ARCHIVÉ -  Transcription

 

 

 

 

 

 

 

              TRANSCRIPT OF PROCEEDINGS BEFORE

             THE CANADIAN RADIO‑TELEVISION AND

               TELECOMMUNICATIONS COMMISSION

 

 

 

 

             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 16, 2007                      Le 16 octobre 2007

 

 

 

 

 

Transcripts

 

In order to meet the requirements of the Official Languages

Act, transcripts of proceedings before the Commission will be

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

and staff attending the public hearings, and the Table of

Contents.

 

However, the aforementioned publication is the recorded

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

either of the official languages, depending on the language

spoken by the participant at the public hearing.

 

 

 

 

Transcription

 

Afin de rencontrer les exigences de la Loi sur les langues

officielles, les procès‑verbaux pour le Conseil seront

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

membres et du personnel du CRTC participant à l'audience

publique ainsi que la table des matières.

 

Toutefois, la publication susmentionnée est un compte rendu

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

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

officielles, compte tenu de la langue utilisée par le

participant à l'audience publique.

               Canadian Radio‑television and

               Telecommunications Commission

 

            Conseil de la radiodiffusion et des

               télécommunications canadiennes

 

 

                 Transcript / Transcription

 

 

 

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 16, 2007                  Le 16 octobre 2007

 

- iv -

 

           TABLE DES MATIÈRES / TABLE OF CONTENTS

 

 

                                                 PAGE / PARA

 

SOUS AFFIRMATION SOLENNELLE : DENNIS BÉLAND      1544 /10684

SOUS AFFIRMATION SOLENNELLE : CHRISTOPHER TAYLOR

 

Cross-examination by The Companies               1545 /10689

Cross-examination by TELUS                       1565 /10854

Cross-examination by Primus                      1587 /11014

Cross-examination by Cybersurf                   1594 /11070

Cross-examination by Xittel                      1611 /11191

 

 

SOUS AFFIRMATION SOLENNELLE : FRANÇOIS AUDET     1620 /11260

AFFIRMED:  DAVID McKEOWN

SOUS AFFIRMATION SOLENNELLE : MICHEL MESSIER

AFFIRMED:  DIMITRI STATHIS

SOUS AFFIRMATION SOLENNELLE : ROBIN LAVOIE

 

Cross-examination by The Companies               1621 /11264

Cross-examination by TELUS                       1657 /11495

Cross-examination by Primus                      1688 /11638

Cross-examination by Cybersurf                   1690 /11652

 

 

SWORN:  JEAN BRAZEAU                             1693 /11674

SWORN:  CINDY McCLOCKLIN                                

SWORN:  ESTHER SNOW                               

 

Examination-in-chief by Shaw                     1693 /11674

Cross-examination by The Companies               1693 /11681

Cross-examination by TELUS                       1719 /11864

Cross-examination by Primus                      1731 /11951

Cross-examination by Xittel                      1734 /11975

 

 

- v -

 

              EXHIBITS / PIÈCES JUSTIFICATIVES

 

 

No.                                              PAGE / PARA

 

TELUS-4       Tab 6 of the Compendium           1580 /10961

 

 

- vi -

 

                      ERRATA / ADDENDA

 

 

PAGE / PARA              DESCRIPTION

 

1515 / 10494     "MR. TACIT:" s/b ""MR. WARE:"

 

 

 

 

                 Gatineau, Quebec / Gatineau (Québec)

‑‑‑ Upon resuming on Tuesday, October 16, 2007

    at 0800 / L'audience reprend le mardi

    16 octobre 2007 à 0800

LISTNUM 1 \l 1 \s 106721067             THE SECRETARY:  Can you be seated, please.  Veuillez vous asseoir, s'il vous plaît.

LISTNUM 1 \l 11068             THE CHAIRPERSON:  Good morning.

LISTNUM 1 \l 11069             Madam Secretary, whom do we have today?

LISTNUM 1 \l 11070             LA SECRÉTAIRE :  Bonjour, Monsieur le Président.

LISTNUM 1 \l 11071             Le prochain panel, c'est Quebecor Media inc.  Je vais demander à monsieur Béland de faire la présentation de ses témoins.

LISTNUM 1 \l 11072             MR. BÉLAND:  Good morning, Mr. Chairman, commissioners.

LISTNUM 1 \l 11073             My name is Dennis Béland and I am Director of Regulatory Affairs, Telecommunications at Quebecor Media Inc.

LISTNUM 1 \l 11074             With me this morning is Christopher Taylor, outside counsel for Quebecor for this proceeding.

LISTNUM 1 \l 11075             A brief biographical statement for myself and Mr. Taylor has been provided to the Commission and circulated to the parties.

LISTNUM 1 \l 11076             Quebecor avait indiqué au Conseil que monsieur Gilles Brunet, notre directeur de Services aux transporteurs chez Vidéotron, serait aussi sur le panel avec nous.  Malheureusement, monsieur Brunet n'est pas en mesure de participer aujourd'hui à cause de raisons personnelles.

LISTNUM 1 \l 11077             En l'absence de monsieur Brunet, monsieur Taylor et moi allons répondre aux questions du Conseil au meilleur de nos connaissances, et si nécessaire, nous prendrons des engagements pour des réponses additionnelles.

LISTNUM 1 \l 11078             Madame la Secrétaire, si vous voulez faire l'assermentation du panel, nous allons procéder, par la suite, avec l'attestation formelle concernant nos preuves.

LISTNUM 1 \l 11079             LA SECRÉTAIRE : Merci, Monsieur Béland.

SOUS AFFIRMATION SOLENNELLE : DENNIS BÉLAND

SOUS AFFIRMATION SOLENNELLE : CHRISTOPHER TAYLOR

LISTNUM 1 \l 11080             MR. BÉLAND:  Mr. Chairman, the evidence and other written submissions of Quebecor were prepared by me or under my direction.  I confirm that these materials are accurate and complete.

LISTNUM 1 \l 11081             We would be pleased to now take questions from other parties and from the Commission.

LISTNUM 1 \l 11082             THE CHAIRPERSON:  Okay, thank you.

LISTNUM 1 \l 11083             THE SECRETARY:  Counsel on behalf of the Companies, you may proceed with the cross‑examination.

EXAMINATION / INTERROGATOIRE

LISTNUM 1 \l 11084             MR. HOFLEY:  Thank you very much, Madam Secretary.

LISTNUM 1 \l 11085             Good morning, commissioners.  Good morning, panel.

LISTNUM 1 \l 11086             I will have very few questions for you with respect to the definition of essential facilities in your evidence.  All I will be referring to is your March 15th evidence.  So if you have that handy, that would be great.

LISTNUM 1 \l 11087             And my colleague Mr. Daniels has a few questions for you, following mine.

LISTNUM 1 \l 11088             Now, if I could take you to paragraph 18 of your evidence, which is at page 5, bottom right corner, here you will recall that you indicate your preferred definition and it has three features.

LISTNUM 1 \l 11089             I would like to just go through them because I have a couple of clarificatory questions and then I have one set of questions around an issue raised by them.

LISTNUM 1 \l 11090             The first criterion is:

"...control by one service provider of a service." (As read)

LISTNUM 1 \l 11091             I just wanted to clarify.  When you say "a service," do you mean a service or a functional equivalent to that service?

LISTNUM 1 \l 11092             MR. BÉLAND:  We mean in fact a service or a facility as defined by the Commission.

LISTNUM 1 \l 11093             MR. HOFLEY:  But in other words, does it have to be that particular service or if there is a functional equivalent to that service, something that does the same thing, that would suffice?

LISTNUM 1 \l 11094             MR. BÉLAND:  I am not sure I understand the question.  We are talking about a service that we control.

LISTNUM 1 \l 11095             MR. HOFLEY:  Okay.  Well, we will come to it, I think, later on.

LISTNUM 1 \l 11096             Now, your second criterion is:

"...needed by a second service provider to offer services." (As read)

LISTNUM 1 \l 11097             Is that by any single service provider?  So it says "a second service provider."  Is it just one service provider or is it needed by service providers generally?

LISTNUM 1 \l 11098             MR. BÉLAND:  It could be one service provider, yes.

LISTNUM 1 \l 11099             MR. HOFLEY:  Just one, okay.  Well, we will come back to that.

LISTNUM 1 \l 11100             And when you say "to offer services" ‑‑ "to build or operate a network or offer services," do you mean in the retail market downstream?

LISTNUM 1 \l 11101             MR. BÉLAND:  Generally speaking, yes.

LISTNUM 1 \l 11102             MR. HOFLEY:  And then your third criterion we all understand, which is the question of duplicability.

LISTNUM 1 \l 11103             If you go to paragraph 25 of your submission, which is over on page 7, you talk about three classes of wholesale services ‑‑ well, that is the title actually but in paragraph 25 you say there are three reasons for requiring a service to be provided on a wholesale basis.

LISTNUM 1 \l 11104             The first one has to do with:

"...to promote the public interest in interconnected, interoperable networks." (As read)

LISTNUM 1 \l 11105             And I am not going to be asking you any questions about that.

LISTNUM 1 \l 11106             The second is:

"...to address a situation where a service provider has SMP in respect of an access service." (As read)

LISTNUM 1 \l 11107             And I will have some questions about that.

LISTNUM 1 \l 11108             And the third is:

"...to promote other social goods such as public safety, public convenience... [et cetera]. (As read)

LISTNUM 1 \l 11109             Now, your test covers all three of the ‑‑ is intended to cover, to be a broad test covering all three of these reasons; is that a fair statement?

LISTNUM 1 \l 11110             MR. BÉLAND:  No, the ‑‑ one of the issues we wanted to convey in our initial evidence was our belief that mandated wholesale services should not necessarily be limited to only essential services.

LISTNUM 1 \l 11111             So you need to look at our three categories of mandated wholesale services and our definition of essential service separately.

LISTNUM 1 \l 11112             To give you perhaps the most evident example, there could be services that are not essential, yet fall within the category of public good, and by breaking out these categories, we wanted to ensure that the Commission took into consideration that possibility.

LISTNUM 1 \l 11113             MR. HOFLEY:  Okay.  So is essential then really ‑‑ when we are talking about the essential services definition, are we talking about the second reason there?

LISTNUM 1 \l 11114             MR. BÉLAND:  No.  In fact, to be more precise, there could be essential services falling within any of those three categories.

LISTNUM 1 \l 11115             MR. HOFLEY:  Okay.

LISTNUM 1 \l 11116             MR. BÉLAND:  We just want to make sure that the Commission when looking at those three categories doesn't necessarily limit itself to essential services.

LISTNUM 1 \l 11117             MR. HOFLEY:  Okay.

LISTNUM 1 \l 11118             Well, I would like to focus on your second category, the SMP category, if we could.

LISTNUM 1 \l 11119             MR. BÉLAND:  Yes.

LISTNUM 1 \l 11120             MR. HOFLEY:  At paragraph 53 ‑‑

LISTNUM 1 \l 11121             THE CHAIRPERSON:  Before you do that, Mr. Hofley, can I just interject.

LISTNUM 1 \l 11122             So I gather your category 1 and category 3, those are really baskets 5 and 6 in the framework that the Commission sent to you?

LISTNUM 1 \l 11123             MR. BÉLAND:  Yes, they would fall well into the Commission's framework in that way.

LISTNUM 1 \l 11124             THE CHAIRPERSON:  Okay, thank you.

LISTNUM 1 \l 11125             I am sorry, go ahead.

LISTNUM 1 \l 11126             MR. HOFLEY:  So if I could take you to paragraph 53, which is page 16, and this is where you talk about access services subject to SMP and you discuss this in more detail.

LISTNUM 1 \l 11127             At paragraph 54, you talk about a number of reasons for market power ‑‑ you will recall that ‑‑ and then you make a submission in the middle.  It says:

"In any case, QMI submits that the public interest in fostering competition justifies requiring the network operator with SMP to make the relevant access facilities available on a wholesale basis."  (As read)

LISTNUM 1 \l 11128             When you are talking about competition there, are you talking about competition at the retail level?

LISTNUM 1 \l 11129             MR. BÉLAND:  Yes, generally speaking.

LISTNUM 1 \l 11130             MR. HOFLEY:  All right.  So if there is no significant market power at the retail level, even assuming there is control over a facility at the wholesale level, would you agree with me that there is no need to mandate access to solve any competition problem downstream?

LISTNUM 1 \l 11131             MR. BÉLAND:  That is not the way we have structured our definition, no.  We haven't made a linkage in our definition between the upstream and downstream markets.

LISTNUM 1 \l 11132             MR. HOFLEY:  I guess I understand you haven't made a linkage, but what I'm asking you is:  Given that you have said that there is a public interest in fostering competition downstream and you go on to say:

"The new entrants would then be able to provide retail services to customers."  (As read)

LISTNUM 1 \l 11133             What I'm asking you is whether or not there should be that linkage, whether or not what you really are saying is that if there isn't a competition problem downstream then there wouldn't be a need to mandate access to an input used for that retail market.

LISTNUM 1 \l 11134             MR. BÉLAND:  Again, we have focused solely on the upstream.  If there is a market power issue upstream, that would be sufficient for us ‑‑ in our opinion for the Commission to give consideration to mandating wholesale access.

LISTNUM 1 \l 11135             MR. HOFLEY:  Thank you for that.

LISTNUM 1 \l 11136             I don't have any further questions, but my friend Mr. Daniels does.

