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TRANSCRIPT OF PROCEEDINGS BEFORE
THE CANADIAN RADIO‑TELEVISION AND
TRANSCRIPTION DES AUDIENCES DEVANT
LE CONSEIL DE LA RADIODIFFUSION
ET DES TÉLÉCOMMUNICATIONS CANADIENNES
SUBJECT / SUJET:
Review of regulatory framework for wholesale
services and definition of essential service /
Examen du cadre de réglementation concernant les services
de gros et la définition de service essentiel
HELD AT: TENUE À:
Conference Centre Centre de conférences
Outaouais Room Salle Outaouais
140 Promenade du Portage 140, Promenade du Portage
Gatineau, Quebec Gatineau (Québec)
October 11, 2007 Le 11 octobre 2007
In order to meet the requirements of the Official Languages
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and staff attending the public hearings, and the Table of
However, the aforementioned publication is the recorded
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either of the official languages, depending on the language
spoken by the participant at the public hearing.
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.
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Canadian Radio‑television and
Conseil de la radiodiffusion et des
Transcript / Transcription
Review of regulatory framework for wholesale
services and definition of essential service /
Examen du cadre de réglementation concernant les services
de gros et la définition de service essentiel
BEFORE / DEVANT:
Konrad von Finckenstein Chairperson / Président
Barbara Cram Commissioner / Conseillère
Andrée Noël Commissioner / Conseillère
Elizabeth Duncan Commissioner / Conseillère
Helen del Val Commissioner / Conseillère
ALSO PRESENT / AUSSI PRÉSENTS:
Marielle Giroux-Girard Secretary / Secrétaire
Robert Martin Staff Team Leader /
Chef d'équipe du personnel
Peter McCallum Legal Counsel /
Amy Hanley Conseillers juridiques
HELD AT: TENUE À:
Conference Centre Centre de conférences
Outaouais Room Salle Outaouais
140 Promenade du Portage 140, Promenade du Portage
Gatineau, Quebec Gatineau (Québec)
October 10, 2007 Le 10 octobre 2007
- iv -
TABLE DES MATIÈRES / TABLE OF CONTENTS
PAGE / PARA
RESUMED: SALVATORE IACONO 447 / 2957
RESUMED: WILLIAM TAYLOR
RESUMED: PAUL ANDERSON
RESUMED: DENIS HENRY
RESUMED: MIRKO BIBIC
RESUMED: SERGE BABIN
RESUMED: MARGARET SANDERSON
RESUMED: PETER WATERS
Cross-examination by MTS Allstream (Cont'd) 631 / 4109
Cross-examination by Primus 889 / 6032
- v -
EXHIBITS / PIÈCES JUSTIFICATIVES
No. PAGE / PARA
MTS-4 Telecom Decision CRTC 90-27 and 699 / 4621
Telecom Decision CRTC 92-8
MTS-6 BCE Nexxia Inc. financial 723 / 4786
statements for year ending
December 31, 1999
MTS-7 BCE Nexxia Inc. financial 723 / 4786
Statements for year ending
December 31, 2000
MTS-8 Two tables entitled "Bell Quebec" 764 / 5128
And "Bell Ontario"
CRTC-4 List of services prepared by 788 / 5299
MTS-9 ERG Opinion on Functional 798 / 5381
MTS-10 Document entitled "Price Cap 813 / 5485
Review and Related Issues",
prepared by Dr. William E. Taylor
PRIMUS-1 Excerpt from the Ontario Energy 901 / 6126
PRIMUS-2 Affiliate Relationships Code for 901 / 6126
Electricity Distributors and
CRTC-5 The Monitoring Report 2007 917 / 6288
Gatineau, Quebec / Gatineau (Québec)
‑‑‑ Upon resuming on Thursday, October 11, 2007
at 0835 / L'audience reprend le jeudi
11 octobre 2007 à 0835
RESUMED: SALVATORE IACONO
RESUMED: WILLIAM TAYLOR
RESUMED: PAUL ANDERSON
RESUMED: DENIS HENRY
RESUMED: MIRKO BIBIC
RESUMED: SERGE BATIN
RESUMED: MARGARET SANDERSON
RESUMED: PETER WATERS
LISTNUM 1 \l 1 \s 41004100 THE CHAIRPERSON: Good morning. Let's resume.
LISTNUM 1 \l 14101 Ms Song, I would appreciate if this morning we could move a bit quicker than yesterday. You took an awful long time to establish the dates, that it took six years to get the various mandated orders. I think we can establish it by just asking is it true that it started on such a date and was issued on such and such a date and move into the substance.
LISTNUM 1 \l 14102 MS SONG: Thank you, Chairman. I will endeavour to do so.
LISTNUM 1 \l 14103 MR. BIBIC: Mr. Chairman, if I may, a very quick point as a preliminary housekeeping matter.
LISTNUM 1 \l 14104 We have a response to Ms Cram on the 41 percent and we can file it.
LISTNUM 1 \l 14105 The quick answer is Appendix 2 of the Monitoring Report indicates that alternative TSPs are defined as including incumbent TSP out‑of‑territory operations such as Bell Canada in B.C. and Alberta.
LISTNUM 1 \l 14106 We have it.
LISTNUM 1 \l 14107 THE CHAIRPERSON: Thank you. Would you just file it with the secretary.
LISTNUM 1 \l 14108 MR. BIBIC: Okay.
EXAMINATION (CONT'D) / INTERROGATOIRE (SUITE)
LISTNUM 1 \l 14109 MS SONG: Thank you, Mr. Chair.
LISTNUM 1 \l 14110 We also have provided an exhibit to the Bell panel with respect to the Monitoring Report. However, I will get a copy of that and address that with the panel a little later on.
LISTNUM 1 \l 14111 At paragraph 147 of Bell et al's 15th March evidence ‑‑ if you could kindly turn to that.
LISTNUM 1 \l 14112 COMMISSIONER DUNCAN: Excuse me, Ms Song, what was the paragraph number?
LISTNUM 1 \l 14113 MS SONG: 147, Commissioner Duncan.
LISTNUM 1 \l 14114 COMMISSIONER DUNCAN: Thank you.
LISTNUM 1 \l 14115 MS SONG: Okay, does everyone have that?
LISTNUM 1 \l 14116 So I will simply read out paragraph 147. It says that:
"Bell et al proposed that in the event that the Commission mandates wholesale access to an essential facility which can be used to provide multiple retail services, the Commission should place a restriction on the use of the facility to ensure that absent the access supplier's consent it can only be used to provide the retail service where there is a need for a remedy to address abuse of significant market power in a particular retail market."
LISTNUM 1 \l 14117 It is actually the latter part of that quote that I have some questions about.
LISTNUM 1 \l 14118 So I would like to understand how the Commission would determine to use Bell et al's words, "whether there is a need for a remedy to address abuse of significant market power in a particular retail market."
LISTNUM 1 \l 14119 What kind of behaviour would satisfy what Bell et al mean by "abuse of significant market power"?
LISTNUM 1 \l 14120 MR. BIBIC: We mean that in the sense of the essential facilities test we have proposed, that denial of access would result in a substantial lessening of competition.
LISTNUM 1 \l 14121 MS SONG: So you mean that the Commission would have to find that there was actual denial of service?
LISTNUM 1 \l 14122 MR. BIBIC: Well, under the ex post test that we have proposed, yes, and under an ex ante test, I think it would have to be a little bit more forward‑looking.
LISTNUM 1 \l 14123 MS SONG: Could you provide an example of that?
LISTNUM 1 \l 14124 MR. BIBIC: Of what, of the definitions?
LISTNUM 1 \l 14125 MS SONG: Of the kind of behaviour that you are speaking about in this section of your evidence.
LISTNUM 1 \l 14126 MR. BIBIC: Sure. I can describe that using an example.
LISTNUM 1 \l 14127 Take a scenario where Bell Canada is the only local service provider in an exchange and no one else is providing service, and a CLEC comes along and wants to start competing for residential local service using unbundled loops, and the incumbent were to say no and deny access, under that scenario I could see the Commission saying: Well, loops are essential facilities in that exchange.
LISTNUM 1 \l 14128 A counter example would be there is also a cable company also providing service there, in which case denial of loops, if that were to happen, wouldn't result in a substantial lessening of competition.
LISTNUM 1 \l 14129 MS SONG: Would acts to increase rivals' costs satisfy abuse of significant market power?
LISTNUM 1 \l 14130 MR. BIBIC: I think ‑‑ well, you are getting into kind of abuse of dominance issues which are addressed through sections 78 and 79 of the Competition Act and the Bureau had a lot to say on that issue with respect to its Telecom Abuse Bulletin.
LISTNUM 1 \l 14131 We meant it here in the context of denial of access resulting in a substantial lessening of competition for the purposes of an essential facilities definition.
LISTNUM 1 \l 14132 MS SONG: So I just want to understand. Are you saying that you would have to find behaviour that would meet the test of sections 78 and 79 of the Competition Act in order to satisfy this criterion of a remedy?
LISTNUM 1 \l 14133 MR. BIBIC: No, Ms Song. I think I am trying to say that this has nothing to do with sections 78 and 79. We made that statement in the context of the definition of an essential facility.
LISTNUM 1 \l 14134 I mean just to put it ‑‑ to put another example. I gave you an example where denial of access to loops may constitute a finding of essentiality.
LISTNUM 1 \l 14135 What we are trying to say here is if in that exchange there is no residential telephony competition and denial of access to loops were to result in a substantial lessening of competition, the Commission could mandate access to loops to provide residential telephony but not access to the same loop to provide a retail internet service if the retail internet market were competitive.
LISTNUM 1 \l 14136 MS SONG: It was my reading of your evidence that your initial proposal at least in this proceeding was that the Commission use the Bureau's TAB framework; correct?
LISTNUM 1 \l 14137 MR. BIBIC: We proposed in our submission an essential facilities definition very similar to that set out in the Bureau's TAB.
LISTNUM 1 \l 14138 MS SONG: Right. So after the transition period, which is what I think this paragraph relates to, paragraph 147 says that the Commission should intervene only where there is a need for a remedy to address abuse of significant market power.
LISTNUM 1 \l 14139 My understanding was that your initial proposal was that that analysis should take place in accordance with the Bureau's TAB, and now you are telling me that that is not the case, that you have changed your position in that regard?
LISTNUM 1 \l 14140 MR. BIBIC: No, we did not change our position, Ms Song.
LISTNUM 1 \l 14141 What we were saying is the Commission would have to make a finding of essentiality and we propose they use the same definition of an essential facility that the Bureau proposed in the TAB.
LISTNUM 1 \l 14142 Now, the Bureau would use its definition for purposes of finding abuse of dominance. We were proposing they use that same definition, that the Commission use that same definition but for the purposes of finding essentiality.
LISTNUM 1 \l 14143 MS SONG: Mm‑hmm.
LISTNUM 1 \l 14144 MR. BIBIC: That is all we meant.
LISTNUM 1 \l 14145 MS SONG: I am not sure we are talking about the same thing, Mr. Bibic. I am trying to understand in what circumstances after the transition period would it be appropriate for the Commission to re‑mandate access to a facility and you are saying in paragraph 147 that that would only arise where there is a need to remedy an abuse of significant market power.
LISTNUM 1 \l 14146 MR. BIBIC: Well, Ms Song ‑‑
LISTNUM 1 \l 14147 MS SONG: So I am trying to understand what behaviour satisfies the criterion of a finding of abuse of significant market power.
LISTNUM 1 \l 14148 MR. BIBIC: Ms Song, I came here to speak on behalf of the company. I have an overall responsibility for this evidence.
LISTNUM 1 \l 14149 So I am trying to explain that in that event our position is that the Commission, to determine essentiality, would simply use the test of an essential facility which we have proposed.
LISTNUM 1 \l 14150 Yesterday, we went through one with Mr. Engelhart, which is at one of the interrogs we filed. I can't remember the number.
LISTNUM 1 \l 14151 If the Commission were to adopt an ex ante structure, we proposed a definition of an essential facility in our opening statement. That is really what we are saying. That is the test the Commission would use after the transition period to determine essentiality.
LISTNUM 1 \l 14152 MS SONG: But isn't it a component of your proposal that there be some kind of conduct in a retail market, that that is another component of your test for essentiality? That is what I am trying to drive at. I don't want general statements about your test for essentiality.
LISTNUM 1 \l 14153 I would like to know specifically in relation to your criterion of dominance or whatever it is in the retail market what kind of behaviour would the Commission have to find in order to satisfy your criterion.
LISTNUM 1 \l 14154 MR. BIBIC: Well, the answer is in the test that we have proposed. It is denial of access.
LISTNUM 1 \l 14155 MS SONG: That's it, that's all, denial of access?
LISTNUM 1 \l 14156 MR. BIBIC: Correct.
LISTNUM 1 \l 14157 MS SONG: Thank you.
LISTNUM 1 \l 14158 Now, moving on, it is my understanding that in its business segment operations Bell Canada has a small and medium business unit, a Bell West unit which operates west of Ontario and an Enterprise Unit; correct?
LISTNUM 1 \l 14159 MR. IACONO: Yes, that is correct, Ms Song.
LISTNUM 1 \l 14160 MS SONG: And what class of customers is served by the Enterprise Unit?
LISTNUM 1 \l 14161 MR. IACONO: The Enterprise Unit, that is the unit that I am currently working in. We deal with customers that have operations across the country, very large business basically.
LISTNUM 1 \l 14162 MS SONG: All right. So regardless of location?
LISTNUM 1 \l 14163 MR. IACONO: Yes. Most of them are national.
LISTNUM 1 \l 14164 MS SONG: And you would agree with me that Bell Canada through its Enterprise Unit is the most significant competitor in that market, in that segment of the business market as defined by Bell Canada?
LISTNUM 1 \l 14165 MR. IACONO: Well, we are certainly an important competitor and there are several others as well.
LISTNUM 1 \l 14166 MS SONG: Does it have the largest market share in that segment of the market?
LISTNUM 1 \l 14167 MR. IACONO: For some products yes, for some products no.
LISTNUM 1 \l 14168 MS SONG: And what products are you referring to as being products for which you are the most significant competitor?
LISTNUM 1 \l 14169 MR. IACONO: Well, I am looking at, for example, legacy services, Frame Relay, services such as those. Clearly, we are not the largest player in terms of market share.
LISTNUM 1 \l 14170 IP services, which is on the newer, obviously, connectivity type services, we obviously have significant capabilities but so do the major competitors.
LISTNUM 1 \l 14171 MS SONG: Yes. And what would that market share estimate be ‑‑
LISTNUM 1 \l 14172 MR. IACONO: I don't have the ‑‑
LISTNUM 1 \l 14173 MS SONG: ‑‑ in the higher speed data access services market?
LISTNUM 1 \l 14174 MR. IACONO: I don't have the market shares with me here.
LISTNUM 1 \l 14175 MS SONG: Do you have any idea, Mr. Iacono?
LISTNUM 1 \l 14176 MR. IACONO: In some segments we are probably ‑‑ just looking at ‑‑ I am just going from memory.
LISTNUM 1 \l 14177 If I look at IP VPN, for example, I think we are definitely the largest in terms of IP VPN circuits but I recall from some material that MTS Allstream is not too far behind Bell in terms of number of circuits in the IP VPN.
LISTNUM 1 \l 14178 MTS Allstream has a very significant MPLS network and a full suite of services, and in fact, I believe in some cases MTS Allstream has some services that Bell is not currently offering in the IP space.
LISTNUM 1 \l 14179 So, you know, it is hard to generalize. It depends on the particular product area that one is looking at.
LISTNUM 1 \l 14180 MS SONG: Yes. I am actually looking for a number but you are not ‑‑ you don't know off the top of your head, you can't provide us with an estimate?
LISTNUM 1 \l 14181 MR. IACONO: No, I can't, not off the top of my head.
LISTNUM 1 \l 14182 MS SONG: Would you undertake to do so for the markets that you have mentioned?
LISTNUM 1 \l 14183 MR. BIBIC: Subject to confidentiality if the Commission ‑‑ we could provide what we have to the Commission in confidence.
LISTNUM 1 \l 14184 MS SONG: Thank you.
LISTNUM 1 \l 14185 But the fact is that in 2006, according to your 2006 Annual Report, the Enterprise Unit alone accounted for revenue totalling approximately $2.5 billion; correct?
LISTNUM 1 \l 14186 MR. IACONO: Yes, that is correct and that comprises two broad categories of portfolios. One is the connectivity, which is all of the ‑‑ well, the connectivity services ranging from basic access to the very hi‑speed bandwidth access and that is about half of the revenues.
LISTNUM 1 \l 14187 The other half is all of the newer ICT professional services, security services.
LISTNUM 1 \l 14188 It is a growing business, and our proportion relative to the overall market in the ICT space of that is still quite small.
LISTNUM 1 \l 14189 So the $2.5 billion is a big number, but it comprises a very vast portfolio of connectivity, managed services, professional services, infrastructure services, equipment, et cetera.
LISTNUM 1 \l 14190 MS SONG: It is Bell's position ‑‑ and I want to return to the aspect of its test that requires that the owner of the facility, which is claimed to be essential, must also be dominant in downstream retail markets.
LISTNUM 1 \l 14191 Clearly, the state of competition in retail markets is a key component in your proposal.
LISTNUM 1 \l 14192 Is that correct?
LISTNUM 1 \l 14193 MR. BIBIC: That's correct.
LISTNUM 1 \l 14194 MS SONG: I want to turn now to Bell et al.'s argument that there is competition sufficient to protect the interests of users in retail business markets.
LISTNUM 1 \l 14195 In order to assist the Commission, I would like to focus on the argument set out at pages 9 to 23 of Bell's July 5th Supplementary Evidence.
LISTNUM 1 \l 14196 As I read pages 9 to 23 of Bell et al.s' Supplementary Evidence, there are essentially two aspects to the argument that there is competition sufficient to protect the interests of users in retail business markets.
LISTNUM 1 \l 14197 The first is the presence of other telephone companies in business telecommunications markets and, in particular, in the large to very large segments of business telecommunications markets, and those points are set out, I believe, at pages 9 to 15.
LISTNUM 1 \l 14198 The second is the potential of cable, electrical utility and wireless service providers to enter into the small and medium business segment of business telecommunications markets.
LISTNUM 1 \l 14199 Are you following me so far?
LISTNUM 1 \l 14200 MR. BIBIC: Yes.
LISTNUM 1 \l 14201 MS SONG: At this time I would like to focus on the first aspect, the arguments and the evidence that you set out at pages 9 to 15.
LISTNUM 1 \l 14202 Again, as I read pages 9 to 15, you are relying principally on bidding, or a request for proposal, or RFP activity as evidence of the fact that there is competition sufficient to protect the interests of users in retail business markets.
LISTNUM 1 \l 14203 Correct?
LISTNUM 1 \l 14204 MR. BIBIC: Correct.
LISTNUM 1 \l 14205 MS SONG: So this bidding activity, and the competitors that are mentioned at pages 9 to 15, are present in the enterprise segment of retail business telecommunications markets. Correct?
LISTNUM 1 \l 14206 Typically or primarily.
LISTNUM 1 \l 14207 MR. IACONO: Primarily, yes.
LISTNUM 1 \l 14208 MS SONG: You don't cite any market share evidence, at least in this part of your July 5th Supplementary Evidence. Correct?
LISTNUM 1 \l 14209 MR. BIBIC: Correct. We didn't think we needed to.
LISTNUM 1 \l 14210 MS SONG: The evidence that you do cite is a list of 18 competitor press releases from a three and a half year period, between January 13, 2004 and June 5, 2007. Correct?
LISTNUM 1 \l 14211 MR. IACONO: Yes. Those 18 were shown as examples of bids won by competitors that were made public by competitors through their websites.
LISTNUM 1 \l 14212 There are obviously a lot more that were not necessarily made public.
LISTNUM 1 \l 14213 MS SONG: Including your own.
LISTNUM 1 \l 14214 MR. IACONO: Yes. In fact, we provided a few in response to the deficiency response, I believe ‑‑ or deficiency argument. We provided 5 or 6 ‑‑ I am going from memory ‑‑ as examples ‑‑
LISTNUM 1 \l 14215 MS SONG: Of your own?
LISTNUM 1 \l 14216 MR. IACONO: ‑‑ of our own, yes.
LISTNUM 1 \l 14217 MS SONG: We will discuss the wholesale facilities and services leased by competitors that actually enable even this level of bidding activity on the part of competitors, but, if I understand you correctly, Mr. Iacono, you are not claiming that these 18 press releases are at all representative of overall bidding activity in the enterprise segment. Correct?
LISTNUM 1 \l 14218 MR. IACONO: That's correct.
LISTNUM 1 \l 14219 In fact, we noted that these were illustrations based on publicly available press releases.
LISTNUM 1 \l 14220 MS SONG: Right, and in your interrogatory responses, I think you couch this evidence by saying that they are only examples.
LISTNUM 1 \l 14221 MR. IACONO: That's correct.
LISTNUM 1 \l 14222 MS SONG: What would be representative, in fact, is the number that we have already discussed, the $2.5 billion in 2006 alone, garnered from the segment of the business market.
LISTNUM 1 \l 14223 Would you agree with me?
LISTNUM 1 \l 14224 MR. IACONO: Certainly, the $2.5 billion would not be representative of bidding activity.
LISTNUM 1 \l 14225 MS SONG: Perhaps not bidding activity alone, but my understanding is that the $2.5 billion revenue figure does, in fact, encompass multi‑year contracts, one, pursuant to bids, or contract renewals in the enterprise segment. Correct?
LISTNUM 1 \l 14226 MR. IACONO: Yes.
LISTNUM 1 \l 14227 As I said before, though, covering services that are way beyond connectivity, as well. So it is a broad, broad portfolio, a full suite of services.
LISTNUM 1 \l 14228 MS SONG: In order to assist the Commission and this public process, will Bell Canada provide, for the same three and a half year period that is covered by your July 5th Supplementary Evidence, the number of RFPs that Bell Canada bid on and won in that period?
LISTNUM 1 \l 14229 MR. IACONO: I think we had that discussion through the deficiency response, and I will leave it to Mr. Bibic to comment, or counsel.
LISTNUM 1 \l 14230 MR. DANIELS: Excuse me. I am sorry to interrupt, but this actually was an issue of a deficiency response we had at argument. The Commission has ruled on that actual request already.
