisite for all the investments we’re making.

1320 But to ensure our success over time, I think ultimately we do require scale to benefit because, as you could imagine, you know, broadband internet does rely upon scale economics, and there is a number of fixed costs that you have in operating a broadband service, and without scale you will be at a disadvantage relative to the larger incumbents that we compete with on a day‑in and day‑out basis if we don’t or we are unable to achieve a certain level of scale so that we can keep our prices down and competitive so we can compete in market.

1321 COMMISSIONER NAIDOO: All right. So, we’ve talked a bit about incentivizing. What would disincentivize such investments? And why, I guess?

1322 MR. JAMAL: Well, I think that for us, the biggest disincentives would be things that prevent us from achieving scale, as well as, you know, other things that would potentially strand our investments because we can’t get a return on that investment over time.

1323 COMMISSIONER NAIDOO: If the Commission imposed mandated access to incumbents’ FTTP facilities over their entire networks, including in rural areas, how would that support your company’s growth beyond your current territory? You touched a little bit on it, but I’m wondering if you can just expand a bit more?

1324 MR. JAMAL: Absolutely. We have a plan to build, you know, our fibre networks in a number of communities across Canada. That will take time. And as we are building, you know, today we have over 65,000 homes that we provide our fibre to the home services to. We make it available to 65,000 homes. We would like to grow that to in excess of 400,000 homes, and, you know, over time, as we get scale, I think that having this mandated access, you know, in communities close to or adjacent to the communities we are building will give us scale in those communities because many of the communities that we service are small and we require local technicians. If they can service larger pockets of homes, it will help our return on investment and ensure that we are able to drive a reasonable return, as well as offer competitive prices.

1325 COMMISSIONER NAIDOO: You’ve, I’m sure, read many of the interventions and been following the hearing. Parties to this proceeding have suggested different limitations to the HSA framework. Some of those suggestions have included head starts, sunset clauses, limitations to access to the services, et cetera. I’m wondering, in your view, should any limitations apply to the framework? And would such limitations help to protect the incentives to facilities‑based providers to invest in FTTP in rural areas?

1326 MR. JAMAL: So, you know, if you ‑‑ if you look at some of these providers that are providing these perspectives, you can probably appreciate that they are responsible for generating, you know, returns to their shareholders, and I think absolutely you can understand, you know, why they’re asking for, you know, limitations on rural and remote communities. You know, they are looking to enhance their profits. You know, already, everyone on the Panel appreciates and understands the Canadian telecommunications industries, you know, drive the ‑‑ you know, some of the highest profitability in the world. And that is because they are protected and they have ‑‑ you know, they are dominant and, you know, I think that, you know, the policies that you’re reviewing today will make prices more affordable and more competitive, which will, you know, challenge their current position, which is why they’re likely providing the ‑‑ the responses that they have.

1327 COMMISSIONER NAIDOO: Xplore has a large direct‑to‑home satellite and fixed wireless access footprint, yet you’ve chosen to invest hundreds of millions of dollars in FTTP, and I understand that FTTP deployment requires a larger capital investment than fixed wireless. So, in what situations and under what conditions would you choose to deploy FTTP in a rural area instead of fixed wireless access on your 5G home internet solution?

1328 MR. JAMAL: A lot of it comes down to the density of the communities that we’re providing our service to. In, you know, slightly more dense communities, we can actually afford to deploy fibre with the support of federal and provincial government subsidies, and generate a reasonable return. When that density gets thinner, it makes it much more difficult to actually get a return on your invested capital, even with government subsidies, and that’s where we look to deploy fixed wireless. And as that density continues to get more sparse, the only option really is satellite in terms of providing a reasonable option for consumers, but also enable yourself to generate a return. So, for us it really comes down to the density of the communities, and the more dense they are, you know, the chance to provide fibre is there with government ‑‑ both federal and provincial ‑‑ subsidies. Hopefully that answers the question.

1329 COMMISSIONER NAIDOO: All right. Well, thank you very much. That’s all that I have.

1330 Madam Chair?

1331 THE CHAIRPERSON: Great. Thank you. I know we have a few more questions. I will turn things over to Commissioner Desmond.

1332 COMMISSIONER DESMOND: Good morning, and thank you for being here. I just have a couple of questions.

1333 You spoke about the fact that you tend to focus on rural and remote areas, but you also have a desire to grow your network, moving to 400,000 homes in the near future. Could you help us to understand the difference between deploying fibre in urban areas as compared to rural and remote areas, and what impacts your decision there? And if we are to have a wholesale mandate, would that create an impact on you in terms of moving into urban areas to deploy fibre?

1334 MR. JAMAL: So, I’ll break down the question, and if I miss any component, please let me know. But in terms of, you know, our focus and, you know, our future plans at this point, we are very much focused on rural and remote areas, and that is going to continue for the 400,000 homes that I spoke about. We have government programs that we are working through, you know, with them, to finalize the contribution agreements. And, you know, our plan is to deliver on that, and we feel like, you know, that is going to, you know, keep us busy over the next three to five years as we complete those obligations and those programs as committed.

1335 You know, with regards to why rural and remote versus urban and suburban for us, I think that when you kind of look at the landscape on urban and suburban in Canada, generally there are, you know, telephone company incumbents that are overlaying their copper networks with fibre in those areas, and a lot of the cable networks are upgrading to the latest versions of DOCSIS which provide, you know, very fast speeds and reliability to consumers.

1336 So, we feel like there’s already choices and options in urban areas, and there are overbuilders like Beanfield that are picking pockets within urban centres to also fiberize. So, we feel like, you know, there’s already, you know, multiple options for access, whereas in rural, you know, in many areas there’s ‑‑ beyond really old copper plant, which provides very, very slow internet speeds ‑‑ there’s not a lot of options. And I think that, you know, we feel like that’s an opportunity to benefit those consumers as well as, you know, provide infrastructure that will, you know, last a long time.

1337 I think that, you know, with the help of the government subsidies that we’re receiving from both the Federal and Provincial Governments, we are building an infrastructure that we believe will actually benefit those citizens for a long time, and I would say that when you talk to the employee base at Xplore, I think that the reason why many of them are there is they want to make a difference. They want to contribute back to the digital economy and they feel like the company has a great purpose, and they feel like it’s worthy to spend their time and energy on this very worthwhile cause.

1338 COMMISSIONER DESMOND: That’s very helpful. I thank the only question maybe that we didn’t have a chance to discuss is whether or not, if there was a mandated access, would that then allow you now ‑‑ give you the opportunity to move into some of these more urban areas more quickly and more easily?

1339 MR. JAMAL: Yeah, I ‑‑ I don’t think that we’re looking for the wholesale access to move into urban or suburban areas. I think we’re looking at it for adding scale where we are in rural and remote areas. So I think that, you know, it’s not like we’re the only ones that are building there; there are other communities that have been built by Bell or Telus or others, and I think that in order for us to get scale in the areas that we are in, it would be really beneficial to be able to get access to their networks where they might be adjacent and close to us so we can get additional scale.

1340 COMMISSIONER DESMOND: Okay. And just one further question, and it’s with respect to whether the incumbents then would be using the networks of other players, and of course the incumbents can often offer bundles, which then makes it difficult sometimes for other players to compete. So, I’m just wondering if you could comment on the impact of bundles on your business?

1341 MR. JAMAL: Sure.

1342 COMMISSIONER DESMOND: And if we were to provide for a mandated access, how that might impact on your ability to continue to compete with bundles in mind?

1343 MR. JAMAL: A hundred percent. You know, I would say that there is for sure a segment of the population that is interested in bundles. I wouldn’t say that that is a hundred percent of the ‑‑ you know, the overall market. There are some people that do ‑‑ you know, are interested in bundles, and many of those based on, you know, the research that I’ve done in the past in previous roles, as well as, you know, research that is available. A lot of times people are choosing bundles because of lower prices.

1344 It’s not ‑‑ you know, I think that consumers generally want the best of breed options, but they want that at, you know, the best prices. And I think that in recent years, I just want to make sure that the Commission understands that the reason why more consumers have adopted bundles is to get access to the pricing discounts that bundles provide them.

1345 And I think that, you know, to me, you know, we can ‑‑ you know, there’s multiple things. Like, if we’re ‑‑ if we’re getting attractive rates on the wholesale side, I think we feel like we can absolutely compete and provide a best of breed option, but in addition to that, there are commercial agreements that we could step into with other providers of services that we don’t necessarily provide, to actually do that.

1346 When I go back in the history of Xplore, at one point in time, you know, the company did have a marketing and a bundling arrangement with Shaw Direct, to provide Shaw’s television service with our remote internet solution. It was a commercial arrangement. We put it together and, you know, we executed in market. So, I think that there’s always the opportunity to do that for the segments that are ‑‑ you know, it’s absolutely critical for them to get all their services from one provider.

1347 COMMISSIONER DESMOND: Thank you very much.

1348 MR. JAMAL: No problem.

1349 THE CHAIRPERSON: Okay. Thanks, Commissioner Desmond. Let’s go to Vice‑Chair Scott.

1350 VICE‑CHAIRPERSON SCOTT: Thank you, Chair.

1351 So, I’ll confess that I’m a little bit confused on the position. So, my questions are really just to disambiguate some of what we’re hearing. So, are you now of the view that wholesale access to FTTP should be regulated, including in rural areas?

1352 MR. JAMAL: So, yes, we have absolutely changed our position as it related to wholesale access in rural areas, and we believe that the Commission should be putting forward a framework that does provide wholesale access in urban, suburban, and rural areas, and rural areas should not be exempt from that regulation. That’s correct.

1353 VICE‑CHAIRPERSON SCOTT: Okay. And then, would the wholesale framework still continue to apply to just the large incumbent players, but not apply to yourselves?

1354 MR. JAMAL: I think that over time, we believe that even we should be subject to that regulation, as we grow and get the sufficient scale in rural and remote areas. Like, I think that, you know, ultimately speaking, today we’re very small. I think that you would probably prefer us spending our money, our time, and our energy building out our fibre networks in rural and remote areas and not focused on the complexities associated with opening up our small networks to other providers. We do believe that, over time, as we gain sufficient scale, that, you know, the regulation that is, you know, put on other scaled players, should also apply to us, once we reach scale.

1355 VICE‑CHAIRPERSON SCOTT: Okay, and what’s the trigger for scale? What’s the threshold?

1356 MR. JAMAL: I think that ‑‑ you know, I think different people have different views of scale. I think that when I look at our economics in our business and what we’re trying to achieve to get to the cost structure that I think we need, to be very competitive long‑term, I think we would kind of mark that as, you know, 500,000 to 1,000,000 subscriptions, based on the economics and the work we’ve done internally as well as, you know, work that I’ve done prior to joining Xplore.

1357 VICE‑CHAIRPERSON SCOTT: Okay. An in areas where Xplore would be the sole provider of fibre to the premises, those customers wait for you to reach scale before they get the same choice that others in Canada receive by virtue of the size of their network builder?

1358 MR. JAMAL: That’s what we’re suggesting, just because ultimately there is no reason beyond we can spend our time and our money kind of figuring that out, or deploying additional fibre based on these Federal and Provincial Government subsidies that we’re getting. I think there’s very tight timelines for us to deliver these projects, and I think that for the benefit of all Canadians, those areas don’t have generally fast internet access options, and we would just prioritize internally, you know, getting to those homes as quickly as possible and not distracting us in the short term. But we do believe that, over time, you know, the regulation should apply to us as well.

1359 VICE‑CHAIRPERSON SCOTT: Okay. That’s certainly much more clear. Thank you.

1360 MR. JAMAL: Yeah. A hundred percent.

1361 THE CHAIRPERSON: Okay. Thanks very much for that. Let’s go back to Commissioner Naidoo.

1362 COMMISSIONER NAIDOO: I just wanted to ask, in considering your change in position, I’m wondering, in your intervention you put a lot of emphasis on the argument that a framework that reduces economic viability in one area ‑‑ specifically urban, is what you had cited ‑‑ could impact decisions to invest elsewhere ‑‑ impact rural investments. I’m wondering, with reference to your change in position, if you’ve changed that viewpoint or if you’ve altered it in any way?

1363 MR. JAMAL: Yeah, I would say that we have. Like, I think ultimately, as we’ve taken a step back to kind of think about the future of our fibre business, I think one of our key success criteria is scale. And I think that, you know, for us to be successful in the long term, we need to achieve scale, and we need to achieve scale as quickly as possible, and we believe that this framework is going to be critical for us to actually do that and ensure that we can continue to invest and survive over the long term.

1364 COMMISSIONER NAIDOO: All right, thank you.

1365 MR. JAMAL: No problem.

1366 THE CHAIRPERSON: Maybe I can just ask one final question, and then we will turn things back over to you for any concluding thoughts.

1367 Just with respect to innovation, could you talk a little bit about what kind of innovation Xplore brings to the market ‑‑ plans to bring to the market ‑‑ and how that innovation benefits Canadian consumers?

1368 MR. JAMAL: Yeah, I would say that Xplore, if you go through history, you know, the company has now been around for a couple of decades, and I would say that there’s a ton of innovation that the company has brought to market, in particular on the customer side. The customer is clearly our focus, and, you know, we were leaders as it related to, you know, policies like, you know, if customers weren’t satisfied within the first 30 days, we had a 30‑day money back guarantee. You know, in addition to that, you could see that, you know, from, you know, our CCTS complaints, they’re very low. We provide a hundred percent of our customer service on shore. We partner with local dealers and installers in local communities that people know and, you know, we’re quite innovative in terms of how we do that and bring that to bear within the local communities we service.

1369 So, you know, I think that we’ve done a lot. We were one of the first companies to put in place a cloud billing system, you know, and we’ve got a great partnership with Salesforce in terms of how we’ve implemented that, and now you can see other providers that are also embarking on doing similar things.

1370 THE CHAIRPERSON: Okay. Thank you so much. We will turn things back over to you for any concluding thoughts.

1371 MR. JAMAL: Yeah, I have a couple, and then I’ll let my colleagues jump in.

1372 I’d say, number one, just to reiterate our comments, I would say that in our view, rural and remote Canadians deserve choice and competition no differently than urban and suburban Canadians. And, you know, I think that is really important as we look out into the future.

1373 I’d say the second thing is, to ensure long‑term sustainable competition, it is critical that you have providers like us, as well as the incumbents, investing in building networks in rural and remote communities as well as urban communities, because that will ensure sustainable competition over time. And, you know, for us, the smaller players, to be successful, it’s critical that we can get scale. And this framework, in our mind, is absolutely necessary to support us as we move forward, if we are to be successful in the long term.

1374 So, thank you so much for hearing our comments, and thank you for taking the time and conducting this absolutely important hearing for Canadians and businesses across Canada.

1375 THE CHAIRPERSON: Thank you very much, Xplore. Thank you for being here.

1376 THE SECRETARY: Thank you. We will now take a break and be back at 10:55. Thank you.

‑‑‑ Upon recessing at 10:36 a.m.

‑‑‑ Upon resuming at 10:53 a.m.

1377 THE SECRETARY: Welcome back. We will now hear the presentation of Bragg Communications Inc. carrying on business as Eastlink.

1378 Please introduce yourself and your colleagues, and you may begin your presentation.

1379 Thank you.

Presentation

1380 MR. BRAGG: Thank you and I’d like to thank the Commission for having us here today.

1381 So I’m Lee Bragg, Executive Vice‑Chair of Eastlink. To my left is Marielle Wilson, Vice‑President, Regulatory and Sustainability, and Brittany Larsen, Director of Regulatory.

1382 So Eastlink thanks the Commission for the opportunity to share our views and experience with the wholesale internet framework. The issues under consideration in this proceeding have the potential to significantly alter our investment plans going forward. This includes our investment in fibre‑to‑the‑home and next‑generation DOCSIS technologies, and our decision to expand or upgrade our services in rural areas.

1383 Eastlink is a family‑owned company with over 50 years experience in the telecom industry. Starting as a small cable TV provider in rural Nova Scotia. With help from the CRTC’s policies that promote facilities‑based competition, Eastlink became the first cable company in Canada to offer competitive telephone service over our cable network.

1384 In the early 2000s we further changed the competitive landscape by being the first in North America to introduce new bundle options, which allowed customers to save more by combining TV, internet, telephone services, all in one bill for one price.

1385 By continuing to embrace CRTC measures supporting facilities‑based competition, Eastlink has since grown into a national company offering innovative internet, TV, mobile, home phone and smart home services in seven provinces. We pride ourselves in being one of the few telecommunication companies whose focus is on rural Canada.

1386 As noted throughout our submissions, Eastlink maintains that the Commission must reject calls to move away from facilities‑based competition. As a regional facilities‑based provider who has supported sustainable competition in our serving areas through careful investment in our network, we maintain that facilities‑based competition provides the best value and long‑term benefits to customers.

1387 A regulatory framework that focuses on the outcome of increased service‑based competition without considering the impact that it will have on the incentives of facilities‑based providers to continuing investing in their networks will result in decreased competition and lower quality networks, especially in smaller rural and remote communities.

1388 Without a wholesale framework that prioritizes the investments made by facilities‑based providers, Eastlink will be forced to reconsider our presence in some of our rural communities where the business case to continue investing no longer exists, and where the market share of service‑based competitors has reached a point such that it is no longer viable for us to maintain our network.

1389 To be equitable, the framework must consider the impact on the ability of the individual facilities‑based providers to continue to invest and compete. Eastlink is closer in size to the country’s largest reseller than we are to the other facilities‑based providers subject to this regime.

1390 Despite this, we are faced with the same regulatory requirements as the largest providers and our costs are compared to theirs without consideration to the differences in the serving areas and how the requirements disproportionately impact our ability to compete.

1391 In rural and remote communities the business case to provide service already is extremely challenging, and it becomes insurmountable when there is a requirement to immediately provide wholesale internet access, especially at rates that do not adequately cover the cost of delivering the service.

1392 If one of our serving areas requires an upgrade to ensure our customers are provided with the service they want and need, but the wholesale regime prohibits us from investing because the business case simply does not exist, we’ll be forced to remove our facilities and stop providing service in the area.

1393 In fact, in recent years we have stopped providing service in 62 communities across Canada where we could no longer justify the business case to continue providing service. This is in direct contrast with the government’s focus on providing broadband service to all regions of Canada.

1394 Eastlink maintains our view, as outlined in our submissions, that the Commission should exempt smaller regional providers from wholesale requirements in newly‑built or recently upgraded areas.

1395 MS. WILSON: A primary focus of this proceeding is the question of mandated access to fibre‑to‑the‑home facilities. Unlike the large incumbent providers, Eastlink is at the very early stages of our fibre‑to‑the‑home deployment. However, we do have internet speeds of up to 1 Gigabit available in many of our hybrid‑fibre coax serving areas.

1396 Given that we already have high speeds available and that our fibre footprint is less than 1 per cent of the total number of homes passed on our network, excluding Eastlink from mandated fibre‑to‑the‑home access is unlikely to result in any decreased assess to high‑quality facilities.

1397 Instead, excluding smaller regional providers like Eastlink who are at the beginning stages of their fibre deployment will allow these providers to continue to invest and expand in new growth technologies and correct the existing imbalance of wholesale supply between cable carriers and ILECs.

1398 Further, it will provide these carriers the opportunity to realize the same returns at the early stages of their deployment that the large fibre‑to‑the‑home providers have benefitted from since the start of theirs.

1399 We support proposals put forward by other intervenors that establish an exemption threshold based on the number of homes passed by fibre on a provider’s network. Establishing this threshold will provide facilities‑based providers an opportunity to earn a reasonable return on their investment before they are required to open up their network to their competitors.

1400 This exemption will encourage smaller regional providers to continue their fibre deployment and will benefit those living in rural and remote communities. When it comes to the appropriate wholesale model, Eastlink encourages the Commission to continue the transition to a disaggregated wholesale internet framework.

1401 The disaggregated model encourages investment by competitors and will contribute to the long‑term sustainability of these providers. Regulatory policies that encourage network deployment not only benefit competitors, as it is the only way those providers are able to offer innovative products and services and lead to investment in next generation networks, but they also improve the overall reliability and resiliency of Canada’s telecommunications networks.

1402 The Commission’s prior decision to transition to a disaggregated model was primarily due to their view that implementing the service would enable competitors to become more innovative by giving them greater control over their service offerings.

1403 In addition, the disaggregated service would encourage competitor investment in alternate transport facilities, thereby serving a more robust telecommunications system.

1404 These determinations hold true today. Due to the significant difference between the final rates approved for the aggregated wholesale service and the interim rates established for the disaggregated service, there is currently no incentive for competitors to migrate their service.

1405 Further, given the ongoing regulatory proceedings to determine the appropriate network configuration, it is not surprising that service‑based competitors have not voluntarily transitioned their service.