LISTNUM 1 \l 11137             MR. DANIELS:  Madam Secretary, I think I have one exhibit, a prefiled exhibit.

LISTNUM 1 \l 11138             THE SECRETARY:  There was a prefiled document that was already distributed.

LISTNUM 1 \l 11139             MR. DANIELS:  It has already been distributed?

LISTNUM 1 \l 11140             THE SECRETARY:  Yes.

LISTNUM 1 \l 11141             MR. DANIELS:  All right.

LISTNUM 1 \l 11142             For those following in the back of the room, I have just one reference to an interrogatory QMI/CRTC 12 April 2007‑107.

LISTNUM 1 \l 11143             In this interrogatory ‑‑ actually I should say, Mr. Chair, the purpose of my cross‑examination at this point is to understand QMI's position on restriction on use.  This is a very short interrogatory where their position is outlined.

LISTNUM 1 \l 11144             Mr. Béland, I take it you were here on Friday and heard my discussion about the restriction on use with the Rogers panel?

LISTNUM 1 \l 11145             MR. BÉLAND:  Yes, I did.

LISTNUM 1 \l 11146             MR. DANIELS:  In light of that I would like to look at your proposed response on this.  This was in response to an interrogatory from the Commission asking you for your position on it.

LISTNUM 1 \l 11147             You say here:

"QMI does not agree with Bell Canada's proposal ..."

LISTNUM 1 \l 11148             I'm talking about the restriction on use:

"... as it is reminiscent of the resale versus sharing distinction that the Commission attempted to enforce the late 1980s and early 1990s."

LISTNUM 1 \l 11149             Let's spare everyone from going through what that means, for those of us who studied it and whatever.

LISTNUM 1 \l 11150             MR. BÉLAND:  That's agreed.

LISTNUM 1 \l 11151             MR. DANIELS:  But that distinction was unenforceable and QMI believes that Bell Canada's proposal would be equally unenforceable.  I would like to just ask you about this unenforceability for a moment.

LISTNUM 1 \l 11152             QMI has its own wholesale tariff for wholesale internet called TPIA, Third Party Internet Access.

LISTNUM 1 \l 11153             Is that correct?

LISTNUM 1 \l 11154             MR. BÉLAND:  Yes, we do.

LISTNUM 1 \l 11155             MR. DANIELS:  Would you agree with me that you, too, like we discussed with Rogers, have restrictions on use in that tariff?

LISTNUM 1 \l 11156             MR. BÉLAND:  Yes, we do.

LISTNUM 1 \l 11157             MR. DANIELS:  Am I correct in stating that you do not have an enforcement problem with the restrictions in those tariffs?

LISTNUM 1 \l 11158             MR. BÉLAND:  No.  We haven't seen an enforcement problem to date, no.

LISTNUM 1 \l 11159             MR. DANIELS:  Okay.  So we can agree, then, that restrictions on use can be enforced through a tariff?

LISTNUM 1 \l 11160             MR. BÉLAND:  I would agree with that statement, yes.

LISTNUM 1 \l 11161             MR. DANIELS:  Now, I also noticed that ‑‑ I'm not going to ask you to turn to this.  There is an interrogatory where QMI states that it purchases CDN from the ILEC ‑‑ which I assume is Bell Canada considering your location ‑‑ but makes little use of those service.

LISTNUM 1 \l 11162             So it is my understanding that you have limited use of CDN, but you do purchase CDN

LISTNUM 1 \l 11163             Is that correct?

LISTNUM 1 \l 11164             MR. BÉLAND:  Exactly.  We purchase some CDN services from Bell, but very limited quantities.

LISTNUM 1 \l 11165             MR. DANIELS:  I take it you also do not perform any simple resale of those circuits.  By that, just so I'm clear what I mean, is as I understand CDN, CDN is to be used by a competitor to augment its network, it's not to take strictly a CDN circuit and simply resell it at the low rate in the retail market.

LISTNUM 1 \l 11166             Is that correct?

LISTNUM 1 \l 11167             MR. BÉLAND:  That's correct.

LISTNUM 1 \l 11168             If I can perhaps foresee where you are going with this, in fact we signed an affidavit, a senior official of Québecor Media ‑‑ of Vidéotron, excuse me, signs an affidavit once a year affirming that we do not engage in simple resale of those services.

LISTNUM 1 \l 11169             MR. DANIELS:  That is because there is a restriction in the tariff on use for the purpose of resale.

LISTNUM 1 \l 11170             Is that correct?

LISTNUM 1 \l 11171             MR. BÉLAND:  More precisely I recall it being a Commission directive, but I think we are touching the same thing, yes.

LISTNUM 1 \l 11172             MR. DANIELS:  And again, are you aware of any enforcement problems with that restriction?

LISTNUM 1 \l 11173             MR. BÉLAND:  It's your service that you are selling to us so it would be you that would be aware of an enforcement problem, but we take the signature of the affidavit very seriously and we produce it once a year as required.

‑‑‑ Pause

LISTNUM 1 \l 11174             MR. DANIELS:  One last question, Mr. Béland.

LISTNUM 1 \l 11175             Yesterday we heard some testimony from the Rogers panel about what is involved to get access to come into this building if Rogers wanted to come into this building with their own facility.  In light of that I wanted to ask you:  Could you confirm that you do provide basic cable service in this building, and specifically ‑‑ I don't know if you are aware right now whether you do, but I assume maybe you can take an undertaking.

LISTNUM 1 \l 11176             MR. BÉLAND:  I'm looking at the quantity of televisions in this room and I hope we provide service, but I can't confirm it on the spot.

LISTNUM 1 \l 11177             MR. DANIELS:  All right.  Well, maybe you could take an undertaking, if you are willing to do that, and you may also want to check with the Le Mirage restaurant right around the corner here which appears to have basic cable.

LISTNUM 1 \l 11178             MR. DANIELS:  So to confirm, you would like an undertaking that we provide cable television service to this building and to Le Mirage restaurant ‑‑

LISTNUM 1 \l 11179             MR. DANIELS:  Located at ‑‑

LISTNUM 1 \l 11180             MR. BÉLAND:  ‑‑ which is in this building as well?

LISTNUM 1 \l 11181             MR. DANIELS:  Yes, it is in this building.  So basically I'm just suggesting that may be the quickest way for you to confirm that you provide cable television services.

LISTNUM 1 \l 11182             MR. BÉLAND:  Okay.  Thank you.

LISTNUM 1 \l 11183             MR. DANIELS:  Are you prepared to take that undertaking?

LISTNUM 1 \l 11184             MR. BÉLAND:  Yes.

LISTNUM 1 \l 11185             MR. DANIELS:  Thank you.

LISTNUM 1 \l 11186             That concludes our questions, Mr. Chairman.

LISTNUM 1 \l 11187             THE CHAIRPERSON:  Thank you very much.

LISTNUM 1 \l 11188             Mr. Béland, can I ask you about your section 25, subparagraph (2) where you say:

"To address the situation where a service provider has significant market power in respect of an access service..."  (As read)

LISTNUM 1 \l 11189             Which is really sort of the key rationale you have advanced for mandating ‑‑ you are making no reference at all to upstream or downstream markets, et cetera.

LISTNUM 1 \l 11190             So the significant market power could be as a result of the efficient operation of an operator rather than in any way being connected to its dominance or control of the wholesale market?

LISTNUM 1 \l 11191             So far, for the last three days we have heard everything was because somebody had significant power on the wholesale market he could control the downstream market.  We had a lot of argument whether the downstream market you would have to have control, but all ‑‑ so this key ‑‑ you can't get into the system unless you get through the wholesaler, so therefore everything was targeted on wholesale market.

LISTNUM 1 \l 11192             Your definition doesn't at all refer either to upstream or downstream markets or wholesale or retail, whatever you want to call it.

LISTNUM 1 \l 11193             MR. BÉLAND:  We are referring to the access service, so we are clearly in the upstream market here.

LISTNUM 1 \l 11194             But you are correct that we don't ‑‑ we expressly avoided bringing in any linkage with the downstream market, any assessment of the service provider's intentions that it might have with regards to limiting or lessening competition in the downstream market.  We felt that an efficient proposal would be one that would look at the upstream service in question and assess the market power there.

LISTNUM 1 \l 11195             THE CHAIRPERSON:  All right.

LISTNUM 1 \l 11196             Andrée?

LISTNUM 1 \l 11197             CONSEILLERE NOËL : Alors, Monsieur Béland, si je comprends bien, vous nous dites... parce que vous faites une distinction entre les services dits essentiels et les services qui doivent être offerts en vente aux services de gros, wholesale.

LISTNUM 1 \l 11198             Quand vous dites que les services doivent être fournis sur une base de services en gros, vous ne parlez pas nécessairement de services essentiels?  C'est bien ce que j'ai compris de votre proposition.

LISTNUM 1 \l 11199             M. BÉLAND : Exactement.

LISTNUM 1 \l 11200             M. BÉLAND : Exactement.

LISTNUM 1 \l 11201             CONSEILLERE NOËL : Vous faites une distinction entre les services qui doivent être offerts, mandated en anglais, sur une base de services offerts en gros, et les services essentiels, qui sont une autre chose.

LISTNUM 1 \l 11202             Alors, pour vous, un service là où le fournisseur de service au niveau du gros a une part de marché significative, SMP, vous dites que le service d'accès doit être offert sur une base obligatoire?

LISTNUM 1 \l 11203             M. BÉLAND : En fait, si je peux revenir à l'origine de notre proposition.

LISTNUM 1 \l 11204             La préoccupation qu'on avait chez QMI en regardant cette question, c'était une préoccupation concernant la possibilité que le Conseil limiterait la définition de services vendus en gros mandatés à des services essentiels uniquement.

LISTNUM 1 \l 11205             Cela nous préoccupait pour deux... on peut parler de deux catégories de services où on voyait que ça ne marcherait pas très.

LISTNUM 1 \l 11206             La première catégorie, c'est les services d'interconnexion, où la notion d'interconnexion et la notion de service essentiel ne se marient pas très bien.  C'est possible qu'on peut développer une définition d'essentiel qui englobe les services d'interconnexion, mais pour nous, on voulait que ça soit plus explicite, l'interconnexion, les services d'interconnexion.  Que ça tombe dans une définition d'essentiel ou pas, ça mérite d'être mandaté comme tel.

LISTNUM 1 \l 11207             CONSEILLERE NOËL : Au niveau de l'intérêt public?

LISTNUM 1 \l 11208             M. BÉLAND : Au niveau de l'intérêt public.

LISTNUM 1 \l 11209             Deuxième catégorie de services, ce sont les services qu'on a dit ici social goods, de type biens publics.  Des exemples, ça serait le réseau 9‑1‑1, l'accès au réseau 9‑1‑1.

LISTNUM 1 \l 11210             On pourrait, j'imagine, avoir un long débat à savoir si le réseau 9‑1‑1 actuel est un service essentiel ou pas, mais à certain point, c'est un débat inutile.  La réalité actuelle, c'est que les concurrents ont besoin d'accéder à ce réseau là s'ils veulent offrir un service local ou même un service sans fil ou même un service VoIP sans installation au Canada.

LISTNUM 1 \l 11211             Un autre exemple, ça serait les poteaux.  On pourrait...

LISTNUM 1 \l 11212             CONSEILLERE NOËL : Les structures de soutènement.

LISTNUM 1 \l 11213             M. BÉLAND : Des structures de soutènement.  On pourrait débattre longtemps la question économique de l'aspect essentiel ou pas, mais en fin de journée, on peut s'entendre qu'il y a un intérêt public à partager les poteaux de téléphone.

LISTNUM 1 \l 11214             CONSEILLERE NOËL : En tout cas, pour les propriétaires sur les terrains desquels les poteaux sont installés, il y a certainement un intérêt visuel...

LISTNUM 1 \l 11215             M. BÉLAND : Oui.

LISTNUM 1 \l 11216             CONSEILLERE NOËL : ...à les partager.

LISTNUM 1 \l 11217             Mais pour ce qui est des services essentiels comme tels, qu'est‑ce que vous qualifiez comme services essentiels?

LISTNUM 1 \l 11218             M. BÉLAND : Mais on a fourni une définition...

LISTNUM 1 \l 11219             CONSEILLERE NOËL : Oui.

LISTNUM 1 \l 11220             M. BÉLAND : ...avec, effectivement, trois éléments.

LISTNUM 1 \l 11221             CONSEILLERE NOËL : Pouvez‑vous me la répéter?  Pouvez‑vous me la répéter?

LISTNUM 1 \l 11222             M. BÉLAND : On va le chercher.  C'est quel paragraphe?

‑‑‑ Pause

LISTNUM 1 \l 11223             M. BÉLAND : Vous allez le trouver...

LISTNUM 1 \l 11224             CONSEILLERE NOËL : Au paragraphe 2?

LISTNUM 1 \l 11225             M. BÉLAND : ...au paragraphe 20 de notre...

LISTNUM 1 \l 11226             CONSEILLERE NOËL : Vingt.

LISTNUM 1 \l 11227             M. BÉLAND : ...de notre soumission initiale.

LISTNUM 1 \l 11228             Les éléments essentiels de notre définition...

LISTNUM 1 \l 11229             CONSEILLERE NOËL : Mm‑hmm.  D'accord.

