ARCHIVÉ -  Transcription - Yellowknife, NWT - 2000/06/17

TRANSCRIPT OF PROCEEDINGS

FOR THE CANADIAN RADIO-TELEVISION AND

TELECOMMUNICATIONS COMMISSION

TRANSCRIPTION DES AUDIENCES DU

CONSEIL DE LA RADIODIFFUSION

ET DES TÉLÉCOMMUNICATIONS CANADIENNES

SUBJECT / SUJET:

NORTHWESTEL INC. - IMPLEMENTATION OF

TOLL COMPETITION AND REVIEW OF

REGULATORY FRAMEWORK, QUALITY OF SERVICE

AND RELATED MATTERS / NOROUESTEL INC.

- MISE EN OEUVRE DE LA CONCURRENCE

DANS L'INTERURBAIN ET EXAMEN

DU CADRE DE RÉGLEMENTATION,

DE LA QUALITÉ DU SERVICE

ET D'AUTRES QUESTIONS

HELD AT: TENUE À:

Town Hall Room Salle Town Hall

Best Western Gold Rush Inn Best Western Gold Rush Inn

411 Main Street 411, rue Main

Whitehorse, Yukon Whitehorse (Yukon)

June 17, 2000 le 17 juin 2000

Volume 4

Transcripts

In order to meet the requirements of the Official Languages

Act, transcripts of proceedings before the Commission will be

bilingual as to their covers, the listing of the CRTC members

and staff attending the public hearings, and the Table of

Contents.

However, the aforementioned publication is the recorded

verbatim transcript and, as such, is taped and transcribed in

either of the official languages, depending on the language

spoken by the participant at the public hearing.

Transcription

Afin de rencontrer les exigences de la Loi sur les langues

officielles, les procès-verbaux pour le Conseil seront

bilingues en ce qui a trait à la page couverture, la liste des

membres et du personnel du CRTC participant à l'audience

publique ainsi que la table des matières.

Toutefois, la publication susmentionnée est un compte rendu

textuel des délibérations et, en tant que tel, est enregistrée

et transcrite dans l'une ou l'autre des deux langues

officielles, compte tenu de la langue utilisée par le

participant à l'audience publique.

Canadian Radio-television and

Telecommunications Commission

Conseil de la radiodiffusion et des

télécommunications canadiennes

Transcript / Transcription

Public Hearing / L'audience publique

Northwestel Inc. - Implementation of toll competition and review of regulatory framework, quality of service and related matters / Norouestel Inc. - Mise en oeuvre de la concurrence dans l'interurbain et examen du cadre de réglementation, de la qualité du service et d'autres questions

BEFORE / DEVANT:

David Colville Chairperson / Président

Jean-Marc Demers Commissioner / Conseiller

Andrée Wylie Commissioner / Conseillère

Cindy Grauer Commissioner / Conseillère

Ron Williams Commissioner / Conseiller

ALSO PRESENT / AUSSI PRÉSENTS:

Geoff Batstone Legal Counsel /

Annie Paré Conseillers juridiques

Gérant de l'audience

Marguerite Vogel Secretary / Secrétaire

HELD AT: TENUE À:

Town Hall Room Salle Town Hall

Best Western Gold Rush Inn Best Western Gold Rush Inn

411 Main Street 411, rue Main

Whitehorse, Yukon Whitehorse (Yukon)

June 17, 2000 le 17 juin 2000

Volume 4

APPEARANCES / COMPARUTIONS

Phillipa Lawson CAC/NAPO

Roger Rondeau Utilities Consumers' Group

Pat O'Connor (UCG)

George Henry Council of Yukon First

Nations

Angus Oliver Government of Northwest

Territories

Peter Macdonald Government of Yukon

Tom Zubko New North Networks

Phil Rogers Northwestel

John Lowe Telus Corporation

TABLE OF CONTENTS / TABLE DES MATIÈRES

PAGE

PREVIOUSLY AFFIRMED /

SOUS LA MÊME DÉCLARATION SOLENNELLE: CLAUDE VACHON 709

PREVIOUSLY AFFIRMED /

SOUS LA MÊME DÉCLARATION SOLENNELLE: MARK WALKER 709

PREVIOUSLY AFFIRMED /

SOUS LA MÊME DÉCLARATION SOLENNELLE: JOHN YEULET 709

PREVIOUSLY AFFIRMED /

SOUS LA MÊME DÉCLARATION SOLENNELLE: W.E. (TED) DEAN 709

EXAMINATION BY / INTERROGATOIRE PAR:

Mr. Pratt 710

Mr. Henry 772

Mr. Zubko 827

Mr. Lowe 869

Mr. Batstone 922

Ms Paré 931

by the Commission 943

Mr. Rogers 981

Whitehorse, Yukon / Whitehorse (Yukon)

--- Upon resuming on Saturday, June 17, 2000

at 0903 / L'audience reprend le samedi,

17 juin 2000 à 0903

4511 THE CHAIRPERSON: Good morning, ladies and gentlemen.

4512 Before we return to cross-examination are there any preliminary matters?

4513 Mr. Rogers...?

4514 MR. ROGERS: Two quick preliminary items, Mr. Chairman.

4515 We have provided to the Secretary this morning a response to an undertaking which relates to this panel. This was a series of questions asked in writing by the Commission Staff, all of which relate to boundary type issues. A written response has been provided to the Secretary.

4516 Perhaps an exhibit number could be given to that.

4517 THE CHAIRPERSON: Madam Secretary...?

4518 MS VOGEL: This document entitled "Northwestel Undertaking to CRTC No. 19, June 14, 2000" will be Northwestel Exhibit 11.

4519 MR. ROGERS: As a second item, Mr. Chairman, we have distributed to the Secretary and in the room a copy of a one-page sheet entitled "Northwestel Quick Facts". This is a summary of facts essentially in an attempt to reduce all the relevant facts, or most of the relevant facts of the case into one page.

4520 It is a bit of a trick to do so, as you can see. We don't claim that it has absolutely everything, but this sheet is being used by our witnesses on this panel and other panels as well, and we thought it might be a useful reference sheet for others in the room. We are happy to distribute it.

4521 All of the material on the sheet has already been filed in the record of the proceeding.

4522 THE CHAIRPERSON: We will see if we can't condense our decision to as brief a document.

4523 Perhaps we could get an exhibit number for that now, as well, Madam Secretary.

4524 MS VOGEL: Yes, Mr. Chairman.

4525 The document entitled "Quick Facts" will be Northwestel Exhibit No. 12.

4526 THE CHAIRPERSON: Thank you.

4527 Are there any other matters?

4528 Just to give a sense, I will track how we move along today. Judging by the times that we have projected for questioning this panel and the next one, we will see where we go. But my inclination would be to take a late lunch today; maybe go through to some time between 1:00 and 2:00 and end for the day.

4529 I presume we will probably be finished with this panel this morning. We could probably get a start on the next panel and finish around that time and then conclude our work for the day and reconvene on Monday.

4530 With that, Madam Secretary, we will have the next party to cross-examine.

PREVIOUSLY AFFIRMED /

SOUS LA MÊME DÉCLARATION SOLENNELLE: CLAUDE VACHON

PREVIOUSLY AFFIRMED /

SOUS LA MÊME DÉCLARATION SOLENNELLE: MARK WALKER

PREVIOUSLY AFFIRMED /

SOUS LA MÊME DÉCLARATION SOLENNELLE: JOHN YEULET

PREVIOUSLY AFFIRMED /

SOUS LA MÊME DÉCLARATION SOLENNELLE: W.E. (TED) DEAN

4531 MS VOGEL: Thank you, Mr. Chairman.

4532 For the record, Council of Yukon First Nations and Government of Yukon have agreed to reverse their order of cross-examination. So the first party to cross-examine this morning will be the Government of Yukon.

4533 Mr. Pratt.

4534 MR. PRATT: Thank you.

EXAMINATION / INTERROGATOIRE

4535 MR. PRATT: Good morning, Mr. Chairman, Commissioners. Good morning, panel.

4536 I would like to start with a look at Attachment 5 to the evidence, the budget process. I am looking at page 80.

4537 This is in the context of the capital expenditure program.

4538 MR. VACHON: We have it.

4539 MR. PRATT: Thank you. At the bottom of page 80 and continuing on to page 81, if I understand this it looks like essentially a three-step process for the capital budget.

4540 First, a general target is set by the executive; correct?

4541 MR. VACHON: Yes.

4542 MR. PRATT: And then there is what looks like a roll-off of departmental budgets from planning, marketing and engineering?

4543 MR. VACHON: Yes.

4544 MR. PRATT: That goes to the capital committee, who does a ranking and determines the priority of the projects based on certain criteria.

4545 MR. VACHON: That's correct.

4546 MR. PRATT: That is the third step. The fourth step, of course, would be the approval of the board; right?

4547 MR. VACHON: That's correct.

4548 MR. PRATT: One of the interrogatories that we had put to the company, YG-203, asked a question if there had been any specific directions regarding the budget envelope for the company.

4549 I understand that this may fall partly into the finance area, so bear with me for a minute.

4550 The response that we got back covered a number of different interrogs, but essentially the message that I took out of -- and if you wanted to check, the cross-reference was Yukon Government 505. There were two CRTC interrogatories is referred to, but they are more general.

4551 MR. VACHON: We'll have the document, please.

4552 MR. PRATT: Sure.

--- Pause / Pause

4553 MR. VACHON: Okay. We have 505.

4554 MR. PRATT: It seems to me that what that says is that reducing capital expenditures is the most immediate way of dealing with cash constraint issues. Do you see that?

4555 THE CHAIRPERSON: Could you give us a specific reference, please.

4556 MR. PRATT: Sorry, Mr. Chairman.

4557 It is on page 3 of 3, the first full paragraph. It says:

4558 MR. VACHON: I don't think this is -- I will bear with you for a while. But as you mention, I don't think it is part of our interrogs.

4559 MR. PRATT: The question I wanted to ask you is: Having read that statement, is that typically a constraint or a consideration in managing the capital projects on a going forward basis?

4560 MR. VACHON: I will answer you for the engineering part or the management of the capital envelope. As you mentioned, I will refer you to the financial panel who will come on later.

4561 The way we manage the capital envelope is, on an ongoing basis, we are monitoring our network from a capacity point of view and from a quality of service point of view too.

4562 The people from network operations will feed engineering on a continuous basis. There is also continuous discussion with marketing people, with sales in order to understand what the customer needs are. This is made on a continuous basis.

4563 When it comes times to approve the budget for the next year, what we do is we take a picture of this envelope where we stand, and we say that is the kind of money we feel we need to spend in order to realize our objectives.

4564 For sure this amount of money after a while is reviewed by the executive of the company, as well as the board of directors, and a decision is made.

4565 The criteria of the decision, which I will let my colleague Ray Hamelin answer you, is made about the level of capital we will spend this year, or that the company can afford to spend in a specific year.

4566 MR. PRATT: Thank you. The first reference I gave you in Attachment 5 says that the capital spending is reviewed by the capital committee.

4567 That is different from the executive?

4568 MR. VACHON: What the capital committee will do is, once we have the envelope that we are allowed to spend or to use, the capital committee is a committee made up of members of the various departments of the company. You will have sales people who really represent the customers, make sure that we take care of customer needs, and will provide the type of network required by our customer base.

4569 You will have people from marketing, people from network operations. We have areas of our network that need to be upgraded. They have criteria. They have a process by which they will make a decision on what are the priorities that the company should address.

4570 For sure people from maintenance would like to have brand new equipment everywhere, would like to have a lot of new test gear. Sales people would like to have everything for the customers. It is a normal priority process. Each and every company is different.

4571 Those people will make recommendations based on the needs.

4572 Do you have something to add, John?

4573 MR. WALKER: Claude, I will add something.

4574 The capital committee is different from the executive. The capital committee basically will recommend to the executive a capital program. We will build a capital program that has many projects in it, and we will recommend that to the executive as an entirety.

4575 If priorities change or new forecasts are obtained during a year, does the capital committee make an assessment of that or recommend to the executive how to reprioritize?

4576 MR. WALKER: Yes. For example, if there were some for a change through the year, that change would be communicated to the Capital Committee, the cross-departmental committee who would then take a look at all those projects and try and reprioritize which ones do we add or remove, given whatever the changes that occurred.

4577 MR. PRATT: Okay. Great. Now, still on page 81, this may be too terse the way it's stated here. I wanted to ask you about the criteria that are used in these evaluations and ranking. It says here that a project "is either mandatory so that it's growth at a base rate area or public safety concerns or economic". What do we mean by economic here? Would that be a business case?

4578 MR. WALKER: Yes. Economic would be that it has a rate of return at net present value that would be appropriate.

4579 MR. PRATT: Fair enough. And then projects are rated on consideration of their strategic impact, effect on customer service as well as their economics. Are those three elements -- which category of projects do those apply to, the mandatory or the economic or both?

4580 MR. VACHON: Could you repeat your question, please?

4581 MR. PRATT: I'm still reading on page 81. It says that projects are rated on consideration of strategic impact, effect on customer service and economics. I was trying to understand what that means in terms of the factors that would be considered in either classifying a project or setting its priority.

4582 MR. YEULET: Basically, some projects provide little or no return. They must be done anyway. That's the mandatory type projects.

4583 MR. PRATT: Right.

4584 MR. YEULET: So basically what we do there is we replace the economic evaluation with an evaluation of the drivers to make that project happen, so we look for the least cost. It's not an exact economic evaluation, but we look at the best options to accomplish it.

4585 An example is if we have a safety issue where we have to replace some helicopter pads or some of our microwave sites, we look at that. If that's more of a risk than doing a replace of a guy wire on a tower or replacement of the whole tower, that type of thing, so we evaluate it slightly different. They are all uneconomic, but we have to try to figure out which is the biggest risk. I hope that answers the question.

4586 MR. PRATT: Yes. That's very helpful. Would it be fair to say then a project may be mandatory because of strategic impact of effect on customer service and then in any case you are going to apply economics. Recognizing it's not a business type project, you are going to apply economic principles to make sure that you get the best result for the most effective cost.

--- Pause / Pause

4587 MR. VACHON: The strategic investment for sure will always -- or we will look more closely to the economics of those projects, but the mandatory projects, like if we have to replace a fuel tank for environmental reasons, we don't look at the economics. We have to make it, we don't have a choice.

4588 MR. PRATT: Okay.

4589 MR. VACHON: So it will be different from one project or the other one.

4590 MR. PRATT: Are there some mandatory projects that are driven by customer service rather than strategic impacts?

4591 MR. VACHON: Yes. If like, as an example, this year we had replaced the Cambridge Bay DMS-10 switches because we were running out of capacity. So what we did -- it was mandatory. Usually we have ways to replace it until we run out of capacity, so it was mandatory and it was for customer service purposes.

4592 MR. PRATT: Okay. Thanks. Can I ask you to find UCG-35, attachment 1.

4593 MR. VACHON: We have it.

--- Pause / Pause

4594 MR. PRATT: Okay. I'm looking at -- it's actually attachment 2, I'm sorry. It would be the last page of that interrogatory. It's the significant variances from the 1998 plan. The budget reference, the second number down there, 1.1.47 is Yukon unserved provision. "Prov", would that be provision, local phone service?

4595 MR. YEULET: Provide local.

4596 MR. PRATT: Oh, provide local phone service. Okay. The comment is that was deferred until the results of the HCSA proceeding known. Correct?

4597 MR. YEULET: Yes. It says there until the results of the high cost serving area proceeding.

4598 MR. PRATT: Okay. Are you able to tell me whether that was a strategic project?

4599 MR. YEULET: Those are not strategic projects I don't believe.

4600 MR. PRATT: Is there any record to show whether it would have been considered strategic?

4601 MR. VACHON: Could you wait until we answer that in a moment, please?

4602 MR. PRATT: Sure.

4603 MR. YEULET: Go ahead.

4604 MR. PRATT: Is there any record to show whether it may have been strategic or how it got into the budget in the first place?

4605 MR. YEULET: That part of the budget, we created that a number of years ago to put a line item in the budget to start to identify the unserved/underserved areas within our operating territory where the customers were wanting service.

4606 There's no economics available or deemed to be available to provide service to those areas. We put it in the capital program as a place holder, hoping that some day maybe we would get the economics to do it and projects such as what's being done right now with the Yukon government to extend service at the Marsh Lake area is one of the ones that was within that budget reference number at some point in time. There are others.

4607 MR. PRATT: Could you tell me how long it has been in the budget kind of floating over from year to year waiting for economics?

4608 MR. YEULET: We have it. I just have to find it here.

4609 MR. PRATT: Okay.

--- Pause / Pause

4610 MR. VACHON: Maybe while we're looking for the information, some of those projects and we will a little bit there I'm sure about this one in the radio system in the MacKenzie Valley. We know that we have to replace those cycles in all the DMS-10s, so those projects are included into our capital plan.

4611 Our capital plan is made of one year budget and three years of forecast costs. We include them into the forecast to make sure that they are part of it, not that we don't forget about it, but year over year they are re-evaluated with the other ones, with the other projects we have to do. Most of the time they are deferred and deferred all the time. That's the same with this project.

4612 MR. YEULET: And this particular budget reference number, the 1147, was originally introduced in the 1998 to 2001 capital program.

4613 MR. PRATT Thank you.

4614 Could I ask you to turn to CRTC 301, Attachment 4. It's 4B exactly. I am looking at page 1 of 3.

4615 THE CHAIRPERSON: Mr. Pratt, what was the reference again?

4616 MR. PRATT: It's CRTC 301, Attachment 4B, page 1 of 3.

4617 THE CHAIRPERSON: Thank you.

4618 MR. YEULET: All right.

4619 MR. PRATT: I am looking at projects 1.1.4, .5 and .6. Can you tell me what those are, first of all?

4620 MR. YEULET: 1.1.4, 1.1.5 and 1.1.6?

4621 MR. PRATT: Yes.

4622 MR. YEULET: Those are expansion of local telephone service within the base rate areas. The first one is Whitehorse specific. Whitehorse is big enough to have its own budget reference number.

4623 The other one is Yellowknife and the third one is Fort Nelson.

4624 MR. PRATT: All right.

4625 There was a reforecasted demand in each case. Can you tell me how that happened and what the consequences were?

4626 MR. YEULET: Reforecasted demand consists of a number of things I guess. The first point is, as Claude has mentioned earlier, basically that the bulk of the company gets the opportunity to submit to the capital program. So the operations folks put in their requests for doing some work. The engineering group also puts in their requests, knowing that they want to do upgrades. They want to do some expansions within the subdivisions, within the major centres, within the base rate areas.

4627 It gets looked at and evaluated and then we say it would be nice maybe to do it, but at this point in time we need to put some funds somewhere else. We are not affecting customer service by not doing it today, so we can defer it. That's the type of thing that would happen.

4628 MR. PRATT: But these three are different than the last project we were just talking about, which was essentially a place holder for something that we knew wasn't going to pencil out for a while.

4629 MR. YEULET: Yes, these three, plus some other ones there that are looking at doing work in the access plant within the base rate areas, as opposed to 1.1.4.7 is outside the base rate area.

4630 MR. PRATT: All right. Great.

4631 Can I ask you just a little bit about 1.1.6 and there was also a CRTC interrogatory, CRTC 1307, that you responded to. I wanted to ask you a little bit about the 3.5 million that's included. I am quoting from the 1307 reference for the broadband access project. Can you tell me about that?

4632 MR. YEULET: We provided an answer in response to Interrogatory CRTC 1307. Basically, one of the goals that the network planning access group was trying to accomplish was to actually expand the network to provision a broadband access and to develop the network to enable that to happen. So that was their hope, to have that put in, but it didn't materialize.

4633 Part of the other issue that we have to keep in mind here within the base rate areas, we also forecast the specific growth and sometimes the communities don't grow as fast as we had originally anticipated, so that doesn't materialize and so we can take away some of those funds and redeploy them into other areas. I hope I answered your broadband question.

4634 MR. PRATT: Yes. I think I may have misled you because I sort of switched gears and I was less interested in the reforecast or the change there, but rather just a little bit more about that particular project.

4635 What was the geographic scope? Where was that intended to provide broadband access to?

4636 MR. YEULET: I don't know all the details of it and according to our response to 1307 the scope and the details of the project are yet to be finalized. I believe it was specific to the core of Fort Nelson.

4637 MR. PRATT: All right.

4638 Just one more question, if I could, on this. I am looking at the second paragraph of 1307. It says:

4639 Can you tell me anything about the plans for integration of narrowband and broadband? What would that involve and what did you have in mind?

4640 MR. YEULET: I don't have the specific details, but it's my understanding that today the telephone plant, basically, is a narrowband telephone plant and the broadband, of course, is broadband. But the planner was looking at maybe this is a possibility to do a test case to try to find a way to amalgamate the two types of networks into one and Fort Nelson being an area of a community of a sufficient size that maybe we could be able to deploy all the different types of technologies.

4641 That's where they were thinking of that coming from, but at this point in time the details have not been ironed out exactly what we would do and it has been deferred.

4642 MR. PRATT: All right.

4643 So it's premature and maybe pointless to even talk about it. Got it.

4644 Can I ask you to look at --

4645 MR. VACHON: If you would wait a moment, please?

4646 MR. PRATT: Sure.

--- Pause / Pause

4647 MR. PRATT: I have a couple of other items on the budget that we had asked some interrogatories on. I was curious to follow up on those as well. One of those is NWTel(YG)-206

0930

4648 MR. VACHON: I have it.

4649 MR. PRATT: Thank you.

4650 Mr. Yeulet, am I in the same territory here with the TMN project? Is this something that's still a feasibility stage?

4651 MR. VACHON: Yes, that's the same. This kind of project is our operating support system that we use to monitor the network and it's in order to help us to remotely be able to see what is happening on the network and sometimes, not now, but more and more with the technology be able to act on the network remotely and shorten our interval to improve service.

4652 Those projects, usually the business cases, it's very difficult to justify because it's difficult to quantify too. so that's a project similar to the other ones we have discussed before.

4653 MR. PRATT: Right. But TMN can take you a lot farther than that. It can actually take you to the point where you are integrating the operating systems and the information systems and even the management systems.

4654 Is that something that is being considered, or will be considered by the company?

4655 MR. VACHON: Yes. It's something that we consider for sure.

4656 At the basic of TMN, the first layer of TMN -- TMN is a kind of pyramidal way to monitor a network where you first monitor your network element outside. So the first layer of the TMN is to be able to connect to your network element, get information from your network element and move this information up to another level where you manage the overall network and move it to another layer where you manage a service running on those network elements.

4657 So that is the principle of TMN very summarized.

4658 In the kind of network that we have with the advantage of technology that we have, there is not a lot of -- and I will use the word "intelligence" for lack of a better word -- there is not a lot of intelligence coming out of those network elements feeding us with information about what is going on.

4659 We have installed, last year, a new Sonet radio between Fort Simpson and Fort Nelson and this type of radio provides you with a lot of information about what is going on in your network.

4660 But, yes, it's our goal, but we have to balance the introduction of TMN with the introduction -- the replacement our network elements on-site.

4661 Part of the set today -- part of the set today is deploy this kind of Sonet radio or fibre optics in the MacKenzie Valley, Fort Smith, deploy switches that provide more information about their performance. So more and more we will have those types of network elements outside, more and more the TMN will be something that we will deploy.

4662 MR. PRATT: Right. And in TMN, if you keep going up the pyramid, you get right to the customer, don't you?

4663 MR. VACHON: Yes. And the implication --

4664 MR. PRATT: Right. So ultimately, in the ideal, you are plugging the customer's needs directly into the provisioning of the network.

4665 MR. VACHON: Exactly. You are correct.

4666 MR. PRATT: Do you see the company getting to that point? Question one.

4667 Question two: What about gathering customer input and supplier and other stakeholder input as part of that philosophy?

4668 MR. VACHON: Precisely what do you mean by gathering the supplier or customer input?

4669 MR. PRATT: Well, if it's an integrated framework, is that representative of the model that the company would move to, the management model?

4670 MR. VACHON: Trying to answer your question I will give you an example with our Family Network.

4671 As we mentioned before, we had deployed our Family Network over satellite and this network is managed from Yellowknife where we have our network operation control centre. With the Family Network we bought monitoring systems that allow us to go up to the customer -- broader, see the performance of the network. It is our plan to go further down the chain and, as you mentioned before, reach a point where can manage the customer network.

4672 The challenge that we have, and the challenge that I would say most of the companies have down south is, is this new Family Network and the new Customer Network runs on new technology and somewhere when you reach the backbone, the core network that carries the traffic, now you reach a piece of equipment which is where you lose a little bit all this nice information that you receive.

4673 So our Family people manage the network as you describe, but our core network monitoring people cannot have all this network together and have an end-to-end view from the customer down to the latest network element in the field.

4674 But I hope I answered your question. That's the direction of the company.

4675 There is no doubt, not only from an efficiency point of view but from a quality point of view, quality of service point of view, that this is definitively the direction we have to take. But it is a very expensive process to deploy.

4676 When I was in Bell I worked three years to introduce this concept of remote monitoring and also network management systems and we were talking millions and millions of dollars to put this thing in place. And not only did it involve deploying the U.S. assist, but it is also involved to upgrade the overall network. So that's a lot of money.

4677 MR. PRATT: And on top of that, then, to make sure that all the people that are managing those things are in tune with the changes in the system. So I think it's a difficult, difficult process, but I agree that it is a valuable one.

4678 I want to ask you maybe a less esoteric question following up from Yukon Government 207. That was a question about the office systems project.

4679 My fairly simple question there is: Of the about $375,000 that you are spending annually on office systems, desktops, PCs, software, peripherals, are you able to tell me -- maybe this is a finance question -- if there is a proportion of that that is sourced locally in the north?

4680 MR. YEULET: Yes, it might be better -- the finance panel might be able to answer it, but my understanding is the bulk of it is bought in the north.

4681 MR. PRATT: Okay. Good.

4682 Can I ask you to turn to CRTC-1109.

--- Pause / Pause

4683 MR. PRATT: Okay. Page 2.

4684 These are all projects that are part of the SIP. Were all these projects transferred from the capital program?

4685 MR. YEULET: Transferred from the perspective of these projects where identified in the capital program and then when we are putting our SIP together we identified these as being part of SIP. So from that perspective, yes.

4686 MR. PRATT: Right. I misspoke I think.

4687 They were existing projects prior to the creation of the SIP?

4688 MR. YEULET: They were projects identified in the capital program as placeholder projects, yes.

4689 MR. PRATT: Okay. Thank you, Mr. Yeulet.

4690 Were they all of the same type as the -- well, as the first one, the 1147, that they were placeholders known to be of questionable economics?

4691 MR. YEULET: That's correct. And then as the need was required then they would be re-put in.

4692 As an example, 1123, the DMS-10 replacements, typically we replace one switch a year. So we don't know which switch it will be. It depends on which one runs out of capacity first, this type of thing.

4693 MR. PRATT: Right.

4694 MR. YEULET: But they are all basically the same type of project.

4695 MR. VACHON: Just maybe to try to picture a little bit the situation, we replace once a year for capacity, but we also replace once a year to get spare parts to maintain the other ones. That's true.

4696 So, as we mentioned before, a lot of our switches our manufacturer discontinued and once a year we have to make sure we maintain enough spares. We are having now more and more problems to get spares in the marketplace and they are more expensive and we pay Nortel extra fees in order to get those components repaired when they break.

4697 So what we do, on a yearly basis we try at least to replace one. We keep the old components and we use them to maintain our other switches.

4698 MR. PRATT: I'm going to kind of transition over to the SIP myself in these next couple of question.

4699 I guess first of all I am interested to know whether you expect that the SIP will be managed along the same process that we spoke of for the capital program.

4700 MR. YEULET: No, not really. It's managed from the perspective of project management, but what we have done is, we put a proposal together for the Commission to review which lays out which projects we are planning on doing in which years. So that would be our baseline and from there that is how we would look at accomplishing all of those projects in each that we have identified.

4701 So I don't know if that --

4702 MR. PRATT: Well, what I'm wondering about is whether there would be any possibility of changes or repriorizing or -- similar to the normal capital process.

4703 MR. YEULET: Yes, I truly believe there would be a times where reprioritization might have to happen, as an example: when we are doing one of our -- as a hypothetical possibility is one of our major transport projects is a multi-million dollar project and if, for some reason, there's some delays in the roll-out of it by a month or two or three, it could affect which year the money is actually -- or the funds would be spent. So it may be an opportunity to move forward other types of projects if we can actually accommodate them. So there is that opportunity that things could be brought forward or slid slightly, depending on the issues that arise when we are actually putting the projects in.

4704 MR. WALKER: Mr. Pratt --

4705 MR. VACHON: The criteria will mainly be -- sorry, Mark -- the criteria will mainly be our ability to -- or a kind of roadblock more than economics that, "This is project is uneconomic; we will do the first one, this one first" because we are held to meet the schedule we have provided; and that's our plan: to meet the schedule, as we have provided.

4706 So they won't move or be delayed because they are not economic. They will move as filed in this interrog.

4707 MR. PRATT: Thanks. That's what I was interested in.

4708 Did you have something to add, Mr. Walker?

4709 MR. WALKER: I was just going to summarize what Claude had said, that things slide in a regular capital program mainly because of the economics of it -- and you can see there's a very good example, the MacKenzie Valley build has slid a number of years, it's been a placeholder, it's been in there, but there have been other projects come up that would be more economic. So, you know, the company has taken the opportunity to put those systems in place.

4710 With the SIP program, all of that money is identified to meet the basic service objective. Most of those, or all of those, projects are uneconomic, so the same driver is not there. They need to be done. We have laid out a four-year schedule to get them done. And we have even laid out the tracking plan. So, we would, as much as possible, try and do that. And there may be some small changes required, due to some small technology things but, as much as we could, we would try to meet that four-year proposal.

4711 MR. PRATT: Good. That alleviates one of my concerns.

4712 Let me ask you about another concern.

4713 If you look at the answer to YG-208. If I understand what happened there, the SMS project got to be larger or more significant than was forecast and, as a result, there had to be some re-jigging of other projects. So, it wasn't necessarily an influence of that project but the influence of another project on some capital spending.