LISTNUM 1 \l 14231 So I think we have already had this discussion, and the Commission has already ruled on it.
LISTNUM 1 \l 14232 MS SONG: There was a deficiency process, and Commission Staff declined to order that Bell produce that information, but I am asking you now, today, because you have put the issue of bidding activity squarely in your evidence, that you provide that information in order to put these 18 press releases, over a three and a half year period, in context.
LISTNUM 1 \l 14233 Will you do that?
LISTNUM 1 \l 14234 MR. IACONO: Ms Song, if I could refer you to paragraph 9 of page 11 of the July Supplementary Evidence, the pages that you raise, it is very clear there that, for example, in a recent Commission decision ‑‑ and I could probably think of a couple of others where the Commission itself has considered ‑‑ and I quote:
"The Commission, therefore, considers that evidence of rivalrous behaviour, primarily in the form of bid responses, is sufficient to demonstrate that the market is competitive enough to warrant forbearance." (As read)
LISTNUM 1 \l 14235 Now, that was in a forbearance context. My point is, the issue of "Does bidding and bidding activity represent an indication of competitive activity" has been determined, number one.
LISTNUM 1 \l 14236 Number two, I also want to cite, by way of an important example ‑‑ government bids, for example, be they federal government, provincial government or municipal government, follow extremely rigorous bid processes. All one need do is go on the MERX site and you can see the kind of processes that those bids entail, and several businesses of a smaller size than obviously the federal government use very similar principles to make procurements.
LISTNUM 1 \l 14237 We procure all types of things at Bell Canada, and we use RFP processes for many of our procurement requirements, be they network related, where we have a choice, or be they pen and paper.
LISTNUM 1 \l 14238 Those processes are well established. Large organizations, in particular, have ‑‑ they have to have very tight procurement processes in order to ensure that they give the proper incentives to potential suppliers to be as competitive as possible.
LISTNUM 1 \l 14239 MS SONG: Mr. Iacono, I am not contesting the fact that you have brought this evidence forward as an indicia of competitiveness in retail business markets, what I am asking you is, if you are going to put this kind of evidence in issue, then I think it is incumbent upon you, the most significant competitor in the enterprise segment of the business market, to come forward with at least the number of RFPs that you have bid on and the number of RFPs that you have won.
LISTNUM 1 \l 14240 MR. BIBIC: Well, Ms Song, our position ‑‑
LISTNUM 1 \l 14241 THE CHAIRPERSON: Ms Song, I am confused here. I thought the interjection from the Competition Bureau ‑‑ I'm sorry, who are you representing?
LISTNUM 1 \l 14242 MR. DANIELS: Sorry, I'm representing The Companies.
LISTNUM 1 \l 14243 THE CHAIRPERSON: The Companies, okay. Well, this has already dealt with interrogatories, and so therefore I really don't quite understand on what basis you feel you can pose a question now in cross‑examination.
LISTNUM 1 \l 14244 MS SONG: Well, I was not certain whether the commissioners, themselves, had had an opportunity to consider this issue. It's our companies position that, if this evidence is to be tested, that we should know of the total amount of RFPs that occurred during that period, how many ‑‑
LISTNUM 1 \l 14245 THE CHAIRPERSON: You surely don't expect me to disavow the Commission. If the Commission ruled on it in whatever form, that's the Commission's decision.
LISTNUM 1 \l 14246 MS SONG: All right, I will move on, then, Mr. Chair.
LISTNUM 1 \l 14247 Now, I believe I have read Bell Aliant's interrogatory responses correctly, that it does not have any out‑of‑territory operations. Correct?
LISTNUM 1 \l 14248 MR. HENRY: That's correct.
LISTNUM 1 \l 14249 MS SONG: Bell Canada, in its out‑of‑territory operations, does it lease any facilities from cable companies?
LISTNUM 1 \l 14250 MR. BIBIC: We don't think so, but I don't know for actual fact.
LISTNUM 1 \l 14251 MS SONG: All right. If you come to believe otherwise, you will let me know?
LISTNUM 1 \l 14252 MR. BIBIC: Absolutely.
LISTNUM 1 \l 14253 MS SONG: It's my understanding that you are a partner in Inukshuk Wireless Partnership?
LISTNUM 1 \l 14254 MR. BIBIC: That's correct.
LISTNUM 1 \l 14255 MS SONG: And Inukshuk holds 323 licences across Canada in the 2.3 gigahertz and 3.5 gigahertz bands. Correct?
LISTNUM 1 \l 14256 Does that number sound about right to you?
LISTNUM 1 \l 14257 MR. BIBIC: There's a large number of licences, so I don't think there's much need to quibble with the number of licences we have. The reason I was hesitating is I thought our licence spectrum was in the 2.5 gigahertz band.
LISTNUM 1 \l 14258 MS SONG: You are referring to Inukshuk now, when you say "our"?
LISTNUM 1 \l 14259 MR. BIBIC: Correct.
LISTNUM 1 \l 14260 MS SONG: Okay, I could be mistaken, but I'm fairly sure it's 2.3 and 3.5. But, in any event, regardless of the numbers, this is spectrum that is capable of utilizing Wi‑Max technology. Correct?
LISTNUM 1 \l 14261 MR. BIBIC: Well, it's pre‑Wi‑Max right now, but we expect that, ultimately, there will be a Wi‑Max standard over that spectrum.
LISTNUM 1 \l 14262 MS SONG: All right.
LISTNUM 1 \l 14263 Did Mr. Babin have something to add to that response?
LISTNUM 1 \l 14264 MR. BIBIC: No.
LISTNUM 1 \l 14265 MS SONG: Okay.
LISTNUM 1 \l 14266 And in its out‑of‑territory operations, does Bell Canada, today, use Wi‑Max to provision last‑mile access connectivity between a customer premises and, say, Bell West's central offices?
LISTNUM 1 \l 14267 MR. BABIN: Yes, we do, Ms Song.
LISTNUM 1 \l 14268 MS SONG: And where would that be?
LISTNUM 1 \l 14269 MR. BABIN: In the Bell West territory, out of territory for the ILEC.
LISTNUM 1 \l 14270 MS SONG: Sorry, for the ILEC? What does that mean?
LISTNUM 1 \l 14271 MR. BABIN: Out of our ILEC territory, which is Ontario and Quebec ‑‑
LISTNUM 1 \l 14272 MS SONG: Yes.
LISTNUM 1 \l 14273 MR. BABIN: ‑‑ we do use Wi‑Max as a last‑mile facility.
LISTNUM 1 \l 14274 MS SONG: Right. But my question had to do with your out‑of‑territory operations.
LISTNUM 1 \l 14275 MR. BABIN: That's right. Our out of territory is in Bell in the West, is out of territory of Ontario and Quebec ‑‑
LISTNUM 1 \l 14276 MS SONG: Right.
LISTNUM 1 \l 14277 MR. BABIN: ‑‑ and we do use Wi‑Max technology for last‑mile facilities.
LISTNUM 1 \l 14278 MS SONG: All right.
LISTNUM 1 \l 14279 You also mention satellite technology as a potential access technology?
LISTNUM 1 \l 14280 MR. BABIN: Yes.
LISTNUM 1 \l 14281 MS SONG: Does you Bell West unit use satellite service to provision last‑mile access connectivity?
LISTNUM 1 \l 14282 MR. BABIN: Not that I'm aware.
LISTNUM 1 \l 14283 MS SONG: Okay.
LISTNUM 1 \l 14284 I would like to move on now to Bell et al's position on interconnection services. I believe that you have included interconnection services not as essential facilities or services per se, but services that may still require regulation for technical or social reasons. Correct?
LISTNUM 1 \l 14285 MR. HENRY: That's correct.
LISTNUM 1 \l 14286 MS SONG: You would limit, however, mandated interconnection to only those services that are related to and ancillary to local and toll interconnection. Correct?
LISTNUM 1 \l 14287 MR. HENRY: That's correct.
LISTNUM 1 \l 14288 MS SONG: But that would extend to services ancillary to both toll and local interconnection. Correct?
LISTNUM 1 \l 14289 MR. HENRY: Yes.
LISTNUM 1 \l 14290 MS SONG: Okay. However, it is your company's position that IP interconnection arrangements need not be mandated. Correct?
LISTNUM 1 \l 14291 MR. HENRY: Sorry, which interconnection arrangements?
LISTNUM 1 \l 14292 MS SONG: Internet protocol, IP to IP interconnection.
LISTNUM 1 \l 14293 MR. HENRY: Well, it depends what kind of IP interconnection you are talking about, but I think perhaps Mr. Babin can talk to the specific.
LISTNUM 1 \l 14294 If you are talking CLECs offering local service on an IP basis, and that kind of IP to IP interconnection, I believe there are many technical issues associated with that that perhaps Mr. Babin could talk to.
LISTNUM 1 \l 14295 MS SONG: Well, actually, before Mr. Babin elaborates, I just want to know whether it's your proposal in this proceeding that IP to IP interconnection services be mandated or whether that falls under your negotiation principles.
LISTNUM 1 \l 14296 MR. HENRY: Well, ultimately, they could be mandated, if it's for the purpose of CLEC to CLEC, or CLEC to ILEC, but a CLEC that's offering local service on an IP platform. So, ultimately, that could be mandated. But the problem is that there are many, many technical issues, again, that Mr. Babin can speak to, that have prevented us from getting to the point of reaching some kind of industry consensus on this.
LISTNUM 1 \l 14297 MS SONG: And when you say "CLEC to CLEC IP interconnection" is that ‑‑
LISTNUM 1 \l 14298 MR. HENRY: Well, I'm distinguishing it from the Internet ‑‑
LISTNUM 1 \l 14299 MS SONG: Right.
LISTNUM 1 \l 14300 MR. HENRY: ‑‑ because Internet IP pairing, I mean, that's done today and there's no Commission intervention. And the web works just fine without out.
LISTNUM 1 \l 14301 MS SONG: Right. So your position would be that IP interconnection for the purposes of providing voice services, data services, at whatever speed, that would all fall under mandated interconnection. Correct?
LISTNUM 1 \l 14302 MR. HENRY: Yes.
LISTNUM 1 \l 14303 MS SONG: What kind of services would not be covered by specifically, and perhaps Mr. Babin can explain what kind of IP interconnection to provide what kind of services would not be mandated in your proposal.
LISTNUM 1 \l 14304 MR. HENRY: Well, I think I have answered that. In the Internet world, there are pairing arrangements around the world that have been entered into without regulatory intervention. Unless and until there were a problem that were ever to develop, I don't see why we would be looking for a solution to a problem that doesn't exist.
LISTNUM 1 \l 14305 On the voice side, if you have a CLEC that operates on an IP basis wanting to interconnect with a CLEC that operates on a TDM basis, well, that is something that, ultimately, could be mandated. It is something that has been looked at and is being looked at actively in CISC.
LISTNUM 1 \l 14306 As I say, the reason it hasn't happened yet is there are a multitude of technical reasons which, again, I think Mr. Babin could explain.
LISTNUM 1 \l 14307 MS SONG: Right. For example, when you say there's a multitude of issues that take a long time to resolve, one example of that would be the length of time it took to resolve the IP interconnection guidelines issue, which was first brought forward to the CISC.
LISTNUM 1 \l 14308 In, I believe, the early part of 2004, the Commission directed that the parties achieve negotiated resolution of that issue by November 2005. It wasn't until, I believe, the latter part of 2006 that something was put forward to the Commission, and finally approved by the Commission. So that's the kind of time that we are looking at to these kinds of negotiations taking to resolve.
LISTNUM 1 \l 14309 MR. BABIN: Yes. I would add, Ms Song, it's not really negotiations, it's really industry discussions. I mean, if you look around North America, there is actually a very limited number of IP interconnections between CLECs and ILECs.
LISTNUM 1 \l 14310 The standards are continually evolving and, as you know, as you mentioned, the Technical Bulletin 14 was approved back in April of this year, and the team have recommended, through work on TIF 19, to come up with those guidelines. But as I said, the protocols and the standards continue to evolve.
LISTNUM 1 \l 14311 Now, to do IP‑to‑IP interconnection within your own network, very easy because you know what is on each end of that interconnection. But dealing with a multiple group of various companies, different technologies, different technology vendors, it is very difficult to land on a standard, and that is really the discussion that is going on.
LISTNUM 1 \l 14312 And I might add as well, since October last year there has been a lot of submissions and a lot of contributions by all members of this committee through CISC. Bell has contributed nine submissions, TELUS has contributed six, FCI Broadband has contributed four, and I might add MTS Allstream have been at the meetings but haven't contributed changes to move these standards forward.
LISTNUM 1 \l 14313 So, you know, there is a lot of discussion, it is not an unwillingness to come up with a standard, it is really coming up with a consensus and working with the electronic manufacturers to come up with that standard.
LISTNUM 1 \l 14314 THE CHAIRPERSON: Do I understand you, the issues are technical, not business then?
LISTNUM 1 \l 14315 MR. BABIN: That is correct, Mr. Chair.
LISTNUM 1 \l 14316 THE CHAIRPERSON: Yes, but I mean is it tested. You suggested we adopt it, all deals with business, not with technical incumbencies. So assuming that these technical ones could be solved, do you expect to be able to workout a business arrangement and supply these services?
LISTNUM 1 \l 14317 MR. BIBIC: The answer, for the most part, is yes. But, under our proposal, we acknowledge that there could be some issues that are industry‑wide and just can't be resolved because they are technical or they are based on standards and they are just not commercial. In which case, the Commission could step in and say, let us mandate a solution for all.
LISTNUM 1 \l 14318 MS SONG: I would like you to now turn to your Appendix 10, to your 15 March evidence please.
LISTNUM 1 \l 14319 Is everyone with me?
LISTNUM 1 \l 14320 MR. BIBIC: We are.
LISTNUM 1 \l 14321 MS SONG: In this appendix Bell et al cite two examples; one from the broadcasting industry and the other from I believe the transportation industry of possible precedent models that could be followed, correct?
LISTNUM 1 \l 14322 MR. BIBIC: Correct, they were just examples.
LISTNUM 1 \l 14323 MS SONG: Right. And I have to ask, in the broadcasting example, are programming undertakings and distribution undertakings, in addition to being suppliers one to the other, are they also competitors?
LISTNUM 1 \l 14324 MR. BIBIC: Well, I suppose there could be vertically integrated distribution undertakings. I know, that Rogers, for example, is both programming undertaking and a distribution undertaking.
LISTNUM 1 \l 14325 MS SONG: Right. But when they are negotiating distribution agreements the unit or the entity, affiliate of Rogers that is coming forward seeking a distribution agreement with another distribution undertaking, are they considered to be competitors in the same relevant market?
LISTNUM 1 \l 14326 MR. BIBIC: I could see them not being competitors. I mean, I am not as familiar with broadcasting as I am with telecom, but..
LISTNUM 1 \l 14327 MS SONG: Right. And in the transportation example, similarly my understanding is that the negotiation model takes place between shippers and carriers?
LISTNUM 1 \l 14328 MR. BIBIC: Yes, I have more familiarity with that, not more, but I have some familiarity with that and that is correct.
LISTNUM 1 \l 14329 MS SONG: Okay. And I assume that you would also agree with me that shippers and carriers, again, are not competitors?
LISTNUM 1 \l 14330 MR. BIBIC: Typically not.
LISTNUM 1 \l 14331 MS SONG: Okay. And is MTS Allstream a customer of yours?
LISTNUM 1 \l 14332 MR. BIBIC: Yes.
LISTNUM 1 \l 14333 MS SONG: One of your biggest?
LISTNUM 1 \l 14334 MR. ANDERSON: Yes, they are.
LISTNUM 1 \l 14335 MS SONG: It is one of your biggest customers and is also one of your biggest competitors in retail business markets, correct?
LISTNUM 1 \l 14336 MR. BIBIC: Yes.
LISTNUM 1 \l 14337 MS SONG: Now that, to me, seems like a distinguishing feature between the telecom industry and the two examples that you cite, you would agree with me?
LISTNUM 1 \l 14338 MR. BIBIC: Would you repeat the question please, Ms Song?
LISTNUM 1 \l 14339 MS SONG: So the fact that in the two examples that you cite the negotiations are happening between entities who are not competitors in the same relevant market is a salient fact that we need to consider in determining how your negotiation model is going to work?
LISTNUM 1 \l 14340 MR. BIBIC: Well, we believe the negotiation model will work because we are going to have an incentive to reach arrangements with our big customers.
LISTNUM 1 \l 14341 MS SONG: All right.
LISTNUM 1 \l 14342 MR. HENRY: I might add, the Commission has expedited hearing processes today between competitors and they encourage parties to negotiate. And as a result of having that very process, parties often do negotiate and often do settle before it gets to the hearing, and very much they are competitors.
LISTNUM 1 \l 14343 MS SONG: Yes, and I think the Commission has in its own records how much time it does actually take to resolve competitor disputes.
LISTNUM 1 \l 14344 MR. HENRY: For the expedited hearings? The expedited hearings are very fast.
LISTNUM 1 \l 14345 MS SONG: There is lead‑up to expedited hearings ‑‑
LISTNUM 1 \l 14346 MR. HENRY: They often get settled very fast, even before you get there.
LISTNUM 1 \l 14347 MS SONG: Right.
LISTNUM 1 \l 14348 MR. ANDERSON: If I could add, Ms Song. Sorry, if I could just add to that.
LISTNUM 1 \l 14349 MS SONG: No problem, Mr. Anderson.
LISTNUM 1 \l 14350 MR. ANDERSON: You are quite right, that Allstream is one of our largest customers. And when you look at the model of negotiate first, I think what we believe is that two parties sitting down and trying to make an arrangement is a much simpler and streamlined process than dealing within a much broader spectrum, which would include Commission involvement and so on. So we are confident.
LISTNUM 1 \l 14351 I mean, as we talked about yesterday, wholesale is a very important business for us, so we are not interested in being uncooperative.
LISTNUM 1 \l 14352 MS SONG: Sorry, your comment that bilateral party‑to‑party negotiations would work better than if the Commission were involved and overseeing the negotiation, I am just trying to understand that. Is that what you are saying?
LISTNUM 1 \l 14353 MR. ANDERSON: I think from a starting point where two parties are sitting down, working through a particular issue, whatever that might be, and coming to an arrangement I think is a good starting point. Absolutely, the Commission has a very strong role and would get involved as required.
LISTNUM 1 \l 14354 MS SONG: Right. I want to turn back to perhaps a specific example, specific examples that you yourselves have raised yesterday. I believe Mr. Bibic mentioned the example of negotiations occurring in the wholesale arm of your business with respect to forborne services. Do you recall those statements?
LISTNUM 1 \l 14355 MR. ANDERSON: Yes, I do.
LISTNUM 1 \l 14356 MS SONG: And what forborne services are you referring to there or were you referring to?
LISTNUM 1 \l 14357 MR. ANDERSON: Forborne services is voice and data, so that could be long distance, digital private line on the data side are a couple of examples on both voice and data.
LISTNUM 1 \l 14358 MS SONG: Right. And to use the language of the Commission and of the industry, you are referring there to interexchange private line services amongst other things?
LISTNUM 1 \l 14359 MR. ANDERSON: Correct.
LISTNUM 1 \l 14360 MS SONG: All right. And my understanding is that interexchange private line or IXPLs are forborne on a section by section basis, cross‑section by cross‑section basis?
LISTNUM 1 \l 14361 MR. ANDERSON: That is my understanding as well.
LISTNUM 1 \l 14362 MS SONG: And the Commission forebears from regulating IXPLs ‑‑
LISTNUM 1 \l 14363 MR. ANDERSON: In those instances.
LISTNUM 1 \l 14364 MS SONG: ‑‑ when there is actually an alternate source of supply on that cross‑section, correct?
LISTNUM 1 \l 14365 MR. ANDERSON: I would agree with that.
LISTNUM 1 \l 14366 MS SONG: So you would agree with me that the dynamics involved in that negotiation are driven by the fact that there is an alternate source of supply for that facility, correct?
LISTNUM 1 \l 14367 MR. ANDERSON: Yes. But I would also say, in sitting down with any large customer, I don't care if it is in wholesale or retail or otherwise, I think the fact that you can't look at one specific situation in isolation. I mean, you look at the overall customer relationship and work accordingly. As I said earlier, we are not interested in being uncooperative.
LISTNUM 1 \l 14368 MR. BABIN: And, Ms Song, if I can just add. I mean, I have been in the business for over 20 years, I have been on the competitive side and I have negotiated with ILECs and there is an incentive for them to negotiate around services, last mile facilities, transport facilities, IXPLs, so I have seen it, I have negotiated myself.
LISTNUM 1 \l 14369 MS SONG: Right. And I was merely trying to point out that when you talk about forborne services and negotiations occurring in your wholesale arm for forborne services, the fact that there is an alternate source of supply for IXPL is a driving factor in those types of negotiations.
LISTNUM 1 \l 14370 MR. BIBIC: Well, Ms Song, you jumped from technical to forborne services.
LISTNUM 1 \l 14371 On the technical services front, we suggest that we should negotiate first regime. If it doesn't work, the Commission can step in. That is the whole point of negotiate first.
LISTNUM 1 \l 14372 On non‑essential services, we are coming at it from the perspective that both parties will have a willingness and an openness to negotiate. I suspect that in the business side of your client's business that they would too.
LISTNUM 1 \l 14373 For example, in Hong Kong, once wholesale regulation was scaled back, it took the incumbent three to four months to negotiate arrangements with CLECs for the supply of GAS and things like local loops.
LISTNUM 1 \l 14374 MS SONG: Mr. Anderson also mentioned in an earlier statement that he felt that party‑to‑party, without the intervention of the Commission, would work fine. Have I represented your evidence correctly?
LISTNUM 1 \l 14375 MR. ANDERSON: Yes, I simply said that two parties sitting down and initially trying to work through an arrangement is a good starting point.
LISTNUM 1 \l 14376 As I will just reinforce, the Commission, obviously, as we have outlined in our evidence and proposals, has a very strong role, as required.
LISTNUM 1 \l 14377 MS SONG: I would like to go back to an example that Mr. Iacono raised yesterday as having been an example of successful, I believe, multi‑party negotiations in relation to Tariff Notice 6767D, and the establishment of the wholesale bundled HSA and GAS internet access services, if you will permit me.