1406 The ongoing regulatory uncertainty would make it difficult for any service provider to make any long‑term business decisions and justify the time and effort it would require to move towards a disaggregated model.

1407 However, that does not mean the Commission should abandon the decision. Given that the disaggregated internet framework was never finalized and fully implemented across the country, there is no basis on which to conclude that widespread implementation is not practical.

1408 A decision on the appropriate architecture for the wholesale internet framework must consider not only the short‑term competitiveness of service‑based competition, but more importantly the long‑term sustainability of facilities‑based providers.

1409 MS. LARSEN: We also request that the Commission place restrictions on which service providers are permitted to access the wholesale internet service.

1410 With the recent acquisitions of resellers by incumbent carriers we have received requests from incumbent‑owned resellers to access our wholesale service in areas where they have their own network.

1411 The wholesale internet framework was introduced as a means to expand competition in the retail market for internet services. It was never intended to be used by the largest telecommunications companies in the country to access the networks of smaller regional competitors.

1412 The fact that we have received these requests highlights that there is a serious issue with the current wholesale rates. Simply put, it should not be more cost‑effective for a facilities‑based provider to use Eastlink’s network rather than their own.

1413 Allowing incumbent providers to use each others’ networks in areas where they have their own facilities will lead to a significant slowdown in innovation and investment, as facilities‑based providers may delay or cancel network upgrades and will instead rely on another provider’s network.

1414 This will lead to a decrease in the number of networks in many serving areas, primarily in rural and remote communities. As such, Eastlink proposes an exclusion of in‑territory use by incumbent‑owned resellers. This restriction should apply at the ownership level and be imposed on all brands owned by facilities‑based providers.

1415 In addition, we support proposals from other parties to this proceeding who suggest that Bell, Telus and Rogers should be prohibited from using wholesale services in all serving areas.

1416 As noted by other parties, allowing the country’s largest carriers to use wholesale internet access risks the competitive position of regional carriers and may lead to a reduction in competition in many serving areas.

1417 Regardless of the wholesale internet framework mandated as a result of this proceeding, it is essential that the rates established adequately compensate facilities‑based providers for the use of their networks.

1418 The Commission has determined that Phase II costing is the appropriate methodology for determining wholesale rates. Proposals that deviate from this decision, such as using a retail‑minus approach to benchmark wholesale rates or establishing uniformed rates across carriers regardless of technology or serving area must be rejected. Eastlink also opposes any approach to rate setting that is focused on ensuring a business case exists for resellers rather than on compensating network owners for their costs.

1419 These alternative rate‑setting approaches will certainly result in rates that do not compensate all providers for the use of their network. Such an approach will disproportionately impact rural providers like Eastlink who have a completely different cost structure than those service providers who operate in Canada’s largest cities.

1420 Failure to properly compensate facilities‑based providers for the cost of delivering their service will only lead to a deterioration of the quality of internet services for Canadians.

1421 If the Commission is concerned by the level of competition in the retail internet market, the solution is not to create a regime that provides easy access to service‑based competitors who have no desire or intention to invest in facilities. This will only result in competitors who are increasingly reliant on a regulatory regime to support their business model, and who will continue to ask for more from the regime to minimize their investments and risk.

1422 Rather, to support long‑term sustainable competition, the Commission’s policies should encourage these service‑based competitors to take greater ownership of their network and require some level of investment in facilities.

1423 We thank you for your time and we’re pleased to answer any questions.

1424 THE CHAIRPERSON: Thank you so much. Thank you for your remarks today and thank you for being here with us.

1425 I know that the Panel has a lot of questions, and we look forward to the discussion. So I will turn things over immediately to Commissioner Desmond to kick things off.

1426 Thank you.

1427 COMMISSIONER DESMOND: Good morning and thank you for being here.

1428 I wanted to start by asking about regional differences. Wholesale ISPs have had various degrees of success across Canada, but we’ve seen a growth of wholesale‑based competition in Atlantic Canada.

1429 The Competition Bureau has suggested maybe there’s something unique about Atlantic Canada that maybe customers have a preference for wholesale‑based competitors.

1430 So I’d be interested in hearing your comments on why Atlantic Canada stands out as an area where there’s been success.

1431 MR. BRAGG: You know, I’d love to think that we’re very unique in Atlantic Canada, but it’s simply math. The wholesale rates are not dramatically different across the country. And we are predominantly rural versus many other providers who operate in large urban markets and may have 75 per cent of their customers in urban low‑cost‑to‑serve markets and have a smaller percentage in rural high‑cost areas.

1432 We’re the flip of that, 80 per cent of our customers are in rural areas, hence our cost to serve is quite a bit higher and, hence, our retail rates, if the competition looked at that, are generally a little bit higher. That is because the amount of capital per customer that we have to deploy because of our rural nature is much higher than almost anybody else.

1433 So, as a result, our costs are a lot higher. So when you have wholesale costs that are within, you know, a few dollars of one another across the country, the opportunity for margin is more available in my network.

1434 So many of the TPIA guys can look across the country and say, you know, the rates are so far below cost in the east there’s a much greater opportunity to be successful there and, hence, you know, that’s why they’re there. It’s a business decision that was available to them because of the imbalance in the rates.

1435 COMMISSIONER DESMOND: But how would that compare then to other rural regions in Canada? I mean, you’ve spoken about how in the Atlantic area you’re more of a rural operator. But there are certainly other rural areas in Canada where we haven’t seen the success.

1436 Manitoba, for example, appeared yesterday and they’ve had very little success in terms of having competitors.

1437 MR. BRAGG: Very little success, you mean there’s very little TPIA in Western Canada?

1438 COMMISSIONER DESMOND: Correct.

1439 MR. BRAGG: Well, Western Canada I say was dominated by Shaw, for example, and Telus, who have major urban markets to operate in. So as a result, their cost structure across the province is lower than our cost structure. We operate in rural BC, rural Alberta, rural Newfoundland, rural Ontario, rural Nova Scotia, PEI, areas in New Brunswick. We’re predominantly rural.

1440 But in, you know, Manitoba, you know, a significant number of people live in the city. So if you are the provider for Winnipeg, your cost structure on average is going to be lower because you have that large urban market with a low cost structure to support. So then your retail rates may be lower as well, which doesn’t leave as much room for the TPIA guys to compete.

1441 So I call it an Eastlink phenomena predominantly because we’re so rural everywhere.

1442 COMMISSIONER DESMOND: Okay, thank you. I wanted to ask you a little bit about your retail rates. Large incumbents like Bell, for example, have promotional opportunities, promotional retail rates in some areas, and sometimes those rates are set below the wholesale rates.

1443 Does that have an impact, in your view, on competition, and what challenges do you face when there are promotional retail opportunities like that?

1444 MR. BRAGG: You know, I’d say any business should be able to offer some products or services from a promotional standpoint below cost periodically for whatever reason. They are rolling out new products and services and they want to attract customers, so they offer it below cost for a period of time.

1445 And, you know, I would always say, I don’t necessarily think they target below cost, I think it’s what’s the right price point that may stimulate the market may happen to be below cost. But I don’t think that that’s the targeted methodology.

1446 I mean, we do see some elements of, I would argue, below cost pricing in our market, but it’s because the TPIA providers operate on our network at such ‑‑ below our cost, that I can’t offer it any farther below cost.

1447 They get to operate on my network below cost, and Bell responds maybe by offering below cost because they’re competing against the TPIA providers who are on my network who have a huge cost advantage because they’re not paying the actual cost.

1448 COMMISSIONER DESMOND: Okay, thank you. I wanted to talk a little bit about deployment in rural areas. And in your submissions, you talk about how difficult it is from a business perspective to deploy fibre in the rural areas and that sometimes those challenges are even insurmountable.

1449 Just to be clear, are you suggesting that you cannot profitably build fibre in any rural areas if there is to be a wholesale mandate?

1450 MR. BRAGG: I mean, what it does is it affects the number of customers that we could conceivably get. I mean it's a fixed cost per kilometre, roughly $70,000 to $75,000 a kilometre to build the type of networks that we build. We generally have a target of the number of homes passed which we would say generally we'll get X per cent of those homes, do a business case on how much capital must be invested, and the ongoing capital to keep adding capacity to the network.

1451 But the challenge is when the rates aren't right, we'd say, Well, now, if a TPA provider can come in and use those facilities at below cost, I don't have any ability to get a return on that capital. Because theoretically, they could get the majority, half, and in some cases we have some communities where we've lost more than half our customers, which have rendered the entire community non‑economic for us, which is why we occasionally have to shut down communities. Not that ‑‑ we don't like to do that. My whole business has been built on trying to grow the number of customers and grow into rural communities.

1452 So when you affect the underlying economics for us on the opportunity to get a payback on the investment, and if you take that opportunity away, then we can't take the risk and make the investment.

1453 COMMISSIONER DESMOND: And I understand what you're saying, and you're going back to costs again, that costs have to be fixed properly. And assuming the costs are fixed in a way that reflects the business, is it then still possible to have this mandated access? And do you see the opportunity to still continue to deploy fibre, assuming the costs are correct?

1454 MR. BRAGG: I'm chuckling a little bit, because I've always said, you know, if you could get the costing right, none of this matters anymore. Nobody ‑‑ you don't need to stack regulation on top of regulation to solve imbalances or imperfections. I would be fine with a wholesale cost anywhere if you could get the cost of your capital with a small return, you should be ambivalent to whether you're retail in the market or wholesale in the market.

1455 I mean, we operate another business. We're in the food processing business. We sell retail blueberries around the world. We also wholesale pack blueberries for our competitors. They all run though our factory. But we're ambivalent because the wholesale rate we get gives us a return on our factories and our overheads and then ‑‑ and so does the retail. We have additional costs. So if you could ‑‑ it's a big “if” ‑‑ if you can get the costs right, then really none of the other issues matter at all. But I think many have acknowledged it is really hard to get the cost right is part of the challenge.

1456 COMMISSIONER DESMOND: Okay, thank you. We've heard from other cable companies that they do deploy fibre in new builds in urban and suburban areas. I'm wondering if you could let us know or if you have any insight in terms of your plans to build in urban or suburban areas. You've talked about your deployment in rural regions. You know, would a mandated access give you the opportunity to expand into urban areas?

1457 MR. BRAGG: Yeah, I think it would. I mean, part of the challenge I have is I know how challenging it's been to get costing right. I know how the regulation impacts the economic model. And that generally makes me nervous, so I'm always a little cautious to say do I want to change from my normal business practice of, you know, making capital investments, building networks into areas, serving customers, getting a reasonable return, and running my business that way and competing with whoever happens to be there versus relying on our regulatory structure that could change at any point in time and go in to service an urban market like Toronto or Montreal not knowing how sustainable my economic model is. It's just, you know, would we look at it? We possibly would. It's a different way for us to do business, so my preference is to continue to invest and build networks, but.

1458 COMMISSIONER DESMOND: Okay, and that's fair enough.

1459 And I'll ask you this question, and I'm not sure if you're able to answer it, but I'm wondering if you have run investment scenarios, and you know, with different possible regulatory outcomes, and is that something that you'd be prepared to share with the Commission?

1460 MR. BRAGG: I mean, we've not run those, you know, detailed models. I mean, we do that. I mean, we just we do that in our heads every day. We know, like it seems to be, you know, with the greatest respect, a waste of my time to run a thousand scenarios based on a thousand different regulatory structures that I don't have any more or less confidence in any one of them, so, that they'll last, right or wrong.

1461 So we just know as long as there's that uncertainty, that's part of being in business is you avoid uncertainty and you try to avoid risk. Regulatory economics is uncertain, so we would choose to avoid it. So we wouldn't, you know, we've not run a bunch of I'll call them professional models on that.

1462 COMMISSIONER DESMOND: Okay, thank you.

1463 In your comments this morning, you've talked about how your FTTP deployment is still in the early stages, generally limited to the high‑cost rural areas. And that's in contrast with maybe the ILECs who've had a head start and they've had an opportunity to maybe recoup some of their investments.

1464 As a result of that, you've argued that your network and those of smaller providers should be protected from wholesale‑based competition. How would consumer choice then be impacted if Eastlink's facilities were not subject to the mandate?

1465 MR. BRAGG: I mean, that's a good question. I would argue in some of those areas, at least they have somebody. At least they've had us build in. So does it prohibit or does it impact the opportunity to have two or three providers in an area? Possibly. But it does ensure at least you'll have one. So I think it's a trade‑off of getting an area serviced versus not having it serviced at all and saying, Well, if we did, there would be two or three there, but we don't. So I mean I think it's ‑‑ you know, it's a balance issue.

1466 COMMISSIONER DESMOND: I'm not sure if you had the opportunity to hear the comments of XplorNet this morning where they suggested that even in rural and remote areas, choice should exist. And they saw themselves subject to a mandate in the future if that were to be imposed, even though they are a smaller player. I just wondered if you wanted to comment on that.

1467 MR. BRAGG: I'm going to go back to your statement where you said, If the rates are right. Then I think after a period of time, we would think that, yeah, sure, those facilities should have the same access. It's a little bit like I like the MVNO structure for cellular. There's, you know, you're allowed a period of time where you're on somebody else's network, but then, you know, eventually you have to build your own facility. So if there was ‑‑ you know, it's not exactly the same, but if the facilities were protected to a point where we could start to get a reasonable payback, then we're less susceptible to the inaccuracies of the rates.

1468 Now, would we, if the rates were really bad, would we eventually abandon networks in rural areas? Yeah, we would have to. But again, it's like ‑‑ I know rates are not the issue on the table right now, but unfortunately, it is one of the big issues that impacts the structure that we're trying to come up with.

1469 COMMISSIONER DESMOND: Okay, thank you.

1470 Just speaking about giving facility‑based competitors the opportunity to sort of first recover their investment and give it time, in your submissions, you did support Cogeco's proposal to exempt smaller players that passed fewer than 350,000 homes. On what basis do you think the 350,000 is the right level, the right threshold?

1471 MR. BRAGG: You know, to be honest, it was easier to support their decision than it was to do a lot of math and figure out should it have been 275, should it have been 300, should it have been 450. And I think by supporting their number, really what we're saying is there is ‑‑ you know, we think it makes some sense to have some sort of threshold that does protect the smaller and more regional players, you know, maybe forever, maybe for a period of time. And that just, you know, I'd say they likely did some homework, and I was happy to take advantage of their homework.

1472 COMMISSIONER DESMOND: Okay, that's fair enough.

1473 When would Eastlink expect to reach 350,000 homes?

1474 MR. BRAGG: You know, that's a good question. You know, it's a really good question, because we don't ‑‑ you know, we don't build fibre to the home. Like we don't have a massive plan. It's a technology choice that we use whether it's ‑‑ if we're building into net new areas that we've never built, we build fibre to the home. It's a better technological solution than building more hybrid fibre‑coax that we've traditionally used. So you know, new areas, so I don't ‑‑ it depends on how many new areas pop up.

1475 As well, we also use fibre to the home if we've got under‑performing coax plants that are going to take a significant amount of capital investment to provide the speeds or the amount of capacity that our customers are looking for. You know, we do an engineering look and some economics to say, you know, Is it better to split the node and add more amplifiers and, you know, or is it better to overbuild ourselves with fibre to the home? Sometimes it's a little more capital. We tend to think it may be a little more future‑proof.

1476 So it just it depends if there's ‑‑ sometimes there's natural disasters knock our networks down. And we'd say, Well, are we going to put the old network back up? Or is this an opportunity to put new fibre to the home up on those three or four streets?

1477 So it's really they're engineering decisions, they're not really economic decisions. So when? Oh, I mean, I don't know. Ten years? Fifteen years, maybe?

1478 COMMISSIONER DESMOND: So that would mean your network, then, would not be available in the short term. It could be 10 to 15 ‑‑

1479 MR. BRAGG: My networks are already available.

1480 COMMISSIONER DESMOND: I mean, sorry, this access, this plan to have it available would not be ‑‑ you're saying the limitation should wait until there's 350,000 homes. You're saying that would be a 10‑year window for you.

1481 MR. BRAGG: It possibly could because we would be ‑‑ we would be very ‑‑ still very, very small, and typically rural areas ‑‑ if they're new builds for us, they're typically quite rural. And so it's, you know, that was our thinking is that those areas should be protected so they actually get built.

1482 COMMISSIONER DESMOND: Right, okay. No, so I just wanted to get a sense of what the timing was in terms of when that could apply.

1483 You also ‑‑

1484 MR. BRAGG: Now, I will say if there's some large technological change, like for some reason there's some fantastic application that's going to drive the necessity that everybody needs five or ten gigabit service in their homes, we're obviously going to speed that up and we're going to build fibre to the home like gangbusters because we don't want to be left behind all our competitors from a serviceability standpoint. So it's, again, it's hard to answer that because it's just ‑‑ it will be circumstances, whatever they may be, that drive that time frame.

1485 COMMISSIONER DESMOND: Okay, no, that's fair. Thank you.

1486 So the proposed rule, I guess, of exempting carriers with less than 350,000 homes passed by the FTTP would in essence create this head start rule. And some parties have proposed a head start rule which would in turn delay the mandated access to fibre for a number of years. And I think in your submissions, you have supported the Bell proposal for a seven‑year window after they've rolled out FTTP.

1487 So just wanted to have a conversation with you about the head start rule and how that could be operationalized in a practical administrative way. So for example, what would trigger the head start rule to apply? Would it be when the fibre is first deployed, or when it's lit, after seven years?

1488 MR. BRAGG: Well, when it's ‑‑ I'm not sure if I understand what you mean by deployed. Like once it's in service?

1489 COMMISSIONER DESMOND: Yes, correct.

1490 MR. BRAGG: Yeah, I would think that makes sense. I mean, I think the challenge will be how you do it on a geographical basis. Home by home? That doesn't seem to make sense. Street by street? You know, I think that's, you know, something that we'd be happy to discuss and I think has to be given some thought that it needs to be a manageable area. And you know, once that area is proven to be serviceable, that we've actually turned it on ‑‑ sometimes it takes time to build these, so you ‑‑ it needs to be triggered from the point you're actually able to get an economic return on that investment, not when you start to spend the money. It needs to be when you start collecting the money. And seven years seems to be a ...

1491 MS. WILSON: So we prefer the threshold, the number of homes passed. We think that's kind of an easier way to approach it. If that wasn't the option, then we would support kind of a head start time limited. But our preference would be a homes‑passed threshold because of the complexities that you're referring to in determining when that would start.

1492 COMMISSIONER DESMOND: And thank you for that. But in terms of implementing either the threshold for seven years or 350,000 homes, how would the Commission and competitors know when those thresholds have been met? So how would we know when you've passed 350,000 homes?

1493 MS. WILSON: I think that would be relatively easy for us to report on, on some sort of frequency, an annual basis, six months. It's not like we don't have that information readily available.

1494 MR. BRAGG: I think ‑‑ don't we already report on numbers of customers that we have? And I mean I think ...

1495 COMMISSIONER DESMOND: Well, I just want to be sure we understand what your intent would be, that there would be a reporting of ‑‑

1496 MR. BRAGG: Oh, I think so.

1497 COMMISSIONER DESMOND:  ‑‑ of when you've reached that ‑‑

1498 MR. BRAGG: Yeah, I mean ‑‑

1499 COMMISSIONER DESMOND:  ‑‑ level, I guess, that would be the intent, to ensure that there is full transparency about the threshold now having been achieved and access being available. Okay.

1500 You've also proposed a sunset clause. So I just wondered if you could speak a bit more about your thinking around what a sunset clause would look like and how that would be implemented.

1501 MS. WILSON: I think again our primary focus was the threshold on homes passed, and these were other proposals that were put forward that, you know, if that wasn't chosen and another one was, we would support a sunset clause.

1502 I think the sunset clause would be, you know, something similar to the MVNO framework where they're allowed to use it for a certain amount of time. That's why we support a disaggregated model, because in theory they could be building out and then over time they transition to their own network. We think that's a better model than having everybody continue to rely on our network.

1503 MR. BRAGG: Yeah, I mean, the advantages to sunset, I believe, is ‑‑ again, I like the MVNO structure ‑‑ is ultimately it does promote somebody, if they choose, obviously, to build out their own facilities. We think in the long run facilities‑based competition is more sustainable, more secure, and likely has the greatest value for consumers. We also think it attracts good business people making good decisions. If you have to actually invest and put some, I say, skin in the game, there's a better discipline to how you run your business and a greater likelihood that you'll sustain that business and stay at it to service the customers.

1504 Also, it minimizes the challenges with ‑‑ back to if you can get the rates right ‑‑ if you can get sunsetted out of it, we worry less about the rates being wrong if it's only for a period of time. I'm not going to like it if the rates are wrong, but we know that we can ‑‑ our business can survive.

1505 The problem today with erroneous rates is we just slowly see the degradation of our business until the business is actually gone. And that's disconcerting to us because we've invested a lot of money in this business.