4714 Is it possible that the same kind of situation could happen with the SIP projects, where there is a non-SIP project that has an impact from a resource perspective or a financial perspective?

4715 MR. VACHON: From a financial perspective, the answer is definitely, no, because Northwestel plans to spend, as we do each and every year, around $25 million of capital over and above the SIP program to maintain the rest of the network and invest in the other areas that we have to invest on a regular basis. The money allocated to SIP is to complete the SIP program, so there won't be transfer of money from one to the other one.

4716 From a time frame point of view -- from a work force, a work group point of view, staff -- we won't have SIP staff and non-SIP staff, so, as we mentioned before, the four-year time frame will be a challenge to us, if you look at the size of our territory and the number of upgrades we are going to have to do and, also, the negotiations we will have to do during this program. For sure there is various for SIP, at this point in time, but none of them will be caused by transfer of money.

4717 MR. PRATT: Great. On the subject of resources, though, there was just one quick question.

4718 I think there was a response to CRTC-1602, very brief, that said that the number of full-time equivalent employees would remain the same, I think 2000-2001.

4719 Do you have that? I can't find mine here. That's my recollection.

4720 So, the question is: Do you anticipate having to add staff to prevent resource issues and to complete the SIP?

0950

4721 MR. VACHON: This one is real tough to answer and to forecast. There are many components in it.

4722 We are currently hiring new employees to be able to maintain technology. Technology is changing outside and we have to bring new blood into the company to maintain this technology.

4723 Also, we have deployed, as I have mentioned before, our family network across the 58 communities in the arctic and the community technicians that we have in those areas to do the regular part type of work don't have the skill and will never have the skill to maintain those networks because they don't have to work on that equipment often enough. So, we will have to have more employees in some locations to be able to fly and maintain that equipment. So there are additions made on this site.

4724 By replacing some of the old analog radios, for sure, we will have, in some areas, benefit of -- you know, we will gain productivity because that equipment don't require as much maintenance as the old equipment, so we have some savings there.

4725 On the other side, when you have a location like Fort Simpson where you have two technicians, I cannot cut one technician; I cut 50 per cent of my workforce over there. In Inuvik I have one technician to maintain radio. So if you look at both ends of this route, between Fort Simpson and Inuvik, if I reduce by one technician on one end of the remote I remove 100 per cent of my radio technician and on the other end I remove 50 per cent.

4726 So when we forecast the staff, we kept -- we said staff levels will remain around 527.

4727 Now, since that time, I think we have refiled our information -- and maybe, Mark, you can help me with this one -- where we have identified additional expenses and some of them will the marketing group and sales group for introduction on the competition.

4728 MR. PRATT: Right. But, Mr. Vachon, would you expect -- let me just take it out for the full duration of the SIP. Do you expect to have to add more technical people over the time frame of the SIP?

4729 MR. VACHON: What we are trying to do -- I don't expect for the SIP, as such, to increase a lot the staff outside. What we have done, we have hired four new engineers to help us to get ready for the 2001 plan. And we know, too, that in two or three years from now some of our engineers will retire, so one will replace the other but, in the meantime, we have the engineers who have been in the company for a while that will help us to connect that new equipment with the existing network.

4730 From a maintenance side, deployment side, even I would like to hire people now. There is no way that I could train first -- it's a challenge for us to attract people here with this kind of competency, but there is no way I could train -- I could have time to train those people and be knowledgeable enough to build a network in time for the SIP. So most of the work will be done EF&I, engineering furnished and installed by the supplier.

4731 MR. WALKER: If I could just add. I think we do recognize -- we currently have contractors work with us, for example, Frontec, that do work for us.

4732 We recognize that there will be peaks and valleys as we go through the SIP and will continue to need to look for some folks in the north that can help us do some of that kind of work.

4733 MR. PRATT: Good. Thank you. I'm going to switch topics just sightly then and maybe take one more -- put more swing at the unserved and underserved. I asked Mr. Walker's previous panel the other day about whether there might be any ambiguity in the definitions. I heard Mr. Yeulet yesterday explain something that I'm not sure if it was ambiguous, but I'm not sure I followed it.

4734 I wondered if you might consider, if the company would consider in the definition of unserved -- I'm sorry, the definition of underserved -- consider any of your customers who have an account with Northwestel. I think, Mr. Yeulet, you said you were trying to draw the distinction on the basis of a working telephone number.

4735 I just wondered, since some customers may have been on rural tel and then forced or migrated to the manual mobile, whether it might be more appropriate just to say anybody who is a customer in the broad sense of Northwestel should be considered underserved.

4736 MR. YEULET: There are a number of factors that we decided to put forward as our proposal. We have decided that based on a reasonable program that these customers, the fixed manual mobile customers, and I just got to pull up my note here so I can reference it before I carry on any further.

--- Pause / Pause

4737 MR. YEULET: Fixed manual mobile is a term that we created somewhere along the line. Basically manual mobile is a push to talk service. It's similar to a walkie-talkie or the CB system truck to truck or vehicle to vehicle service. Somewhere along the line customers wanted it to be able to use it at their home, so somewhere along the line we created this fixed manual mobile process where they actually take their battery or whatever and put it in their house and they keep this radio operational.

4738 They don't have a telephone number. They don't have direct access to the public switch network. It's not a system that's secure. There's always at least one side of the channel available for anybody that's listening in to hear. They are basically customers that are very far out of the way from any service we have.

4739 That's just some of the reasons why we determined that they are under unserved. Ted, you might want to add some more to this.

4740 MR. DEAN: Mr. Pratt, I think I heard you say that there could be customers that actually moved from rural to fixed manual mobile. I'm not aware of any customers like that. If there are individuals like that, maybe we should take that off-line and address those as individual cases.

4741 I guess this was a judgment or one of those issues of balance. We had to decide how far were we going. So just any customer that had a customer record with us we thought was going a little too far.

4742 Another example of customers that might have a customer record with us but are not -- don't have a land phone or a telephone number at all. We have actually got customers that live far away from any settlement, but have a calling card.

4743 If a customer records with us, they have a calling card that they can make phone calls. They do get a bill and they pay the bill, but they have no equipment at all. They are going as far as saying anybody that's got a customer record we definitely felt was going too far.

4744 MR. VACHON: I think to maybe answer your question, as you mentioned yourself, we have been forced to draw the line somewhere. Those lines are not easy to draw. Never mind where you draw the line, there's always one that is on this side of the line and one who is the other side of the line.

4745 I don't know. I think in the overall perspective of the plan, it might be something that could be reconsidered, where we should draw the line based on the decision, based on what will happen in the future. It's just a matter of judgment from our part where this line should be drawn. Is it correct? Is it wrong? We assumed based on our analysis that it was a good place to draw this line. Again, I think it's something that could be revisited for sure based on the outcome of this decision.

4746 MR. PRATT: I was checking on the quick facts to see if I could see how many customers we are talking about, but I couldn't find it. How many people are there in this category, do you know, Mr. Yeulet?

4747 MR. YEULET: The fixed manual mobile, we have approximately 386. I say approximately because it could come and go.

4748 MR. PRATT: These are all people that you would consider unserved or are there some that may be served through NMI in which case they may be underserved.

4749 MR. YEULET: These are all fixed manual mobile customers, the 386 that I mentioned, and they are all Northwestel customers and they are unserved.

4750 MR. PRATT: Okay. Do you know if anything is being done to make sure that these people understand what their situation is or is there some provision for them to talk to somebody and get an explanation, if necessary?

4751 MR. YEULET: Yes. We have actually sent out a survey to all the addresses of the fixed manual mobile customers. Since the fixed mobile customer has their own equipment, it's not our equipment, we don't know where they actually are located. We just know that they use one of our sites.

4752 We have sent out a survey and asked them if they would be interested in having service and what the costs possibly would be based on what we proposed to the Commission.

--- Pause / Pause

4753 MR. PRATT: Can I ask you to turn to YG-107, please.

4754 MR. VACHON: We have it.

4755 MR. PRATT: Now, the purpose of this question was to ask what considerations would be included or what methodology would be used for determining the most cost efficient technology. It's a fairly thorough answer.

4756 My first question is whether the assessment of most cost efficient technology is something that is typically applied in the normal construction program.

4757 MR. VACHON: Yes, it is.

4758 MR. PRATT: So the methodology would be the same for the SIP as for the construction permit.

4759 MR. VACHON: Exactly.

4760 MR. PRATT: And I think you have said there that the time frame -- I'm looking at the last paragraph -- time frame over which the costs were assessed is a ten year outlook. You use the latest economic parameters and technology information.

4761 I'm interested in the technology information in particular. What kind of time horizon would you be looking at for technology?

4762 MR. DEAN: The technology costing that went into the SIP evaluations were the four year rollout of SIP. There was another view of a six year rollout. All the builds were within that four year to six year build, but in any technology evaluation, the study assumes equipment replacement at a certain point in time.

4763 What we are saying there is for SIP we used our standard economic evaluators of when equipment would be replaced.

4764 MR. PRATT: Okay. Is there in this process an opportunity for gathering user input or customer requirements with respect to technology?

4765 MR. VACHON: Could you -- you mean that we will use in the core network or --

4766 MR. PRATT: Well, for this type of evaluation, yes.

4767 MR. DEAN: There was certainly a lot of customer input for building the overall SIP of where the individual unserved/underserved customers were. With respect to customer information for evolving technology and an evolving definition of basic service, I think we felt we were somewhat constrained by the definition provided by the Commission.

4768 We definitely built the technology to ensure that we met that definition.

4769 MR. PRATT: I guess what I am thinking about are user needs looking forward and the technologies that may be appropriate to meeting those user needs.

4770 MR. VACHON: Yes. As we mentioned yesterday, we conduct a lot of consultation with the various customers. We talked a lot yesterday about the features, the switches, and this has been identified by many customers. The representatives from Fort MacPherson was quite precise about their need for having call number identification.

4771 The other one -- and it is part of our process to choose the least cost technology.

4772 We are aware of the customer needs. We know where the technology is going. In our selection of technology we have made sure that the technology chosen can grow and can in the future provide to the customers the type of service they are looking for.

4773 We didn't go directly to the customers asking whether they preferred wireless or wireline. We didn't make this kind of consultation.

4774 It is more to make sure that the technology selected will serve the current and future needs of the customers.

4775 MR. PRATT: Are there any circumstances under which you would consider asking the customers about a technology preference?

4776 MR. DEAN: In the earlier consultation process, I think we heard fairly clearly from at least one customer in the rural Yellowknife area that that customer in particular -- and I felt he felt he was speaking for a group of customers -- would prefer wireless over wireline.

4777 So definitely that input is going to be considered.

4778 MR. PRATT: Good.

4779 MR. VACHON: On the other hand, I am just trying to figure out the process of going to a customer where one neighbour would prefer to have wireline and the other prefers to have wireless and where I will finish with this process.

4780 I think the role of the company is to deploy the technology required to best fit the need of this program from a customer point of view, from a performance point of view, and from a future growth potential.

4781 I think those are the most important triggers to choose to select the technology, more than having a customer who prefers to be served by wireless or wireline.

4782 So I am having a little bit of difficulty trying to understand the process of consulting customers.

1005

4783 MR. PRATT: Right. I think we maybe went down the wrong path. I am by no means interested in some kind of democratic process where each person votes for the colour or type they would like the company to implement.

4784 But on the broader level of stakeholders, in the list of factors you are considering I assume that you would also want to make sure that the choices you made about what is most efficient and best for the long term and mapping in your knowledge and expertise of the network is also going to be good for the users, for the stakeholders, in the broader sense.

4785 MR. VACHON: I would say that the further it is realistic to go with this process -- and I think we are doing it today. We work closely with the government. We work closely with the Yukon Government. We work closely too with the GNWT Government and the Nunavut Government trying to understand their needs and the needs of their constituents.

4786 Based on this input we designed a network in order to make sure that it will fit their needs.

4787 As an example, in the Nunavut Government, and also the GNWT and the Yukon, but maybe more obvious in the Nunavut Government where they have a lot of remote locations, tele-medicine, tele-education is very important for them. So in our selection of the technology -- and I understand that those components are not part of the SIP at all here.

4788 I just provide this example to show how we have taken into consideration the requirement of the customers to deploy our network and design it.

4789 MR. PRATT: Thank you. I think yesterday you spoke to Ms Lawson about consultations you might have done with other companies on least cost technology options and mentioned, quite properly I think, that there were not many reference points in southern Canada because of the unique environment here in the north. It was more like you could help them in circumstances rather than they could help you.

4790 What I wondered is whether you have had any consultations with Alaska, any companies in Alaska, to find out what has been done there or what solutions they may have derived.

4791 MR. DEAN: Certainly in the satellite world we deal very closely with Alaska. There is mainly a three-part group with ourselves, Alaska and Telesat Canada, that works a lot on that. Again in the satellite area, we talk on a fairly regular basis.

4792 So if you want to know who we spoke to, definitely in the satellite world it was Telesat extensively, and we do keep in touch with our friends over in Alaska.

4793 MR. VACHON: What Ted is referring to, we use the technology for satellite to transmit voice services that avoid the double hop when you make long distance calls over satellite. It reduces the delay for the customer and provides better quality of service. This technology is produced by Hughes. It is a U.S. company. We have a user conference that we hold every year with Telesat, Hughes, and Alascom, because they use the same technology as us. We work together trying to influence Hughes in their development. Hughes is a huge, huge multinational company and we are pretty small for them. So working with Alascom we try to get more leverage to influence this big company and provide us with what we need from a technology point of view.

4794 MR. WALKER: Mr. Pratt, just another example of consultation in trying to understand the needs.

4795 We heard from Mr. Henry a couple of days about some of the needs of the First Nations groups. As a matter of fact, beginning in November of last year or so we met with them several times to understand the needs of their communities with respect to the SIP program. I think Mr. Wells spoke on the marketing panel about further discussions with them which started this month, and will proceed again in July, about other services that that group of folks may need for their communities and their constituents.

4796 So another example of how we are trying to understand the needs of some of the different folks in our area.

4797 MR. PRATT: Mr. Walker, is it possible that SIP might be adjusted to take those kinds of considerations into account, based on consultations of this type?

4798 MR. WALKER: No. I would say that the SIP has been established with those kinds of consultations having already taken place. We have had consultations with numerous organizations and groups and municipalities and people. All of that has already been done, and the program we have before the Commission now incorporates all that.

4799 We have had further discussions -- and I haven't been involved, but I know that Mr. Wells has, and he spoke of that -- with the Council for Yukon First Nations on a going forward basis on what we might be able to do for their specific needs and requirements. That would be outside of SIP.

4800 MR. PRATT: Thank you.

4801 Mr. Chairman, it appears that I am either out of practice or inefficient. I may have another 20 to 30 minutes of questions.

4802 THE CHAIRPERSON: Go ahead.

4803 MR. PRATT: Thank you.

4804 Can I ask you to look at CRTC-1803.

4805 MR. WALKER: We have it.

4806 MR. PRATT: The response there indicates that subject to the SIP and tariffs the company accepts the obligation to provide local service.

4807 I want to ask you a question with that in mind, in relation to the provision of Internet service in small communities. If there were an Internet service provider already providing service in a small community shouldn't Northwestel consider that ISP as having already addressed that particular part of the service obligation, the basic service obligation?

4808 MR. WALKER: Are you referring to the communities that we are talking about in the SIP program?

4809 MR. PRATT: Yes.

4810 MR. WALKER: The communities under 2,000?

4811 MR. PRATT: Yes.

4812 MR. WALKER: I think this was addressed by Ray Wells on the other panel, but I think what he had mentioned was we had developed a program that would permit or that would put facilities in place in these communities to allow two Internet service providers to go into those communities.

4813 Once the facilities were there the local ISP, the ISP that was in that community would have first right of refusal to using those facilities at the wholesale rate that we have proposed that are part of our proposal now.

4814 MR. PRATT: I remember that. I think it's clear that the SIP, the plan for Internet access, picking up from the obligation that was established in Decision 99-16, was to make local Internet access available as part of the list of basic service.

4815 I am just wondering though if someone's already there do you think that your obligation has been met or the obligation has been met if there is service already provided there?

4816 MR. VACHON: I think what we have to look at is the local Internet. Some of those Internet providers are using long distance calls. So our goal is to make sure that people have access dialling a local number to the Internet. As we mentioned before, we could have provided a local call, a local access to our switch over the network for the Internet, but we felt it was risky from a traffic point of view to have this additional burden on our traffic and volume of calls and long, long holding time.

4817 So instead what we chose was to build two pipes. It comes I think to the same result. Those who are already Internet providers, our intent is not to come and say "Northwestel, now we provide Sympatico you are out of here." Those are the two pipes and they available for you and you have the right to say no, or you have the right to use them.

4818 MR. PRATT: Mr. Vachon, does the plan include just the pipe or are there electronics, modems and other equipment?

4819 MR. DEAN: Perhaps the best place to look for the details on that is some detail we provided in Interrogatory GNWT 4 that I referred Ms Lawson to. It details all the pieces that are there. So, no, it's definitely more than the pipe. It's right down to the telephone number on the switch.

4820 Maybe going back to your previous question, just a couple of comments that came to my mind. In these locations under 2,000 lines we see that some of them do have today local ISPs, but as we have watched the market over the last couple of years we have seen a fair bit of churn in that market. People come and people go.

4821 So, if it is truly the obligation to have that capability to connect at local rates at the community, we were worried about on a go forward basis what if somebody withdraws from the market, would miss that community in SIP assuming that some other entrepreneur had provided the service, but if they ran into economic problems later on and were no longer providing the service, then the obligation would fall back to us.

4822 So we certainly felt it was a much better way to go, to provide the same facilities to all the locations, the capability for the same service at all locations.

4823 MR. VACHON: I think it's part of our -- like you referred to 1803 where we talk about being the incumbent, the local carrier. It's part of our responsibility to make sure that we provide this service. I think that's the reason why Northwestel has to remain in good health to provide those types of service in the 96 communities that we have. That's a role we want to play and that's a role that we have played up to now, even sometimes people are not totally satisfied, but the challenges are great for us to be able to provide this type of service.

4824 For sure Northwestel recognizes this role to be the local incumbent carrier and we want to make sure that those services will be available any time. Like Mr. Dean said, those people sometimes appear and disappear for all kinds of reasons, but Northwestel will remain and that access will be there forever.

4825 MR. PRATT: Thanks, Mr. Vachon. I am also reassured by your statement. It's not your intent to make those entrepreneurs disappear. That's not part of what your intent is and that alleviates a concern that we have.

4826 MR. VACHON: I think Northwestel has tried in the past and is still trying to work a lot with local suppliers. We work with IS providers here in our territory.

4827 We also work with Frontec. Frontec is a company made from NASCO and ATCO and I am not aware of all the other companies that might part of it, but they are local people. Part of them are local people and we try to use as much as we can those contractors to do work for us, trying to keep the economy in the north. That's something also that I would like to acknowledge and sometimes it is maybe not always recognized.

4828 A lot of companies recognize themselves as northern companies and I won't name any, but they have their headquarters in Calgary or in Edmonton. Northwestel is a company with its headquarters here in the north in Whitehorse for corporate and finance. We also have another headquarters in Yellowknife for network operations and sales.

4829 I think it's very important for the north, very important for us to be here. It gives us the opportunity to really understand our territory, really understand our customer's needs and it helps us to provide a better service. That's something that we all do on a regular basis to travel across our territory.

4830 I travel a lot myself. I went recently to Sanikiluaq. It's a small island in Hudson Bay and if you refer to your map you will see where this island is.

4831 Just to give you an idea of why it is important to understand your territory, when we charter from Iqaluit to Sanikiluaq and we had bad weather, we were forced to stop on the Quebec side in -- I forget the name of the small community.

4832 UNIDENTIFIED SPEAKER: In Chisasibi?

4833 MR. VACHON: No, it's not Chisasibi. It's Kuujjuarapik I think.

4834 Anyway, we stopped there waiting for the good weather to come back and the good weather came back at eight o'clock at night, but when we called Sanikiluaq to go, the answer was that the truck that ploughs the runway doesn't have headlights, so there's no way we can go. That's the kind of challenge that we face.

4835 So we spent the night in Kuujjuarapik and we took the first cab and I am sure, Mr. Williams, you know what kind of cab you have in the north. You ride in the trunk of a pick-up truck at minus 40 below and you go to the community. They provide you with a house, a couple of mattresses and you use your jacket as a blanket.

4836 The day after you leave finally and you go to Sanikiluaq, you do your work and people stop you on the street. They know there's new people in town. They stop you and they ask you "Could you fix my phone, please? Could you do that?" and "This thing doesn't work" or "I don't know what happens. When I dial like that it doesn't work".

4837 We make regularly those kinds of trips. I think it's important for me, important for my employees. I want them to go out and understand. When you have headquarters in Edmonton, you don't do those kind of trips.

4838 I could provide you with a zillion examples about the kinds of challenges that we have, but I can tell you I know my territory. I know my customers. I know the challenge that my people have to provide service and it's very important for us. That's why I think the north needs a company who has this knowledge of the territory. You will never have this knowledge with fly-by-nights who come here, make money and take the money out of the country.

4839 I think that's what we are trying to do.

4840 MR. PRATT: Thank you. Can I ask you to have a look at CRTC-1110. This was the question from the Commission that asked you to assume a six year rollout of the SIP.

4841 MR. VACHON: We have it.

4842 MR. PRATT: And I think it's clear without my putting it on the record that we agree with the tenor of the your response that the SIP should be completed as soon as feasibly possible.

4843 What I am interested in here again is the consultation process. You talk at page 2 of 3 about the consultation process, the customers you talked to, the governments, Northern Rockies Regional District, community level groups.

4844 What I'm wondering about is whether you would consider, having taken this input on the SIP and having that input be very much a part of your planning for the SIP, whether you would consider providing those customers and stakeholders with some periodic updates about how the progress of the project is doing.

4845 MR. YEULET: At this time we have prepared a proposal to the Commission on a tracking report card per se to the Commission on a yearly basis. I think it covers all the aspects of the whole program so that everyone would know what they are. We could extend that out to other areas.

4846 We have also committed to doing surveys in the unserved/underserved areas the year prior to going there so that the customer base will have an idea when we are doing it, what we are doing. I believe we have also stated that we will talk to the communities if there is major construction going on so that they will know things are happening.

4847 I think the consultation process overall will continue. It might not be totally formalized yet, but as we go through it, we will find out how better to communicate to the customer base.

4848 MR. PRATT: Well, it's certainly an excellent idea to gather the input and the consultation. I think you should be commended for that. It would seem to me an opportunity for you to provide those same stakeholders with an update on progress and let them know, since they have essentially a stake in the project by having given you their input, how things are going and what they can expect.

4849 MR. WALKER: I absolutely agree. I'm sorry, I don't remember the interrogatory that we answered, but I think that we did or I know that we did say that once we have the decision that we would get back to these groups because once we have the decision, we will know what the SIP actually looks like, if there are any changes to it as we had planned. We can go back to these groups and say "Okay, here is what has come out of this whole process and here is when we plan on providing these types of services to you."

4850 We did answer that in one interrogatory. I can't remember which one it was.

4851 MR. PRATT: Not to belabour this, Mr. Yeulet, but I presume that there is going to be a whole range of metrics, projects reporting metrics and things related to the SIP that you will be keeping. Correct?

4852 MR. YEULET: Yes. There will be tracking mechanisms internally to keep track of the projects as well. I'm sure that we can over time create some kind of a program where we can have regular communication. I'm pretty sure we can do that.

4853 MR. PRATT: Something could be quite easily extracted from the reporting you are going to do anyway.

4854 MR. YEULET: It's definitely possible, at least to the areas that are being worked on in that particular time frame.

4855 MR. PRATT: Thank you.

4856 MR. VACHON: You were talking previously about asking if we will have the staff in order to make sure that SIP succeeds. I think Mr. Yeulet is one of these live examples. Mr. Yeulet was in charge of planning and engineering before to be on this hearing, working these hearings.

4857 The reason why we have released Mr. Yeulet of his function was to make sure that when we will roll out the plan, this plan will work properly so Mr. Yeulet after the end of this week will be on full time just to plan and track and make sure that everything is delivered on time and all the project management related to the introduction of the SIP will be managed by Mr. Yeulet on a full time basis.

4858 That's a commitment that we have made. It won't be done through our regular engineering group just in case something slips with the other priorities that we have to handle, so it will be done on a full time basis.

4859 MR. PRATT: Okay. With that in mind, I think Mr. Hayden's interest is in my finishing quickly so Mr. Yeulet can get off the stand as soon as possible.

4860 MR. VACHON: I'm sure that he is anxious too.

4861 MR. PRATT: Can I ask you to look at YG-209, please. Now, there is a list of the projects or some projects here. At least some would be SIP projects and others capital projects with observations related to improvements related to efficiency or quality of service.

4862 My general question here is do you expect that implementation of these projects, given the comments about efficiency and improvements in service, would have any measurable impact on the quality of service indicators? Is there anything that would lead you to believe that there could be improvement in any of those indicators?

4863 MR. YEULET: The 1.1.47 I truly believe as we start to roll out, you know, in the local programs to the unserved/underserved areas will improve the quality of service in probably two aspects. One is the number of complaints on the quality of local and long distance service and the number of complaints will definitely drop off because it's a big hassle. That's one example.

4864 Another one, of course, is the Yukon infrastructure project. It's being done right now. There are a lot of complaints on quality of long distance and old analog system, lack of -- well, it's primarily the long distance quality. That's two examples. Do you need more?

4865 MR. PRATT: The more the merrier as far as I'm concerned. Mr. Yeulet, you mentioned their complaints. You are not talking about the quality of service indicators then in that case. Right?

4866 MR. YEULET: I'm talking the quality of service indicator customer complaint. I think it's 5.1.

4867 MR. PRATT: Okay.

4868 MR. YEULET: That should come down big time.

4869 MR. PRATT: One of the reasons I was asking this question is that in the response to CRTC 1103, the only indicator that was mentioned as potential improvement -- I can wait for you to get it.

4870 MR. VACHON: Okay.

4871 MR. PRATT: The only indicator mentioned in 1103 they expected to improve was 5.1.

4872 MR. VACHON: What you referred to is the quality of service, as measured by the CRTC -- the CRTC quality of service measures our ability to deliver service. Where we capture the quality of long distance is the complaints from the customers.

4873 If I look here -- maybe you don't have it -- I have the details of the customer complaints for 1998 and 1999 and most of those complaints relate to rural service; people complain because they don't have regular service as other ones. So, in 1998, we have six out of eight complaints related to rural service because people were complaining about rural service. In 1999, we have six out of 12 related to rural service; the other one is quality; some of them are billing. Another one is SR-500 which is also another way to provide service in a remote area.

4874 So those type of complaints, once we will have introduced the SIP, will definitely be reduced.

4875 Another area where you will have improvement in quality service -- and I'm coming back to the representative of Fort MacPherson, talking about the noise and cross-talking; he saying, "You know, we have two conversations for the price of one" -- and he is correct; I won't try to hide the situation, it's true, and it's old analog radios. The cost of replacing this radio is $8-9 million and it will have an impact on 2200 NAS. So if you look at the revenue generated by 2200 NAS and you try to make the economic of $9 million, it will take a while.

4876 So that's why the SIP should eliminate those types of problems.

4877 And the one that we do in partnership with the Yukon Government was the second old analog radio that we have in service.

4878 MR. PRATT: So, from your perspective, the customer complaints are a fairly good indicator of how well you are doing?

4879 MR. VACHON: For me, it's the last test.

4880 MR. PRATT: Right.

4881 MR. VACHON: Because the way we use the CRTC indicators -- the CRTC indicators are important for us, but the way I really use the CRTC indicators is to monitor where I have to improve in order to impact on my customer services. I can have good CRTC indicators but, at the end of the day, if my customers are not happy I have to do something about it. And what we received from -- yesterday, we were talking about a customer survey that we do on a monthly basis and we ask different questions to our customers, and part of them is quality of service, and with the effort that we have made over the past two years -- two years ago our CRTC indicators were pretty low; we were missing more than we are missing today. So we worked hard in order to improve our quality of service -- and we have improved that quality of service. We still have one we are struggling with, but all the other ones exceed what the CRTC is asking us, and working with the CRTC indicators, we have also seen our survey go from -- the percentages of correction, in some area went, from 70-something per cent up to 80-85 per cent. Like, in the installation residential we went from 75 per cent to 82.8 per cent in nineteen ninety -- between 1997 and 1999. So it's seven points up that we made. And we were missing appointments, in the past. We were saying to the customer, "We will be there this day and we will provide you service" and we were missing those dates. Now, our appointments met for installation is up to 97 per cent -- 96 per cent, that I respect my dates.

4882 So it has a direct impact on customer survey, and we can see that we went up from 75 to 82. And we have the same with business and the same with repair, too. Repair business, we went from 73 to 78.4 per cent of increase in quality of service in two years.

4883 So those are really -- for me, the customer survey, the customer voice, is the last test. That's what I call the "acid test"; if you pass this one you are okay. The other ones are just numbers.

4884 MR. WALKER: Just by way of another example, the Commission, in Decision 99-16, did ask us to put together a SIP program which addressed the basic service objective, and they go on to state:

4885 And a couple of programs that we have put in our SIP program, the MacKenzie Valley upgrade and some of the spurs on that upgrade, are designed specifically to address the quality of long-distance service.

4886 MR. PRATT: Okay. Thanks.

4887 Mr. Vachon, just to follow up on the comment you made.

4888 I'm curious to know what you think might happen with the advent of competition, competition actually coming into your territory.

4889 Do you anticipate the customer information to be more important? Is there anything else you would do differently? Or how do you feel about that?

4890 MR. VACHON: I cannot answer it will be more important because customers have always been important for us. So that's an answer that I have to say, no, it won't be more important. And I'm sincere when I say that, and I'm very honest, too.

4891 Customers are the main reason for you to remain in business and be profitable. So even if I look at the customers from a financial point of view or I look at a customer from a service point of view, customers -- and you have heard this motto before, or slogan: The customer is Number One. And you cannot say a customer will be more or was less important.