LISTNUM 1 \l 14378 It is my understanding that in those negotiations or leading up to those negotiations there was a significant degree of Commission intervention that actually led up to those negotiations. Is that correct, Mr. Iacono?
LISTNUM 1 \l 14379 MR. IACONO: Yes, I wasn't involved in that prior to that, but I do understand that there were files and tariff notices ‑‑ not tariff notices, but applications going back to 2001‑2002. I don't remember the exact dates, but, sure.
LISTNUM 1 \l 14380 MS SONG: So, with respect to that bundled internet service, the Commission ‑‑
LISTNUM 1 \l 14381 MR. BIBIC: Ms Song, sorry to interrupt, what do you mean by bundled internet service? I was reading the transcript yesterday and I got bogged down on that point. I just want to make sure we are all clear before we answer the question.
LISTNUM 1 \l 14382 MS SONG: Actually, I think it is pretty clear because we are talking about your tariffed HSA and GSA service.
LISTNUM 1 \l 14383 MR. BIBIC: It is not bundled though.
LISTNUM 1 \l 14384 MS SONG: What do you mean by bundled?
LISTNUM 1 \l 14385 MR. BIBIC: Our HSA and GAS service provides access ‑‑ it goes from the premise back to the central office.
LISTNUM 1 \l 14386 MS SONG: Right.
LISTNUM 1 \l 14387 MR. BIBIC: So, when you say "bundled" I don't know what you mean.
LISTNUM 1 \l 14388 MS SONG: It is the end‑to‑end, or to use Mr. Anderson's word, it is a dedicated internet access service.
LISTNUM 1 \l 14389 MR. BIBIC: What do you mean by end‑to‑end? From which end to which end? I wasn't going to bring this up, but you are using the word "bundled" again, and I just want to make sure nothing turns on it before we answer your question.
LISTNUM 1 \l 14390 MS SONG: I don't have it in front of me, but ‑‑ here it is.
LISTNUM 1 \l 14391 I think what I mean, and just to be clear for the Commission, is that it is not an unbundled service. As I believe Mr. Anderson confirmed yesterday, it would be of no use to a competitor who wants to collocate and use part of its network in order to provide the internet access service to the end use customer.
LISTNUM 1 \l 14392 MR. BIBIC: But, you see, even with GAS and HSA, you go back from the premise, you go back to the central office, and from the central office back through the transport part, you have to buy other elements, either your own self‑supplied, or from the incumbent.
LISTNUM 1 \l 14393 So, you could use GAS and part of your network, and that is why I just want to make sure we are clear on the terminology.
LISTNUM 1 \l 14394 MS SONG: Yes, and I think we are clear. I think we are both talking about the fact that the HSA and GAS service involves both an access and transport component.
LISTNUM 1 \l 14395 Moving on with my example, what I wanted to say is that prior to the negotiations, the Commission actually directed Bell to disclose costing information with respect to the ADSL service. It is my understanding that this costing information revealed that the prices that Bell Canada originally proposed to wholesale competitors for the ADSL service were at mark‑ups ranging from 100 to 600 per cent. Do you have any information that would contradict this?
LISTNUM 1 \l 14396 MR. IACONO: No. I do recall, though, those exchanges because I obviously had to read some of that prior to sitting down with industry to do the negotiations.
LISTNUM 1 \l 14397 We were able to conduct those negotiations without reference to cost studies; we filed the tariffs without reference to cost studies. There were issues, there were some organizations wanted to do this on a cost plus 15 per cent mark‑up basis, i.e. cat 1, category 1, and we filed it as a category 2 and it was approved as a category 2.
LISTNUM 1 \l 14398 MS SONG: Right, but in your normal bilateral negotiations without Commission intervention, that kind of relevant information as to your actual costs and the actual mark‑ups that you are incorporating into your negotiated proposals would not apply.
LISTNUM 1 \l 14399 MR. IACONO: Typically suppliers don't reveal their mark‑ups to their customers. You don't, your client doesn't when it is negotiating with its customers. I mean, that is just normal business practice.
LISTNUM 1 \l 14400 MR. BIBIC: Ms Song, did it take a long time? Yes. Did it get done? Yes. Is GAS/HSA an essential service? No. Even your client agreed, as the Commission pointed out in its orders approving these tariffs, that MTS supported the immediate adoption of Bell Canada's proposed tariff items.
LISTNUM 1 \l 14401 As far as GAS and HSA, MTS Allstream submitted that they should be classified as category 2 competitor services.
LISTNUM 1 \l 14402 MS SONG: Thank you.
LISTNUM 1 \l 14403 I would like to move off of your negotiate first proposal now, and discuss with you some of the terminology that we have been using in our discussions today.
LISTNUM 1 \l 14404 When we are talking about access, and this follows up on Mr. Bibic's intervention just now, we are talking about the component of the network that connects the customer's premises to a central office. Correct?
LISTNUM 1 \l 14405 MR. BIBIC: In our case, yes.
LISTNUM 1 \l 14406 MS SONG: The transport component involves the facility and services ancillary to the facility that connect to central office to other central offices. Is that correct?
LISTNUM 1 \l 14407 MR. BABIN: I would add, Ms Song, not necessarily the central office. It would be whatever the point of presence is for whichever carrier is taking that access. So, it is a point of presence, transport between points of presences or COs or central offices would be considered transport.
LISTNUM 1 \l 14408 MS SONG: Right. In the case of your own networks, you have not only access to each and every, let's say, commercial building in your operating territories, but also between central offices, points of presence in a fairly dense configuration. Correct?
LISTNUM 1 \l 14409 MR. BABIN: I would just clarify the access. When you say in the incumbent territory, it is generally copper access or low density loop access. We don't have fibre to every commercial building in our operating territory and that is something we would build on a case‑by‑case basis, as any competitor would do.
LISTNUM 1 \l 14410 MS SONG: I am glad you bring up fibre.
LISTNUM 1 \l 14411 So, of course you would not build a fibre access facility to the 7‑Eleven in a small town in Ontario. Correct?
LISTNUM 1 \l 14412 MR. BABIN: Likely not.
LISTNUM 1 \l 14413 MS SONG: And that is why you don't have fibre to every building that in your operating territory. Correct?
LISTNUM 1 \l 14414 MR. BABIN: Correct.
LISTNUM 1 \l 14415 MS SONG: But if there is sufficient potential revenue and customers in a building, such as a building in downtown Ottawa, you would surely provision that with a fibre facility. Correct?
LISTNUM 1 \l 14416 MR. BABIN: Correct, and I think that the discussion isn't whether you lease facilities or build. It is whether you can recover, as you said, enough revenue to recover the costs of building that facility or that lateral connection.
LISTNUM 1 \l 14417 As we talked about yesterday, there are other carriers that have facilities running in front of buildings, and we have done some analysis, and we have shown on the record that there are ways of recovering costs, depending on the services you provide to those customers.
LISTNUM 1 \l 14418 MS SONG: I do want to discuss with you how you decide whether you are going to provision a building with copper or fibre, but I just wanted to talk a little bit about the architecture at this point, but thank you, Mr. Babin.
LISTNUM 1 \l 14419 It is also my understanding that there is a link component that is required to connect the access facility or component to the transport facility or component, correct, when it comes to services like CDN, I am not sure for Ethernet and perhaps DSL. Correct?
LISTNUM 1 \l 14420 MR. BABIN: That is correct, connects links in our central office would connect the access to the competitor's co‑location.
LISTNUM 1 \l 14421 MS SONG: Now I would like to understand, using some specific examples, when Bell Canada, in its operating territory ‑‑ sorry, Bell Canada, Bell Aliant, SaskTel and Télébec would provision specific types of access and transport facilities, because I do think that it is important to bring out that you don't have fibre to every building and that there is a reason for that. So, I would like to understand what that reason is.
LISTNUM 1 \l 14422 We will do that using specific examples.
LISTNUM 1 \l 14423 Let's say you have the bank customer, and you are familiar with that because you have many bank customers. Correct?
LISTNUM 1 \l 14424 MR. IACONO: Yes, we do.
LISTNUM 1 \l 14425 MS SONG: I spoke about the example of the 7‑Eleven, but let's take the branch office, say a branch office in ‑‑
LISTNUM 1 \l 14426 THE CHAIRPERSON: Indian Head.
LISTNUM 1 \l 14427 MS SONG: Indian Head. Well, the only problem with that example, of course, is that it is not in any of their operating territories.
LISTNUM 1 \l 14428 MR. BIBIC: SaskTel is part of this panel.
LISTNUM 1 \l 14429 MS SONG: Excuse me. All right, then, we will take Indian Head.
LISTNUM 1 \l 14430 I don't think any of the major chartered banks are actually headquartered in Indian Head. I think that is fair to say. But, of course, the major chartered banks are all located in Bell Canada's ‑‑ headquartered in Bell Canada's operating territory, I believe, even the Bank of Nova Scotia. Correct?
LISTNUM 1 \l 14431 MR. IACONO: That is correct.
LISTNUM 1 \l 14432 MS SONG: So, I would like to stick to an Ontario example, being a central Canadian myself.
LISTNUM 1 \l 14433 Let's say you have a branch of the bank in Perth, Ontario. Would you provision or would that kind of a building, stand‑alone branch office in Perth, Ontario, be provisioned using a fibre facility?
LISTNUM 1 \l 14434 MR. BABIN: That would depend on the services you are selling to that customer, obviously. As I said, it is about recovering enough revenues from that customer. If it is hi‑speed, if it is, you know, hi‑speed data services and hi‑speed access to the internet, perhaps it might make sense to construct a lateral fibre connection to that building if there is fibre passing in front of the building.
LISTNUM 1 \l 14435 It would all depend on the services you could sell to that customer.
LISTNUM 1 \l 14436 MS SONG: And what kind of services would you have to reasonably be capable of serving to that little branch office in Perth, Ontario, in order to decide to provision that with fibre facilities?
LISTNUM 1 \l 14437 MR. BABIN: Well, hi‑speed services, obviously. So, DS‑1, DS‑3 services, which are the time division multiplex type services, TDM legacy type services or Ethernet, Ethernet 10 meg, 100 meg or 1 gig. It would be the higher band width services.
LISTNUM 1 \l 14438 Certainly not for one voice line, but for hi‑speed services, definitely.
LISTNUM 1 \l 14439 MR. IACONO: Ms Song, typically for those types of situations, DSL services more than sufficiently serve the needs of the branch. Other IP‑VPN access services, et cetera, you know, an IP Centrex, an IP key system, an IP PBX interconnected with PSTN connectivity linking back to head office.
LISTNUM 1 \l 14440 So, there is a variety of ways of providing branch office locations. In fact, that is how the solutions are actually designed, be they for in territory operations or be they out of territory where we are, say, operating in Edmonton or Alberta generally or Saskatchewan. So, we will provision services through third parties where it makes sense to do it through third parties or, in some cases, we will provision using our own network.
LISTNUM 1 \l 14441 So, there is a variety of ways of provisioning and meeting the requirements of the branch locations of a large company.
LISTNUM 1 \l 14442 MS SONG: It all hinges on the requirements of the customer and primarily, I am hearing, their data needs. Correct?
LISTNUM 1 \l 14443 MR. IACONO: Well, data and voice, because typically they are integrated systems. MST Allstream or Rogers, to the extent that Rogers provisions customers of that type, face the same solution possibilities and solutions‑based dimensions.
LISTNUM 1 \l 14444 You provision, or design a solution based on what the customer's needs ultimately are. So, typically they have voice and they have data, and they integrate.
LISTNUM 1 \l 14445 MS SONG: Right. But if you have your Perth, Ontario branch, and the Perth, Ontario branch has ten employees and the ten employees need a phone line with dial tone and they need to access their e‑mails, I am hearing that you might probably provision that with DSL, copper‑based DSL rather than a fibre facility.
LISTNUM 1 \l 14446 MR. IACONO: DSL or DSL alternatives, yes.
LISTNUM 1 \l 14447 MR. BABIN: I would also add that I think your initial assumption was this was a branch network. Several locations. So, you would have to look at it as an entire deal. You may provision based on future needs as well.
LISTNUM 1 \l 14448 I think Mr. Iacono is correct. Probably a DSL‑type service would suffice, but it depends on the future needs and it depends on all of the locations as part of a total deal.
LISTNUM 1 \l 14449 MS SONG: Currently would you be provisioning that branch office in certain cases with CDN as opposed to DSL where you are dealing with lower capacity needs?
LISTNUM 1 \l 14450 MR. BIBIC: CDN we would use potentially out of territory, but in territory you are referring to ‑‑
LISTNUM 1 \l 14451 MS SONG: I am talking about your in territory now. So, in territory, would you typically be providing the Perth office with CDN as opposed to DSL where you have lower capacity, lower data band width needs?
LISTNUM 1 \l 14452 MR. IACONO: CDN doesn't apply to retail customers. It applies to wholesale customers in terms of the tariff and the rating structure.
LISTNUM 1 \l 14453 Equivalent services would typically be used.
LISTNUM 1 \l 14454 MS SONG: Right. I am talking about using a dedicated digital network access line as opposed to a DSL which is a packetized network access line ‑‑
LISTNUM 1 \l 14455 MR. IACONO: Again, it depends on the specific needs of the customer. So, it can vary from one customer to the next, and it can vary, in fact, for any given customer from one location to the next, depending on what they need to do from those locations.
LISTNUM 1 \l 14456 MS SONG: But typically in your in territory operation. I am not talking, Mr. Iacono ‑‑ I know you have responsibilities over the entire country for enterprise customers, but in territory, when you are deciding how to provision a specific customer location with lower capacity data and voice needs, you would typically be provisioning that using DSL as opposed to digital network access facilities. Correct?
LISTNUM 1 \l 14457 MR. IACONO: As I said typically means typically, yes, but in some cases it could be something else. It depends on the customer's requirements.
LISTNUM 1 \l 14458 In fact, I can think of some situations where they don't need internet connectivity or IP connectivity and a basic business line will do in a particular location for that particular customer. Can you generalize from that? No. It varies one customer to the next.
LISTNUM 1 \l 14459 MS SONG: Let's move to downtown Ottawa, then. This downtown Ottawa of the bank has many more employees, perhaps 50, 60, 70 employees, and in addition to providing retail banking services, the bank provides business banking services, there are financial advisory services. There is a full suite of services being offered to the bank's own customers at this downtown Ottawa location.
LISTNUM 1 \l 14460 It is reasonable to assume, I believe, and you will correct me if I am wrong in my assumption, that at this particular location the customer's needs would be different in terms of band width than your Perth location for the same customer. Correct?
LISTNUM 1 \l 14461 MR. IACONO: Yes, I think that would be a safe assumption, yes.
LISTNUM 1 \l 14462 MS SONG: For that kind of a location, customer location, how would you be provisioning that in territory?
LISTNUM 1 \l 14463 MR. IACONO: Again, you would use the appropriate facilities in terms of services, be they DS‑3 based or otherwise. I will ask Mr. Babin to give you the technical side of this because I am not a technician, unfortunately, but, again, it depends on the band width requirements, number of users, scaleability requirements, growth requirements of the customer. So, you would provision with the higher capacity services and features.
LISTNUM 1 \l 14464 MS SONG: So, higher capacity, either DSL, CDN or Ethernet in territory?
LISTNUM 1 \l 14465 MR. IACONO: Well, not CDN because CDN doesn't apply to retail, but the network equivalent of CDN, which is DNA, et cetera, but at a much higher price.
LISTNUM 1 \l 14466 MS SONG: All right.
LISTNUM 1 \l 14467 And then let's move to downtown Montreal or downtown Toronto where the headquarters of this bank are located and there you have perhaps thousands of employees, there are intense requirements for data transmission because of the amount of financial and other information, perhaps there are even trading desks at this downtown location.
LISTNUM 1 \l 14468 How would you typically provision that kind of a customer location?
LISTNUM 1 \l 14469 MR. IACONO: I will use the term "big pipes" but I will ask Mr. Babin to explain.
LISTNUM 1 \l 14470 MR. BABIN: Well, it would be likely fiber. In many cases these customers are also looking for redundancy, and so they may go to another carrier and get a separate fiber into their location so they have a redundant network in the case of fiber failure, fiber cuts, which happen quite often. The customer remains in service.
LISTNUM 1 \l 14471 So likely fiber with high capacity bandwidth on that fiber.
LISTNUM 1 \l 14472 MS SONG: All right.
LISTNUM 1 \l 14473 And just to stay on the technical side, perhaps you can help me understand.
LISTNUM 1 \l 14474 My understanding is that when you are talking about fiber, use of fiber transmission facilities, that translates into what we call Ethernet services and that those services come at very hi‑speeds, 10 megabits per second, 100 megabits per second, or gigi or 1000 megabits per second; correct?
LISTNUM 1 \l 14475 MR. BABIN: Not necessarily, Ms Song. I mean fiber, you can use the traditional TDM services on fiber as well ‑‑
LISTNUM 1 \l 14476 MS SONG: Mm‑hmm.
LISTNUM 1 \l 14477 MR. BABIN: ‑‑ SONET‑type facilities, not necessarily Ethernet.
LISTNUM 1 \l 14478 MS SONG: Okay.
LISTNUM 1 \l 14479 MR. BABIN: Certainly, from my experience in having been, again, on the other side, building to customer locations fiber facilities, we have done that. We used to do that prior to the CDN decision in 2005.
LISTNUM 1 \l 14480 Today, with CDN, as we talked about yesterday, many out‑of‑territory incumbents now use CDN services. There is no incentive to build.
LISTNUM 1 \l 14481 MS SONG: Okay. So your comments just now had to do with competitors, correct, not your in‑territory ILEC operations?
LISTNUM 1 \l 14482 MR. BABIN: Correct, out‑of‑territory ILEC operations.
LISTNUM 1 \l 14483 MS SONG: And your responsibilities are what in the company, sorry?
LISTNUM 1 \l 14484 MR. BABIN: At Bell Canada I run all the operations for Bell Canada. I also run field services for Ontario and Quebec.
LISTNUM 1 \l 14485 MS SONG: All right, so in territory.
LISTNUM 1 \l 14486 MR. BABIN: And I have experience in out‑of‑territory as well.
LISTNUM 1 \l 14487 MS SONG: Okay. I was trying to focus on your in‑territory operations ‑‑
LISTNUM 1 \l 14488 MR. BABIN: Okay.
LISTNUM 1 \l 14489 MS SONG: ‑‑ but thank you for the clarification.
LISTNUM 1 \l 14490 MR. BABIN: You are welcome.
LISTNUM 1 \l 14491 MS SONG: However, I guess you indicated that you could run lower speed services on fiber facilities but the maximum speeds achievable on Ethernet ‑‑ sorry, fiber facilities running Ethernet are, as I said, 10 megabits, 100 megabits per second, 1000 megabits per second?
LISTNUM 1 \l 14492 MR. BABIN: No, you can actually run higher speeds with TDM technology as well.
LISTNUM 1 \l 14493 MS SONG: Mm‑hmm.
LISTNUM 1 \l 14494 MR. BABIN: There are rings across Canada. There are metropolitan fiber rings in Montreal, in Toronto, out west, that actually have equivalent speed facilities, equivalent to 1 gig Ethernet.
LISTNUM 1 \l 14495 MS SONG: So 1 gig Ethernet would be 1.5 ‑‑ sorry, 1000 megabits per second?
LISTNUM 1 \l 14496 MR. BABIN: Yes. You have got OC, the optical network, OC‑48, so C‑192s ‑‑ I don't want to get too technical here, Ms Song, but you can actually provide TDM‑type facilities outside of ‑‑ it doesn't have to be Ethernet, I guess is my point.
LISTNUM 1 \l 14497 MS SONG: Right. But the DS‑0/DS‑1 run at 56 kilobits per second and DS‑1 facilities run at 1.54 megabits per second ‑‑
LISTNUM 1 \l 14498 MR. BABIN: That is correct.
LISTNUM 1 \l 14499 MS SONG: ‑‑ which are lower speeds than the ‑‑
LISTNUM 1 \l 14500 MR. BABIN: Right.
LISTNUM 1 \l 14501 MS SONG: ‑‑ lower Ethernet?
LISTNUM 1 \l 14502 MR. BABIN: That is correct.
LISTNUM 1 \l 14503 MS SONG: Okay. All right.
LISTNUM 1 \l 14504 Now, I would like to talk about what distinguishes Ethernet from DSL from a customer experience perspective if you are able to explain that to me and to the Commission panel.
LISTNUM 1 \l 14505 MR. BABIN: It depends on the services that are riding over those facilities.
LISTNUM 1 \l 14506 DSL is a technology that runs over a copper facility at speeds up to ‑‑ in today's environment you can get up to 15 or 20 megabits per second.
LISTNUM 1 \l 14507 Ethernet is a packet‑switch network technology. It is also a protocol and you can get equivalent services over that facility, and depending on how it is designed and how it is architected, there are different experience levels, and depending on the applications that you are running, different experience levels using that facility.
LISTNUM 1 \l 14508 MS SONG: Right. But my understanding is that DSL, for example, is asynchronous, which means that the maximum speeds ‑‑ sorry.
LISTNUM 1 \l 14509 ADSL is asynchronous, which means that the maximum speeds to download information to the user is much higher typically than the maximum speeds at which the user, the end‑use customer, can upload information?
LISTNUM 1 \l 14510 MR. BABIN: Yes. You had started your question with DSL, not ADSL, but there are symmetrical DSL services as well that have the same speed upstream and downstream. So it depends on the experience.
LISTNUM 1 \l 14511 In many cases when you are just using the internet to download information, you actually don't need upstream capability.
LISTNUM 1 \l 14512 If it is synchronous‑type applications like Tele‑Education, you would usually use symmetrical services like SDSL.
LISTNUM 1 \l 14513 MS SONG: Right. And that all depends on the customer's needs, for example. So for the branch office ADSL may be fine but when you move to the downtown Toronto office, I am assuming you are not provisioning that whole office with its 1,000 employees using DSL facilities necessarily?
LISTNUM 1 \l 14514 MR. BABIN: Well, we have many large clients that use DSL as an access to our Virtual Private Network and I know Allstream does the same.
LISTNUM 1 \l 14515 It depends on the needs of the customer and it depends on how many users. It depends on the bandwidth required by the applications. There are many factors that affect a decision of what facility you are going to use on the customer's premises.
LISTNUM 1 \l 14516 MS SONG: Right, but I was actually talking about the downtown Toronto location.