1506 So if there's an off ramp to get away from, you know, with the greatest intentions, you know, coming up with rates, at least it protects businesses from that not being as accurate as maybe it could be or should be and with the result of it promotes more facilities, better business practices. We just think it's a better model in the long run.

1507 COMMISSIONER DESMOND: Okay, thank you.

1508 And I just have one question from your opening remarks, and it's with respect to paragraph 21, where you propose the exclusion of an in‑territory use by incumbent‑owned resellers. Just wondering if you could comment a little bit further on that and how, you know, does that create an inequity maybe for national players versus regional players?

1509 MR. BRAGG: So this is on somebody having access to their network, access to, say, our network where ‑‑ in an area where they already own a network?

1510 COMMISSIONER DESMOND: If I'm understanding your paragraph 21 correctly, you're suggesting that there be an exclusion of in‑territory use. So if the incumbent ‑‑

1511 MR. BRAGG: Yeah, right.

1512 COMMISSIONER DESMOND: If the incumbent owns the network, they then would not have the ability to use your network, for example.

1513 MR. BRAGG: That does seem to only be logical. I mean, the only reason somebody would is it's demonstrative of erroneous rates. Why would somebody want to use my network where they already had a network? It's only because they know they can get on it at below‑cost rates and it makes more sense to, you know, let me subsidize them than them operate their own network.

1514 Like it's ‑‑ I mean, I think it's proof that the rates aren't right, because there's no logical reason why, you know, company A, who owns a network in Halifax or Charlottetown, would want to use somebody else's network. It doesn't make any sense, unless it was cheaper, which obviously they would know. You know, they're not dummies. They can do the costing and know a bargain when they see it. And it puts a significant amount of pressure on us or whoever that network owner is to have to offer up their network at below‑cost rates and, you know, could lead to some anti‑competitive behaviour in the long run.

1515 COMMISSIONER DESMOND: Okay, thank you ‑‑

1516 MS. WILSON: Sorry, just to add to that, we wouldn't have a network to use. So in terms of equitable, Bell doesn't have any wholesale access in any of our territories or most of our territories. So there ‑‑ we couldn't go on their network.

1517 MR. BRAGG: Yeah, we couldn't get back at them.

1518 COMMISSIONER DESMOND: Okay, thank you so much. And I'll turn it back to the Chair.

1519 THE CHAIRPERSON: Okay, thank you very much. I will turn things over to Vice‑Chair Scott.

1520 VICE‑CHAIRPERSON SCOTT: Thank you.

1521 So I fully appreciate your desire to not want to run a thousand scenarios with unknown probabilities. But you did say you're running scenarios in your head kind of on an on‑the‑fly basis. So when you're looking at an investment opportunity, I think you mentioned you've got cases where you're losing 50 per cent of the homes passed to wholesale competitors. Is that kind of what's running through your head when you're looking ‑‑ when you're making those decisions, like go or no go? I might lose 50 per cent of these customers?

1522 MR. BRAGG: Yeah, I'll use an example. We've recently participated in the Ontario broadband sort of funding mechanism where we bid on certain areas. We had to build into our model that we would lose about 30 per cent of our customers to TPIA providers because that's what our experience has been. So that means we're at I'll call it 70 per cent of the original opportunity for homes that we would service. So that dramatically affects our economics on what our capital requirements are going to be.

1523 So you know, it's ‑‑ ultimately, it meant there were areas that we would have bid on to service, but we knew when we did the calculation that, oh, we could lose this number of customers to TPIA, and it makes it non‑economic even with a hundred per cent subsidy. And it forced us to demand ‑‑ I say demand; we were lucky enough to get some of it ‑‑ a higher subsidy than we otherwise would.

1524 And we have had areas ‑‑ I mean, we had Develop Nova Scotia, who was on earlier, who I will say have done a good job spending the province's and the federal government's money building communities that we announced we were going to build a hundred per cent on our dollar. And then when the TPIA rates came and we said, Oh, these were quite rural communities, took a significant amount of capital. If we feel with these rates that there's a huge opportunity, which there obviously was because we've got so many TPIA providers in our networks, that we would lose 30 to 40 per cent of the customers in these areas to a TPIA provider and have to subsidize their operations, suddenly, the economics is destroyed to service those communities. So I had to go back to the former premier and unannounce that we were building these communities.

1525 And I think it's a waste of funds and terrible public policy when you have a company that's willing to build these rural communities and then, because of one policy, it forces another government agency to subsidize. And so now, yes, it's gotten built out, but Bell, because they didn't have to offer TPIA, they don't have that risk. So then they take the government money and build the communities and have the advantage to service those customers when we've been penalized because of the policy issues that were a little wonky. Right?

1526 VICE‑CHAIRPERSON SCOTT: So can we assume, then, though, that there are some communities ‑‑ because I know you are continuing to make some investments ‑‑ there are some communities where even with an assumption of a 30 per cent loss to wholesale, the economics are such that they still make sense?

1527 MR. BRAGG: No... no rural. We're not building any rural. I mean, we'll do it... there some subdivisions and some areas of the edge of Halifax or the edge of Charlottetown, or Sudbury, where it's still dense enough that we can absorb the losses and it would still make sense, but small town are communities. I mean, we're... we're shrinking the networks, rather than growing them, in rural areas.

1528 VICE-CHAIRPERSON SCOTT: Right. Is there any... sorry. I fully appreciate that the cost in rural areas skews high, and in some cases, significantly high. Is there any correlation between the number of wholesale customers that you lose in rural? So, is the wholesale business more concentrated in urban? More concentrated in rural? Or evenly divided across the two?

1529 MR. BRAGG: It's... I mean, we do... I would say it's a little bit more focused in our urban market. It's predominantly because that's where some of them have started ‑‑ so, from an advertising reach it's easier. But we have had... you know, we had a guy... we actually just bought them because I didn't want Bell to buy them, a TPIA provider in Kapuskasing, who took half our customers. Kapuskasing was... my next one on the list that we were going to shut down the entire town because it was cheaper to shut it down than it was to continue to run it for... his behalf, basically.

1530 So... you know, he decided to exit the business and put the money in his pocket ‑‑ which is fine ‑‑ it pained me to... I say, buy my own customers back, but we did it. But mostly, because we didn't want to lose them to somebody else, and... you know, if somebody else bought it would have just shut the town down.

1531 Now, we think there's a chance we'll be able to salvage that community and... you know, that's fine.

1532 So, it's a little... it's kind of community by community but it's more sensitive to us, in the rural areas, because of the... it's... it's probably... it's the nature of our cost. The... I would argue that the TPIA wholesale rates are... they're not right but they're closer to being accurate in urban markets, because of the... because of the dramatic difference in cost to serve.

1533 Like, we're 100 homes per kilometre, in Halifax, and we're... where I grew up, in Cumberland County, we're 10. So, it's a 10‑fold capital impact on servicing those customers.

1534 Now, we charge the same everywhere and it's... you know... I'm going to say it, and it shouldn't be a surprise, urban has always subsidized rural, so... that's fine, but if you have a wholesale cost structure that's predominantly based on urban costs it hammers the rural areas, and we can't... we can't really high‑grade and charge two or three times as much in rural areas to recoup it, that just creates more opportunity for a TPIA provider, because the TPIA rates are balanced.

1535 Now, I kind of get it, you can't have a TPIA rate on... down every street. That's too hard to manage, but it's part of the argument why we say... you know, more... rural just gets more and more costly, because every additional rural mile that we build is more costly than the last rural mile, because we always build in the best economic cases first... you know, and economics change, and sometimes people move and you continue to build, but when you have a... I'll call it an urban‑based TPIA rate, it just... like, it just hammers the economics in those rural areas. So, you just say: I'm not going to do it.

1536 VICE-CHAIRPERSON SCOTT: Thank you for that, and I did want to talk about rates again next. You've made several references to the importance of getting rates right, and how some of these problematic scenarios disappear or are mitigated if the rates are right.

1537 But for wholesale rates to be right, it's got to achieve at least two objectives... or sorry, it would need to be reflective of your costs and how you can make reasonable returns so you can continue investing.

1538 It's also got to allow the wholesaler to put up service offering into the market that deliver some benefit to customers. If a rate can't achieve both of those things then it feels a bit like we're wasting our time, here. It's like a rate that covers the costs of...

1539 MR. BRAGG: Your words, not mine. (laughter)

1540 VICE-CHAIRPERSON SCOTT: It's theoretical but I... but this is exactly... I mean, it's getting back to my Goldielocks scenario that I floated the other day, is there a rate at which you recover your costs and make a reasonable return that allows you to continue investing, and a reasonably efficient small ISP can access that rate and put a service in a market that customers actually benefit from?

1541 MR. BRAGG: I mean, that's a... you see... I don't want to be flipping but I don't care, and I shouldn't have to care. I should care about what my costs are and getting a reasonable return. I don't know how somebody else is going to develop a business model or what benefits they're going to provide to the customer, what their own internal cost structures are. I have... I have no way to control that. I only know what my costs are to build and operate a network, and those need to get covered in a wholesale rate.

1542 So, does it... does it leave much room for a TPIA provider to... you know, get an adequate amount of margin and provide a differentiated service or a cheaper product? Like, I don't know. That's their business to figure out. Is it... is it challenging? It is challenging, and part of it is is because it's not a service‑based business model, it's a capital recovery business model.

1543 So... you know, 75 percent of the cost is in the capital, and if everybody, including the TPIA provider ‑‑ as they should, is cover the cost of the capital. The service side of it, where they can differentiate, is a small number.

1544 So, I agree, it's really hard to be a huge... it's... it's hard to be a price differentiator, it may not be that hard to be a service‑offering differentiator. But, I don't really think it's my place to tell the TPIA providers: Here's how you should run your business and here are the products and services that you should offer, that are my soft spot... (laughter)... that will differentiate you in the market. Like, they should have to do some work on their own to figure out what their own opportunities are.

1545 VICE-CHAIRPERSON SCOTT: Sure... and I'm not asking you to roll over and show your value, but what I am trying to determine, though, is whether or not this Goldielocks‑owned exists... and you're not my sole source of information on this question. I'm going to ask Goldielocks questions all week long, I suspect.

1546 MR. BRAGG: (laughter)

1547 VICE-CHAIRPERSON SCOTT: But I do appreciate your input on that.

1548 Maybe for my last question... I do want to get back to the 62 communities that you referenced... because I think you used the phrase 'stopping service' in those communities, and I wanted to get a better grasp on exactly what that means.

1549 MR. BRAGG: The majority of those communities, there are... you know, a majority of them are small rural communities that either had a terrible high‑speed internet or some had no high‑speed internet whatsoever.

1550 And traditionally we would go in, look at those communities, and say... you know, what's the opportunity here? We'll upgrade either with a more advanced fibre‑to‑coax build or fibre‑to‑the‑home build, and do the math and say... you know, if we can sell more digital TV, more high‑speed internet, we can be more competitive in those areas, we make that decision.

1551 But, what we don't like doing is running crappy networks, so because of the TPIA rate imbalance we would say these rural areas, if we... if we make them good we attract TPIA providers, and if we lose 10 or 20 percent of the homes, then the economics is destroyed. So, we know... we know we can't afford to upgrade them, because we'll just lose the customers. We don't... we don't like operating them when they're junky, and part of it is the operating costs. You still have to pay the poll attachment fees, you still have to pay lots of other...

1552 So, it's... it's a better business decision to say: Let's shut them off and then we'll never have to worry about them again, which is kind of painful. We would rather invest in providing more products and services.

1553 So, that's the... you know, that is the bulk of them. I mean... and there were... I used Kapuskasing for an example; economically, Kapuskasing should have been shut down. We've... you know, mostly, Marielle would let me do it, because she didn't want to feel the wrath of what would happen.

1554 But, we've... we've held off making more draconian decisions, even where the economics are so challenging, mostly because I've not given up and thinking that this should be able to be solved at some point. We should be able to have a reasonable wholesale rate that accomplishes... you know, a reasonable return on investment, reasonable opportunities for people to continue to invest and build networks in rural areas.

1555 I mean, it's taken a long time, it's been a lot of work, but, you know, I'm... we're still at it, so I'm not... I've not given up yet.

1556 So, that's part of the reason why we haven't... haven't just gone... you know, full swing and shut off everything that's not economic, but there are some that are just so obvious, we just say: Well, we're... it seems like not going to ever be able to service those areas, so we shut them off.

1557 VICE-CHAIRPERSON SCOTT: Okay, and I don't think we have those 62 communities on the record, either publicly or confidentially. Sorry, I'm looking at you and that's the half... if we're going to.

1558 MS. WILSON: No, we haven't provided that but we're happy to, if you...

1559 VICE-CHAIRPERSON SCOTT: I think that would be worthwhile, and I think the staff may put it into an RFI...

1560 MS. WILSON: Sure.

1561 VICE-CHAIRPERSON SCOTT: ... or whatever information, we'll make sure we get it, one way or another.

1562 And again, just to be clear and to the extent that you know, do those communities that do have an alternative source of internet available to them?

1563 MR. BRAGG: Some, it has been built... I'm just... I just happen to be aware that... you know, Bell, or somebody else, had gotten a subsidy and they were going to build them, others, I... I don't... I don't know, to be honest. I don't know whether... well, we can find out, I guess, somehow, but...

1564 VICE-CHAIRPERSON SCOTT: We can find out as well, too, if we're referring to the 62.

1565 MR. BRAGG: Yeah... there you go. (laughter)

1566 VICE-CHAIRPERSON SCOTT: Like, not all my problems are your fault. (laughter)

1567 But thank you very much for the answers to my questions. Thank you, Sir.

1568 THE CHAIRPERSON: Thanks very much. We will go over to Commissioner Naidoo.

1569 COMMISSIONER NAIDOO: Hi. Rogers told us that the magnitude of costs to upgrade and maintain its HFC network is comparable to the investments others are making in FTTP.

1570 So, are you of a similar view to them, and do you think it would be more cost‑effective to upgrade existing HFC networks than to deploy completely new FTTP?

1571 INV. BENIC: I mean, it's... you know, again, it's an engineering discussion. Generally, it's pretty comparable. We think that in the long run, if it's... you know, six to one, half a dozen of the other, we'd rather invest in fibre‑to‑the‑home. I think it's a little more future‑proof.

1572 I think... I mean, we suspect the operating costs are slightly lower... and it's most... it's not a lot but it's mostly electricity, it just... it takes less power to run a fibre‑to‑the‑home network... capital costs are pretty similar.

1573 But I think it's really... for us, it's the... it's the future upgrade cost that's less, like today, we would spend... you know, 15 or 20 percent of our embedded capital every year just... for no new customers, just adding capacity to the networks.

1574 Now, with a fibre‑to‑the‑home it might only be 10 percent. You still have to add capacity at the customer premise and back in your central office, but the... the middle pieces of the network are a little more future‑proof.

1575 So, we just think it's a... for even dollars it's a better engineering decision.

1576 COMMISSIONER NAIDOO: Well, throughout the hearing you probably heard that for some interveners bundling is a big issue. You have a wireless business that you operate in the same are as your wireline networks.

1577 And so, I'm wondering, to what extent are you now selling wireless internet bundles and how important are those bundles to your customer base, and your ability to compete?

1578 MR. BRAGG: I mean, I think they're important, but it's... you know, somebody else commented, which I agree, it's... it's about the price. I mean, it's... if you make the bundle...

1579 The fact that the two products are together don't really matter a hill of beans, it's it there... you know, is there price advantage for the consumer?

1580 Now, operationally there's a bit of an advantage for us. If you've already got a preexisting customer relationship, from a customer service standpoint... you know, marketing to existing customers is easier than marketing to net new customers.

1581 So, it's... you know, it's a... it's important but it's also... you know... people do make independent decisions on their cell phones versus their landline services. They... we run two different billing systems, we know that people kind of think a little differently about it.

1582 But... we also recognize the risk associated with if a large incumbent, who has a cellular footprint in our market, was allowed to get access to our network, it's... it's a tremendous advantage for them, versus a small independent TPIA provider who doesn't have preexisting relationships, if somebody like a Bell or a Rogers or a TELUS can leverage their existing relation... wireless relationships and leverage that in a TPIA format, to go after our customers, we think that could be quite detrimental.

1583 COMMISSIONER NAIDOO: We heard yesterday, from some interveners who advocate for lower income Canadians. They are of the view that bundles don't necessarily... in some instances aren't the best option for everybody, price‑wise.

1584 They had indicated that some lower income customers would actually like the bundles to be unbundled, so that they could buy specific services based on speed, or whatever they want.

1585 What do you say to that?

1586 MR. BRAGG: You know... obviously, I have sympathy for... you know, I have sympathy for rural Canadians who don't have access to networks. I have sympathy for low income. Like, I think those are legitimate issues that we need to deal with.

1587 I think... you know, I'm a little bit of two minds, and this has always been a challenge for me to get squared away in my head is: 1) I always have a cost argument... is... the fact that somebody has a need, whether they have a need for a lower‑priced service and they can't afford what I have to offer, or if it's an organization that feels they have a need to be in business... like, those... those are fine, those are needs, but they don't change from the facts of how much it costs to actually provide the service.

1588 Now, could we or should we have more low‑income‑oriented rate structure for certain groups? You know... maybe. Somebody has to pay for them, so does that mean we raise the rate somewhere else? It's likely what would happen, that's the way that it has to happen. I mean, is it the obligation maybe of the provincial government, social services, like, I don't know, but you can't... I mean, need doesn't change the facts of the matter, so...

1589 And unbundling... I mean, it's a little bit... we've had what we would have deemed to be low‑income targeted products but we always get pushed back, it's like: Yeah, yeah, yeah, yeah, I like the price but I want the... I want the all‑you‑can‑eat model, and I want the fancy cell phone, and I want the unlimited data at that low price. And it's like: Well, we just... you can't do that... well, we can't do that.

1590 But that tends to be part of the challenge is when we've skinnied down to try to meet the economic needs of somebody, then it's no longer a product that anybody wants.

1591 So... like, I don't... to be honest, I don't know what the answer is to that one.

1592 COMMISSIONER NAIDOO: All right. Well, thank you very much. Those are all my questions. Madam Chair?

1593 THE CHAIRPERSON: Thank you very much.

1594 So, maybe I'll just ask a couple of questions and maybe we'll go back to the Vice‑Chair after.

1595 So, part of our role here, as you know, is to do a bit of a balancing act. We want to promote competition. We want to promote investment. So, maybe just starting with the investment piece. I'm wondering... it's a bit of an open‑ended question, but can you talk to us a little bit more about the investment, the planned investment? You talked about the costs. You said $72‑$75,000 per kilometre to build. You talked about the ongoing capital, adding capacity to the network.

1596 Can you just talk to us a little bit more about the costs, how... how you see that going up? Because you did say that... you know, for the communities that may be further out it's more costly.

1597 Can you just unpack that a little bit more for us?

1598 MR. BRAGG: Well... so, an element of the cost that I've referenced to a bit... you know, it becomes a higher cost. It's not that the absolute dollars are more to service this rural areas, it's just that there's less density. It's... it's a density issue, which is what drives the cost. It's... it ends up being the cost per home passed, which is the big challenge.

1599 And our additional capital that we have to deploy, that's predominantly... I mean, I know, 10 years ago I think I was scolded by one previous chair for the fact that our rates have gone up five or six percent every year, and it's like... yeah, but our usage had gone up 30 percent every year, so everybody is getting a bargain.

1600 Now... and that's part of the challenge, is the... the cost per megabyte of internet is the lowest it's ever been in history. The problem is everybody uses more of it... and I shouldn't say it's a problem. I mean, it's a product that I sell to people, so that should be a good thing. But the fact that usage goes up so much, we... we do need to continue to make sure that the network can actually deliver that usage.

1601 So, we... we invest in it, for no... again, no new customers, so obviously we have to put the rates up if we... you know, invest another $200 million.

1602 Now, we've been for... I don't like to say fortunate but we've cut back our capital because we...we're not building new areas, but we still... I don't know what our capital was last year, $225 million. We didn't build anything new, a little bit of cellular... but that's the magnitude of how much we have to continue to reinvest.

1603 And it's a little bit of a challenge on why I think the rate setting exercise is so challenging, because you're not... you can't set rates at a point in time. You need to set rates that actually...

1604 And I think this is the big challenge. You need to set rates that anticipate and will recover that additional capital that's required to be spent. Because if it doesn't then I don't spend the capital, if I can't get that recovered, and the network slowly goes downhill.

1605 The risk you have is if you build that into the rates then maybe I won't spend it either, because I'm happy to put the money in my pocket. Like, that's the... this is the challenge with the rate‑setting exercise is it is really hard.

1606 Now, is there a sweet spot? Possibly. But, you know, the capital is the big issue. I mean, we've dealt with this in the past, where... you know, through some of our rate‑setting submissions we've gotten pushed back on... you know, I don't want to get into technical details on... like, working fill factor, having arguments from the Commission on... you know, you... you spent capital too soon and your network should be able to absorb the usage more before you spend the capital.