4892 MR. PRATT: Thanks, Mr. Vachon.

4893 I think that's a good point -- a good note for me to finish on, Mr. Chairman. That's all the questions I have.

4894 THE CHAIRPERSON: Thank you, Mr. Pratt.

4895 Madam Secretary...?

4896 MS VOGEL: Our next party for cross-examination, this morning, is the Council of Yukon First Nations.

4897 Mr. Henry...?

4898 MR. HENRY: Good morning, Commissioners, Mr. Chairman --

4899 THE CHAIRPERSON: Good morning, Mr. Henry.

4900 MR. HENRY:  -- and panel.

EXAMINATION / INTERROGATOIRE

4901 MR. HENRY: I'm glad that as part of Yukon hospitality the Commissioners are able to experience the four seasons of the Yukon.

--- Laughter / Rires

4902 MR. HENRY: I think we are in fall, now. It snowed yesterday.

4903 THE CHAIRPERSON: For what it's worth, it's not all that different than Nova Scotia right now.

--- Laughter / Rires

4904 MR. HENRY: There you go.

4905 I just want to pick up on a question that Mr. Pratt asked, Mr. Vachon, dealing with consultations, and then what Mr. Walker stated.

4906 In terms of the process, Northwestel anticipates meeting with First Nations, in the foreseeable future, to discuss what?

4907 MR. VACHON: I cannot answer you because -- discuss what. I know that Mr. Wells and Mr. Flaherty had meetings with Mr. Schultz. So, what I would prefer is that maybe you wait for the policy panel to ask this question to Mr. Wells and Mr. Flaherty what the meeting in July is all about. I now it's about potential network but I cannot say more than that for now.

4908 MR. HENRY: Okay. Just to back up, then.

4909 Getting us to this position, in terms of the SIP plan, there was a main letter sent to the First Nations, as a way of introduction that planning was going on for SIP. Is that correct?

4910 MR. VACHON: Mr. Yeulet will answer these questions

4911 MR. HENRY: Sure.

4912 MR. VACHON: Being in Whitehorse, he's the one who made all those consultations.

4913 MR. YEULET: Yes, there was a letter that was sent out, originally, and then we were in discussions with the First Nations Group CYFN, and I actually personally attended two different meetings with them through the process, and through those consultations we managed to understand what the needs are of the communities in question and what their expectations were for new subdivisions or growth or areas that were unserved at the time. I'm not sure if all the Bands were represented but the bulk of the Bands were in attendance during those meetings that I had with the CYFN and I think we covered, in our program, all the areas that they had brought forward and identified.

4914 MR. HENRY: So was it a leadership meeting, do you know?

4915 MR. YEULET: Leadership meeting? I don't think I would call it a leadership meeting.

4916 What I did is, we went there and one of the times was I showed them all the areas that we had identified and the First Nations groups had submitted all the areas that they had identified in their areas and then I took that information and then readjusted our program to make sure that we had incorporated all of those areas.

4917 So it's more of a "This is what I proposed. Did I meet your needs? What is it that you think that you need?" And we put those two together based on the areas of providing service.

4918 MR. HENRY: To bring you to the SIP program that is now proposed?

4919 MR. YEULET: That's correct.

4920 MR. HENRY: Okay. And then were there outlined community consultations?

4921 MR. YEULET: There was not actual travel and consultation with the individual communities. It was done through a letter that actually Joanne Macdonald had sent out to the First Nations 14 bands on our be -- or in consult -- on our behalf I would -- I would say it was on our behalf.

4922 And then all of this information came back through her, which we utilized, and then that is when I met with the First Nations group in their building in Riverdale.

1045

4923 MR. HENRY: In some instances, if no information was received then what were some of the assumptions that were made?

4924 MR. YEULET: If no information was received?

4925 MR. HENRY: Yes.

4926 MR. YEULET: I believe that we had feedback on all of them, but if there was no feedback then the assumption would have been that there was nothing there, and we had never had anything on record that there was anything there.

4927 MR. HENRY: What I'm getting at is, there is a principle that Northwestel is using that refers to know -- or ought to have known kind of concept. How does that play in the planning?

4928 In other words, do the First Nations or the individual First Nations have to come forward to Northwestel or, like you said, it's not there?

4929 MR. YEULET: Well, I don't know if I would agree with that statement.

4930 I have been in the north for a long time, a lot of other people within the organization have been in the north a long time. We have a pretty good idea of which areas are currently unserved or under-served. You know, we have been through processes where we have tried to extend service to a lot of these areas in the past. Due to cost the customer base in those areas couldn't afford to have service extended to them, thus that's why we are where we are today.

4931 So that was part of the basis where we had a starting base from. So when we started to build our service improvement parameters we had some idea of where a lot of these areas were. Then through discussion, or at least through the correspondence that was put out, we identified maybe a couple of other areas, and I don't know offhand if there was any additional, but wherever there was then we did incorporate that into our plan.

4932 So it is our understanding that there are no areas out there today where there are customers that have been identified that aren't in our program.

4933 MR. VACHON: I think, Mr. Henry, if I understand your question, it is how far Northwestel goes in order to get the input. Like should we knock at the door at each and every hamlet and band in order to build our plant.

4934 Given the time frame that we had to build this plant and given the size of our territory, too, in order to schedule meetings with each and every hamlet and band and meet them face-to-face all across the 96 communities, I don't think it would have been realistic for us.

4935 So the approach we chose was to send letters to each of them first, also to send letters to the association that represents those various bands or communities or hamlets, send letters to the territorial government to make sure we did not forget anybody and tried to get as much input as we can.

4936 Also, we have arranged some public sessions, like we have one in Fort Nelson, two in Whitehorse, one in Yellowknife.

4937 While I was in Iqaluit recently I tried to meet with the government over there. I have not been able, but the Assistant Vice-President of Sales met with the Nunavut First Nations to make sure they understand what we are trying to do. As much as we have been able in the time frame we had, I think we have reached, one way or the other, each and every band.

4938 The other thing we do, too, on a regular basis is, I went to Old Crow and Tuktoyaktuk recently -- and every time I travel in a small community I always stop at the hamlet, introduce myself, ask about service, if they have special needs. We also stop at the nursing stations, major health stations, major health care centres to make sure they don't have any major problems with communications so if something happens. Those consultations are made on a continuous basis.

4939 And before the SIP we went through the process that I described before. And you will find maybe -- I don't have it here handy but we can find it for you in one of the interrogs, we have identified each and every association that we have communicated with, with their names and their address. So each of the individuals is mentioned in this document.

4940 MR. HENRY: Do you make a distinction between client relations and planning? Do you know what I mean? Consultations for planning for technical services that, say, arise out of a self-government or a land claim agreement?

4941 Because just by interpretation, Mr. Vachon, it sounds more like client relations so I just want to see if you make a distinction between the two.

4942 MR. VACHON: I'm not sure I understand your question.

4943 MR. HENRY: Client relations, stopping in at the band hall when you are in the community or stopping in to see how the phone services are versus long-term planning or objectives of the First Nations in terms of telco and communication development in the Yukon?

4944 MR. VACHON: I think both goals are satisfied at the same time. Because if I take the example of Old Crow, when I met with the band in Old Crow they talked to me about the new subdivision that they want to open outside of the centre of the community and they have --

4945 We have a common problem because the subdivision will be across the runway to the airport. So I have to find a way to get my cable on the other side and I'm not sure they will be happy if I dig a trench in the runway, and I'm not sure the pilot will be happy if I install a pole and a line above the runway.

--- Laughter / Rires

4946 MR. VACHON: But what we are trying to do when we meet with those people is to get their input where they want to grow, how they want to grow and what kind of needs have.

4947 And they talked to me about the new centre they have built in Old Crow where they will have -- and he gave me a number about the number of computers they will have. So when I came back I asked my engineer, "Are you sure we are going to have enough bandwidth? Are we sure we have enough network to satisfy those kinds of needs?" Because they will generate a lot of data out of this town that we are not used to seeing in Old Crow."

4948 So that's how it is incorporated. It is more than a customer services relationship.

4949 And that is why I meet with the hamlet. I meet with the hamlet to understand their needs, what they want to do, what their growth is.

4950 And I'm not the only one, because I cannot go anywhere -- but it's the policy that we have in the company and this policy goes as far as when you are coming back from a trip in a community we prepare a report saying, you know, "I have been Aklavik last week and I met with the Hamlet and this is what I have been told".

4951 And it is sent across the company, the various departments, marketing, sales and network operations. We capture the data and if we have something to do from a service point of view, we take this information, planning people will look at what is going on. That is our way to get informed about the growth.

4952 The same in Tuktoyaktuk. When we met in Tuktoyaktuk they had built a new subdivision. I think it's five miles out of the centre of the small community and we asked them how many potential customers do you think you are going to have in the subdivisions. That is the kind of information we gather and we include in our planning.

4953 MR. WALKER: Mr. Henry, if I could just add, long-term planning may be of the type that we are beginning to do with CYSN, for example. I think it would start at the executive level in our company. I think that our president and vice-president met with the Grand Chief, and I understand that those consultations are going to continue.

4954 To me, that would be a type of long-term kind of planning on the needs and requirements in this case of the First Nations here in the Yukon.

4955 MR. HENRY: Thank you, Mr. Walker.

4956 That is very encouraging, Mr. Vachon, in terms of the consultative process.

4957 Did you get a copy of the community plan? Did you have a look at the community plan or was it just a discussion?

4958 MR. VACHON: They didn't give me a copy of it.

4959 MR. HENRY: It was a discussion.

4960 MR. VACHON: Yes, it was a discussion. They showed me. We visited the small town with them, and it was the Director of Public Works -- I forget his name. It was the person in charge of development in the small town in Old Crow that showed us what his plan was, where he wanted to go.

4961 MR. HENRY: Going back to your airport story, instead of digging a trench, did you consider maybe using a pipeline under it?

4962 MR. VACHON: I will let my engineers answer that.

4963 I know his plan was -- he was forecasting five additional houses in this new subdivision. So we are going to have to find a way to look at how much it would cost to build a network for five additional houses. For the first three or four years, I think that was the plan, to have five additional houses.

4964 I am coming back to what I said before about least cost technology: what is the potential growth of this area and what will be the best way to serve the customer?

4965 MR. HENRY: Will those five houses in Old Crow's development, is that going to be something that would be part of SIP now, that kind of development?

4966 MR. VACHON: I cannot answer at this level of detail. If there are customers in this area that are not served, they might be part of it. But Mr. Yeulet is more aware than I am of the SIP.

4967 MR. YEULET: Yes. That particular one was mentioned during our process that we went through. It is not explicitly identified in SIP. We are aware of it. It will be done somewhere along the line. It is adjacent to an existing base there. We actually have some facilities on that side of the airport already. At both ends of the runway we have facilities going across. So it is a matter of how we are going to extend it.

4968 It will get done, but it will end up being more of our normal capital construction program in the year that they ask for the service. At this point in time I don't believe the service has been asked for.

4969 MR. HENRY: Thank you. In just want to go back to the definition of "unserved". This is where I have some difficulty in what Northwestel knows or doesn't know or should know in the context of previous requests for service.

4970 I note that of your 386 fixed manual mobile, the majority of them refuse to get the upgrade. The majority refused for the $1,000 service.

4971 What I am wondering is this: They do make a request, but then in terms of economies it is too costly. So it goes to the wayside.

4972 MR. YEULET: I don't know if all of these customers or the majority of these customers, or any percentage of these customers, have actually ever had a request for upgraded service. Some of them are just happy to have that type of service. They don't have power in their locations. It is a small cabin somewhere, and they are happy with that.

4973 We did conduct a survey recently, and we are still getting the results back actually. I would have to look at the numbers here.

4974 We have an 80 per cent response to date of the customers that have responded that would like the upgrade.

4975 In our survey we mention that it could be up to $1,000 for a connection charge per construction. Right now the response is really positive. It is our hope that we will be able to extend service to all of them within the $25,000 guideline.

4976 MR. HENRY: Just dealing with the first part of your statement, for the $1,000 what if the person doesn't want to change, the user doesn't want to change. Do they have an option to keep the existing service that they have?

4977 MR. YEULET: If an individual wants to keep the fixe manual mobile service, as far as I know we are not planning to take that service out of service at this point in time. They don't have to take service.

4978 When we did the survey, that is what we were trying to get a feel for, just how many individuals out there would really like to get upgraded service.

4979 MR. HENRY: Is your survey information included in SIP now?

4980 MR. YEULET: It is not included in the service improvement plan at this point in time. We are still actually getting the results. They are still coming back in.

4981 Like I said before, the way to look at our survey is -- all we know about most of these customers is a box number. So we had to send it to the box number, and they are slowly coming back.

4982 MR. HENRY: How will this information be incorporated into SIP as SIP unrolls?

4983 MR. YEULET: These customers would be rolled in the latter part of the program. We have identified in the program that there are a number of manual customers that we expected that would take service. We just took a reasonable assumption, and we put those costs in the latter part of the program. So they are accommodated there.

4984 MR. HENRY: In year 4, for example.

4985 MR. YEULET: The bulk of them are. There are cases where there may be fixed manual mobile customers, and as part of our survey we have asked them exactly where they live, to the best of their ability. A lat and a long would be perfect, because then we can actually find them on a map location from somewhere: mile or kilometre such-and-such on the Alaska Highway, turn right, go in two kilometres, et cetera.

4986 We tried to get an idea where these customers are.

4987 There may be cases where we are extending our wireline facilities or we are putting in a wireless local loop service into one of the areas that are larger. These customers may be in and along the route. They will have the opportunity to get upgraded at that time so they won't have to wait until the end of the program.

4988 It all depends on where the individual customers are located.

4989 MR. HENRY: Is there any work being done in that regard down around Toad River, any consideration that you know of?

4990 MR. YEULET: In Toad River --

4991 MR. HENRY: Muncho Lake Region?

4992 MR. YEULET: Yes. In our service improvement program we are extending wireline service in both directions out of Toad River to as far as we can reach those existing customers that we know about.

4993 In Muncho Lake it is the same process, only Muncho Lake will be a wireless solution, I am expecting.

4994 MR. HENRY: Around Muncho Lake.

4995 MR. YEULET: Muncho Lake, yes.

1100

4996 MR. HENRY: And then that's where you start jumping through the hoops of $1,000 or $25,000, depending on what the cost is to do something like that?

4997 MR. YEULET: No. All the areas are being considered that an unserved customer would be obligated to pay the $1,000 construction charge. Any costs over $25,000 per subscriber in a specific area, then they would pay more than that.

4998 At the present time we don't believe there are very many areas that will actually end up exceeding the $25,000.

4999 MR. VACHON: Maybe as an example, if you have a customer where the cost to provide service is $30,000, the first $1,000 is paid by the customer and the next $25,000 is paid by Northwestel, and the last $4,000 will be paid by the customer.

5000 MR. HENRY: I have a hard time figuring that out for a subscriber. I am wondering if you could help me and create a scenario that would look at $25,000 or $30,000 for a subscriber to access your network.

5001 MR. YEULET: I will try to give one off the top of my head here.

5002 We have, as an example, an area -- and I will keep it fairly small so that I can keep track of the numbers here.

5003 We have an area where there are four customers and it costs us $100,000 to extend facilities to there, whether it be wireline or wireless. You take the four customers, you divide it into $100,000, and you end up with $25,000 per customer.

5004 Northwestel is willing to go to that limit. So those customers will get service without having to incur any additional costs.

5005 You have to keep in mind that that is outside of the $1,000 contribution and/or the service connection charges. Those are outside of this envelope.

5006 MR. HENRY: I can understand the mathematics. I am trying to understand the situation where that might arise and what would be the option if they had a cheaper alternative, for example, or if they -- do you see what I am trying to get at?

5007 MR. YEULET: Yes. At the present time most of our numbers are planning level numbers --

5008 MR. HENRY: Sorry, Mr. Yeulet. Could you start again, please?

5009 MR. YEULET: At the present time most of our numbers are planning level numbers, so there is a degree of error, plus or minus.

5010 Also, we don't at this point in time have actual surveys completed of each of the areas which we have committed to doing before we actually go there.

5011 So once we start to do the actual detail design and get the actual cost, we will know what it really will cost, the least cost technology and we will also have done the survey, so we will know how many customers we are talking about. It is our belief that I don't think there will be -- I would like to say none, but I don't know if there will ever be no cases where it's not more than $25,000 per customer based on the total cost of the project and the number of customers.

5012 The other thing to consider is our last resort -- I'll call that a last resort. It is for those individual customers and they are not really part of anywhere. They are just somewhere along the side of the highway and they want service if we can extend service to them with our Execom Radio that we are proposing to use. It costs roughly $25,000. So the individual is into that maximum zone.

5013 But overall I believe that the bulk of the customer base should be within those limits.

5014 MR. HENRY: How far off the road would they have to be?

5015 MR. YEULET: It's not a matter of how far off the road they are. It's a matter of how far they are away from an existing microwave site that we can actually connect them to. It's the geography in the area.

5016 Typically, when people, or from my experience anyway, whenever I have been out, people like to place their facilities, their cabins, their hotels or their houses along a lakeshore or along the river and, typically, when you look around the north it's down in the bottom of a valley. So geography has a big play in here and we actually have a line of sight because that's real key. If they can't, wherever their location is, if they can't actually in a line of sight see a microwave site where we can actually get a digital signal to go through, then they won't get service.

5017 MR. HENRY: And then, as you find these situations out and start doing the planning, et cetera, that will be rolled in as we go along with the SIP program, yes.

5018 MR. YEULET: As we find these locations?

5019 MR. HENRY: Yes.

5020 MR. YEULET: Yes. I hope that we have identified the bulk of them already, but I am sure there may be more that will come forward. So that's part of the criteria, if it is going to exceed more than $25,000 per customer then that was our maximum because I truly believe there are people, like we have got a big countryside that we are looking after and I am sure there is somebody somewhere out there that we are not going to be able to provide service to. I mean it has got to be out there.

5021 MR. VACHON: I think that will depend highly on the decision of the Commission about this hearing. That's the plan we have proposed and depending on what the decision will be and what is the criteria that will be provided to us in order to provide the service it will make a difference.

5022 I think our big challenge with the territory that we have is that we have in Northwestel many small networks. We don't have one big network all connected together like you have down south. We have a network in Iqaluit that serves a bunch of communities. You have another network in Yellowknife and it's like having a network in Quebec and having a network in Edmonton and you have another network in Vancouver and you have another network in Winnipeg, but all of those networks don't have more than 4,000 or 5,000 lines and you have to connect all those networks together with the geography that you have.

5023 So until we have a final decision from the Commission and until we know exactly where the customers are, just think about a telephone company in Edmonton and in Winnipeg and try to find where the customers are in Quebec or in New Brunswick or in Vancouver and it's a big task.

5024 Even though we don't have as many customers, they are spread out over the same area, the same kind of territory.

5025 MR. HENRY: Now, coming back to 99-16, paragraph 41, it sets out guidelines established by --

5026 MR. VACHON: Could you give us a moment?

5027 MR. HENRY: Sure.

5028 MR. VACHON: All right.

5029 MR. HENRY: It sets out the guidelines that the Commission set out for looking at how you are going to roll out the plan. It is very straightforward, but Northwestel then says there is going to be some unserved potential customers remaining. I guess this is an extreme scenario, in sparsely populated or isolated areas. That's what you were referring to, Mr. Yeulet?

5030 MR. YEULET: Yes, that's what I am relating, that the bulk of them would locate there somewhere.

5031 MR. HENRY: And then that after SIP you'd deal with some of these areas and that there might be alternatives, fixed wireless as an example might be a least cost solution. Is there an opportunity or will you have a way of dealing with that, with the customers as they come forward?

5032 MR. VACHON: That's what I wanted to say. I am mainly thinking about the First Nations people. If we because of the rules that we will have to apply here and depending on the decision of the Commission, if we have in some locations customers, and I am not talking one or two, I am talking about mainly the bands that have been isolated from this process, Northwestel will be more than happy to partner with those customers, those bands like we did with the Yukon government, like we did in the past with our organization to find out working together how we can provide service to those customers.

5033 I think too in part of the 99-16 decision the CRTC has mentioned that they hope also that some of the earliest levels of government and associations will step in and try to find a way in the future and make sure we maintain this network.

5034 So no doubt we are looking forward to work with any of the customers and after a while those who will be really isolated to provide service.

5035 MR. HENRY: I can appreciate your planning difficulties, particularly with some of the First Nations that don't have land claims agreements in place yet and because the matter is subject to land claims negotiations it is not available for the new areas or subdivisions or the land selections or site specific. There may be areas that are in a remote location that would require telco services -- for example, a rehabilitation centre that would be in a traditional area. Those issues haven't been factored in yet or you haven't had those discussions yet, have you?

5036 MR. YEULET: In an existing area or is this a brand new area? Is that what you are referring to?

5037 MR. HENRY: In a brand new area that might come out of a land claim.

5038 MR. YEULET: Yes, and that's another concern, the service improvement program today as it stands is to extend service to as many Canadians as possible. So what we have done is we have gone out and trying to identify where all these Canadians are in our vast territory.

5039 But what happens after the program is finished? What happens after year four? We are still going to continue to be a high-cost area. We are still going to continue to have areas being developed that are not economic to reach. So, yes, that is a concern of Northwestel and a concern of northerners, of how we are going to deal with life after SIP, as I call it.

5040 Do we continue to have a subsidy to continue to do this, or is it going to be the responsibility of the developers, whether it be government or First Nations or whomever that actually are going to have to come up and take on that responsibility.

5041 I don't know at this point in time, but in SIP hopefully we have covered everybody that we know about today that is looking for service.

5042 MR. VACHON: And maybe to build on Mr. Yeulet's point too, when we talk about basic services today, I'm sure nobody knows what basic services was 10 or 20 years ago, what they will be in 10, 20 years from now and even five years from now we don't know.

5043 As John mentioned, the economics of replacing technology for 90 or 200 customers will remain the same as they are today, so we are going to have to find a process by which if we want to remain at the same level that we will be at the end of the SIP, we are going to have to find a process to ensure those things happen.

5044 We will face the same challenge. The territory won't be different and the challenge will be exactly the same. We really hope as a northerner, as a company, as part of this program we will ensure that we will maintain this level of service that we will deploy in the next years.

5045 MR. HENRY: After SIP -- let me rephrase this. During the rollout of SIP, would there be any consideration given to redirecting a subsidy or directing a subsidy to deal with these extremely high cost areas, if you will, as part of building either as part of SIP or part of SIP as an example.

5046 MR. VACHON: I would like to answer you, Mr. Henry, but I don't think it belongs to this panel to provide you an answer on this type of question. It's more the technical side of the SIP that we are knowledgeable.

5047 MR. HENRY: I appreciate that.

5048 Mr. Chairman, I'm about half way through.

5049 THE CHAIRPERSON: Okay. Well, then I would suggest that this is an appropriate time in your questioning that we might take our morning break at this time then.

5050 MR. HENRY: Sure. Thank you.

5051 THE CHAIRPERSON: So we will take our break and convene at 11:30.

--- Recess at 1115 / Suspension à 1115

---  Upon resuming at 1125 / Reprise à 1125

5052 THE CHAIRPERSON: Before we return to questioning by Mr. Henry, are there any preliminary matters.

5053 Mr. Rogers.

5054 MR. ROGERS: Just a quick item. We have provided to the Secretary four responses to undertakings given over the last couple of days and 20 copies have been provided to the Secretary.

5055 I should mention that some of it includes confidential information, so there are both confidential and abridged versions provided. We will distribute the abridged version in the room.

5056 THE CHAIRPERSON: Thank you, Mr. Rogers. Perhaps without just passing them out, you can assign exhibit numbers right now, Madam Secretary, and we won't take the time to circulate them just now.

5057 MS VOGEL: Thank you, Mr. Chairman.

5058 The first undertaking, which was to provide the elasticity estimate inherent in the stimulated residential minutes repatriated in year 2000, will be marked as Northwestel Exhibit No. 13.

5059 The next undertaking, which was in reference to Northwestel's response to interrogatory CRTC 411, will be marked as Northwestel Exhibit No. 14.

5060 The next, which was an undertaking to confirm whether credit card calls can be made from a toll denied line, will be marked as Northwestel Exhibit No. 15.

5061 The last at this time, which was an undertaking wherein Northwestel was requested to provide a portion of market share loss assumed by Northwestel in areas that will not be equipped with equal access in the year 2001, this will be marked as Northwestel Exhibit No. 16.

5062 THE CHAIRPERSON: Thank you, Madam Secretary.

5063 Is there anything else?

5064 Before we return to questioning let me just give a sense and correct a proposal which I had for today which I set out earlier this morning.

5065 Based on where we were at, I want to give a sense where I was kind of thinking we might be going with this proceeding.

5066 Based on where we were at yesterday and my thinking, just based on the times that we had, that today we could probably finish this panel and get a bit of a start on the finance panel with a view that we would probably finish the interrogatory process or the questioning, the cross-examination part of this process on Monday. I hadn't really canvassed the parties in terms of how much time you might want in order to prepare your argument.

5067 My thinking was that the parties would have Monday night and perhaps Tuesday morning. We might have the argument phase on Tuesday afternoon, for example, which would mean that we could finish the proceeding on the end of the day, Tuesday.

5068 That was based on a presumption that we would probably, as I said, finish this panel and maybe get a start on the finance panel today. It has taken a little longer today. I'm not blaming anybody. The parties are quite entitled to take the time they need to do the questioning, so this is not a reflection on you, Mr. Pratt.

5069 In all seriousness, it's not meant as that at all. You know, I know it's difficult to necessarily estimate how long it is going to take to get through the questions. As I said at the outset of the proceeding, we are all a little rusty on this.

It would be my proposal now -- I had earlier said that we would go through and probably not take a lunch break through to two o'clock.

5070 My sense is, unless somebody has a huge objection, I am going to propose a change to that, that we do take a lunch break today, probably at about 12:30 and come back -- we are all here anyway -- and see if we can't get a start on the finance panel this afternoon and perhaps do the Government of the Yukon Territories and maybe Telus on the finance panel and then finish the finance panel on Monday and see if we couldn't finish the cross-examination on Monday.

5071 That's sort of where my sense is as to where we might go. If nobody has got a problem with that, perhaps we can let the Secretary or counsel know as we go through the rest of Mr. Henry's questioning.

5072 With that, I will turn the questioning back to Mr. Henry.

5073 THE CHAIRPERSON: I can finish in one minute if they agree to all the conditions that First Nations want to set forward and the Chairman can give the undertaking. It's done in 30 seconds.

5074 Thank you, Mr. Chairman.

5075 I just wanted to go back. Mr. Pratt mentioned that Northwestel does some work with Alaska earlier in his questions to you. You do have consultations you said regarding satellite usage.

5076 MR. VACHON: Yes, we did.

5077 MR. HENRY: Is there -- does Northwestel do any work in the circumpolar region, for example, Finland or Greenland, areas like that, that are dealing with similar conditions as we do here in the north. I'm wondering if there is any dialogue or any intention of dialogue in the future.

5078 MR. VACHON: All I can answer is our Senior Vice-President in Iqaluit went to Greenland earlier this year, but I cannot provide you more detail about the outcome of this meeting with Greenland. As you know, the Arctic Winter Games, it was part business and part of preparation of the Arctic Winter Games that will be between Iqaluit and Greenland  -- not in 2001 -- 2001 or 2002. Northwestel is a sponsor of this event. I know we have discussed with them, but that's all I can say about it.

5079 MR. HENRY: So there is no -- okay. Thank you.

5080 Mr. Vachon, yesterday you mentioned that negations were under way to run fibreoptic through Wood Buffalo National Park. I'm wondering, in terms of those negotiations, are there similar types of negotiations regarding access anticipated as a result of the SIP as it rolls out.

5081 MR. VACHON: Could you be precise by what you mean by access?

5082 MR. HENRY: Well, you want to run cable through the park.

5083 MR. VACHON: Yes.

5084 MR. HENRY: Okay. You said you were in negotiations to determine how you were going to run -- it's like digging up the airport.

5085 MS VOGEL: What we did was went sent letters or we are in the process of sending letters. It's recent. We are in the process of sending a letter to the various parties involved in the Wood Buffalo Park to first understand what are the rules to go through the park and what will be the terms and conditions to go through the park in order for us to know what kind of design we can do and if it is possible. So that is about where we are now.

5086 I don't have more information than that. Because Fort Smith is planned for 2002, the second year of the SIP, and we know that usually those types of negotiations take time, so we have already started to send letters to the intervenors.

5087 MR. HENRY: And do you anticipate any similar type negotiations being a requirement here in the Yukon?

5088 MR. YEULET: Off the top of my head I don't see us going through any parks. Now, whether there are any land claims issues where we may plan on putting in new microwave sites if they are required, or whatever, we are not there at this point in time yet.

5089 Most of the places where we go with access is along a highway right-of-way, so there usually hasn't been an issue with getting that type of permission, but we have had trouble getting through Wood Buffalo Park in the past. They have some pretty stringent rules.

5090 MR. HENRY: Mr. Yeulet, have you reviewed the land claim dealing with access to settlement lands?

5091 MR. YEULET: No, I haven't, and it was never mentioned throughout the discussions that I have had with the Council of Yukon First Nations when I had the meeting with them.

5092 Basically, the meeting that I did have with them was with all the chiefs of all the bands or the majority of them that were represented. That wasn't mentioned, that I can recall.

5093 MR. HENRY: Thank you.

5094 Moving on to another issue, I'm wondering, the subcontracts and the construction of your new services -- as mentioned are highly specialized -- in comparison to the concerns raised by your union representative regarding local hire and training and access to the opportunities, what opportunities, if any, might be available for a First Nation or other such company to be able to work? Is it anticipated those opportunities might be considered?

5095 MR. VACHON: It's hard to say for now because we don't know exactly what the work -- detailed work will be. But I think a little bit like we did with the -- we will do in with the Yukon build, the project we have for the Yukon government, we will use the best commercial effort in order to create jobs here and use local contractors.