LISTNUM 1 \l 11230             M. BÉLAND : ...si je peux dire, ce sont le contrôle par un fournisseur du service ou de l'installation en question, le besoin d'un autre fournisseur à utiliser ce service pour lui‑même offrir un service dans le marché, généralement le marché de détail, et finalement, l'idée que le service ou l'installation ne peut pas être dupliqué, d'une perspective objective et pratique.

LISTNUM 1 \l 11231             CONSEILLERE NOËL : D'accord.

LISTNUM 1 \l 11232             Moi, je n'ai pas d'autres questions, Monsieur le Président.

LISTNUM 1 \l 11233             THE CHAIRPERSON:  Thank you very much.

LISTNUM 1 \l 11234             Commissioner Cram.

LISTNUM 1 \l 11235             COMMISSIONER CRAM:  In your interconnection ‑‑ how would you treat access tandem and DC, direct connect?  Would you treat it as part of interconnection or under your second ‑‑ the SMP access test?

LISTNUM 1 \l 11236             MR. BÉLAND:  A surprisingly complex question and the reason is that ‑‑

LISTNUM 1 \l 11237             COMMISSIONER CRAM:  I don't realize it because I don't even know that it is complex.

LISTNUM 1 \l 11238             MR. BÉLAND:  I would love to be able to give you a one‑word answer.

LISTNUM 1 \l 11239             The reason is that in fact, QMI, we proposed what I would call a restructuring of that whole notion of direct connect/access tandem.

LISTNUM 1 \l 11240             What we have proposed in our evidence is what I would call a simplification restructuring of interconnection whereby we would effectively do away with this need to distinguish between inter‑exchange carriers and local exchange carriers and say that all interconnection happens at the local interconnection region level, the LIR level.

LISTNUM 1 \l 11241             An inter‑exchange carrier knocking on the door of an ILEC or a CLEC would have a right based on interconnection principles to terminate traffic within the entire LIR that they are looking at.

LISTNUM 1 \l 11242             Any further transport functionality that they would be looking for in the nature of a larger, geographically larger access tandem type of thing would be considered a non‑interconnection service and then you would need to look at whether that particular service was essential in a particular context.

LISTNUM 1 \l 11243             COMMISSIONER CRAM:  Under the SMP test?  Under your SMP test?

LISTNUM 1 \l 11244             MR. BÉLAND:  Yes.

LISTNUM 1 \l 11245             COMMISSIONER CRAM:  Okay, thank you.

LISTNUM 1 \l 11246             THE CHAIRPERSON:  Okay, thank you very much.

LISTNUM 1 \l 11247             Who is next, Madam Secretary?

LISTNUM 1 \l 11248             THE SECRETARY:  I am calling the counsel for TELUS Communications Company, please, to come forward.

EXAMINATION / INTERROGATOIRE

LISTNUM 1 \l 11249             MR. SCHMIDT:  Good morning, Mr. Chairman.  Good morning, commissioners and panel members.

LISTNUM 1 \l 11250             My name is Stephen Schmidt and I am counsel to TELUS in this proceeding.

LISTNUM 1 \l 11251             I am assisted this morning by Mr. Mark Murakami, a Director in TELUS' Wholesale Division.

LISTNUM 1 \l 11252             I will be referring to QMI's 15 March evidence a couple of times this morning, so it would be helpful if you had that at hand.

LISTNUM 1 \l 11253             I will be referring as well to a compendium of documents which we have pre‑filed with the Hearing Secretary and I believe she is distributing it now.

LISTNUM 1 \l 11254             I am going to touch on four topics this morning and I would be surprised if it took more than 30 minutes, Mr. Chairman.

LISTNUM 1 \l 11255             The first topic area relates to QMI's use of and dependency on ILEC facilities, the basic object of this conversation being to explore what QMI needs to deliver their retail telephone service.

LISTNUM 1 \l 11256             To that end, I would ask you to open Tab 1 of the compendium, which contains Interrogatory Response QMI‑Bureau 12Apr‑2, and at paragraph B of that response, QMI states:

"With limited exceptions all of QMI's services other than mobile wireless services are provided over QMI's wholly owned network." (As read)

LISTNUM 1 \l 11257             So I want to explore this statement a little bit with the panel to see what particular classes of ILEC services fall within or outside of your limited exception that you articulated.

LISTNUM 1 \l 11258             So can I take it from your statement at paragraph B there that you provide both business telephone service and residential service over your own network, just as a general proposition?

LISTNUM 1 \l 11259             MR. BÉLAND:  As a general proposition, yes.

LISTNUM 1 \l 11260             MR. SCHMIDT:  Thank you.  Well, I will get a bit more specific then.

LISTNUM 1 \l 11261             Do you use ILEC loops to provide your residential telephone service?

LISTNUM 1 \l 11262             MR. BÉLAND:  No.

LISTNUM 1 \l 11263             MR. SCHMIDT:  Okay.  Do you use ILEC loops to provide your business telephone service?

LISTNUM 1 \l 11264             MR. BÉLAND:  In some cases, yes, and perhaps here we should distinguish between the two networks that Vidéotron operates.

LISTNUM 1 \l 11265             Vidéotron operates what is traditionally referred to as a cable network, a hybrid fibre‑optic coaxial cable network over which we provide some business services.

LISTNUM 1 \l 11266             MR. SCHMIDT:  Okay.

LISTNUM 1 \l 11267             MR. BÉLAND:  We also operate a ‑‑ let's call it a pure fibre network which corresponds to the former Vidéotron Telecom Ltd. ‑‑

LISTNUM 1 \l 11268             MR. SCHMIDT:  Okay.

LISTNUM 1 \l 11269             MR. BÉLAND:  ‑‑ and Vidéotron Telecom Ltd. generally provides business services over its own end‑to‑end network but, in some circumstances, does make use of ILEC local loops, local services and some other services.

LISTNUM 1 \l 11270             MR. SCHMIDT:  And what type of circumstances would those be where you might be using an ILEC loop?

LISTNUM 1 \l 11271             MR. BÉLAND:  Probably the classic example would be were Vidéotron business services were to win a multi‑site, larger business service contract.  Vidéotron may have connectivity, using its own fibre, to the majority of sites, but may not have connectivity to a couple of sites.  In those cases, then we will look at the opportunity to get those connections from an alternative supplier, which will often end up being the ILEC.

LISTNUM 1 \l 11272             MR. SCHMIDT:  But could be someone else potentially as well?

LISTNUM 1 \l 11273             MR. BÉLAND:  Could be someone else, sure.

LISTNUM 1 \l 11274             MR. SCHMIDT:  Okay.  So to the extent that you are using business loops I hear it, it is in the exceptional circumstances maybe I will paraphrase, where you are planting a contract that extends beyond your network footprint or whatever?

LISTNUM 1 \l 11275             MR. BÉLAND:  The clear preference for Vidéotron business services is to provide services over its own end‑to‑end facilities.  But in some circumstances, relatively limited, we make use of other providers' facilities, yes.

LISTNUM 1 \l 11276             MR. SCHMIDT:  Okay, thanks.  Do you make use of co‑location services from any ILEC to provide residential telephone services?

LISTNUM 1 \l 11277             MR. BÉLAND:  No.

LISTNUM 1 \l 11278             MR. SCHMIDT:  Okay.  And flipping to the business side, do you use co‑location services from any ILEC to provide business telephone services?

LISTNUM 1 \l 11279             MR. BÉLAND:  No, and neither were we using the coax network nor were we using our own fibre network.

LISTNUM 1 \l 11280             MR. SCHMIDT:  So co‑location is not part of the recipe at all for you to deliver services in the retail market?

LISTNUM 1 \l 11281             MR. BÉLAND:  No.

LISTNUM 1 \l 11282             MR. SCHMIDT:  I will ask you, would this mean you wouldn't be picked up in Rogers' test, the four co‑locator test?  You are in the market, but you are not co‑locating?

LISTNUM 1 \l 11283             MR. BÉLAND:  If you will allow me, let me just back‑up one step.  Vidéotron itself is not co‑located anywhere, in any ILEC central offices.  But if we return to the small number of cases where Vidéotron makes use of another service provider's services to reach a minority of locations, that service provider that we might be purchasing those services from, itself, maybe co‑located.

LISTNUM 1 \l 11284             MR. SCHMIDT:  I accept that, but I have asked you about yourself.

LISTNUM 1 \l 11285             MR. BÉLAND:  Yes.

LISTNUM 1 \l 11286             MR. SCHMIDT:  And you don't co‑locate?

LISTNUM 1 \l 11287             MR. BÉLAND:  I just wanted to clarify that.  We don't anywhere.

LISTNUM 1 \l 11288             MR. SCHMIDT:  And the you wouldn't be picked up in the Rogers' test, another carrier might be?

LISTNUM 1 \l 11289             MR. BÉLAND:  I am not sure what you mean by picked up, but I would think, no.

LISTNUM 1 \l 11290             MR. SCHMIDT:  Well, the Rogers' test, which is looking at four co‑locatees, if I could invent a word.

LISTNUM 1 \l 11291             MR. BÉLAND:  If we are not co‑located we wouldn't be picked up.

LISTNUM 1 \l 11292             MR. SCHMIDT:  Yes, that is certainly my impression.  Thank you.

LISTNUM 1 \l 11293             Okay, continuing with just a few more questions about how your network works.  When one QMI telephone customer is calling another QMI telephone customer, all within the same city, I guess Montreal could be an example, is there any facility you need at all from the ILEC to complete that call between those two customers?

LISTNUM 1 \l 11294             MR. BÉLAND:  A QMI telephone customer calls another QMI telephone customer in Montreal ‑‑

LISTNUM 1 \l 11295             MR. SCHMIDT:  All in the same city.

LISTNUM 1 \l 11296             MR. BÉLAND:  ‑‑ in the same city. Off the top of my head, I don't think we would need any facility of an ILEC.

LISTNUM 1 \l 11297             MR. SCHMIDT:  Yes, that would be my suspicion.  Okay.

LISTNUM 1 \l 11298             So in that fact situation you can probably route and complete the call entirely over your own network?

LISTNUM 1 \l 11299             MR. BÉLAND:  I think that is probably a fair statement, yes.

LISTNUM 1 \l 11300             MR. SCHMIDT:  Okay, thank you.  And then if I tweak the situation slightly and say one QMI telephone customer calling another QMI telephone customer, but they happen to be in different cities that you serve, would you need any ILEC facility to get the call from that city to that city, all to QMI customers?

LISTNUM 1 \l 11301             MR. BÉLAND:  I can't say definitively, but I would suspect that in the majority of cases that that call, again, is carried entirely over QMI's facilities.

LISTNUM 1 \l 11302             MR. SCHMIDT:  Okay, thank you.

LISTNUM 1 \l 11303             That is about it on this topic, Mr. Chairman.  And in terms of punch lines, I infer from my exchange there that they are substantially able to duplicate the ILEC network and they are able to substantially deliver residential and voice telephone services entirely over their own platform.

LISTNUM 1 \l 11304             The second topic I would like to move onto relates to CDN services and the precise impact that their introduction had on your business.  We have heard a lot of people talk about CDN services and what it did or didn't do, whether it is good or whether it is bad, but we haven't talked to you about it.  And you have put in evidence.

LISTNUM 1 \l 11305             If you would turn to paragraph 57 of your 15 March evidence.  There you say in the last sentence in the paragraph:

"Instead, CDN service prices were set at a level which severely undermined the ability of Vidéotron and other competitors in the market to compete in the market and greatly decreased the incentive for new entrants to build competing facilities." (As Read)

LISTNUM 1 \l 11306             Since that is a pretty brief description, I want to just talk to you for a couple minutes to kind of factually fill out the picture about what this means.

LISTNUM 1 \l 11307             I guess first off, when you say CDN services, what type of services or facilities are you referring to in that passage?

LISTNUM 1 \l 11308             MR. BÉLAND:  We would be referring to ILEC access services, DS‑1, DS‑3 and up.  We would be referring to the intra‑exchange portion that goes along with those services.  We may also be referring to some inter‑exchange services of DS‑1, DS‑3 and up.

LISTNUM 1 \l 11309             MR. SCHMIDT:  Okay.  And keeping in mind that the service was introduced progressively over a period of about five years, I think beginning in May 2002 and sort of creeping along all the way to the present, there has been a ruling I think even as recently as February of this year, the CDN links ruling for example.  So given this sort of five‑year rolling introduction or expansion of CDN, when you are talking about the impact of CDN on your business what kind of timeframe are we talking about?

LISTNUM 1 \l 11310             MR. BÉLAND:  I am not sure I would use your language about a rolling introduction.  Sure, there were issues being resolved over time, but I think the hit, if you will, the introduction came in a couple pretty large discreet chunks.

LISTNUM 1 \l 11311             MR. SCHMIDT:  Yes, I mean, I accept that, I work at a carrier too.  All I am trying to say is that it didn't all happen at once, but I accept your characterization.

LISTNUM 1 \l 11312             MR. BÉLAND:  Yes.  But, if you want me to comment on the impact on the former Vidéotron Telecom, which ‑‑

LISTNUM 1 \l 11313             MR. SCHMIDT:  That is my whole object here.

LISTNUM 1 \l 11314             MR. BÉLAND:  ‑‑ for the information of everyone, was merged into Vidéotron January 1, 2006, but I will refer to it as Vidéotron Telecom, which it was at the time.