LISTNUM 1 \l 14517 MR. BABIN: Again, it would depend. There are downtown locations that we would provision using DSL as an access into our IP VPN, for example, network.
LISTNUM 1 \l 14518 MS SONG: Yes. I am trying to ask you to stay with the example, which was of the headquarters of the bank office. I am not talking about any old downtown branch location.
LISTNUM 1 \l 14519 MR. BABIN: That was in downtown Montreal you had mentioned, I think, not Toronto. Is that the example you are talking about?
LISTNUM 1 \l 14520 MS SONG: No, I think I was talking Toronto actually.
LISTNUM 1 \l 14521 MR. BABIN: Okay.
LISTNUM 1 \l 14522 MS SONG: But I don't think it much matters except that I am not sure that there are any major chartered banks with headquarters in Montreal anymore.
LISTNUM 1 \l 14523 So I am asking about that particular example of the headquarters of a bank that has many thousands of employees. Would you be provisioning all the users in that location, in that kind of a customer location, using DSL facilities?
LISTNUM 1 \l 14524 MR. BABIN: Likely not. You would probably use fiber, as I said earlier.
LISTNUM 1 \l 14525 MS SONG: Thank you. Okay.
LISTNUM 1 \l 14526 And what other limitations are there to an ADSL service as compared to an Ethernet service?
LISTNUM 1 \l 14527 MR. BABIN: I am not sure I understand the question. Limitations with respect to what?
LISTNUM 1 \l 14528 MS SONG: What are the technical differences that distinguish ADSL from Ethernet?
LISTNUM 1 \l 14529 MR. BABIN: They are very different protocols.
LISTNUM 1 \l 14530 MS SONG: Yes, they are very different protocols. DSL is much slower typically, correct?
LISTNUM 1 \l 14531 MR. BABIN: It would depend on which DSL you are using.
LISTNUM 1 \l 14532 MS SONG: Right. So the highest speed DSL is much slower than the highest speed Ethernet service, correct?
LISTNUM 1 \l 14533 MR. BABIN: That would be correct, yes.
LISTNUM 1 \l 14534 MS SONG: Right. And my understanding is that with DSL there are also latency or delay problems due to the fact that typically it is a much slower service than the hi‑speed Ethernet services, correct?
LISTNUM 1 \l 14535 MR. BABIN: That would not necessarily be the case. It would depend on the network configuration, the network architecture. There are dedicated DSL services where you can have speeds, guaranteed speeds above a certain level.
LISTNUM 1 \l 14536 MS SONG: Right. And my understanding is that DSL is also distance sensitive, correct?
LISTNUM 1 \l 14537 MR. BABIN: That is correct.
LISTNUM 1 \l 14538 MS SONG: Right. And what distinguishes Ethernet from a DNA or a CDN DS‑0 or DS‑1 service from a customer experience perspective?
LISTNUM 1 \l 14539 MR. BABIN: Well, CDN is an access facility, so that is just competitive digital network access. So it is a loop. CDN is a loop. It is like an unbundled loop, effectively, that can be used for higher speeds. CDN is dedicated. If it is a CDN DS‑1, which is a 1.5 meg service, or a DS‑3, it is a dedicated facility.
LISTNUM 1 \l 14540 MS SONG: Right. So I think you were talking about the technical difference between DNA or CDN and Ethernet.
LISTNUM 1 \l 14541 So you are talking there about the fact that Ethernet is a packetized protocol whereas DNA actually creates a virtual ‑‑ sorry, not a virtual, a dedicated channel in whatever physical facility you are running the DNA service over; correct?
LISTNUM 1 \l 14542 MR. BABIN: You said DNA. I think you meant CDN. The CDN facility is dedicated, yes.
LISTNUM 1 \l 14543 MS SONG: Okay.
LISTNUM 1 \l 14544 MR. BABIN: But you can run Ethernet over that as well.
LISTNUM 1 \l 14545 MS SONG: Right.
LISTNUM 1 \l 14546 My understanding is that Ethernet technology is a more efficient technology from a technical or technological perspective, because it allows carriers to fully utilize the capacity on that facility, rather than creating dedicated channels, which, when not in use, are not in use, but cannot be used for other applications or other uses. Correct?
LISTNUM 1 \l 14547 MR. BABIN: The CDN is a dedicated facility, so if your bandwidth requirements are less than what your equipment is on the CDN facility, then, yes, you are not using the facility all the time.
LISTNUM 1 \l 14548 MS SONG: All right. Thank you very much, Mr. Babin, for helping me through this section.
LISTNUM 1 \l 14549 I would like to move on to another area.
LISTNUM 1 \l 14550 Your companies have stated on the record of this proceeding, I believe, that most of the fibre facilities used to support next generation services were constructed by your companies in the last 10 years. Correct?
LISTNUM 1 \l 14551 MR. BIBIC: Do you have a reference in our evidence?
LISTNUM 1 \l 14552 It's quite possible, but I can't remember.
LISTNUM 1 \l 14553 MS SONG: You cannot remember that. Okay.
LISTNUM 1 \l 14554 MR. BIBIC: It is the last 10 years bit that ‑‑
LISTNUM 1 \l 14555 Did we say that in our evidence?
LISTNUM 1 \l 14556 MS SONG: Do you think it could be longer than that?
LISTNUM 1 \l 14557 MR. BIBIC: I don't know. You suggested that we said it in our evidence, but I just can't remember.
LISTNUM 1 \l 14558 MS SONG: How about turning up Appendix 6, paragraph 76 of your March 15th evidence.
LISTNUM 1 \l 14559 MS SONG: Do you see that?
LISTNUM 1 \l 14560 MR. BIBIC: We see that.
LISTNUM 1 \l 14561 MS SONG: You are with me, Mr. Bibic?
LISTNUM 1 \l 14562 MR. BIBIC: I have the paragraph.
LISTNUM 1 \l 14563 MS SONG: You are aware that MTS Allstream has stated in its evidence ‑‑ and I don't think I need to take you through it, but the reference is MTS Allstream‑CRTC‑12 April 07‑203 ‑‑ that the establishment of fibre networks to provide next generation services such as Ethernet has taken place over a much longer period than 10 years. Correct?
LISTNUM 1 \l 14564 Are you aware of that in our company's evidence?
LISTNUM 1 \l 14565 MR. BIBIC: I am not aware of that in your company's evidence.
LISTNUM 1 \l 14566 MS SONG: Then I would ask you to turn up that interrogatory.
LISTNUM 1 \l 14567 It is MTS‑A‑CRTC ‑‑
LISTNUM 1 \l 14568 MR. HOFLEY: Mr. Chairman, is there an exhibit number for this?
LISTNUM 1 \l 14569 THE CHAIRPERSON: Madam Secretary, are you going to distribute something?
LISTNUM 1 \l 14570 THE SECRETARY: It is on the pre‑filed record, right?
LISTNUM 1 \l 14571 MS SONG: Yes, I believe so.
LISTNUM 1 \l 14572 THE SECRETARY: Could you repeat the question number?
LISTNUM 1 \l 14573 MS SONG: MTS Allstream‑CRTC‑12 April 07, No. 203.
LISTNUM 1 \l 14574 THE SECRETARY: We don't have that, I'm sorry.
LISTNUM 1 \l 14575 MS SONG: I apologize.
LISTNUM 1 \l 14576 THE CHAIRPERSON: Ms Song, what turns on the 10 years that you are trying to establish?
LISTNUM 1 \l 14577 MS SONG: Pardon me, Mr. Chairman?
LISTNUM 1 \l 14578 THE CHAIRPERSON: What turns on whether it is 10 years or 12 years since these facilities have been established?
LISTNUM 1 \l 14579 MS SONG: What am I trying to establish?
LISTNUM 1 \l 14580 THE CHAIRPERSON: Yes.
LISTNUM 1 \l 14581 MS SONG: I am trying to establish that these networks were actually constructed over a period of almost 20 years, rather than 10 years.
LISTNUM 1 \l 14582 MR. BABIN: Maybe I could add, Mr. Chairman, that the last 10 years is when we have started to deploy fibre closer to the customer.
LISTNUM 1 \l 14583 If you understand the network, there is the feeder network portion, which is coming from the central office and going out to a business park or a subdivision, and then there is the distribution network beyond that.
LISTNUM 1 \l 14584 Twenty years ago we were deploying fibre, but it was really just to concentrate copper loops and bring it back into the central office on fibre, it wasn't to provide next gen services.
LISTNUM 1 \l 14585 Over the last 10 years the technology is now available to provide higher speeds, next gen‑type services closer to the customer.
LISTNUM 1 \l 14586 MS SONG: Right.
LISTNUM 1 \l 14587 MR. BABIN: That's why the reference is to 10 years, because prior to that the fibre was really deployed for interoffice trunking or transport, not out, closer to the customer.
LISTNUM 1 \l 14588 That was, actually, for the purposes of voice traffic.
LISTNUM 1 \l 14589 MS SONG: Mr. Babin, you are conceding, then, that the deployment of fibre in your ILEC networks may have commenced as early as 20 years ago.
LISTNUM 1 \l 14590 MR. BABIN: As I said, fibre in order to relieve feeder, which is not necessarily driving customer next gen services. It is really for the purposes of transporting copper loops back into the central office.
LISTNUM 1 \l 14591 Really, all it is is a concentrator, a digital loop concentrator. That is what we deployed, and I was at Bell at the time of deploying those, and they were strictly digital loop carrier systems, not hi‑speed, next gen services.
LISTNUM 1 \l 14592 The other area for fibre was in transport facilities between offices ‑‑ between central offices ‑‑ and that was really to carry voice traffic.
LISTNUM 1 \l 14593 MR. BIBIC: The sentence in paragraph 76 is in reference to fibre to support next gen services.
LISTNUM 1 \l 14594 MS SONG: Right.
LISTNUM 1 \l 14595 If I understand correctly ‑‑ and I realize that you are much better able to speak to this than me ‑‑ what you are talking about, in part, when you say fibre networks in what you have just said ‑‑ you are talking, in part, about the equipment and other facilities that are required to augment that fibre network in order to provide next generation services.
LISTNUM 1 \l 14596 My question had more to do with: When did you actually put the fibre in the ground?
LISTNUM 1 \l 14597 That fibre is very expensive to put in the ground, is it not?
LISTNUM 1 \l 14598 MR. BABIN: It depends if the duct structures are already there or not, but, generally, to put in a transport facility and dig up streets and put in conduit, it is expensive, yes.
LISTNUM 1 \l 14599 MS SONG: The point that I would like to get at is: When did you actually start putting that fibre in the ground?
LISTNUM 1 \l 14600 MR. BABIN: As I said, we started to relieve feeder networks 20 years ago ‑‑ 1986 or 1987 perhaps ‑‑ and that was strictly to relieve feeder cables and prevent digging up streets and adding a lot of copper.
LISTNUM 1 \l 14601 But these were, as I said, digital loop concentrators, which strictly took 500 copper loops and aggregated them into several DS‑1s.
LISTNUM 1 \l 14602 MR. IACONO: Ms Song, if I may add a very quick comment from a colour and context viewpoint, because I was at Bell, obviously, at the time ‑‑ I was not on the engineering side. I never was and I never will be, but I do remember the conversations about fibre and the economies achievable through fibre utilization.
LISTNUM 1 \l 14603 So, at the end of the day, it was all about maximizing efficiency, which, in turn, given the regulatory context of that particular day, or time, or era, had implications with regard to: the lower our costs overall to carry traffic, the better off everyone is, including consumers.
LISTNUM 1 \l 14604 Otherwise, more inefficient utilization of resources would mean higher costs, which would have implications downstream from a tariffing point of view.
LISTNUM 1 \l 14605 So it really was an efficiency perspective, clearly not tied to next gen services, because, quite frankly, I don't think next gen services existed at the time, in terms of the way we define them today.
LISTNUM 1 \l 14606 MS SONG: I think you have confirmed what my client says on the record of this proceeding, which is that the actual laying of fibre in your in‑territory networks began as early as 20 years ago. Right?
LISTNUM 1 \l 14607 MR. BABIN: I think the statement, Ms Song, was that the ILECs' transport and access fibre facilities are ubiquitous, i.e., they are everywhere.
LISTNUM 1 \l 14608 In certain areas, as I said, we did deploy fibre to relieve feeder network. In those areas there would be fibre. We would have had to overbuild fibre if we were going even further to provide Nex Gen services closer to the customer. We would also have to build fibre to get into business buildings to offer services, higher speed services, as we talked about for that bank head office. That would have to be build. You know, today, we actually lease fibre out west from other carriers that have fibre.
LISTNUM 1 \l 14609 So there are options out there, and not just the ILEC fibre. There's lots of fibre in the ground today.
LISTNUM 1 \l 14610 THE CHAIRPERSON: Mr. Babin, please, can you answer the question and not give us a lecture.
LISTNUM 1 \l 14611 MR. BABIN: Sure.
LISTNUM 1 \l 14612 THE CHAIRPERSON: It was a very specific question. She asked you: did you start laying fibre 20 years ago?
LISTNUM 1 \l 14613 MR. BABIN: Yes.
LISTNUM 1 \l 14614 THE CHAIRPERSON: The answer is yes ‑‑
LISTNUM 1 \l 14615 MR. BABIN: Yes.
LISTNUM 1 \l 14616 THE CHAIRPERSON: ‑‑ so let's get on, let's not waste time with commercials.
LISTNUM 1 \l 14617 MR. BABIN: Okay.
LISTNUM 1 \l 14618 MS SONG: So I have provided to your counsel previously, and I would ask you to turn up, Telecom Decision CRTC 90‑27.
LISTNUM 1 \l 14619 Madam Secretary, I would like to mark that as an exhibit.
LISTNUM 1 \l 14620 THE SECRETARY: This will be MTS Exhibit No. 4.
LISTNUM 1 \l 14621 MS SONG: Thank you. And also Telecom Decision CRTC 92‑8.
EXHIBIT MTS‑4: Telecom Decision CRTC 90‑27 and Telecom Decision CRTC 92‑8
LISTNUM 1 \l 14622 MS SONG: Given the progress that we have made in our discussion, I won't take you through those decisions, but those decisions do confirm the early date at which Bell Canada, for one, began laying fibre in its network.
LISTNUM 1 \l 14623 Now, there is a follow‑up question, however, to this, and it would be that it's my understanding that, for at least part of this period, Bell Canada was rate‑of‑return regulated. Correct?
LISTNUM 1 \l 14624 MR. HENRY: Yes, that's correct.
LISTNUM 1 \l 14625 MS SONG: Right. And then for, I believe, a few years there in the late‑nineties it was ‑‑ or, sorry, early‑nineties, it was spit rate base regulated. Correct?
LISTNUM 1 \l 14626 MR. HENRY: I think split rate base came in '95.
LISTNUM 1 \l 14627 MS SONG: Right. And part of the laying of the fibre would have been covered from the utility segment of the spit rate base. Correct?
LISTNUM 1 \l 14628 MR. HENRY: I'm not sure what you mean by "covered" by it. It had to be assigned to ‑‑ some of it had to be assigned to the utility segment. To the extent that it was used to provide legacy voice services, yes. To the extent that it was intended to be used for other purposes, it was assigned to the competitive segment.
LISTNUM 1 \l 14629 MS SONG: Right. But Mr. Babin has just finished explaining to me that, at the time that the fibre was being laid ‑‑ and at that time ‑‑ the only services that were envisaged were legacy services, not Nex Gen services. Correct?
LISTNUM 1 \l 14630 MR. HENRY: In the early nineties, yes. Towards the mid‑ to late‑nineties, there was, we all know, the Beacon initiative which was envisage, and, in fact, it never materialized.
LISTNUM 1 \l 14631 MS SONG: Okay, thank you very much.
LISTNUM 1 \l 14632 There has been a reference already in the hearing to date to, I believe, the problem of remotes, and, in fact, I may have referred to that myself in our discussion yesterday. So the problem that I'm speaking of is the issue in relation to ADSL services, where an end‑use customer is served off of a so‑called remote.
LISTNUM 1 \l 14633 So you are familiar with that issue, gentlemen?
LISTNUM 1 \l 14634 MR. BIBIC: Yes. Do you mean a voice remote or a data remote when you say "remote", though?
LISTNUM 1 \l 14635 MS SONG: I'm not sure that I understood that there was a difference, but let's say both data and voice remote.
LISTNUM 1 \l 14636 MR. BIBIC: Okay.
LISTNUM 1 \l 14637 MS SONG: Okay?
LISTNUM 1 \l 14638 MR. BIBIC: Well, something may turn eventually when you get to the other questions, so we will wait.
LISTNUM 1 \l 14639 MS SONG: Right. And you will bring the necessary clarification when we get to that.
LISTNUM 1 \l 14640 Now, my understanding is that a remote is basically ‑‑ can be as small as a green box on a street corner. Correct?
LISTNUM 1 \l 14641 MR. BABIN: Yes.
LISTNUM 1 \l 14642 MS SONG: Right. That's typically what they are, these cabinets that stand in the ‑‑ metal cabinets that stand on street corners?
LISTNUM 1 \l 14643 MR. BABIN: Yes, generally brown, but you would see them on the street corners, yes.
LISTNUM 1 \l 14644 MS SONG: Okay. I thought they were green in my neighbourhood, but...
LISTNUM 1 \l 14645 And the remote ‑‑ sorry, the customer's premises are connected to the remote by copper facilities, typically. Correct?
LISTNUM 1 \l 14646 MR. BABIN: Correct.
LISTNUM 1 \l 14647 MS SONG: All right. But the distinction is that from the remote back to the central office, the facility that connects remote to the central office is fibre. Correct? It's fibre link?
LISTNUM 1 \l 14648 MR. BABIN: The fibre connects the remote, but there's also copper facilities there, as well. Generally, the remotes would be deployed to provide higher services.
LISTNUM 1 \l 14649 MS SONG: Right. So are you saying that the old copper facility in your operating territory would not be ripped out?
LISTNUM 1 \l 14650 MR. BABIN: Correct.
LISTNUM 1 \l 14651 MS SONG: Okay. Do you still attach equipment to that copper facility?
LISTNUM 1 \l 14652 MR. BABIN: Absolutely, yes.
LISTNUM 1 \l 14653 MS SONG: Okay.
LISTNUM 1 \l 14654 MR. BABIN: Customers that are using copper facilities would remain connected. When we deploy a remote, when a customer orders the Nex Gen services, like ADSL, they would be connected to that remote one at a time.
LISTNUM 1 \l 14655 MS SONG: Okay. You are saying "one at a time", and once you have connected all of the customer locations that are connected to that remote, what do you then do?
LISTNUM 1 \l 14656 MR. BABIN: Let me clarify, Ms Song. One at a time, as they order services.
LISTNUM 1 \l 14657 MS SONG: Oh, I see. Okay.
LISTNUM 1 \l 14658 Once you have signed up all the customers, what do you then do with the customer prime equipment that you have ‑‑ sorry, what do you then do with the equipment that's located in your CO that's connected to the fibre?
LISTNUM 1 \l 14659 MR. BABIN: It remains in the CO.
LISTNUM 1 \l 14660 MS SONG: All right.
LISTNUM 1 \l 14661 Now, as I understand it, there is a problem that affects competitors in particular with respect to serving customers that are served off of these remotes. Could you explain that problem for the panel?
LISTNUM 1 \l 14662 MR. BIBIC: This is where, I think, something may turn on whether or not you are referring to a voice remote or a data remote. Are you referring to a potential problem in the delivery by competitors of voice services or Internet services?
LISTNUM 1 \l 14663 MS SONG: Let's talk about Internet services, first of all.
LISTNUM 1 \l 14664 MR. BIBIC: We are not aware of any ‑‑ well, okay, so your problem's with respect to the provision by competitors of Internet services when Bell has data remotes deployed?
LISTNUM 1 \l 14665 MS SONG: Well, when the customers are served off a remote as opposed to on a continuous copper loop between the central office and the customer location, yes.
LISTNUM 1 \l 14666 MR. BIBIC: Okay, and the competitor wants to offer DSL?
LISTNUM 1 \l 14667 MS SONG: Yes, but it doesn't want to subscribe to your HSA or GAS ADSL tariff.
LISTNUM 1 \l 14668 MR. BABIN: Well, in that case, there are situations where are no copper facilities available to that remote location and, you know, I think it's an issue in a very small number of cases. In fact, this year, if I recall, in Ontario, out of all the unbundled loop requests that we received in the first quarter, there was 1.3 percent of them that were considered held order, i.e there was not a copper loop there. But in many ‑‑ in all the other cases, there are copper facilities available.
LISTNUM 1 \l 14669 My point would be the presence of a remote offering DSL services in that neighbourhood does not mean there are no longer copper facilities available. As I said, we move the customers over as they order services. We don't have large market shares of DSL. There's cable companies that are offering hi‑speed, as well.
LISTNUM 1 \l 14670 So it does mean there's still copper facilities in the majority of cases where there are remotes.
LISTNUM 1 \l 14671 MS SONG: Did you have anything to add, Mr. Babin.
LISTNUM 1 \l 14672 MR. BIBIC: No.
LISTNUM 1 \l 14673 MS SONG: No, okay.
LISTNUM 1 \l 14674 MR. BIBIC: I had a question for him, that's all.
LISTNUM 1 \l 14675 MS SONG: Okay.
LISTNUM 1 \l 14676 So you said that in your view, this problem only affects 1.3 percent of competitor requests for loops, and that's throughout the Province of Ontario? Is that correct?
LISTNUM 1 \l 14677 MR. BABIN: In the first quarter of this year 1.3 percent of the unbundled loop requests could not be fulfilled in Ontario.
LISTNUM 1 \l 14678 MS SONG: Right. But that statistic, of course, is all requests for unbundled local loops, not just requests for locations where you have more intensely deployed remotes, correct?
LISTNUM 1 \l 14679 MR. BABIN: Yes, it is 1.3 per cent of all orders received for unbundled loops in Ontario in the first quarter of this year.
LISTNUM 1 \l 14680 MS SONG: Yes, so that includes markets where you don't even have any remotes, correct?
LISTNUM 1 \l 14681 MR. BABIN: I would have to check that, I am not sure.
LISTNUM 1 \l 14682 MS SONG: All right, well you will get back to me on that.