5096 MR. HENRY: And for First Nations, I know in the past Northwestel has been supportive of training programs dealing with new technologies. Would you be supportive if there were programs that were aimed at encouraging First Nation involvement for both training and employment opportunities?

5097 MR. VACHON: I would like to refer that question to the policy panel. My role is more to build this network on time and how we will make it and the involvement and partnership will be discussed later.

5098 MR. HENRY: I'm trying to lobby.

5099 I will redirect that.

5100 Now, with regard to your experience in frame relay in the NWT, I would like to talk a little bit about that.

5101 You mentioned partnerships earlier, Mr. Vachon, and Mr. Wells in previous testimony talked about the partnership with Arcticom. I would like to spend a few minutes and just ask if you could talk about that.

5102 You have a partnership as part of Arcticom?

5103 MR. VACHON: Yes, we have a partnership with two other partners, ACL, Arctic Co-Op Limited, as well as NASCO. So that is what constitutes Arcticom.

5104 MR. HENRY: That involved high-speed digital work?

5105 MR. VACHON: That involves frame relay services.

5106 MR. HENRY: Primarily frame relay?

5107 MR. VACHON: Yes.

5108 MR. HENRY: What is the nature of that partnership, if you could?

5109 MR. VACHON: Again, it's not that I don't really want to answer you question, but I would think that, if I am correct, that those kinds of discussions should be discussed more at the policy panel than the technical panel.

5110 MR. HENRY: Are you familiar with the Arcticom project?

5111 MR. VACHON: Yes, I am.

5112 MR. HENRY: Okay. Because what I'm getting at is: Based on your experience, what were issues, if any, that came out of that partnership including, for example, the construction and the work that was done, budget overruns, if any, employment opportunities. Just generally what was the experience there?

5113 It's not a policy question of whether you want to get into partnerships, it's really more what was your experience and then if there were overruns how did you deal with them.

5114 If there were time lines -- you mentioned earlier that there are a variety of factors that may influence the roll-out, including availability of technology or, et cetera. I'm just more getting your expertise than --

5115 MR. VACHON: This kind of partnership -- a partnership is always a challenge. When you are more than one to make decisions there are always more hurdles than when you are the only to make decisions.

5116 But, in a nutshell, we are very pleased with this partnership. We have, I think -- this partnership gives us the opportunity to deploy in remote communities a lot of good services.

5117 From a budget and time line point of view, as Mr. Wells mentioned before, we have deployed at this point in time a really unique network offering frame relay over satellite and I think we have been, as Ray mentioned, I think the first company to make it in North America.

5118 And we have been approached -- that is one of the items that we have discussed with Alascom too, because Alascom was really interested in this frame relay network, the way it has been engineered and deployed.

5119 So, as I mentioned, it is a good partnership, it is good to support local companies; it is good to the north, given the small market that we have and the limited resources that we have, too, to work with local people.

5120 But again, that is my evaluation of our partnership with Arcticom.

5121 MR. HENRY: Were there time lines that had to be changed as the work went on? I'm not talking about specific examples, but generally was there a time line delay and then, if so, how was that factored in?

1150

5122 MR. VACHON: Yes, we had some delays in the -- as I said, the technology was new for us, the technology was new for some of the partners too, and it was a totally new concept and I think it is part of any project that involves new technology, new development, new deployment and those kinds of delays happen.

5123 MR. YEULET: I was just going to add to that.

5124 I believe that all the communities did get turned up on schedule as the program did roll out, but there was definitely some project delays as it was getting through.

5125 It was trying to produce a project to 58 communities using new technology so, yes, there were some great hurdles that had to be overcome, but overall I believe it was done in a time frame that was agreeable to all once they understood the scope of the project.

5126 MR. HENRY: And in terms of choice of technology, what was the outcome of that? Did you have to make changes in the technology as you went along?

5127 MR. VACHON: No. Not on the core network.

5128 We have made some changes in the distribution in a couple of small communities where the network was not ready, but that's about it. The main infrastructure remains exactly the same.

5129 MR. ROGERS: Mr. Chairman, I think the panel has tried to be as helpful as they can with the history of the Arcticom Project as it occurred a number of years ago. I believe some of the people involved or on this panel were not even with the company at the time.

5130 I'm wondering how much value there is in going into the details of the history of that project, given that we are now looking prospectively at something in the future, the SIP program, and so on.

5131 So there is a limit to the knowledge of the panel and then I would also raise a question as to whether or not it really is useful to pursue the details of a project which is long over.

5132 THE CHAIRPERSON: Mr. Henry...?

5133 MR. HENRY: My understanding, Mr. Rogers, is that it is our most recent example of network development -- as you said, 56 communities; which is a large roll-out -- and that it was on time is to be commended, and that's our latest example.

5134 And then, second to that, in terms of this panel's expertise, my understanding is that it is dealing with network design and network delivery and network implementation, which has a lot of similar factors. But having said that, I had one more question, dealing with Arcticom, if you would indulge me.

5135 Did Northwestel ever do a competitive bid against Arcticom? That Arcticom was interested in, in terms of contractual services or such.

5136 MR. VACHON: The playing ground between Arcticom and Northwestel is very clear and we just respect the contract that we have and we don't compete one against the other one.

5137 MR. HENRY: So there are no competitive bids? There were no competitive bids, sorry?

5138 MR. VACHON: The contract doesn't allow it.

5139 MR. HENRY: Thank you.

5140 Now, I'm wondering if, in terms of cost overrun or timelines or availability of technology -- I just wanted to be clear on this -- would Northwestel anticipate requesting more funds? Let's say we get to Year 4 -- and I know a lot of the more higher-cost areas are going to be dealt with in Year 4, as you stated earlier -- if budgets become an issue, what falls off the table or what prevents services, because I know it's subject to costs and that's part of the guidelines, but what prevents that? And then what would Northwestel do?

5141 MR. VACHON: I would like to make sure I understand. Do you want to know what would prevent it or what we will do if ever it happens?

5142 MR. HENRY: The latter, please.

5143 MR. VACHON: Again -- I'm sorry to do that -- I would like to bring you back to the financial panel where -- for sure, I won't make this kind of decision; I will have to talk with my CFO and find out how we handle the situation.

5144 MR. HENRY: Appreciated.

5145 You have talked a little bit about toll operators in Nunavut. Given that First Nation individuals are very unlikely to come in to Northwestel and complain, I'm wondering -- complain about service or service delivery -- I'm wondering if Northwestel is considering a liaison person or -- we heard from the testimony of Mr. Kane earlier Northwestel has a poor reputation in some First Nation communities; on the other hand, it has a good reputation in other communities, so I would like to put that on the record, as well -- but is how you would deal with that as the SIP is being rolled out over four years is that something that --

5146 MR. VACHON: Again, Mr. Henry, I don't think this question is network related and it should be addressed by the policy panel.

5147 MR. HENRY: Well, it's network-related in that you are the one that's building it. I'm not asking about an employment opportunity.

5148 MR. VACHON: I think our role is to make sure that we satisfy the directive of the Commission, and the first one is to provide basic services and improve long-distance calls, including enhanced feature and local access to Internet, and that's what my panel will do is to make sure that this basic service is put in place. How we will manage basic service after a while, when they will be in place, I don't think this type of answer belongs to this panel.

5149 MR. HENRY: Okay. I will redirect, then.

5150 In YG-512, I want to direct your attention to your last paragraph -- and I understand that this is in the context of uncollectibles. But if you read the paragraph, it very clearly sets out Northwestel's knowledge and variables to the marketplace and I'm wondering -- because, earlier, we were talking about the seasonal cycle of employment or of living or places of living or residency, et cetera, and the impact on the construction season. I'm wondering if these factors have been factored into the roll-out into the SIP? For example, a short construction season in the more remote locations; access is going to be an issue to those places.

5151 MR. VACHON: Yes, they have been. Take as an example the -- you are all, I'm sure, aware of the ice road that we have and we have a period of time during the year where Yellowknife is accessible only by air because by the time the MacKenzie River is really frozen and we can access it. Those types of things have been considered. The daylight in Griese Fjord is not very long in the winter. So those factors, too, have also been considered. Those are factors that we are used to deal with, and they are part of our plan -- and they are part of our challenge, too, no doubt.

5152 MR. HENRY: Okay. Thank you.

5153 And then, I just want to go to CYFN No. 4, please.

--- Pause / Pause

5154 MR. VACHON: I have it.

5155 MR. HENRY: I direct your attention to the last sentence in the first paragraph.

5156 Does that conflict with the testimony of Mr. Walker? I'm just wondering how you see that, how you interpret that.

5157 MR. VACHON: The last sentence of the second paragraph or the first paragraph?

5158 MR. HENRY: The first. Where it says:

5159 MR. WALKER: I don't think it conflicts, at all. I think that we have, as John has talked at length, a process -- developed a process and implemented a process where we have consulted, throughout the development, our SIP program. Part of the responses to our interrogs also suggest that prior to going into particular areas, we will do a letter survey of that area to garner further information --

5160 MR. HENRY: Sorry. I don't mean to interrupt, Mr. Walker. We are not talking about consultation here, now. We are actually talking about proposed subdivisions that are coming on stream and that you would have detailed information arising from your consultation process, and then Northwestel, here, if I read it correctly, is saying that those more detailed plans would be actually prepared prior to the commencement of the SIP. So we have two -- we can't be both places.

5161 MR. YEULET: Yeah, I don't think we are in both places. Let me know if I'm answering your question. What we did is we have worked with First Nations through a number of consultations, or discussions, processes -- I believe we actually had a total of five discussions through this process where we actually met with the First Nations Group, but, basically, part of what the process was was, "Tell us where there's areas today where you unserved/ underserved customers".

5162 Also, while you are at it, tell us where you are planning on expanding subdivisions over the next little while. In other words, are you going to add another five lots here, four lots there? It was more from that vein.

5163 So they have provided us everything that they know of today, and they have said in the next few years we are hoping to expand the subdivision, like the one that Mr. Vachon mentioned in Old Crow. They mentioned one that was in Beaver Creek, the White Rivers First Nations group, that they are expanding the subdivision in Beaver Creek.

5164 We looked at it. It is adjacent to the existing base rate area. We said we will just include that into our normal construction program. We are not going to make that part of SIP.

5165 That is the type of thing we have done. I don't believe they have ever identified any areas out in the middle of nowhere that we have never had identified yet.

5166 MR. HENRY: That comes back to your understanding, for example, of what Northwestel knows or doesn't know that falls into that category.

5167 MR. VACHON: For the record, we met I would think more with the first Nations in the Yukon than anywhere else because that is where we have more underserved and unserved customers.

5168 The meeting we had, we had on November 26th. We had another on December 16th. We had another one on January 20th with all the Bands to present the blueprints. We also had another one on January 21st, and the next one on May 20th between Mr. Flaherty and Ray Wells and Mr. Schultz.

5169 Those are all the meetings consultations we had. We took into consideration, as we mentioned here, their input in order for us to build this plan.

5170 MR. HENRY: I am looking at the date of the interrogatory in relation to Mr. Wells talking about consultation taking place in July. So I am assuming that this consultation process that you are referring to here is also inclusive of other -- to use your words -- detailed plans that may come out of further consultation.

5171 MR. YEULET: No. Basically what we have done is we went through the process and we have identified everything that we believe -- well, hopefully we have covered all areas now. That is what we have put into the service improvement program.

5172 If there are other areas that come up, brand new developments, somebody decides to build a subdivision in the middle of nowhere going forward, that is outside of the service improvement program, and we will have to find a way to deal with that.

5173 So it is slightly different. I truly believe that this February interrog response covered all of the dealings that we have had with the meetings, and the discussion that is going on in July with Mr. Wells -- there again, it has to go to that panel. But I think it is focused more on the high speed. It's a whole different area rather than service improvement for basic service.

5174 MR. HENRY: How did you conclude it is dealing with high speed?

5175 MR. VACHON: I would suggest, Mr. Henry, that Mr. Wells will be back here. You are asking us to talk about a meeting that we were not part of.

5176 MR. HENRY: No, I am not.

5177 MR. VACHON: You are talking about the meeting of July.

5178 MR. HENRY: No. I am asking you to respond to Interrog no. CYFN-4.

5179 MR. VACHON: My answer --

5180 MR. HENRY: Just as a point of clarification, Mr. Yeulet, your SIP was filed January 17th.

5181 MR. VACHON: My answer to your question is, first, the SIP was filed on January the 17th; you are right. This interrog you are talking about specifically was filed on February 28th.

5182 Before February 28th or January 17th we met for the first time on November 26th with the CYFN. We met for the second time on December the 16th --

5183 MR. HENRY: No, it's not --

5184 MR. ROGERS: Excuse me. Mr. Henry, could you let the witness answer the question and then get to the next question.

5185 MR. HENRY: No. I will stay on this question. He can answer it.

5186 MR. VACHON: If I understand your question properly, it seems you are concerned if we have included the consultation or the result of the consultation into this plan.

5187 Our answer is -- and maybe I should ask you to precise your question before answering. This way I will make sure I satisfy your needs.

5188 What is the relationship you are trying to do between the date of January 17th, this interrog and -- and I am not sure what.

5189 THE CHAIRPERSON: Mr. Henry, let me ask you a question.

5190 It is not clear to me whether your concern turns on the words "more detailed plans are prepared". I am getting the impression that you have the impression that there is a SIP program and that somehow or other there is another plan where the words "more detailed plan" refers to.

5191 It is not clear whose more detailed plan from the wording of the sentence that we are actually talking about.

5192 My understanding, from reading that sentence, is that Northwestel has put forward a broad service improvement plan. As they get to individual specific communities, that plan will be focused more, detailed more to serve that particular community, as we get closer to actually starting that project.

5193 That is what I understood those words to mean. I may be wrong with that understanding.

5194 MR. VACHON: No.

5195 THE CHAIRPERSON: It strikes me that you may have a slightly different interpretation of what those words mean.

5196 MR. HENRY: Well, there are two parts to it. One is that there is going to be something that takes place after SIP. Let's look at life after SIP.

5197 SIP has not been approved yet, so it hasn't commenced. What I am saying is that as more information from First Nations become available, instead of five houses there are eight, will those new plans, more detailed plans, be incorporated in SIP?

1210

5198 MR. VACHON: I will answer the first part of it. Then maybe John would like to add something.

5199 What is important to understand is the way SIP is done now. It is a time frame. It is a predefined time frame over four years. In order to accomplish this time frame, to do what we have to do, we have had consultations based on the basic criteria that have been provided to us.

5200 We had this consultation. We met, as per the date that I provided you before. We get your input and we build our plan, as Mr. Colville mentioned, a high level plan on how we will realize the SIP by the end of the four years with the information that we have.

5201 At the end of the four years this plan is over. I think that we have enough on the plate now to deal with the plan that I would like to talk of after SIP, elsewhere than here; what will be the future development that will happen in the north, where they will be, and so on and so forth.

5202 What you need to understand is that this plan is a four-year plan. For the four years we have consulted people many times. We took their input, we built the plan and that is the plan that you have here.

5203 With the high level information we have received, when it comes time for me to order equipment I will know exactly how many I need and what type I need, I will be closer to each and every person and I can say: Where exactly are you? That is the detailed plan we are talking about here.

5204 MR. HENRY: Based on your previous consultations.

5205 MR. VACHON: Based on previous consultations.

5206 MR. YEULET: Just to add to that, when we go into the subdivision there may be 20 lots in the subdivision. We talked about that yesterday. There might only be ten houses today. There might be 12 houses by the time we get there. They are just automatically incorporated into the program as part of the subdivision.

5207 MR. HENRY: Okay. Thank you very much.

5208 If it was unclear from my part, then thank you for your patience. That is what we wanted to question prior to the approval and then prior to the commencement: that detailed plans are delivered and then things may change, as you just said. So thank you.

5209 I would like to go to CRTC-110, please.

5210 MR. VACHON: We have it.

5211 MR. HENRY: Mr. Vachon, in terms of the question I am wondering outside of what you identified, this should be read in conjunction with -- okay, no; it is still 110.

5212 Have you looked at specifically First Nation funding or access to First Nation funding in terms of your telecommunications development and planning?

5213 And if you want, we can put this to your finance panel.

5214 MR. VACHON: Again I apologize, but all the funding issues and where the money is coming from is more of the expertise of the financial panel.

5215 MR. HENRY: Okay. And then we have one more question.

5216 Under capital expenditures you stated some projects are mandatory for public safety purposes. That was earlier this morning.

5217 What do you mean by public safety and what would be an example of that, please?

5218 MR. VACHON: It might be a tower that needs maintenance, deterioration of the anchor, the concrete on which the tower has been built. So we have to replace it. That is an example.

5219 The tower could fall on somebody. Those are the kinds of investments that we are talking about here.

5220 MR. HENRY: So it is more a liability issue than it is a people issue, for example: fire, elders in remote locations.

5221 MR. VACHON: Yes.

5222 MR. HENRY: Okay. Thank you.

5223 THE CHAIRPERSON: Thank you, Mr. Henry.

5224 I think we will take our lunch break now, then, and reconvene at 1:30.

5225 I guess Mr. Lowe will be up next, I think.

5226 Mr. Zubko? Oh, I'm sorry. Okay.

5227 Anyway, we will take the lunch break now.

--- Recess at 1215 / Suspension à 1215

--- Upon resuming at 1330 / Reprise à 1330

5228 THE CHAIRPERSON: Good afternoon.

5229 We will move the next party to cross-examine.

5230 Are there any preliminary matters?

5231 Madam Secretary?

5232 MS VOGEL: Mr. Chairman, there is a further exhibit. It is the response to an undertaking given to CRTC counsel that was to update Interrogatory CRTC 707, Attachment 2 and Interrogatory CRTC 1701.

5233 That will be marked as Northwestel Exhibit No. 17.

5234 THE CHAIRPERSON: Thank you.

5235 The next party, then.

5236 MS VOGEL: Our next party for cross-examination of this panel is New North Network, Mr. Zubko.

5237 MR. ZUBKO: Thank you once again, Mr. Chairman.

EXAMINATION / INTERROGATOIRE

5238 MR. ZUBKO: Panel, good day.

5239 I am going to be addressing to a great extent the smaller community issues, partly because I am probably more familiar with that scale of operation.

5240 I would like to point out also that I am -- I told you the other day I wasn't a lawyer. I'm also not an engineer so you will be patient with me if I ask questions that aren't exactly as proper technically as they could be.

5241 I'm going to start with Internet service again.

5242 The Quick Fact sheet that was handed out this morning, I did a count on it. I may have counted incorrectly, but approximately I count 17 communities that have less 50 access lines; 12 that have between 50 and 100; and 10 that are between 100 and 200.

5243 Is that approximately accurate?

5244 MR. VACHON: Yes. If you look on the other side of the sheet you have the count that starts at 500 lines, so we have 79 under 500; 10 between 500 and 1,500; and 7 above 1,500.

5245 MR. ZUBKO: Yes. So the breakdown below that, you would concur, is close to being accurate?

5246 Now, if we took, for example, a community that had -- well, let's say Sacks Harbour as an example -- 83 lines.

5247 First of all, how many trunk lines would you normally use to that number of customers, long distance trunk lines, typically?

5248 MR. DEAN: I don't have the interrog handy -- I think the guys back there are pulling it out -- but we definitely answered that question in an interrog and a couple of other times --

5249 MR. ZUBKO: Okay. We don't have to be specific to facts, but I mean you must -- in the range of 50 to 100 connections over satellite, what kind of a trunk ratio would you normally deploy?

5250 MR. DEAN: Well, it varies depending on the volume of calling coming out of a particular community, but there are certainly communities in the 8 to 10 trunk size, 10 to 20 trunk size.

5251 MR. ZUBKO: Okay. That is more than satisfactory. Thank you.

5252 In a community in the neighbourhood of about 100 lines, certainly there are lines that one would never expect to need to access Internet by dial-up such as control lines perhaps, lines that are used for offices strictly for voice. Do you have any handle on what kind of a ratio that might be?

5253 MR. VACHON: Your question is: Out of 100-line or 200-line exchange how many of those lines will access Internet?

5254 MR. ZUBKO: Either will -- take it either way, how many will or how many would not ever need to access Internet?

5255 MR. VACHON: I'm not sure about your question because what I have in mind is that we have in our central office lines that we use for testing, they are called test lines, and usually the number of lines available for a customer in a switch will be in the neighbourhood of 90-95 per cent number of lines available. The other ones are test lines and all kinds of lines.

5256 So I don't know if you're talking about those lines or how many customers will take Internet services or how many customers can use Internet at the same time. So that's what I'm trying to understand.

5257 MR. ZUBKO: Okay. Let me try to rephrase the question.

5258 If you took a typical office environment, you might have 10 lines in it that would be used for a variety of reasons, either voice communications, fax communications and possibly Internet. Agreed?

5259 Some of those lines would not ever be expected to be used for Internet. For example, a dedicated fax line.

5260 So what I'm trying to do is trying to get a relationship between -- you have 100 lines in the community, some of them will never be used for Internet, which means that the rest of them potentially might be.

--- Pause / Pause

5261 MR. DEAN: I think you're right, there are some of the lines on a switch are going to have a lot less likelihood of dialling into a local Internet local ISP than others.

5262 Again, I don't have the numbers right in front of me, but I recall when the marketing panel was here they spoke several times about the split between residential lines and business lines and while it is not 50/50 it was, you know, fairly close to those kinds of numbers.

5263 MR. VACHON: Just to make sure we are talking about the same kind of lines, for me a line is the way by which the customer accesses my switch.

5264 So if I go back to your question, a customer who has one line at his home and he wants to access Internet, he will access Internet using his home line. So that is one line to access Internet.

5265 So if he asked me "How many lines can I access Internet" and I have 100 lines, 100 customers, my answer is 100.

5266 So that's why I'm having problems understanding if you are talking trunking that goes out or lines from the customer.

5267 MR. ZUBKO: You are absolutely correct.

5268 I'm talking about customer lines.

5269 MR. VACHON: Okay.

5270 MR. ZUBKO: What I'm trying to get to is -- and maybe I can do it this way: I would suggest to you that probably two-thirds of the business lines that you have would not be used for Internet now, that they would be used for voice dedicated lines, fax, dedicated fax lines and other such things.

5271 Now, if I put that premise in front of you, would you agree with it? Disagree with it?

5272 MR. VACHON: I cannot answer your question.

5273 MR. ZUBKO: Okay. Let me continue on then.

5274 Actually, before I continue on, you would accede to the fact that some of those lines would, in all likelihood, never be used for Internet access?

5275 MR. VACHON: There are people who don't have computers so for sure they won't use their line for Internet access.

5276 MR. ZUBKO: Or the line may be hooked up to a fax machine as a dedicated fax machine line. That's common in an office environment for example.

5277 MR. VACHON: Could be dedicated to the fax or they could use both lines for fax and computers. That's also common in many buildings. It's hard to say.

--- Pause / Pause

5278 MR. ZUBKO: Okay. The marketing people indicated that penetration for Internet, where it was available, varied, I think from something in the neighbourhood of over 30 per cent to somewhere under 60 per cent in the residential area. Is that accurate?

5279 MR. VACHON: I don't know. I think marketing is in a better position than me to answer this question.

5280 MR. ZUBKO: Okay. If we assume that it's in the 40 to 50 per cent range, and if we assume that, say, 25 per cent of the phone lines that you have in a community are used for dedicated purposes that would preclude them from being used for Internet access, then would it be -- could we take it from there that in a community where there is approximately 100 lines that it would be reasonable to expect that probably no more than 40 or 50 would be used for Internet access?

5281 MR. DEAN: The exact number is probably a marketing question.

5282 MR. ZUBKO: Okay.

5283 MR. DEAN: Just to allow you to go along with your line of questioning --

5284 MR. ZUBKO: All right. The reason I'm asking this is because I'm trying to determine how you came to determine the appropriate type of access in a switch in a small community and the cost of it.

5285 MR. VACHON: I will just provide a high level of answer and Ted can provide more technical information.

5286 The line is not the only component of a switch that will make the switch not be able to process your information.

5287 The switch, again it is a little bit like a computer on which you have a server, on which you have many customers or many people using this network and how many cables you have connected to this computer doesn't change anything to how many people access the switch. For sure you can have one or five at the same time or only one.

5288 The problem is the usage, the CCS that will be pulled out of this switch and a voice line will take 64 kilobytes, never mind if you transfer data or if you don't transfer date. You take 64 kilobytes and it's there and it's busy so it's taken out of the capacity of this switch.

5289 When you talk -- usually for a voice you use 64 kilobytes because you are talking all the time, but a computer, very often you work and you send and you receive, but the 64 kilobytes will be utilized all the time.

5290 So the blockage is more at the switch level than at the line level because you will freeze a bunch of capacity that won't even be used because you will be working on your computer.

5291 The proposal that we have made with frame relay, the advantage of this proposal is because if the frame relay is busy -- if I can use this word -- only when you receive or you send information. So it's much more efficient than having a line hot all the time and taking a capacity on your main switch.

5292 MR. ZUBKO: Okay.

5293 Can you explain to me the need for digital access from your switch to the ISP?

5294 MR. DEAN: The premise behind the type of Internet access that we had proposed was that it would support the V90 protocol. If you accept that, then physically, electronically the way that it has to be connected is digitally, because V90 only works with a single analog to digital conversion. As soon as there is another analog to digital conversion in the line-side connect it cuts the speeds.

5295 MR. ZUBKO: Okay. Why did you come up the 56K rather than, say, 33.6?

5296 Let me rephrase that.

5297 I'm reading from page 1 of the Service Improvement Plan segment. It says:

5298 Okay?

5299 I guess what I would like to know is where the definition of "low speed data" came to mean 56K instead of, say, 33 or some lesser amount?

5300 MR. DEAN: I'm not sure exactly where you are reading, but in the --

5301 MR. ZUBKO: Oh, I'm sorry. It's page 4 of your evidence.

5302 MR. DEAN: Well, I'm looking at CRTC 99-16 and the stuff you are quoting from is very similar to what is in paragraph 24.

5303 But in paragraph 29 it reads:

5304 So the Commission specifically said they would not set a speed so we felt we had to set a speed that we were designing our network to.

5305 As Mr. Vachon had mentioned, yesterday I believe it was, personal computers that people buy today, I think you would be very hard-pressed to buy one that did not come with a V90 modem. That, I certainly believe, is today's customer expectation.

5306 Again, what we are trying to do in this Basic Service Objective is meet the customer expectation. So if that is the customer expectation, we felt that is what we needed to build to.

5307 MR. VACHON: I think it is more than customer expectation too -- if I can add this also -- to put in place something that won't be obsolete next week. If the computers are provided today at 56 kilobytes, I think it would be not very wise from our part to provision technology which is already obsolete. So that's why we went with the 56 kilobyte.

5308 MR. ZUBKO: And the cost attributed to going to 56 instead of 33.6, as I understand it from your evidence, is about $5 million?

5309 MR. DEAN: I don't think I would agree with that at all. The $5.3 million is the whole Internet infrastructure that we are putting in place.

5310 MR. VACHON: The cost of digital trunking is just $1.4 million.

5311 MR. ZUBKO: Okay.

5312 MR. DEAN: And that is an identified cost for digital trunking. Even if you had lines VF-connect to VF-modems, there would still be costs that would need to be identified. The incremental costs of going to digital trunking, I would suggest, is reasonably small. We didn't calculate it, I guess, because we started with the premise that V90 is what made the most sense.

5313 MR. ZUBKO: Do you have any idea of how many places you wouldn't get 56K? It was in your evidence yesterday, I believe, that 56K -- pardon me, it's in your evidence here, in the Service Improvement Plan, that 56K may not be realized, depending on a number of factors, line quality, et cetera. Correct?

5314 MR. DEAN: I think that is a pretty common understanding in the industry that 56K, as we discussed with, I believe it was Ms Lawson yesterday, is the maximum speed that will work through those modems and very often the speed will be lower.

5315 MR. ZUBKO: And V90-type modems will work through analog -- multiple analog to digital translations at a lower speed. Correct?

5316 MR. DEAN: Yes, V90 modems if you dialled. I mean, I am sure most ISPs that are providing analog connections today are connecting to V90 modems. It is certainly my understanding that the typical connection speed from the V90 to an analog modem is in the 2880 range.

1350

5317 MR. ZUBKO: Could you explain to me the other costs? I looked at the information that you gave to NWT's interrogatory for I think it was No. 4, but it wasn't clear to me where the other costs were involved. If upgrading a switch is $1.4 million, can you tell me where the rest of the money is going to go?

5318 MR. VACHON: Can we take the interrogatory please?

5319 MR. ZUBKO: Sure.

5320 MR. VACHON: Thank you.

5321 MR. ZUBKO: Can you fill me in on where the rest of the $4.9 million is in the $1.4 for the switching upgrades?

5322 MR. DEAN: Have you got a copy of --

5323 MR. ZUBKO: No, I'm sorry, I don't.

5324 MR. DEAN: There's a sketch in Attachment 1 which talks about the rest of the physical elements --

5325 MR. ZUBKO: I saw that.

5326 MR. DEAN:  -- that we are provisioning in our proposal to remote access servers. So there are two modem pools which we certainly felt was a prerequisite to allow two different ISPs to establish in that community a router, a connection into and out of the frame relay network in the remote community. So, basically, there is an access and some trunk increments and then off into the rest of the frame relay network.

5327 So the main part is on a per community basis the two access servers, the router and the frame relay components.

5328 MR. ZUBKO: Do you ever see the real practicality of there being two ISPs in a market that has a theoretical potential of 48 Internet customers?

5329 MR. VACHON: Again, what Northwestel has tried to do is to give the opportunity for people to connect. Regarding the potential of takers of such an effort I think it belongs more to the marketing panel on what could be the penetration, but what we are trying to do in those communities has been explained before, is try to provide the community with a choice of suppliers.

5330 Mr. Henry was here this morning talking about First Nations as an example and maybe some of them would like to have a specific supplier and some other residents would like to have another supplier. The take might not be high, I don't know, but we try to provide diversity to our customers.

5331 For sure, as we mentioned before, I think it has been mentioned in one of our interrogatories, in a community of 19 or 25 lines we don't expect to have maybe too high a speed that will show up and even one that will show up to provide service in this community.