LISTNUM 1 \l 11315             I guess what was maybe particular about our circumstance at that time was that Vidéotron Telecom was a CLEC, it became a CLEC very early on, I think in 1998 or, sorry, maybe even 1996, even prior to Decision 97‑8.  And Vidéotron Telecom was focused, to a large extent, on the wholesale market.  Vidéotron Telecom's business plan, to a very large extent in those early years, was to be a carrier's carrier.  So Vidéotron was selling these CDN equivalent services to people like other wireline CLECs, wireless carriers.  That was a very large portion of the company's business.

LISTNUM 1 \l 11316             What happened when the CDN regime was introduced is that suddenly whereas Vidéotron was in the market building facilities and competing against the ILECs' retail rates for those DNA services ‑‑

LISTNUM 1 \l 11317             MR. SCHMIDT:  Which were once retail services and CDN is just a new name and a lower price for a retail service.

LISTNUM 1 \l 11318             MR. BÉLAND:  To be precise, imagine that there is a wireline CLEC that wants Vidéotron to do some building for it.  That was basically the business plan.

LISTNUM 1 \l 11319             You are a wireline CLEC, or a wireless carrier from somewhere else in Canada, and you want us to do some building for you, and we will put some fibre in the ground and we will sell you the CDN equipment and services.

LISTNUM 1 \l 11320             That was a large part of Vidéotron Telecom's business plan.

LISTNUM 1 \l 11321             We would sell these services to these companies at a competitive rate, relative to what the ILEC's rates were in those days.

LISTNUM 1 \l 11322             What happened was that, suddenly, the ILECs were mandated to sell those very same services at much reduced rates.

LISTNUM 1 \l 11323             I won't get into whether those much reduced rates ‑‑ on what basis they were calculated and how appropriate that was.  What mattered to Vidéotron Telecom at that time was the dramatic reduction in the price at which our customers could get those services from someone else.  As a result of a regulatory decision, and as a result of that, Vidéotron lost a considerable part of its customer revenue base.

LISTNUM 1 \l 11324             MR. SCHMIDT:  Yes, I was going to ask you about that.

LISTNUM 1 \l 11325             So we see this dramatic reduction in prices for the service you offer.  Did it cause you to lose carrier customers?

LISTNUM 1 \l 11326             In sort of a granular way, what did it do to your business?

LISTNUM 1 \l 11327             Did you lose customers?

LISTNUM 1 \l 11328             MR. BÉLAND:  It caused an immediate ‑‑ it caused some customers to leave Vidéotron Telecom immediately.  It caused other customers to immediately exert substantial pressure on Vidéotron Telecom to lower its rates in order to retain them.

LISTNUM 1 \l 11329             I might note, as well, that one of the issues at the time that particularly offended Vidéotron Telecom was the fact that when the ILECs were mandated to reduce those rates substantially, those wholesale rates, they were kept whole by receiving subsidies from their deferral accounts.  Whereas we just took the hit and had to keep on going.

LISTNUM 1 \l 11330             So that was particularly offensive to the company.

LISTNUM 1 \l 11331             MR. SCHMIDT:  Are you still in the wholesale business?

LISTNUM 1 \l 11332             MR. BÉLAND:  Yes.

LISTNUM 1 \l 11333             MR. SCHMIDT:  Has CDN caused you to change the pace or nature of your facility build‑out?

LISTNUM 1 \l 11334             Is your wholesale network static, or is it growing?

LISTNUM 1 \l 11335             MR. BÉLAND:  It's still growing, but I think it's fair to say that it's growing at a much less rapid rate than it was prior to CDN.

LISTNUM 1 \l 11336             MR. SCHMIDT:  All right.  Thank you.  I think that's enough on that topic.

LISTNUM 1 \l 11337             Mr. Chairman, I am going to move on to the third of the four topics.

LISTNUM 1 \l 11338             I am going to chat with you a bit about pricing now.

LISTNUM 1 \l 11339             Mr. Béland, would you agree with me that the Commission prices Category 1 competitor services on the basis of Phase 2 costs, plus a markup to recover fixed and common costs?

LISTNUM 1 \l 11340             MR. BÉLAND:  I believe that is the definition of Category 1, yes.

LISTNUM 1 \l 11341             MR. SCHMIDT:  That seems to be how it works, yes.

LISTNUM 1 \l 11342             Would you agree that the Commission includes interconnection services in Category 1?

LISTNUM 1 \l 11343             MR. BÉLAND:  I believe so, yes.

LISTNUM 1 \l 11344             MR. SCHMIDT:  Okay.  And these services also have rates which include a markup to recover fixed and common costs?

LISTNUM 1 \l 11345             MR. BÉLAND:  Yes.

LISTNUM 1 \l 11346             MR. SCHMIDT:  Turning to the parties of the proceeding and away from the Commission for a moment, I would like to focus on what the carriers are saying.  My question to you is:  Would you agree that most of the service providers in this proceeding, the folks who are buying this stuff, the folks who are selling it, generally agree that the Commission should continue to have a markup as part of the price for mandated services?

LISTNUM 1 \l 11347             MR. BÉLAND:  I, frankly, haven't reviewed the other parties' submissions on that precise point, so I can't say.

LISTNUM 1 \l 11348             MR. SCHMIDT:  In fact, I am going to help you with that review.

LISTNUM 1 \l 11349             If you turn to Tab 6 of the compendium ‑‑

‑‑‑ Pause

LISTNUM 1 \l 11350             MR. BÉLAND:  I'm sorry, could you give me that reference again?

LISTNUM 1 \l 11351             MR. SCHMIDT:  Absolutely.  It's Tab 6 of the compendium, the black‑covered document you have.  Tab 6 is hiding somewhere behind Tab 5.

LISTNUM 1 \l 11352             MR. BÉLAND:  Yes.

LISTNUM 1 \l 11353             MR. SCHMIDT:  It's the last page of the book.

LISTNUM 1 \l 11354             THE CHAIRPERSON:  I presume you are making this an exhibit?

LISTNUM 1 \l 11355             MR. SCHMIDT:  Yes, I am.  Thank you.

LISTNUM 1 \l 11356             THE SECRETARY:  It will be TELUS Exhibit No. 4.

EXHIBIT NO. TELUS‑4:  Tab 6 of the Compendium

LISTNUM 1 \l 11357             MR. SCHMIDT:  Thank you very much.

LISTNUM 1 \l 11358             In this exhibit, what we have done is, we have excerpted the markup proposals of the major carrier parties and provided paragraph references for them.

LISTNUM 1 \l 11359             I am only interested in ‑‑ would you agree with me, as a general proposition, that the service providers we have set out here ‑‑ they are saying:  Gee, my markup proposal is that there ought to be a markup.

LISTNUM 1 \l 11360             MR. BÉLAND:  Again, I haven't reviewed the providers' proposals.  I would suspect that many of the providers, like QMI, made proposals that distinguished between different categories of services.  I would be surprised to see that providers recommended a single markup for all of the services that might be captured by this proceeding.

LISTNUM 1 \l 11361             MR. SCHMIDT:  I put it to you that we are not trying to actively misrepresent the record, and you have had this for a couple of days, in any event.

LISTNUM 1 \l 11362             So, subject to check, you would agree that the general view seems to be that there would be a markup for mandated services.

LISTNUM 1 \l 11363             MR. BÉLAND:  There seems to be a recommended markup for significant categories of services, yes.

LISTNUM 1 \l 11364             MR. SCHMIDT:  Directionally, that seems to be where folks are going.

LISTNUM 1 \l 11365             MR. BÉLAND:  Sure.

LISTNUM 1 \l 11366             MR. SCHMIDT:  That's fine.

LISTNUM 1 \l 11367             We know what the Commission thinks about markups for mandated services, and we know what a lot of the carriers in this proceeding seem to think about markups for mandated services, but you are not quite there with them.  You are not proposing a markup at all, are you, for the large class of services that you call traffic termination services and that I might call interconnection services?

LISTNUM 1 \l 11368             MR. BÉLAND:  We have proposed no markup for mandated interconnection services.

LISTNUM 1 \l 11369             MR. SCHMIDT:  Okay.  I just want to make that clear.

LISTNUM 1 \l 11370             Before I move on, Mr. Chairman, from this topic, in terms of punch lines, all I want to establish is that the Commission has an established and embedded approach to using markups.  Most of the folks who sell and buy this stuff for a living say that there should be a markup, subject to check, but QMI holds a different view, at least for interconnection services.

LISTNUM 1 \l 11371             The last thing I want to touch on this morning is your local interconnection region proposal.  This is set out at paragraph 40 of your 15 March evidence.  It is discussed there briefly.

LISTNUM 1 \l 11372             Commissioner Cram touched on this briefly this morning, and you referred to it in discussing the relationship of AT and DC to your proposal, and you said that this is sort of a restructuring of existing services, if I am characterizing it correctly.

LISTNUM 1 \l 11373             If I open up a Bell Canada or a TELUS tariff book, am I going to find this inter‑LIR service listed in there?

LISTNUM 1 \l 11374             The one you have proposed at paragraph 40 of your evidence.

LISTNUM 1 \l 11375             MR. BÉLAND:  Every LEC would have an LIR termination service.  We begin with that.  And the ILEC would also have a tariffed transport service to non‑competitive LIRs, yes.

LISTNUM 1 \l 11376             MR. SCHMIDT:  I have asked you a specific question.  If I open up these tariff books, am I going to find a service called "Inter‑LIR Transport"?

LISTNUM 1 \l 11377             Or, is this a proposed service, like a restructure?

LISTNUM 1 \l 11378             It's not the existing services that I see in there.

LISTNUM 1 \l 11379             MR. BÉLAND:  No, you don't have that service in your tariff book today, if that's what you are asking.

LISTNUM 1 \l 11380             MR. SCHMIDT:  So it's something new that you would like to see as an outcome of this proceeding.

LISTNUM 1 \l 11381             MR. BÉLAND:  Yes.

LISTNUM 1 \l 11382             MR. SCHMIDT:  And you will recall the Chairman's remarks over the last few days where he said this is a review proceeding to look at existing ‑‑ I underline that word ‑‑ mandated services.  Do you remember that?

LISTNUM 1 \l 11383             MR. BÉLAND:  Yes.

LISTNUM 1 \l 11384             MR. SCHMIDT:  And the public notice is equally clear on this point.  You don't have to turn to it, but paragraph 29, looking at services currently provided by the major ILECs?

LISTNUM 1 \l 11385             MR. BÉLAND:  Yes, and I think we are running into the preface to my comments to Commissioner Cram, is that this service that we are providing is new, but it is effectively part of a restructuring of access tandem service.  In that respect, it is not new.

LISTNUM 1 \l 11386             I am admitting that it is complex.  I am admitting that we haven't gone down in a binary fashion, keep that one, get rid of that one, keep that one, get rid of that one.  What we have done, because we thought that there was a wish on the part of the Commission to get at first principles, if you allow me, what we have done is we have looked at direct connection access tandem and proposed what amounts to a restructuring of that.  Whether you want to categorize that as new or not, I don't think the word really fits.  It is a restructuring.

LISTNUM 1 \l 11387             MR. SCHMIDT:  I will certainly accept your earlier responses where you twice told me it was new.  I won't even sort of get into it with you on the substantive wisdom of the restructure.  I might actually agree that this should be done.

LISTNUM 1 \l 11388             But it is new and I don't think, unfortunately, that this is the setting that it can be entertained in.

LISTNUM 1 \l 11389             MR. BÉLAND:  I am sure the Commission can resolve that.

LISTNUM 1 \l 11390             MR. SCHMIDT:  I am certain they will, in fact.

LISTNUM 1 \l 11391             That concludes my questions, Mr. Chairman.

LISTNUM 1 \l 11392             THE CHAIRPERSON:  Thank you very much.  I appreciate your brevity in delivering the punch line.  That makes it a lot clearer.

LISTNUM 1 \l 11393             Mr. Béland, I just wanted to ask you about your idea of not setting prices and leaving everything subject to negotiation between the parties with ultimate referral to CRTC for arbitration or mediation where necessary.

LISTNUM 1 \l 11394             How do you square that with the reality of when you are trying to sell to the business customer, who is in multiple locations and there is an RFP, there is a time limit, et cetera?  Don't you need to, in order to make your bid, know at what prices you are going to buy the services for those territories whom you don't serve but you rely on them?

LISTNUM 1 \l 11395             Just in a concrete way, I don't know how you would do that because your competitor could basically upset your bid by not agreeing to prices and, therefore, make it very difficult for you to speculate.

LISTNUM 1 \l 11396             MR. BÉLAND:  Yes.  I recall an exchange you had with another party last week, I don't remember which party it was.

LISTNUM 1 \l 11397             Our expectation would not be that these negotiations would happen location by location, facility by facility.  We would expect that parties would negotiate what would, in effect, be a standing agreement.

LISTNUM 1 \l 11398             So, if you look at Vidéotron's particular circumstances, we need access on occasion to access facilities, some of which may end up being in the mandated category.

LISTNUM 1 \l 11399             We would not expect to be going off to Bell or TELUS Quebec or Télébec and negotiating with them each time we found a business location at which we need one of these rare accesses.  We would expect to have negotiated some form of standing framework agreement with them, which we would employ as required when these situations arise.

LISTNUM 1 \l 11400             THE CHAIRPERSON:  So, if I said wonderful, I accept your proposal, it is in place from now on or from whatever target date we take, you would expect there to be a flurry of negotiations to make wholesale framework agreements between yourself and your competitors so you basically have those on a standby basis so you know what they are going to charge you should there be a need to acquire services from them?