LISTNUM 1 \l 14683 MR. BIBIC: When there is a problem that you mention, the competitor can either lease HSA, GAS or get access to third‑party internet services today. So there are choices.
LISTNUM 1 \l 14684 MS SONG: Well, if the competitor in question wants to use a portion of its network, I believe the answer that we established already yesterday was that HSA or GAS is not going to help him, that is not the appropriate solution. We are talking about unbundled access in order to provide facilities‑based competition in DSL markets.
LISTNUM 1 \l 14685 So I just want to get back to Mr. Babin with respect to his 1.3 per cent figure.
LISTNUM 1 \l 14686 It is my understanding that in Windsor, for example, Bell Canada has said that this problem can affect 25 per cent of customer locations. Windsor being one of those markets apparently where remotes have been more intensely deployed. Could that be, Mr. Babin?
LISTNUM 1 \l 14687 MR. BABIN: I am not familiar with the Windsor. But I just found the 1.3 per cent reference was in the Bell Canada‑PRIMUS 10, 12 of April, 2007, and it was as a percentage of the total number of inward orders for unbundled loops.
LISTNUM 1 \l 14688 MS SONG: Right, including for markets that don't have any remotes ‑‑
LISTNUM 1 \l 14689 MR. BABIN: Correct.
LISTNUM 1 \l 14690 MS SONG: ‑‑ deployed in them? All right.
LISTNUM 1 \l 14691 And my understanding is that co‑location in these remotes is not the answer, because we are talking about a little cabinet on a street corner, correct? Is co‑location possible?
LISTNUM 1 \l 14692 MR. BABIN: Well, that is correct. I think it was discussed in CISC committee and it was deemed to be, by all members of the CISC, that it was not practical to build another remote next door to the remote.
LISTNUM 1 \l 14693 MS SONG: Yes. And my understanding is that this very issue is in fact the issue, or at least a portion of the issue in Tariff Notice 6622, which I discussed with you yesterday, and that has been outstanding for six, seven, perhaps more years than that, correct?
LISTNUM 1 \l 14694 MR. ANDERSON: That is correct. I know there were a couple reviews of it and there has been no resolution at this point.
LISTNUM 1 \l 14695 MS SONG: Right. And so competitors who currently, under the Commission's local competition framework, have the right to collocate in a central office are out of luck when it comes to customers served off of remotes, correct?
LISTNUM 1 \l 14696 MR. BIBIC: No.
LISTNUM 1 \l 14697 MS SONG: Well, Mr. Bibic, apart from your point about they can always subscribe to the retail HSA and GAS service or use TPIA, right, that is what you were going to tell me?
LISTNUM 1 \l 14698 MR. BIBIC: Correct. And if they also want to provision voice, there may not be a problem at all.
LISTNUM 1 \l 14699 MR. IACONO: And, Ms Song, just to clarify, HSA or GAS are not retail services, because they are just simply providing the connectivity. There is no ISP component to it.
LISTNUM 1 \l 14700 MS SONG: Right. And TPIA also has the same limitation as HSA and GAS, in that a competitor who wants to provision the service on a facilities‑based competition basis, again that would be of no avail to it, correct? That is my understanding.
LISTNUM 1 \l 14701 MR. BIBIC: I don't know.
LISTNUM 1 \l 14702 MS SONG: Okay, again I will perhaps have the opportunity to ask that question of somebody who does.
LISTNUM 1 \l 14703 All right. I want to turn back to paragraph 147, which we started off with this morning. This is in your March 15 evidence. But I want to focus on a different aspect of that quotation.
LISTNUM 1 \l 14704 Are you with me again?
LISTNUM 1 \l 14705 MR. BIBIC: Not quite yet. Okay.
LISTNUM 1 \l 14706 MS SONG: I want to focus on the statement that the Commission should place a restriction on the use of the facility to ensure that, absent the access supplier's consent, it can only be used to provide the retail service where there is a need for ‑‑ to address abuse of significant market power in a particular retail market.
LISTNUM 1 \l 14707 So I want to focus on the restriction on use that you intend to impose on competitors that lease your facilities and services.
LISTNUM 1 \l 14708 Now, it is my understanding that currently unbundled local loops can be obtained by competitors to provide downstream internet as well as voice services, correct?
LISTNUM 1 \l 14709 MR. BIBIC: Correct.
LISTNUM 1 \l 14710 MS SONG: And in your proposal, what restriction on use of the unbundled local loops should be imposed on competitors in accordance with paragraph 147 of your evidence?
LISTNUM 1 \l 14711 MR. BIBIC: Well, under our proposal, as we discussed yesterday, loops would be determined to be nonessential, subject to a phase out. If a competitor came in and said in a particular exchange loops are essential, the Commission would have to look at what the product market is where the competitor is alleging that there is an issue.
LISTNUM 1 \l 14712 MS SONG: Right. And I think you have already said that you don't think there is an issue in retail internet access?
LISTNUM 1 \l 14713 MR. BIBIC: That is correct.
LISTNUM 1 \l 14714 MS SONG: Right. So in your proposal, if the Commission did say that unbundled local loops were essential in certain markets, you wouldn't allow a competitor to use that unbundled local loop in order to provision internet access services to a downstream competitor?
LISTNUM 1 \l 14715 MR. BIBIC: Well, you use the words we "wouldn't allow" and I can't agree with that. What we are suggesting is that if the retail internet market is competitive in the exchange, but the voice market is not, the Commission could find in that exchange that there should be mandated access to loops for voice. But the Commission would not mandate use of that loop for internet, whether or not we would reach an agreement to allow the competitor, on terms acceptable to both, to also use that loop for internet. It would be up to the market to decide.
LISTNUM 1 \l 14716 MS SONG: Right. It would be a prohibition, so you are suggesting that the Commission should impose on the use of the unbundled local loop?
LISTNUM 1 \l 14717 MR. BIBIC: I mean, I haven't really thought through exact words that would be used to implement it, but ultimately the effect of the mandated order would be to allow use of the loops for voice only.
LISTNUM 1 \l 14718 MS SONG: All right. And let us say, you know, just as you, Bell Canada, had no inkling that next generation services would emerge, let us say that at the application layer, as I believe was mentioned earlier on in this hearing, at the application layer there is some technological innovation that allows unbundled local loops to be used to provide some other service that none of us here know about or have any knowledge of, at least at this point. Let us say that happened.
LISTNUM 1 \l 14719 So under your model if somebody came to you and said, I want to use the unbundled local loop to provide advanced home security services. Your answer to that would be, no, you can't have it, right?
LISTNUM 1 \l 14720 MR. BIBIC: I believe I said quite the opposite. I said we would entertain a commercial negotiation. Restriction on use is not unheard of in the Commission. There used to be a voice restriction on cable internet access and now there is a multicast of a broadcasting restriction. That is the type of restriction on use we are talking about.
LISTNUM 1 \l 14721 MS SONG: Right. But if you did deny access to that loop for the purposes that the competitor would like to use it for, say perhaps because you yourself think it is an interesting idea to compete in that retail market and you don't see it to be in your interest to grant your competitor access to that loop, let us just say, if you will follow me in that example.
LISTNUM 1 \l 14722 You are saying that you would deny, perhaps. The competitor would then have to make an application of some kind to the Commission and that would take however long it took. Meanwhile, I guess, the customer of the competitor would be out of luck. Correct?
LISTNUM 1 \l 14723 MR. BIBIC: Dr. Church yesterday gave a long answer to this issue, which I was here and heard and endorse.
LISTNUM 1 \l 14724 The market will sort that out. I mean, what you left out in your hypothetical is what the retail market is in question and whether or not the so‑called denial, in your words, lead to a lessening of competition or harm the consumer.
LISTNUM 1 \l 14725 MS SONG: But the point I am driving at is that the Commission has typically looked at factors such as technological neutrality and in the policy direction that has been re‑emphasized.
LISTNUM 1 \l 14726 Is that kind of a rule technologically neutral, when we can't envisage at this point what technological advances could emerge?
LISTNUM 1 \l 14727 MR. BIBIC: Ms Song, I am going to keep my comments really brief, but the policy direction instructs reliance on market forces, and markets typically work like this. Somebody has a great idea and needs somebody to manufacture it for them, or a manufacturer needs somebody to distribute it for them, or somebody who is a distributor needs somebody to retail it for them. I mean, this is how the market functions.
LISTNUM 1 \l 14728 THE CHAIRPERSON: Let me just understand this. I am getting lost here.
LISTNUM 1 \l 14729 In Ms Song's example, we are talking about a restriction, and she now says presumably we have mandated access but subject to this restriction, and now she comes along with a new invention that is caught by that restriction.
LISTNUM 1 \l 14730 Wouldn't, under your proposal, then that entail really a new determination by the Commission as to whether the use of your facility for that new use is essential or not? Wouldn't you go through the whole process again?
LISTNUM 1 \l 14731 MR. BIBIC: Absolutely.
LISTNUM 1 \l 14732 THE CHAIRPERSON: Thank you.
LISTNUM 1 \l 14733 MS SONG: I would also like to ask with respect to Ethernet or next generation services, where there is a significant amount of technological innovation that is still ongoing, I believe Ethernet technology and transport protocols can be used to provide a panoply of downstream retail services, including voice, wide area network, remote LAN access, probably many others that Mr. Babin could fill in for me. But the point is that it can be used for a number of downstream retail services.
LISTNUM 1 \l 14734 Again, it is my understanding that with Ethernet, the great power of that technology is that all of that kind of traffic becomes packetized and it all streams down a big pipe and utilizes the capacity on the transmission facility in the most efficient way possible.
LISTNUM 1 \l 14735 So, my question is: When you are dealing with this restriction on use, how do you apply that in practice to an Ethernet facility which a competitor, like you ‑‑ I mean, you are not separating out your voice and data traffic, I am assuming, on these Ethernet facilities ‑‑ how do you distinguish between, separate out the voice and the data traffic on that facility?
LISTNUM 1 \l 14736 MR. BIBIC: Contractually. So, if the Commission has mandated a restriction on use because the mandated access is going to be to remedy a particular downstream problem, the user should be using the facility at mandated rates in order to provide just that, and there are models the Commission has used before where you can have the user self‑declare that through senior officer affidavits that that is all they are using the facility for.
LISTNUM 1 \l 14737 Depending on the product market there is a way to actually technically verify on the network what the facility is being used for, and ultimately there will be a contractual arrangement or a contractual relationship, even through tariff, between the two parties. If that is breached, then there are remedies for breach of contract.
LISTNUM 1 \l 14738 MS SONG: My question wasn't a legal ‑‑ I don't think it was a legal question. It is how do you, from a technology perspective, how do you determine what is voice, what is data, and if the facility is being used to transport both types of traffic?
LISTNUM 1 \l 14739 MR. BIBIC: Take an example where access to DS‑3, there is mandated access to DS‑3 loops for the purposes of providing high capacity data services to your bank in Toronto, and the user comes up with some whiz bang way of offering TV over that ‑‑ you can tell I am not a technologist ‑‑ it shouldn't without reaching a commercial agreement with the access provider.
LISTNUM 1 \l 14740 There may not be a way of actually determining whether or not that is being done. I don't know, you might be able to observe it in the marketplace, but ultimately it is up to the user to just respect the restriction.
LISTNUM 1 \l 14741 MS SONG: So, the restriction is that the Ethernet facility, for example, could only be used to provide voice services. Correct?
LISTNUM 1 \l 14742 MR. BIBIC: If that is where the problem is, or data, if that is where the retail market problem is, or both, if there is a retail market in both.
LISTNUM 1 \l 14743 MS SONG: So, the competitor goes to the customer and says, I have got this big fat pipe that I can give you, but I'm sorry, I can only use to it provide voice services to you.
LISTNUM 1 \l 14744 MR. BIBIC: We are covering ground we covered yesterday with Mr. Engelhart now. Or the competitor can go to another provider or they can come to us and reach a broader arrangement.
LISTNUM 1 \l 14745 What we try to do is design a proposal that respected the policy direction's instruction to regulate where necessary in an efficient and proportionate manager and in a least intrusive manner. That is the policy underpinning of the restriction.
LISTNUM 1 \l 14746 MS SONG: Mr. Chairman, at the outset of this session this morning there was an issue that was discussed between the panel and MTS Allstream. We had arranged to discuss it at a break, and I am wondering if ‑‑
LISTNUM 1 \l 14747 THE CHAIRPERSON: It sounds to me like a wonderful time for a break. Why don't we have a ten‑minute break and you can discuss it with Bell.
LISTNUM 1 \l 14748 MS SONG: Thank you very much.
‑‑‑ Upon recessing at 10:30 a.m.
‑‑‑ Upon resuming at 10:46 a.m.
LISTNUM 1 \l 14749 THE CHAIRPERSON: Ms Song, were you able to resolve things with the company over the break?
LISTNUM 1 \l 14750 MS SONG: I believe so, Mr. Chairman. However, I seem to have misplaced some paper. I apologize, I am going to have to locate that.
LISTNUM 1 \l 14751 THE CHAIRPERSON: Okay.
LISTNUM 1 \l 14752 MS SONG: Thank you, I am back.
LISTNUM 1 \l 14753 Panel members, I would like you to turn up Bell Aliant, Bell Canada answer to interrog from the Bureau, 12 April '07, number 24.
LISTNUM 1 \l 14754 MR. BIBIC: Is that number 24?
LISTNUM 1 \l 14755 MS SONG: Yes, but it is Bell Aliant Bell, not the companies, as you have entitled it there.
LISTNUM 1 \l 14756 MR. BIBIC: Correct. We have it.
LISTNUM 1 \l 14757 MS SONG: Great. I just would like you to help me understand this answer. In answering this question, are you referring to how the companies, Bell Aliant and Bell Canada, decide on the size of facility that it will build in its in territory operations?
LISTNUM 1 \l 14758 MR. BIBIC: That is correct.
LISTNUM 1 \l 14759 MS SONG: So, the companies decide on the size of network access facility to be built based on its own internal criteria, serving area concept in urban areas and non‑urban concept in rural regions. That is what you explain in this answer. Correct?
LISTNUM 1 \l 14760 MR. BIBIC: Yes. There was a submission in confidence on the provisioning guidelines called "Access 2000," attachment number 1 to the interrogatory response.
LISTNUM 1 \l 14761 MS SONG: So, whenever there is a new building, a new development that comes up within your territory, you go through this analysis to determine is it copper, is it fibre, what capacity do we reasonably expect will be required by this particular customer location. Correct?
LISTNUM 1 \l 14762 MR. BIBIC: Correct.
LISTNUM 1 \l 14763 MS SONG: The decision is not whether to build. The decision is really how big a pipe do I build to that particular location. Correct?
LISTNUM 1 \l 14764 MR. BABIN: No, there are decisions whether we do build or not. Examples, greenfields in Ontario or Quebec, we have made decisions not to build based on economics.
LISTNUM 1 \l 14765 MS SONG: So there you are talking about greenfields in terms of fiber facilities; correct?
LISTNUM 1 \l 14766 MR. BABIN: Just serving actually, copper or fiber facilities.
LISTNUM 1 \l 14767 MS SONG: Okay. And what regions would that be in, rural, remote regions; correct?
LISTNUM 1 \l 14768 MR. BABIN: No, there are actually regions just north of Toronto, Richmond Hill, Markham, areas we have made decisions not to build.
LISTNUM 1 \l 14769 MS SONG: You are making decisions not to build to residential customers?
LISTNUM 1 \l 14770 MR. BABIN: Correct.
LISTNUM 1 \l 14771 MS SONG: Okay. Any other type of customers?
LISTNUM 1 \l 14772 MR. BABIN: Well, there would be decisions depending on enterprise customers where we may not bid on businesses.
LISTNUM 1 \l 14773 MS SONG: Okay. And is that a relatively isolated instance, Mr. Babin?
LISTNUM 1 \l 14774 MR. BABIN: Which instance are you talking about?
LISTNUM 1 \l 14775 MS SONG: Not building to residential developments in your territory.
LISTNUM 1 \l 14776 MR. BABIN: It depends on the territory. The example is FCI Broadband, which is now acquired by Rogers, would go into certain subdivisions north of Toronto and we would make a decision not to build in that subdivision as well.
LISTNUM 1 \l 14777 MS SONG: Right. So relatively isolated instances, right?
LISTNUM 1 \l 14778 MR. BABIN: Yes, in residential.
LISTNUM 1 \l 14779 MS SONG: All right. Great. All right.
LISTNUM 1 \l 14780 I would like to now refer to Appendix 9 of your evidence, your March 15th evidence, and to two MTS Allstream interrogatories:
‑ the first being Bell Canada/MTS Allstream 12April07‑158;
‑ the second being Bell Canada/MTS Allstream 12April07‑159; and
‑ the third being Bell Canada/Bureau 12April07‑25.
LISTNUM 1 \l 14781 COMMISSIONER del VAL: Ms Song, can you please repeat the ‑‑ is it Appendix 9?
LISTNUM 1 \l 14782 MS SONG: Yes, it is Bell et al's March 15th evidence. I believe it is Appendix 9.
LISTNUM 1 \l 14783 COMMISSIONER del VAL: Thank you.
LISTNUM 1 \l 14784 MS SONG: Finally, if you will turn up material previously provided to counsel for Bell et al, the financial statements of BCE Nexxia Inc. for the years ending December 31st, 1999 and December 31st, 2000.
LISTNUM 1 \l 14785 Madam Secretary, I would like to mark those as exhibits. Thank you.
LISTNUM 1 \l 14786 THE SECRETARY: I am marking the BCE Nexxia Inc. December 31st, 1999 as Exhibit No. 6 and the next one, December 31st, 2000, Exhibit No. 7.
EXHIBIT MTS‑6: BCE Nexxia Inc. financial statements for year ending December 31, 1999.
EXHIBIT MTS‑7: BCE Nexxia Inc. financial statements for year ending December 31, 2000.
LISTNUM 1 \l 14787 MS SONG: So taking the BCE Nexxia Inc. financial statements for the year ending December 31st, 1999, I would like to very quickly walk through these financial statements.
LISTNUM 1 \l 14788 But before I do, you will please confirm for me that Bell Nexxia Inc. was at this point in time an unregulated affiliate of Bell Canada; correct?
LISTNUM 1 \l 14789 MR. BIBIC: Yes, we can use BCE Nexxia and Bell Nexxia interchangeably. Yes.
LISTNUM 1 \l 14790 MS SONG: And BCE Nexxia Inc.'s business was to provide data, advance network access and solutions to customers across Canada; correct?
LISTNUM 1 \l 14791 MR. HENRY: I believe that is the case.
LISTNUM 1 \l 14792 MS SONG: So it operated in your traditional operating territories of Ontario and Quebec as well as in other provinces across the country?
LISTNUM 1 \l 14793 MR. HENRY: That is my recollection.
LISTNUM 1 \l 14794 MS SONG: Now, if you will go to the statement of loss which is at page 2 of 10 and happens to be the third page of Exhibit No. 6.
LISTNUM 1 \l 14795 The top line is revenue. You will see that $545 million.
LISTNUM 1 \l 14796 The second line is cost of sales.
LISTNUM 1 \l 14797 Could you just explain to me what those costs of sales included?
LISTNUM 1 \l 14798 MR. BIBIC: No, we have no knowledge.
LISTNUM 1 \l 14799 MS SONG: Could you please go to page 5. These are the notes to the financial statements.
LISTNUM 1 \l 14800 I am assuming that since I did provide this to you two days ago that you have reviewed these financial statements.
LISTNUM 1 \l 14801 MR. BIBIC: Ms Song, I only ‑‑
LISTNUM 1 \l 14802 MR. DANIELS: Ms Song, I believe you provided it to us last night.
LISTNUM 1 \l 14803 MS SONG: Oh! Sorry.
LISTNUM 1 \l 14804 MR. BIBIC: 9:15 p.m.
LISTNUM 1 \l 14805 MS SONG: Last night. Sorry.
LISTNUM 1 \l 14806 Have you reviewed these financial statements?
LISTNUM 1 \l 14807 MR. BIBIC: I read them over last night after I got them but I wasn't around at the time and no one on the panel has intimate familiarity with BCE Nexxia ‑‑
LISTNUM 1 \l 14808 MS SONG: Right.
LISTNUM 1 \l 14809 MR. BIBIC: ‑‑ or the financials of BCE Nexxia.
LISTNUM 1 \l 14810 MS SONG: So perhaps you can't tell me specifically what these costs of sales involved in terms of whether it is CDN or Ethernet or unbundled loops or whatever it was that is entailed but you will correct me at a later point if your understanding is that these costs of sales did not include direct costs of purchasing services from your ILEC affiliates across Canada? Will you do that?
LISTNUM 1 \l 14811 MR. BIBIC: You would like us to confirm that these costs of sales do not include acquiring services from the Bell Canada parent?
LISTNUM 1 \l 14812 MS SONG: Well, I think my question was a little convoluted, so I will rephrase.
LISTNUM 1 \l 14813 Page 5 of 10 of your financial statements say that:
"BCE Nexxia purchases most of its network products and services from Bell Canada and other related companies. See Note 8." (As read)
LISTNUM 1 \l 14814 Do you see that in the middle of page 5?
LISTNUM 1 \l 14815 MR. BIBIC: Yes, I see it now.
LISTNUM 1 \l 14816 MS SONG: And I am suggesting to you that the line cost of sales on your statement of loss for the year ending December 31st, 1999 refers to purchases from Bell Canada and your other regulated affiliates, and you will confirm for me if you come to a different understanding of that line of your statement of loss.
LISTNUM 1 \l 14817 MR. BIBIC: We will do our best to find out, keeping in mind the passage of time.
LISTNUM 1 \l 14818 MS SONG: Mr. Bibic, are you telling me that you cannot get that information?
LISTNUM 1 \l 14819 MR. BIBIC: Ms Song, I really don't know. It is 1999. The people who may be familiar with this may no longer be around.
LISTNUM 1 \l 14820 If I undertake to provide you with something, I will do my best. We always do.
LISTNUM 1 \l 14821 MS SONG: Tell me if you think it is something other than direct costs to your ILEC affiliates.
LISTNUM 1 \l 14822 All right?
LISTNUM 1 \l 14823 MR. BIBIC: You have asked the question, and we will undertake to inquire for the answer.
LISTNUM 1 \l 14824 MS SONG: Thank you.
LISTNUM 1 \l 14825 Going down this page, then, we see that your gross margin was $198 million, approximately. That is before any other expenses. Correct?