1607 And I said: I can't believe I'm arguing this. What's the logic for me to spend the capital if I don't need to? Like, there isn't...

1608 I obviously need to spend the capital upgrading the network. There's no... there's no reason why I would just send money to Cisco just because I happen to like them... nobody would do that! It's out of necessity.

1609 So, we get... we get into these arguments... and some of it is because the... some of the costing models don't... don't fit the way our networks are built as much anymore, and you... you just get into these challenging discussions, which...

1610 Like, I... you know, it's fine to have a debate about... I say how much... you know, you and I can have a debate about how much Marielle spent on her house but you can't debate me on how much I spent on my house, and I... I know we spent this money building these networks.

1611 So, it's... it's such a challenging issue from the capital, and... you know, we have ongoing... we have the upgrade issues, we have rural issues, but... like, I don't know... I mean, I can give you more detail and lots of engineering and economic documentation about how much... how we do it and what the costs are, but it's... you know, generally it's $70,000 or $75,000 a kilometre. And it's not hard to do the math. If you don't get 10 or 15 homes in that kilometre then it's hard to do it, and we're... we're a little bit fortunate, we're a private company. We tend to be able to absorb a longer payback, which is why we think we've been a little bit more successful in building out some of these rural areas in the past, because we could... we could justify a longer‑term payback. We don't... we don't have analysts who scrutinize us every quarter, we don't have a bunch of different shareholders who want different dividend amounts or returns, like we were pretty content when we built the business model. It might take five, six, eight, ten years to get a payback on building these rural areas but we won't do it for a 20‑year payback, and that's what's happened to us with the rate structure in place, so we just say: Well, we can't... we were already on the bubble and we just can't do it.

1612 THE CHAIRPERSON: Okay. Thank you for that. So, the other... the other part of this is promoting competition, as you know, and we've heard and we've heard a lot yesterday from PIAC and OpenMedia about... I would say frustration on the part of Canadian consumers. I'd say in some cases desperation, given the stories that they were sharing with us with respect to the lack of choice, affordability, customer service experience. We talked about how some customers only have access to one... the choice of one provider.

1613 I know you touched on this... on the consumer's side of things with Commissioner Desmond. What I'd like to ask you is how to reconcile that, where consumers are saying: We only have access to one provider. Any other provider, even if that's a large provider, of it's an incumbent, if we have any choice, that would help. At the same time, you're suggesting limits on the wholesale access regime.

1614 What I would like to ask is how you would reconcile that... the other piece of this is ‑‑ and you've said this, you've said... you know, for example, specifically with respect to allowing the large incumbents to use wholesale access should be off the table. You said if we did that that would risk the competitive position of regional carriers, it could lead to a reduction in competition.

1615 Can you just help us reconcile those things?

1616 MR. BRAGG: I'll do the last one first. I mean, I think part of the challenge... with the market... with the size and scale that the big guys have, if they were to avail themselves of our network ‑‑ you're going to get tired of me saying it ‑‑ at the low‑cost rates... I mean, that's a huge economic advantage for them and it's very detrimental to us. Like, we are... we're absorbing... we have 84,000 TPIA customers that we lose $20 a month on. So, can I absorb that? Today because I've cut back so much capital. And it continues to grow. So, if we had 150,000, you know, we don't generate enough, we can't operate the network. Some of the smaller TPIA guys, because of their scale, they can't add 10,000 a month. They just can't do it.

1617 Rogers could. Like, Rogers could take 200,000 of our customers in a year. Like, they have the ability and scale to do that and they know that from a costing arbitrage standpoint that it's so below cost and disproportionately below cost because of our rural nature, it's a huge advantage for them. So, you know, they easily take all our internet customers and then I don't generate enough TPIA revenue to cover my cost to operate the network, so I shut the network off. And, like, nobody wants to do that.

1618 Are we happy about stranding over a billion dollars worth of capital investment? No, of course not. But that's the risk that the big guys pose, is they can really take advantage of the rate inequity. So, hence, that's why we say you can't ‑‑ you know, if the rate was right, it wouldn't be an issue, but I understand why it's so challenging to get the rate right and I suspect we never will.

1619 We may get closer to it, but I think that's the reason why we need some of these guardrails, whether it's the offboarding after five or seven years, whether it's a reasonable amount of time to get some return on your capital before you have to subject it to somebody else. Like, that's the reason why we need some of these guardrails, is to protect ourselves from an erroneous rate. So, that's that piece.

1620 Now, I can't even remember what your first question was.

1621 THE CHAIRPERSON: The fact that we heard that some customers only have access to one provider ‑‑

1622 MR. BRAGG: Oh, access to one.

1623 I think that's likely in very rural areas. And who's the one? I suspect it's ‑‑ I only have one I like that ‑‑ you know, satellite is available everywhere. Xplore has a pretty robust rural wireless internet deployment, as do many others. So, I don't buy that there's that many single internet provider towns or communities. Like, yeah, there's some, but most areas have at least two and three if you count the satellite guys.

1624 Now, is that a fair competitor? They're more money and they have less service. I would not consider them a competitor really in my territory where I have a good fibre‑based or coax‑based solution, but they're good in the rural areas where nobody else is willing to build.

1625 But you get into ‑‑ the real question is: Is there enough competition? I would argue I compete every day. I don't have ‑‑ I nor anybody I compete with have pricing parity. If you get to economic theory, I don't have any dominance in the market, nor does anybody who competes against me. I don't have pricing power. I can't change prices, nor can anybody who competes against me. You just have to ‑‑ you only need two to make it competitive.

1626 You can look at our returns. Like, it baffles me why nobody ‑‑ everybody talks about ‑‑ I mean somebody earlier said, you know, “The telecommunication providers in Canada make more money than anybody in the world.” That's just not true and you can do it in about 30 seconds, go to the internet and see that the returns of Comcast are better than Bell, Verizon's better than Bell, AT&T not so much, but just in 30 seconds you can prove that that's not the case.

1627 I know Bell's return on assets is about 5 percent. That's quite terrible. They've underperformed the TSX average in the last 20 years as a company. So, I find it challenging to think that if we are suggesting that a company that's in the bottom half of performing companies in Canada is too good, like, I think that's a real problem from an economic statement. That's where it is. Like, it is competitive. Like, we make very little free cash. I know Bell is challenged, we are all challenged with some of these decisions.

1628 I understand why, you know, maybe Bell has gone a little bit crazy with some of their past statements, but I respect ‑‑ and I don't defend Bell very often ‑‑ but I respect the economic situation that they may find themselves in and it's challenging when your returns are not that great and you live with somebody saying “not enough competition, not enough competition”.

1629 I can tell you it is very competitive because I compete against those guys every day. This is not a debate that we can have because I'm doing it every day.

1630 Now, the issue of customers saying, you know, our customer service is terrible, I would say there's no excuse for that. That can be fixed and then that's ‑‑ I actually like it when Rogers or Bell or Telus have terrible customer service because I think that's an advantage for me, again, because it's a competitive market.

1631 Lots of the other guys, you know, do they want ‑‑ and the one that challenges me a lot are customers that say “there's not enough differentiation of the services that are provided”. I'm like, “Well, it's internet, it's internet access, it's like selling water. I mean it's kind of hard to differentiate it.” There are lots of other apps and bells and whistles that somebody else could sell. Could we sell those? Sure, maybe and make ourselves look like we have more products on our shelves. But that's not the business that I'm in and there are lots of other people that do that.

1632 So, I think it's ‑‑ you know, when we all invest the same amount of money to cover the same mile and build the same networks and offer the same products and services and basically have the same economic structure, our prices end up being kind of the same. I've used this analogy before. Like, why does a Ford and a Chrysler and a Chev pickup truck all cost the same? Because they all are made the same way in the same type of factory. Like, it's just that's what we do.

1633 So, I think it's a little utopian to think if we just add more people who are doing the same thing, using the same network, that we're going to get a different result. I actually think that's a little naïve for whoever thinks that.

1634 I'm sorry, that was a bit of a rant.

1635 THE CHAIRPERSON: Okay. Thank you for your candour.

1636 I'm just going to quickly turn things back over to the Vice‑Chair and then we will turn it back to you for concluding remarks.

1637 VICE‑CHAIRPERSON SCOTT: My question seems really boring now, but after conferring with staff, we would like to put an undertaking request to you.

1638 So, regarding the 62 communities, could you undertake to provide us with the names of those communities, the number of households within, and whether or not those communities were targeted by public funding via Invest Nova Scotia? And could you undertake to provide that by March 1st?

1639 MR. BRAGG: I believe we can. So, the question on targeted by public funding after we had shut them down?

Undertaking

1640 VICE‑CHAIRPERSON SCOTT: Any information you have.

1641 MR. BRAGG: Any information on that, okay. I mean some are out West in Alberta and I don't ‑‑ we may have lost touch on whether somebody has funded a build‑out out there. I mean we'll do our best to give you what we know.

1642 VICE‑CHAIRPERSON SCOTT: That's perfect. Thank you.

1643 THE CHAIRPERSON: Great, thanks very much. So we will turn things back over to you for concluding remarks.

1644 MR. BRAGG: I think you've likely heard enough from me, so I don't know if my colleagues have anything to add on anything that's been said so far.

1645 I don't think so. I think I've had more of my share of the microphone than I needed.

1646 THE CHAIRPERSON: Well, thank you very much. Thank you for being here with us and for sharing your perspective with us today. We really appreciate it.

1647 MR. BRAGG: Thank you for having us.

1648 THE SECRETARY: Thank you.

1649 We will take a lunch break and resume at 1:00 p.m. Thank you.

‑‑‑ Upon recessing at 12:08 p.m.

‑‑‑ Upon resuming at 1:00 p.m.

1650 THE SECRETARY: Welcome back, everyone.

1651 We will now hear the presentation of Beanfield Technologies Inc.

1652 For the participant appearing remotely, can you please confirm that you hear us correctly?

1653 MR. MILLER: I do, thank you.

1654 THE SECRETARY: Perfect. We do, too.

1655 Please introduce yourselves and you may begin your presentation. Thank you.

Presentation

1656 MR. HOFLEY: Madam Chair, Mr. Vice‑Chair, Commissioners, Commission staff, good afternoon. My name is Todd Hofley and I’m the VP, Policy and Communications at Beanfield.

1657 Joining me remotely is Peter Miller, our regulatory counsel.

1658 Our CEO and COO both very much wanted to be in attendance but unfortunately cannot and they send their regrets.

1659 We appreciate this opportunity to appear before you today. Your review of wholesale access is one means of achieving the broader policy objective of facilitating a more vibrant and sustainable competitive retail Internet service market.

1660 Our comments today, however, will largely focus on a different area, one where we believe the objective of vibrant and sustainable competition has historically been met but is now alarmingly and dangerously at risk, namely, the competitive framework for the residential multiple dwelling unit, or MDU, market, otherwise known as condos and apartments.

1661 But first, I’d like to tell you a bit about Beanfield.

1662 Beanfield began life in the late 1980s as a community‑centred networking provider in Liberty Village, downtown west Toronto. Today we operate extensive fibre networks in Toronto and Montreal, with expansion in Vancouver and Ottawa‑Gatineau. In fact, the Zibi development just outside this door is serviced with our network. We connect over 3,000 commercial buildings, have a service area of over 200,000 residential units and have more than 4,000 kilometres of fibre.

1663 Our residential business is almost exclusively MDU‑based. We compete successfully in this space, typically achieving a penetration rate of 25 percent in the MDUs we service.

1664 I think we can agree that Canada is an urban nation. Close to 85 percent of Canadians now live in urban centres, with MDUs comprising over a third of existing Canadian dwellings, a proportion that is consistently growing. Last year, MDUs made up 77 percent of all new housing starts in Canada. Put another way, four out of every five new homes started last year were MDUs and MDUs will make up the majority of housing in Canada in a very short period of time.

1665 This means that the MDU market is the competitive retail market of the future. This market represents well over half of what we think is the realistically achievable market for independent ISPs and is virtually the only segment of the residential market where vibrant and sustainable competition can thrive.

1666 This is because MDUs, particularly high rises, permit economies of scale that can justify multiple facilities‑based competition. This historically meant the presence of two incumbents, at least one or two independent ISPs, plus third‑party wholesale competitors.

1667 The resulting vigorous competition has led to the lowest price for Internet service in any market segment, with Gbps symmetrical speed, unlimited usage, no contracts, with free hardware and installation for $50 to $60 a month being a current standard and less than half of what a comparable incumbent would offer to a single‑family house.

1668 We think this significant price difference is important because rentals and condos are also the most affordable housing option available. Whether it’s seniors, students, new immigrants or first‑time homebuyers, this demographic makeup is most in need of, and can best use, the benefits of vibrant competition.

1669 The fact that this competition is mostly facilities‑based also means greater innovation in service offerings, including vitally important network resiliency, redundancy, safety and security. If multiple networks are present in MDUs, MDUs with water sensors, elevator phones and security cameras can operate with redundancy, something that the Rogers network failure of July 2022 reminded us is so important.

1670 Simply put, in our view, the Commission cannot achieve its goal of a truly vibrant and sustainable competitive retail Internet service market without vibrant and sustainable competition in the MDU market.

1671 Over 25 years ago, the Commission affirmed the rights of end‑users, including tenants, to access the service provider of their choice in all situations. This is the foundational principle that underlies and is supposed to be achieved directly through the MDU Access Condition established in 2003. This would effectively be expanded through mandated aggregated wholesale HSA services.

1672 Unfortunately, at the very time the Commission is seeking in this proceeding to increase end‑user choice through mandating aggregated wholesale HSA, large incumbents are actively thwarting that choice in the MDU market.

1673 As we outlined in our interventions, incumbents are increasingly locking up MDUs through bulk billing arrangements signed at the developer level prior to occupancy and prior to resident‑elected Condominium Boards being formed.

1674 Developers and incumbents negotiate significant up‑front fees in return for these arrangements. The carrier issues one bill for all service to the building and end‑user residents are automatically required to pay for internet service as part of their rent or condo fees. The end‑users have absolutely no choice in the matter. They must pay whoever has been chosen for them. There is no ability to opt out, no ability to change provider, and nothing to be done if the service is poor.

1675 These arrangements are now becoming so entrenched that by our estimates incumbent/developer bulk billing arrangements represent well over half of all new condo developments in the GTA and, because they not been challenged, we are also seeing it spread across the country and not just in urban areas. Despite Commission disclosure requirements and because of how these agreements have been intentionally structured, they are given limited exposure and are normally a big surprise to the end‑user.

1676 In 2021, the Commission concluded that no further regulatory measures were necessary to address MDU access‑related issues such as this. To test this conclusion, on September 20, 2023, we filed a Part 1 Application against a large incumbent in respect of a specific bulk billing arrangement initially established with a developer. Should the Commission confirm that existing regulatory measures are adequate to that task, we are hopeful that a precedent will be established that curtails the serious erosion of effective competition in the MDU market.

1677 That being said, we believe the broader threat to competition is so significant that a more robust, definitive statement must be made.

1678 In your letter to hearing participants, you stated, “the Commission wishes to focus on how to ensure that all Canadians benefit from a wide range of affordable Internet choices as quickly as possible...”.

1679 For Canadians to benefit from affordable Internet choices, they first and foremost have to be in a position to effectively make those choices.

1680 Incumbent/developer executed bulk agreements that preclude effective market access for competing providers do not provide these Canadians with choice. A residential MDU is just like a small town or neighbourhood, sometimes with thousands of residents. We do not allow the person who builds or governs a town to deny choice to its residents, nor do we allow monopoly provision of services. So, why are we treating these residents and citizens differently and allowing it in MDUs?

1681 And to be clear, once an MDU is locked down and lost to a bulk billing arrangement, it is lost to facilities‑based and wholesale providers alike, meaning that a massive segment of the very market the Commission is trying to open up is being locked away and monopolized as we speak.

1682 I have been a condominium board president for the past 13 years. Making decisions on behalf of hundreds or thousands of residents is a big deal and I can assure you that boards take their responsibilities very seriously. Checks and balances in provincial condominium legislation mean that there is almost no way for a bulk agreement to be established by a resident‑elected condominium board unless it has already been established at the developer level. This is why incumbents seek to thwart choice at the developer level.

1683 Given the evidence of expansion and abuse of bulk billing arrangements, and difficulty in monitoring, Beanfield believes that the simplest way of preserving competition in the MDU market is to officially ban the practice.

1684 We’ve discussed how wholesale access is affected by the practice of bulk billing, but I would also like to address a more general aspect.

1685 The Commission has been struggling with wholesale access for some time and compared to facilities‑based competition, we do think that it’s an imperfect solution. The worst‑case scenario, however, is not imperfection, but that a new wholesale access regime inadvertently enables large incumbents to entrench their dominant position. This risk, raised by Cogeco and Eastlink, is that the big three incumbents use their dominance, along with flanker brands, acquired wholesale providers and bundling strategies, to squeeze out regional carriers and independent ISPs. As a solution, Cogeco proposes that any wholesale HSA mandate be accessible only by smaller or regional providers as eligible purchasers. Beanfield supports that proposal.

1686 Thank you for listening. We look forward to your questions.

1687 THE CHAIRPERSON: Thank you very much, Mr. Hofley. Hello, Mr. Miller. We really appreciate Beanfield being involved in this proceeding.

1688 I will turn things over to my colleague Commissioner Desmond to start the questioning for the Commission. Thank you.

1689 COMMISSIONER DESMOND: Good afternoon. Thank you for being here.

1690 In your submissions you argue that the Commission should treat MDUs differently from the urban or suburban markets and from rural and remote markets, and, as we understand it, that you oppose the FTTP in the MDU market. So, I wanted to talk a little bit more about the MDU market that you operate in.

1691 I understand that you operate in the three largest urban centres. So, could you kindly explain how you see the competition differing between the three centres that you operate in?

1692 MR. HOFLEY: Our current residential offering is only available ‑‑ well, there's a tiny bit in Ottawa‑Gatineau, as I just mentioned. We're trying to build out more. As a facilities‑based provider, that takes investment. And we have a small footprint in Vancouver, but predominantly, we are in the Toronto market.

1693 The MDU market, because of the economies of scale that can be created within that, as I've stated, is really the market where facilities‑based competition can thrive the most. We heard Eastlink earlier talking about houses passed. It's much easier to create competition when you pass a house and there's 300 houses on that single pass versus 10 to 15 and that's how we built our business. That's why we have been successful in this business.

1694 And so, we think that the MDU market is distinct because of that economy of scale and it's why when we talk about the addressable market, we think it’s vital that that be preserved for independent competition because you can’t have somebody grow to actually compete for the incumbents unless they have the ability to capture some sort of market share with innovative products and with economies of scale that favour ‑‑ or that at least allow that competition to thrive and to build a network, versus just being squashed under the weight of the incumbents’ dominance.

1695 COMMISSIONER DESMOND: Do you see differences in the markets you operate in? Like, Vancouver versus Toronto?

1696 MR. HOFLEY: The MDU markets typically operate the same, wherever you are. The economies of scale, again, create ways and means for the price to significantly drop for consumers, and that is the same, absolutely, across the country.

1697 COMMISSIONER DESMOND: Okay. Thank you. In your opening statement, you did speak at length about the bulk billing arrangements, but at the end of your statement, you talk about a more general approach ‑‑ the more general aspect, and I’m wondering if maybe we could expand on that a little bit more? Could you explain what you would see as a solution to ensuring that there’s competition and investment, generally speaking ‑‑ not so much about bulk billing, but in a general way?

1698 MR. HOFLEY: So, I think there is a risk when opening up mandated access, as Cogeco and Eastlink and others have pointed out, that the incumbents use that to undercut. Eastlink spoke at length about how that can happen, and we think that anything ‑‑ that when you’re creating a new regime, you don’t want unintended consequences. And that’s a fear of what one of those unintended consequences could be.

1699 To be completely honest, we don’t really operate a lot within this sphere. We don’t provide aggregated access for residential units, so it’s not an area of our business expertise. So I would rely more on the other, you know, contributors to this conversation, like Eastlink, Cogeco, CNOC, et cetera, who would have a much better idea of what the appropriate means of achieving that would be.

1700 COMMISSIONER DESMOND: Okay. How would you support competition then, and wholesale‑based competition, for the MDU market?

1701 MR. HOFLEY: Well, we think any ‑‑ I think Canadians have been very clear that they want a lot more competition and they want a lot more choice. As I said, in Toronto, which is primarily where we are centred, we have wholesale competitors that we are up against all the time in these buildings, whether it’s Rally or TekSavvy, or whomever. And we are happy to compete against those. We think that there is a need for those to exist in all markets.