LISTNUM 1 \l 11401             MR. BÉLAND:  Yes.  I think these sorts of negotiations are common in the marketplace.  We would have a sense of what quantities we would forecast to need.  There would be potentially volume discounts offered on the other side of the table.  We would hash that out in negotiations, arrive at a framework agreement, and it would be on standby.

LISTNUM 1 \l 11402             THE CHAIRPERSON:  Thank you.  If there are no other questions.  Thank you very much.

LISTNUM 1 \l 11403             Madam Secretary, who is next?

LISTNUM 1 \l 11404             THE SECRETARY:  Thank you very much, gentlemen.

LISTNUM 1 \l 11405             I was just informed that MTS Allstream no longer intends to cross‑examine QMI.

LISTNUM 1 \l 11406             Therefore, we will be moving to Primus Telecommunication, with counsel Ruby.

LISTNUM 1 \l 11407             THE CHAIRPERSON:  Good morning, Mr. Ruby.

LISTNUM 1 \l 11408             MR. RUBY:  Good morning.

EXAMINATION / INTERROGATOIRE

LISTNUM 1 \l 11409             MR. RUBY:  Good morning, panel.

LISTNUM 1 \l 11410             If I may, I would like to start by briefly following up on the Chairman's last question with respect to negotiations.

LISTNUM 1 \l 11411             As I understand it, Quebecor's position is that with respect to rates, the parties should have six months to negotiate new rates, and then if they fail to do so, they should have the right to apply to the Commission to set a rate.  Do I have your position right?

LISTNUM 1 \l 11412             MR. BÉLAND:  No, I don't think that is our position.  Where are you taking that from?

LISTNUM 1 \l 11413             MR. RUBY:  Mr. Chairman, I apologize.  I didn't realize this would be an issue, and I am just following up on your question.

LISTNUM 1 \l 11414             THE CHAIRPERSON:  I was referring to paragraphs 53 to 61.  They don't mention six months.  They just suggest that these prices would be negotiated, and in eventuality that they can't reach agreement, they would go to the Commission for arbitration or mediation.

LISTNUM 1 \l 11415             MR. RUBY:  I apologize for not having a copy of it, but what I am thinking of is an interrogatory response, QMI/CRTC 12 April 402, and maybe I can just read the paragraph.

LISTNUM 1 \l 11416             It says:

"As far as rates are concerned, QMI is of the view that wholesale service, which is to be phased out, should transition to negotiated rates within six months.  After that date, parties would be required to negotiate rates, and in the event of failed negotiations, they could apply to the CRTC to set a rate."  (As read)

LISTNUM 1 \l 11417             It then goes on to talk about how it would work in the transition period.

LISTNUM 1 \l 11418             That is where I take the six months from, Mr. Béland.  I apologize for not having a copy but, as I said, I am just following up on the Chairman's question.

LISTNUM 1 \l 11419             MR. BÉLAND:  My apologies.  You have an accurate quote there.

LISTNUM 1 \l 11420             MR. RUBY:  Okay.  I just want to get an idea of how this works.

LISTNUM 1 \l 11421             First of all, from QMI's perspective, I gather from what you told Mr. Schmidt, since you don't co‑locate, you both currently and anticipate buying, is it fair to say, relatively few services from the ILEC?

LISTNUM 1 \l 11422             MR. BÉLAND:  We don't currently buy many services and we don't anticipate buying many more, that is correct.

LISTNUM 1 \l 11423             MR. RUBY:  It is just Bell, when we talk about the ILEC in your case.  Right?

LISTNUM 1 \l 11424             MR. BÉLAND:  No, in fact our cable territory covers the territories of Bell, Bell Aliant, Télébec and TELUS.

LISTNUM 1 \l 11425             MR. RUBY:  Terrific.  So, it is those three.

LISTNUM 1 \l 11426             I gather that when you came up with the six months, the way you did it is you figured out what QMI would need to negotiate with those three ILECs for those few services.  Is that right?  Is that how you did the six months?

LISTNUM 1 \l 11427             MR. BÉLAND:  No, not exclusively because we also provide one mandated service, which is TPIA service.

LISTNUM 1 \l 11428             MR. RUBY:  So, it is the other way around for that one service?

LISTNUM 1 \l 11429             MR. BÉLAND:  This is a general proposition.

LISTNUM 1 \l 11430             MR. RUBY:  Let me ask you this.  Can you agree with me that with respect to a national carrier, a telecom service provider that operates across the country, it would have to negotiate with each and every ILEC for every service that it buys?

LISTNUM 1 \l 11431             MR. BÉLAND:  Yes, I agree.

LISTNUM 1 \l 11432             MR. RUBY:  Are we on common ground that six months, in that circumstance, is just not enough for a national operator who uses an extensive amount and different types of currently mandated services to negotiate these agreements?

LISTNUM 1 \l 11433             MR. BÉLAND:  Yes, I am not going to argue with you on that point.  I can understand that certain providers, based on the quantity of negotiations that they would have to entertain, may require more time.  I won't disagree with you on that.

LISTNUM 1 \l 11434             MR. RUBY:  A lot more time in fact.  Right?

LISTNUM 1 \l 11435             MR. BÉLAND:  I won't ‑‑

LISTNUM 1 \l 11436             MR. RUBY:  Okay, fair enough.  I won't take you any further than that.

LISTNUM 1 \l 11437             Just two other very brief points.

LISTNUM 1 \l 11438             Does Quebecor have many TPIA customers?

LISTNUM 1 \l 11439             MR. BÉLAND:  We have a significant and growing base of TPIA customers, yes.

LISTNUM 1 \l 11440             MR. RUBY:  I take it that with respect to your internet broadband services and your local telephony, you use the same technology as Rogers roughly.  Right?  All the cable companies use the same thing so I don't have to go through again some of those issues?

LISTNUM 1 \l 11441             MR. BÉLAND:  There are differences between the cable networks.  I don't know what conversation you are referring to when you say going through it again, but it depends on what level you are talking about.

LISTNUM 1 \l 11442             MR. RUBY:  That is fine.  Let me focus you on two things then and see if we can do this quickly.

LISTNUM 1 \l 11443             I take it Quebecor offers no quality of service guarantees to VoIP providers when a VoIP service runs over a Quebecor broadband service.  Right?

LISTNUM 1 \l 11444             MR. BÉLAND:  We don't even know when a VoIP service ‑‑ an access‑independent VoIP service is running over Quebecor internet service.

LISTNUM 1 \l 11445             MR. RUBY:  Will you agree with me that that means that a VoIP provider cannot guarantee the quality of service of the VoIP service to its customer because, of course, it uses your broadband connection?

LISTNUM 1 \l 11446             MR. BÉLAND:  The VoIP provider has a lot of factors that it can control in terms of managing the quality of service to its customer, but clearly the access‑independent VoIP provider does not control our underlying internet service, if that is what you are saying.

LISTNUM 1 \l 11447             MR. RUBY:  So, it can't make any promises with respect to the quality of the overall service.  That is fair, isn't it?

LISTNUM 1 \l 11448             MR. BÉLAND:  Any promises that would assume a quality of service beyond which Vidéotron already provides, sure, they can't make those promises.

LISTNUM 1 \l 11449             MR. RUBY:  I take it that it is fair, then, to say that access‑independent VoIP, as opposed to the access‑dependent VoIP service that QMI offers, they are not really substitutes for one another.  Right?

LISTNUM 1 \l 11450             MR. BÉLAND:  They are together in the marketplace and they compete against each other.

LISTNUM 1 \l 11451             MR. RUBY:  So, you think that they are just replaceable with their substitutes one for the other?  You will agree with me that is not the way you market your products.  Right?  You don't say, you can choose the other guy's or mine, they are all the same?

LISTNUM 1 \l 11452             MR. BÉLAND:  I don't think a lot of people market their products that way, but if you are asking does our marketing team watch what access‑independent VoIP providers are doing in the market and what services they offer and at what prices, of course they do.

LISTNUM 1 \l 11453             MR. RUBY:  I will leave it there.

LISTNUM 1 \l 11454             Thank you, Mr. Chairman.  Those are my questions.

LISTNUM 1 \l 11455             THE CHAIRPERSON:  Thank you very much.

LISTNUM 1 \l 11456             Madam Secretary, who is next?

LISTNUM 1 \l 11457             THE SECRETARY:  Thank you very much.

LISTNUM 1 \l 11458             Now we will proceed with Cybersurf Corp., counsel Tacit.

LISTNUM 1 \l 11459             MR. TACIT:  Thank you.

LISTNUM 1 \l 11460             THE CHAIRPERSON:  Good morning, Mr. Tacit.

LISTNUM 1 \l 11461             MR. TACIT:  Good morning, Mr. Chairman.

LISTNUM 1 \l 11462             I have handed out a small stack of interrogatory responses from the record, which I would appreciate if we could have circulated, to begin with.

‑‑‑ Pause

LISTNUM 1 \l 11463             THE CHAIRPERSON:  Okay, let's go.

LISTNUM 1 \l 11464             MR. TACIT:  Thank you.

EXAMINATION / INTERROGATOIRE

LISTNUM 1 \l 11465             MR. TACIT:  I am curious as to whether Vidéotron has any plans to put in place a resale offer for its retail telephone service at any time, again looking at the competitive landscape on the retail side.  Are there any such plans contemplated?

LISTNUM 1 \l 11466             MR. BÉLAND:  I am not aware of any.

LISTNUM 1 \l 11467             MR. TACIT:  I am curious about the conditions under which this might in fact occur.  If we look at the first interrogatory in that package that I just handed out, which is QMI/The Companies 12 April 07‑17.  In part C, The Companies say:

"Vidéotron provides retail telephone services, but does not currently have any resellers for these services.  Any proposal to do so would need to be evaluated in terms of the business opportunity it presented and its coherence with QMI's business priorities."  (As read)

LISTNUM 1 \l 11468             What I would like you to focus on are the words "and its coherence with QMI's business priorities."  What do you mean by that?

LISTNUM 1 \l 11469             MR. BÉLAND:  It means that any party that would be wishing to resell ‑‑ to purchase via resale the retail telephone service of Vidéotron would need to bring a value proposition to the table, to Vidéotron.

LISTNUM 1 \l 11470             MR. TACIT:  I guess what you would take into account is whether or not there would be too much competition or not with the retail side of Vidéotron's own operations, is that fair, if wholesale was granted?

LISTNUM 1 \l 11471             MR. BÉLAND:  I think the value proposition would be looked at on its merits when it is made.

LISTNUM 1 \l 11472             MR. TACIT:  We will leave it at that.

LISTNUM 1 \l 11473             Now, my understanding is ‑‑ I am just going to explore for a bit your negotiated regime for setting access prices for SMP access services and the implications of that for pricing.  So, I just want to take you through that briefly.

LISTNUM 1 \l 11474             As I understand it, QMI has adopted the definition of SMP contained in the TPRP report.  Is that correct?

LISTNUM 1 \l 11475             MR. BÉLAND:  That is correct.

LISTNUM 1 \l 11476             MR. TACIT:  And that definition, which is at page 3‑19 ‑‑ you don't need to turn to it, but I am just going to read it out so we can discuss it ‑‑ says:

"A service provider with SMP has an incentive to keep prices higher and produce lower quantities than those that would normally prevail in a competitive market.  As a result, customers who would have purchased some extra units at competitive prices will not be able to do so.  This is a waste from the point of view of society as a whole and, hence, economic efficiency.  Such pricing also leads to an income redistribution from customers to the service provider since the price for the quantity of service that is produced and purchased is higher than it otherwise would be in a competitive market."  (As read)

LISTNUM 1 \l 11477             That is the passage you are talking about when you talk about the definition of SMP in the TPRP report.  Is that correct?

LISTNUM 1 \l 11478             MR. BÉLAND:  I don't think that is precisely their definition, but it is a characterization of what they would see as happening when there is significant market power.

LISTNUM 1 \l 11479             MR. TACIT:  Sorry, are you saying this is not an accurate quote?

LISTNUM 1 \l 11480             MR. BÉLAND:  No, that is an accurate quote, but I don't think it is a definition, but it is a characterization of what is going on.

LISTNUM 1 \l 11481             MR. TACIT:  I believe that is the reference you gave in QMI/TELUS 6.  It is not part of this package where you were referring to the TPRP report.

LISTNUM 1 \l 11482             MR. BÉLAND:  It is an accurate quote.

LISTNUM 1 \l 11483             MR. TACIT:  If we look at that as being the concept that QMI has adopted, I would like you now to turn to your evidence, specifically paragraph 55 of your March 15th evidence, if you could.

LISTNUM 1 \l 11484             MR. BÉLAND:  Yes, we have it.

LISTNUM 1 \l 11485             MR. TACIT:  You say there:

"According to the TPRP, regulatory intervention in interconnection arrangements is required ..."  (As read)

LISTNUM 1 \l 11486             I am sorry, I am looking at the wrong ‑‑ I am looking at Cogeco's submission.  That is not going to help us very much.

"While QMI believes that SMP access services must be made available on a mandated wholesale basis, QMI is also of the view that the rates for such services should be subject to negotiation rather than tariffing." (As read)

LISTNUM 1 \l 11487             That is the company's evidence still.  Correct?

LISTNUM 1 \l 11488             MR. BÉLAND:  That is true.