5332 MR. ZUBKO: So would it be accurate then to say that you basically took a cookie cutter approach to the Internet service provisioning?

5333 MR. VACHON: Can you be precise with what you mean by a cookie cutter approach?

5334 MR. ZUBKO: Basically, you disregarded the fact that there is a large number of communities that are in the 50 to -- I guess combined in the less than 200 lines.

5335 MR. VACHON: I think the purpose of a panel is mainly to explain to you how we have deployed this technology. The policy or the strategy of how many we will deploy belongs more to either the marketing panel or the policy panel.

5336 I think my engineers here are capable to explain to you how this network works, but how the policy has been developed I would suggest you ask those questions to the policy panel.

5337 MR. ZUBKO: Thank you.

5338 I guess I am a little surprised. I would have thought the policy panel or the policy people in your organization would have looked to you to get an idea of what level of service you thought was required in a community. However, I will ask the policy panel that question.

5339 In a community, there are 17 communities with less than 15 lines -- pardon me, less than 50 lines, according to my account of your fact sheet. Did you consider any other options for Internet access other than dial-up telephone? I am thinking that it may have been a cheaper way to go than providing it via dial-up. Was that ever looked at?

5340 MR. DEAN: I am a little confused as to what you could be referring to.

5341 MR. ZUBKO: I could be referring to, for example, wireless modems.

5342 MR. DEAN: The basic service objective refers to access to the Internet at local rates. We certainly read that as meaning it involved the telephone network.

5343 Even today there are private satellite options that customers could have if they wanted that had nothing to do with the telephone network, but certainly that type of equipment is much more expensive. In the market today I would suggest it is only for a very few.

5344 MR. ZUBKO: So the answer is no. Is that correct?

5345 MR. VACHON: Sorry?

5346 MR. ZUBKO: Is the answer to the question no, you didn't look at alternative methods?

5347 MR. VACHON: We look at various alternatives and we without going too much into detail here, we look at the voice first. That's the one we have looked at, is to have this Internet work over our regular voice network. I explained before why it was not a good option for us.

5348 We also have to deploy our frame relay network in each and every community. It's there and it is running and so it doesn't require additional investment in technology, except the Internet equipment that will be required.

5349 When we talk about modem pools, you can have a modem pool of -- and I don't remember the number by heart, but I think we are talking about four modem, eight modem, twelve modem, twenty-four modem. In a community where we have only 60 customers we won't install 24 modems for sure or 60 lines. We will install less modems.

5350 To go with new technology, it comes back to what we have discussed before when we were talking about least cost technology. If I deploy in my network technology that I don't have today -- or, there is always a way to deploy a network with cheap stuff or just for the sake of saying you provide service. But I have to be able to maintain this network and make sure I provide good service to my customers.

5351 If I deploy technology for the Internet, and people are relying on this technology to make sure it works and runs all the time and if I have various types of technology different in each and every community, when I have a failure in those communities I will be flying a guy with the wrong spares in order to fix this problem. So we have to make sure, given the size of our territory.

5352 I understand for a small company to provide service in a very specific location you can go with this type of approach, but for us who have to maintain a total network throughout 96 communities, we need some kind of standard.

5353 We have to make sure that, first, it is reliable and people can use it properly, and when it breaks or fails I have spares or I can fly spares, or I don't have to fly a technician with 25 spares to know which one really fits with the technology we have deployed there. So standard is very important in our industry in order to provide and sustain a good quality of service, but we have looked at various scenarios.

5354 MR. DEAN: Your specific question is did we look at other alternatives. Again, in GNWT-4 we talk about some alternatives we looked of establishing separate trunks from the remote communities to some central hub. We went on and had a further question on that in CRTC 2108, where we explained it in even more detail.

5355 Definitely we looked at some other alternatives. You know, as we are the telephone company as well as providing the infrastructure for the Internet, we were certainly concerned with LD blockage over and above access to the Internet. Compared to an individual who is only concerned about being an ISP, we do definitely have some other constraints that we were worried about.

5356 MR. ZUBKO: Thank you. I think we will probably come back to that issue a little later.

5357 You mentioned earlier today, Mr. Vachon, the concern that you had that some of the -- I think you used the word -- fly-by-night companies that are providing Internet might walk away from that service provision and leave you holding the bag, so to speak.

5358 Did you consider the idea of asking the Commission to put aside a reserve for SIP enhancements in order that people who had already made investments in Internet provision would not be threatened by the entrance of Northwestel into the market as an alternative?

5359 MR. VACHON: No.

5360 MR. ZUBKO: Okay. On this subject, the last question I have is on collocation. In your diagram and in the various pieces of evidence, it's not totally clear to me where you intend to, for example, locate the modem pools that you talk about providing. Would they be in your switch or would they be in the ISP's office?

5361 MR. DEAN: The physical infrastructure that's outlined in GNWT-4, and I might point out that there is a couple of pages on GNWT's notes -- the original GNWT-4 is dated February 28. There is a couple of pages that are updated June 8. I'm not sure if you have got the latest copy of it.

5362 All of that stuff, as the drawing says, we expect to be located in the remote central office.

5363 MR. ZUBKO: So what would the ISP be -- how would he be provisioning -- how do you access that modem pool?

5364 MR. DEAN: Physically or how would the ISP keep their interest in being -- buying some of that wholesale Internet service at the specific location?

5365 MR. ZUBKO: Yes. If I came to you and said I want to be an ISP, whatever location, how would I access the facilities that you are providing as an ISP?

5366 MR. DEAN: I think it was Mark that talked several times during the marketing panel of the process of selecting ISPs, so can we start with the assumption that you are one of the selected ISPs and go from there or where did you need to go?

5367 MR. ZUBKO: I'm asking about the physical and management capability of using an ISP using your facility. Do you want me to be more specific? I can.

5368 MR. DEAN: Please be more specific.

5369 MR. ZUBKO: Okay. How would I access the terminal server in order to put in authentication tables for my customers -- passwords, names and user names and passwords, that kind of thing -- with the terminal service located on your premise?

5370 MR. DEAN: Again, as we have shown in the drawing on GNWT-4 there, through the Internet basically at wherever your hub location would be you could run your BNS and your radio servers, your new servers, your e-mail from your hub location. This is just remote access technology to allow you to bring those customers back to the rest of your Internet infrastructure.

5371 MR. ZUBKO: Okay.

5372 MR. DEAN: Maybe it's important to point out that physically that's the reason we need two remote access servers to ensure that a customer dialling in to access server No. 1 is only going to ISP No. 1 and a customer dialling in to remote access server No. 2 is only going to ISP No. 2.

5373 MR. ZUBKO: So the answer then is access to the modem pools would be via remote -- your so-called remote server. What type of a unit is that? Can you be specific?

5374 Let me back up. Normally an ISP would have a modem pool in his facility along with his servers, cash servers, whatever else he wanted to have. He would have a trunk line coming in with Internet service on it. He would have either digital or analog lines coming into his modem pool. They would all be contained in his own facility. He would have full management control over it.

5375 MR. DEAN: Have you -- are you a dial-up ISP in Inuvik today?

5376 MR. ZUBKO: I am.

5377 MR. DEAN: Do you also have dialogue access in any of the other communities under contract?

5378 MR. ZUBKO: No, we do not.

5379 MR. DEAN: Okay. The architecture, as we have suggested in GNWT-4, is basically the architecture Northwestel uses and, to the best of our understanding at least, the architecture several other ISPs use for accessing multiple remote communities.

5380 They don't duplicate their billing and their authentication servers in every community. They bring all that back over a data network. We are suggesting the data network to use is the frame relay network.

5381 MR. ZUBKO: So your model is built predicated on an ISP that would serve numerous communities as opposed to an ISP who might service a single community. Would that be a fair statement?

5382 MR. DEAN: I think our model is built with the assumption that we are dealing with ISPs that are interested in more than one community.

5383 MR. ZUBKO: Okay. Thank you.

5384 MR. VACHON: But you can be interested in one community also. I think that the way the network is designed is to provide the access to the ISP and when you asked Mr. Dean how you will access, he answered that usually ISP access remotely those servers.

5385 Does it mean that the network has been designed only for ISPs that will serve many communities because I think that it has been discussed before. If there is a local supplier in town, he will have the first right of refusal. The explanation of going remote into a switch doesn't mean that we designed this network only for ISPs that will deal with many communities. It's just the way you will access it.

5386 MR. ZUBKO: I guess part of the reason for asking these questions is I did quite a bit of work with Arcticom in the very early days in trying to determine how we could potentially put some services into communities into our area. One of the very significant issues that we could not get past was collocation of modem pools.

5387 At that time the answer we got back was no, you cannot collocate anything on our premises. That's why I'm asking about this. It's because there appears to be a change in policy. Maybe this is better for the policy panel than the infrastructure panel. That is a great deal of the reason for my confusion in understanding exactly what you have proposed here.

5388 MR. VACHON: In this proposal, Northwestel will provide the modem pool and there will be no relocation. It won't be owned by the ISPs. We will give you the access.

5389 MR. ZUBKO: Thank you. I will now move on to a little more specifically the satellite side of the program.

5390 How many communities do you have to put satellite uplinks into that are not already there? I think that was in your evidence, but I missed it. Or do you have satellite services in every community that you would be provisioning for Internet service?

5391 MR. DEAN: There is no new satellite uplinks specifically to connect to Internet. As we said several times, we are connecting to our existing frame relay infrastructure which significantly reduces the cost.

5392 MR. ZUBKO: You said earlier that you decided to use two pipes to separate data and voice services into communities; correct?

5393 You are going to have two separate bandstreams, one to run data and one to run voice?

5394 MR. DEAN: That's right.

5395 MR. ZUBKO: Are you familiar with frame relay access devices that you can program for priority of service or levels of service?

5396 Perhaps I can explain the question a little more, if you want.

5397 MR. DEAN: Please do.

5398 MR. ZUBKO: There are frame relay access devices that will allow you to prioritize certain ports on a port by port basis so that you can prioritize voice and have data be secondary in priority.

5399 Did you look at those kinds of devices?

5400 MR. VACHON: I have to explain something. Our concern about having voice and data together has nothing to do with the frame relay. It is within the switch, the switch that handles voice and data. Our concern is the switch. It has nothing to do with the frame relay.

5401 The frame relay will take the bandwidth you need and it will mix voice and data. Voice is a pretty small component on the frame relay network.

5402 The problem is within the switch, that the switch will have one of its trunk captured for 64 kilobytes all the time. The bottleneck is not the frame relay network. I don't have to be concerned about the frame relay -- I always have to be concerned, but I don't have to be concerned from an Internet point of view about how much voice and data I will transport.

5403 The bottleneck, using a regular dial-up for the Internet is the switch itself. It is not the transport network. I just want to be precise on this point.

5404 MR. ZUBKO: So was I mistaken when you talked about taking two pipes into the community?

5405 MR. VACHON: Two pipes -- it is not two. What we will offer is an access for two ISP providers. On how many pipes it is transported doesn't have anything to do with it. It is the access we will provide.

5406 As you know, all this data, all those communications, voice and data, are digital, so they are multiplex and they all travel in the same pipe. If it is satellite, it will go over satellite. If it is terrestrial, it will use a radio.

5407 All those bits, binaries are all mixed together and they use the same transport network.

5408 MR. ZUBKO: I guess I obviously misread what you had stated earlier. I am still somewhat confused about how remote access servers have any impact, good or bad, on your switches.

5409 MR. DEAN: It's not that the remote access server is good or bad. The concern we had is if we are in one of these small communities and, as we suggested before, there might be eight to ten trunks coming out of that community, if the access to the Internet was through voiceband modems, direct dial-up across the toll network to some remote location, it would only take eight customers on the Internet, with the typical long holding times that Internet calls experience, to completely tie up that community's toll network.

5410 In GNWT-4, and as I mentioned before, in 2108, we went through quite a bit of detail of costing out the incremental bandwidth that that would mean. And it was significant.

5411 Again, for our considerations -- because we are not just the Internet provider; we are also the long distance toll provider -- we definitely felt that the safest and the best way for both types of services is to keep them separate.

1415

5412 MR. ZUBKO: I wasn't suggesting that the dial-up frame relay access service was an appropriate thing. I was trying to get to confluence of data and voice on to the frame relay and exactly what you were doing there.

5413 If there was an ISP presently located in a community who had its infrastructure of modem pool, servers, et cetera, would you still plan on providing modem pools in the CO?

5414 MR. VACHON: I think this question doesn't belong to this panel again. Our role is to build a network, to provide local Internet access to each and every community. The company suggested to provide two access in order to have more than one Internet supplier to provide choice to the residents.

5415 MR. ZUBKO: All right. Let me rephrase the question.

5416 Would you have a technical problem in connecting to an ISP's infrastructure already in place?

5417 MR. VACHON: Could you repeat your question, please.

5418 MR. ZUBKO: Would you have any technical problem in connecting a data line to an ISP to his modem pool if he was already set up in place?

5419 MR. DEAN: No. We do that today. In many locations the local ISP is connected through our frame relay network back to wherever their hub is.

5420 MR. ZUBKO: Okay.

5421 MR. VACHON: I think what you -- and I am sure you realize it, but when the Commission asked us to provide local access to Internet, there is a cost of providing this access. There is a cost of transport to carry this traffic. This cost might be very high, and that's why you don't have Internet in many communities in the north today.

5422 What this will allow is for us to build an access that will be subsidized and can be used by any ISP supplier. It is not a Northwestel Sympatico Internet deal that we are doing. What we are trying to do is to build a network that will allow a maximum of two ISPs in the community under 2000 lines to provide Internet access.

5423 The rates for that access have been filed, and they are competitive. In other words, it makes room for ISPs to offer service and still be profitable.

5424 That's what we are providing. We are providing the link between this community and the rest of the world. That's what our mandate is.

5425 MR. ZUBKO: Okay. Thank you. I will leave that aside. Just the one point I would like to make. My company is turning on a small network next week, the end of next week, which is three remote sites and the infrastructure in a teleport.

5426 This is a system that uses some equipment that we started with about four years ago. The cost is about $50,000 at the time. We are now deploying additional equipment for about $20,000. The system carries several trunk lines and also carries data on a prioritized basis.

5427 With that background of having put that system together is a lot of what has brought me to ask the questions of your design.

5428 I would like to talk a little bit about switches. Page 5 of your evidence, you indicate that you have a variety of switches. You also include in there that you have a Meridian switch. Can you tell me what type that is and how many you have?

5429 MR. DEAN: You are referring to page 5 in the evidence.

5430 MR. ZUBKO: The bottom paragraph.

5431 MR. DEAN: Near the bottom. Yes. I'm not sure where it was. I thought it actually was in here where it talks about we have one location where we have a Meridian as the basically main local switch.

5432 MR. ZUBKO: Can you tell me what type of Meridian? Is it a PBX? Do you know?

5433 MR. DEAN: Well, that's what Meridian is. It starts with a PBX. This particular one we have actually adapted the translations and in addition to having the major PBX features, we are offering pretty well the local as it was 7-D dialling for a local exchange as well, kind of another half of the switch as it were.

5434 We have two customers on the switch. One is a private customer which has abbreviated dialling. The other half has seven digit dialling.

5435 MR. ZUBKO: Okay. Do you plan to use PBXs for other switching requirements in the future?

5436 MR. DEAN: As we pointed out in our SIP, we don't see that as quite the right technology anywhere else, but this is a rather unique location. We think it works quite well there.

5437 MR. ZUBKO: Can you tell me why you don't think it's the appropriate technology for, say, places that have less than 25 lines?

5438 MR. DEAN: Well, for the very small line size, we certainly think that the other switch that we use is must more cost effective than even the small Meridians. The very smallest Meridians, to the best of my knowledge, don't have all the features that the Meridian that we are talking about at this one location have.

5439 MR. ZUBKO: What was that model again?

5440 MR. DEAN: It's an Option 61. I just wanted to check to see whether there was any issue of the --

5441 MR. ZUBKO: Well, thank you. Most modern PBXs with that kind of loading from my research would indicate that they do pretty much anything that's included in the CRTC's basic service requirement. Do you disagree with that?

5442 MR. DEAN: Well, I would agree that they do pretty well. You are right on that. One of the big issues with a lot of PBXs is the actual line voltage with what we are used to. We are used to using 48 volt line voltage as opposed to 24, which is still fairly common as a loop voltage for PBXs which extremely -- it means you are working with extremely limited loop link.

5443 As I think it was Mr. Henry that mentioned, even a lot of the small communities, fairly well ribbon developments along a river or around the edge of a lake, so loop reach is a very serious concern.

5444 The other small switch that we use we think scales down even better than a small PBX.

5445 MR. ZUBKO: What kind of cost -- which switch would that be, DMS-10?

5446 MR. DEAN: No. The very small switch that we use is the Redcom.

5447 MR. ZUBKO: Okay. And from a hardware perspective, what's the cost of that switch?

5448 MR. DEAN: That is filed in confidence.

5449 MR. ZUBKO: I see. Okay. Does the Redcom switch usually take a voice mail addition?

5450 MR. DEAN: Could you repeat the question, please?

5451 MR. ZUBKO: Does a Redcom switch usually accept a voice mail addition or a server, remote server?

5452 MR. DEAN: There's a voice mail addition that you can add on to Redcom. Yes.

5453 MR. ZUBKO: Is that filed in confidence as well, the cost of it?

5454 MR. DEAN: Any individual costs for specific suppliers are definitely filed in confidence.

5455 MR. ZUBKO: Would you accept the statement that voice mail can be provided on a very small scale basis for less than a thousand dollars?

5456 MR. VACHON: I think that the voice mail has been excluded from this DNN feature we will offer. I'm not sure that you can in a community of a thousand residents offer voice mail for less than a thousand dollars.

5457 MR. ZUBKO: I was thinking more of the sub 100 lines.

5458 MR. VACHON: Again, I think the goal here is to provide equivalent to each and every community. Communities with a thousand NAS will cost much more. We thought it was maybe not reasonable to include voice mail, so we cannot again create two classes of citizens.

5459 Those who are under a hundred line come with a small kind of arrangement where we can offer voice mail. Another community with 1,500 where we don't offer because it's too expensive.

5460 MR. ZUBKO: Well, I find that interesting considering that you are offering equal access in poor communities and a lot of enhanced services already. I guess if that's a definition of class of citizen or customer, then I would suggest you are already there.

5461 MR. VACHON: I think that all those options, you know, feature -- we can equip the switch until you turn red with all kinds of features, but at the end of the day all those features are very expensive.

5462 You mentioned at the beginning that your scale of activities was mainly small locations and maybe one or two. When you look at 96 communities to develop voice mail all across those communities, you might end up with a pretty interesting bill that we have to add to what we are trying to offer already.

5463 So, as we stated at the beginning of those hearings, we excluded voicemail because of the costs of deploying voicemail everywhere and we felt that it has not been the -- throughout our consultation sessions, too, with our customers, voicemail was not an option that has been asked a lot; it has been asked by the GNWT, in one of their interrogs, but most of our customers did not really ask for voicemail. They were asking mainly for call display.

5464 MR. ZUBKO: If a service provider felt that he could offer voicemail as an addition to one of your switches, would you -- from a technical point of view, would you be prepared to accommodate that?

5465 MR. VACHON: I don't know if it could be done, we would have to look at what kind of technology but, again, it's not really -- I understand your question relates to technology but, from a technology point of view, it's hard to say, depending what kind of box it is, if it works or not. I don't know. But it's more, I think -- the main decision to be made is more from a policy point of view, "Do we want to break the network or the service offering with various providers". I don't know. That's not up to us to answer this question, I think.

5466 MR. ZUBKO: I guess -- some of the things that my company has looked at, seriously, in a lot of ways, is how to do small things in small communities and how to do them economically and it's, I guess, been our experience -- in the cable industry, for example, we found that deploying Internet on our cable system, because we were a small system, was very easy to do. We didn't have a lot of the complications of hybrid fibre and copper combinations. The system was equivalent to, basically, one node, when we started, in size, customer demand.

5467 If we looked at it from the perspective of a larger cable company, our very easy answer, and very obvious answer, would be: deploying cable Internet in Inuvik is not a practical thing to do. But we didn't look at it that way; we looked at it from the point of view of there's advantages to having a small service, a small type of service, and we found that we could provide that service very economically and we made quite a successful operation out of Internet provision on our cable systems.

5468 Now, again, if I had looked at it from the point of view of, "Can we do it everywhere?", no, you can't, "Can we do it in a bigger system?", it gets tougher when you get into a bigger system -- and it comes back, I guess, to my question of, you know, "Did you use a cookie-cutter-approach to providing these services and try and make everything the same?", and I think you have answered that question a number of times that, yes, you did take that approach, for a variety of reasons, and so, I'm just trying to dig a little deeper to find if -- I mean I guess the bottom premise here that we are trying to look at is, "Is there better ways of looking at this from a small community point of view?"

1430

5469 MR. VACHON: What I'm trying to answer -- and maybe I don't make it well -- is that what we have tried to do with this plan is to provide what we have been asked by the Commission and what we have been asked, including the comments from the customers. We didn't go, as you know, into a lot of detail how it will be done and with whom and so on and so forth. So those type -- again, I would like to come back -- those type of discussions don't belong to this panel. We can talk a lot about what technology can do and, yes, a lot of things are possible. Could it be done in the environment or in the kind of framework we were talking about today, that's another ball game and -- that's why we are not sure how to answer you, because I don't think the answer belongs to us.

5470 MR. ZUBKO: That's fair.

5471 I won't be much longer, Mr. Chairman.

5472 I heard your press announcement on the Ingram Trail development. You are anticipating serving up to 60 customers along that piece of highway, for a cost of $1.2 million. Is that correct? I believe that's -- at least, that is what CBC reported.

5473 MR. YEULET: Yes, that's planning level number that we developed, based on what we believe is the number of customers out there.

5474 MR. ZUBKO: And that's using the technology described earlier, Execom?

5475 MR. YEULET: No; this would be a new digital wireless local type solution. The bulk of the -- there's quite a few areas within Ingram Trail, at this point in time, that would not be able to receive a signal, actually, from Yellowknife, so we funded in here to actually create another site along the way to actually create the site to extend service to all of those customers out there; so part of the cost was actually to build another site out there.

5476 MR. ZUBKO: Okay. I had discussions with a number of people familiar with Ingram Trail in the business of radio and Internet and what have you and they stated to me that they felt that they could provide a voice in data service into that area for a neighbourhood of a quarter million dollars.

5477 If that was true, would you consider leasing that facility from them or contracting them to provide that service on your behalf?

5478 MR. VACHON: Did they mention to you how much it will cost in satellite bandwidth to offer this service, too?

5479 MR. ZUBKO: I guess -- I did not put together all of the components but I don't believe that they were looking at satellite bandwidth.

5480 But the question, I guess -- my question is this: If they could do it for that price and an operating price that was commensurate with yours, would you be prepared to contract them to provide that service on your behalf?

5481 Would you have a problem, technically, with doing that?

5482 MR. VACHON: I cannot answer this question today, not knowing what you are referring to.

5483 MR. ZUBKO: Okay. Perhaps I will ask that of the policy panel on a more general basis.

5484 I would like to ask you another question.

5485 If you knew that various components of this service improvement plan would be put out to tender, or to a request for proposals, would you have designed the system differently, in order to be more cost conscious and, therefore, be able to be more competitive?

5486 MR. YEULET: Well, some aspects of the proposal most probably will go out for proposal to pick the exact technology, in some cases, or to an RFQ to supply and install. That possibility is still there; that hasn't been ironed out yet. But what we have done here is we based it on what we believe is -- as Mr. Vachon has said a number of times -- trying to use existing technologies wherever we can so that we have got a base to work from; not to say that there might not be something else that comes along in a year or two or three that's better.

5487 MR. ZUBKO: I think I just have one last question. Are you using NMI to provide any services to fulfil the obligations of the CRTC's mandate?

5488 MR. YEULET: No, not that I am aware of.

5489 MR. ZUBKO: Mr. Chairman, those are all of my questions; thank you very much.

5490 THE CHAIRPERSON: Thank you, Mr. Zubko.

5491 MS VOGEL: Our next party for cross-examination of this panel is Telus, Mr. Lowe.

--- Pause / Pause

EXAMINATION / INTERROGATOIRE

5492 MR. LOWE: Thank you. Good afternoon.

5493 With me is Mr. Leigh from the company.

5494 Mr. Vachon, I see from your CV that you have held a number of senior management positions with Bell Canada. Is that correct?

5495 MR. VACHON: Not a lot of "senior", but a lot of positions.

--- Laughter / Rires

5496 MR. LOWE: I notice that in 1993 you were General Manager of the Signature service. Is that correct?

5497 MR. VACHON: That is correct.

5498 MR. LOWE: Those would be the large business customers of Bell Canada, the Signature service customers?

5499 MR. VACHON: Yes, they are.

5500 MR. LOWE: Were you involved in any construction program reviews with Bell Canada?

5501 MR. VACHON: Construction of...?

5502 MR. LOWE: The construction program review process for Bell Canada.

5503 MR. VACHON: No.

5504 MR. LOWE: Were you involved in the capital committee process for Bell Canada?

5505 MR. VACHON: No. Most of my career I had been on the maintenance side of the network.

5506 MR. LOWE: Thank you. I expect that I will get a similar response as I got from the earlier panel -- and I am not trying to offend you here. Did you talk to Bell Canada about how much you should spend on this SIP program?

5507 MR. VACHON: I don't think it belongs to us to answer how much we should spend on this program. I don't know why I would have asked Bell this kind of question.

5508 MR. LOWE: So you didn't --

5509 MR. VACHON: No.

5510 MR. LOWE:  -- consult with Bell on it and talk to them.

5511 MR. VACHON: No.

5512 MR. LOWE: Bell is doing their own service improvement program; correct?

5513 MR. VACHON: I assume, like all the telcos.

5514 MR. LOWE: Are they doing theirs in four years?

5515 MR. VACHON: I am not aware.

5516 MR. LOWE: You didn't talk to them about the advisability of a four-year program?

5517 MR. VACHON: A four-year program in Northwestel -- I don't know how long we will go with Bell, but I think, like Mr. Wells explained yesterday, Bell is Bell and Northwestel is Northwestel. And to compare a Bell network where you have close to 9 million NAS to a network where you have 70,000 NAS, the comparison stops pretty quickly.

5518 When I was in Bell, I had 70,000 NAS in one building. Here I have 70,000 NAS in 96 communities, so it is pretty difficult for me to compare both.

5519 MR. LOWE: If you didn't consult with Bell, you didn't consult with Telus on the service improvement program, did you?

5520 MR. VACHON: No.

5521 MR. LOWE: Thank you. Yesterday you had a discussion with Ms Lawson surrounding the words "as feasible" in Decision 99-16.

5522 Do you recall that discussion?

5523 MR. VACHON: Feasible? Yes.

5524 MR. LOWE: I believe your testimony was feasible means doable. Do you recall that?

5525 MR. VACHON: I mentioned based on my poor English, feasible, to me, is doable.

5526 MR. LOWE: Perhaps I could refer you as a last resort to your evidence.

5527 You are responsible for Section 2 of the evidence. Is that correct?

5528 MR. VACHON: Yes.

5529 MR. LOWE: On page 4 -- and I think the earlier panel gave similar testimony -- the service improvement program is driven by the directions in Decision 99-16. I will give you a chance to have a look at page 4 of the evidence.

5530 I take it what you are saying is that you are really only doing here what the Commission asked you to do in the decision.

5531 MR. VACHON: Yes. What we are doing here is our interpretation of what the Commission asked us to do.

5532 MR. LOWE: On page 4 you lay out the basic service objective, and then in the next paragraph you set out what the company saw as its mission in achieving this objective.

5533 Do you see that?

5534 MR. VACHON: Yes.

5535 MR. LOWE: On page 5, in the same paragraph, you say -- and this is the first full sentence at the top of the page:

5536 And that is the service improvement program.

5537 And that is Northwestel's smaller communities.

5538 Do you see that? You may want to read back and pick up the --

5539 MR. VACHON: No. I see it.

5540 MR. LOWE: Can you tell me where in Decision 99-16 it says that the service improvement program should allow northern businesses to compete better.

5541 MR. VACHON: What is your question?

5542 MR. LOWE: Where in Decision 99-16 does it say that the service improvement program should allow northern businesses to compete better?

5543 MR. VACHON: You know as well as me that they don't mention it. But when you look at our customer base you realize that 50 per cent of our customers almost are business and 50 per cent are residences, or close to that percentage. By deploying this network, not only will it provide good services to our residential customers, it will reduce their total telephone bill. It will also reduce the total telephone bill of the businesses that are part of our territory.

5544 So it is more a benefit. The plan will benefit all of our customers.

5545 MR. LOWE: You see a legitimate purpose of the service improvement plan is to allow northern businesses to compete better.

5546 MR. VACHON: I think that you are stretching the words a little bit here.

5547 Would you suggest to me not to connect or to remove service to the business or keep the business with the current level of service that they have and offer it only to the residential customers?

5548 MR. LOWE: Could you please refer to Decision 99-16, if you have a copy up there, paragraph 76. There is a statement --

5549 MR. VACHON: Could you --

5550 MR. LOWE: I was going to charge on and then I will give you a chance to read it.

5551 The sentence says:

5552 Do you see that?

5553 MR. VACHON: Which paragraph are you referring to?

5554 MR. LOWE: Paragraph 76.

5555 MR. VACHON: I see it.

5556 MR. LOWE: What you are saying in this proceeding is that in the case of Northwestel we can anticipate the decision in the rebanding proceeding and make subsidies available for single line business right now in the north.

5557 MR. VACHON: I don't have the competency to talk about band.

5558 MR. LOWE: Fair enough. I think we have been over this before. There is nothing in the decision which says that the service improvement plan shall be four years, is there?

5559 MR. VACHON: Excuse me. I missed your question.

5560 MS LAWSON: There's nothing in the decision which says that the SIP should be four years, is there?

5561 MR. VACHON: No.

5562 MR. LOWE: And the Commission directed Northwestel to file a SIP by which it will achieve the basic service objectives over time. That's what you quote at page 4 of your evidence. So I take it "over time", your interpretation is over time should mean four years. Correct?