1702 One of the concerns we always have, though, is that when we’re talking about a sustainable competitive environment, service providers, because they are getting their network access from a facilities‑based provider, have a limited ability to offer new or innovative products. They have a limited ability to increase/decrease their speeds because they’re buying access from somebody else.

1703 When a ‑‑ for example, if we go back to the Rogers July ‘22 outage, if you happen to be in a building that was bulked out by Rogers and you were ‑‑ well, not a building that was bulked out by Rogers, but if you happen to have been a building that had Rogers in it and you were a TekSavvy customer and TekSavvy had bought its transport on Rogers, you were also out. And you were at the back of the line for that fix, because they will fix their customers first and then they will fix TekSavvy’s customers second.

1704 So, from a sustainability and resiliency ‑‑ and talking about the overall telecommunications world in which we live in Canada, and ensuring that 25 percent of the population doesn’t get cut off from their services, we think that sustainability‑wise, facilities‑based competition is what we should be striving toward, while understanding that that isn’t always practical in as large a country as we have, and also understanding that sometimes service‑based providers then grown into facilities‑based providers.

1705 There are a number of situations across the country. You have small, feisty independent startups who are starting off as service‑based providers, and then they’re like, “You know what? I really want to build a network.” And this is where the bulking becomes insidious, is because they’re like, you know, Beanfield to some extent but have a very difficult time existing in the framework that ‑‑ if the bulking existed 10 years ago, or 12 years ago when Beanfield started, it would be very difficult for Beanfield to have competed in that space, because a new entrant wants to build a network, and the most cost‑efficient way for them to do that is go, “Oh, my God, look at this. There’s this 200‑unit condominium that’s going up in downtown Halifax. I want to build a network to that. It’ll cost me, you know, X amount per kilometre to get there, but then once I’m there I’ve got 400 homes that I can hook up at a relatively low cost as compared to hooking up 200 homes in a neighbourhood.”

1706 And I really encourage us, when we’re talking about MDUs ‑‑ and perhaps this is me as a condominium president talking, is that oftentimes we speak about buildings and MDUs as singular entities. These are two and three hundred homes, and when we’re talking about bulking, these deals are now not just single buildings; we’re talking about massive masterplan communities that have 12 to 13 condominiums with 500 units each. Six thousand houses. Imagine that. That’s like the Glebe all having a single provider.

1707 And so, that economy of scale is really important for service providers to then have an opportunity to become a facilities‑based provider, which would then add to the sustainability and the redundancy and the resiliency of their overall telecommunications network.

1708 COMMISSIONER DESMOND: You spoke about the fact that there are competitors in the market; you’re happy to compete. But at the same time, we’re seeing many wholesale‑based competitors being acquired by incumbents. So I’d be interested to hear your view on why that’s happening.

1709 MR. HOFLEY: I think the wholesale‑based providers have kind of said it all there. The rates obviously had a massive effect on their ability to compete. It’s a very difficult line you’re trying to find. But again, as it’s a space that we don’t particularly operate in, but we have certainly seen it, and we lament the lack of that competition.

1710 You know, as a small independent provider, we want there to be more competition. We’re happy to compete. We want to, like, go head‑to‑head and figure out, how do we do this? How do we maximize an efficiency on our end so that we can provide a really great deal to a consumer on the other end? That’s something that we want to do and we’re not shying away from that. But in terms of how to actually make that happen in a way that’s fair to the providers of that aggregated access ‑‑ I’m not quite sure.

1711 COMMISSIONER DESMOND: Okay. Thank you. Can we have a conversation about your investments? In 2022, you did purchase Urbanfibre and FibreStream, and that of course helped you to grow your footprint in the country, as well as establish a presence in Vancouver. And you’ve mentioned your interest in continuing to invest and compete, particularly in the MDU market. So, are you in a position where you can share your plans for network investment and expansion? And have you ever considered rural areas?

1712 MR. HOFLEY: So, again, the rural question is incredibly important, but it’s not really one we’ve considered because of that economy of scale. We have a very limited means of reaching that. All of our hubs are in urban centres, and that is an intentional business decision. So we haven’t considered rural areas. Our expansion is focused on those areas that we currently operate in, and that includes continued expansion.

1713 Oftentimes we talk about a city like Toronto as it being a single thing, but the city of Toronto has many, many parts to it, many of which are underserved. We’ve spoken a lot about the digital divide, and that is of great concern to us. And what we have been focusing on is the digital divide that exists within cities, because there are still huge swaths of area within Toronto as a city that are massively underserved in terms of fibre deployment, and fair and good pricing.

1714 So, those are the areas that we’re focusing on in terms of our network buildout. How do we densify within the markets that we currently operate? How do we build more capacity, more network, to get to more people, to offer, you know, a better ‑‑ a better price? You know, our objective has always been ‑‑ it sounds kind of trite, but our objective has always been about connecting communities, connecting people, and that runs through everybody in the company. And so we really focus on how can we provide the most bang for our buck?

1715 COMMISSIONER DESMOND: So, thank you for that response, and I appreciate that you haven’t really considered moving into the rural areas. But do you have any suggestions for the Commission for things that could be put in place to support wholesale‑based competition in the rural areas?

1716 MR. HOFLEY: Well, I think the question you’re considering is the right one. You know, how do ‑‑ how do we do this? Who has the networks that exist in those areas, and how do we create a regime that provides enough of a payback to the entities that created those networks but does allow a wholesale provider to also enter that neighbourhood and perhaps differentiate themselves on cost or perhaps some other small component of their service offering?

1717 COMMISSIONER DESMOND: Okay. Thank you. If there were to be a mandated wholesale HSA service, would that impact you in terms of expansion? Would you intend to further your expansion if that was put in place?

1718 MR. HOFLEY: I think any expansion always is a very active and live conversation, so right now, because it’s not something that we really deal with a whole lot except in the MDUs, it doesn’t really factor into our considerations. We want to build out our networks in the area, and we think we have a good enough product with good enough support and good enough people and intentions behind it that we can win.

1719 You know, I had mentioned our market penetration of about 25 percent. That’s a crazy high market penetration for a small company up against the Rogers and Bells of the world. But it shows you what can be done if it’s done in the right way and if you use the economies of scale when building out that business. So, I don’t think it would, but I can’t say it won’t.

1720 COMMISSIONER DESMOND: Okay. So then, can I ask the question maybe in a different way, or turn it around and ask you, if there were to be a mandate, how would that impact on your business?

1721 MR. HOFLEY: Well, some of that would depend upon what the rate is that you set, because that might affect us, you know, depending upon who we’re competing against. That might lower or raise, or however that would work. But certainly, it would create more competition. As we’ve said, you know, there’s been a real drop in wholesale providers over the course of the past few years, and we’ve seen that.

1722 And so, you know, we kind of have a “bring ‘em on” kind of attitude. You know? If you want to compete and you want to create efficiencies, and we want to let the market do its job to the best that it possibly can, then let that happen. We’re happy to do that. But again, it will depend upon what the rate is that you set, because if it’s set too low, then that will affect what we can offer, and that will affect, you know, our investment. We’re a, you know, small private company, and so we have to be very careful about how we ‑‑ how we build up.

1723 COMMISSIONER DESMOND: Okay, thank you. And I’m sure you’ve had the opportunity to read the submissions of other parties, and the Commission has been provided with a whole range of suggestions with respect to limitations that could be put in place if mandated access was provided for ‑‑ things like head start, number of homes passed, those kinds of things. I’m wondering if you have any views on those suggestions or on those limitations that should apply if a framework was mandated?

1724 MR. HOFLEY: To be completely honest, because it’s not really the sphere that we operate in, we haven’t given it much thought as to what that should be. We do think, though, that it is really important to allow a facilities‑based competitor who is small a decent return in order so that they can continue to build that network, because what we need are more networks. We also needs some service providers, but what we need really are more networks that can compete more, and those networks compete at a small scale in a small community or at a large scale.

1725 So, some sort of ‑‑ it seems reasonable that some sort of head start or, I believe just because I happen to be here ‑‑ I know I’m referring a lot to Eastlink ‑‑ you had mentioned the MVNO structure, and I think that’s ‑‑ I think that’s an interesting idea for something that would encourage the investment that you want to continue to create while also allowing for a broader number of competitors, and hopefully price depression.

1726 COMMISSIONER DESMOND: Okay. Thank you. And just one or two last questions. And it’s about the 2023 policy direction which requires all forms of competition to be fostered. So, I’d be interested in hearing your views on how the Commission should balance service‑based and facilities‑based competition as a potential outcome of this proceeding. How do we balance those two things?

1727 MR. HOFLEY: Peter, I’ve been talking a lot.

1728 MR. MILLER: Thanks. I think Beanfield’s position on that is simply that one should allow facility‑based competition to thrive where it can, and so Beanfield’s preoccupation, as you know, is in the MDU market, and concern that that market is getting locked up. So, Beanfield is asking that you ensure that market is open to facilities‑based competition. I think it was interesting to hear from Eastlink and Bragg to realize that there are areas in rural Canada where facilities‑based competition can also thrive. But as Randall said earlier, there are areas where it’s unrealistic, and wholesale competition makes the most sense.

1729 So, I think the balance is in simply ensuring, as we suggested earlier, that you have no unintended effects. In other words, don’t allow a market to close inadvertently. And then, if you can open up both the wholesale market and the facilities market as much as possible, then a natural balance will evolve.

1730 COMMISSIONER DESMOND: I would be interested in hearing your views on the position of the incumbents, who have said that operating both aggregated and disaggregated shouldn’t be imposed ‑‑ that it’s difficult to maintain both. Do you have a view on those submissions?

1731 MR. HOFLEY: We don’t operate in that way, so I don’t really know how they’re coming to that conclusion. So no, I don’t really have something there.

1732 COMMISSIONER DESMOND: Okay. That’s very helpful. Thank you very much.

1733 THE CHAIRPERSON: Okay. Thank you, Commissioner Desmond.

1734 Let’s go over to Commissioner Naidoo.

1735 COMMISSIONER NAIDOO: Hi, there. Thanks for being here today.

1736 MR. HOFLEY: Hi.

1737 COMMISSIONER NAIDOO: In your remarks today ‑‑ your opening statement ‑‑ you supported mandated access to incumbent FTTP facilities, provided that the mandate is restricted to smaller or regional providers. So, I’m wondering if you could define for us what you consider to be a smaller carrier?

1738 MR. HOFLEY: So, I think our focus has always been ‑‑ and our love has always been towards the independent providers. But this obviously changes from region to region. I think there might be an argument made that, depending upon the regions, somebody who is not Rogers, Bell, or Telus but is dominant in the region might not be considered a smaller provider. So, you know, when I think of a smaller provider, I’m thinking, you know, Purple Cow Internet in Halifax and, you know, that kind of, like, what the actual threshold would be ‑‑ I’m not quite sure what that would be.

1739 I know many people have had different ideas, but I do think that if somebody is not an incumbent but has a relatively large footprint and has the market dominance in that area, and has benefitted from that incumbency ‑‑ then it might be considered an area where they should have to open up their FTTP.

1740 COMMISSIONER NAIDOO: Thank you for that. And would you support a head start rule or a threshold where a company must have a minimum number of homes passed before the mandate applies to them?

1741 MR. HOFLEY: Well, as I said, I certainly think that there is need for that, to encourage investment. Otherwise, you very much risk that investment being cut off, especially in areas where a lot of these companies are small, private, former municipally‑owned companies or family‑owned companies where they have to make very critical decisions about how to deploy that, just like we do. So, having a head start on that makes some sense.

1742 Again though, and I feel like I’m saying this a lot, this isn’t the area where we are experts. We don’t really work in this world or in these communities, so ‑‑ but I do think, again, in terms of creating the necessary framework for that investment to continue, which is the facilities‑based investment that we think leads to a sustainable and competitive environment ‑‑ that a framework that somehow allows people to benefit from their investment first, is appropriate.

1743 COMMISSIONER NAIDOO: All right. Thank you very much.

1744 THE CHAIRPERSON: Thanks very much.

1745 Let’s go to the Vice‑Chair.

1746 VICE‑CHAIRPERSON SCOTT: Thanks.

1747 So, you've obviously put a strong point of emphasis on the bulk billing arrangements. Are you feeling any other competitive pressure? We’ve heard from other providers that they’re feeling targeted by flanker brands as another means of ‑‑ you know, any time a competitor starts to succeed, you’re seeing some targeted pricing aimed at ‑‑

1748 MR. HOFLEY: All the time.

1749 VICE‑CHAIRPERSON SCOTT: Okay. Do you want to tell ‑‑ what else are you seeing in the market?

1750 MR. HOFLEY: Yeah, I mean ‑‑ I mean, listen. We ‑‑ we see the competitive ‑‑ the competitive pressures for us are literally directed at us. You know? We’ve seen this play out building by building, across the city of Toronto. And this is no small matter whereby, if we are ‑‑ our presence in a building means significantly less. Yesterday I had a gentleman named Varesh reach out to me who lives in a rental apartment in Toronto, in Thorncliffe Park, and his rental condominium building is bulked out by Rogers, and it was bulked out 25 years ago, and he has only had Rogers for the past 25 years, and he pays $120 a month for his internet service. And this kind of goes toward the bulk. And I know I’m harping on that, but it’s reflective of what I’m talking about, in that Beanfield exists in a building three blocks away, and the price there from Rogers and Bell, is between 50 and 60 bucks a month. So, the exact same service ‑‑ but because there’s a lack of competition there, they have to pay double the rate.

1751 And so, we definitely see targeted advertising coming at us. In fact, they’ll mention us in the targeted ad. You know, ‘You a Beanfield customer? Switch to us.’ You know? We have the flyers that they have in the markets. We have the ‑‑ we know of the special arrangements that they make within those buildings, to offer those customers, if a customer calls up and says, “Hey, I’m with Beanfield. What can you give me?” They’ll price match.

1752 And to us, while frustrating, that is the market doing what it’s supposed to do ‑‑ a bunch of competitors trying to figure out, how do we offer the best price with the best intentions to our customers? Where do we find the efficiencies? Versus predatory pricing, which would mean my goal isn’t to offer the end‑user a great deal because we think we can offer a great deal, but to squeeze out the competitor so that we can start raising the prices. And we can see that. I mean, $120 in an MDU that’s a rental is a crazy price, when virtually across the street you can get the exact same thing for half.

1753 VICE‑CHAIRPERSON SCOTT: That was helpful. Thank you.

1754 THE CHAIRPERSON: Okay. Thank you.

1755 Maybe I can just ask one final question, and then ‑‑

1756 MR. HOFLEY: Sure.

1757 THE CHAIRPERSON:  ‑‑ we will turn things back over to you. So, you know that one of the things that we are trying to achieve in this proceeding is to ensure that there are innovative offerings in the internet services market.

1758 We have seen in some of the interventions ‑‑ and you may have seen that ‑‑ references to how wholesale‑based competitors can bring innovation into the market. I think that I heard you correctly in your opening, when you said that there is a limited ability for wholesale providers to offer new and innovative services. So, I’m just hoping you can help us reconcile those two views?

1759 MR. HOFLEY: Sure. So, I think a service provider obviously is buying their speed and their transport from somebody else. So, that’s what they sell. You know, it was referred to earlier as ‘I’m selling water,’ and that’s not inaccurate.

1760 So, from facilities‑based provider’s perspective, we can respond to the market and we can install fibre and we can upgrade services. So, for example, the most recent technological upgrade in terms of speed increase is something that’s called XGS‑PON, which Bell released last week saying they weren’t offering any speeds above 3 Gbps, but XGS‑PON is a 10 times factor increase from the previous GPON. So GPON gives you a maximum speed of 1 Gbps, and XGS‑PON gives you speeds of up to 10 Gbps.

1761 That’s not something that a service provider could ever do unless the facilities‑based provider does it first, and then they carry‑on.

1762 So that type of an innovation is impossible from a service‑based provider and they will never drive that kind of innovation because they have to, because they don’t own their own network.

1763 Beanfield made a decision at the very beginning to really want to control its own destiny because it was ignored by the incumbents. Beanfield, back when the internet was first started, went to the incumbents and said, hey, this is an area of downtown Toronto that’s underserved, we’ve got all these amazing creative industries and they really want to get on the World Wide Web, can you come help us? And they were like no, not big enough.

1764 So, you know, our founders just started laying fibre and they were like, we’re going to do it ourselves. So that’s how it was born, out of that necessity. And so it’s going to take the facilities‑based provider to create the backbone, to create the network, to create the hub structure that allows you to bounce signals.

1765 So that if a signal is lost, if there’s a fibre cut because, you know, a squirrel chewed through it or somebody dug something up in the road in the wrong way or who knows, it’s 1,000 different ways that these fibre cuts can happen. If you design your network in a way to reroute all of that signal, that’s on the backs of the facilities provider. A service provider can’t do that, they’re stuck with the transport you’re providing.

1766 So in terms of expanding the speed, expanding the technology, they don’t really have the ability to do that. That’s not to say that they don’t play an important role, but they don’t have the ability to change that backbone infrastructure which is where so much of this dance of light and chemistry happens in terms of latency. And we don’t want to get into all the geeky stuff, but it’s kind of fun. But, yes, that’s where that all happens.

1767 So it really comes down to the facilities‑based providers being able to have those networks, change those settings on the back end. How do we create more lanes of traffic on a single strand of fibre? And that’s not up to the service providers, it’s up to the facilities‑based providers.

1768 THE CHAIRPERSON: Thank you very much for that. I think the Vice‑Chair actually would like to get into a discussion about latency, but we’ll leave that for another...

1769 Really appreciate you being here with us. Perhaps we can turn things back over to you for any concluding remarks?

1770 MR. HOFLEY: Sure. Thank you, Madam Chair. Thank you for hearing us out on an issue which is important to internet competition, but that we recognize is tangential to your main hearing, focus of wholesale FTTP access.

1771 The MDU market has historically been a market that’s benefitted from fibre and sustainable facilities‑based competition, one in which independent ISPs have succeeded head‑to‑head against incumbents bringing innovation and user choice and much lower prices to MDU residents.

1772 That healthy competition in the MDU market has been central to independent ISP market share. In fact, we estimate that the MDU market represents on the order of the realistically achievable independent ISP market about 50 per cent, and one that should be growing.

1773 Unfortunately, we’re now losing ground in the MDUs because of a loophole in the current rules and incumbents locking up MDUs in bulk agreements at the developer level, which is massively changing the addressable market, massively. In as little as three years, a market that was relatively open to independent ISPs has become one where over half of new properties already have de facto exclusive deals with one of the incumbents before residents even move in.

1774 The marketplace for consumers is rapidly eroding, substituted by a marketplace of developers, none of which are end users.

1775 Conveniently, the cover charge to this exclusive club can only be afforded by deep‑pocket incumbents.

1776 Much has been said at this proceeding about how the lack of a well‑functioning wholesale access regime led to a decline in effective competition in the retail internet services market over the last four to five years.

1777 We urge you not to wait for further evidence of decline in internet service competition in the MDU market before acting to ensure that the MDU market remains open to effective competition. Time is of the essence if we’re to have a sustainable and competitive MDU market for both facilities‑based and service‑based independent ISPs alike.

1778 Thank you very much.

1779 THE CHAIRPERSON: Thank you very much for being here with us today.

1780 THE SECRETARY: Thank you. I will now invite Community Fibre Company to come to the presentation table.

1781 When you’re ready, please introduce yourself, and you may begin your presentation.

1782 Thank you.

Presentation

1783 MR. LAHAISE: First and foremost, my thanks to the Commission for the opportunity to present to you here in person today. Good afternoon. I am Benjamin LaHaise, the founder of Community Fibre Company, which is based in Lanark Highlands, a rural township roughly 100 kilometers away from the National Capital Region. Lanark Highlands is a land of rocks, hills and trees, which are the natural enemies of wireless signals and the reason that the Community Fibre Company came into being.

1784 The Community Fibre Company believes that a range of wholesale services, including aggregated FTTP services, are necessary inputs required to rebuild a functioning competitive telecommunications market in Canada. However, the implementation details of those services will dictate whether they succeed or fail to deliver on the promise of increased competition.

1785 When the dial‑up internet first became widely available in the 1990s it was the great equalizer. Those of us living in rural communities were on equal footing with our urban counterparts. The cost to send and receive data was no longer dominated by the $0.34/minute long distance charges that we had to pay to talk to our friends in the city in the 1980s.

1786 I had written an entire section about the history of ISPs in Ontario, but there simply is not enough time in 10 minutes to cover the subject. Instead, I can summarize it succinctly in the following way: historically, from the 1990s until the 2010s, it cost roughly $20,000 to start an ISP. Today, that cost is orders of magnitude higher due to the decline in affordability of wholesale services.