LISTNUM 1 \l 11489             MR. TACIT:  I guess what I would like to ask you is this:  If, by definition, significant market power means that a price for a service is above competitive levels, isn't leaving rates subject to negotiation going to ensure that the ultimate price at which the service is sold will reflect that significant market power and end up being set at a level that is higher than would occur either in a regulated or competitive market?

LISTNUM 1 \l 11490             MR. BÉLAND:  I think that an access provider that would be taking that approach is going to be running into some resistance from the party at the other side of the table.  What constrains the access provider, if you will, in terms of negotiating reasonably is the threat of seeing this go to the Commission if they are not negotiating in a reasonable manner.

LISTNUM 1 \l 11491             MR. TACIT:  I guess reasonable is a matter of degree.  Right?  Because the significant market power may be slight, it may be greater.  In an ex post scenario the degree of scrutiny might not be as great on a specific kind of rate dispute as it would be when somebody is filing a tariff that is going to be used by potentially a large base of powers.

LISTNUM 1 \l 11492             So it is conceivable that that significant market power would be translated into the rates for the end service, isn't it?

LISTNUM 1 \l 11493             MR. BÉLAND:  Well, we believe there are cleared advantages in negotiation that should ‑‑

LISTNUM 1 \l 11494             MR. TACIT:  No, I understand that.

LISTNUM 1 \l 11495             MR. BÉLAND:  ‑‑ that should not be discarded by going immediately to the Commission.

LISTNUM 1 \l 11496             So we believe that there is a rationale for giving negotiation a chance and that the knowledge that the issue can be brought to the Commission if one or the other party is not acting reasonably is an important discipline.

LISTNUM 1 \l 11497             MR. TACIT:  So you don't think it could ever be the case that significant market power could end up being translated into the rates for these services if it is under a negotiated regime?

LISTNUM 1 \l 11498             MR. BÉLAND:  Again, I think if there is a party that is entering consistently into negotiations with the rates that are excessive, I think that party would find itself eventually in front of the Commission.

LISTNUM 1 \l 11499             MR. TACIT:  All right.

LISTNUM 1 \l 11500             Let's assume for a moment ‑‑ and I know we disagree on this point ‑‑

LISTNUM 1 \l 11501             THE CHAIRPERSON:  Let's wait for a moment.  Commissioner Cram needs a break.

LISTNUM 1 \l 11502             We will take a 5‑minute break.

‑‑‑ Recessed at 0915 / Suspension à 0915

‑‑‑ Resumed at 0920 / Reprise à 0920

LISTNUM 1 \l 11503             THE CHAIRPERSON:  All right, Mr. Tacit.  Sorry for the interruption.  We have Commissioner Cram with us again, so go ahead.

LISTNUM 1 \l 11504             MR. TACIT:  That's fine.  I didn't think it was the kind of testimony you would get all choked up about.

‑‑‑ Laughter / Rires

LISTNUM 1 \l 11505             THE CHAIRPERSON:  Lovely.

LISTNUM 1 \l 11506             MR. TACIT:  Before the short break I guess we agreed to disagree about whether the negotiated regime would lead to rates for services that inherently imported or contained some significant market power, in other words were priced above competitive rates, but let's assume for a moment that turns out to be the case.

LISTNUM 1 \l 11507             Would you agree with me that where there is that sort of significant market power according to the very definition the demand for the service would be dampened somewhat?

LISTNUM 1 \l 11508             MR. BÉLAND:  I'm sorry, I didn't understand when you said let's assume that to be the case, what is ‑‑

LISTNUM 1 \l 11509             MR. TACIT:  That the prices are above competitive levels.  Through the negotiation process we end up with prices that are some ‑‑ just take my assumption for a minute and work with it.  I know you don't agree with it, but ‑‑

LISTNUM 1 \l 11510             MR. BÉLAND:  Sure.  So we have had negotiations and we have somehow ‑‑

LISTNUM 1 \l 11511             MR. TACIT:  Somehow I have ended up with ‑‑

LISTNUM 1 \l 11512             MR. BÉLAND:  You somehow managed to convince this purchaser to pay higher than market prices and the purchaser has not found it in their interest to bring that to the Commission?

LISTNUM 1 \l 11513             MR. BÉLAND:  Well, it doesn't matter what the reason is.  I don't want to argue about the basis for the assumption.  We can do that in final argument.

LISTNUM 1 \l 11514             Just take the assumption for the purpose of the ‑‑

LISTNUM 1 \l 11515             MR. BÉLAND:  Okay.

LISTNUM 1 \l 11516             MR. TACIT:  So would you agree with me that as a general proposition, according to the very definition of "significant market power", such a situation reduces a reduction in the demand for wholesale services, just by definition?

LISTNUM 1 \l 11517             MR. BÉLAND:  The demand ‑‑ yes, the demand from that particular purchaser for those particular wholesale services.  I guess if the supply and demand curve slope the way they should, yes, that would be a conclusion.

LISTNUM 1 \l 11518             MR. TACIT:  That would certainly hamper, it might even marginalize competitors?

LISTNUM 1 \l 11519             Would you agree with that?

LISTNUM 1 \l 11520             MR. BÉLAND:  You are laying on a lot of assumptions here.  I mean now we are ‑‑ you have asked me to assume that this competitor is a pretty poor negotiator and you are now asking me to assume that this competitor is such a poor negotiator on a manner on which its business depends.

LISTNUM 1 \l 11521             I can follow with your assumptions ‑‑

LISTNUM 1 \l 11522             MR. TACIT:  Again, I don't want to argue with you, but for example there could be a situation where because of an RFP deadline or whatever there just isn't time.  I know you said people try to have wholesale agreements in place, but there may be circumstances where this occurs.

‑‑‑ Pause

LISTNUM 1 \l 11523             MR. BÉLAND:  Sorry.  What is your question?

LISTNUM 1 \l 11524             MR. TACIT:  I'm just asking whether that couldn't end up detrimentally affecting the competitors and even marginalizing them?

LISTNUM 1 \l 11525             MR. BÉLAND:  I guess all sorts of things could happen, the competitor could reduce the volumes of services that it sells; the competitor could reduce ‑‑ keep the volumes but reduce its margins.  I guess there are all sorts of possibilities.

LISTNUM 1 \l 11526             MR. TACIT:  Let's talk about the investment incentives.

LISTNUM 1 \l 11527             One of the benefits that QMI states of a negotiated regime is that it provides an ongoing incentive for new entrants to build their own facilities.

LISTNUM 1 \l 11528             Correct?

LISTNUM 1 \l 11529             MR. BÉLAND:  Yes.

LISTNUM 1 \l 11530             MR. TACIT:  Okay.  But we want those incentives to be based on competitive prices, not supernormal prices.

LISTNUM 1 \l 11531             Wouldn't you agree with that?  Because otherwise the investment would be inefficient.

LISTNUM 1 \l 11532             MR. BÉLAND:  The best incentives would be based on competitive prices, yes.

LISTNUM 1 \l 11533             MR. TACIT:  Thank you.

LISTNUM 1 \l 11534             Now, you used the CDN example and we have been through that before as an example of how incentives can be dampened by regulated price changes, but as I understand it QMI or Vidéotron makes very limited use of ILEC CND services.

LISTNUM 1 \l 11535             Is that right?

LISTNUM 1 \l 11536             MR. BÉLAND:  That's true.

LISTNUM 1 \l 11537             MR. BÉLAND:  Okay.  On the other hand, Vidéotron has a pretty good business providing CDN‑type services of its own.

LISTNUM 1 \l 11538             Correct?

LISTNUM 1 \l 11539             MR. BÉLAND:  The business was better before the CDN decisions, but yes, it is a continuing business and we are trying to grow it, yes.

LISTNUM 1 \l 11540             MR. TACIT:  So I guess what I would suggest to you is, if my premise bears out that overall prices that are set through negotiations only will be somewhat higher for access services that have SMP, could it not be the case that it would give QMI a price umbrella under which it could price its own CDN services relative to competitive rates?

‑‑‑ Pause

LISTNUM 1 \l 11541             MR. BÉLAND:  I'm having difficulty assuming a price umbrella because there would be presumably other competitors as well that are constraining Vidéotron's prices.

LISTNUM 1 \l 11542             MR. TACIT:  Well, then what I'm saying is, if Vidéotron is so sensitive to what the ILEC pricing is in terms of its own ability to sell CDN services, then what I'm suggesting to you is that if somehow through a negotiated regime the Bell prices get set at prices that are above competitive levels, that also provides a bit of extra headroom for Vidéotron in terms of its pricing of its CDN services.

LISTNUM 1 \l 11543             It has to work both ways.

LISTNUM 1 \l 11544             MR. BÉLAND:  Again, it has to depend on the ‑‑ I'm sorry.

LISTNUM 1 \l 11545             MR. TACIT:  If a price drop for the ILECs is harming your business, then presumably a price increase above competitive levels would benefit your business.

LISTNUM 1 \l 11546             Right?

LISTNUM 1 \l 11547             MR. BÉLAND:  But, as I said, it depends on the overall competitive conditions in the market as well.

LISTNUM 1 \l 11548             MR. TACIT:  But it could have that effect, could it not?

LISTNUM 1 \l 11549             MR. BÉLAND:  Under your narrow set of assumptions it could, yes.

LISTNUM 1 \l 11550             MR. TACIT:  The other part ‑‑

LISTNUM 1 \l 11551             MR. TAYLOR:  I would just like to add something.

LISTNUM 1 \l 11552             Your assumption on this seems to be that the price that the ILEC is going to be setting for its services is somehow untouched by the activity of competitors such as Vidéotron in the market and it's not.  It's not being mandated by the Commission.  This would be a negotiated price.

LISTNUM 1 \l 11553             So the purchaser who goes to the ILEC and says "I want that service" and the ILEC says "Well, I have significant market power, you have to pay this much", that purchaser could then go to Vidéotron and say "Well, they are telling me that I have to pay that much", and Vidéotron could go "Well, I will do it lower" and the ILEC could be aware of that and therefore may not sent its price so high.

LISTNUM 1 \l 11554             So where is competition what are you likely to end up with?  Competitive rates.

LISTNUM 1 \l 11555             If Vidéotron is not there in the market actively playing, then there would be an increased chance of the ILEC.

LISTNUM 1 \l 11556             But the proposal you are putting before us, to me, if Vidéotron is there in the market competing with the ILEC, I don't see the fact situation arising that you are proposing which would sort of like create this artificial umbrella for Vidéotron.

LISTNUM 1 \l 11557             MR. TACIT:  Okay.  Well, we will agree to disagree on that.

LISTNUM 1 \l 11558             The other aspect of this is the length of time that it would take to negotiate.

LISTNUM 1 \l 11559             I believe that in Response to a Cybersurf Interrogatory No. 9 QMI actually said that it could take days, weeks, months to negotiate and the same sorts of time periods if it has to be taken to the Commission.

LISTNUM 1 \l 11560             Do you see any prejudice occurring to customers as a result of those sorts of delays?

LISTNUM 1 \l 11561             MR. BÉLAND:  Well, there would presumably be transition provisions.  That is one of the matters under consideration in this proceeding.

LISTNUM 1 \l 11562             MR. TACIT:  I'm not talking about transition, though, I'm talking about when ‑‑ let's assume the regime you have in place is in place and a customer wants your service.

LISTNUM 1 \l 11563             MR. BÉLAND:  Okay, so a new ‑‑ let's call it a Greenfield customer.

LISTNUM 1 \l 11564             MR. TACIT:  New customer or a new service that just comes out after this negotiated regime is in place.  I'm not talking about the transition period any more.

LISTNUM 1 \l 11565             MR. BÉLAND:  Again, I think that's a fairly common situation in markets.  If you are a business, or you are an entrepreneur who wants to get into a certain line of business, part of your job is to plan your affairs well and to plan ahead for the negotiations that you might require for the various inputs that you need.  I think that is a common state of affairs in business.  I wouldn't call it a detriment.

LISTNUM 1 \l 11566             MR. BÉLAND:  But there is a different situation where the supplier has significant market power, wouldn't you agree?  There is an imbalance right at the outset in negotiating.

LISTNUM 1 \l 11567             MR. BÉLAND:  But as I said earlier, the difference here ‑‑ the difference between this context and the context we would find in many other markets is the threat, if you will, that if one of the negotiating parties isn't acting reasonably it will find itself before a regulator.

LISTNUM 1 \l 11568             MR. TACIT:  Okay, you have made that point.

LISTNUM 1 \l 11569             Now, you also use as an example of this regime, the regime under the Broadcasting Act where BDUs that want to carry certain licensed programming services and the owners of those services negotiate rates for carriage and you used that as an example.

LISTNUM 1 \l 11570             Correct?

LISTNUM 1 \l 11571             MR. BÉLAND:  Yes, that's true.

LISTNUM 1 \l 11572             MR. TACIT:  But would you agree with me that example is very different in one crucial respect, and that is that the BDU doesn't compete in the end market for the programming service.  It is a symbiotic relationship.  In other words, both parties have an interest in the carriage of the signal, but the cable company isn't competing with the programming service as well in the retail market?

‑‑‑ Pause

LISTNUM 1 \l 11573             MR. TAYLOR:  There is some accuracy to what you say, but it is not entirely correct.

LISTNUM 1 \l 11574             I mean, in the BDU environment there will be a number of services ‑‑ there often are a number of services that are actually owned by the BDU or an affiliate of the BDU so it is a more complex situation than what you are describing, but it is not as simple in terms of direct competition and nothing but direct competition as in the telecom environment.