5563 MR. VACHON: Four years came from the consultations that we have made with the various levels of government as well as our customers. People in the north have been expecting competition as well as improvement in basic services for a while, so that's how we came with the four years.

5564 MR. LOWE: And page 5 of your evidence, you say that the SIP proposal includes input from a broad cross-section of individuals, organizations and governments. Do you see that?

5565 MR. VACHON: Yes,

5566 MR. LOWE: Then whipping ahead to page 7, you refer to the Commission's directive to consult stakeholders prior to preparing their service improvement plan. Do you see that?

5567 MR. VACHON: Yes.

5568 MR. LOWE: This is at the top of the page. The reference is paragraph 43 of the decision. That's what you say Northwestel has done. They did comply with this aspect of the directive and had the stakeholder consultations prior to preparing the service improvement program.

5569 MR. VACHON: Yes.

5570 MR. LOWE: Now, is a stakeholder someone who will take the benefit or part of the benefit of a proposal? Is that a stakeholder?

5571 MR. VACHON: Yes. We consider those stakeholders.

5572 MR. LOWE: A stakeholder, that would be somebody who would get the benefit of a proposal. Correct?

5573 MR. VACHON: Yes.

5574 MR. LOWE: What about someone who bears the burden or part of the burden of a proposal? Would that be a stakeholder as well?

5575 MR. YEULET: We deem the words "consult stakeholder" as being the northerners, the customers that would be affected by this service improvement plan.

5576 It's our intention that through this proceeding, we have submitted a proposal to improve services throughout. If you are considering a stakeholder as someone who pays into it, no, we didn't consider that as part of our program. We developed a reasonable program to improve services to meet the Commission's decision 99-16 and now we put that forward.

5577 That's as far as we have gone. We didn't go and suggest that we should go out and consult those who should have to pay this funding because we are not sure who that necessarily is totally. That's the Commission's --

5578 MR. LOWE: Well, the Commission did say in the decision that if Northwestel is able to demonstrate that it needs supplementary funding, any such funding will come from the existing portable subsidy mechanism within the former Stentor company's operating territory. Are you aware of that aspect of the decision?

5579 MR. VACHON: Yes. It seems to me you read it pretty carefully.

5580 MR. LOWE: Thank you. I want to be fair to you. You say this is a made in the north solution, right?

5581 MR. VACHON: This is a what?

5582 MR. LOWE: Made in the north solution.

5583 MR. VACHON: Yes, it is.

5584 MR. LOWE: Thank you.

5585 MR. VACHON: Because it's a north problem.

5586 MR. LOWE: Thank you. So you only had extensive conversations and meetings with all those stakeholders who stood to benefit from the proposal and not with those who would bear the burden of the proposal. Right? I would see if a brainwave has come from the back here.

5587 MR. VACHON: I think that's the purpose of this proceeding now and all the interrogatories we have received too.

5588 MR. LOWE: So then when the Commission said consult stakeholders prior to preparing service improvement plans, what they meant is you consult with benefiting stakeholders before you prepare and the people who pay get to have a shot at it at the hearing. Is that your view?

5589 MR. VACHON: That was not our view when we prepared this plan.

5590 MR. LOWE: So did you didn't talk to any competitors like CallNet or AT&T. You didn't talk to Bell.

5591 MR. VACHON: I answered this question already.

5592 MR. LOWE: And you didn't talk to Telus.

5593 MR. VACHON: I answered this question already too.

5594 MR. LOWE: And do you think these parties are parties that may bear the burden of the proposal?

5595 MR. VACHON: Again, I am coming back to what I said. We had to receive a framework like Telus had to. I look forward to having Telus calling me about their SIP, but we had a framework provided by the Commission. We built the SIP plan. We counselled our customers to know what they would like to do.

5596 The proceeding in which we are now, the purpose of this proceeding is to be interrogs and we have received yours. We answered your question. Now the hearing is to hear your question, what you are doing and try to hear my answer too.

5597 The role of the Commission will be to define what this plan should be based on what they will have heard, your questions, and what they will have heard from our side, our answers.

5598 That's my understanding of the process. That's how we have built the SIP.

5599 MR. LOWE: If you have stakeholder consultations and you only hear half the story, it's kind of like you got a one winged bird, isn't it? It kind of always goes in one direction.

5600 MR. VACHON: I think you made this point already. I understood it.

5601 MR. LOWE: All right. I will move on. Thank you. Could you please refer to CRTC 108, attachment 2.

5602 MR. VACHON: We have it.

5603 MR. LOWE: Now, in this interrogatory you show a total capital spent under the service improvement program in each of the years. It is broken down by category: toll free, Internet, unserved locations, underserved, enhanced calling, improved toll. Then it shows the capital expense for each, the annual operating for each and the annual revenues for each. Do you see that?

5604 MR. VACHON: Yes.

5605 MR. LOWE: Is this one of your interrogatories? Is this an interrogatory that was assigned to this panel? Have I got the right panel for this one?

5606 MR. VACHON: Yes.

5607 MR. LOWE: Now, I see in -- if we just look at the year 2001, you have got a capital expense of $17 million, annual operating costs of $500,000, and for that you get annual revenues of $168,000.

5608 The revenues don't even cover the increase in operating expenses. Is that correct? Is that the way you read this?

5609 MR. VACHON: Welcome to the north.

5610 MR. LOWE: No, that's fair enough. I'm just trying to understand how it works. So even if the capital is free, it's still not really a good investment, is it, if you just look at it in terms of economics. We will hear about the other stuff after. I just want to focus on the economics here for a moment.

5611 MR. VACHON: Yes. And that's why we -- our company has the kind of network that we have today, because the density of population does not justify the investment.

5612 MR. LOWE: Now, could you please turn to CRTC 2501, attachment 2.

5613 MR. VACHON: We have it.

5614 MR. LOWE: And then I was looking just -- I'm sorry, I may have misspoken. I meant 2105.

5615 Did I mislead you? Sorry.

5616 MR. VACHON: And I knew the answer on this one.

--- Laughter / Rires

5617 MR. LOWE: It's the one for 2002 switching that I was looking at. What this attachment does -- and correct me if I am wrong -- is it identifies particular projects and the location. It shows the year that the project goes ahead, the capital cost and the number of lines.

5618 I was looking at the third one from the bottom, which is Coral Harbour. That is an expenditure of $321,000 and it is 287 lines that we are talking about here.

5619 Do you see that?

5620 MR. VACHON: Yes.

5621 MR. LOWE: I take it that this is to support enhanced callings, such as Call Display. Is that one of the functionalities that you get out of this?

1500

5622 MR. DEAN: In the switching line there is going to be -- if you compare that to Attachment 3 where it breaks it down by the four program types similar to the 108 that you referred us to earlier in the switching, there is going to be a big piece of enhanced calling by the trunk piece of toll free Internet.

5623 MR. LOWE: If we broke down the $321,000 --

5624 MR. VACHON: Yes. You have a small code in the column Program Type. You have i and iv. And if you go to the bottom of the page, it explains to you what the investment will be.

5625 MR. LOWE: Right.

5626 MR. VACHON: So it will be toll free access to Internet and enhanced calling feature on the switch.

5627 MR. LOWE: Do you know what the breakdown would be, just rough and ready?

5628 MR. DEAN: If you go back to Attachment 3, you will see the breakdowns. That is why there are both attachments.

5629 MR. LOWE: Do you know how many lines would be taking the enhanced features out of the 287?

5630 MR. VACHON: Again, that doesn't belong to my panel. I don't know.

5631 MR. LOWE: Well, back at 108 it shows revenues under each particular type of expenditure, including enhanced calling, toll free access. That is your interrogatory, isn't it?

5632 So if you got those numbers, why can't you provide me with some indication of Coral Harbour penetration rates?

5633 MR. VACHON: I am sure you will understand that in those interrogs there is a lot of duplication one to the other one. I am sure you have been asking questions of the marketing people that was talking about Internet and technology, and they said we cannot answer these questions because we do not have the knowledge, and you will have to ask the technology panel.

5634 The same is true on the other side. I prepare the technology and our peers from marketing have provided us with the numbers for revenue. So I cannot comment in detail what the revenues are for Coral Harbour, how many customers and what will be the penetration.

5635 MR. LOWE: Did you decide on the prioritization, then, of these projects year over year? We see some places wait until 2003 and 2004 versus 2002.

5636 Did you decide on who gets what when kind of thing?

5637 MR. YEULET: As we mentioned previously, there was a prioritization: larger before smaller. From this perspective, sometimes it ties in whether there is a transport upgrade that is being tied into it at the same time.

5638 So there were things looked at like that perspective.

5639 MR. LOWE: Wouldn't you want to know if people are kind of beating down the door at a particular location to sign up for this stuff or whether it is a non-event in the particular community?

5640 MR. YEULET: In a lot of cases a lot of customers are looking for enhanced features. And looking at the decision that came from the Commission, we used our best judgment in trying to roll it out to the larger areas before the smaller areas.

5641 MR. LOWE: We will get to that later.

5642 On the next year of this attachment to 2105, Attachment 2, if we look in the access category -- I think this is Attachment 3 -- or page 3 of Attachment 2.

5643 This is getting like broadcast news here.

5644 In Carmacks there is a capital expenditure of $304,000 to benefit -- is it ten NAS?

5645 I saw -- and this just caught my eye -- Braeburn Lodge. Is this to provide access service to Braeburn Lodge? Is this part of this particular program?

5646 MR. YEULET: Yes. The way they are broken down, there is only one line item on there. But I want to bring to your attention here that what we are looking at in this Interrogatory 2105 is a six-year program as the Commission has asked us to prepare. That is not the program that we have put forward. This is the program that the Commission has asked to see, a six-year view.

5647 So it is quite different from the four-year view. We tried to spread things out differently.

5648 But to answer your specific question, there are three locations: the Braeburn Lodge, Drury Creek and Fox Lake. There are three different areas that we have just highlighted under that specific area.

5649 MR. LOWE: What should I be looking at then? This is the Commission's view of the world, not yours.

5650 For your view of the world for Braeburn Lodge -- and that expenditure didn't have Fox Lake in it, and it was $287,000. Was that it?

5651 MR. YEULET: No. The view would be the same. I am just saying that what we are looking at here is a six-year view and not the four-year view that we had put together.

5652 If you look at the line item called Access Carmacks, Yukon, et cetera, there are three items underneath. They are Braeburn Lodge, Drury Creek and Fox Lake. Those are specific areas that are along the highway. They are not in Carmacks per se. We just used it as a reference.

5653 MR. LOWE: This Braeburn Lodge, is this that restaurant that is kind of noted for its cinnamon buns and the three-pound burgers? Is that the same place?

5654 MR. YEULET: That's the one. It is a lodge, and there are also customers in the area.

5655 MR. LOWE: That's the one -- they have the radio number now, and you are going to tie them in so they will have a land line phone. That is part of the deal here.

5656 MR. YEULET: That is correct.

5657 MR. LOWE: And then the cabins around there, I asked someone about it and they said they are kind of cottages. Maybe this is a little high-flown but he described it as the "Hamptons of Whitehorse". Is that kind of what we are looking at here?

5658 MR. YEULET: I don't think so. That is that person's interpretation. There are customers all the way along --

5659 MR. LOWE: Have you ever been to the Hamptons?

5660 MR. YEULET: No.

5661 MR. LOWE: I haven't been either. I haven't been up to Carmacks either. So I am trying to compare one place I have never been to another place I have never been to.

5662 MR. YEULET: You've got me there.

5663 MR. LOWE: But they are seasonal residences. They are sort of cottages and seasonal residences and then this restaurant.

5664 MR. YEULET: The lodge is a year-round lodge, if I can recall correctly. I have driven there year-round, and it has always been open. There are people who live there, so they have phone service.

5665 So yes, it is a year-round residence.

5666 MR. LOWE: Do you know if some are seasonal, if some are kind of cottages, friends of the owner that have places there and they go up and have a cinnamon bun?

5667 MR. YEULET: And a cheeseburger. It's similar to a lot of areas where there is combination of permanent residents, cottage lot owners, semi year-round population. It is a similar type of network that we have in a lot of places in the north.

5668 MR. LOWE: Could you please turn to page 12 of your evidence. This is on to the prioritization.

5669 Mr. Chairman, if you would like to take a break before we start prioritizing, that is fine with me.

5670 THE CHAIRPERSON: Well, maybe you can prioritize for me. How much longer do you expect to be?

5671 MR. LOWE: Well, I hate to tip my hand, but I will probably be half an hour or so.

5672 THE CHAIRPERSON: Well, maybe we should take a break now then.

5673 We will take a break until 3:25.

--- Recess at 1510 / Suspension à 1510

--- Upon resuming at 1528 / L'audience reprend à 1528

5674 THE CHAIRPERSON: Okay. Mr. Lowe...?

5675 MR. LOWE: Thank you, sir.

5676 On page 12 of your evidence, you describe the prioritization process under SIP and there's a sentence there:

5677 And that's the quote from paragraph 41 of Decision 99-16.

5678 Do you see that phrase, "subject to network design and cost limitations"?

5679 MR. VACHON: Yes.

5680 MR LOWE: And so, by referring to cost limitations, the Commission must have had in its mind some view of cost reasonableness of these projects.

5681 MR. VACHON: Might be.

5682 MR. LOWE: Maybe?

5683 MR. VACHON: Maybe.

5684 MR. LOWE: Or maybe not?

5685 MR. VACHON: Maybe not.

5686 MR. LOWE: Thank you.

--- Laughter / Rires

5687 MR. LOWE: And one of the items was -- it's the last prioritization factor, sir, permanent dwelling before seasonal ones, and you have already explained you decided that that just was not in your territory, given the way things are up at the lodge and so on, but I just want to make -- you looked at that aspect of the decision and, in a studied fashion, you said, "Well, we will forget about that prioritization factor"?

5688 MR. VACHON: No, you are not correct. What we are saying is we serve the permanents first, but in many of our areas, you have permanent as well as seasonal, so I cannot --

5689 MR. LOWE: You can't stop on the road outside --

5690 MR. VACHON: Yeah, you got this one.

5691 MR. LOWE: Okay. And then at page 14 of your evidence -- and this is sort of in the bottom third of the page -- you talk about transport technology and long distance quality and you say:

5692 And then you say:

5693 Do you see that?

5694 MR. VACHON: Yes.

5695 MR. LOWE: And how long has the radio system been antiquated?

5696 MR. DEAN: I guess I could talk to how long it's been since it's been installed. On some of the equipment, I could tell you when it was manufacturer discontinued.

5697 MR. LOWE: Well, did it become antiquated the day you wrote the evidence? Or was it antiquated a year before? Or two years before? Or was some of it antiquated maybe back in 1992 when the eastern Arctic was transferred over? When did this stuff become antiquated?

5698 MR. VACHON: I think what we say in this paragraph is that in some of our areas of our territory, mainly the radio sites -- in the Arctic, you don't have any radios; it's only satellite. Some of those radios are old analog radios that are manufacturer discontinued, we cannot have any more spares, they don't exist, so what we do, we have our technicians, or we send those components to some company who can prepare them for us. So, when we say "antiquated", it means that you cannot buy them any more because they are too old. Some of them are over 20 years old.

5699 MR. LOWE: "Antiquated" doesn't mean 100 years old, then?

5700 MR. VACHON: Not for our radios.

5701 MR. LOWE: And so, it's reasonable to think that some of this radio system would have been antiquated or would have been hard to get replacements, you know, since before Decision 99-16 was issued. Correct?

5702 MR. VACHON: Yes. I think Northwestel -- and we have identified it through these hearings, that a lot of this -- and you can -- I'm sure you might go there, too, but in some of our sections where it's the capital program, we said that some of those radios were notified to be replaced, and they have never been replaced because of the economics. And, again, if you -- and I talked a little bit about that before, but if you refer to this map and you compare this map to a Telus network or to a Bell network or MTS network -- MTS is a little different because they go up to Churchill Falls -- but if you compare our network with, let's say, the Telus network, you will see that Iqaluit, as such, is one network, you will see that Yellowknife is another network, and so on and so forth. So it's like, for us, if we were Stentor with 77,000 lines and we had to maintain this network.

5703 So a lot of those radios, the customers are spread out everywhere and, as I mentioned before, to replace a radio, one of those antiquated radios in the MacKenzie Valley, we are talking $9 million for 220 NAS, and Northwestel cannot afford to replace this radio until it's mandatory, that we don't have choice, that's the end of it, we received all we can have from this radio.

5704 MR. LOWE: Fair enough. They are antiquated and replacement is long overdue. Correct.

5705 MR. VACHON: That's correct.

5706 MR. LOWE: Thank you.

5707 Now, the reference on page 14 -- and I'm going to refer you --

5708 MR. VACHON: Just to maybe mention, when you say "it's long overdue", it's long overdue -- they provide service today; they don't provide the quality of service that we are directed to provide, as per this consultation, this decision. So that's what I mean, you know. We are providing those radios, they work, people have dial tone, but people cannot have the type of little service that had been presented into the Decision 99-16.

5709 MR. LOWE: So they are used and useful but they are just not up to the snuff of Decision 99-16?

5710 MR. VACHON: Yes.

5711 MR. LOWE: Thank you.

5712 Now, the reference at page 14 -- and this is the one we just read, where the company was directed to include plans for upgrading the quality of the long distance service -- I take it that's paragraph 63 of the high-cost decision? -- if you still have that. And I will just read you the sentence and you can reflect on it:

5713 MR. LOWE: Certainly.

--- Pause / Pause

5714 MR. VACHON: Okay, I have it.

5715 MR. LOWE: And the sentence I'm thinking of is:

5716 Do you see that?

5717 MR. VACHON: Yes.

5718 MR. LOWE: And at page 14, when you say the Commission directed the company to includes plans, that's what you were referring to is that part of the decision. Correct?

5719 MR. VACHON: Yes, because the problems with quality of service, long distance quality service, we have in our network today are mainly caused by those old analog radios. That's the cause of the quality of service.

5720 The other cause of quality of service is the absence of what we call echo canceller and it's a component that removes echoes on the network, and those components have to be deployed everywhere, too, and are very expensive. So that's where we -- that's how we will solve those long distance quality problems.

5721 MR. LOWE: Thank you.

5722 Now, just back to the feasible discussion and, you know, your Nike test, just do it, you know, if it's doable then it's feasible. Is that test -- the feasibility and whether it's doable, is it the same test that should be used for measuring and upgrade of the long distance network?

5723 In other words, if -- and, you know, we can disagree on this but if an economic evaluation is really not part of -- and I can hear Mr. Rogers stirring here and you may want to move this over to the panel and that's fine, but what I'm getting at is, if there's a test as feasible for meeting the basic service objective and that has little or no economic content in it, in terms of the economic payback or present value of the project, then what about upgrading the long distance network? Is it the same as feasible or kind of just do it test? Or is there an economic content to determining whether there may be upgrade or not? Looking at payback, looking at, you know, PWAC studies, present worth and so on.

5724 Is this making any sense?

5725 MR. VACHON: I'm not sure if you are asking me if there is a positive business case in replacing the technology. Is that what you are asking?

5726 MR. LOWE: Well, sure, let's start with that.

5727 Is there a positive business case for replacing the analog radio?

5728 MR. VACHON: I think that the Commission itself recognized -- first of all, if it would be economic for us to replace it, we are a small company in the north but we are not dumb, we would have made this investment before, in order to increase our revenue. And the Commission itself recognized, in its decision, that the purpose of the phone is to help to provide this level of quality of service in the area where it is uneconomic to provide this type of service.

5729 So, to argue around the economics of those projects, I think -- I don't think it's worthwhile.

5730 MR. LOWE: So did you look at any present worth studies for upgrading just the long distance network?

5731 MR. VACHON: I'm not an economist, but when I have to spend $9 million to provide improved service to 2,200 customers that I already have, for me, I don't need to make long-time studies to have my answer.

5732 MR. LOWE: Okay. So you looked at what you had to do to do it, to do the basic service objectives and upgrade the long distance system and you kind of treated it all the same, in terms of evaluating the projects and prioritizing them and timing them and then deciding --

5733 MR. VACHON: What I would like to bring you back to is the decision. The decision is to make sure we have all across the territories digital networks to offer service. Those networks are analog.

5734 So what we have done is, we look to the number of customers we have to serve, what size of transport facility that we need, and we choose a digital transport facility that fit the size of the customers that we have to meet, and that's how much it costs. That's what we have done from a technical point of view.

5735 MR. LOWE: Okay. Thank you.

5736 Now, you did testify yesterday that there are some -- even for achieving the basic service objectives there is some economic limit to your decision to proceed with projects or not. What I'm thinking of is your discussion at, I believe it's transcript 619 and it was on the CCS 7 example.

5737 Do you recall that discussion?

5738 MR. VACHON: Yes.

5739 MR. LOWE: That CCS 7 -- and I wasn't here, I just read the transcript so I may not have gotten the flavour of it, but you said it would have been really kind of tempting to have the CCS 7, there are lots of useful things you can do with it, there is call display for long distance, but you decided not to go ahead with that particular project because it was just too expensive for the benefit.

5740 Is that a fair summary of your testimony?

5741 MR. VACHON: Yes, that's correct.

5742 MR. LOWE: Thank you.

5743 And CCS 7, it's useful for serving national business customers as well, isn't it, and that is probably one of the reasons why it would have been kind of a tempting project for you.

5744 MR. VACHON: CCS 7 is very useful, mainly in big network like yours.

5745 There are many advantages to CCS 7. One of them is to reduce the usage of your network, because with CCS 7 mainly, as I said, in larger networks like yours, when you place a call the CCS 7 through the SCP will access directly the callers and the person that you call and check if the end state -- if the phone is busy or not, and if the phone is busy he won't connect the call throughout all the network so it won't capture a network element for nothing.

5746 So for a large company with huge networks, CCS 7 is a very good network in order to reduce your capital investments and better manage your network.

5747 In an environment like us where you have -- and again, if you look at the map -- a community of 200 NAS in Aklavik, it won't change a lot for me to have CCS 7 and see if the customer that I call is busy or not. The economics are not there because I only have 12 trunks, I don't have 20,000 trunks getting into these switches.

5748 So CCS 7 is very useful for a big company.

5749 In our case, what CCS 7 was really providing was the long distance call feature. All the other advantages coming from CCS 7, they would have been nice to have for sure, but it's not a must as it is in big networks.

5750 MR. LOWE: And it's useful for billing too, isn't it?

--- Pause / Pause

5751 MR. LOWE: That's all right. Nothing much turns on it. That's fine.

5752 Then you say at transcript 619 that it would have added an additional $30 million and you said that's just way too expensive and so that was the time to tighten the belt and, you know, axe the project. Correct?

5753 MR. VACHON: Yes. What we did, we thought about our stakeholders that will have to pay for the subsidy and --

--- Laughter / Rires

5754 MR. LOWE: Thank you.

5755 MR. VACHON: And as I described before, the benefit that you have from CCS 7 doesn't warrant the investment in the kind of network that we have, so that's why we stepped back. We knew it was a lot of money.

5756 If I just put my maintenance hat, technician guy, I would like to have CCS 7, like I would like to have a bunch of things, but I don't think it's a good investment and it was a good decision for us.

5757 MR. LOWE: Just for clarification, on page 15 of your evidence you say that CCS 7 would have been an additional $13.9 million and then at the transcript it's $30 million and I was just wondering if that was a typo or what.

5758 MR. VACHON: There are two components to CCS 7. The first one is the equipment attached to the switch.

5759 But CCS 7, what it is is all your information about your phone numbers is carried over a different network so it means that we have to provision on a satellite this additional network so there are costs associated with satellite too. Ted could provide you more detail, if you want.

5760 MR. LOWE: Okay. Well, that's fine.

5761 So when you say $13 million or more in capital, you are now saying the "or more" would be another $16 million or so?

5762 MR. VACHON: Yes. And maybe to answer your question about billing, when you have CCS 7 the billing has to be made in your local switch using what we call LAMA(ph) and our billing is done remotely, so that's where your billing is coming into account.

5763 MR. LOWE: Thank you.

5764 MR. DEAN: On page 15 of the evidence, yes, the paragraph you are referring to is specifically the switching technology, the cost of $13.9.

5765 There was another interrogatory -- I forget the number off the top of my head -- where we did explain the split between the transmission component and the switching component.

5766 MR. LOWE: Now, at page 18, and this is getting into the area of using:

5767 Do you see that?

5768 MR. VACHON: I'm sorry, could you indicate to me which paragraph you are at?

5769 MR. LOWE: I'm not sure it's a quote but my reading of the paragraph is that you propose to complete -- and maybe it's the second full paragraph: "You propose to complete the project identified in SIP over four years" and -- where is this thing?

5770 Well, let me just ask you: If you do have additional SIP funds are you going to be using them for the construction program review projects which have been uneconomic year over year?

5771 MR. VACHON: Additional to those that we are asking, or --

5772 MR. LOWE: Well, you have referred to some in here, at page 17 at the top:

5773 And then you describe some examples.

5774 Then you are saying, I think, if I'm reading this correctly, that if you have some SIP funds then you would use it to pursue these projects which have kind of been in the hopper for a long time and you have been wanting to get to for awhile and so you would use the funds to get at those.

5775 MR. VACHON: Yes. And what I would like to -- you are correct in your statement.

5776 What I would like to precise is, we won't use the SIP fund to replace equipment that is not necessary or to make upgrades that are not necessary to provide the basic service. If we replace those from radio from analog to digital it is because we have been asked to go with digital.

5777 MR. LOWE: Okay. So you kind of dust off these projects. And some of these, you refer to some that appear in nine successive capital programs and they are continually deferred due to the uneconomic nature of the capital projects, but with SIP you can finally breathe life into them and go ahead with them, if you have the available funds. Correct?

5778 MR. VACHON: My mandate -- our company mandate in the past was to provide telecommunications services with the definition to distinguish voice mainly. So analog radio was fulfilling this mandate.

5779 Today, with this new definition, we have to provide digital service, local Internet and add calling features, so the network that we have cannot provide those services, that is why -- it's not a free run "Go and upgrade your network", it is a directive to provide this kind of service that requires this kind of technology, and that is what we are doing here.

5780 MR. LOWE: Now, I would like to turn to -- and I'm not going to get into this in any detail. It's Northwestel Exhibit 10. Quite frankly, you could look at any map of your system, but this is the handiest.

5781 I was just trying to find Atlin on that map.

5782 MR. VACHON: Find Atlin?

5783 MR. LOWE: Atlin.

5784 MR. VACHON: Maybe you drive too fast. This map is intended mainly to explain -- to show our territory, our major centres, talk about the distance and talk about -- have an idea where the communities are. It's not to show the various locations.

5785 Atlin is a very small town in British Columbia. It's somewhere I would say around the IODE of British.

5786 MR. LOWE: So it's just below the border, just below Whitehorse, isn't it, on that lake? It's the little Switzerland of the north.

5787 MR. YEULET: Atlin is Telus territory. It's one of those anomalies that we have in our wonderful district. It's just up there, just slightly below where you see Carcross.

5788 MR. LOWE: And then if I want to phone Atlin, it's the first listing in your phone book, isn't it? Atlin is right there, isn't it?

5789 MR. YEULET: Yes. We worked together with Telus, I believe, to put it in our phone book, but that would be another department that would have -- another panel would have to say how it gets in there.

5790 MR. LOWE: Then I see this Whitehorse city map which is at the back. It's got Whitehorse and area. It includes Atlin, B.C., and the southern lakes and so on. It struck me that there must be quite a strong community of interest between Atlin and the Whitehorse area and that's part of your network.

5791 MR. YEULET: Yes. Atlin is -- pretty well anybody who goes through Atlin has to come through -- not necessarily Whitehorse per se, but pretty close, yes, from that perspective. There's a lot of things that happen between Whitehorse and the Yukon and Atlin, a lot of functions.

5792 MR. LOWE: There could be a lot of calling between the two areas.

5793 MR. YEULET: I don't know how much calling goes on between. I'm not in that area. I don't think this panel can answer that question.

5794 MR. LOWE: Well, did you think about instead of spending extra SIP money on some of the steel or CPR projects, did you think about spending it on achieving the basic service objective in Atlin?

5795 MR. DEAN: Atlin's not Northwestel's operating territory. It's your operating territory.

5796 MR. LOWE: So you didn't even think about if there's some extra improvement funds, there's this territory Atlin just to the south of Whitehorse. There's this strong community of interest, maybe that's a good place to fulfil the basic service objectives and avoid, you know, a situation where the people of Atlin are kind of outside the candy store looking in. You know what I mean?

5797 MR. DEAN: Well, I think if we examine the elements in the basic service objective, I would be very interested in pointing out which ones Atlin don't have. They do have a digital radio system going to Atlin. They do have a digital switch. I'm not sure what more Atlin needs. Help me, please.

5798 MR. LOWE: I really can't help you too much on this, I'm sorry to say, but, you know, I'm an even faster flyer than I am a driver.

5799 Say the objective wasn't being met there, say the basic service objective wasn't being met, would you look at spending some of your excess SIP funds over in Atlin?

5800 MR. VACHON: If Atlin was one of our communities, like we did in other small communities, yes. It's a matter of what we had been asked. It's to provide basic services in the territory that we serve, not in other territories.

5801 MR. LOWE: So if it comes to a choice between meeting a basic service objective in a community which has a community of interest with your surrounding area on one hand, residential customers, basic service objective, or some nine year old CPR program, you would pick the nine year old CPR program for your own area.

5802 MR. VACHON: If I had the choice to use my company money to provide service to my customers or to provide service to customers of another company, I would take care of customers. I'm pretty sure that Telus, if you would have to invest your capital money to provide service, you would provide service to your customers too.