1787 Costs began to increase substantially in the 2010s after the introduction of capacity‑based billing began to drive up cost. A few years later then disaggregated broadband services came along. Under interim DBS rates, the bare minimum capital requirements for an ISP began to exceed $200,000 to service a single central office. Actual costs to cover the same territory as with the GAS and GAS‑FTTN services escalated to the hundreds of millions of dollars based on Bell’s estimated $150,000 per central office implementation cost for DBS, and that doesn’t include transport.

1788 Today, there is an urgent need for GAS‑FTTP to bring the startup cost for competitors back down to the more historic norm of $20,000. Quite simply, we need more competitors to come into being, and to make that happen we need to make it more affordable.

1789 Additionally, we need the wholesale tools for competitors to grow beyond that initial $20,000 of investment. This means improved access for all input components an ISP needs to grow. These inputs are: transport circuits; access networks; and, last‑mile networks.

1790 IP transit is omitted from the list of inputs above due to the fact that numerous transit providers are available in major cities that can be reached provided that affordable wholesale transport circuits are available.

1791 GAS‑FTTP, like GAS before it, blends all three inputs together into a single unified service. This means that a small ISP or carrier can use GAS‑FTTP as a substitute for transport, access and last‑mile network components where needed. This is necessary because of the fact that many smaller communities, especially Lanark Highlands, do not have access to competitive transport facilities. The only transport provider I can access in Lanark Highlands is Bell.

1792 Additionally, there are many gaps in FTTP coverage. Small ISPs can use GAS‑FTTP as a substitute for their own access networks. This is particularly helpful in the case of brownfield communities which are adjacent to greenfield FTTP deployments paid for by builders of new subdivisions, as is the case in quite a number of rural neighborhoods.

1793 Where it is uneconomic to deploy facilities, GAS‑FTTP can act as the last mile of last resort. The Competition Bureau’s reports on the limited mobility of broadband subscribers between providers demonstrates this need. This meshes with the Community Fibre Company’s experience that FTTP subscribers are incredibly sticky, making it difficult for the second provider in a market to break even initially. To build a subscriber base, brand recognition, and revenue, it is necessary to use wholesale services to grow an ISP’s total addressable market.

1794 Additionally, there has been a breakdown in growth options for ISPs over the past 20 years. The ladder of investment is missing several rungs. In the 1990s and 2000s, prior to the shift to fibre‑to‑the‑node technologies, small ISPs and carriers were able to migrate from dial‑up and wholesale DSL services to Limited Distance Data Service and then become CLECs and DSL service providers by co‑locating in central offices for direct access to unbundled local loops.

1795 Importantly, LDDS circuits enabled ISPs to offer dedicated always‑on services directly over a copper local loop leased from the incumbent without the high cost of mandated co‑location. This was a small, but important step for ISPs to ramp‑up investment in their own facilities.

1796 While LDDS circuits suffered from the many electrical noise‑related issues inherent in copper telephone networks, fibre does not. Fibre LDDS circuits will enable differentiated services by ISPs that are willing to invest in building their own points of presence closer to their customers. We can and should be able to offer affordable 100 Gbps internet access to Canadians, even if the incumbent is not willing to do so.

1797 Incumbent carriers are able to inflate costs for competitors by building expensive networks with large amounts of spare capacity. This can be seen today in the ongoing FTTP construction of Bell Canada’s FTTP network around Lanark County where many individual rural homes are being served by 4‑port multi‑service terminals. That is, there are 4 last‑mile fibres installed to service a single home, while the next home down the road is also served by its own 4‑port multi‑service terminal. Again, four dedicated fibres.

1798 Incumbents don’t care about these inflated costs, as their planning cares about the cost to operate the FTTP network over the next 30 years, not over the much more limited three‑year timespan that most ISPs have to live within.

1799 DBS’s failure was a direct result of inflated costs. Had wholesale DBS been priced such that competitors could have actually made money, it would have been more successful. Instead, we have been stuck with wholesale prices that are far above retail for the entire existence of DBS.

1800 Should GAS‑FTTP continue to set wholesale prices above retail, as is currently the case with the interim rates that are set to come into effect on May 7th, then GAS‑FTTP will fail to support competition

1801 In fact, if small carriers and ISPs were given access to the pre‑existing transport fibre between central offices, they could drive down the cost of transport. Using new, low‑cost 100 gigabit networking equipment with recently‑released 25 kilometre range optical modules, it is now possible to build an affordable 100 Gbps layer 2 network for a cost of less than $10,000 per central office.

1802 This compares favorably to the more than $2,000 per month cost of wholesale 10 Gb network access from the incumbent, which is at a fraction of the 10 Gb capacity of the access.

1803 Absent access to the underlying fibre, the only other option for the Commission to reign in the high prices of incumbent carriers would be to adopt an efficient carrier model for costing in place of the current Phase 2 costing methodology.

1804 Last, but not least, the Community Fibre Company’s greatest concern is the ongoing harm to the competitive market that is being caused by government subsidies being given to thelarge carriers. Specifically, Ontario’s Accelerated High‑Speed Internet Program is gifting incumbents like Bell Canada more than $5,800 per home. These subsidies make it impossible for a competitor to participate in those markets.

1805 It is depressing to think that any fibre built, rural fibre, built in Ontario in 2024 to service unserved rural homes by companies like the Community Fibre Company will be overbuilt by much larger competitors with government funds by the end of 2025.

1806 The Community Fibre Company strongly believes that fair and reasonable wholesale rates for access to the large carriers’ networks must take into account these subsidies that will never be duplicated for competitors.

1807 The Commission must ask the following questions. Why did none of the smaller competitors receive a single dollar from Infrastructure Ontario announcement on August 4th, 2022? How will these large subsidies distort the market for other carriers and ISPs?

1808 I’d like to deviate a bit here and react to a few comments that were mentioned earlier today. Like NCF raised, we are highly supportive of trying to avoid price increases. We have not increased prices, access prices, for our customers since 2017.

1809 We don’t do introductory price discounts. We feel that it is very misleading and unfair.

1810 Reacting to Xplornet, their mention of scale is at the heart of what I would like the Commission to consider. ISPs start locally. You’re trying to service the needs of your customers directly in your own community. You do it because there’s a need that’s not being met. And in Community Fibre’s case, we did that because there’s no internet where I was. Like, I would have had to put up a 120‑ft wireless tower to get a line of sight to the nearest Bell central office in McDonalds Corners.

1811 So there is a need to support competition everywhere from the small scale to the large sale needed by a company like Xplornet, which stars to become dominated by issues like access to support structures and rights of way.

1812 Reacting to Beanfield’s mentioning of the Rogers outage. It is important to note that the Rogers outage was a layer 2 and layer 3 outage. Those of us who use Rogers wavelengths for transport were not impacted by it.

1813 And this is where the distinction between access to the facility being the fibre versus the facility being the network is important to make. You can build resiliency in networks by giving access to the raw fibre, which is presently not really available outside of large cities where there’s competition for transport business.

1814 But if you only get access to more affordable layer 2 and layer 3 services and complex services like aggregated FTTP, you’re still vulnerable to outages in the carrier that are aside from physical outages caused by fibre cuts.

1815 This abbreviated presentation scratches but the surface of the complexity of the issues present in this proceeding.

1816 Thank you for your time and attention. I look forward to any questions you may have.

1817 THE CHAIRPERSON: Thank you very much to the Community Fibre Company for being here with us and for participating in the proceeding. We really appreciate hearing your views.

1818 I will turn things over to my colleague, Commissioner Naidoo, to start the questioning for the Commission.

1819 Thank you.

1820 COMMISSIONER NAIDOO: Mr. Lahaise, thank you very much for being here today, we appreciate it.

1821 You argued that the Commission should mandate new or different services such as fibre local loops, you had mentioned that in your intervention, to give facilities‑based providers more control over their network, equipment and costs. I just wanted to let you know that we’d heard you on that.

1822 However, you also indicate support for mandated aggregated FTTP services. And since the availability of such a service is really a key decision in this particular hearing, I’d like us to focus on that today.

1823 So I’m wondering if we could start with ‑‑ if you could briefly explain to us in what way is having access to an aggregated FTTP service might impact you and also other rural facilities‑based providers?

1824 MR. LAHAISE: So the biggest problem you have as a rural provider is today, it wasn’t so much the case 10 years ago, but the communities that unserved are starting to get more and more spread out. Incumbents like Bell have gone and substantially built the more urban centres.

1825 So you have locally in Lanark County towns like Almonte, Carleton Place, both have ‑‑ and Smiths Falls, have all had Bell FTTP builds essentially completed now. Lanark has been built, it has not been activated.

1826 Perth had WTC put in gigabit fibre several before Bell did. And it’s interesting, because in Perth Bell has some fibre that they’ve installed to pick‑up customers, but they haven’t built the whole town.

1827 So the challenge is the rural coverage is getting to be more and more spotty. And, as a small carrier, to me transport networks, transport fibre is a cost, it will always be a cost, an expense, a cost that you pay because you need it to do business. And it’s difficult to grow to the point where you can afford to build your own transport lengths.

1828 So out in Lanark Highlands virtually all of my customers pay $60 per month for their service. It’s delivered over fibre, but we’re limited in speeds because we’re limited by transport.

1829 Transport circuits from incumbents are based on the capacity, but they’re not based on the usage. And so what you saw with the DSL market in GAS and GAS‑FTTN, because the capacity and the usage is ‑‑ usage is aggregated over a larger scale.

1830 So your cost ‑‑ because your access cost for a DSL is only, what is it, $23 a month, plus a local loop, so you’re paying maybe $50 a month to go and get 50 megabit service next to a central office, even a small town. You can then go and you can incrementally add capacity. And I’ve done this in a few places where, like Lanark Highlands, where we’re limited, you can incrementally add capacity.

1831 You can’t do that when you have to buy a commercial term fibre port. If you want to offer 1 gigabit service your end users, you’re going to have to buy a 10 gigabit port from a carrier. Your access cost in a rural market is substantially more than it is in the urban market.

1832 And so the end result of having something like GAS‑FTTP, means that we will be able to use that and aggregate those ports over a larger area for the places that are otherwise uneconomic for us to get to.

1833 COMMISSIONER NAIDOO: Okay. Thank you for that. What measures or regulations do you think the Commission should put in place to incentivize small providers like you to continue to invest in networks?

1834 MR. LAHAISE: Easier access to support structures and rights of way. The support structures issue, I have to say I am slightly disappointed that we are two days less than a year from the decision that was put out last year, and we don’t have a tariff that’s in effect with the new rules.

1835 Even worse is here in Ontario most of the poles are owned by Hydro One, and the Commission doesn’t have jurisdiction. I know there was a study that was published I think back in 2019 that explained what sort of changes to the Telecommunications Act are needed to go and give the CRTC jurisdiction over poles owned by LDCs.

1836 I think that is an important question that needs to be considered, because the simple fact of the matter is that entities like the Ontario Energy Board don’t really consider telecom to be a concern that they need to factor in in their decisions and that they need to address.

1837 And so like going back to McDonalds Corners, simply because I know it well, there’s a two‑kilometre stretch I want to put a fibre link on. My cost for that is a few thousand dollars.

1838 When I talked to Hydro One about it 14 years ago, they wanted me to pay them to replace 10 poles on that run. So that short run, which should only cost a few thousand dollars to do, is now up in the $50,000 to $100,000 ballpark to get poles replaced.

1839 COMMISSIONER NAIDOO: In what ways do you think that aggregated FTTP service would help you to compete with other facilities‑based providers in the areas that you serve? And I think that the providers that operate in the area that you serve would include Bell, Rogers, and Xplore as well; right?

1840 MR. LAHAISE: So the way it is today, we have I think three customers that are not on our own facilities out of our pool of more than 500 customers. And the reality is that, yes, aggregated FTTP today would not have an effect on that. Our actual direct overlap with Bell and Bell fibre is minimal. We have gone for the more rural customers. We target neighbourhoods that are unserved because that is where the demand is. And so I don't think the service will make a difference for the customers we serve today, but it does mean that there are places.

1841 Like we had a customer in Carleton Place. We tried to get them hooked up to a Bell small business fibre connection. Bell wanted $9,200 to place a multi‑service terminal over one 60‑metre span. It was cheaper for me to pull seven kilometres of fibre than to pay Bell to connect a business to fibre when they had a entire subdivision right next to it that the builder had paid Bell and Rogers to put fibre into.

1842 So what it would do is it would open us up to being able to expand to some of these neighbourhoods that are on the edge of service territories that it would just cost too much for us to get to on our own.

1843 COMMISSIONER NAIDOO: Based on your opening remarks, I think that it's clear that you've been watching the hearing very closely, especially today. You had cited some of the things that you had heard just from the intervenors today. So to that end, I wanted to explore a little bit more.

1844 Xplore had noted, as you probably know, its intention to use wholesale access to compete in rural areas, which was a change from its original intervention. And I know that you haven't had a lot of time to actually put thought into this, but I just wanted to see if you had any thoughts on how that might affect your business.

1845 MR. LAHAISE: Inevitably, I will probably lose customers. A good chunk of our network ‑‑ we had one subdivision in Ashton already has been overbuilt by Bell. We'd put in service back in 2019, and we will now have to deal with more competitors offering more choice. The advantage is, because we are facilities‑based, we can set our own prices.

1846 That said, pricing by the incumbent for their fibre builds is highly suspect in my view, as I've tried to put on the record examples of the sort of pricing that is being offered to end‑users. Once you factor in bundled services, you can't compete. It's we've lost ‑‑ we've lost a handful of customers to bundles that are at prices that are impossible for us to ever, ever offer. The TV service we had been reselling, our margin on it was virtually nothing, like maybe five per cent after everything. And there was no way we could discount that TV service down to zero, as a company that's vertically integrated and owns a lot of the content that it sells. Yeah.

1847 COMMISSIONER NAIDOO: All right. Well, thank you very much. Those are all my questions, but I'm sure my fellow Commissioners have other questions as well.

1848 Madam Chair?

1849 THE CHAIRPERSON: Thank you. Thank you, Commissioner Naidoo.

1850 Let's go to Commissioner Desmond.

1851 COMMISSIONER DESMOND: Good afternoon. I have a question for you with respect to investment. And I'm sorry if maybe I missed your response earlier, but I just wanted to clarify if where the incumbents claim that if we were to have wholesale‑based competition that could in turn reduce their investment and their incentive to deploy networks, particularly in rural areas and particularly in Indigenous communities. So I'm wondering if you could maybe respond to that or expand on that a bit more.

1852 MR. LAHAISE: So the context I will paint is that of Ontario. And in Ontario, rural is going to be built because the province is paying for it. And no amount of whining by certain incumbents will change that because there is no way they will refuse to accept $483 million worth of subsidies. So if they say that they're not going to be building rural, what they mean is they are not going to be building fibre in the rural markets that other companies that got the AHSIP funds for those areas.

1853 That said, urban markets and markets where the incumbent has a competitor, they react strongly. They will do what they did to Community Fibre, which is when they saw that we reached out to a community and were going to do that ‑‑ and our first three big projects were complete failures because our permits were delayed and denied for 474 days by Bell on Ramsay Concession 8 in Mississippi Mills.

1854 Somehow, because of the delays by City of Ottawa and Hydro Ottawa, Bell got their permit to build the CCV subdivision of 160 homes, all million‑dollar homes, one week before us and were built. And because our engineering firm came up with a very complex, timely design for us to build, by the time we had done the initial strand construction on Easter weekend of 2018, Bell already 120 of the 160 homes hooked up.

1855 And the delay in that incidence was we'd reached out to Hydro Ottawa in October 2016, had met with City of Ottawa in January, paid City of Ottawa February of 2017, got our permit from Bell in May of 2017, waited then for City of Ottawa to get our MAA approved in August of 2017, waited another five months for Hydro Ottawa to decide that they weren't going to use their existing joint use agreement, and at the end of the whole process, no, we'll use the old one. And so that delayed our permits so long that Bell took that market.

1856 And then Bell did it again in Richmond. There was a minor defect in the design created by the engineers. Hydro Ottawa approved the design, because they owned the poles with: Fix this defect, write it on the plans. Bell rejected those plans for six more months while they built, served the customers, took all the customers. And we had to refund thousands and thousands of dollars worth of deposits.

1857 So when the incumbent encounters competition, they will compete. Where there is no competitive pressure, they will jack up prices.

1858 COMMISSIONER DESMOND: Okay, thank you.

1859 THE CHAIRPERSON: Maybe I can just ask one final question and then we will turn things back over to you for the final word. It sounds like you have been following along, as my colleague said, and certainly you heard what we heard today.

1860 We heard that ‑‑ twice, in fact ‑‑ that selling Internet services is akin to selling water in some ways. We heard that it's very difficult for companies to innovate, so wholesale providers to innovate, and that in fact you need to be essentially a facilities‑based provider or else you don't have the ability to kind of expand speed technology, et cetera. Can you just provide us with your views on that?

1861 MR. LAHAISE: Bandwidth is plentiful when you have access to fibre. Bandwidth is not plentiful when you have managed access to that fibre.

1862 So I'm a technical person. Most of my career has been in software development. I've done a lot of work on network protocols. I know protocols like PPPOE and L2TP inside and out because I've implemented them more than once.

1863 The bandwidth scarcity is largely artificial because if you have access to the fibre and you want to provide more bandwidth, well, change the optics and the electrical equipment you have on either end. You can light up another colour of light. You can put a dense wavelength division multiplexer on the fibre and get 96 channels that you could run each one at 100 gigabits if you had access to the raw fibre. But nobody wants to provide access to dark fibre anymore.

1864 Back in the late '90s and early 2000s, there was Hydro Ottawa Telecom down in Toronto when I was living in Toronto, and you could lease dark fibre from them for pennies per metre per month. It was the cheapest dark fibre ever. And what happened? The municipality was desperate for cash. They sold off the asset, and now you can only buy lit services on that.

1865 Right now, what is happening with the deployment of fibre is that this is equivalent to the changes that happened back in the 1980s when rurally we were migrating largely from party lines to private lines. So lots of new copper was being deployed because that was the advanced thing at the time. Fibre didn't exist. Today, lots of fibre is being deployed. The incumbents and those being subsidized to built in Ontario are building large scalable fibre networks.

1866 We should be able to take advantage of that because the deal is the public gives the telecoms use of public rights‑of‑way to give back to the public use of telecommunication service because we think, as a country, that this is beneficial for Canadians. So we should be able to use those telecom assets to the greatest degree possible and to do things like have multiple carriers use the same transport fibres for different layer‑two and layer‑three networks so that they don't have the same outage scenario as Rogers did. But Bell has had layer two outages ‑‑ on a much smaller scale, but they have had them as well. It's just it hasn't been noticed as much because their network is so much bigger and has so much more diversity.

1867 We should be able to make use of all telecom assets to the greatest degree possible and beneficial for all Canadians.

1868 THE CHAIRPERSON: Okay, thank you very much for that. We will turn things back over to you for any final words.

1869 MR. LAHAISE: I think a lot of what I'd hoped to say got touched upon today. I do think there is a great need to look beyond just the aggregated FTTP. Telecom is complicated. There is no one‑size‑fits‑all solution for all problems. It's been sad to see what has happened with the loss of wholesalers in the last two years. I think that's a disadvantage for Canadians. I personally have experienced ‑‑ I've spent hours and hours on the phone with the incumbent trying to get things fixed. I've even helped customers go and renegotiate their contracts.

1870 There's room for improved competition by service providers to do things better and to meet the needs of their customers. So whatever the Commission can do to support that, I'm looking forward to see what form that takes. Thank you.

1871 THE CHAIRPERSON: Thank you very much for sharing your expertise and your perspectives with us today.

1872 THE SECRETARY: Thank you. We will take a short break and resume at 2:25. Thank you.

‑‑‑ Upon recessing at 2:13 p.m.

‑‑‑ Upon resuming at 2:25 p.m. /

1873 THE SECRETARY: We will now hear the presentation of Saskatchewan Telecommunications. Please introduce yourself and your colleagues and you may begin your presentation. Thank you.

Presentation

1874 MS. GAVEL: Thank you.

1875 Madam Chair, Commissioners, good afternoon. I'm Charlene Gavel, president and CEO of SaskTel. Today with me are Doug Kosloski, SaskTel's VP, Regulatory Affairs, and general counsel; Andrew McKay from our Regulatory Affairs group; and Jamie Patterson, regulatory counsel.

1876 We're here to talk about SaskTel's Fibre to the Prem network, the challenges we face expanding our network, and why mandating wholesale access to our fibre is not in the best interests of the people of Saskatchewan. SaskTel has grave concerns with the potential expansion of the mandated high speed access regime because it will challenge SaskTel's ability to fulfill our mandate, which is to provide high quality, stable, widely available service to the people of our province in an economically feasible manner.