LISTNUM 1 \l 11575             MR. TACIT:  All right.  Thank you.

LISTNUM 1 \l 11576             Mr. Chairman, those are my questions.

LISTNUM 1 \l 11577             THE CHAIRPERSON:  Thank you very much, Mr. Tacit.

LISTNUM 1 \l 11578             Madam Secretary, who is next?

LISTNUM 1 \l 11579             THE SECRETARY:  The next panel is Telecommunications Xittel Inc., Mr. Denton.

‑‑‑ Pause

LISTNUM 1 \l 11580             THE CHAIRPERSON:  I didn't expect to see you again so soon, Mr. Denton.  It's wonderful.

LISTNUM 1 \l 11581             MR. DENTON:  The pleasure of showing up every day.

‑‑‑ Laughter / Rires

LISTNUM 1 \l 11582             MR. DENTON:  It's okay, we can crack a joke.

LISTNUM 1 \l 11583             Good morning, sir.  Good morning, gentlemen.

LISTNUM 1 \l 11584             THE CHAIRPERSON:  Since you are at the end of the questioning order, that's what I meant.  It usually takes longer to come to you.  So I'm delighted that we are making good progress.

LISTNUM 1 \l 11585             MR. DENTON:  So am I.  Thank you.

EXAMINATION / INTERROGATOIRE

LISTNUM 1 \l 11586             MR. DENTON:  Good morning, Mr. Béland.  Good morning.

LISTNUM 1 \l 11587             To frame my questions, Mr. Chairman, they essentially bear on the concerns of the internet service providers to obtain reasonable access through cable facilities to the various services that they seek to get for the sake of their businesses and the problems that are or not associated with getting that access.

LISTNUM 1 \l 11588             Mr. Béland, in percentage or proportion, whichever you choose, how many of the ‑‑ what proportion of the ISPs that deal with your company are buying internet services of the kind mandated by Decision 99‑11 and what proportion are buying the third party internet access in one or another of its various formats, in just one or the other?

LISTNUM 1 \l 11589             What would you say?

LISTNUM 1 \l 11590             MR. BÉLAND:  Just for my clarity and the clarity perhaps of the room, 99‑11 is the old ‑‑ we will call it the old high‑speed internet resale regime, mandated resale regime.

LISTNUM 1 \l 11591             MR. DENTON:  Yes, sir.

LISTNUM 1 \l 11592             MR. BÉLAND:  We certainly have ISPs today that are customers of each regime.

LISTNUM 1 \l 11593             The precise numbers I couldn't give you, but I could take an undertaking.

LISTNUM 1 \l 11594             MR. DENTON:  That would actually be interesting factual information for us and I think the Commission.  Thank you, I would ask you to do that.

LISTNUM 1 \l 11595             MR. BÉLAND:  That information has been provided before, but it has been provided in confidence to the Commission.

LISTNUM 1 \l 11596             But, as I said, I can confirm to you that there are ISPs dealing with us under each regime.

LISTNUM 1 \l 11597             MR. DENTON:  Both.

LISTNUM 1 \l 11598             Would you offer some views as to why ISPs would choose to use the older form of services available under the Decision 99‑11 rather than the services under third party internet access?

LISTNUM 1 \l 11599             MR. BÉLAND:  Frankly, it's easier, for one thing.  Let's call it the old resale regime is a simple resale regime where an ISP can effectively get an end‑to‑end high‑speed access service from Vidéotron at a reduced rate relative to Vidéotron's own retail rates.  I think it's fair to call it simple resale.

LISTNUM 1 \l 11600             Whereas TPIA is a much more complex undertaking where the ISP manages important aspects of the end customer service.  To give you just but one example, the ISP will go and get its own internet address in blocks from the authorities, the ISP will physically interconnect its router to our router, et cetera.

LISTNUM 1 \l 11601             So it depends on the business priorities and, frankly, the skills of the ISPs.  Some ISPs may be more purely marketing oriented and prefer the simpler resale regime and other ISPs may have more confidence in their technical abilities and prefer the TPIA regime.

LISTNUM 1 \l 11602             MR. DENTON:  Thank you.  That is a useful and informative answer.

LISTNUM 1 \l 11603             For instance, does TPIA offer the functionalities that permit an ISP to track a customer's use of bandwidth?

LISTNUM 1 \l 11604             MR. BÉLAND:  Subject to check, I believe that there is a tool that allows Vidéotron's own end users to track their own bandwidth usage and, subject to check, I believe that same tool is available to our TPIA customers.

LISTNUM 1 \l 11605             MR. DENTON:  Would you be able to provide that answer for certainty in a later submission, please?

LISTNUM 1 \l 11606             MR. BÉLAND:  Yes.

LISTNUM 1 \l 11607             MR. DENTON:  Thank you.

LISTNUM 1 \l 11608             I'm going to use the term, Mr. Chairman and Panel, reverse DNS.  Reverse DNS performs a function of "look up" which whereby it searches for the IP address and provides the domain name.  It bears on the services available.

LISTNUM 1 \l 11609             has Vidéotron or Québecor implemented reverse DNS and is it commercially available now in accordance with the commitment you made to assist to make the TPIA work?

LISTNUM 1 \l 11610             MR. BÉLAND:  The service has been implemented by Vidéotron.

LISTNUM 1 \l 11611             It is currently in the testing stage.  I believe that we have successfully tested it with at least one ISP.

LISTNUM 1 \l 11612             MR. DENTON:  When do you think it will be made commercially available?

LISTNUM 1 \l 11613             MR. BÉLAND:  I can't say precisely, but I would think that it would be in very short order.

LISTNUM 1 \l 11614             MR. DENTON:  Months?

LISTNUM 1 \l 11615             MR. BÉLAND:  Weeks or months.

LISTNUM 1 \l 11616             MR. DENTON:  Thank you.

LISTNUM 1 \l 11617             THE CHAIRPERSON:  Mr. Denton, just for my information, can you explain to me what the utility of this is and why it would be used?  Have the witness explain.

LISTNUM 1 \l 11618             MR. DENTON:  I can certainly explain the utility, sir, in relation to the utility of TPIA in terms of making it available and working with the ISPs.  They generally want to know, or occasionally want to know with whom they are dealing or how to find a customer or how to find an endpoint.  Most of these things deal with the difficulties of finding an end point.

LISTNUM 1 \l 11619             But in this case you take the IP address, which is your end point, and you want to know what customer is associated with that end point.

LISTNUM 1 \l 11620             MR. BÉLAND:  Mr. Chair, if I may?

LISTNUM 1 \l 11621             THE CHAIRPERSON:  Yes, please.

LISTNUM 1 \l 11622             MR. BÉLAND:  In a cable network internet addresses, the numeric address that corresponds to your internet address, are allocated dynamically on an ongoing basis as individual end customers sign up and sign down.  So the TPIA providers have expressed an interest in the availability of a tool that would let them know which end user is using which end address at a particular point in time.  That is the tool that has been developed.

LISTNUM 1 \l 11623             THE CHAIRPERSON:  I see.  All right.  Thank you.

LISTNUM 1 \l 11624             MR. DENTON:  Which goes to the usefulness of TPIA versus other forms of ‑‑

LISTNUM 1 \l 11625             My next question bears on the theme that the ISPs have advanced and will advance that the various incumbents take such measures as they can to dissuade ISPs from making investments in facilities.

LISTNUM 1 \l 11626             So having said that nice soft pitch across the plate, here comes the question.  When the ISPs in Montreal were on the point of making a decision to either build or self‑supply their own facilities between the Canix co‑location point and Vidéotron, what was the response of Vidéotron?

LISTNUM 1 \l 11627             MR. BÉLAND:  Your question, is this in the context of ISPs that are TPIA customers of ours?  I am not sure of the precise context of your question.

LISTNUM 1 \l 11628             MR. DENTON:  The context of the question, so far as I am informed, is that the ISPs in Montreal were on the point of supplying their own facilities between the Canix co‑location and exchange point and your Montreal point of interconnection.  And you took some action then that was import for those ISPs.  Do you recall what it was?

LISTNUM 1 \l 11629             MR. BÉLAND:  I don't understand the way the question is being posed.  But what I can say is that in our TPIA tariff there are points of interconnection identified.  In fact, to be precise, there are five points of interconnection that provide access to the entirety of our network.

LISTNUM 1 \l 11630             In the specific case of the Montreal point of interconnection, my understanding is that there were some discussions around granting the ISPs some flexibility and not necessarily establishing interconnection at the specific point that Vidéotron had identified in its tariff, but rather at a more convenient point and that the parties in question, the ISPs and Vidéotron, managed to mutually agree on an interconnection arrangement that was more convenient to them than the default arrangement outlined in the tariff.

LISTNUM 1 \l 11631             I have the impression that that is a positive thing, that that is Vidéotron demonstrating flexibility in order to permit easier access to its TPIA service.

LISTNUM 1 \l 11632             MR. DENTON:  Thank you, Mr. Béland.  I think the cooperation was appreciated. I just need to point out that it had certain effects of what the ISPs were incented to do or not.  And that is the answer to my question.  Thank you.

LISTNUM 1 \l 11633             Thank you, Mr. Chairman, that completes my questions.

LISTNUM 1 \l 11634             THE CHAIRPERSON:  Thank you very much, Mr. Denton.

LISTNUM 1 \l 11635             Is there no other questions?  I gather this finishes the cross‑examination of Québecor.

LISTNUM 1 \l 11636             Now, let us take a 10‑minute break while Cogeco sets itself up.  Thank you.

‑‑‑ Recessed at 0945 / Suspension à 0945

‑‑‑ Resumed at 0957 / Reprise à 0957

LISTNUM 1 \l 11637             THE CHAIRPERSON:  Okay, Madam Secretary, let's go.

LISTNUM 1 \l 11638             LA SECRÉTAIRE : Merci, Monsieur le Président.

LISTNUM 1 \l 11639             Nous allons procéder maintenant avec un nouveau panel de témoins représentant la compagnie Cogeco Câble inc.

LISTNUM 1 \l 11640             Monsieur Messier, si vous voulez présenter les témoins, s'il vous plaît.

LISTNUM 1 \l 11641             M. MESSIER : Merci, Madame la Secrétaire.

LISTNUM 1 \l 11642             Bonjour, messieurs les commissaires.

LISTNUM 1 \l 11643             Sont avec moi, aujourd'hui, pour comparaître à l'audience : monsieur François Audet, qui est vice‑président, Télécommunications chez Cogeco; suivi de monsieur David McKeown, qui est président de View Communications, qui nous a assistés dans la préparation; moi‑même, Michel Messier, directeur des Affaires réglementaires, aspect télécommunications...

LISTNUM 1 \l 11644             COMMISSIONER DUNCAN:  Excuse me, Mr. Messier.  I am sorry, I can't get the translation channel.

LISTNUM 1 \l 11645             M. MESSIER : O.K.

LISTNUM 1 \l 11646             THE SECRETARY:  I was informed that the panel members have channel 1 and the remainder of the room channel 8 ‑‑ 7, sorry.

LISTNUM 1 \l 11647             COMMISSIONER DUNCAN:  I could try it again to see if it does ‑‑

LISTNUM 1 \l 11648             M. MESSIER : O.K.  Alors, est‑ce que vous entendez bien?

LISTNUM 1 \l 11649             CONSEILLERE DUNCAN : Merci.

LISTNUM 1 \l 11650             M. MESSIER : Merci.

LISTNUM 1 \l 11651             LE PRÉSIDENT : Est‑ce que vous pouvez parler un peu plus haut dans le microphone, s'il vous plaît?

LISTNUM 1 \l 11652             M. MESSIER : Oui, c'est ce que je vais faire.

LISTNUM 1 \l 11653             Alors, à ma gauche, près de moi, monsieur Dimitri Stathis, qui est directeur principal au niveau des Marchés commerciaux de Cogeco; suivi de monsieur Robin Lavoie, qui est directeur principal au niveau de l'Ingénierie et du Développement corporatif.

LISTNUM 1 \l 11654             Alors, Madame la Secrétaire, vous pouvez procéder à l'assermentation.

LISTNUM 1 \l 11655             LA SECRÉTAIRE : Merci.

SOUS AFFIRMATION SOLENNELLE : FRANÇOIS AUDET

AFFIRMED:  DAVID McKEOWN

SOUS AFFIRMATION SOLENNELLE : MICHEL MESSIER

AFFIRMED:  DIMITRI STATHIS

SOUS AFFIRMATION SOLENNELLE : ROBIN LAVOIE

LISTNUM 1 \l 11656             LA SECRÉTAIRE : Merci beaucoup.

LISTNUM 1 \l 11657             Mr. Daniels, you may proceed with the cross‑examination.

LISTNUM 1 \l 11658             MR. HOFLEY:  So there is no oath or no ‑‑ I am sorry, I apologize.

EXAMINATION / INTERROGATOIRE

LISTNUM 1 \l 11659             MR. HOFLEY:  I will be asking you a few questions, gentlemen, and then my colleague Mr. Daniels will be.

LISTNUM 1 \l 11660             My questions relate to your definition and the process for determining whether a facility is an essential facility, and that might surprise you or might not surprise you that I am asking you only these questions because, as I understand it, you have not sought to have regulation maintained for any service save support structure services and interconnection services; is that correct?

LISTNUM 1 \l 11661             M. MESSIER : Avec certitude, c'est exact pour les structures de soutènement.