5803 Should Northwestel provide service to Atlin, it's not the purpose of this panel here at all.

5804 MR. LOWE: Excuse me.

--- Pause / Pause

5805 MR. LOWE: I'm just going to read this into the record and you can look at if you want. It's your response to CRTC 2801, page 3 of 3:

5806 MR. VACHON: Give me a minute, please.

5807 MR. LOWE: Right.

--- Pause / Pause

5808 MR. VACHON: I have it.

5809 MR. LOWE: Does it say the company is aware along the 7 highway that currently has no service --

5810 MR. VACHON: Could you let me know where --

5811 MR. LOWE: Page 3 of 3.

5812 MR. VACHON: Sorry.

5813 MR. LOWE: 2802. Sorry.

5814 MR. VACHON: Yes. I have it.

5815 MR. LOWE: And does that indicate that perhaps the basic service objective is not being met in the Atlin area and Northwestel is aware of that?

5816 MR. YEULET: We would have to dig out the Telus response, but I think Telus is saying they are not expecting to have to provide any service to that area, but in our case we are suggesting that.

5817 MR. LOWE: This is fine. If it's on the record, we can deal with it in argument. There is no need to belabour this.

5818 MR. YEULET: Yes. Most of the issues are on the record between Telus, especially for Atlin.

5819 MR. LOWE: That's fine. Now, at page 19 of your evidence you talk about upgrades for pay phones. Then above the -- the paragraph above the heading "tracking plan":

5820 I take it that you don't mind expanding or re-interpreting the basic service objectives when you think it's appropriate. Is that fair? Maybe at some stage it's not a SIP, it's a gulp.

--- Pause / Pause

5821 MR. VACHON: So I have a little bit more information, could you repeat your question and we will try and answer properly.

5822 MR. LOWE: I was just observing that it seems that the company seems willing to amend the scope of the basic service objectives and the funding that SIP was supposed to provide in decision 9916 when it suits its purpose as evidenced by the fact that you may expand SIP to reflect these software upgrades some time down the road.

5823 I guess if you want a question, I will say don't you agree and you can have at it.

5824 MR. VACHON: Yes, we agree. That's what it says in the document.

5825 MR. LOWE: Okay. Thank you. Now, on page 20 reporting on the tracking sheet, and this is that tracking plan, and I realize that you discussed this yesterday with Ms Lawson and I don't propose to replough that ground.

5826 I take it that what's going to happen is you are going to report on the tracking sheet which is in this interrogatory 105 and I think it's also reproduced in the staff briefing paper. That's going to be filed with the Commission every year. Is that right?

5827 MR. VACHON: Yes. We suggest every first quarter.

5828 MR. LOWE: So if someone disagreed with what is being done, then it would be up to them to muster up the energy and try to convene a proceeding to review it before the Commission.

5829 Is that the way it would work?

5830 MR. VACHON: I don't know how this process would work. What we have been asked is to provide a yearly or to provide a regular status update of where we are and we propose to the Commission to file every year. What the Commission will do or how the Commission will treat this filing, I don't know.

5831 MR. LOWE: So it gets filed somewhere. You send it in, and that is probably going to be the end of it, isn't it.

5832 MR. VACHON: I can't answer this question.

5833 MR. LOWE: Do you anticipate any kind of annual review or a chance for people to come forward in some fashion? I know it is time consuming and everyone wants to get on with business.

5834 MR. ROGERS: Mr. Chairman, I think Mr. Lowe will have much better progress in pursuing questions of method regulation and the process and the review, and that sort of thing -- method of regulation will be handled by the finance panel, which is the next panel. I am sure they will be pleased to answer regulatory methodology issues.

5835 MR. LOWE: I can do that; that's fine.

5836 We talked about Atlin, and you agree that Northwestel and Telus both provide service in northern British Columbia; correct?

5837 MR. VACHON: Correct.

5838 MR. LOWE: Should this proceeding be used to redraw traditional serving territory boundaries?

5839 MR. VACHON: I think we have some -- I wouldn't say boundary issues, but some boundaries have to be better defined between B.C., Telus and Northwestel. Northwestel will be more than happy to look at those boundaries.

5840 Our main goal to define those boundaries properly is to make sure that we don't have any customers who fall in no-man's land where there is nobody who plans a network for them. I think it is very important, from the customer's point of view, to have a company accountable to provide service to those customers and include those customers in their planning.

5841 It is something that we will have to work together on, and Northwestel will be more than happy to do so.

5842 MR. LOWE: I want to clarify, although I think the record is pretty clear on this, in the interrogatories.

5843 In Interrogatory NWTel(CRTC)-804, Attachment 2 -- and you can refer to it, if you want. My question is: It seems to us in that interrogatory that Northwestel was making a claim for Atlin and all of Telus' Peace River offices.

5844 I want to make sure that we are not going to hear in final argument that there is a new land grab or that you have gone back to that position in some fashion.

5845 MR. VACHON: I will check 104, if you don't mind. I don't remember.

5846 MR. LOWE: It is 804.

--- Pause / Pause

5847 MR. YEULET: That wasn't the intent, if that is how it came across. There have been interrogatories since then that got the boundary down to a really close perspective between Telus and Northwestel.

5848 MR. LOWE: You are not after Atlin and you are not after the Peace River offices.

5849 MR. YEULET: No.

5850 MR. LOWE: Okay. Should customers have a say in which company provides them service, particularly in these sort of penumbral areas where it could be either way, not a clear case?

5851 MR. YEULET: The answer, in a nutshell, is no, the customers have not been involved at this point in time because we have not figured out where the boundary really is. But we propose, at least Northwestel's proposed scenario we think covers the customer's base that best suits where the community of interest, of going forward customers, not necessarily of customers that already belong or utilize the specific incumbent telco.

5852 MR. LOWE: We were thinking about cross-examination with maps, boundaries, and pins and stars and all of that, and reflecting on it we thought maybe the hearing room is not the place to be drawing hard boundaries.

5853 I think you are saying that yes, we should sit down and talk about this and maybe get some customer choice and community of interest, and these other considerations involved.

5854 MR. YEULET: Yes. In the last undertaking that we just provided to Commission Staff, when you get a chance to look at it you will see that both companies are almost on the same line now. There is just a really small grey area.

5855 I think it is in our interest to try and narrow that gap down to the last point.

5856 MR. LOWE: Back to the SIP again. Is there a lead time to order some of this equipment to get the job done in time?

5857 I had thought the rule of thumb for switches is two years from pulling the trigger to tuning it up.

5858 MR. VACHON: No, it is not two years. It is shorter than that.

5859 The other thing we have done, or we have started to do, is we have started to deal with some suppliers to try to understand their availability. You have to understand that competition will be open in January 2001, and we have been asked to provide service within a specific time frame.

5860 The decision of the Commission will be made in November. So if we wait for November to start to design and build this network, we will never be there in time, for sure. What we have done is we have started to work out the pre-engineering, trying to not spend too much money on this thing.

5861 But we have started to talk to the supplier, and they are aware that we are coming up with this kind of plan. The time to deliver switches could be, given they know that, between six and eight, nine months, maximum, I would say.

5862 MR. LOWE: You are spending $18 million in 2001 under SIP.

5863 MR. VACHON: Seventeen million.

5864 MR. LOWE: Seventeen. Well, whatever the record says.

5865 You are going to have to make some irrevocable commitments with suppliers pretty soon in order to keep that track, aren't you?

--- Pause / Pause

5866 MR. YEULET: It is an issue, especially from the switching perspective. We have to continue to work with the suppliers and hope that they put us on the list to ensure that when the Commission makes a decision we can actually place the order and deliver.

5867 It is still up in the air, but we are working with the suppliers to see if we can't come up with some arrangement, especially when we are talking not just one year's worth of service improvement but we are talking a four-year program.

5868 So hopefully it is in everybody's best interest to say yes, this is the right thing, and they will put us on the plate to actually be able to deliver the number of switches that we will need in that particular year.

5869 It is something that we definitely are working at.

5870 MR. LOWE: When do you figure you would have to pull the trigger with them, give them that firm commitment, sign the contract, no outs?

5871 MR. VACHON: This commitment cannot be made before the decision. We will have to wait until the final decision is made. When the final decision is made, we will trigger everything.

5872 We have triggered some already. I was talking previously about the right of way in the buffalo park. We try to be ready -- not that we anticipate any kind of answer, but just that we know the time frame is short and we are going to have a lot to do in a very short time frame.

5873 We try as much as we can to work on creating contacts with suppliers. It is just advance work to help us.

5874 The other thing too to consider in our environment is the weather. Before May, I would say maybe April, building conditions will be very difficult because of the weather. Our construction period, as we mentioned, is very short. We are going to have to have all our line up to make sure we work hard during this short period of time to deliver what we have to deliver.

5875 MR. LOWE: What if the Commission's decision is kind of delayed past November?

5876 MR. VACHON: I would think that it would be realistic to believe that the four-year plan would be delayed too.

5877 MR. LOWE: Thank you very much. Thank you, Mr. Chairman.

5878 THE CHAIRPERSON: Thank you, Mr. Lowe.

5879 Commission counsel...?

5880 MR. BATSTONE: Thank you, Mr. Chairman.

EXAMINATION / INTERROGATOIRE

5881 MR. BATSTONE: I am going to start off with a question on the fixed manual mobile customers.

5882 It has been talked about a fair bit today and I just want to clarify a few things that were said. Yesterday at the very end of the day, Mr. Yeulet in response to questions from Mr. Rondeau was talking about fixed manual mobile customers being split between NMI and Northwestel.

5883 You had said:

5884 I would like you to clarify there. You are saying that there are fixed manual mobile customers both on the Northwestel network and the NMI network?

5885 MR. YEULET: No. A fixed manual mobile is our network. A fixed manual mobile is unserved and they are only on Northwestel's network.

5886 MR. BATSTONE: Okay. So there is no issue here on NMI upgrading service to fixed manual mobile customers.

5887 MR. YEULET: Not that I'm aware of. No.

5888 MR. BATSTONE: What tariff items would typically apply to a fixed manual mobile customer? What are they paying for it to get their service?

5889 MR. YEULET: I don't have the tariff item in front of me, but I have --

5890 MR. BATSTONE: That's not necessary. Just sort of generally, if you can.

5891 MR. YEULET: According to my notes here, the non-reoccurring rate, in other words, the order processing rate is $16.50 for a resident and $34.10 for a business. Then the rates for a fixed customer residential is $20 a month and a business is $26 a month. Those customers each pay six cents air time on local calls.

5892 MR. BATSTONE: And there's no like rural community surcharges or anything like that.

5893 MR. YEULET: Not that I'm aware of. No.

5894 MR. BATSTONE: Okay.

5895 MR. WALKER: If I could just add. Maybe the rural area serving charge that you are thinking of applies to customers primarily in northern B.C. that we put on a different system when we were down there. We installed a brand new system down there, an SR500.

5896 In lieu of exchange line mileage, we charged them just the thing called a rural area serving charge. I believe it's about $40. It does not apply to fixed manual mobile.

5897 MR. BATSTONE: Okay. I would like to turn now to tracking of the SIP program. This is also an area that we have talked about a little bit during the course of the day.

5898 This morning -- I will back up a little bit. Yesterday you said that you had a program management system which would track the costs for the SIP.

5899 MR. YEULET: That's correct. Well, through our capital program we have databases that keep track of all the funds that get charged to capital projects.

5900 MR. BATSTONE: What I was wondering, is this a system whereby you would have -- like you would be generating estimates presumably for particular items that were being upgraded pursuant to the SIP.

5901 MR. YEULET: Yes. What we are proposing is to utilize our existing capital program per se, but isolate any projects that are pursuant to the service improvement program so that we can actually attract both of them within the same.

5902 MR. BATSTONE: Okay. My question is: You will be generating specific estimates for specific upgrades, I take it.

5903 MR. YEULET: Yes. There will be a detailed estimate prepared for every project within the service improvement program.

5904 MR. BATSTONE: This morning you had said that the estimates in the current SIP proposal were planning numbers. I take it that's a higher level of aggregation or a higher level of confidence, I guess. It's a preliminary kind of estimate, is that right?

5905 MR. YEULET: That's right. It's a standard process that we come up with a planning level member and then when it gets closer to the time, then you work out the details.

5906 MR. BATSTONE: Right. And the estimates that you would eventually -- once you get closer to actually doing the upgrade, the estimates you would actually develop.

5907 I think, Mr. Vachon, you were saying yesterday that those would be approved by more senior management.

5908 MR. VACHON: Yes. The way the process works is you will do the detailed design and the detailed design, you will price exactly how much it will cost. Depending on the value of the work that you want to undertake, there's a schedule of authority. It goes up to the Board if the expense exceeds -- I think it's a million dollars.

5909 MR. BATSTONE: But there is a formal process anyways to generate the estimates and then I take it to track the estimates as well.

5910 MR. VACHON: Very rigorous.

5911 MR. BATSTONE: Right. In response to CRTC 2101 -- I don't know if you want to pull that one out.

--- Pause / Pause

5912 MR. VACHON: Yes. We have it.

5913 MR. BATSTONE: It's page 1. It's in the first paragraph at line 7. The response states that:

5914 My question to you is if there are already these detailed estimates that are approved and what not, why would it be such a burden to provide project by project monitoring of the estimates and the actuals?

5915 MR. YEULET: I think what we are trying to say there, that's not our interrog, whichever panel. I think the intent of that is we manage every one of our projects on a project basis. What we are suggesting is what we would provide to the Commission is an overall review of the whole program.

5916 It would be broken down at the project level, so you can see that we did what we said we were going to do or things are delayed or they are fast tracked, whatever. The intent of that was to say that yes, we monitor our projects on a day to day, month to month basis from a company corporate perspective, but it's not something that we felt would then have to be passed on to the Commission to try and review because it's just going to be that much more work involved.

5917 MR. BATSTONE: But the information is there, I guess. It could be done.

5918 MR. YEULET: A lot of the information would be there. It's just a matter then how we would format it to pass it on to the Commission, I guess.

5919 MR. BATSTONE: Okay. My final questions just relate to another issue that was discussed, this time yesterday with Ms Lawson. She was talking about the cost of upgrading switches. You recall there was a discussion both of the costs for hardware, the costs for software, and principally in respect of enhanced calling features. The number that was being passed around was $11.6 million to do the hardware upgrades.

5920 My question is would all of those costs be associated with enhanced calling features or is there more to it than that?

5921 MR. VACHON: It won't be long.

--- Pause / Pause

5922 MR. DEAN: The $11.6, I think that was in 106, is the hardware.

5923 MR. BATSTONE: Okay, but it's hardware for switch-up grades, right, to provide just call management services or is it more general than that? Did those switch upgrades provide more than just that functionality?

5924 MR. DEAN: The main trigger for it is to provide the enhanced features. The reality of what's included in that is you have to bring the switch to the current version.

5925 MR. BATSTONE: So I take it from that then -- like can you say that a proportion of those costs would be dedicated just to call management and I guess the other thing I would be interested in is the access to emergency services and the privacy features.

5926 Like, are there specific hardware upgrades just for those things? Or is the hardware upgrade something more general than that that provides all of those functionalities?

5927 MR. VACHON: I will try to make the explanation simple and --

5928 MS BATSTONE: Sure. This is my chance to say, "I'm just a lawyer not an engineer".

--- Laughter / Rires

5929 MR. VACHON: The switches to -- the software required to provide the enhanced call feature cannot -- I used the analogy of a pure PCDT yesterday, and the application software to provide those features cannot be supported by the -- like the switch provides lines to customers, the switch provides trunking to connect to the rest of the world, the switch also has hardware to -- and the intelligence to connect your calls, but this switch, the hardware cannot support the software; so if I want to install the Excel software into a whole PCDT I cannot make it. So I have to replace my switch to have one more powerful -- add a stronger computer with more power in order to run those applications.

5930 And so, to answer your question, for me, it's difficult because I have to replace this computer, but this computer is not used only for features, it's also used to connect calls, it's also used to handle trunking, it's also used for a bunch of things, but the basic hardware doesn't support the software for call feature.

5931 MR. BATSTONE: Okay. And for something like the privacy protection features, would that principally be a software upgrade?

5932 MR. VACHON: Yes, the production feature you are talking about is part of CMS. If you don't have CMS you don't have it.

5933 MR. BATSTONE: Okay. Thanks very much. Those are all my questions.

5934 Now, I believe Counsel Paré has some questions.

EXAMINATION / INTERROGATOIRE

5935 MS PARÉ: I just have a few questions on quality of service indicators.

5936 Northwestel will recall that in response to Interrog 102 they proposed a remote classification for indicator 2.1 -- you can get the reference if you want but it's probably not necessary, at this point.

5937 In that proposal, Northwestel also proposed that "community" be defined as a community served by Northwestel where there are less than two full-time technicians.

5938 I would like, now, to take you back to Decision CRTC-2024. In that decision, at paragraph 16, the --

5939 MR. VACHON: Excuse me. Could I ask you to speak a little bit louder, please.

5940 MS PARÉ: Sure.

5941 MR. VACHON: I have a hearing problem. Thank you.

5942 MS PARÉ: I could also do it in French but I don't think the rest of the crowd will understand.

--- Laughter / Rires

5943 MR. VACHON: I would be more than happy to do it, actually.

--- Laughter / Rires

5944 MS PARÉ: So would I.

5945 If I could take you back, for a moment, to Decision CRTC-2024. In that particular decision, which was the proceeding on quality of service indicators, Northwestel had proposed a dismission of remote which was based on the number of network access services.

5946 At that time, Northwestel had proposed that the "remote community" be defined as a community with less than 500 network access services and where access to the community for a larger centre be either by aircraft or by road with more than three hours of normal driving.

5947 Furthermore, at that time, Northwestel had proposed a standard of 70 per cent of out-of-service troubles cleared in 10 working days.

5948 Now, the question that I have for your panel is: What would be the implications or what would be Northwestel's position if the Commission were to adopt the former definition, the one that was proposed in CRTC -- the one that was suggested by Northwestel in CRTC-2024 yet adopted the proposed standard in this proceeding, which is 80 per cent cleared within five days.

5949 MR. VACHON: The reason why we have revised our definition -- and I agree that maybe we should have perceived this problem the first time we made the definition -- is our challenge to provide service -- and I would like to precise that the reason why we would like to have this "remote" definition is only for the out-of-service clear within 24 hours.

5950 If you look at our service indicator, as I said before, we all exceed them except the out-of-service, and the reason why we have problems with the out-of-service is our ability to react because of our environment. When I can plan my work -- when I have 10 days to provide service to provision service to a customer, I can plan this work, I know when the flight is leaving and I can schedule the technician, I know which date the flight will go from one place to the other one because we don't have flights every day -- so I know on Tuesday there's a flight going to Aklavik and, from Aklavik, my technician can come back and go to other locations. So I'm pretty good when I know -- when I can plan my work a little bit in advance.

5951 When a trouble occurs and I have 24 hours to fix this trouble, the 500 NAS, or lines, doesn't mean anything because my ability to be able to fix this trouble quickly is, "Do I have a technician available to fly in this community and serve the customers?", and if you take my small map -- and that's the main reason why I brought this map was to help us to understand a little bit how it works -- if you take, as an example, Iqaluit, Iqaluit is on the east part of the map, and I have trouble in Pangnirtung, and Pangnirtung is right above, it's a blue circle right above the star -- the star represents Iqaluit -- and I dispatch a technician in Iqaluit, in Pangnirtung I have flights only -- let's say the --

--- Pause / Pause

5952 MR. VACHON: I'm just thinking about my employees who dispatch my technician. I don't know how they do it.

--- Laughter / Rires

5953 MR. VACHON: Let's say I have trouble in Clyde River -- Clyde River is a little bit more west north than Pangnirtung -- and I dispatch a technician in Clyde River to fix a problem and, the same day or the day after, I have a problem in Pangnirtung and, now, I need to send another technician but the technician available might be elsewhere -- I can have a guy in Cape Dorset, or they are all busy in Iqaluit working on other troubles -- so I have to bring my technician back from Clyde River to Iqaluit and send this technician from Iqaluit to Clyde River. But in a lot of those communities, like Clyde River, you only have two flights a week. So, to make it in 24 hours -- let's say the flight is on Thursday and we are only on Tuesday, my guy is stuck in Clyde River until Thursday, he cannot go out of there, and by the time he's out, and usually the flights are at the end of the day, so it means he will have to spend the night in Iqaluit anyway and after a while, I fly him back into Pangnirtung to fix this trouble -- you can have a trouble in Clyde River on the Monday and I don't have any flights in Clyde River before the Tuesday so, again, there's no way I can do -- even if he has 2000 NAS or one NAS, even he has 501 NAS or 490 NAS, I cannot fix my problem more. That's why we came with this two permanent employees because where we have a larger centre, we have full-time employees, and those employees are available to fly and fix those problems, the network.

5954 So the trigger for us, really, to provide service is -- as I said, it has nothing to do with the NAS; it's really our ability to have somebody to fix it.

5955 Another example is Enterprise. Enterprise is a 60 NAS community close to Hay River. And it is a 15-minute drive. No problem. I don't have any staff in Enterprise, but I can do very well in Enterprise because I have staff close. So that is why we changed our destination.

5956 MS PARÉ: I have listened to you carefully, and I understand that accessibility is an issue, but I still don't understand why you moved from an objective standard based on number of NAS to a staffing level position.

5957 MR. VACHON: That is what I have tried to explain, and I know I have not been very good explaining it. I will try again.

5958 MS PARÉ: Let me ask you: Under the new definition that you proposed, I understand that 74 communities would be classified as remote.

5959 MR. VACHON: Yes.

5960 MS PARÉ: Under the previous definition, under the number of NAS, how many communities would be classified as remote?

--- Pause / Pause

5961 MR. VACHON: It was less than that. It was around 60 communities, I think.

5962 MS PARÉ: Could you provide us with a list of those communities that would be captured by the definition of remote if we were to use the number of NAS, less than 500 NAS?

5963 MR. VACHON: Yes, we could do that.

5964 MS PARÉ: Thank you.

1630

5965 MR. VACHON: I would like to come back to the definition of staff. The assumption we have made is that when a community is identified has urban or rural or rural or remote, I cannot, Northwestel, change this category by myself. I have to go back to the Commission and ask that we would like to remove this community from remote to rural or from rural to remote. That is not something I can do myself.

5966 The only reason why we would change a community from one category to the other would be -- the example that comes to my mind is a location like Faro north of Whitehorse where we have a gold mine that closed. The town went from 1,800 residents to 100 residents.

5967 At 200 NAS in a community, I don't have enough workload to justify having a technician.

5968 The other reason that we went with this number of employees instead of NAS is the -- you don't have those numbers, and I will be happy to share this information with you -- is that the number of troubles that we have in those small communities -- I have an average of 47 to 50 troubles per year. It means I have less than one trouble per week in those communities.

5969 Let's say in a week I can have two troubles, and if it happens that this trouble is not the same day that the flight is flying in or that I have a tech available, my percentage of appointments of having service fixed within 24 hours is zero per cent. I can have one in six months, and if by coincidence I can fix it the same day, I am 100 per cent.

5970 So when you look at the percentage, it doesn't really reflect the quality of service we are providing. The number of NAS doesn't really reflect the quality of service we are providing. That is why we went with the employees, because that is how we serve our territory.

5971 MS PARÉ: But wouldn't you agree with me that if the Commission adopted your proposed definition at this time, then quality of service standards and indicators would be subject to corporate staffing decisions?

5972 MR. VACHON: Could you repeat your question, please.

5973 MS PARÉ: If the Commission were to adopt the definition that you are proposing at this time, wouldn't you agree with me that quality of service indicators and standards and the list of communities that would be captured under this definition would be subject to corporate staffing decisions?

5974 MR. VACHON: Yes and no. They would be subject to be met --

5975 In a sense yes, I would have maybe to displace my technician. It is hard to answer.

5976 What will drive our decision to move our technician -- I moved a technician recently from Nanisivik to Resolute Bay because the flight, the availability for us to fly from one community to the other one was better from Resolute Bay than from Nanisivik. So we moved our technician to have better coverage.

5977 MS PARÉ: I guess what I am referring to is that your proposed definition says less than two fulltime technicians. So in order to move a community from rural to remote, all you would have to do, if it is only accessible by air, is to remove the technician or have one fulltime technician and one part-time technician. That would move that community into a remove community.

5978 That is what I am referring to.

5979 MR. VACHON: Yes and no. I cannot look at my network from a one community point of view. It depends on the number of communities I have from where I serve my customers.

5980 Again, if you come back to this map, what we have identified on the map is the community where we have community technicians, where we have power corporation technicians where we have signed a contract with the power corporation. In order to help us provide better service, we have asked the power corporation to do some of the work for us, some basic work that had to be done.

5981 That is what my community technicians do too, the basic work.

5982 Those technicians don't move, but what they can do is very limited.

5983 Where I have fulltime technicians is in my large centres. So I will have a fulltime technician in Cambridge Bay. Even if you go with 500 NAS, I won't move a technician in Hall Beach. It would not be economic. It would not make any sense to have a technician that handled one or two troubles per week, and the rest of the days he doesn't have anything to do.

5984 So I really match my technicians with my workload and where my workload is. For the day to day small service I try to handle it with community technicians.

5985 The community technician is a challenge for us to maintain. A lot of our community technicians are First Nations technicians, aboriginal people, and Northwestel respects their lifestyle and culture. We hire those technicians and pay them 40 hours a month.

5986 I have one trouble per week on average, so I pay them four hours per week. We ask them to call us every day to see if we have problems to fix.

5987 As I said before, they have their culture. They have their way of living. A stake in Hall Beach is pretty expensive, so those people have to hunt and bring food back to their house. So sometimes they are not always available.

5988 So I have to fly people again. I am back to flying people, and flying people is where my high concentration of customers are.

5989 MS PARÉ: Just one last question. Given what you just said, would the company welcome the possibility of the Commission establishing a list of those communities that would fall under remote at this point, according to the list that you have submitted, and freeze that list?

5990 MR. VACHON: Yes, that's what I said. I think that is already how it is today. I cannot move a -- like down south, you cannot move a community from rural to urban without going to the Commission.

5991 Am I correct?

5992 MS PARÉ: That's all; thank you.

5993 THE CHAIRPERSON: Thank you, counsel.

5994 I understand some of my colleagues have questions, some of which were again deferred to this panel from previous panels.

5995 I will turn first to Commissioner Demers.

5996 COMMISSIONER DEMERS: Thank you, Mr. Chairman.

5997 Maybe I should start by saying that Mr. Vachon said he once worked for a large corporation. Maybe now he will work with a great corporation.

5998 MR. VACHON: I already realize this point.

5999 COMMISSIONER DEMERS: Just a few questions because I understand that none of you have worked on a SIP before. That is what I understood from what you were saying.

6000 MR. VACHON: Not of this nature. The only SIP I have been involved in was when we went down with the 8FR to 4FR in Bell and to FR many years ago. That's about it.

6001 COMMISSIONER DEMERS: It was, for me, interesting to know why today you are going to provide service to areas where you were not providing service before.

6002 That was my surprise when I was appointed to this panel, the fact that some people have no service and now you are going to provide it, but I think you gave some explanation for that.

6003 So my first question is on the fact that you are proposing a four year plan. Let's assume that the Commission would approve that for purposes of my question. What assurances do you give the Commission that you will bring that proposal to its end in four years.

6004 MR. VACHON: As we have answered in one of the interrogs, a four years plan for us it will be a big challenge. We would like to go with a four year plan with the possibility maybe to go a bit in the fifth year, depending on the kind of problems we will face.

6005 I don't know what kind of follows between now and the end of this time. I think we have talked about the kinds of challenge we can face with the supplier, with the ability to get permission to deploy networks.

6006 Today to say it's four years, that's what we are aiming to and that's what we put in place -- we will put in place. John is in place to make sure we make it in four years, but four years will remain for us a big challenge given the environment and given the size of this company.

6007 COMMISSIONER DEMERS: My question is based on the fact that you have a big chunk of that four year program in the last year. I think you referred to the fact that usually you plan ahead three years. This is why I am trying to get from you whether -- especially what is going on in the fourth year is firm from the point of view of the plan that you have already.

6008 I understand with that, of course it's clear, that there is an increase in rates that goes with this. I don't know if it's your panel, but I don't think I recall having seen when you expect the rates to increase to pay for that, to pay for this program.

6009 If people are already paying for it and it's delayed, then there is a problem with some explanations.

6010 MR. VACHON: I would leave, like you mentioned, maybe leave the financial panel to answer these questions, but I would like to also maybe mention these people will benefit from the coverage of long distance starting in January 2001, which is also part of this procedure.

6011 COMMISSIONER DEMERS: I see. On another point. Yesterday I was asking whether you knew how many households would not be served following the end of your SIP program. Today again this question at least indirectly came to the table.

6012 You have no idea of how many people will be left without service following that?

6013 MR. VACHON: Mr. Yeulet I'm sure will let the experts answer.

6014 COMMISSIONER DEMERS: We understand he has a four year job at least.

6015 MR. YEULET: Only if I make it through year one.

6016 COMMISSIONER DEMERS: But you have an idea.

6017 MR. YEULET: Yes. It's an approximate. Approximately

6018 COMMISSIONER DEMERS: How many people would not be served by your company at the end of the SIP? How many households, say, rather than people?

6019 MR. YEULET: We believe we have identified all of the households that we could attempt to find. I don't know if we will have any households per se. It's a really tough question. Now, a lot of those households may not take service, so that's part of it.

6020 I truly believe that there will be a few households somewhere that won't have access to this improved basic service. I don't know where they are at this point in time. I can give you an example.

6021 I just got a letter from an individual just a couple of days ago now. I'm not sure if it's this week or last week. He wrote a letter. He said latitude this, longitude that. He says "I'm writing this letter because I heard there's a possibility of getting a telephone service". He says "I'm putting it in an envelope and I'm hoping that a helicopter will come by in the next couple of weeks because I'm living in the middle of nowhere. I know I'm over the flight paths, the planes that fly over, because I see them fly over all the time".

6022 Eventually I got this letter from him. That's an individual that may not get service. I don't know. Once we plot him on our map, then we try to figure out if we can get a signal to him. That's why it's so hard to tell.

6023 We believe that we have gone throughout the area as best we can to accommodate everybody that we can.

6024 COMMISSIONER DEMERS: Thank you.

6025 MR. VACHON: We will have some tough decisions to do. John talked about this one. We have others where somebody lives totally on the other side of the lake. There's no road to access this customer. I don't think it makes sense for me to equip my technician with a boat or canoe to go over and provide service. We have those kinds of situations today. Some customers like that may not have service after.