LISTNUM 1 \l 14826 MR. BIBIC: What page are you on now?
LISTNUM 1 \l 14827 MS SONG: I am back on the Statement of Loss.
LISTNUM 1 \l 14828 MR. BIBIC: Yes, I see that.
LISTNUM 1 \l 14829 MS SONG: Then, after you deduct all of your other expenses associated with carrying on this business, your loss before interest and income tax is $70 million, and your net loss for the year alone is $41.7 million.
LISTNUM 1 \l 14830 Do you see that?
LISTNUM 1 \l 14831 MR. BIBIC: I do.
LISTNUM 1 \l 14832 MS SONG: At this time, Mr. Bibic, BC Nexia was a wholly‑owned subsidiary of Bell Canada. Correct?
LISTNUM 1 \l 14833 That is confirmed by, again, Note 1 of your Notes to the Financial Statements.
LISTNUM 1 \l 14834 An indirectly wholly‑owned sub of Bell Canada. Correct?
LISTNUM 1 \l 14835 MR. BIBIC: That's correct.
LISTNUM 1 \l 14836 MS SONG: So all of the equity in this company is being provided by your parent company. Correct?
LISTNUM 1 \l 14837 Perhaps if you looked at the Balance Sheet that would help you, under "Shareholders' Equity".
LISTNUM 1 \l 14838 MS SONG: It is Page 1 of 10, the second page of the exhibit.
LISTNUM 1 \l 14839 MR. BIBIC: I see the share capital, and I am looking at Note 7 to see what it says about Shareholders' Equity.
LISTNUM 1 \l 14840 MS SONG: All right.
LISTNUM 1 \l 14841 MR. BIBIC: I have no reason to think that the Shareholders' Equity didn't all come from Bell Canada. If it didn't, we will correct the record.
LISTNUM 1 \l 14842 MS SONG: The point is, this particular affiliate was not going out to the public financial markets for financing at this time. Correct?
LISTNUM 1 \l 14843 MR. BIBIC: Bell would be.
LISTNUM 1 \l 14844 MS SONG: Yes, but this company was not. Correct?
LISTNUM 1 \l 14845 MR. BIBIC: I can only presume that that is the case, but I do not know.
LISTNUM 1 \l 14846 MS SONG: All right.
LISTNUM 1 \l 14847 I would now like to go to Exhibit No. 7, Madam Secretary, the BC Nexia Inc. Financial Statements for the year ended December 31, 2000.
LISTNUM 1 \l 14848 THE SECRETARY: I'm sorry, you will have to repeat the exhibit title.
LISTNUM 1 \l 14849 If I am correct, it is not Exhibit No. 7, it is Exhibit No. 8.
LISTNUM 1 \l 14850 Oh, you are referring back. I'm sorry.
LISTNUM 1 \l 14851 MS SONG: So it is Exhibit No. 7, Madam Secretary?
LISTNUM 1 \l 14852 THE SECRETARY: Yes.
LISTNUM 1 \l 14853 MS SONG: Thank you.
LISTNUM 1 \l 14854 Do you have that in front of you now?
LISTNUM 1 \l 14855 MR. BIBIC: Yes, we do.
LISTNUM 1 \l 14856 MS SONG: Again, turning to the Statement of Deficit, which is on Page 2 of 9 ‑‑ it appears to be the fourth page of the exhibit ‑‑
LISTNUM 1 \l 14857 MR. BIBIC: I have it.
LISTNUM 1 \l 14858 MS SONG: Again, the top line is "Revenues", $880.6 million. "Cost of Sales", $761 million. "Gross Margin", $119 million. "Net Loss", for the year alone, $190 million.
LISTNUM 1 \l 14859 By the end of your second year of operation, it would appear that you have bled $231 million.
LISTNUM 1 \l 14860 Do you see that?
LISTNUM 1 \l 14861 MR. BIBIC: Where do you refer to 231?
LISTNUM 1 \l 14862 MS SONG: If you turn over the page, sir ‑‑
LISTNUM 1 \l 14863 MR. BIBIC: I see that.
LISTNUM 1 \l 14864 MS SONG: You add up your cumulative net losses, and you have a total bleed of $231 million.
LISTNUM 1 \l 14865 If you turn over the page to the Statement of Cash Flows ‑‑
LISTNUM 1 \l 14866 I apologize. Before I do that, could you turn back to the first page of your Statement of Deficit?
LISTNUM 1 \l 14867 I want to compare your 2000 Statement of Deficit to ‑‑
LISTNUM 1 \l 14868 MR. BIBIC: Which page are you on, Ms Song?
LISTNUM 1 \l 14869 MS SONG: Statement of Deficit for the year ended December 31, 2000.
LISTNUM 1 \l 14870 MR. BIBIC: Which page?
LISTNUM 1 \l 14871 MS SONG: The page that you were just at, Page 2 of 9, at the bottom of the page.
LISTNUM 1 \l 14872 MR. BIBIC: Oh, I see.
LISTNUM 1 \l 14873 MS SONG: Yes, it is the same page we were on.
LISTNUM 1 \l 14874 I want to compare the revenues and cost of sales in 2000 as opposed to revenues and cost of sales in 1999.
LISTNUM 1 \l 14875 It would appear that BC Nexia's cost of sales actually increased in the period between 1999 and 2000.
LISTNUM 1 \l 14876 Would you agree with me, just from eyeballing these figures?
LISTNUM 1 \l 14877 MR. BIBIC: I would.
LISTNUM 1 \l 14878 MS SONG: I would then ask you to go back to Page 4 of 9, which is the Statement of Cash Flows.
LISTNUM 1 \l 14879 If you go down to the line "Investing Activity" ‑‑
LISTNUM 1 \l 14880 MR. BIBIC: Yes.
LISTNUM 1 \l 14881 MS SONG: ‑‑ the first subheading is "Purchases of Capital Assets".
LISTNUM 1 \l 14882 Do you see that?
LISTNUM 1 \l 14883 MR. BIBIC: I do.
LISTNUM 1 \l 14884 MS SONG: It appears that you managed to spend $121 million in 2000 on the purchase of capital assets.
LISTNUM 1 \l 14885 Can you tell me what those assets might have been?
LISTNUM 1 \l 14886 MR. BIBIC: No.
LISTNUM 1 \l 14887 MS SONG: All right. Would you undertake to find out for me?
LISTNUM 1 \l 14888 MR. BIBIC: The reason I hesitate is because it will require a lot of work to locate the people, and I will have to get them to pull everything up, I suppose.
LISTNUM 1 \l 14889 I am no forensic auditor, but I would imagine there would be a lot of work involved in this.
LISTNUM 1 \l 14890 I am starting to hesitate because the more we pile on the undertakings, the more difficult this will be.
LISTNUM 1 \l 14891 MR. HOFLEY: Mr. Chairman, perhaps if we understood the relevance of this, we might be able to gauge whether or not an undertaking is appropriate.
LISTNUM 1 \l 14892 THE CHAIRPERSON: Ms Song, what do you have to say?
LISTNUM 1 \l 14893 MS SONG: Mr. Chairman, we are going through these statements because they establish, in part, the economics of a competitor's operations, and that is relevant to this proceeding, since these very companies have put in issue the economics of competitor operations. I would like to use Bell Canada and its affiliates' own experience as a backdrop to the questions which I will be getting to next with respect to Appendix 9.
LISTNUM 1 \l 14894 THE CHAIRPERSON: Do you want this information so that, presumably, in your final submission you can draw out the differences, in terms of investments that your company has to do in this tariff if it was ‑‑ vis‑à‑vis Bell? That's what you are driving at?
LISTNUM 1 \l 14895 MS SONG: The position of Bell et al has been that it is feasible for competitors to duplicate their own ubiquitous ILEC networks ‑‑
LISTNUM 1 \l 14896 THE CHAIRPERSON: Right.
LISTNUM 1 \l 14897 MS SONG: ‑‑ and we have evidence already filed on the public record of this tribunal with respect to what those economics actually are for competitors. We believe that this is directly relevant to the issue of the feasibility of duplication, which my friends insist is the case of their ubiquitous networks.
LISTNUM 1 \l 14898 THE CHAIRPERSON: So with respect to this specific undertaking, you are now trying to find out...?
LISTNUM 1 \l 14899 MS SONG: I'm not asking for an itemized list, Mr. Chairman.
LISTNUM 1 \l 14900 THE CHAIRPERSON: So more or less, let's clarify what you are asking for.
LISTNUM 1 \l 14901 MS SONG: Yes. I would like to understand what kinds of things were being purchased, in terms of capital assets, in this time period.
LISTNUM 1 \l 14902 MR. BIBIC: Could we focus that question to what kind of assets need to be purchased for Bell West today? This is a company that doesn't exist, as I understand it ‑‑
LISTNUM 1 \l 14903 MS SONG: Bell Nexxia.
LISTNUM 1 \l 14904 MR. BIBIC: ‑‑ with investment seven years ago.
LISTNUM 1 \l 14905 MS SONG: Yes. This is not a predecessor to Bell West, is it?
LISTNUM 1 \l 14906 MR. BIBIC: No, but the company doesn't exist and it's seven‑year‑old information ‑‑
LISTNUM 1 \l 14907 MS SONG: Right.
LISTNUM 1 \l 14908 MR. BIBIC: ‑‑ and we may not be able to find what we spent $121 million on in 2000.
LISTNUM 1 \l 14909 MS SONG: What I would like to know is were you purchasing or investing in network access facilities at this time? Were you building fibre? Were you building access and transport facilities? Those are general questions which I would find it very difficult to believe that you can't find the answers to at this date.
LISTNUM 1 \l 14910 THE CHAIRPERSON: Sorry, I'm just trying to follow up the relevancy. You are trying to establish whether it can be duplicated or not. Surely that's going to be done on the basis of today's costs, not on the basis of the costs in 2000.
LISTNUM 1 \l 14911 What Mr. Bibic suggested, if he gives you Bell West data of today, wouldn't that be much more relevant than Bell Nexxia information that's seven years old?
LISTNUM 1 \l 14912 MS SONG: Mr. Chairman, thank you for that, but I'm not trying to establish so much the costs of building today, I'm trying to establish that, at the time that BCE Nexxia was operating as a competitor in this time period, with the losses that it was incurring on a year‑over‑year basis, could it, and did it, actually invest in network access facilities as The Companies says all competitors should now be doing, today.
LISTNUM 1 \l 14913 COMMISSIONER CRAM: Your point, if I understand, Ms Song, is that, primarily, the assets were infrastructure, telephony infrastructure. Is that correct?
LISTNUM 1 \l 14914 MS SONG: Actually, I don't have any basis to know that. I think it is relevant to know whether that was, in fact, what this money was being spent on. That isn't precisely the issue. I don't think we have anything in front of us that would allow us to conclude that, and I'm merely asking the Bell et al panel to inform of us that relevant fact.
LISTNUM 1 \l 14915 COMMISSIONER CRAM: Wouldn't that normally be in the report to shareholders?
LISTNUM 1 \l 14916 MS SONG: It may well be, Commissioner.
LISTNUM 1 \l 14917 COMMISSIONER CRAM: And would you be satisfied with that level of information?
LISTNUM 1 \l 14918 MS SONG: Absolutely.
LISTNUM 1 \l 14919 COMMISSIONER CRAM: I'm sure Bell Canada has that.
LISTNUM 1 \l 14920 MR. BIBIC: Well, are you referring back to, at this period of time, the report to shareholders of BCE Nexxia?
LISTNUM 1 \l 14921 COMMISSIONER CRAM: Yes.
LISTNUM 1 \l 14922 MR. BIBIC: Then, this was a private company owned by Bell, so there would be no publicly available annual report to shareholders like there would be for Bell Canada.
LISTNUM 1 \l 14923 COMMISSIONER CRAM: I would think there would be, but...would there not be a report to Bell saying how much infrastructure was purchased?
LISTNUM 1 \l 14924 MR. BIBIC: Well, we can look for that, but I suspect this is the level of detail.
LISTNUM 1 \l 14925 COMMISSIONER CRAM: Okay.
LISTNUM 1 \l 14926 THE CHAIRPERSON: Well, I think, Mr. Bibic, if I understand what Ms Song is trying to establish, I mean, it's slightly relevant, as far as I would say. It's not totally irrelevant, so I think you should do your best to answer to the level of specification that she just modified, in effect. So it's the type of information that would be contained in a report to shareholders, if this was a public company.
LISTNUM 1 \l 14927 MR. BIBIC: Okay.
LISTNUM 1 \l 14928 CONSEILLERE NOEL : Monsieur Bibic, pouvez‑vous nous préciser, quand vous allez nous répondre, à quelle date Bell Nexxia a été liquidée et la raison qui était derrière la décision de liquidation?
LISTNUM 1 \l 14929 M. BIBIC : D'accord. Je prends l'engagement.
LISTNUM 1 \l 14930 MS SONG: Can you tell us today why it was folded?
LISTNUM 1 \l 14931 MR. BIBIC: I can't, no.
LISTNUM 1 \l 14932 MS SONG: All right.
LISTNUM 1 \l 14933 Now, we have already spoken today about your now business unit, Bell West. You will recall that discussion, gentlemen?
LISTNUM 1 \l 14934 MR. BIBIC: Which discussion?
LISTNUM 1 \l 14935 MS SONG: The discussion of Bell West, which I referred to earlier on this morning.
LISTNUM 1 \l 14936 MR. BIBIC: No, I don't recall, but...
LISTNUM 1 \l 14937 MS SONG: All right. Well, you do have a business unit ‑‑
LISTNUM 1 \l 14938 MR. BIBIC: Yes, of course.
LISTNUM 1 \l 14939 MS SONG: ‑‑ called Bell West.
LISTNUM 1 \l 14940 MR. BIBIC: Of course.
LISTNUM 1 \l 14941 MS SONG: All right. My understanding is that at one point Bell West was called Bell Intrigna ‑‑
LISTNUM 1 \l 14942 MR. BIBIC: Correct.
LISTNUM 1 \l 14943 MS SONG: ‑‑ it then became Bell West ‑‑
LISTNUM 1 \l 14944 MR. BIBIC: Correct.
LISTNUM 1 \l 14945 MS SONG: ‑‑ and that those were separate corporate entities, distinct corporate entities from Bell Canada.
LISTNUM 1 \l 14946 MR. BIBIC: Correct.
LISTNUM 1 \l 14947 MS SONG: All right.
LISTNUM 1 \l 14948 MR. BIBIC: But I don't believe it is today.
LISTNUM 1 \l 14949 MS SONG: That's right.
LISTNUM 1 \l 14950 MR. BIBIC: Okay.
LISTNUM 1 \l 14951 MS SONG: Exactly. It's a unit of Bell Canada.
LISTNUM 1 \l 14952 MR. BIBIC: Today, correct.
LISTNUM 1 \l 14953 MS SONG: Yes. Okay. Because of that, your financials, if I look at your annual reports, for example, I'm talking about Bell Canada's annual reports ‑‑ or BCE's annual reports, do not separate out the financial for Bell West, your western operating unit. Correct?
LISTNUM 1 \l 14954 MR. IACONO: I believe that's correct, yes.
LISTNUM 1 \l 14955 MS SONG: All right. And Bell West, just to clarify, is a competitor in primarily business telecommunication markets in your territories west of Ontario...and I'm going over ground I went over this morning because that is what I was discussing with you. Correct?
LISTNUM 1 \l 14956 MR. IACONO: Yes.
LISTNUM 1 \l 14957 MS SONG: All right.
LISTNUM 1 \l 14958 Now, in a similar vein to the review that we have just done of the Bell Nexxia Inc. financial statements, I would like to ask you to provide to the Commission and to MTS Allstream not the financial statements, a statement of the annual revenues, direct cost of sales and annual network investment for the period between 1999 and today.
LISTNUM 1 \l 14959 Will you undertake to do that?
LISTNUM 1 \l 14960 MR. HOFLEY: Mr. Chairman ‑‑
LISTNUM 1 \l 14961 THE CHAIRPERSON: Mr. Hofley ‑‑ go ahead.
LISTNUM 1 \l 14962 MR. HOFLEY: Mr. Chairman, I don't understand how or why The Companies would provide confidential information to MTS Allstream. We can debate whether this is relevant. Obviously, it's within the Commission's powers to ask that it be provided to the Commission, but to provide confidential information to a competitor strikes me as well beyond anything I have seen in this proceeding.
LISTNUM 1 \l 14963 If we were going to go there, then I would like to open up the record, the confidential record of MTS Allstream that's been presented, and put it on the public record.
LISTNUM 1 \l 14964 THE CHAIRPERSON: Why is all of this coming up at this point in time? Why wasn't this dealt with at interrogatories beforehand? I am somewhat at a loss why this comes up at this point in time.
LISTNUM 1 \l 14965 MS SONG: Mr. Chairman, we do believe that this is an issue that should be brought before the panel. I can't frankly answer why it wasn't dealt with during the interrogatory stage but this, as I think we have already discussed with respect to Bell Nexxia, which operated in Ontario and Quebec as opposed to Bell West, which is truly a competitor out of territory operation, we believe that this information is relevant.
LISTNUM 1 \l 14966 THE CHAIRPERSON: But how do you answer Mr. Hofley's question? You have submitted whatever information you did and you claimed it confidential at the other table I understood it. You are a competitor to Bell West in the western territory. So if he now undertakes, he will file it subject to confidentiality. The only thing you are going to get is a statement, but the main numbers of which you are interested in will be held confidential for obvious reason, because you are competing with each other. So I am not quite sure where this is all going to get us.
LISTNUM 1 \l 14967 MS SONG: Well, I am not hearing from Mr. Hofley quite yet that he is alleging that there would be some prejudice that outweighs the public interest in disclosure of this information on the public record. But if you are concerned ‑‑
LISTNUM 1 \l 14968 THE CHAIRPERSON: Well, okay, but let us clarify that. I assumed that was implicit in his answer. Mr. Hofley, does that do you any injustice?
LISTNUM 1 \l 14969 MR. HOFLEY: I can confirm that. And in fact, Mr. Chairman, there certainly is much greater public interest in this Commission and the parties here having access to confidential information on the record in direct answer to CRTC interrogatories, which we have been denied.
LISTNUM 1 \l 14970 So to suggest that this is somehow different than all the rest of the information, which is much more relevant and has been maintained on the confidential record, is frankly surprising.
LISTNUM 1 \l 14971 MS SONG: Well, Mr. Chairman, if I could just address that point. If the concern is about current information, and I believe that most of the confidentiality claims that have been maintained by the Commission in the interrogatory process had to do with current network access lines, current business, future plans, and if that is the concern then that can be addressed. It would be my submission that that can be addressed by Bell West providing historical information.
LISTNUM 1 \l 14972 Surely, the disclosure of information that is years old could not amount to any prejudice.
LISTNUM 1 \l 14973 THE CHAIRPERSON: And when you say historical information what did you have in mind?
LISTNUM 1 \l 14974 MS SONG: So if Mr. Hofley and his client can establish that there would be prejudice from current financial information, then we would be satisfied with a lesser period, 1999 to say 2003.
LISTNUM 1 \l 14975 THE CHAIRPERSON: I think we will take a five‑minute break. The panel will consult, thank you.
LISTNUM 1 \l 14976 MS SONG: Thank you, sir.
LISTNUM 1 \l 14977 COMMISSIONER CRAM: Can I just ask one question? MTS would have the data on Bell, as I called it yesterday, enigma, would they not? And so when did MTS get out of Bell Intrigna?
LISTNUM 1 \l 14978 MR. PEIRCE: Mr. Peirce for this point, Commissioner Cram. We have financial information for certain of the years in question. There are issues that have been raised about the ability for us to produce that information, which we are not going to be able to resolve today.
LISTNUM 1 \l 14979 I think where we are is that if we come around to the panel viewing confidentiality as being important, what we think is important is that the information related to direct cost of sales, which are of course telco costs, and network investment, are directly relevant to the argument being put directly in issue by the companies that pose to see the end decision and otherwise that there is no incentive to build, but that there is the possibility of a business case for profitable duplication of the network.
LISTNUM 1 \l 14980 COMMISSIONER CRAM: Thank you.
‑‑‑ Upon recessing at 11:25 a.m.
‑‑‑ Upon resuming at 11:30 a.m.
LISTNUM 1 \l 14981 THE SECRETARY: Order please.
LISTNUM 1 \l 14982 THE CHAIRPERSON: First of all, just going back for one second to the Bell Nexxia statement. Ms Song, if you look at Exhibit 7, you presumably saw on the note 4 there is a breakout of the capital assets and it tells you how much were the network assets and how much, et cetera. So I am not quite sure why you are asking Bell to provide further information.
LISTNUM 1 \l 14983 I think the information you are looking for is there.
LISTNUM 1 \l 14984 But that being the case, on the other one, in terms of Bell West, given that all of this turns on the issue of disincentive, that is a present mandated rule, et cetera, that information would be useful for the panel, and I think if Bell could make it available, subject to whatever confidentiality they want to claim up to the latest available, we will appreciate it.
LISTNUM 1 \l 14985 Obviously then we will rule on the confidential request that you put in, and we would rule in such a way as not to impede your competitive position.
LISTNUM 1 \l 14986 MS SONG: Thank you, Mr. Chairman.
LISTNUM 1 \l 14987 THE CHAIRPERSON: Mr. Hofley, I understand you wanted to make some other remark?
LISTNUM 1 \l 14988 MR. HOFLEY: No, I think you have made your decision, Mr. Chairman, but just so I understand, we would file 1999 to date?
LISTNUM 1 \l 14989 THE CHAIRPERSON: I think the financial statement for your division, which you call Bell West, up to the latest available, subject to whatever confidentiality you want to claim.
LISTNUM 1 \l 14990 MR. HOFLEY: We would file that with the Commission only?
LISTNUM 1 \l 14991 THE CHAIRPERSON: Yes. We would then rule if all of it, any part of it or nothing should be made available, taking into account the competitive position of the parties.
LISTNUM 1 \l 14992 MR. HOFLEY: Mr. Chairman, I do have one thing to note, and I will confess that I haven't had the time to confer with the person who just gave me this, but my understanding is ‑‑ and I am going to be corrected in a second by a kick ‑‑ is that in companies MTS 156 in round 1, information was sought of this nature and was provided to the Commission in confidence.