LISTNUM 1 \l 11662             MR. HOFLEY:  Okay.

LISTNUM 1 \l 11663             M. MESSIER : Par contre, notre position pourrait être nuancée en ce qui a trait aux boucles locales.

LISTNUM 1 \l 11664             MR. HOFLEY:  Oui.  Now, your discussion of essential facilities definition commences at paragraph 19 of your March 15 evidence.  I would ask you to turn to that if you need to and your definition can be found at paragraph 21.  It is a fairly broad definition and I just want to better understand it.

LISTNUM 1 \l 11665             I am focusing on the first prong of your definition but the second aspect where it starts "or a network access service."  Do you see that?  Okay.

LISTNUM 1 \l 11666             Now, it says:

"...where a network access service is required to provide retail telecommunications services." (As read)

LISTNUM 1 \l 11667             Is that required by a competitor or is that required by all competitors?

LISTNUM 1 \l 11668             MR. MESSIER:  Required by all competitors.

LISTNUM 1 \l 11669             MR. HOFLEY:  Now, at paragraph 22, you go on to explain your criteria and you say first that:

"A necessary..." (As read)

LISTNUM 1 \l 11670             It is towards the bottom of the page at page 7 of 42.

"A necessary condition for concluding that access services in the second category is essential is that it is not practical or feasible for competitors to substitute or practically or reasonably duplicate the input in question." (As read)

LISTNUM 1 \l 11671             And after six days of testimony, I think we don't need to ask you any questions about that but I wanted to ask you about the very next sentence and it says:

"If the facility function or service satisfies the first criterion, it is presumed essential and is then assessed under the second criterion." (As read)

LISTNUM 1 \l 11672             So as I understand it, for criterion number 1, the party claiming access under your test must establish that ‑‑ the competitors must establish that they need the service and that it cannot be duplicated; correct?

LISTNUM 1 \l 11673             M. MESSIER : C'est exact.

LISTNUM 1 \l 11674             MR. HOFLEY:  And that is what you say at paragraph 26.  So that would be in essence an ex post review of an application by a party seeking access to a service; correct?

LISTNUM 1 \l 11675             M. MESSIER : C'est exact, oui.

LISTNUM 1 \l 11676             MR. HOFLEY:  Okay.  But then in this paragraph you suggest that for the second criterion:

"It is presumed that the party controlling the input has market power [the facility] has market power over the facility to prevent or lessen competition." (As read)

LISTNUM 1 \l 11677             Do you see, that is your second criterion?

LISTNUM 1 \l 11678             M. MESSIER : Pardon, quel paragraphe?

LISTNUM 1 \l 11679             Me HOFLEY : Paragraphe 21, numéro 2, mais...

LISTNUM 1 \l 11680             M. MESSIER : O.K.  Oui.

LISTNUM 1 \l 11681             Me HOFLEY : O.K.

LISTNUM 1 \l 11682             So in the second criterion, it flips over ‑‑ the onus flips over because you say:

"It is presumed that the party controlling the input has market power to prevent or lessen competition." (As read)

LISTNUM 1 \l 11683             Now, by "prevent or lessen competition," do you mean substantially lessen or prevent competition like the Competition Bureau says or you just mean prevent or lessen to any degree?

LISTNUM 1 \l 11684             M. MESSIER : Non, de la façon dont on voit, ça doit être substantiellement.

LISTNUM 1 \l 11685             MR. HOFLEY:  Okay.

LISTNUM 1 \l 11686             M. MESSIER : Et la façon dont nous avons construit cette définition là, il y a deux composantes.  Comme on a démontré, expliqué dans notre soumission, l'analyse doit être conduite en deux étapes, mais les deux sont importantes.

LISTNUM 1 \l 11687             MR. HOFLEY:  Okay.

LISTNUM 1 \l 11688             M. MESSIER : Elles sont liées.

LISTNUM 1 \l 11689             Me HOFLEY : Merci.

LISTNUM 1 \l 11690             Now, we are coming to the end.  You provide a bit further detail in respect of this and you say ‑‑ it is at paragraph 23 in the middle:

"In short, if through control over the input an incumbent carrier can deny or prevent a competitor's ability to enter a regulated market or to lessen competition in a forborne telecommunications market, the input should be considered essential." (As read)

LISTNUM 1 \l 11691             So that should be read as all competitors, correct?  You just testified that it was all competitors?

LISTNUM 1 \l 11692             MR. MESSIER:  All competitors, yes.

LISTNUM 1 \l 11693             Me HOFLEY : C'est vrai?

LISTNUM 1 \l 11694             M. MESSIER : Oui.

LISTNUM 1 \l 11695             Me HOFLEY : O.K.  Merci.

LISTNUM 1 \l 11696             Those are my questions.  There is really a punch line, Mr. Chairman.  I am just trying to understand it.  It seems that we do have in this test a downstream market power issue built in.  It just didn't on the face of it appear to have that.

LISTNUM 1 \l 11697             THE CHAIRPERSON:  Okay.  Thank you, Mr. Hofley.

LISTNUM 1 \l 11698             Mr. Daniels, you had no questions?

LISTNUM 1 \l 11699             MR. DANIELS:  No, I do have some questions.

LISTNUM 1 \l 11700             THE CHAIRPERSON:  Okay, thanks very much.  Then let's hear from the next ‑‑

LISTNUM 1 \l 11701             MR. DANIELS:  No, no, no.  Sorry, I do.

LISTNUM 1 \l 11702             THE CHAIRPERSON:  I thought you said you didn't, I am sorry.

LISTNUM 1 \l 11703             MR. DANIELS:  I do have questions.

LISTNUM 1 \l 11704             MR. HOFLEY:  Not that many.

‑‑‑ Laughter / Rires

LISTNUM 1 \l 11705             MR. DANIELS:  I should have said yes, I do, as opposed to no, I do.  I apologize for that.

LISTNUM 1 \l 11706             Mr. Chairman, this part of my cross‑examination is going to deal with some lesser known services that we haven't really discussed yet much in the hearing, although there is a fair amount of record on them.

LISTNUM 1 \l 11707             The first service that I am going to focus on is the transiting service and in order to understand Cogeco's position ‑‑ because there are very few things that we do have disagreement with but I do want to understand their position on the transiting service ‑‑ I am going to ask them to explain a few things for us to see if we can figure out whether it is an interconnection service or if it is an essential facility outside of the interconnection under the market power issue.

LISTNUM 1 \l 11708             So that is the purpose of the first part here but to begin I think it is going to help us both to get a common understanding of what the service is, especially considering some of the commissioners may not be familiar with the esoteric nature of some of these things.

LISTNUM 1 \l 11709             As I understand it, transiting ‑‑ to being, I first want to just clarify how local interconnection generally works.

LISTNUM 1 \l 11710             Is it correct to state that two LECs ‑‑ so they could be an ILEC and a CLEC or it could be two CLECs ‑‑ are required to interconnect with each other in the same local interconnection region, the LIR, as a general rule, that it is their responsibility to interconnect with each other, and that that goes back to the original local 97‑8 decision, although, granted, it is a larger ‑‑ the LIR is a larger area now than originally with the exchange?

LISTNUM 1 \l 11711             But as a general proposition, can we agree that two LECs are required to interconnect to each other in LIRs as set by the CRTC?

LISTNUM 1 \l 11712             M. MESSIER : Dans la décision 2005‑28, il a quand même été reconnu par le Conseil qu'un carrier qui avait des obligations de CLEC pouvait rencontrer ses obligations comme CLEC à travers un autre CLEC.  Donc, c'est exactement le cas de Cogeco avec ses ententes avec TELUS.

LISTNUM 1 \l 11713             Maintenant, si on va s'interconnecter directement, le CLEC décide de s'interconnecter dans une région d'interconnexion locale, oui, ça doit procéder selon le modèle qui a été adopté, le modèle par défaut d'interconnexion.

LISTNUM 1 \l 11714             MR. DANIELS:  Okay.  I am really just trying to ‑‑ it is more for an educational purpose for our conversation.  You are jumping to exactly how Cogeco does it today.

LISTNUM 1 \l 11715             I am just trying to establish the general principles that two carriers have to ‑‑ you know, that the CRTC set out regions, the LIR, that two of them are supposed to interconnect to each other and we are going to get into the transiting arrangement as the alternative.

LISTNUM 1 \l 11716             But as a general proposition, can we agree that that is the area?

LISTNUM 1 \l 11717             M. MESSIER : Oui.

LISTNUM 1 \l 11718             MR. DANIELS:  You have made reference to a TELUS arrangement.  I want to hold off on that for a moment and still concentrate on explaining what transiting is.

LISTNUM 1 \l 11719             In terms of being able to do this, what the CRTC acknowledged is that, at the beginning stages of local competition, it may be difficult, for whatever reason ‑‑ that two LECs wouldn't have to directly connect with each other, but that they could choose, if they wanted, to go through the ILEC to interconnect them.

LISTNUM 1 \l 11720             Is that correct?

LISTNUM 1 \l 11721             M. MESSIER : C'est exact.

LISTNUM 1 \l 11722             MR. DANIELS:  And that is what we refer to as the transiting service when it is provided by an ILEC, which basically allows two LECs, rather than directly connecting with each other, to choose to go through the ILEC instead.

LISTNUM 1 \l 11723             Is that a fair description of the transiting service?

LISTNUM 1 \l 11724             M. MESSIER : Oui.

LISTNUM 1 \l 11725             MR. DANIELS:  Although the CRTC in Decision 97‑8, when they created local competition, first established that this was not an essential facility, they said that it should be treated as an essential facility in that decision.

LISTNUM 1 \l 11726             Is that an accurate description?

LISTNUM 1 \l 11727             M. MESSIER : C'est exact, oui.

LISTNUM 1 \l 11728             MR. DANIELS:  As such, it was set at what has since become to be known as Category 1 rates, and we can agree, therefore ‑‑

LISTNUM 1 \l 11729             Actually, let me take it step‑by‑step.

LISTNUM 1 \l 11730             They are Category 1 rates, the lowest rates possible.

LISTNUM 1 \l 11731             M. MESSIER : Exact.

LISTNUM 1 \l 11732             MR. DANIELS:  And we generally refer to these types of services, and this service in particular, as a "near essential service".

LISTNUM 1 \l 11733             That's what we mean by "near essential"?

LISTNUM 1 \l 11734             M. MESSIER : Exact.

LISTNUM 1 \l 11735             MR. DANIELS:  Just so we are clear, the purpose, really, is to allow two LECs to not have to bother building or directly connecting with each other.  That is what we are saving within the local inter‑exchange region.

LISTNUM 1 \l 11736             That's why the Commission originally mandated this.

LISTNUM 1 \l 11737             Is that a fair description?

LISTNUM 1 \l 11738             M. MESSIER : Je suis d'accord, oui.

LISTNUM 1 \l 11739             MR. DANIELS:  I am positing to you that this is a transit service, not an interconnection service.  I would like to understand your position on whether you think it is an interconnection service or whether it is a transit service.

LISTNUM 1 \l 11740             M. MESSIER : Notre position, c'est de considérer que tous les services qui font partie du régime d'interconnexion qui a été rendu obligatoire, mandaté par le Conseil, devraient être traités comme des services d'interconnexion.

LISTNUM 1 \l 11741             MR. DANIELS:  Let me try to understand this, because I think this is an important distinction that we are wrestling with in this proceeding, calling what I believe is a transiting service an interconnection service.

LISTNUM 1 \l 11742             If a caller wants to make a call from London, England to a Cogeco local customer in, say, Trois‑Rivières, now, imagine that that call originated on British Telecom's network, so it is a British Telecom customer in London, England, now, British Telecom, we can agree, needs to find a way to deliver that call all the way to Cogeco in Quebec; is that correct?

LISTNUM 1 \l 11743             M. MESSIER : Oui.

LISTNUM 1 \l 11744             MR. DANIELS:  In doing so, it may contract with another carrier who has an undersea cable to take that call all the way across the Atlantic Ocean to Canada.

LISTNUM 1 \l 11745             Is that a fair description of what would probably happen?

LISTNUM 1 \l 11746             M. MESSIER : Probablement, oui.

LISTNUM 1 \l 11747             MR. DANIELS:  And that undersea cable operator would then deliver or make arrangements to deliver that call to Cogeco.

LISTNUM 1 \l 11748             In that scenario, is that undersea cable operator providing an interconnection service?

LISTNUM 1 \l 11749             M. MESSIER : Ce n'est peut‑être pas un service d'interconnexion au sens de... mais il y a eu un échange de trafic entre les carriers pour compléter la communication, et en ce sens‑là, considérons que globalement, ça fait partie des services d'interconnexion, oui.

LISTNUM 1 \l 11750             MR. DANIELS:  Would you agree with me that in the scenario I am giving there may be many different options for that undersea cable in terms of who they could get, Cable & Wireless, Teleglobe, a host of different carriers?

LISTNUM 1 \l 11751             There are a whole bunch of different options available in that scenario?

LISTNUM 1 \l 11752             M. MESSIER : Dans le scénario des communications outre‑mer, oui, je suis d'accord.

LISTNUM 1 \l 11753             MR. DANIELS:  And yet, if I understand your proposal, if it's an interconnection service, you are proposing that it be regulated as an interconnection service, and, therefore, as an essential facility.

LISTNUM 1 \l 11754             Am I mischaracterizing ‑‑