1645

6026 COMMISSIONER DEMERS: Thank you. In the process of applying or putting into force, building and so on of your network in each community, have you provided some way for the community to participate? Will you have an information program, a communications program so that in future your would-be customers would know you are around and be ready to ask for service for one thing? Do you have something like that?

6027 MR. YEULET: Well, at this point we are planning on doing a survey of the underserved and unserved areas, you know the unserved areas which have underserved customers in them prior to us going in there, actually the year prior to us, what our proposal is.

6028 At this point I haven't developed another survey to actually go out and ensure that customers -- we will have to put something in place to ensure that service is coming so that they can actually go in and apply for service. It's beneficial to both parties to do that. That way it also gives the company an opportunity to determine how many customers actually will be taking service so that we can plan it out.

6029 We don't actually just build the main plant, the main system, to get to the area and then, you know, now we don't have the work force available to actually connect up the customers. That would be even more disappointing over a period of time.

6030 We will put a mechanism in place over time here before we roll this out.

6031 COMMISSIONER DEMERS: And it will be partly a matter of communications with the community, not only, in other words, people who are going to be there to build, but also some people experienced in communicating with people.

6032 MR. YEULET: Yes. We will get our communications department and customer service involved in this.

6033 MR. VACHON: I think we will use various ways to make it as we did for the preparation of the plan where we will use newspaper, media. We will for sure talk with the various levels of government, associations.

6034 We might maybe in some locations arrange with our sales group other consultation sessions with people trying to help identify this. All this is management defined, but it's part of our SIP program to make sure we find those customers where they are.

6035 COMMISSIONER DEMERS: Thank you. On another matter. Today, just a few minutes ago, we talked about the report you would make to the CRTC. There is, I saw, the prototype of that report.

6036 The way it's set up right now, is it a document which is to be valuable inside the company and not only a document that is made for the Commission?

6037 MR. VACHON: I would say yes. The various tracking mechanisms that we will have, we will have a tracking mechanism at the engineer level where you have all the details of this project. When those reports come up to me, I will be surely very interested to see not how we progress in Old Crow if the router had been installed, but I will be interested to know if the switch in Old Crow had been replaced by the date when it has to be replaced, so it will be some kind of structure of reporting.

6038 The report that we will produce to the Commission will surely be of a lot of interest for me like the indicator that we are already filing our part of the thing that I look at on a monthly basis. We review too the executive content on a monthly basis, our service indicator, how we have performed last month. We look at the variant.

6039 I have to explain to my boss why we have had problems and what kind of action plan we have in order to improve this situation. The same thing will happen with the SIP where we will track and see how we are doing and try to build the contingency plan.

6040 COMMISSIONER DEMERS: So that document says something to you, not only to the Commission. In other words, it's useful. When you look at it, you know where your program is going.

6041 MR. VACHON: Yes. The document is not developed yet. We will have to propose a document. I would suspect that John will try to build only one document that will fit the use of everybody.

6042 COMMISSIONER DEMERS: And would that document be made available to your Board of Directors?

6043 MR. VACHON: I'm sure too that like they track -- already they track. They monitor how we spend the capital. I have to report to the board and also to my boss how I spend the capital, where if we over-run on the run. It is the same with the service indicator. It won't be different with the SIP for sure.

6044 COMMISSIONER DEMERS: Thank you. Just two little points here.

6045 On the enhanced services, you have as a plan that you -- in some communities you would not have all the enhanced services. My question would be are you not concerned with that? So that I get an answer from you, let me suggest an example.

6046 You would not today build a network where people would be on party lines because, I suppose, that's not what people want. In the same sense, are you building something today with so many enhanced services but not other enhanced services. Of course, it is not like somewhere else where all enhanced services are available.

6047 Are you not handicapping your network at this moment for the future?

6048 MR. VACHON: Not from an enhanced feature point of view. In order to -- to provide the enhanced features, we have, as claimed before, to upgrade our switch to have the hardware powerful enough to handle those features. We try to strike a good balance about what we think makes sense to offer compared to the cost.

6049 To offer more options, more features, would be just to buy a more powerful software package and offer most of those features. What I would like to make sure that we all understand is the feature that we have selected has part of the basic services, our definition, our -- I would say not our definition, but the features that we have selected that fit under this definition will be offered all across the territory in each and every community.

6050 You won't have a community that has four or five features out of six and the other one will have only two or three. You will have all the same features. Over and above the features we are offering, there are other features that could be offered. We felt that for the cost and also the -- that kind of creature that really our customers are looking for. We said we can drop those ones in order to reduce the size of our SIP and reduce the cost.

6051 COMMISSIONER DEMERS: I understand. On the other hand, when people go to Edmonton, they will find out it's like the long distance rate that things are different when you go south than when you are in the north. Therefore, the service will be different.

6052 My other point is on the Internet providers in small communities. You are building a network that will provide for two, yours and a competitor. That was raised at one point, I think.

6053 The choice of your competitor -- let me put the question like this. How do you like to be the one who will choose your competitor?

6054 MR. VACHON: I would like to maybe correct a point here. Northwestel has not identified himself as the first supplier of Internet services. What we will offer is two accesses. Northwestel might not be the supplier selected at all.

6055 We won't be the first supplier of choice. We might end to be the supplier of last resort. What we are doing with our Internet offering is to provide two accesses that any ISP can use to offer Internet services.

6056 Depending on the selection process that we will put in place, Northwestel would be at the same level as any other ISP to go and offer Internet services. So it's not we connect Northwestel, we're there, is there any other ISP supplier who wants to come into this town? That's not the way it works.

6057 What we have done is just to provide two accesses. We will have to define a mechanism by how those suppliers are selected and provide service to the community. The reason why we went this way was specifically to avoid to be perceived by the small ISPs like we have a big phone, we are big Northwestel, we take all the Internet market.

6058 We knew that this kind of reaction would happen, so we selected instead to access. It's there for everybody. Who will be the Internet supplier? It will depend on the mechanism that we will define, but it won't be a mechanism more favourable to Northwestel than for Mr. Zubko. It will be fair for everybody.

6059 COMMISSIONER DEMERS: Thank you.

6060 Thank you, Mr. Chairman.

6061 THE CHAIRPERSON: Thank you.

6062 Commissioner Williams.

6063 COMMISSIONER WILLIAMS: Thank you, Mr. Chairman.

6064 Good afternoon, Mr. Vachon and panel members.

6065 How long have you been an employee of Northwestel, Mr. Vachon?

6066 MR. VACHON: January 17, 1998. Welcome to the north.

6067 COMMISSIONER WILLIAMS: It's certainly a breath of fresh air to hear your attitude commitment to approach the customer services you and your team have presented throughout the last while. We will certainly be watching the customer service indicators very closely.

6068 I certainly think your leadership in this area can only help Northwestel build customer loyalty and maybe solve some of their other problems.

6069 You talk about this vast territory. Maybe you don't want to give some of your technicians boats. I understand. Bell used to use an aircraft in the Eastern Arctic to sometimes solve some of these customer service scheduling problems around air schedules and high cost of charters and that sort of thing.

6070 I know of companies in Edmonton that do a significant amount of work throughout the north. One example would be A.D. Williams Engineering. They use a small Piper Malibu that's capable of flying from Edmonton to Iqaluit without stopping at a pretty fast rate and it's not that expensive an aircraft.

6071 Has Northwestel considered other forms of maybe their own transportation to solve these needs, not for board meetings or management meetings but for customer service problems?

6072 MR. VACHON: Since I joined Northwestel, we have never looked to the cost of buying our own airplane and serving the north, but I would think that this practice would be really expensive. I described before with an average of less than two troubles per week per location, this plane will be all around the place to provide service.

6073 Bell too abandoned this aircraft. They don't have it any more. Before I moved here in Northwestel, I was looking to northern Quebec, all the Kootouac(ph) plus the Terrebonne area. It was my territory, part of the rest of Quebec.

6074 We have exactly the same set-up that we have here. We had a couple of community technicians to address the most urgent needs, like broken -- drop the wire from the house to the pole, and those types of things.

6075 And our main staff was in Kujuwat(ph) and we had two processes the same that we had there. We had the scheduled routine, that they travel around the territory to perform routine or provide more complex services. Also, for emergencies they were flying with regular flights.

6076 Now, we also -- we will never hesitate in case of emergency -- and I am coming back with Kootouac. Kootouac has been a pretty busy town recently -- the first I visit Kootouac.

6077 But the second one was the power corporation plant burned down and we flew a crew from Yellowknife as soon as we knew. As soon as we had the daylight, we flew a plane with a generator and two technicians to provide power to our central office before the battery goes down and a customer would be out of service totally.

6078 This trip cost me $15,000 for 200 NAS so I'm sure I should see my money back soon.

--- Laughter / Rires

6079 MR. VACHON: But that's the kind of team. That's how we try to react when emergencies happen. And I think it's not only Northwestel, it is many telephone companies when there is an emergency we react.

6080 For a one night in trouble per week, should we buy an aircraft and the mechanics and maintenance and costs and insurance and everything? I think it's a lot of money.

1700

6081 COMMISSIONER WILLIAMS: Okay, that's fine.

6082 A couple of days ago on a previous panel I was struck by a phrase that was:

6083 I think Mr. Wells said it in regards to the service improvement plan. And I think they went on -- or maybe they didn't go on, maybe someone else had mentioned that:

6084 As a company, do you view the service improvement plan as something the CRTC has imposed upon you, or do you agree and support the thrust of the basis service objective as it pertains to residents and businesses in the Northwestel serving area, in particular the unserved and under-served markets?

6085 I know everybody wants to serve where the big money is, but I mean like in the other areas.

6086 MR. VACHON: The responsibility should belong to business you mean?

6087 COMMISSIONER WILLIAMS: Are you reluctant participants in this service improvement plan or is it something you want to champion for the benefit of northern Canadians?

6088 MR. VACHON: I'm not sure I understand the question, but --

6089 COMMISSIONER WILLIAMS: Do you support --

6090 MR. VACHON: Totally. Yes, I think that --

6091 COMMISSIONER WILLIAMS: Do you think it's a good idea to improve the service?

6092 MR. VACHON: Okay, I get your question.

--- Laughter / Rires

6093 MR. VACHON: I was not sure your question to be -- I was not sure it was such an easy question.

--- Laughter / Rires

6094 MR. VACHON: I can take more like that. I'm not used to understanding.

6095 COMMISSIONER WILLIAMS: I can't promise you that by the way.

6096 MR. VACHON: No.

6097 Definitively, because -- for two reasons.

6098 First, from a fairness point of view for the rest of -- for the northerners, but also from a selfish point of view too, when we have to face our customers and they would like to have better service. We know we have limitation to provide service and most of our customers, too, know that we have limitation to provide service.

6099 But you were talking about people travelling to Edmonton and they will see what is available. People watch TV too and they see Candice Bergen that advertises 5 cents a minute any time, and they see the same advertising and they would like to have access to those services.

6100 So yes, it's a great thing for us and a great thing for the northerners too.

6101 COMMISSIONER WILLIAMS: Okay.

6102 Just off to an angle a little bit and then I'm going to come back to service. It just strikes me because you were describing how you solved some service problems and provided the flexibility to aboriginal people and you --

6103 Does Northwestel have any First Nations or aboriginal employees that work more than four than four hours per week?

6104 MR. VACHON: Yes, we have.

6105 COMMISSIONER WILLIAMS: Okay. At the management or senior management levels?

6106 MR. VACHON: We have at the management level.

6107 COMMISSIONER WILLIAMS: I don't have that demographic information yet, but I would imagine 50 per cent of Northwestel's customers would be aboriginal or First Nations. Would that be a fair statement?

6108 MR. VACHON: I don't know.

6109 COMMISSIONER WILLIAMS: Okay.

6110 MR. VACHON: It would be a real guess, a wild guess on my part.

6111 COMMISSIONER WILLIAMS: Yes, it would be a wild guess on mine until I see the actual information.

6112 Okay, back to service.

6113 In your experience have any ISPs experienced difficulty or delays in getting connected to your network when upgrading to ADSL?

6114 MR. VACHON: Not that I know.

6115 I know there is a gentleman who was part of the consultation session that alluded to the fact he might have problems to connect to Northwestel's network, and I think before making any kind of comment about any specific customer it would be good to understood what the real situation is too.

6116 But I'm not aware, myself, of any customer experiencing problems connecting to our DSL network.

6117 By the way, we have in Yellowknife a couple of ISPs connected to our network and offering this service.

6118 COMMISSIONER WILLIAMS: Okay.

6119 MR. VACHON: So some have made it and some allege they are having troubles.

6120 COMMISSIONER WILLIAMS: Would you undertake to look into it?

6121 Somebody provided this in an envelope to me today. It's about a half page story describing some of the difficulties they are having and I said I would bring it up.

6122 MR. VACHON: Maybe one point --

6123 COMMISSIONER WILLIAMS: I don't want to get into the specifics of a customer either.

6124 MR. VACHON: Okay.

6125 COMMISSIONER WILLIAMS: I think it's one side of the story and we have to hear the whole story before --

6126 THE CHAIRPERSON: For the record, what Commissioner Williams was referring to is a public document, it is an excerpt from a newspaper story. It's not just a document in a plain brown envelope.

--- Laughter / Rires

6127 COMMISSIONER WILLIAMS: Thank you, Mr. Chairman.

6128 THE CHAIRPERSON: And perhaps we will refer to it. It is a newspaper story from the "Yukon News", Friday, June 15th, 2000, "ISP Demands Level Playing Field".

6129 COMMISSIONER WILLIAMS: See, they're not easy for me either.

6130 Recently, in fact just a few days ago, on June 12th, Bell ExpressVu announced a new direct PC-type of satellite-delivered Internet service that is available immediately. Are you aware of that product?

6131 MR. VACHON: Yes, we know that ExpressVu will offer Internet services.

6132 COMMISSIONER WILLIAMS: They will be selling it nationwide for $39.95 per month for -- assuming you already subscribe to the ExpressVu service, or $49.95 per month if you don't, for 60 hours a month service, or three hours per day.

6133 Of course, a small dish and a modem is required at a cost here of $299. So for $299 you can buy the equipment and then $39.95 or $49.95 per month. The customer has to purchase this $300 worth of equipment.

6134 My question is: This new -- it seems pretty competitively priced. I looked at the article here and somebody said that Internet is being provided now at $59.95 and it is priced below cost and it probably should be worth twice that. So obviously they are not right. This is a large company that is able to provide this service on a nation-wide basis for $39.95 per month.

6135 So I guess my question is: Will this new competitively priced service offering by Bell ExpressVu influence or affect the SIP roll-out in the north, particularly in the smaller communities?

6136 MR. VACHON: I cannot answer this question because it's -- I can explain to you how this dish works, but what will be the impact on our market belongs more to our marketing people than to myself to make any judgment call on this one.

6137 COMMISSIONER WILLIAMS: Okay. That's fair enough. It just seemed that it's priced well below other comparables in the marketplace.

6138 It may have some affect. Because it's available anywhere in Canada, it may help solve some access to the Internet-type challenges that exist today.

6139 On page 12 of your service improvement plan evidence dated January 17th, it talks about 99-16, paragraph 41 -- and I will wait -- through the bottom of the page, but it says:

6140 Now, would enhanced calling be considered an upgrade?

6141 MR. VACHON: Enhanced calling?

6142 COMMISSIONER WILLIAMS: Enhanced calling. Extra services added to existing -- would that be considered an upgrade?

6143 MR. VACHON: The enhanced feature that we are offering, if it is...?

6144 COMMISSIONER WILLIAMS: Would that be considered an upgrade?

6145 Well, I guess I will give you the whole thing and then you can come back with it.

6146 It says here that unserved areas should be served, you know, prior to upgrades and you have got 14.5 million set up for unserved and your deployment over four years with the bulk of it in the fourth year. Right? And in enhanced calling, you have got a similar amount, 12.8 million, but it's spread out equally over the four years. I was just wondering how you prioritized that, given these four areas.

6147 MR. VACHON: To provide service to unserved and underserved is a priority before to provide upgrade, and if you look to what we have proposed in our four-year plan, close to 80-85 per cent of the customers will be served within the first two years while we will be deploying switch in the third and fourth years. So most of the unserved and underserved will be done at the beginning of the plan, no doubt.

6148 Now what we have to look at, too, is how the network works. By increasing number of customers to connect to a switch and so on and so forth, you have to build a network that can support those additional customers, additional traffic. So I cannot say -- the first year I connect all my unserved/underserved; the next year I do all my switch; and the fourth year I do all my transport. We tried to create a balance to build this network in the best way in order to provide service and impact most of the customers that we can in the first year, but to refer to unserved and underserved, most of them are served in the first two years.

6149 COMMISSIONER WILLIAMS: Okay. Thank you very much; it's been a long day.

6150 I have no further questions, Mr. Chairman.

6151 THE CHAIRPERSON: Thank you, Commissioner Williams, for giving me a heart attack.

--- Laughter / Rires

6152 THE CHAIRPERSON: I just have a couple of questions -- just a follow-up to a couple of earlier questions, actually, one for each, I think, probably.

6153 Mr. Dean, on the -- or Mr. Vachon, whoever -- just going back to this issue of the enhanced calling features and the costs associated with that, particularly, in the smaller more remote communities, and just following up on the questions that Counsel Batstone asked, if we look at -- and, again, I think we talked about the number that came from CRTC-106, the $11.6 million. If I asked the question in the reverse: If you were not to provide enhanced calling features in those communities, would you save the $11.6 million? If you were just not to provide the enhanced calling features but provide everything else, would you save $11.6 million.

6154 MR. VACHON: Not totally. We will check with Mr. Nishikawa for the number.

6155 THE CHAIRPERSON: Actually, you would save the -- I'm just looking at the hardware. You would also save the $824,000 in software. But just looking at the hardware, first.

6156 MR. VACHON: What we will have to do -- like, in order to provide the Internet service, we want to offer it over digital trunk because we have been said to offer digital network, so we will have to upgrade some of those switches to provide the digital trunking to -- I think the other reason to -- so the digital trunking is a part of it -- let me come back.

--- Pause / Pause

6157 MR. DEAN: I guess there's two other areas that we definitely need to keep in mind with the upgraded switch and basically we costed out the overall upgrade and then tried to decide which one of these programs they all fit in and so it might -- it's kind of hard to decide how to slice the pie. But a lot of the switches are manufacturer discontinued, we cannot buy incremental parts for them. So one of the key pieces in the overall program is access to the Internet, and we have said we think the best way to do that is digitally from the switch.

6158 The other key piece is improved toll -- and, again, we have said, the best way to do that is digitally from the switch to a digital transmission system.

6159 Both of those digital connections require an upgrade of the switch. So it was pretty much a judgment call which piece of these upgrades to put the hardware upgrade.

6160 The one thing that I guess if you said, "Don't do anything on enhanced calling", the column you could pull out is the software. But most of the hardware is required across several of the programs.

6161 THE CHAIRPERSON: Did you want to add something to this?

6162 Well, that's useful. But I wonder if it's possible for you, then, to identify the hardware that's identified only with the enhanced calling features? Or is, in fact, most of this hardware -- hardware that you end up having to buy and install for all of the other and the enhanced -- just piggybacks on this and now you have got the software? Because it's confusing, because of 106. Because you assigned $11.6 million of hardware to enhanced calling features, it isn't clear whether that is driven only by enhanced calling features or, as you now indicated, some, half, most of this hardware would be hardware that you would be buying anyway because of these other things that you have just indicated, and that's what's confusing to us and I think others here.

6163 MR. VACHON: To provide the enhanced calling, all the software had to be upgraded.

6164 THE CHAIRPERSON: I understand that. It's the hardware that --

6165 MR. VACHON: Now, if we -- okay, you are just looking for the hardware?

6166 THE CHAIRPERSON: Yes.

6167 MR. VACHON: Okay.

6168 THE CHAIRPERSON: So is that possible to break that out?

6169 MR. DEAN: So we will take this as an undertaking to say --

6170 THE CHAIRPERSON: Yes.

6171 MR. DEAN:  -- a "what if" scenario there was no CMS but the other two pieces are still there?

6172 THE CHAIRPERSON: Yes. Exactly. What of the $11.6 million in hardware would you not need if you weren't doing the enhanced but you would still need it because you were doing the other things. Okay?

6173 MR. DEAN: We will do it.

6174 THE CHAIRPERSON: So you accept that as an undertaking.

6175 At the risk of showing I don't have confidence in our counsel -- and I do -- I want to raise the issue the other counsel raised with you.

6176 This issue of the two technicians, Mr. Vachon, I guess the problem for us is even if I accept that we can approve the communities that would fit under the "remote", how do we get around dealing with the incentive that you could have -- and I appreciate you are dedicated to doing the best job you can for the company and for your customers -- but let's say you find yourself in the situation that, "I'm having a real struggle meeting this test of 80 per cent within 24 hours and if I just cut my technicians from two to one, I now have a new test that I can much more easily meet, so, the simple solution to my problem might be just to cut one technician in the community and, now, I'm more easily able to meet this new threshold".

6177 How can we, you and the Commission together, resolve this problem that gets around this incentive that you might have, even if we do approve the communities and you come to us and say we want to put a new community on the list because we are having this --

6178 MR. VACHON: You raise a good point. I think in our answer we have tried to be really honest about our ability to deliver the service, given the environment. Even if I cut a technician, I am still held to provide the level of service that has been agreed at the beginning except if I change the category of the location from rural to remote.

6179 I would assume that the Commission would ask me why, what is the factor that means I would like to change this community from rural to remote. The factor could be that there is -- as you know, we have a lot of mining in the north. If the mine closed and the population dropped, I cannot justify with the workload that I have. I cannot justify any more technicians.

6180 I would think those justifications could explain why we have to change it.

6181 We are talking NAS. We are talking employees. But the basis of it is workload.

6182 In my large centres, my technicians handle an average of 600 to 700 activities per year, each technician, which is an average of, I don't know, three or four per day; and with vacation and everything, it makes sense.

6183 In my small communities, my technicians handle a workload of 145 activities per year, which is an average of below one per day. It is a little bit less than one per day. That is the only thing. It is workload.

6184 I don't have any workload to have somebody sit there waiting to have a trouble. Because of the geography I can have -- and again you have to refer to the number of troubles we are talking about.

6185 I am talking about -- in the rural communities I am talking about 8,000 troubles across -- in the rural communities I am talking about 3,000 troubles across 74 remote communities. So it is not a lot of trouble per community.

6186 The trigger is really the volume, is to have somebody waiting just in case something happens. I can have in one week 25 troubles in one community, and I can be months with no troubles at all in the other areas.

6187 So where should I have the staff? Where will the next trouble be? Is it in Pangnirtung or is it in Resolute Bay? I don't know where it will be. That is our challenge, to try to find out where the trouble is.

6188 I know I mentioned this before, but I think the out of service result that we have in the appointment met the interval respected, the ten days. I am over 90 per cent, 92 to 93 per cent.

6189 In most of the indicators we are not the worst one. We are not the worst one across Canada. We are among the best ones except the out of service. That is really the only one that I have a hard time to meet. It is purely a matter of where the next trouble will be and where my guy will be when this trouble happens.

6190 That is why we went with staff instead of going with NAS. I understand your point. I agree with you that there is a risk. I might be the most honest guy. I have my problems too. But you can have another one that is not really honest and will play the game. I understand your concern but it is just the nature of the business.

6191 THE CHAIRPERSON: Thank you for that.

6192 Just a final point.

6193 Mr. Yeulet, I wanted to follow up on a discussion. I appreciate that it is the end of a long tiring day, and it is fairly simple math.

--- Laughter / Rires

6194 THE CHAIRPERSON: You had a discussion with Mr. Henry this morning regarding the cost of going to the community, the share that you will pick up and the cost that the consumer/subscriber will pick up. This morning you used the example of $100,000 in a community with four people, so it was fairly simple. Each one pays their $1,000 share, and since the balance was less than $25,000 you pick up all the rest.

6195 Is that correct?

6196 MR. YEULET: Yes. If they were unserved customers, they would pay the $1,000 to have service as part of the overall contribution to construction.

6197 The $25,000 platform is the cost to provide the service, to get it out there.

6198 THE CHAIRPERSON: So it is $100,000 to get the service there. They collectively pay $4,000; you pay the $96,000 balance.

6199 MR. YEULET: No. I pay the $100,000 and they pay $4,000. If you have --

6200 THE CHAIRPERSON: This is what I was afraid of.

--- Laughter / Rires

6201 THE CHAIRPERSON: It is going to cost you $100,000 to go into this community.

6202 MR. YEULET: Yes.

6203 THE CHAIRPERSON: They each have to pay $1,000, I understand.

6204 MR. YEULET: That is correct.

6205 THE CHAIRPERSON: That is $96,000 left.

6206 MR. YEULET: Yes, let's go with that scenario.

--- Laughter / Rires

6207 THE CHAIRPERSON: So you agree to pay the $96,000.

6208 MR. YEULET: I agree to pay the $96,000.

6209 THE CHAIRPERSON: If it is $104,000, they each pay four and we have $100,000 left, divided by four. That is $25,000 each. So you are still paying --

6210 MR. YEULET: That's why I didn't want to go down that avenue, because it is a different scenario than what I have.

6211 THE CHAIRPERSON: The $104,000 works out even for a community of four; right?

6212 MR. YEULET: No.

6213 THE CHAIRPERSON: No?

6214 MR. YEULET: No.

6215 THE CHAIRPERSON: Where am I going afoul here, then?

6216 MR. VACHON: I think what you mean is -- let's say we have four customers. It costs $100,000 to provide service. They each pay $4,000. I will pay $96,000.

6217 THE CHAIRPERSON: Right.

6218 MR. VACHON: If it costs $104,000, I will pay $25,000 per customer, which is $100,000. They will pay, each of them, $1,000, which is $4,000; so $104,000.

6219 If it costs $125,000 to provide service, they will pay, each of them, $1,000, which is $4,000. I will pay $96,000 and they will pay --

6220 THE CHAIRPERSON: They will each share the excess.

6221 MR. VACHON: Yes, the excess of it, if they want to have the service.

6222 The kind of problem we might face is if only two customers want to have the service and the two other ones say they don't want the service. Now we get into another kind of discussion where are the other ones willing to each pay the cost of having service?

6223 THE CHAIRPERSON: I understand that. But if we just take your $120,000 example. They each pay $1,000, so there is $4,000. You have $116,000 left. You will pay $100,000. And then there is $16,000 left to divide between the four.

6224 MR. VACHON: Among the four customers.

6225 THE CHAIRPERSON: Okay. Thank you. I better understand that. I knew it would be a struggle at the end of the day.

6226 It has been a long tiring day for you.

6227 MR. DEAN: Can I ask for one clarification on my undertaking?

6228 THE CHAIRPERSON: Yes.

6229 MR. DEAN: We agreed we are going to leave the enhanced features out. But when we were talking before, we separated enhanced from privacy from emergency.

6230 THE CHAIRPERSON: I am not doing that. I just want to know -- I know counsel did. I am just asking you for the enhanced features.

6231 MR. DEAN: But is privacy still in or is privacy out as well?

6232 THE CHAIRPERSON: I consider privacy to be one of the enhanced calling features.

6233 MR. DEAN: Great, because that is where I was putting it. I just wanted to make sure that was the right spot.

6234 THE CHAIRPERSON: What I am trying to get at is the hardware you would have to spend anyway, and then let's deal with it.

6235 If you can separate out the privacy from the others, so much the better. But that is not what I asked you.

6236 I think that concludes all the questions for this panel. Thank you very much.

6237 MR. ROGERS: Mr. Chairman, there is a matter of redirect.

6238 THE CHAIRPERSON: Redirect, yes. I'm sorry, Mr. Rogers, I forgot.

EXAMINATION / INTERROGATOIRE

6239 MR. ROGERS: Very quickly, just a few questions for the panel. I think it might be Mr. Walker who is most familiar with this.

6240 Mr. Walker, are you generally familiar with the terms of Public Notice 99-21 that governs this proceeding?

6241 MR. WALKER: Yes, I am.

6242 MR. ROGERS: According to the Public Notice on April the 10th, did Telus have an opportunity to provide its own proposals or evidence in this proceeding?

6243 MR. WALKER: Yes, they did.

6244 MR. ROGERS: Did they take up that opportunity to file any evidence?

6245 MR. WALKER: No, they did not.

6246 MR. ROGERS: Thank you. No further questions.

6247 MR. LOWE: Is this apropos any particular line of cross which raised this issue or just animus by the by?

6248 MR. ROGERS: It was apropos the input that might be given by stakeholders.

6249 THE CHAIRPERSON: I thought as much.

6250 MR. LOWE: That is the linkage; thank you.

6251 THE CHAIRPERSON: As you can probably appreciate, the projection that I had this morning -- and it is probably good that I haven't been working on this SIP program, because my consultations with stakeholders and projections forward based on that have not been terribly accurate for the last day and a half.

6252 The future projection that I had this morning as to where we might end up with our proceeding is somewhat off target, given the amount of time we spent with this panel -- which was valuable time and very useful and helpful to the Commission in dealing with all of these important issues.

6253 My estimates here suggest, based on what has been proposed to us, that we still have about 11 hours of questioning remaining. So we will at least have a full day on Monday, even if some of us collapse it a bit, and it probably now looks like it will carry over to Tuesday.

6254 We will just have to see where it goes on Monday. But the projection for concluding that I had this morning is probably out the window.

6255 In any event, I think I would like to propose that we start at 8:30 on Monday morning, if that is acceptable to everyone.

6256 I think that is normally our time for starting work, in any event.

6257 If we could do that, we will see you all Monday morning here at 8:30, where we will begin with the Finance Panel.

6258 Enjoy the rest of your weekend. Thank you.

--- Whereupon the hearing adjourned at 1733, to

resume on Monday, June 19, 2000 at 0830 /

L'audience est ajournée à 1733, pour reprendre

Date de modification :

2000-06-17