1877 SaskTel has invested more in Saskatchewan networks than anyone else. Since we began our Fibre to the Prem rollout, we've spent over $800 million to build a world‑class network for the people and businesses of our province. And we're not done yet. SaskTel has invested so that the people of Saskatchewan ‑‑ whether they live in urban or rural areas ‑‑ can receive reliable, affordable, high quality broadband access service. Our shareholder, the Province of Saskatchewan, strongly supports that mandate. SaskTel network builds deliver on the objectives of both section 7(b) of the Telecommunications Act and the most recent Policy Direction to the CRTC.

1878 SaskTel has invested heavily in wireline infrastructure, in many instances with negative business cases. The idea that SaskTel should make existing and future facilities available to competitors is exasperating. Losing exclusive control over who uses the network that we built and how those users pay for this access affects our ability to justify future investments.

1879 The proposed HSA regime not only compromises SaskTel's ability to recover the money we've already spent, it also risks network expansion that is currently planned and other projects that we might undertake in the future. The proposed HSA regime is a direct challenge to SaskTel's ability to sustainably provide Saskatchewan with reliable, affordable, and high quality Internet services.

1880 What's worse is that the proposed HSA regime benefits the companies who have avoided making economically challenging network investments. It's companies like SaskTel who wind up harmed despite us being the ideal of what the Government of Canada says it wants, which is the building of sustainable network deployments to connect as many people as possible. Simply put, the HSA regime punishes the network builder and rewards third parties who have taken no financial risk. The harm is then magnified by a network builder having no control over the rate charged for mandated access, because rates determined by the Commission won't reflect real‑world costs.

1881 Taken together, the impacts of the HSA regime will necessarily reduce SaskTel's investments in network expansion.

1882 To understand why the proposed HSA regime is so concerning, you need to understand who SaskTel is and why we continue to exist as the largest government‑owned telecom in North America. Newfoundland and Labrador is the only province with a population density lower than Saskatchewan. Ontario has 13 times the population in a territory less than twice our province's size. Saskatchewan's 1.2 million people are widely dispersed, with two cities having populations of about a quarter million each; only 10 more cities with a population of more than 10,000; 163,000 square kilometres of farmland; and hundreds of widely dispersed communities with less than 1,000 people as well as a north that is half the territory of the province yet still thinly populated.

1883 The economies of scale and the per‑customer costs to serve that the Big Three enjoy simply aren't present in Saskatchewan. Yet SaskTel's mandate is to serve as many of these widely dispersed people as we can.  For instance, we have recently announced network expansion plans that will provide fibre service to some communities with less than 200 houses.  Our mandate is supported by the current regulatory environment and will be harmed if that environment changes, meaning fewer communities of that size can be served.

1884 We're not arguing that other Canadian providers have it easy, but the percentage of their customers in rural and remote areas just does not compare to Saskatchewan's reality. This is because of our geography and population and because other providers are primarily profit driven and won't serve remote locations unless they can do so profitably. They simply don't share SaskTel's reason for existing.

1885 As a Crown corporation, SaskTel's primary mandate is to serve as many of Saskatchewan's people as we can in an economically feasible manner. While our shareholder absolutely has given us the mandate to provide high quality, stable, and widely available service, they also require a financial return. While we build and upgrade as much as possible, sometimes with negative business cases, our public policy mandate is not absolute and it must be balanced with financial sustainability. Anything that harms the business case for network upgrades will hurt our ability to maintain, improve, and expand service. It will also hinder the CRTC's and the federal government's goal of expanding coverage.

1886 If the Commission's primary goal is to address competition, there is no need for intervention in Saskatchewan because SaskTel already has a facilities‑based competitor for about 92 per cent of the households we're able to serve. The other households we do serve that don't have competition are in true rural and remote areas.

1887 Among the facilities‑based providers, Shaw, who is now owned by Rogers, is the cable provider in Saskatoon and four of the eight other major communities in Saskatchewan among other places. Access Communications is the cable provider in Regina, in the remainder of the other major communities, and in over 200 small or mid‑sized towns.

1888 Cable providers are fierce competitors who currently invest to upgrade their networks and offer competitive prices. They continue to improve their service in many smaller centres, sometimes using transport obtained from SaskTel. Other fibre providers and some fixed wireless providers do the same in other areas. Wholesale‑dependent competitors have access to copper‑based facilities, many capable of providing broadband speeds, which they can use to compete in many other areas of the province.

1889 SaskTel has competition from at least one of these providers in every community but one which we serve with Fibre to the Prem, and our drive to make investments has been competition. Most communities with more than 600 people have at least two facilities‑based providers, and facilities‑based providers are strong competitors. Saskatchewan has the competition its residents need. What our residents really need is more connectivity.

1890 Also consider that wholesale‑dependent competitors provide no network diversity. Facilities‑based competitors have their own networks, allowing them to control their own costs and product pricing through their own investment decisions and diversified services. Perhaps as important as competition, having multiple facilities‑based network providers helps the Commission support the federal government's stated desire for more network diversity and resilience.

1891 Facilities‑based providers also advance the federal government's objective of having 100 per cent of Canadians connected to the Internet by 2030. Conversely, an HSA regime will restrict the expansion of networks and reduce facility investments necessary to support network diversity and resilience over time. If there is truly a desire for Canadian networks to be resilient and widely available, the Commission should not impose an HSA regime.

1892 One important note before moving on to the competition question. If the Commission does implement an HSA regime, then SaskTel agrees with Cogeco and Quebecor that the three largest national providers shouldn't be eligible to purchase any mandated wholesale services from smaller providers. In fact, we don't think any providers who are currently significantly facilities‑based should be eligible. Granting this eligibility would further restrict network expansion and especially the diversity of networks.

1893 Before concluding, we must address the irrational argument that network builders have already recovered their investment, which, it is argued, would somehow make it okay to then impose an HSA regime. Parties have constructed this cost recovery argument as if, somehow, it creates a logical bridge for them to gain access to infrastructure they didn't build. A few of these parties have even gone so far as to suggest that if network builders have been recovering investment for seven years, such networks should then be open to use by other providers.

1894 These arguments are ludicrous. The build‑out of fibre to the prem networks is not complete, and many network investments that have recently been completed have been in place for less than seven years. Some network investment areas are finished, some are under construction, and yet more areas of our province with no specific network build plans as of yet, but we must consider investing in them in the future. Even in areas where Fibre to the Prem is now available, we must continue to maintain and upgrade networks and supporting infrastructure. Many of these individual investments have payback periods of well over seven years, and as we deploy into more remote areas, the required payback gets longer and longer. While certain urban areas have had fibre service deployed for longer periods, those areas already have strong price and facilities‑based competition.

1895 In addition, the idea that just because a facilities provider has recovered a network investment, that network should now be open to all is misguided and self‑serving. Companies that place capital at risk should be allowed to recover their investment and continue relying on the revenue generated from the networks they build to support current and future operations. There is no good reason why network builders should be allowed to recover only a certain amount and then lose control over a network that they took the risk to build. The absurdity of this argument means that network builders cannot use revenues to build future networks, the very networks that governments desire.

1896 An HSA regime designed to address the lack of competition in major Eastern Canadian metro areas is not fit for deployment in Saskatchewan as it would hurt SaskTel’s ability to extend its infrastructure investments in more rural and remote areas.

1897 To sum up, mandating wholesale fibre‑to‑the‑prem access in Saskatchewan would be a mistake that would harm the quality and the speed of wireline networks in our province, reduce the number of people SaskTel can connect and negatively affect our economic sustainability.

1898 As we stated earlier, SaskTel has spent over $800 million expanding fibre‑to‑the‑prem facilities. We need to recover this investment. Networks are not ‘all built’ as some have argued, and the argument that cost recovery is near complete is untrue, self‑serving and irrelevant. Expanding SaskTel’s fantastic network even further, which all levels of government are clamouring for, will cost us hundreds of millions more. Mandating wholesale access will challenge future expansion plans for us and for others. Removing SaskTel’s ability to set prices would mean each new expansion of network subject to the HSA regime would have to be tested against a price we didn’t set.

1899 The proposed HSA regime will severely challenge SaskTel’s ability to fulfill our mandate to connect the Province of Saskatchewan. This means that not only are Saskatchewan people harmed but that the federal government’s stated objective of making sure that all Canadians have access to high‑quality services will be much more unattainable. Additionally, mandating HSA access will reduce network diversity and resilience because it will reduce incentives for any company to build additional facilities and may incent other facilities‑based providers to abandon existing facilities.

1900 The Policy Direction says you must contemplate the HSA regime, but it does not say you must implement it in the same manner everywhere. SaskTel has demonstrated that implementation of the HSA regime in Saskatchewan would have serious detrimental consequences and reduce the number of people connected. Placing barriers in front of connecting more people for the specific purpose of increasing competition ‑‑ and we’ve shown that Saskatchewan has strong competition ‑‑ seems counterproductive.

1901 Just as SaskTel must balance public policy mandates with financial objectives, the Policy Direction requires you to balance the perceived need for wholesale competition with continued network expansion and network redundancy. The proposed HSA regime counteracts these other important policies and objectives like network resiliency and service expansion. It is not sound policy. Respectfully, the Commission’s true focus should be on coverage and service levels for communities, not developing a regulatory crutch for resellers that offer no technology improvements or service area expansion.

1902 The Commission can’t simply treat Saskatchewan as collateral damage in its effort to address issues arising in other parts of the country as doing so will only hurt the residents of Saskatchewan. We respectfully ask you to exclude Saskatchewan from the implementation of any HSA regime.

1903 Madam Chair, Commissioners, thank you for the opportunity to appear. We await your questions.

1904 THE CHAIRPERSON: Thank you very much. Thank you for your opening remarks and for being here with us today.

1905 The first question that I really wanted to ask you about you've touched on quite a bit in your opening remarks and that's really about what makes Saskatchewan different or unique. Maybe I will just throw it out there in a bit of a different way to see if there's anything that you would like to add.

1906 What are the factors that you think make Saskatchewan, SaskTel unique vis‑à‑vis other parts of the country as it comes to competition and internet pricing?

1907 MS. GAVEL: Thank you for the question.

1908 Yes, we are very unique. Our province ‑‑ and I explained a bit about the geography of our province ‑‑ we're a big land mass with few people, so we are really truly rural and remote. Two big centres we call them, nine other sort of major centres, and other than that we get to small towns. And what makes SaskTel and Saskatchewan unique is that as a government‑owned or as a Crown corporation in Saskatchewan, our objective really is to get to all corners of the province with high‑speed connectivity, and, frankly, we're doing a really good job of that already.

1909 As I said, we're going to be deploying fibre in communities as small as 200 people already and those communities are all over the place. It's not like they're along a corridor. We're really going, like, throughout the entire province.

1910 And that connectivity is important to our government for so many reasons. It's important for economic development, it's important for ‑‑ we all know why connectivity is important, but we really are taking it to heart in terms of getting to those small places. And, you know, having a public policy mandate to do that is helpful, but it doesn't come at all cost. So, you know, we've made great strides in doing that and we will continue to monitor both business cases and how that looks.

1911 MR. KOSLOSKI: Madam Chair, I would just add that we've had Commissioners out to Saskatchewan before and they were surprised at how remote our rural is. We call it rural, but for other parts of Canada, it is remote. You step outside the boundaries of Regina and Saskatoon and you're in farm fields, and the next community is 10 to 20 kilometres away, and it's multiplied in that manner, and the distance between communities is vast. We don't have communities that are a kilometre or two kilometres apart. We really are remote and sparsely populated, and reaching those communities is a huge expense and it's a very expensive proposition to build those networks.

1912 MR. PATTERSON: Commissioner, I would just add before we close on this one that there is a data point in Charlene's speech that I think was pretty important: 92 percent of the households that we pass we have competition at already and that's facilities‑based competition. I think the interesting twist to place on that is that until Rogers bought Shaw, that wasn't including any of the big three. So we've worked hard to expand that coverage across our province.

1913 THE CHAIRPERSON: Thank you very much for that.

1914 With respect to prices, in your submissions you talk about how prices are falling ‑‑ or consumers are paying less on a per megabyte basis than they were before. But then we've also seen on the record, and I'm sure you've seen this, and OpenMedia was here yesterday. They did a survey and they put that on the record, saying that 78 percent of people think that their internet is less affordable now than it was in 2019.

1915 So, can you just maybe help us reconcile the fact that we've heard from some intervenors that the price per is coming down, but at the same time internet is becoming less and less affordable?

1916 MS. GAVEL: Sure, I'll start. You know, there's lot of data and we can all find data to support things, but, you know, I'll go back to something I read from Stats Canada just recently. I believe it was that internet prices have fallen by 8 percent over the last year, while the price of other things, of general inflation has been 4 percent. So, you know, we can all find different data points.

1917 We do have lots of different price points for our internet packages and I would say that, you know, given the competition we have, we can say that prices have gone up, but I think competition is really keeping prices in check. And we have very, very strong competition in Saskatchewan.

1918 I would say that as well, you know, consumers continue to need higher speeds and that is something that we need to continue to invest in. As consumers have more connected devices in their home, are doing more things on the internet, higher speeds are required and that's an investment that's required by the providers to ensure that that is provided to those consumers.

1919 So, you know, when we talk about prices, we've got many different price points and we certainly are conscious as well of ensuring that there are low cost options for consumers that need those. And we have several different packages in that regard. We have special prices for students. For $50 they get 150 megabits per second. We have other internet prices where, you know, for low‑income families and seniors, very affordable pricing.

1920 So, you know, there's lots of different ways to look at this, but I think that although some would say prices have gone up, I think there's lots of supporting information to say that competition is strong, keeping prices down, and that there are lots of affordable options for sectors of our province.

1921 THE CHAIRPERSON: Thank you for that.

1922 I have another question that kind of helps us reconcile. Your intervention says that wholesale‑based competitors can only operate because of, and I quote, “artificially low wholesale rates”, but at the same time we've had parties come before us and show us situations where the incumbents are selling internet plans at prices that are less than those wholesale rates. So I'm wondering if you can help us reconcile those two perspectives.

1923 MS. GAVEL: I'll start but we have some other experts that are well versed in what we've submitted.

1924 It's expensive to build networks. So, when we look at the cost of our network or what the wholesale cost that was submitted was, there's lots that goes into that and, you know, we performed the costing that was requested. At different times there's different levels of competition and the prices are across our province consistent.

1925 So, I would say that, you know, pricing is complex, but I'm going to pass it over to Andrew to speak more about what was submitted in that regard.

1926 MR. McKAY: Thank you.

1927 There may be cases when proposed wholesale rates appear to be higher than retail rates, certainly not with our current DSL service, but with the fibre rates that may look that way. You have to be careful to compare the one wholesale rate which doesn't vary per speed against the appropriate retail rate.

1928 We have a range of retail rates that many would be higher than the wholesale rate. Perhaps one would be lower. Often, we would hope that our customers come to us at the lower rates and move up as they see the value and therefore we would actually gain more revenue by taking that approach. And we think our competitors could also take that approach if they wanted to, if they appeared. At the end of the day, if we follow the costing model and come up with the cost, we would like to recover that.

1929 THE CHAIRPERSON: Maybe I can put to you something that we heard earlier today from Eastlink, which was that if we get the costing right, nothing else matters. So, would you agree with that, that you would be ambivalent between wholesale and retail if the costing is right?

1930 MS. GAVEL: We would say that facilities‑based competition investment is the most important thing. So, for wholesalers to buy what we've already put in the ground and what we already have is just training customers. What's really important to us is that more customers in our province get connectivity and that's going to require facilities‑based investment within the province to get those networks built out further to the areas that don't have that connectivity. It's also going to encourage economic development, it's going to encourage investment in our province, it's going to encourage innovation and it's also going to encourage ensure that we are a very connected province. So, I would say that all these things are important, as well as the network resiliency that's required and that's important to the government and us.

1931 So, although getting the price right, I suppose, if this goes ahead is important, we don't agree that this should be mandated in Saskatchewan because of all the reasons we talked about, us being different and the fact that the really important thing is, again, getting that connectivity farther out to our residents, and that's not going to happen with this regime.

1932 MR. KOSLOSKI: I would just add to that that if you're inclined to impose the regime on Saskatchewan that you recognize that there's a cost difference regionally across Canada. The costs are different and in Saskatchewan that's more important because it is a very expensive place to deploy a network.

1933 THE CHAIRPERSON: Thank you very much for that.

1934 Maybe moving to limits on a wholesale access regime. You said in your submissions that wholesale mandates should not apply in areas where there is only one fibre or cable network and my understanding is that because those areas are quite challenging in terms of deployment, but those might also be the areas where consumers would be most concerned about not having sufficient choice. And again, we've seen on the public record a lot of concern around choice and, again, what I would describe as sort of frustration on the part of some consumers saying they have no choice.

1935 So, would these not be some of the areas that we may want to see another internet provider?

1936 MR. PATTERSON: I think what SaskTel has seen is that, you know, when we take service to a community that hasn't had it before, we improve service there, they're delighted to have our service. You know, they're familiar with SaskTel. We're pretty good at customer service, we think, and we haven't had a lot of issues there.

1937 I think the other thing to keep in mind is that the price point is the same there as it is across the rest of the province. So, if we're the only provider in that market, any speed above 10 megabits per second, the price is the same whether it's Regina or the smallest town in the province.

1938 THE CHAIRPERSON: Okay. Thank you for that.

1939 Can you talk to us a little bit about the difference between deploying fibre in urban areas as compared to rural and remote areas, the areas that you serve?

1940 MS. GAVEL: Well, it comes down to economies of scale essentially. So, when we're deploying in the larger areas, when we look at how many homes there are to serve and businesses, on a per customer basis it's not as expensive. As we get into the more remote and rural areas, when we look at sort of the cost per home passed or the cost per home served, as we get more and more rural and remote, it becomes more and more expensive for lots of reasons. There's the base infrastructure that's needed, not just the fibre that goes to each home. So, as we look at that and the additional transport and the additional work to get that network built in the smaller areas, the costs go up, and, you know, as we get to the smaller and smaller places, they go up significantly. So, it's really, again, the geography of our province and the density of the population.

1941 THE CHAIRPERSON: Thank you for that.

1942 If I can just ask a follow‑up question then. So, how would a wholesale mandate affect your decision to build fibre in more urban areas where it might be cheaper to deploy versus rural and remote areas?

1943 MS. GAVEL: We certainly are going to more rural and remote areas. I've said before that's important to us and that's important to our government, but not at all cost. We need to continue to be a financially sustainable company to continue to invest in the upkeep of that network and all the things that go with that.

1944 So, although we have got into small communities, we need to consider what the costs are, what the payback is and what the business case looks like going forward. So, assessing what that looks like in the face of a potential HSA regime, I can't say exactly what that will mean, but we will need to consider that in light of maintaining financial sustainability.

1945 THE CHAIRPERSON: Okay, thank you for that.

1946 And just continuing on the theme of investment, we've heard and we've seen this throughout the proceeding, it's on the record, that obviously networks are expensive to build, to operate and to maintain. I'm wondering if you can talk to us a little bit more about that. We heard about some of that today in terms of the ongoing cost.

1947 Can you just talk to us a little bit about that? I then have a follow‑up question on investment.

1948 MS. GAVEL: Absolutely, they are very expensive to build and maintain, and, as we have said, more expensive in Saskatchewan for reasons of our population density and the geography that we cover.

1949 So, not only is it just putting the fibre in the ground or putting the fibre on the poles at the start, it's about the upkeep of that, it's about maintaining a network that's resilient, it's about monitoring that. There's so many more things that go into it. It's about selling it, it's about ensuring that it's reliable and resilient. You know, there's a lot of capital costs, but there's a lot of ongoing costs that are necessary to keep that network going as well.

1950 And again, I'll just go back to the uniqueness of Saskatchewan, different when you've got a few metropolitan areas that are very big versus a network that's throughout the province. We often talk about when one of our technicians goes out to an area to fix something, it's hours and hours and hours of windshield time because of the ground that they need to cover, the highways that they need to go down. So even those kinds of expenses are higher for SaskTel than they would be for others. Again, it's how widespread our population is and how remote and rural our towns are that contribute to the greater expense in Saskatchewan, particularly for SaskTel.

1951 THE CHAIRPERSON: Okay, thank you for that.

1952 You have said in your submissions that a wholesale regime should not be mandated until you've recouped your fibre investments. Can you help us understand the implications of that? Because we've heard that it can take decades to pay back fibre investments. So, is your view that consumers should not be able to access a wholesale‑based provider until after you've recouped your investments?

1953 MS. GAVEL: I think the recouping of investments is sort of a tricky question. We have done lots of investments and each investment is a little bit different and based on different assumptions and in different areas of the province. So, you know, we do need to ensure that we are operating in a sustainable way and able to pay for what we've put in the ground and what we're operating.

1954 So, when you talk about consumers getting access to a wholesale provider, our consumers have choice with the competition that we have from facilities‑based providers. If it's just about consumers having choice and ensuring that the rates are fair, I think that's already covered in Saskatchewan, as we've talked about. We've got very strong competition with two facilities‑based providers. In 92 percent of the households that we are at, there's competition already, and we don't do things like charge more in certain areas if there's no competition.