LISTNUM 1 \l 14993 I am not aware of the deficiency claim or ‑‑
LISTNUM 1 \l 14994 MR. DANIELS: I would just like to clarify. The answers that you are looking for, the information was filed as part of our monitoring report requirements we think since 2000, and that is the same information as the information that is being sought here.
LISTNUM 1 \l 14995 I think that is the clarification that we were looking for. In terms of being in the Commission's possession, the information is already in the Commission's possession, but it was filed, to be fair, not as Bell Intrigna statements but as the reference to the monitoring reports which contain that information.
LISTNUM 1 \l 14996 THE CHAIRPERSON: First of all, you assume that the left hand knows what the right hand does, but besides that, this is part of this proceeding, this specific request. I ask you to file it, subject to whatever confidentiality. We will then deal with it.
LISTNUM 1 \l 14997 If Ms Song is not satisfied with our ruling, she can obviously have, then, whatever remedy she wants to pursue.
LISTNUM 1 \l 14998 MR. HOFLEY: Thank you, Mr. Chairman.
LISTNUM 1 \l 14999 THE CHAIRPERSON: Okay, proceed.
LISTNUM 1 \l 15000 MS SONG: Thank you.
LISTNUM 1 \l 15001 I would like you to now turn up Bell Canada/Bureau 12 April 07‑25, which I referred to earlier.
LISTNUM 1 \l 15002 As I read this interrogatory and, more specifically, the answer that Bell Canada has provided that this interrogatory, this describes the analysis or the reasoning that is used by Bell Canada in order to decide when and what capacity of facility to build in its out of territory operations. Is that correct?
LISTNUM 1 \l 15003 MR. BABIN: That is correct.
LISTNUM 1 \l 15004 MS SONG: Are you talking about how you decide currently and in all relevant times past?
LISTNUM 1 \l 15005 MR. BABIN: Currently, yes. This is the process that Bell West uses today.
LISTNUM 1 \l 15006 MS SONG: Would it have been a different process, say, in 1999?
LISTNUM 1 \l 15007 MR. BABIN: No. The same process, looking at the economics, looking at the services and the revenues provided by customers.
LISTNUM 1 \l 15008 MS SONG: Just so that we can understand that a little better, what this interrogatory response says at page 3 of 4 ‑‑ do you see that?
LISTNUM 1 \l 15009 MR. BABIN: Yes.
LISTNUM 1 \l 15010 MS SONG: It says that:
"Bell Canada considers a number of factors when considering network investment. It examines the customer's needs with respect to number of locations, timing and band width requirements and performs a lease versus build analysis. Bell Canada also examines the capital and expense requirements, contract terms and rates, the availability of build capital and the rate for leasing the facilities from other providers. Significant metric utilized in Bell Canada's evaluation is the pay back period, which refers to the length of time required to recover its investment." (As read)
LISTNUM 1 \l 15011 I would like to understand what you mean by "pay back period." Just to speed things along, my understanding of the pay back period is that it is a function of the potential revenue to be generated from the customer location, and the costs of building out the facility in question. Is that, generally speaking, what you mean by the pay back period?
LISTNUM 1 \l 15012 MR. BABIN: Generally speaking, that is correct, yes.
LISTNUM 1 \l 15013 MS SONG: Of course, the potential revenue is a function ‑‑ we are talking about your out of territory operations. The potential revenue would, in turn, be a function of the existing market price. Correct?
LISTNUM 1 \l 15014 MR. BABIN: Correct.
LISTNUM 1 \l 15015 MS SONG: For retail services?
LISTNUM 1 \l 15016 MR. BABIN: Sure, yes.
LISTNUM 1 \l 15017 MR. IACONO: Ms Song, existing market price, as well as expectations regarding future price movements. So, typically a good business case will make assumptions regarding how costs and prices will change over time, as well as how demand will change over time.
LISTNUM 1 \l 15018 MS SONG: You would expect, of course, that it is possible, I would assume that your models would envisage, that once you enter as a competitor, that market price may well go down. Correct?
LISTNUM 1 \l 15019 MR. IACONO: It is possible, yes.
LISTNUM 1 \l 15020 MS SONG: You wouldn't expect it to go up, would you?
LISTNUM 1 \l 15021 MR. IACONO: In some cases, sure.
LISTNUM 1 \l 15022 MS SONG: Static or go down?
LISTNUM 1 \l 15023 MR. IACONO: No, you are putting words in my mouth. I didn't say static or go down. I said prices can go up, sometimes they do. That is reality of markets, number one.
LISTNUM 1 \l 15024 Number two is the notion of a discounted pay back or a pay back period is pretty standard. Your client obviously does pay back period analyses as well.
LISTNUM 1 \l 15025 MS SONG: What if the costs of construction exceeds all potential revenue over the acceptable pay back period?
LISTNUM 1 \l 15026 MR. BABIN: We would look at other options such as lease facilities or buy facilities from somebody else.
LISTNUM 1 \l 15027 MS SONG: So, the decision would be unacceptable pay back period, insufficient expectation of revenue, too expensive to build. So, we are not going to build. Correct?
LISTNUM 1 \l 15028 MR. BABIN: Correct.
LISTNUM 1 \l 15029 MR. BIBIC: At that point in time.
LISTNUM 1 \l 15030 MS SONG: You then examine other options, and I suppose as an out of territory competitor, the other options involve leasing facilities from other providers, most notably the former monopoly in that territory. Correct?
LISTNUM 1 \l 15031 MR. BABIN: Correct.
LISTNUM 1 \l 15032 MS SONG: What if the cost of leasing exceeds the potential revenue to be generated in the fiscal period or in the period in question?
LISTNUM 1 \l 15033 MR. IACONO: It sounds like a pretty poor business proposition that you probably shouldn't be doing in the best interests of your shareholders.
LISTNUM 1 \l 15034 MS SONG: So, it is don't serve, and I am not putting words in your mouth there, am I?
LISTNUM 1 \l 15035 MR. IACONO: Right. No bid situations, no respond. Some potential business is just not worth doing business because you are not going to be able to do so doing money, and that again is a reality of life and of business.
LISTNUM 1 \l 15036 MS SONG: If the cost of leasing exceeds potential revenue, you would assume that the cost of building would exceed potential revenue, and the consequence to the retail customer, I would suggest to you, is negative in that situation?
LISTNUM 1 \l 15037 MR. IACONO: Not necessarily. If the customer is not willing to pay price commensurate with value delivered, then from the business provider perspective there is no business to be done there.
LISTNUM 1 \l 15038 So, it comes down to how much does a customer value a particular solution. If the price needs to be higher commensurate with the value being received, but the customer is not willing to it, then the market doesn't clear, i.e. there is no sale, there is no purchase, that happens every day.
LISTNUM 1 \l 15039 MR. BIBIC: But perhaps, Ms Song, in your laboratory experiment, the customer will get well served by any number of other providers who would be quite prepared to put in a bid and offer service.
LISTNUM 1 \l 15040 MS SONG: I am not talking about a lab experiment, though. I am talking about the real world.
LISTNUM 1 \l 15041 Just getting back to Mr. Iacono's point ‑‑
LISTNUM 1 \l 15042 MR. BIBIC: In the real world there are options for end users.
LISTNUM 1 \l 15043 MS SONG: We will, I think, talk about other options later on in this proceeding, but Mr. Iacono, let's just assume that you are talking about the same retail service offering to the end user customer, and the competitor is vying for that business and the former monopoly already has that business.
LISTNUM 1 \l 15044 If the competitor decides it can't build, it can't serve because leasing costs exceed potential revenues, then all I am saying is that the customer, therefore, would have no choice, no price competition, perhaps no differentiating product offerings as between that competitor and the former monopoly.
LISTNUM 1 \l 15045 MR. IACONO: I think your premise is extremely facile. I really don't accept it.
LISTNUM 1 \l 15046 MR. TAYLOR: Think about what ‑‑
LISTNUM 1 \l 15047 MS SONG: Sorry, just before you jump in, Dr. Taylor, and I will allow you to do that, what aspect of my question do you find facile?
LISTNUM 1 \l 15048 MR. IACONO: The whole thing, with all due respect.
LISTNUM 1 \l 15049 MS SONG: And what specifically?
LISTNUM 1 \l 15050 MR. IACONO: You are basically portraying a situation where the former monopoly, who could turn out to be MTS Allstream, the former monopoly is essentially holding a customer hostage is really what you are getting at, and, you know, that is not how markets work.
LISTNUM 1 \l 15051 MR. TAYLOR: Just let me add that the economic problem in your hypothetical is that the market price that the customer has to pay is so low that the competitor can't lease and beat that price and can't build and beat that price.
LISTNUM 1 \l 15052 Well, there certainly are good circumstances under which that customer is doing well, thank you. It is receiving a lower price than it would get if everyone had to build, for example.
LISTNUM 1 \l 15053 MS SONG: You are talking about in a monopoly environment it is getting a lower price. Is that what you are referring to, Dr. Taylor?
LISTNUM 1 \l 15054 MR. TAYLOR: Is getting a price sufficiently low, in your hypothetical, that one can't build or lease, in your hypothetical, to beat that price. It is not necessarily a bad price.
LISTNUM 1 \l 15055 THE CHAIRPERSON: Can you just clarify, Ms Song said something that struck me as not necessarily obvious. She stated that the lease price exceeds the revenue. You obviously can't lease and you also obviously wouldn't buy.
LISTNUM 1 \l 15056 I would have thought that whether you buy or not is dependent on more factors than just on this one customer and the potential revenue from that customer.
LISTNUM 1 \l 15057 MR. TAYLOR: That is right, these are network decisions, so the decision to build is generally not, though sometimes, a build to a single building or something like that, but depends upon other services and other customers that one can serve in such construction.
LISTNUM 1 \l 15058 MS SONG: In appendix 9 of your March 15th evidence, gentlemen, you say at paragraph 7 that your costs of providing service diminished as a result of the CDN decision. Correct?
LISTNUM 1 \l 15059 MR. BIBIC: Correct.
LISTNUM 1 \l 15060 MS SONG: As a result, did you lower your prices to customers?
LISTNUM 1 \l 15061 MR. IACONO: Again, that is a very broad question. I don't know if we lowered prices in terms of price tables, but there are different ways of providing values, there are different ways of providing price reductions through bundled offers, for example, et cetera.
LISTNUM 1 \l 15062 If you look at in a general way, and I am not trying to not be helpful, I don't have an answer to give you because I can't answer it.
LISTNUM 1 \l 15063 MR. TAYLOR: And this is a competitive market. We are not a rate‑of‑return regulated firm. What Bell West competes against are prices that are in the market, and because Bell West's costs may have gone down doesn't mean in a competitive market that necessarily its prices would.
LISTNUM 1 \l 15064 Now, if its competitor's costs went down as well, one would expect to see the market price fall.
LISTNUM 1 \l 15065 MS SONG: Mr. Iacono's point, I think, was that he can't tell me whether in individual cases the prices that you charge to your retail customers went down, but I think that perhaps that is where the financial statements may come into play, as that will tell you whether your overall revenues increased or decreased.
LISTNUM 1 \l 15066 MR. IACONO: Again, revenues are a function of price and quantity, and quantity has various dimensions to it and price has various dimensions to it. So, you can't really conclude, based on revenues alone, what prices are doing.
LISTNUM 1 \l 15067 MS SONG: Can you tell me right now if your revenues in fact did increase for Bell West?
LISTNUM 1 \l 15068 MR. IACONO: Again, we will wait and see how we end up with the submission that we have agreed to take a look at for the Commission.
LISTNUM 1 \l 15069 MS SONG: Can I ask you, then, what did you do with all that extra cash that you had from your CDN cost savings?
LISTNUM 1 \l 15070 MR. IACONO: I can't answer that question. I don't know.
LISTNUM 1 \l 15071 MS SONG: Can you undertake to find out and tell me?
LISTNUM 1 \l 15072 MR. BIBIC: I don't think we trace a dollar ‑‑ is that possible, Mr. Iacono?
LISTNUM 1 \l 15073 MR. IACONO: The savings weren't that huge. They certainly weren't as large in aggregate as what your competitors saved in Ontario and Quebec from the CDN decisions. Again, that is well known.
LISTNUM 1 \l 15074 MR. TAYLOR: Money in a firm is fungible. So, the fact that costs went down for Bell West doesn't mean that you can trace that reduction in cost to any particular other action that Bell West may take to invest or to pay dividends or to do other things. It all flows into the pot.
LISTNUM 1 \l 15075 MS SONG: You do make some sweeping statements in your appendix 9 about your decreased incentives, but I will leave it at that for a moment.
LISTNUM 1 \l 15076 MR. BIBIC: Ms Song, nine other parties have said the same thing and your client has also said that it did not invest in building any self‑supplied local access after the CDN decision. So, I think it is fairly well established on the record. They are not sweeping statements.
LISTNUM 1 \l 15077 MS SONG: Mr. Bibic, that is not an answer to my question, but I thank you for your contribution.
LISTNUM 1 \l 15078 MR. BIBIC: It is a response to your categorization of our evidence.
LISTNUM 1 \l 15079 MS SONG: Moving on, I believe at ‑‑ just bear with me one moment.
LISTNUM 1 \l 15080 MS SONG: Turning back to the Bureau's interrogatory number 25 to Bell Canada, which we had before, again, I am looking at the same passage on page 3 of 4, and there is a statement just before the one that I had previously read into the record that:
"Under Bell Canada's current provisioning practices, Bell Canada will only consider investing in its own facilities in locations where requiring access at speeds greater than DS‑1." (As read)
LISTNUM 1 \l 15081 To put it another way, unless the location requires DS‑3 or higher, you are not going to build, right, that is what you are saying there?
LISTNUM 1 \l 15082 MR. BABIN: That is correct.
LISTNUM 1 \l 15083 MS SONG: Can you tell me why that is.
LISTNUM 1 \l 15084 MR. BABIN: It is all around priortization of capital and we have made a guideline decision for Bell West that we would not invest in fibre facilities given the low rates of CDN, and so we would lease CDN in those facilities as opposed to building our own facilities.
LISTNUM 1 \l 15085 MS SONG: So I would like to now ask you to turn up our interrogatory number 158, Bell Canada/MTS Allstream 12April07‑158.
LISTNUM 1 \l 15086 MS SONG: Are you with me?
LISTNUM 1 \l 15087 MR. BABIN: Yes.
LISTNUM 1 \l 15088 MS SONG: All right, thank you.
LISTNUM 1 \l 15089 This interrogatory refers to your paragraph 9 of Appendix 9, and paragraph 9 of Appendix 9 deals with the 20 buildings in which you actually have access facilities or to which you actually have an access facility that you acquired from, I believe, a now defunct provider.
LISTNUM 1 \l 15090 And you say there that the costs of connecting those access facilities ‑‑ I mean you actually have fiber to these buildings and you say that the costs of connecting those access facilities to the customers' premises within those same buildings outstripped the costs of simply leasing CDN access facilities from an ILEC; right?
LISTNUM 1 \l 15091 MR. BABIN: That is correct.
LISTNUM 1 \l 15092 MS SONG: All right. So if I understand what you are saying correctly, the costs that you are referring to here are the costs of what you call augmentation, right, to augment that fiber facility so you actually connect the customer at its location and whatever electronics and equipment you need to install into your point of presence; correct?
LISTNUM 1 \l 15093 MR. BABIN: Yes.
LISTNUM 1 \l 15094 MS SONG: All right. And those costs are so great that you cannot invest ‑‑
LISTNUM 1 \l 15095 MR. BABIN: I think our position, Ms Song, is that the CDN pricing is so low that the economics of build versus lease favour leased facilities on CDN.
LISTNUM 1 \l 15096 MS SONG: Right, and I think you are confirming by using the negative exactly what I just said; correct?
LISTNUM 1 \l 15097 MR. BABIN: We have also shown in what is on the record payback periods that you can actually build lateral facilities and we have done our own analysis around retail services that you can actually pay back between one and four DS‑1s depending on the lateral connections, in TELUS‑2 that we have responded to.
LISTNUM 1 \l 15098 MS SONG: All right. So just so that I get a clear answer on the record, you are saying here and to me now, you are saying in your evidence and in my interrogatory and here now to me that the costs of just simply augmenting that access facility are so great that it doesn't make sense for you to do that?
LISTNUM 1 \l 15099 MR. BIBIC: Well, paragraph 9 says that in part. It also references the fact that in some of those 20 buildings we were near the buildings and had to build an additional drop to the building.
LISTNUM 1 \l 15100 MS SONG: Right. Again ‑‑
LISTNUM 1 \l 15101 MR. BIBIC: So that wasn't ‑‑
LISTNUM 1 \l 15102 MS SONG: Those are even more significant than just putting customer prime equipment, equipment in your point of presence?
LISTNUM 1 \l 15103 MR. BIBIC: Well, it is an additional cost ‑‑
LISTNUM 1 \l 15104 MS SONG: Right.
LISTNUM 1 \l 15105 MR. BIBIC: ‑‑ compared to situations where you are already in the building.
LISTNUM 1 \l 15106 MS SONG: And just to be specific, if you turn over to page 2 of interrogatory number 158, you actually list the specific costs that you are talking about to connect these customers that are in buildings to which you actually have fiber facilities.
LISTNUM 1 \l 15107 And you list them as building cabling ‑‑ so that would be the cabling inside the building ‑‑ building electronics, electronics required at the central office co‑location site, as well as route‑specific fiber splicing and grooming activity; right?
LISTNUM 1 \l 15108 MR. BABIN: That is correct.
LISTNUM 1 \l 15109 MS SONG: All right.
LISTNUM 1 \l 15110 Now, I assume that in‑territory these very same costs that you claim need to be covered in order for you to invest in connecting these customers via your own facilities, these types of costs are already incorporated into your own wholesale CDN tariffs; correct? They are not unique to your competitor operations, right?
LISTNUM 1 \l 15111 MR. BIBIC: Yes, but we don't have anyone in our territory to buy CDN from.
LISTNUM 1 \l 15112 MS SONG: No, no, that is not what I am asking, Mr. Bibic.
LISTNUM 1 \l 15113 You do have a CDN tariff in‑territory, do you not?
LISTNUM 1 \l 15114 MR. BIBIC: Yes, which is ‑‑
LISTNUM 1 \l 15115 MS SONG: Yes, and what I am asking you ‑‑
LISTNUM 1 \l 15116 MR. BIBIC: But others don't in our territory.
LISTNUM 1 \l 15117 MS SONG: ‑‑ is: Do you claim these kinds of costs, fiber splicing, putting in building electronics, putting in electronics required at the central office, these are costs that you incorporate into your wholesale CDN tariffs in‑territory when you provide CDN service to your wholesale competitors?
LISTNUM 1 \l 15118 MR. BIBIC: I am not a costing expert, so I don't know the specific elements that are built into our CDN costs.
LISTNUM 1 \l 15119 MS SONG: Right. Well, you will undertake to find out for me then, will you, sir?
LISTNUM 1 \l 15120 MR. BIBIC: Okay. So you would like to know if the items listed in the last sentence of paragraph (a) of this response are things that are included in the cost space of our CDN tariff in‑territory?
LISTNUM 1 \l 15121 MS SONG: Right.
LISTNUM 1 \l 15122 MR. BIBIC: Okay.
LISTNUM 1 \l 15123 MS SONG: Yes. And if there are some that are and some that aren't, you will let me know?
LISTNUM 1 \l 15124 MR. BIBIC: Yes.
LISTNUM 1 \l 15125 MS SONG: Thank you.
LISTNUM 1 \l 15126 MS SONG: All right. I had also provided to you yesterday evening another exhibit. It doesn't have a title but it contains two tables, one entitled "Bell Quebec" and the other "Bell Ontario."
LISTNUM 1 \l 15127 Madam Secretary, I would like to mark that as an exhibit.
LISTNUM 1 \l 15128 THE SECRETARY: It will be Exhibit No. 6 ‑‑ no, no, no, sorry ‑‑ No. 8.
EXHIBIT MTS‑8: Two tables entitled "Bell Quebec" and "Bell Ontario."
LISTNUM 1 \l 15129 MS SONG: No. 8.
LISTNUM 1 \l 15130 Okay, gentlemen, do you have that?
LISTNUM 1 \l 15131 MS SONG: Are you with me, gentlemen?
LISTNUM 1 \l 15132 MR. BIBIC: Yes.
LISTNUM 1 \l 15133 MS SONG: Okay, thank you.
LISTNUM 1 \l 15134 This Exhibit No. 8 contains information that is available on the BCE website as of October 9th, 2007, and as I understand it, it reflects the number of agreements that Bell Canada has with building owners with respect to access to specific buildings within their territory.
LISTNUM 1 \l 15135 Does that look right to you?
LISTNUM 1 \l 15136 MR. IACONO: Yes, Ms Song. I actually went on the website this morning and this is, by province, the MDU agreements filed or on the website pursuant to Telecom Decision CRTC 2003‑45.
LISTNUM 1 \l 15137 MS SONG: Right. And just to clarify, these are only the written agreements, correct?
LISTNUM 1 \l 15138 MR. IACONO: I am sorry?
LISTNUM 1 \l 15139 MS SONG: These are the written agreements? These numbers reflect where you have a written agreement, correct?
LISTNUM 1 \l 15140 MR. IACONO: Yes. The notes on the website describe that.
LISTNUM 1 \l 15141 MS SONG: Right. Good. I just want to clarify that because it is not apparent in the exhibit.
LISTNUM 1 \l 15142 MR. IACONO: It is not apparent from the exhibit, no.
LISTNUM 1 \l 15143 MS SONG: Right. All right.
LISTNUM 1 \l 15144 And actually, what surprises me about this information is actually how few agreements there appear to be because you are saying that you have agreements to 268 buildings in Quebec and 935 buildings in Ontario, and surely, that can't even be an infinitesimal percentage of the total number of buildings in Ontario and Quebec?
LISTNUM 1 \l 15145 MR. IACONO: These are MDU agreements. I am certainly no expert on this, but these are MDU agreements, with a very, very specific meaning of what an MDU agreement is, and, as I understand it, other parties are also supposed to be filing and posting on their websites similar agreements. I don't know if they do or not.
LISTNUM 1 \l 15146 These, to the best of my knowledge ‑‑ the agreements that are listed, in terms of specific cities for each province, and the actual location, with address ‑‑ I looked at a few ‑‑ to the best of my knowledge, this is complete in terms of ‑‑
LISTNUM 1 \l 15147 MS SONG: I am not suggesting that it is not complete, sir.