1955 So, if it's to regulate something like that, you know, that's not necessary in our province. I think we are doing well in that regard and I think our consumers and our customers are well taken care of in that regard, and I don't think wholesale access will add to that in any way. In fact, it will just, you know, create that disincentive for more facilities‑based investment and more network resiliency. That's what is really required in our province.

1956 THE CHAIRPERSON: Thank you for that.

1957 Wholesale rates do include a markup designed to help pay off network investments. So, would a revenue stream mean that we should be able to introduce a wholesale regime more quickly?

1958 MR. McKAY: So, a revenue stream here, you mean if we get sufficient revenue from our wholesale service?

1959 THE CHAIRPERSON: That's right, that a component of that is the investment that you've made. So, you would get revenue for this use of wholesale.

1960 MR. McKAY: Right. So, we would probably not consider that a 30 percent markup on a Phase 2 cost would be a sufficient markup to result in something like that. Is there some stream at which it would be good for us to invest anyways? Sure there is. Do we believe that would be the resulting rate? We're not confident that it would be.

1961 And we think ‑‑ the other item that we've talked about somewhat but maybe not brought up as much is it's not just us that's impacted. There's other providers, other facilities‑based providers in the province, and if they have access to our network maybe they'll stop building, and if they infer that some will stop building, some will change their business plans and adopt a wholesale‑dependent plan instead, and then you'll have less diversity and you'll have less expansion.

1962 THE CHAIRPERSON: Okay, thank you for that. So, we've heard the view that incumbents should not be allowed to access wholesale services. What effect would it have on SaskTel and would there be a difference if another incumbent started selling services in your territory? Would it matter if it was somebody who was in‑territory versus out of territory?

1963 MS. GAVEL: So, I think there are two questions there. So first we would, you know, encourage more facilities‑based investment in our province. So we would hope that would encourage, you know, more connectivity for all of our customers, rural and remote, and throughout the province. We would encourage that ‑‑ you know, that resiliency is important.

1964 So, if someone else is investing, that's good, and how would that affect us? You know, we would ‑‑ we think that our investment is important and we'll continue evaluate that on an ongoing basis.

1965 You know, our mandate is to provide services to the people of Saskatchewan and that's what we intend to continue doing.

1966 MR. PATTERSON: Madam Chair, I think the other thing to take into account here is ‑‑ I'm wondering if you're asking about ‑‑ well, what if one of the Big Three were to come in and use your networks to provide service to your customers?

1967 Yeah, that would be a real problem, right? I mean, they've chosen not to build in the province of Saskatchewan for a reason, because it's expensive to do that, here. And so, for them to come and be able to use our network at an artificial rate, that would be very frustrating for us. And as Bragg shared with you this morning, it would be very challenging for us to work with, especially with them riding on our high‑quality network.

1968 It's not just the Big Three, though. I mean, you asked the question in such a way as ‑‑ like, should the reseller have a nexus to the province of Saskatchewan?

1969 And yeah, we do think they should, because the problem here is if you would bring in a third‑party reseller that has no nexus to the province of Saskatchewan and they're just extracting value from a network that they didn't build, they're not adding any innovation. They're not adding any investment. They're not adding any of that network resiliency that Charlene was talking about.

1970 And then, if you have local providers that get access to our network, they're going to be incented to stop building their networks, stop innovating for their networks. If you go backwards in time a little bit, fibre didn't always exist. SaskTel had their DSL network and the cable cos had a faster alternative.

1971 SaskTel had to make the decision to go and invest that hundreds of millions of dollars to improve the product that it could provide to the people of the province of Saskatchewan. It wasn't a cheaper, easy choice, and we made it a long time ago, and we've been following through on that.

1972 And so, for us to continue to do that, for us to continue to innovate, we have to have the revenue that we generate from our network, to expand that network for other people in our province and sustain it into the future.

1973 So, there's reasons at each tier, there, that I think it's really problematic to introduce external access to our network.

1974 THE CHAIRPERSON: Thank you for that. Maybe just a follow‑up question that I have, one last question and I will turn things over to the Vice‑Chair.

1975 So would the effect be different, in SaskTel's view, if we're talking about an incumbent from outside of territory accessing your network versus, let's say, Rogers or Access?

1976 MR. PATTERSON: Sorry, an incumbent from outside of our territory would be Rogers, and Access is from inside our territory. Could you rephrase the question? I don't think I quite got it exactly.

1977 THE CHAIRPERSON: Does it change your view at all ‑‑ so, if somebody is coming in ‑‑ if an incumbent is coming in from outside of territory, who doesn't operate in Saskatchewan, then coming in to access your network, versus somebody who's already operating in Saskatchewan, does that make any difference to you, in terms of the effect of that access?

1978 MR. KOSLOSKI: So, I would approach your question in this manner. We have two substantially large competitors in the cablecos. This whole regime not only affects ‑‑ potentially affects SaskTel, because we're the fibre provider, but it affects them as well, because they will limit their network investment if they're allowed to use someone else's network.

1979 I would suggest that if they are substantial enough ‑‑ on which I argue they are ‑‑ they not be given access to our network.

1980 There are other providers in the province that ‑‑ they are smaller, they are fibre ‑‑ they're starting to deploy fibre in parts of the province, and they're very regional in the province, and I would suggest that a regime like this would also affect them as well. Even if you provided them access to our network, it starts to go down the road of them changing their business plans. We heard that from Xplore today, mid‑stream they are reconsidering their business plan.

1981 We would have, I think, the unintended consequence of these companies going out and trying to provide connectivity to the very remote households in our province, starting to look at whether they need to do that and then either abandoning their network or stopping any future network builds, or in the case of any new entrance to the market, not making any investment at the outset.

1982 And so, I just ask that you have that in mind of these unintended consequences that could result from that.

1983 THE CHAIRPERSON: Okay. Thank you for that answer. I just have one final question.

1984 If we were to mandate aggregated FTTP access ‑‑ you've asked for twelve months to make it available and I'm just wondering if you could talk to us about what would need to happen within those twelve months?

1985 MR. McKAY: Well, we would have to develop the service. We would have to put in the systems required. We would have to ‑‑ with our proposed service ‑‑ which we don't think should be mandated ‑‑ but if it was, there's equipment that we'd have to order and the time lag on that is substantial. It would take time.

1986 We would have to make changes at all of our serving fibre offices. Again, it's time.

1987 THE CHAIRPERSON: Thank you very much. Thank you for answering my many questions. I will turn things over to the Vice‑Chair.

1988 VICE‑CHAIRPERSON SCOTT: Thank you. I've got fewer.

1989 So, we had a number of interveners already express the challenge of us getting the rates correct, but you went a step further and were pretty clear, saying because rates determined by the Commission won't reflect real work, real cost, you were pretty definitive there.

1990 Is that a Saskatchewan‑specific phenomenon? Is there something with the architecture of our costing that doesn't work in Saskatchewan? Or is there something fundamental about our architecture of our costing method that applies across the board?

1991 MR. McKAY: So I think there's a fundamental tension between any company determining what they believe their network costs, and a regulator trying to ensure that they believe that cost is reasonable. And certainly, in ‑‑ I would say in the past, but to this day we see overrides put in on certain fill factors, for instance, or we must assume a certain negative inflation rate on certain equipment that we may not agree with.

1992 And I understand why that's done, but it does result in, often, prices which we might not agree were correct. And it's not specific to us. Everyone will complain, from both sides.

1993 VICE‑CHAIRPERSON SCOTT: Okay.

1994 MR. PATTERSON: I think the final point to wrap up what Andrew is saying there is, our only data point is what we've seen set for Eastern Canada. It's not close. I mean, there's not much more to say to it than that, right? That doesn't cover SaskTel's cost to operate its network.

1995 VICE‑CHAIRPERSON SCOTT: Okay, so ‑‑ and I know that SaskTel would be a good actor but can you see a scenario in which the Commission would be required to push back on costs that are submitted to us? Or is the expectation that we would take at face value the company's costs and not provide a challenge function?

1996 MR. McKAY: That has not been our experience to date. We agree that there is a challenge function and we try to step up to it.

1997 VICE‑CHAIRPERSON SCOTT: Thanks. The other thing I wanted to ask about, because sometimes Canadians do surprise me and I ‑‑ we had a hearing in the Far North ‑‑ or in Whitehorse about the Far North, which also has high costs.

1998 And there, I did expect to hear a lot about prioritization of coverage and network quality. Even in the Far North we heard a lot of voices talking about the importance of choice.

1999 So, you spoke about quality and coverage being preeminent. Do you have evidence that you could get on the record showing that the people of Saskatchewan feel the same way? So, that they're satisfied with the choice between two service providers, and that there isn't a strong interest in seeing greater choice?

2000 MR. PATTERSON: I'd like to take that question in a slightly different direction, if I might.

2001 You know, I think you've asked us for essentially an undertaking, but what SaskTel gets is phone calls from the Minister's Office, right? So if a customer is dissatisfied with the level of service that we have in that area, the Minister phones, and we always answer, right?

2002 So, it's not directly answering your question, I guess, but we're constantly working to expand our network, constantly working to expand the service that we provide, and in doing so we think we do a pretty great job of covering the province of Saskatchewan. And given our market share and the work that we do to maintain that, we think we're doing okay.

2003 Now, if you were to hear that SaskTel was horrible at that, maybe you would need to take a second look, but we don't think that's there right now. Our CCTS complaints are amongst the lowest in Canada and they're far lower than they should be, given our fairly minor market share.

2004 VICE‑CHAIRPERSON SCOTT: Okay. If that's what's available, I guess that's what's available. So, there's no survey work, no ‑‑ there's nothing? No research that you’re aware of that asks the people of Saskatchewan whether they're satisfied with the level of choice. It's just the market share of the two providers that show that people are satisfied with the choice of two providers?

2005 MR. KOSLOSKI: Well, there's three providers. There's us and the other two cable providers.

2006 There's also fixed wireless providers in every community. Satellite is the new innovative technology that is out there. And so, there's lots of choice for consumers out there, and they use their feet when they want something different.

2007 What's unique is that they can choose their technology. A wholesale provider doesn't give you that choice. Here, you're stuck with the technology.

2008 And Jamie's right, we ‑‑ if there was a problem, we'd hear about it, and we don't have any data or surveys, or anything of that nature looking at are you happy with choice or do you want more choice. We don't have anything, and I'm not aware of anything of that nature.

2009 VICE‑CHAIRPERSON SCOTT: Okay, thank you. That's all.

2010 THE CHAIRPERSON: Okay, thank you, Vice‑Chair. It's a lot of questions. I think we're really enjoying the discussion.

2011 Commissioner Naidoo?

2012 COMMISSIONER NAIDOO: Thank you very much.

2013 So, I know that you're a Crown Corporation and likely operate differently than some of the other providers that have been appearing before us this week.

2014 But in your opening remarks you noted that your mandate is to operate in a, “economically feasible manner,” and then you mentioned that you have made some investments with negative business cases.

2015 So, I'm wondering if you can help us to understand a little bit more about the terms that you mandate and what you mean by those statements that ‑‑ in your opening remarks.

2016 MS. GAVEL: Can you clarify the terms that we mandate? Sorry. Repeat the last part of the question, please?

2017 COMMISSIONER NAIDOO: Yeah, just that ‑‑ what are the terms of your mandate? Considering that you had mentioned that you have made some investments with negative business cases, I'm wondering what your mandate is, and what you had referred to, as far as negative business cases, in your opening statement.

2018 MS. GAVEL: So, absolutely. We're a provincial Crown corporation. We certainly look to be financially sustainable.

2019 So we are in a competitive market. We are efficiently run and we are effective in that regard.

2020 So, you know, it's not to do that at all costs, though. Our mandate is to provide connectivity to Saskatchewan and as I said, we are going farther and farther out with fibre, into smaller and smaller communities.

2021 So, as we get farther and farther out, those business cases aren't always positive, but we believe that connectivity is still important and our shareholder recognizes that there will be some of those investments that have negative NPVs, but the importance of getting that connectivity to those residents overrides that.

2022 But it doesn't come at all cost, and we can't do that forever and not make enough money to be a sustainable organization, to support, you know, all the other things that we need to do and to provide a dividend back to the province.

2023 So we definitely play a dual role. We balance public policy with that profitability, all the time in all the decisions we make, and we have the support of our board and our shareholder to operate in that way.

2024 COMMISSIONER NAIDOO: Thank you for that. I know you've been following the hearing and Xplore had suggested that there be a lower wholesale rate for non‑incumbents making fibre investments in remote and rural areas.

2025 Can you provide your views on the appropriateness of that approach and whether it would be appropriate to create a unique tariff, for example, with a lower rate for that type of provider? And do you believe that a common tariff could have different wholesale rates?

2026 MS. GAVEL: So, as we've talked about, networks are expensive and they get more expensive as we go farther and farther out to more rural and remote locations.

2027 So to say that, you know, to serve rural and remote, that the rate should be lower, it makes it harder to recover that investment or to make it economically sustainable across the board.

2028 So, I was a bit ‑‑ yeah, I'm not sure that that is feasible or makes sense to us, frankly.

2029 So, you know, we need to consider what those investments are and what that looks like, and, you know, perhaps ‑‑ you know, I think that we've made the point that we are more expensive, so maybe one rate doesn't fit everything, but fundamentally, you know, we don't think that access to our network regardless is the right decision.

2030 MR. McKAY: If I could add ‑‑ sorry, one thing; I believe, Xplore's proposal was two different retail minutes rates, and we would oppose the idea of retail minus in general. We don't think it gives anyone an incentive to lower rates from there on.

2031 COMMISSIONER NAIDOO: Thank you very much. Those are my questions.

2032 THE CHAIRPERSON: Thank you. We will now go to Commissioner Desmond.

2033 COMMISSIONER DESMOND: Okay. Thank you very much.

2034 Listening to your submissions I understand that SaskTel does not believe that an FTTP mandate should apply, given the investments that you've made, the geography that you're dealing with.

2035 Other parties have suggested that one way to deal with that would be a head start rule, where there would be a window of time.

2036 If the Commission were to adopt that approach, is that ‑‑ what challenges would you see with that from your perspective? How would you adjust accordingly? What would be the administrative approach we could use to implement something like that?

2037 MS. GAVEL: I think that would continue to be difficult. I think, you know, every business case we have is a little bit different, so what is that head start? What justifies when that kicks in?

2038 And yet, still, our objective is to get connectivity to more people, not just the same people in a different way.

2039 So it goes against sort of our fundamental belief of the importance of network, for the network expansion, for the network resiliency, and ensuring that the people of Saskatchewan are connected.

2040 So, I think administratively it would be difficult to figure out what that is, for ‑‑ you know, is it by geography? By town? By rural and remote? They're all very different investments with very different decisions, and I think it would be really hard to influence something like that in a way that makes sense and is feasible.

2041 COMMISSIONER DESMOND: Okay, thank you.

2042 As we've said, you've suggested that SaskTel should be perhaps excluded from a regime, if one is put in place.

2043 What about Rogers? Would they also be excluded in Saskatchewan? Like, how would we ensure that parties are treated equally, or fairly?

2044 MS. GAVEL: So, we're very different than Rogers. We continue to ‑‑ you know, we're small, right? We are a very small provider within the grand scheme of particularly the Canadian landscape. So, you know, their network is different than ours and, you know, if they’re mandated in other areas of the country, you know, I think that's a decision that, you know, will be something that needs to be weighed against the other benefits.

2045 So we don't believe that it should be applied in Saskatchewan. We would hope that instead of, you know, a wholesaler riding on any network, that they continue with additional coverage, as opposed to purchasing, you know, from a wholesale perspective.

2046 So I think that's important, given our province's geography and our mandate.

2047 COMMISSIONER DESMOND: So, just to be clear, you're saying it shouldn't apply in Saskatchewan at all, not just to SaskTel; it needs to be province‑wide?

2048 MS. GAVEL: Yes.

2049 COMMISSIONER DESMOND: Okay. And I just have a final question. And as you were speaking today I got to thinking about the policy direction, the 2023 telecom policy direction, and in particular section 10, which specifically says that the Commission must mandate an aggregated wholesale high‑speed access service.

2050 So I'm just curious if you could provide your thoughts on that, and how you would square that with what you're proposing today.

2051 MR. KOSLOSKI: I'll take that one, Commissioner.

2052 So the policy direction does say that you are to consider mandating it, but what it does not say is that it must be applied everywhere, nor does it say that it must be applied in the same manner across the country.

2053 So there is a gap.

2054 You know, we've identified that Saskatchewan is unique. We have two competitive facilities‑based providers in all of our communities, and communities as small as 200.

2055 The mandating of this service would disrupt the benefits that the Saskatchewan people have seen, not only from SaskTel but from Shaw and from Access, where they do have choice, and these are choices that are available to them in each and every one of the communities that we serve.

2056 The policy direction also has a number of other things that you have to consider. It's just not about competition. You have to balance competition and investment; that's in the policy direction.

2057 It also says that you have to consider the effects that this will have on connectivity to the rural and remote and Indigenous communities, and the competitors that are in Saskatchewan today are currently delivering high‑quality, reliable service to those very communities.

2058 And so, putting a regime in place disrupts that and could potentially disrupt further connectivity in the future.

2059 I might add that, you know, the policy direction has a line in it that says ‑‑ and I'm just going to quote, here, that requires a wholesale HSA service to be in place until the Commission ‑‑ and here’s the quote:

    “... determines that broad, sustainable and meaningful competition will persist.”

2060 Our submission is that, in Saskatchewan, competition exists today, in our province, and a wholesale service is not needed in Saskatchewan. So, that objective has been reached in Saskatchewan.

2061 COMMISSIONER DESMOND: Okay. Thank you very much.

2062 THE CHAIRPERSON: Thank you very much. Thank you for answering our questions. We would like to turn things back over to you, if you have some key take‑aways you would like to leave with us, or if there's something that we didn't cover in the discussion that you would like to share with us, now would be a good time.

2063 MR. KOSLOSKI: Well, I do have closing comments, they're going to be repetitive, and certainly I can address them to the Commission.

2064 So, thank you, Madam Chair and Commissioners for this opportunity to appear. We do really appreciate it.

2065 As discussed, SaskTel is not supportive of a proposed wholesale HSA service. SaskTel and Saskatchewan are different. SaskTel is the only entity that is government‑owned with a public policy mandate. Saskatchewan has fierce and robust facilities‑based competition in every market. Saskatchewan has a large sparsely populated land mass that results in costs being much higher than elsewhere, and as a result requires longer periods to recover those costs.

2066 Our objective is to connect as many people as possible in Saskatchewan, in the most economic way. On this, our objective is in line with the Government of Canada's objective of connecting 100 percent of Canadians.

2067 Mandating the HSA regime does nothing to connect more Canadians and it will curtail Saskatchewan's and Canada's objective.

2068 The HSA regime simply churns those customers that are currently connected. It does nothing to connect more. The HSA regime will damage facilities‑based providers' ability to build more network, by making poor economics even worse.

2069 While SaskTel might make these investments in these high‑cost areas to reach the underserved and unserved, mandating an HSA regime will impose worse economics on an already economically‑challenged business case.

2070 As indicated, our shareholder's objective to continue to build infrastructure is not limitless. The proposed regime counteracts other more important policies and objectives, like network resiliency and connectivity to rural, remote, and Indigenous communities.

2071 We respectfully repeat that the Commission's true focus should be on coverage and service levels for these communities through advancing facilities‑based providers, not developing an artificial regulatory scheme for resellers that offer no technology improvements or service area expansion.

2072 If the Commission eventually determines that a wholesale HAS service applies to Saskatchewan, SaskTel has provided a proposed service, based on your instructions. This proposed service is based on SaskTel's Phase 2 costing and the Commission's approved markup. It reflects how expensive it is to serve Saskatchewan, especially in those rural and remote households. Saskatchewan is a high‑cost province. If you must mandate the service in Saskatchewan ‑‑ and we say you shouldn't ‑‑ then you must allow SaskTel to not only recover its costs but also support future network expansions.

2073 So, once again, thank you, Madam Chair, Commissioners, and thank you.

2074 THE CHAIRPERSON: Thank you very much for being here with us today. We really appreciate it and we appreciate hearing your perspective. Thank you.

2075 THE SECRETARY: Thank you. So, this concludes today's agenda. The hearing is therefore adjourned for the day, and we will resume tomorrow at 9 a.m. Thank you.

‑‑‑ Whereupon the hearing adjourned at 3:27 p.m., to resume on Wednesday, February 14, 2024 at 9:00 a.m.

Reporters
Christine Ladouceur
Monique Mahoney
Lynda Johansson
Tania Mahoney
Brian Denton