LISTNUM 1 \l 15148 My point, actually, is ‑‑
LISTNUM 1 \l 15149 MR. IACONO: Ms Song, if I may, just so everyone understands, MDUs are Multiple Dwelling Units, for those who may not be familiar with them.
LISTNUM 1 \l 15150 THE CHAIRPERSON: Are these for buildings or for building owners?
LISTNUM 1 \l 15151 Could one agreement cover more than one building?
LISTNUM 1 \l 15152 MR. IACONO: To the extent that the owner of the building has more than one building.
LISTNUM 1 \l 15153 They are listed, I believe, Mr. Chairman, address by address.
LISTNUM 1 \l 15154 THE CHAIRPERSON: I see.
LISTNUM 1 \l 15155 MS SONG: Mr. Chairman, my understanding is that the numbers you see in this table relate to specific buildings.
LISTNUM 1 \l 15156 It is not the number of agreements that Bell Canada has, say, with Olympia & York, there is one number per building.
LISTNUM 1 \l 15157 Mr. Iacono, what I was going to ask you is: You have access to more than 935 MDUs in Ontario and 268 MDUs in Quebec. Correct?
LISTNUM 1 \l 15158 MR. IACONO: Again, perhaps I should read the notes that are on the website, because they are instructive.
LISTNUM 1 \l 15159 Note 1 is:
"As the Incumbent Local Exchange Carrier, Bell Canada provides local exchange service to most MDUs in Ontario and Quebec."
LISTNUM 1 \l 15160 No. 2:
"Service is provided under Bell Canada's CRTC‑approved Terms of Service..."
LISTNUM 1 \l 15161 Then, No. 3:
"Local Exchange Carriers requesting information on any other specific locations are requested to contact their Bell Canada Carrier Services Group representative by normal channels." (As read)
LISTNUM 1 \l 15162 These are specific agreements with the multiple dwelling unit owners, pursuant to the CRTC decision.
LISTNUM 1 \l 15163 I don't know, I have not reviewed the decision in detail this morning, considering the late time at which we received the initial exhibit, but my understanding is that the agreements have a very specific meaning and interpretation relative to the Commission's requirement for us to have these on the public record, and they are.
LISTNUM 1 \l 15164 It is all a matter of public record, so it is easily verifiable.
LISTNUM 1 \l 15165 MS SONG: Right.
LISTNUM 1 \l 15166 I don't want to give you the impression that I am saying that this is somehow not complete, I think it probably is.
LISTNUM 1 \l 15167 I take your point that you are not sure exactly what MDU means. For example, it could refer to commercial buildings, as opposed to residential dwelling units.
LISTNUM 1 \l 15168 MR. IACONO: Yes, I would have to do a deeper dive to understand exactly what types of buildings are covered here, but just looking at the website picture, it looks like an apartment building to me.
LISTNUM 1 \l 15169 MS SONG: Right, but you will perhaps undertake to clarify that, since these are your agreements.
LISTNUM 1 \l 15170 MR. IACONO: We would be pleased to.
LISTNUM 1 \l 15171 MS SONG: Thank you.
LISTNUM 1 \l 15172 The question that I was asking you, to which I did not get an answer, and therefore I will repeat it, is: You have access, currently, to more than 935 MDUs, however they are defined by Bell Canada, in Ontario. Correct?
LISTNUM 1 \l 15173 MR. IACONO: Yes. That's what I was getting at when I read the note, because it does say very explicitly that Bell, as the incumbent carrier, provides local exchange service to most MDUs in Ontario and Quebec.
LISTNUM 1 \l 15174 We don't necessarily have agreements with most MDUs in Ontario and Quebec. We have 935 in Ontario, and 268, by way of agreements, and other organizations, other companies, have agreements. Some of them, presumably, have quite a few, as well. I don't know, I haven't gone to their websites.
LISTNUM 1 \l 15175 MS SONG: What you are saying is, for buildings other than the 935 that you have listed in this table, you don't need an agreement to gain access to the facilities in those buildings. Correct?
LISTNUM 1 \l 15176 MR. IACONO: No, I don't think you can conclude that. If I am a building owner ‑‑
LISTNUM 1 \l 15177 In fact, my wife and I have a little building. It is not an MDU by any stretch of the imagination, but I don't have an agreement with anyone. Maybe I should.
LISTNUM 1 \l 15178 I don't have an agreement, though, with Bell or with anyone else.
LISTNUM 1 \l 15179 MS SONG: Yes, that was my question.
LISTNUM 1 \l 15180 I am asking you specifically, not about you and your building ‑‑ or your wife's building ‑‑ I am asking you specifically, for those buildings that aren't listed here, how do you gain access to those buildings?
LISTNUM 1 \l 15181 I am asking you: Do you need an agreement to gain access to the buildings, or do you just say, "I need access to the building to fix this or that"?
LISTNUM 1 \l 15182 Is that how it works?
LISTNUM 1 \l 15183 MR. IACONO: To be honest, I don't know. As I said, I would have to go in and look at all of the details associated with what precisely these agreements are for and what they entail, and I have not had the time to do that.
LISTNUM 1 \l 15184 MR. HENRY: Ms Song, if I might add, it is a condition in the Commission's Decision 2003‑45 that any LEC that has access to a multi‑unit dwelling makes sure that the customer has choice to any other LEC.
LISTNUM 1 \l 15185 That is a Condition of Service, and the Commission has said that if that becomes a problem, it will entertain complaints and it will utilize section 42 of the Act to force building owners to provide that access to others.
LISTNUM 1 \l 15186 MS SONG: Sir, that wasn't my question. Maybe I will ask it this way, because I suspect that perhaps you think I am going somewhere where I really am not going.
LISTNUM 1 \l 15187 Maybe I will just ask you: How many commercial buildings do you have access to in Ontario?
LISTNUM 1 \l 15188 MR. BIBIC: I believe that Mr. Iacono just answered that he doesn't know, as he sits here today, the answers to your specific questions.
LISTNUM 1 \l 15189 MS SONG: Pardon me?
LISTNUM 1 \l 15190 MR. BIBIC: I believe that Mr. Iacono said that he doesn't know the answers to your specific questions.
LISTNUM 1 \l 15191 MS SONG: I haven't asked the specific question of how many commercial buildings do you have access to currently.
LISTNUM 1 \l 15192 MR. BIBIC: The answer is that we don't know.
LISTNUM 1 \l 15193 MS SONG: Mr. Iacono doesn't know.
LISTNUM 1 \l 15194 Will you undertake to find out for me, please, and let me know?
LISTNUM 1 \l 15195 MR. IACONO: I will certainly do my best to do so.
LISTNUM 1 \l 15196 MS SONG: And the same for Quebec, please.
LISTNUM 1 \l 15197 MR. IACONO: All right.
LISTNUM 1 \l 15198 COMMISSIONER del VAL: Ms Song, I have a follow‑up question.
LISTNUM 1 \l 15199 So what if Bell has access to 6,000 buildings? Where do you want to go from there?
LISTNUM 1 \l 15200 MS SONG: Thank you, Commissioner del Val ‑‑
LISTNUM 1 \l 15201 MR. BIBIC: Ms Song, with respect to the undertaking we gave, I am going to take it back.
LISTNUM 1 \l 15202 In Companies‑Rogers April 12th, No. 3, we responded to a similar question. The companies do not keep an inventory of the specific commercial buildings where they have established network connections.
LISTNUM 1 \l 15203 So it has been asked, and we have given an answer. We weren't aware of it as we jumped and accepted the undertaking.
LISTNUM 1 \l 15204 MS SONG: That undertaking has to do with how many buildings do you have network access to, and my question was ‑‑ I thought my question was: not access in terms of access facilities; how many commercial buildings in your Ontario and Quebec operating territories do you have the right to enter into.
LISTNUM 1 \l 15205 That was my question.
LISTNUM 1 \l 15206 MR. BIBIC: Ms Song, if we don't have an inventory of the network connections to buildings that we have, it is less likely the case that we could answer your question.
LISTNUM 1 \l 15207 COMMISSIONER del VAL: Can we just, Ms Song ‑‑
LISTNUM 1 \l 15208 MS SONG: Yes, Commissioner del Val. The point that I am driving at is that, typically ‑‑ my understanding is that, typically, where a competitor requires access to a commercial building, the building owner will, in almost all circumstances, require that a written agreement be entered into.
LISTNUM 1 \l 15209 The fact that a written agreement is required necessarily entails negotiation, delay, and a more significant administrative burden on a competitor vis‑à‑vis a monopoly operating in its traditional operating territory.
LISTNUM 1 \l 15210 What surprises me by the figures available on BCE's website is how few buildings the incumbent, Bell Canada, appears to have entered into.
LISTNUM 1 \l 15211 We know ‑‑ and it is not my intention to provide evidence here today, but I am trying to respond to the Commissioner's question.
LISTNUM 1 \l 15212 It is our understanding that exactly the opposite prevails for us.
LISTNUM 1 \l 15213 Again, in order to put the number of buildings here into context, I don't think it's a leap to say that Bell Canada probably does have access to all commercial buildings. I don't know what the number of all commercial buildings in Ontario and Quebec is, but it would be a fairly significant number.
LISTNUM 1 \l 15214 THE CHAIRPERSON: I am now really befuddled.
LISTNUM 1 \l 15215 Mr. Iacono read out from the website saying that they have access to all commercial buildings or MDUs in their territory. You, as an incumbent, must know in Manitoba what is the story. Presumably, MTS has access to all of them.
LISTNUM 1 \l 15216 So what are you now trying to establish with this line of questioning? I mean, Bell admitted that they have access. It seems logical that an incumbent has access to most of them. When a new one comes in, there's an extra burden, which, you suggested, the competitor has to negotiate an agreement.
LISTNUM 1 \l 15217 If that's the point you are trying to establish, I think you already have established it, so why are we digging further into this?
LISTNUM 1 \l 15218 I'm sorry, I just do not follow your line of questioning or what you are trying to establish. Maybe you can clarify.
LISTNUM 1 \l 15219 MS SONG: Well, I think it is time to move on, Mr. Chairman, but, you know, in order to establish the fact that Bell Canada, in its traditional operating territory, can just basically walk into a building, as opposed to having to negotiate a written agreement every time they want to walk into a building, I thought that it was relevant to know how many buildings, in total, are there, commercial buildings are there in total, just to put these numbers into context. But I will now move on.
LISTNUM 1 \l 15220 THE CHAIRPERSON: So would you want them to tell you how many commercial buildings they serve in Ontario?
LISTNUM 1 \l 15221 MS SONG: That was what I had asked. Mr. Iacono indicated that he could find out that number. Mr. Bibic has now said they can't.
LISTNUM 1 \l 15222 MR. BIBIC: Ms Song, I pointed you to an interrogatory and you didn't want to go there. It says:
"The Companies estimate that over time they would have established connectivity to most commercial buildings in their serving territories to provision either voice or voice and data services." (As read)
LISTNUM 1 \l 15223 I was trying to answer the question. It says it right there in the interrogatory that Rogers posed.
LISTNUM 1 \l 15224 MS SONG: I'm not suggesting that you didn't try to answer the question. Thank you.
LISTNUM 1 \l 15225 Finally, you have given evidence that it's taken you over ‑‑ or approximately 20 years to build your fibre networks. Correct?
LISTNUM 1 \l 15226 MR. BIBIC: We had a discussion around that, yes.
LISTNUM 1 \l 15227 MS SONG: Yes. Isn't it reasonable to assume that it will take competitors at least that long?
LISTNUM 1 \l 15228 MR. BIBIC: No.
LISTNUM 1 \l 15229 MS SONG: Why is that, Mr. Bibic?
LISTNUM 1 \l 15230 MR. BIBIC: Well, it wouldn't take 20 years to build connection, fibre access to a building. I don't know what you are referring to. Are you referring ‑‑
LISTNUM 1 \l 15231 MS SONG: Okay.
LISTNUM 1 \l 15232 MR. BIBIC: ‑‑ to a new entrant coming in and building a ‑‑
LISTNUM 1 \l 15233 MS SONG: Let me clarify that.
LISTNUM 1 \l 15234 MR. BIBIC: ‑‑ ubiquitous network across the country? I mean, we got to scope that down a little bit.
LISTNUM 1 \l 15235 MS SONG: I think the question is, let's take Bell Canada in Ontario and Quebec, isn't it reasonable to assume that ‑‑ in order for a competitor to duplicate the fibre network that you currently possess, which you have told us has taken you at least 20 years to build, isn't it reasonable to assume that it would take a competitor at least that long?
LISTNUM 1 \l 15236 MR. BIBIC: I'm not sure a new entrant, Ms Song, needs to duplicate our fibre network. It so happens that cable companies actually have duplicated networks. A new entrant can compete effectively in various product and geographic markets without having to duplicate the entirety of all the incumbent's networks, fibre or otherwise.
LISTNUM 1 \l 15237 MS SONG: But it is your position, is it not, that what we should all be striving for here is a full end‑to‑end facilities‑based competition model. Correct?
LISTNUM 1 \l 15238 MR. BIBIC: It is not our position that we should be striving to have, you know, one entity ubiquitously building every single far reach of Canada. The point is that, for example, high‑capacity data services, you know, in your head bank headquarters in Toronto, the point is to incent competitors to build. In the case of residential telephony, well, we have got end‑to‑end facilities‑based competition.
LISTNUM 1 \l 15239 It all depends, you know, which particular product market, geographic market you are talking about, but the point is to incent competitors to build. We haven't said the point is to incent a particular competitor to build absolutely everywhere.
LISTNUM 1 \l 15240 MS SONG: The final point that I would just very briefly like to touch upon is ‑‑
LISTNUM 1 \l 15241 COMMISSIONER de VAL: Ms Song, may I just follow up on that?
LISTNUM 1 \l 15242 MS SONG: Yes.
LISTNUM 1 \l 15243 COMMISSIONER de VAL: I think, Mr. Bibic, you did say that you started laying fibre in the ground about 20 years ago, around 1986. And then I think in the interrogatory you said that for the next generation services the augmentation started about 10 to 15 years ago.
LISTNUM 1 \l 15244 I thought Ms Song was asking you why wouldn't it take the competitors just as long. I thought that your answer to that was no, and so Ms Song asked why. Is that...?
LISTNUM 1 \l 15245 MR. BABIN: I think, Commission de Val, when we started to build in fibre for Nex Gen services, you know, there was copper in the ground, and so there was coordination with that technology in the ground as opposed to starting fresh. But it's also, you know, the changes in the way the technology works today. I think, to Mr. Bibic's point, it's not to build everywhere, it's building on a, you know, business case basis by a customer basis or by a building basis.
LISTNUM 1 \l 15246 Certainly, if you were going to build exactly what Bell's built in the last 15 years, it would take a number of years to do that, as well.
LISTNUM 1 \l 15247 THE CHAIRPERSON: But even then, you would have the benefit of learning curve and technology advances, so, by definition, it should be less than it took you.
LISTNUM 1 \l 15248 MR. BABIN: Yes, I would agree with that, Mr. Chairman.
LISTNUM 1 \l 15249 MS SONG: Just following up on that, Mr. Babin, when you were speaking earlier, you did mention that some of the costs of laying down fibre would depend on whether you already had access to ducts. I assume that in your ILEC territory you do have access to ducts because you already have a copper network laid down. Correct?
LISTNUM 1 \l 15250 MR. BABIN: In the fibre network, there would be duct structures, and that would be part of our support structure agreements that we would have in place.
LISTNUM 1 \l 15251 MS SONG: Right. And technological innovation is not really relevant to the issue of actually laying down the fibre in the ground. Correct? When you were talking ‑‑
LISTNUM 1 \l 15252 MR. BABIN: Can you repeat the question, sorry?
LISTNUM 1 \l 15253 MS SONG: When you are talking about technological innovation, you are talking about the equipment that you would place on the fibre facility, but in terms of actually laying down fibre, that's just construction. That's ripping up roads, that's going into buildings and building physical facilities. Right? So you weren't meaning to suggest that technological innovation would have reduced those costs?
LISTNUM 1 \l 15254 MR. BABIN: No, I think the point is over the last 15 years many companies have built conduit structures into buildings or conduit structures in metropolitan cities, and so that some of those impediments, I would say, to construct are already overcome. And, you know, there's support structure agreements in place that everybody has access to those support structures.
LISTNUM 1 \l 15255 MR. BIBIC: And we are not suggesting that access to support structures not be regulated. We have got it in the technical services category in our proposal.
LISTNUM 1 \l 15256 MS SONG: Right, but there are other costs associated with laying down fibre other than accessing ducts or support structures, you will agree me?
LISTNUM 1 \l 15257 MR. BABIN: Well, there would be the electronics that we talked about earlier.
LISTNUM 1 \l 15258 MS SONG: I'm talking about laying down fibre. We are talking about laying down fibre, Mr. Babin ‑‑
LISTNUM 1 \l 15259 MR. BABIN: Yes.
LISTNUM 1 \l 15260 MS SONG: ‑‑ so why are you bringing in electronics again?
LISTNUM 1 \l 15261 MR. BABIN: No, you said there would be other costs.
LISTNUM 1 \l 15262 MS SONG: Associated with laying down fibre ‑‑
LISTNUM 1 \l 15263 MR. BABIN: Yes.
LISTNUM 1 \l 15264 MS SONG: ‑‑ other than simply the costs of accessing support structures and ducts. Correct?
LISTNUM 1 \l 15265 MR. BABIN: Correct, yes.
LISTNUM 1 \l 15266 THE CHAIRPERSON: Let me ask a question. Laying down fibre, we only talk about the laying down of fibre, which Ms Song is concerned. Over the last 10 years, have there been improvements in the way you do it technology? I mean, are there new methods that make it faster, cheaper, et cetera, than before?
LISTNUM 1 \l 15267 She said it's just construction. I don't know. I would be interested to see whether the costs today are the same as 10 years or, actually, since nowadays you do it differently, you actually do it cheaper and faster. So that's the question is.
LISTNUM 1 \l 15268 MR. BABIN: No, I think, Mr. Chairman, my point was that there is ducts there, so pulling in fibre, you actually don't have to tear up roads and you have access to those support structures and everybody has access to them. So it is the cost of pulling in the fibres, the cost of the fibre.
LISTNUM 1 \l 15269 THE CHAIRPERSON: The methodology of digging down and putting ‑‑
LISTNUM 1 \l 15270 MR. BABIN: Generally the same.
LISTNUM 1 \l 15271 THE CHAIRPERSON: ‑‑ is still the same?
LISTNUM 1 \l 15272 MR. BABIN: Yes, generally the same.
LISTNUM 1 \l 15273 MS SONG: All right. Now, with respect to the pricing of essential facilities I realize that in your proposal there would not be actually any services that would fall into that category as a result of this proceeding. But I just want to confirm that in your proposal you agree that for those services or facilities that are deemed to be essential the facilities and services should be priced at Phase II costs plus fixed mark‑up, correct?
LISTNUM 1 \l 15274 MR. BIBIC: Correct.
LISTNUM 1 \l 15275 MS SONG: Thank you.
LISTNUM 1 \l 15276 Just a moment please, Mr. Chair. Mr. Chair, those are all my questions, but I will be followed by Mr. Koch who will have more questions to address to the expert panel.
LISTNUM 1 \l 15277 THE CHAIRPERSON: Why don't we do that after lunch?
LISTNUM 1 \l 15278 But before we break for lunch, maybe you can answer one of my questions that bothers me.
LISTNUM 1 \l 15279 I have heard you talk all morning long about disincentives to investment because CDN is so cheap, et cetera. While that may be something undesirable for us from a public service point of view, wanting to see a build‑up of network, et cetera why, as a company, would it be a disincentive? I mean, isn't it a benefit for you?
LISTNUM 1 \l 15280 Doesn't it mean that you have an input cost that now has gone down and you could use the investment that you would have spent on laying out fibre or whatever the case may be and invest it in other areas of your business? Why is it a disincentive to you?
LISTNUM 1 \l 15281 If it is a disincentive to see the build‑up of networks, yes, I understand, but why from a company‑specific point of view you call that a disincentive.
LISTNUM 1 \l 15282 MR. BIBIC: Well, if you are talking about our operations out west, for example, we went in 2004, I was involved in this and we acquired the assets in the west of GT, sold the eastern assets to Call‑Net, now Rogers has them.
LISTNUM 1 \l 15283 And I remember sitting in a room trying to figure out with my business colleagues how we were going to now reduce our cost structure by using these assets that we had acquired by moving migrating service, the facilities that we were leasing from TELUS, onto our own facilities. The CDN decision came out in February of 2005, right after we bought these assets, and we stopped using those GT facilities. So that is the context.
LISTNUM 1 \l 15284 The incentive is ultimately by moving things on our network we over time ultimately get better control of our overall cost structure and we get better control over our product set. What happens is we are not weaned off CDN, we continue to use CDN. Frankly, we have a limited capital budget envelope and then we have to prioritize amongst the different programs we are going to use that money on.
LISTNUM 1 \l 15285 If CDN weren't available, I think you would see us use the facilities we have more or build out where it would make more sense. Ultimately, in the long run, we would be in better control of the return on those investments.
LISTNUM 1 \l 15286 THE CHAIRPERSON: So really it comes down to control over your investment?
LISTNUM 1 \l 15287 MR. BIBIC: It does in the medium to long‑term, yes.
LISTNUM 1 \l 15288 THE CHAIRPERSON: Okay, thank you.
LISTNUM 1 \l 15289 Now, let us break now. We will resume in ‑‑
LISTNUM 1 \l 15290 MR. McCALLUM: Mr. Chair?
LISTNUM 1 \l 15291 THE CHAIRPERSON: Yes?
LISTNUM 1 \l 15292 MR. McCALLUM: May I make a short announcement?
LISTNUM 1 \l 15293 THE CHAIRPERSON: Sure, counsel.
LISTNUM 1 \l 15294 MR. McCALLUM: The Chair announced yesterday that there would be a list of services available. Commission staff has now prepared a list of services and a short covering sheet with instructions. The list of services has just been listed in alphabetical order and there is a blank number of categories and parties are requested to complete the form and submit it when they submit their remarks on the 9 of November.
LISTNUM 1 \l 1